PBV Part 3: How do I Protect My Intellectual Property in China: Manufacturing in China

You’ve probably heard a million horror stories about somebody taking their great idea to China only to see it get ripped off and appear on shelves before they even received their first shipment, or something equally horrid. It happens, but it doesn’t have to if you take the right precautions. Here are a few steps you can take to protect your ideas, but remember, there are usually trade-offs. Better protection may require a higher price or an adjustment of your quality standards. Decide for yourself what level of protection you will be satisfied with and what it is worth to you.

Find a partner you can trust

In order to get your product made right, somebody will need to have all the information. It’s hard enough to get the quality you need even when everything is clearly specified, so you need to find one person or company that you can trust with all of the information to make sure that it gets done right and to help manage the rest of your Intellectual Property (IP) protection strategy.

Using a company that is based in your home country gives you significant legal protection through common binding contracts such

The legal system is getting better, but if you are relying on your contracts to protect you, your prospects are grim.
as Non-Disclosure Agreements (NDAs). Make sure that you have these in place and signed with whomever you are going to work with BEFORE you disclose any information. If you are using a Chinese person or company in this role, make sure you are 100% sure that they are trustworthy. Most products that get knocked off are done so by “partners” who were able to generate a good deal of faith. Your partner should get your approval at each step of the way before they share your information.

Don’t bother signing contracts with Chinese companies

To date, even very large multinational corporations have had little success enforcing legal contracts such as NDAs in China. The legal system is getting better, but if you are relying on your contracts to protect you, your prospects are grim. It’s usually not worth your time or money.

Make a critical component outside of China

If there is a component that requires a high level of technology that is difficult to achieve in China, or a trade secret that is difficult to find out, make that piece domestically. If your product requires that component to work, then you will be well protected. This can also be done with specialty raw materials as long as the factory won’t be able to figure out where they came from or how to duplicate them.

Get a patent in each country that you plan to sell to

Outside of China, patents give the holder a significant ability to sue those that infringe on their designs. If you have patents in the markets you plan to distribute in, then, even if the Chinese factory makes the product, it will be very difficult for them to find a customer willing to take the risk of distributing it.

Use multiple factories to make the different components

Use your trusted partner to send the different components to different factories so that no one factory gets a complete understanding of what your product is or does, then assemble all of the components at your trusted partner’s factory or your own domestically. Although the workers will still see the complete product, they do not have the capital, resources, or market understanding to take the product to a foreign market. It is really the factory bosses, and potentially engineers, that you need to be most careful about.

Use a factory that has the skills, but does not specialize in your industry

IP Protection

Is that my product?!

If you are making a new seat cushion, use a backpack factory, or vice versa. The idea is that from the Chinese perspective, the difficulty lies in marketing the product. It is very easy for them to introduce a new product to their existing customers, but very difficult for them to make new connections with buyers in a different industry. If you are doing this, you must be extra careful to verify that they can achieve the quality you need. Without experience, some small details can turn into big problems.

Make unannounced visits to the factory

Either personally or through your trusted partner, make unannounced visits to the factory to see if they are producing when you have not placed orders. The factory should be willing to let you in and go to any part of their factory without hesitation. If they stall or try to keep you out, beware.

If you are using tooling, take the tooling when you finish production

After your production is finished, take the tooling back with you to your partner’s warehouse when it is not in use. The cost of making new tooling is often prohibitive for a factory to copy a product, particularly if they do not have the drawings. This may apply to other equipment necessary for production as well.

Only send the electronic version of your drawings to your trusted partner

Once drawings and specifications are received in electronic format, you have no idea where they can go. When you send them to your partner, inform them to only discuss the print versions with the factories when they are getting quotes. Eventually you may need to share the files with the final factory you choose, but at least 10 different factories didn’t receive them through the process. Let your partner know that they need your approval before they send the electronic versions to anybody.

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