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How can I find out who owns the Intellectual Property (IP) for a product I want to buy in China?

Posted: 2013-01-10

Full Question

How do I find out who actually owns the IP for a product I want to buy in China? At least 15 different "firms" claim to manufacture a product that we are looking at. The products that they manufacture all appear to be identical, using the same chips, hardware and enclosure. The only differences are the model numbers and the stickers on the devices. In addition, a European company claims to have patent rights on the product, selling the identical product for three times the price. How do we find out if the manufacturer has rights to the IP?

Answer

I'm glad to see you are doing the honorable thing and checking out the ownership of Intellectual Property (IP) before you buy. Some buyers get into big trouble because they assume if there is a supplier selling something; the supplier is responsible if the product is in violation of patent or a counterfeit. But that thinking is only partially correct and misses the key dangers.

Let’s look at two possibilities.

If the IP is registered IN CHINA to somebody else, then the China seller is offering counterfeit goods and is exposed to a lawsuit in China, even if they are exporting to a marketplace where the product is not IP protected.

If the IP is not registered in China, but is registered in the destination market, then the China supplier may not be exposed, but the importer of record (you) has massive exposure.

The supplier may say, “there is no IP involved, buy from us, we sell overseas all the time.” Easy for them to say, because they are not the importer or distributor or user into your country, if something goes wrong, the USA lawyers can't go after a Chinese company in China with no assets in the USA. So the government and lawyers go after the easy target - you.

So, if I were in your shoes, the first thing I would do is to check to see who owns the IP in the USA for this product. But even if the IP is unprotected in USA, you should still double check the ownership of the IP in China. For example, if the European company owns the IP in EU and China, but not USA, you may not have legal exposure if you import to the USA, but you are still very exposed to supply chain drama if you purchase from China. Imagine if you place an order, then the EU company or PRC government raids the warehouse of your supplier in China. Those goods will be confiscated, your supplier may very well go out of business, and you just lost not only the money you had sent to the supplier, but now you have no orders to deliver to your clients. In short, it can be a big mess, so you are wise to do the homework in advance and find out who owns the IP in the two key markets: your home country and your country of manufacture.

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