Best Practices for Protecting Your IP When Doing Business with a Chinese Company – Part 2
In Part 1 of our two-part series on the 9 Best Practices for Protecting Your IP When Doing Business with a Chinese Company, we covered some of the best practices surrounding the legal aspects of working with China:
1 – Carefully Evaluate the Overseas Electronic Contract Manufacturing Companies IP Risk
2 – Keep Up to Date on the Latest IP Laws and Regulations
3 – File IP Copyrights, Patents, and Trademarks in China
4 – Register Your IP with China Customs
5 – Track and Protect IP Information
But how are some Chinese companies exploiting the IP of U.S. manufacturers? By producing counterfeit goods based on your designs and plans, stealing trade secrets, invalidating legitimate trademarks and patents, and even using more advanced methods such as reverse engineering existing products in order to produce “knock-off goods” and building parallel distribution networks to compete with legitimate networks.
These actions can seriously impact your market share and the cost of doing business if they are not addressed properly. In recent years the Chinese Government has done a better job protecting U.S. IP, but there are several steps you can take to help protect your businesses IP.
7 – Select Your Business Partners Wisely
Only partner with overseas manufacturers, suppliers and distributors that you have conducted extensive due diligence on before signing any agreement. Carefully evaluate each of their IP policies and protections and make sure that they are robust enough for your products and processes. Make sure they include IP protection clauses in all contracts and agreements. Be sure to educate any business partners on the importance of protecting IP and provide them with resources to help with this process when applicable.
8 – Develop Manufacturing Processes That Protect Your IP
The manufacturing process is one of the parts most vulnerable to IP protection breakdowns. Some of the processes you can put into place to help mitigate this risk include:
- Setting up the building or production area with separate work areas that have access carefully controlled within them to assure that few or no employees know the entire process.
- Break up critical parts of the design and production processes to limit the likelihood of one or more employees having complete access to the entire process the IP cannot be copied.
- Incorporate technology or techniques that make the process difficult to copy such as specialized inks, labels, stamps, other unique identifiers to limit the ability to copy the IP or duplicate the IP manufacturing process.
- Limit access to sensitive areas, critical equipment, and important information based on the manufacturing employee’s job title and work function.
- Make sure that the employees have detailed confidentiality, non-compete, and non-disclosure agreements in place as a condition for hire.
9 – Use a U.S. Electronic Contract Manufacturing Company
Another option–and probably the best option–is to avoid the need to manufacture your electronics overseas in the first place. There are many benefits of using a domestic electronic contract manufacturer, but choosing to manufacture electronics in the U.S. also provides the following benefits surrounding IP processes:
- Extensive IP protection for copyrights, patents, and trademarks.
- Consistent enforcement of IP agreements with straightforward legal processes to resolve disputes.
- An educated workforce of employees who are well trained and paid with little incentive to steal your IP.
- No need to file paperwork for copyrights, patents and trademarks in multiple formats and languages resulting in saved time in the production process.
- Manufacturing domestically is less risky than transferring IP to China, especially for cutting edge, latest generation products which may be more wanted by unscrupulous electronic contract manufacturers.
- No need to coordinate IP protection with an overseas team that may not have as strong of a commitment to protecting your IP.
- Laws, regulations, and judicial rulings enforcing IP law don’t need to be reviewed to make sure that they are valid under Chinese law.
- Fewer opportunities for foreign companies to steal critical IP, or use that IP to create counterfeit goods or set up illegitimate distribution networks for these products.
- Reduce legal expenditures considerably because there is no need to have a large legal team in place in China.
This concludes our two-part series on the 9 Best Practices for Protecting Your IP When Doing Business with a Chinese Company.
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