PROTECTING INTELLECTUAL PROPERTY DURING PRODUCT DEVELOPMENT AND MANUFACTURING

We have a deep understanding of what Intellectual Property means. This is not only about signing a document in the hope to get it usefull while one day you may need to go to a court. It is also all about establishing procedure, data management, adapted and customized manufacturing and supply chain strategy.

For a business willing to launch a new product on the market, confidentiality is a critical notion which can not be neglected. It has consequences on time to market for the company itself, but also to stay ahead the competition.

Especially in China, more than anywhere else, intellectual property remains a big concerns as culture, business practice and law may be fundamentaly different from western countries. We have been facing those challenges in the past and with years and experience on the chinese ground, we are able to offer our customers the right strategy to avoid to get their product to be copied too fast.

LEGAL SYSTEM TO PROTECT YOUR IP

It can sounds usefull to sign a Non-Disclosure Agreement (“NDA”) as being the first basic step to protect your idea. However, in China those NDA might not protect you so much because. Indeed, for the Chinese law, a such document will probably not worth much. You probably don’t ignore that it is also difficult to obtain law enforcemenn full compensation as it will need to be proven a certain number of elements you might not have.

It may be also difficult for foreign established companies to enforce the law in country where they don’t even have a single legal entity.

In most case, even you would win the case, then the following situation would happen:

– You will spend so much money in lawyer fees that your compensation will not cover your expenses

– Win-win situation: 50-50, you don’t win it all.

– Copycat manufacturer will close out their business and will go to bankruptcy, pulling out their asset to the next building and starting business within another name. Still you will not get your compensation and you will still have to pay the legal fees to your attorney.

It can be usefull, and we even recommend it, to register your brand, trademark, design (both in China and in other countries) as in China such registration is based on “first arrive first serve system” and get your brand to be registered and approved may take till 2 years time frame to be accomplished.

In China, reverse engineering is not considered as being illegal.

RISKS WHEN DEVELOPPING & MANUFACTURING PRODUCTS IN CHINA

While performing product development, procurement and manufacturing in China, risks mainly come from customer to speak too much about their projects.

Here are a shortlist of what we have already seen in the past as situation while visiting, auditing, inspecting some suppliers and while working with customers:

– Customer gives too much information to suppliers who finally turn to have access all the data to manufacture full product itself, and to market it directly from China, becoming direct competitor of its own customer. Sometimes, customer get contact with supplier by giving their website address, making easy for supplier to see what finished products are manufactured, on which markets, to which client and at which price they are sold.

– Customer A to give some documents about project A to suppliers (sales people A) via USB key, which is later used by another sales B to give to another customer B to copy file of project B, the files from customer A were remaining on the USB key, and the customer B was no one else than competitor of customer A…

– Customer A to pay mould fees to supplier A to design a customized mould. The mould got used by supplier A to supply another supplier B who sell the parts to customer B, being the competitor of customer A

– Customer A to pay mould fees to supplier A with iron steel quality selected to be used 300 000 shot, but supplier A was renting the mould to supplier B, making the mould life cycle of customer A to be diminished and not long enough to handle the production which was scheduled. Customer A had to pay two mould…

– Supplier A produce for customer A some parts but instead of producing 10000 pieces as agreed, he produced 5000 pieces extra which were sold on the back by supplier A to the competitor of customer A.

– Supplier A produce for customer A final product, but dispute occur or supplier A estimate that quantities manufactured are not enough to generate profit, in order to compensate its cost (or to revenge in case of dispute), supplier A will produce and sell product somewhere else without letting know customer A.

– Customer A asks supplier A to print and operate packaging, on which one information are clearly indicated and which usually give access to final customer, final concept, final market and many more information that may help supplier A to become the competitor of its client.

THE KEY TO OPERATE EFFICIENT INTELLECTUAL PROPERTY PROTECTION

The key remains in establish a strategy of Operationnal Intellectual Property and not only a Legal one. We voluntary spread a,d split information in small part for each sub-suppliers to make difficult for them to reconstruct the full product.

BENEFITS USING A WESTERN PRODUCT DEVELOPMENT FIRM IN CHINA

One of the reason why our customers prefer to work with us than with a chinese factory making full finished product  is because we have capabilities to coordinate several sub-suppliers making each one a single only sub-elements of the product to be manufactured while having the capability to respect intellectual property, confidentiality and discretion.

In the end, not a single manufacturer get the full product in hand. So as long as the product is still under manufacturing process in China, the copycat process remains more difficult and slower than sub-contracting a full project to a single chinese supplier.

The other reason why our customer choose us is because we doesn’t do marketing for products that get manufactured under our own roof (unless an agreement has been established by customers and being part of the strategy). Since we are not specialized in a particular product, you will never see a project which has been delegated to us being marketed online on B2B platform or anywhere else.