Controlling IP is always a huge issue, and has been a wide-ranging topic for decades in China. China has been the "me too" producer for many many years, and the running joke is that R&D in China means "receive and duplicate. " There are some very practical ways you can protect yourself against these kinds of IP issues when starting your business in China.
Divide and conquer
One way that you can protect yourself is not having all of your production done in one factory. Rather than finding a factory that's vertically integrated, do business with a number of different factories. None of those factories would have the manufacturing processes or capabilities to do all of the needed production in one spot where there is risk of losing control of the IP. Taking the bits and pieces that they are making and the components in the sub assemblies into a separate, trustworthy, facility for the final assembly can help limit the ability of any one of those factories from taking your product into the marketplace and selling your design.
Hold drawings close....really close
Another way to control this issue is by making sure that you control drawings and intellectual property. Often times when we are bridging the gap between industrial design and manufacturability, there are many revisions to each one of the different components that goes into the product assembly. We want to make sure we have tight control over the revisions and understand why they were made and the engineering behind them. Capturing all revisions and keeping them close to the chest as far will help maintain the integrity of those drawings and allow you to hold that IP at your main office.
Don't do what this company did
In recent years we worked with a company that had gone through a dozen iterations on the product that they were developing. During the course of that development work with their factory, they did a couple of things which we think could have been done better. One of which is they didn't compensate the factory for any of the development work, so at the end of development, the factory felt as though the original design was so different than what they ended up producing that the factory actually had IP control and not our client. In one sense the factory did have IP control, because the customer didn't stay on top of the revisions from an engineering point of view. If and when they wanted to change the production from that factory, they actually did not have an updated set of drawings to be able to look to another factory to make their product, and they were not able to register with the relevant patent offices with current drawings of the products.
Want to avoid IP issues in China like these? Contact us to help you get control of your most precious asset - your IP - from idea to market.