Intellectual property (IP) theft is one of the main thoughts of start-ups and small businesses importing from China and other Asian countries.
We all know that Chinese manufacturers have a certain reputation. Despite this, how likely is it that one of your suppliers will invade your market and earn a lot of money by exploiting your intellectual property?
In this article, we explain what all start-ups and small businesses need to know about managing intellectual property risks when importing from Asia.
Read on to find out how you can protect your intellectual property and why most importers overestimate the risk of intellectual property theft. You can also find out why the real risk may not be a vendor stealing your intellectual property, but you (unknowingly) infringing another company’s intellectual property.
What is intellectual property?
Intellectual property provides protection to the intangible creations of a person or company and can, for example, include patents, trademarks, or trade secrets.
Intellectual property also includes the article you are reading. I wrote it, so I own the copyright.
So, what are we referring to in the context of “importing products from Asia”?
Basically, everything included in your product specifications:
- Product design drawings
- Logos and trademarks
- Description of operation
- Circuit Drawings
- Packaging design
Sharing and protecting your intellectual property with Chinese suppliers
Sharing product specifications with your suppliers is not a matter of choice. For obvious reasons, a supplier cannot calculate a price – let alone make a sample product – if they do not have the information you need to give them about the product.
The following is an introduction to the three most common ways to protect intellectual property:
Sign a Non-Disclosure Agreement (NDA) with your suppliers before sharing your intellectual property with them
The Non-Disclosure Agreement (NDA) is a confidential agreement that (depending on how it is outlined) “prohibits” the supplier from making replicas of your product, using your trademark and/or sharing your product information with other buyers.
A supplier can’t make a quote, much less make a prototype before they have access to your product specifications.
Therefore, the Non-Disclosure Agreement must be signed by the supplier before you can share product information with them.
Let’s say you’re recruiting manufacturers for a particular item and you’re still in the process of finding the best rates, which means you have to get a large number of NDAs signed before you even receive a quote.
If you’re a start-up or small business, you may find it difficult to convince your supplier to sign a Non-Disclosure Agreement, just so you have a chance to submit a quote.
Simply put, forcing all suppliers to sign Non-Disclosure Agreement (NDA) can significantly slow down the process and cause some of them to give up.
The same situation is not a problem if you are a funded tech company – but this article was written for the promising Amazon seller – not for Tim Cook.
And that’s not the only problem you’ll face.
At best, a Non-Disclosure Agreement will cause the supplier to think twice before using your designs or trademarks. Yet, if a supplier really wants to replicate your product and/or brand, they can.
First, because he knows that you don’t have some financial power and enough time to pursue it in court.
In addition, the supplier can circumvent the Non-Disclosure Agreement by having your products made by another company not included in the signed Agreement.
Therefore, you must first prove that your supplier has leaked the news related to your intellectual property … and, what’s more, he did it for a fee.
One more time… This article was not written for multinational corporations that have an army of lawyers…
In light of the above, is it worth signing a Non-Disclosure Agreement?
It depends, as always.
If you are a tech start-up and you have a particular intellectual property, then it is worth it.
If you are a new wristwatch brand or a private label… then it’s not so worth it. But, again, the Non-Disclosure Agreement can, in fact, help, in the sense that it makes the supplier think twice before stealing your intellectual property, as long as a penalty (a dollar amount) is clearly specified.
Model Patent and Trademark Registration
The Non-Disclosure Agreement is interesting, since it appears to be a simple and cost-effective solution to a complex problem. Yet, as I have already explained, this is not the case.
There are, however, more effective remedies. And expensive.
By protecting your intellectual property in your target markets, such as the European Union or the United States, you solve the main problem: the risk of your supplier using your intellectual property to compete with you in your country.
Trademark registration is the simplest form of intellectual property protection. This prevents other companies from using your brand name – in the market where it is registered. For more comprehensive protection, you must register your trademark in all major markets.
This could include China as well, if only for the sake of blocking those who misuse your trademark.
If your product had a unique function or design, you could apply to receive the design patent or functional patent. All this, once again, must be implemented in all major markets.
Keep in mind that applying for a patent is much more expensive and takes longer than applying for a trademark.
Conclusion
Intellectual property is one of the main thoughts of companies importing from China and other Asian countries.
However, most companies face much more serious risks.
That said, I understand where this concern comes from, and at the very least, all serious entrepreneurs should start by applying for the trademark.
Don’t let your worries hold you back anyway. It’s very likely that you’ll care about your brand much more than your Asian suppliers ever will.
Need help importing products from China?
It can be difficult to go from product conception to production. To help you manage the entire process – from the creation of a specification, to sampling, up to quality control, rely on ImportazioneFacile.it experts, they will support you step by step by putting their many years of experience at your service, to face all the possible pitfalls that lie behind an import, they will take care of having all the specifications required by the suppliers executed, checking that no errors are made in design and production.
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