Prevent Overseas Manufacturers from Copying Your Product

Home | China Law Blog | How to Prevent Your Manufacturer from Copying Your Product Renaud Anjoran over at the Quality Inspection Blog has written a post that anyone who has products made in a foreign country should read. The post is entitled, How to Protect against Copies when you Manufacture in China, and it makes for an excellent guide on how to prevent your manufacturer from copying your products. It starts with the sourcing stage and on that it has these tips -- I have added my own comments in italics: 1. Supplier selection. Renaud's advise is to choose foreign owned Chinese factories whenever possible and to choose large Chinese manufacturers that do a lot of exporting. These companies have "a better understanding of, and a greater respect for, your IP rights" and are therefore less likely to copy. I agree. This holds true in virtually all countries. 2. Get your suppliers to sign a contract. Renaud's advice here is dear to my heart. He says: "forget about NDAs. China business lawyers can draft a contract that addresses the real risks facing importers. You can read more details here on the China Law Blog and you should do this before communicating any technical information to anybody." I wholeheartedly agree. 3. Register your intellectual property rights. Renaud advises you consult with a lawyer about the need to register your IP in China. He is right and what he says about China applies pretty much everywhere else as well. 4. Don’t send product information to many companies. Renaud suggests you qualify the factory before communicating your product information. He points out that if you send your design information to two companies and then use only one for actual product production, you are at great risk of the jilted manufacturer copying your product. He's 100% right. 5. Keep your supply chain as disjointed as possible. If possible, "purchase components from several factories, and keep the final operations separate from the rest of the steps, so few people can see the whole. True, but you will have to weigh cost and convenience on one side versus IP protection on the other side. Renaud then addresses what he calls the "special case of molds and customized tooling," for which he recommends you do the following to reduce the risk of your manufacturer using your molds to supply your competition: a. Put a mark on your molds. Renaud quotes me on this, per the following: Identify the heck out of your molds by etching or engraving (in Chinese) the fact that the mold is your property and, if possible, do this both where it is obvious (to deter others) and where it is well hidden (to deter those who might try to remove your markings). b. Get the molds wrapped up between two production runs. Renaud calls for sealing the molds between production runs: At the end of the final inspection (before goods are shipped out), the inspector can wrap the molds, use proprietary adhesive tape, and then place some type of seal or a proprietary sticker on the wrapping. The importer then instructs the supplier to only unwrap the whole package when the next production batch is to take place — but before the unwrapping, the supplier must take a photo of the whole package with the day’s newspaper next to it (just like terrorists do to prove someone is still alive on a certain date). This sounds a bit complicated but it is not that hard to explain if you show photos of an example. c. Transfer the molds to a separate place between production runs. "If your supplier is not cooperative and you don’t trust them, it makes sense to transfer the molds out of their factory." Renaud's post lists a number of additional things you can do to reduce copying of your products and I urge you to read the rest of his post here. Check Out Our China Law Services Share Twitter Facebook LinkedIn E-mail Comment Dan Harris Dan Harris is a founding member of Harris Sliwoski, an international law firm where he mostly represents companies doing business in emerging market countries. Most of his time is spent helping American and European companies navigate foreign countries by working with the international lawyers at his firm in setting up companies overseas (WFOEs, Subsidiaries, Rep Offices and Joint Ventures), drafting international contracts, protecting IP, and overseeing M&A transactions. In addition, Dan writes and speaks extensively on international law, with a focus on protecting foreign businesses in their overseas operations. He is also a prolific and widely-followed blogger, writing as the co-author of the award-winning China Law Blog. 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