Protecting your IP
While most suppliers in China are trying to earn an honest living, there are also a large number of unscrupulous companies who are out to make a quick buck. And one of easiest ways to do this is by stealing your intellectual property. Most people think IP just refers to designs and trademarks. But it also includes sensitive buyer information such as export value, shipping destination, customer and end-user identity, and market value of goods shipped.
Here are some measures you can take to keep your IP safe when sourcing in China:
Take steps to protect your IP BEFORE you start sourcing.
- Be the first to register-First to Market vs. First to Register.
- File all legal documentation at home and in China.
- Do not share info without nondisclosure or other agreements in place.
- At the same time, do not rely solely on NDAs and noncompete agreements. Attach bilingual MOUs to purchase orders. The MOUs must be initialed by a person in authority.
- Make sure you follow Chinese law in China.
- Do all due diligence.
- Involve third parties for sensitive information.
Establish long-term personal relationships.
- Get to know industry and government figures in your particular field.
- Learn about customs and develop contacts on both sides of the Pacific.
Have a regular, physical presence.
- If custom-made, own the tooling outright.
- Keep an eye on tool and sample rooms, and the warehouse.
- Pull molds and dies.
- Require samples to be returned.
- Distribute components to various suppliers instead of just one. Your payments, penalties and ship dates should be contractually tied to QC reports.
The following sourcing experts contributed to this article:
Mike Bellamy - chair of the China Sourcing Information Center's advisory panel and founder of PassageMaker
David Dayton - owner of Silk Road International, founding member of the China Sourcing Information Center and lead editor of CSIC's China Sourcer magazine