China Sourcing and Protecting Intellectual Property- Part One

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China Sourcing seems precarious.


China has a reputation for knocking off or copying products. This reputation is well deserved. If you look at it from a neutral point of view, it is kind of amazing. I say amazing because, not only are the accuracy of knock-offs impressive, but the speed of copying a product is breathtaking. On one hand this is a good thing if it is your product  and you are trying to source it in China. However this uncanny skill is not so good if you are thinking about a factory copying your product without your permission and penetrating your market.

China Sourcing with perspective.

China Sourcing and Intellectual Property

But let's take a step back. Usually, most knock-offs are commissioned by competitors outside of China and not initiated by the Chinese. And most of these knock-offs are introduced in third world markets and not head to head with, say a US or German market, because our markets are very difficult to enter. I know there are lots of high profile examples that seem to indicate otherwise, but I am talking about the majority of knock-offs I see.  I am not excusing this practice either mind you. It is not good. But it is a reality. So it begs the question, what to do about it?

One more China sourcing diversion before we talk about solutions. I am going to make a bold statement. Chinese people are are  extraordinarily honest and honorable. Considering China sourcing issues I just talked about, how can I make such a statement? Here is how. China is not a nation of laws. If you think about it, China has only recently become a world player in the industrial age. And the laws and judicial infrastructure are not in place compared to the west. Just imagine how businesses in the US would behave if we were not a nation of laws. It boggles my mind when I think about it. So I am amazed at just how well behaved the Chinese are considering these factors. And that the integrity of the people and the culture. On a side note, this is why relationships are so important in China. It is difficult to take someone to court over a dispute so both parties must get to know each other and trust must be earned.

What to do about China Sourcing while protecting your Intellectual Property.

Well, if you want to manufacture a product in China while minimizing being copied, the most straight forward solution is to have components of your finished product produced in different factories and assembly and packaging in yet a separate factory or even back home, wherever that may be. This way, no one company sees the whole picture or understands the function of your product. Also you should trademark, patent and copyright your products in China. The irony is that as China strives to evolve from the low cost provider to more sophisticated manufacturing, it is starting to produce its own intellectual property that needs to be protected not only world wide, but from the Chinese themselves. So patent, copyright and trademark laws are starting to be enforced in China out of necessity. I have seen dramatic change just over the past few years. (For more information, read this from the WSJ - "Is China Finally Getting Tough on Piracy?)

In part two of this blog, I will give you a personal example of a product I source in China for world distribution and what I have done to protect my Intellectual Property. (Hint: China Sourcing, Go on the offensive.)

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Gary Young: Founder, President and CEO of the Avela Corporation Gary Young CEO of the Avela Corporation helps companies source produces and services in China with offices in Houston and Shanghai since 2002. Mr. Young’s experience extends from sourcing both commodities and unique OEM opportunities, to intense product development projects. His relationship with China extends into his personal life with his daughter-in-law Eva who is from Shanghai and the newest addition to the family Aiden ,who is presently learning English, Mandarin and Shanghainese. Mr. Young is a Vistage Member since 2001.

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