IP Ownership: How to Establish and Protect Your IP in China

Imagine running a company that has no trouble meeting its target metrics. After outsourcing your product development to a Chinese manufacturer, your performance skyrockets. Everything is going smoothly, but then you encounter issues with intellectual property.

You soon discover the presence of numerous products identical to yours on the market. When taking advantage of Chinese manufacturing services, there are certain steps you’ll need to take to protect your IP ownership.

This will help you avoid a large number of issues you may have otherwise encountered. Let’s explore the key information to keep in mind when moving forward.

NDAs Are Not Enforceable

One of the biggest mistakes business owners make when outsourcing to Chinese manufacturing services is using US-based non-disclosure agreements. Unfortunately, there’s no way to enforce these in China. This is because China’s legal system loosely interprets American agreements.

What they define as “non-disclosure” likely won’t coincide with your original intentions. As a result, you risk not having sufficient IP protection. The last thing you want is to find yourself in a situation where you thought your intellectual property was properly safeguarded.

Use an NNN Agreement

Also known as “Non-disclosure/non-use/non-circumvention agreements,” these are essential for protecting your proprietary information in China. This also includes trade secrets.

These agreements also protect against IP misuse. For instance, a manufacturer could steal your product design info. They could then create a cheaper replica to introduce to the market.

They might also sell this information to a competitor. You won’t have to worry about scenarios like these with an NNN agreement in place. These contracts also protect financial information, customer data, and employee info.

Use China-Specific Contracts

Every agreement you work with should be written in Chinese. However, it’s also recommended to create bilingual contracts to maintain clarity. As you might assume, you’ll need to work with a Chinese professional to ensure everything is in order.

Even a single oversight can have catastrophic consequences. To clarify, something could get lost in translation. Or, a phrase commonly used in the US could have an alternative meaning in China.

Dealing with international disputes often costs a large amount of time and resources. It’s in your best interest to avoid situations like these at all costs. Your agreements should use Chinese laws to prevent complications.

Disputes could arise from IP infringement if you don’t take this precaution. It’s worth noting that China’s legal landscape is constantly evolving. You shouldn’t assume that past regulations are currently applicable.

It’s also important to check if new legislation influences the way your company operates. Stay diligent in keeping yourself updated on contemporary information.

Understand China’s Legal Protections

China has a variety of legal protections for intellectual property. It’s essential to understand these so you can make full use of them. Utility models are used for improvements on current designs.

They last for 10 years and are more common than conventional patents. Invention patents are much more complex. They’re meant for innovative or complex inventions and last for 20 years.

China’s copyright protection extends to musical, literary, artistic, and audiovisual creations. Keep in mind that China is a member of the Berne Convention. This offers extended protection of your intellectual property.

To clarify, it can allow enforcement in the other countries that are members of this organization. You can file the trademark with the China National Intellectual Property Administration (CNIPA). Without the right trademark services, you risk losing control over your intellectual property.

Contractors Own Their Work

By default, contractors own their work. You’ll need to create a written agreement that explicitly states otherwise. This is a common oversight many entrepreneurs make when working with Chinese manufacturers.

When creating a contract for your outsourced workers, it should include rules for IP creation while on the job. There should also be guidelines for intellectual property after the agreement. Without the right protections in place, workers could bring proprietary information to competitors.

They could also start their own business and use the IP they developed while working for you. Both situations will cause unnecessary complications. Don’t overlook the IP already owned by both parties before the agreement begins.

There may be situations where your contractor already owns specific intellectual property before working with you. The agreement can’t infringe upon this information. You could encounter legal complications if you do so.

Dealing with an international lawsuit is difficult to accommodate under every circumstance. You’ll need to hire an attorney to represent you. There’s also a chance the case won’t resolve in your favor.

Finding the Right Manufacturer

To minimize the chance you experience IP issues, it’s essential to work with the right manufacturer. When searching for someone to hire, examine their past reputation. This will give you a better idea of what you can expect from them.

Avoid manufacturers that don’t have a strong amount of positive feedback online. Do they often work with companies like you? It’s imperative to look through their portfolio.

If they don’t frequently handle projects like yours, there’s a chance they will fall short of your needs. Ask about the pricing structure, as well. Dealing with financial surprises can be difficult after hiring a Chinese manufacturer.

You should also avoid the cheapest options you encounter. You often get what you pay for. Do they seem enthusiastic about helping you?

Never work with someone who doesn’t seem interested in helping your company reach its goals. Be patient during your search so you can find the best choice for your needs. It’s never recommended to settle for less.

Always Protect IP Ownership

A single IP ownership infringement can cause a large number of issues for your company. The tips in this guide will help you find a reputable manufacturing service that doesn’t threaten your company’s longevity.

Shield Works is a British-owned manufacturing warehouse located in the heart of Zhuhai city. We pride ourselves on being an integral part of the rapidly developing South China Greater Bay Area.

We can help you fully protect your IP and keep your brand safe. You’ll learn more about how we can help when you get in touch with a representative today.