When you manufacture in China, you should protect your intellectual property (IP) from your manufacturers and business partners.
Unfortunately, manufacturers and business partners in China sometimes secure the trade marks, patents, copyright and know-how belonging to foreign companies, even if they are in business together.
However, there are several steps you can take to ensure your IP is protected.
Step one is to register your IP with the relevant agencies and conduct due diligence on your potential business partners and manufacturers.
Step two is to proactively manage your IP. Consider developing robust legal agreements with your manufacturers and take care with the way you manage and use your IP in China.
Before you give a local manufacturer access to any of your IP, you should ensure you have a legally enforceable agreement governing the use of the IP with them and take the following steps:
- ensure the agreement is developed to be enforceable in China
- ensure the terms of the manufacturing arrangement are documented in a supply agreement
- keep accurate records and copies of key correspondence relating to the agreement, this may assist you if there are any dispute
- before you share any commercially sensitive information with your business partner or manufacturer, ensure you have a confidentiality or non-disclosure agreement in place.
This will protect your product, business know-how, moulds, plates and secret information.
Managing your IP use
Along with legal agreements, you should be careful not to share your IP more widely than necessary:
- you can compartmentalise the design and production process and the equipment that produces your goods so they are difficult to copy
- consider keeping vital designs or latest-generation technologies in Australia
- classify all your confidential content and limit access to a need-to-know basis
- place security cameras in rooms where confidential information is stored and restrict access to the rooms using security provision
- consider making your products difficult to copy by incorporating specialised technologies or techniques which make it harder to replicate and will allow you to easily identify genuine products from any imitations
- establish an internal fraud hotline.
Protecting your moulds and plates
When your manufacturer is using your moulds and plates to make your goods, there are legal and practical steps you can take to protect them.
- Register your design in China to give you legal IP protection.
- Have a contract with your manufacturer stating your IP rights over the design
- Included non-compete clauses to prohibit your manufacturer from producing or selling similar products
- This will give you dual protection because if the manufacturer started illegally making your products, they would be infringing both the IP provisions and your contract.
- Actively monitor your manufacturer’s production to ensure they are not making extra products.
- After working with the manufacturer ask for your moulds and plates to be returned so you can destroy them or ask a reliable third party to destroy them on your behalf.
- Another alternative may be that you choose to sell, or license the right to use the moulds and plates to your manufacturer.
Working with employees
As a general rule, you should share IP with employees only on a need-to-know basis only. It is a good idea to put in place protocols, such as computer log-ins and passwords to establish which employees have access to the information.
We suggest you educate your employees about your confidentiality requirements.
Tracking data flow, file transfers and closely monitoring the entry and exit of flash disks, portable hard drives and laptops is recommended.
Engaging with Chinese Customs is another way to protect your IP. Chinese Customs provides border protection of patent, trade mark and copyright for imported goods and exported goods.
If a company is the owner of the IP in China and wishes to enforce their rights on imported or exported goods they will need to lodge their IP rights with the General Administration of Customs. Where Customs finds any goods that it suspects infringes registered IP, the IP owner will be notified and the goods will be detained. As an IP owner you can notify Customs of any goods you suspect are infringing your rights.