China Manufacturing: How to Prevent Your Own Manufacturer from Copying

Renaud Anjoran over at the Quality Inspection Blog has written a post that just about everyone who manufactures in China should read. His post is entitled, How to Protect against Copies when you Manufacture in China, and it makes for an excellent step by step guide on how to prevent Chinese manufacturer from copying your products.

It starts with the sourcing stage and on that it has these tips:

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. Renaud sees these companies as having “a better understanding of, and a greater respect for, your IP rights” and therefore less likely to copy. I agree.

2. Get suppliers to sign a contract. Renaud’s advice here is dear to my heart. He says: “forget about NDAs. China business law specialists can draft a contract that addresses the real risks facing importers. You can read more details here on the China Law Blog. Naturally, do this before communicating any technical information to anybody.” This is exactly what we are always preaching and I wholeheartedly agree.

3. Register your intellectual property rights. Renaud advises that you consult a China lawyer about the need to register your IP in China. He is right on this as well.

4. Don’t send product information to many companies. Renaud suggest that you qualify the factory before communicating your product information. He correctly 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.

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 that very few people can see the whole.

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 chance of your manufacturer using your molds to supply your competition:

1. 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).

2. 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 the 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 that someone is still alive at a certain date).

This sounds a bit complicated but it is not that hard to explain if you show photos of an example.

3. 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 methods to employ to reduce copying of your products and I urge you to read the rest of his post here.

The post China Manufacturing: How to Prevent Your Own Manufacturer from Copying appeared first on China Law Blog.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.

Source: http://www.chinalawblog.com/2015/10/china-manufacturing-how-to-prevent-your-own-manufacturer-from-copying.html