One of President Trump’s justifications for the trade war he is waging on China is the theft of intellectual property from American manufacturing companies.
These violations – which run from counterfeiting brands and stealing secrets to putting pressure on companies to share technology with local Chinese companies – has been a sore spot in trade negotiations and treaties between the two countries. As a result, companies that are considering having their products made in China are wary to do so for fear of having their products copied or outright stolen from them.
What is Intellectual Property Theft?
According to the World Intellectual Property Organization, Intellectual property (IP) “refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.”
“IP is protected in law by, for example, patents, copyright and trademarks, which enable people to earn recognition or financial benefit from what they invent or create. By striking the right balance between the interests of innovators and the wider public interest, the IP system aims to foster an environment in which creativity and innovation can flourish.”
China violates this definition in a few ways: One, the Chinese government requires foreign firms to form ventures with local partners in China, which can result in the transfer of technology and product manufacturing designs. Two, the Chinese government actively encourages businesses to carry out their R&D activities only inside China.
It’s a catch-22: If companies do not agree to these terms, the Chinese government then restricts them from manufacturing in their company. If they DO agree to the terms, the companies are then effectively giving over their trade secrets to the Chinese firms and in turn, the Chinese government.
Is China Stealing Ideas from Manufacturers?
There seems to be plenty of evidence that they are: According to the Chicago Tribune, there are have been several high profile cases involving large American companies in just the last 5 years alone:
• Federal prosecutors charged in an indictment unsealed last month that the Chinese tech giant Huawei stole trade secrets from U.S. cellphone company T-Mobile and offered bonuses to employees who managed to swipe technology from other companies.
• Apple has been infiltrated by thieves trying to steal driverless car technology for a Chinese company, according to criminal charges filed in Silicon Valley.
• In November 2019, the Justice Department charged a government-owned Chinese company, Fujian Jinhua Integrated Circuit Co., and co-conspirators with stealing trade secrets from the U.S. semiconductor company Micron Technology.
• A year ago, a Chinese company, Sinovel Wind Group, was convicted in a federal court in Wisconsin of stealing technology —the electronic brains that run wind turbines — from its American partner, AMSC, formerly known as American Superconductor Inc.
According to a 2017 report by the United States Trade Representative, Chinese theft of American intellectual property currently costs between $225 billion and $600 billion annually.
How do I protect myself from Intellectual Property Theft in China?
If you have concerns about losing the intellectual rights to your manufactured product by theft in China, there are a few steps that you can take to secure your product rights. It should be noted that you should consider doing all of the following suggestions BEFORE you begin manufacturing in China:
- Engage legal counsel that has knowledge of patent law in the US & China.
- Protect your designs in your home market (patent, trademark, etc.): Filing patents and trademarks can be expensive, but it is a worthwhile investment if you have to defend your right to the product later.
- Get signed exclusivity contracts from your suppliers: Again, if you are dealing with sourcing in China (a common practice that is often demanded by Chinese manufacturers) this will be very difficult. If you are sourcing from the US, this will be less of a challenge.
- Look at the customers of a factory: Don’t send sensitive designs to factories that have many larger customers that might want your product.
- Use multiple factories for components and do final assembly somewhere else: This will keep companies who may steal from having access to all your parts, and knowledge on how you do the assembly for your product.
The Best Way to Protect Against Property Theft in Manufacturing: Manufacture in Mexico
All the reasons stated above will help you protect yourself against possible theft of your intellectual property, but there is no guarantee that once your product is sent to China that it will happen anyway.
There is one sure-proof way to ensure that your manufacturing product can be safe from intellectual property theft: have it produced in Mexico with a reputable nearshore manufacturing partner like NovaLink.
Unlike firms in China, nearshore manufacturing partners like NovaLink will ensure that your product, and it’s intellectual property rights, will be protected. NovaLink will allow you to source your product from anywhere you like, work with our design engineers for production, have it assembled in our factories or with another partner, all while protecting your rights legally & with the strictest confidence.
Your intellectual property rights in Mexico are strengthened even more by the new USMCA agreement, with one of the main points of the new treaty being the protection of Intellectual property rights of products between the three countries. According to the Office of the United States Trade Representative:
“The United States, Mexico, and Canada have reached an agreement on a modernized, high-standard Intellectual Property (IP) chapter that provides strong and effective protection and enforcement of IP rights critical to driving innovation, creating economic growth, and supporting American jobs.”
The enforcement of these rights makes it very difficult, next to impossible, to steal intellectual property rights of companies manufacturing in Mexico.
NovaLink has the process of getting started with manufacturing in Mexico down to a precise science. Whether you are a large corporation or a small business trying to get off the ground, NovaLink has the process, consulting for supply chain, software, facilities and manpower to get your business up and running quickly and efficiently with minimal cost.
Do you need a nearshore manufacturing partner or solution for your business? Contact NovaLink today: 956-621-7362 or visit our website: www.novalinkmx.com