03 Mar 2022 Guest Post: China Intellectual Property Theft
By guest author Michael Dillon, Novalink Vice President of Business Development and Marketing | 5 min read
The United States cites the theft of intellectual property from American manufacturing companies as justification for its trade sanctions against China.
Trade negotiations and treaties between the two countries have been tainted by these violations, which range from counterfeiting brands and stealing secrets to putting pressure on companies to share technology with local Chinese firms.
This makes companies wary about having their products made in China for fear of having their products stolen or copied.
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.”
One of the ways China violates this definition is by requiring foreign firms to form joint ventures with local partners, which can result in the transfer of technology and product designs. A second reason is that the Chinese government actively encourages businesses to conduct their R&D within the country.
It is a catch-22: If companies refuse to agree to these terms, the Chinese government restricts their ability to manufacture in China. By agreeing to the terms, the companies will effectively be handing over their trade secrets to the Chinese firms, and thus to 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?
There are a few steps that you can take to protect your product rights if you are concerned about having your intellectual property stolen in China. You should consider doing all of the following 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
While all of the above reasons will assist you in preventing possible intellectual property theft, there is no guarantee that it will not happen once your product is sent to China.
You can make sure that your manufacturing product is safe from intellectual property theft by having it manufactured in Mexico with a reputable nearshore manufacturing partner like NovaLink.
Nearshore manufacturing partners like NovaLink ensure that your product, and its intellectual property rights, will be protected, unlike firms in China. The NovaLink platform enables you to source your product from anywhere you like, work with our design engineers to produce it, and have it assembled in our factories or with another partner, all while protecting your rights legally.
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.”
It is almost impossible to steal the intellectual property rights of companies that manufacture in Mexico due to the enforcement of these rights.
Manufacturing in Mexico is a precise science for NovaLink. NovaLink has the process, software, facilities, and manpower, as well as the supply chain, to help your business get up and running quickly and efficiently with minimal cost.
NovaLink is a best-in-class, outsourcing solution for domestic and international companies seeking to relocate or initiate manufacturing in Mexico in a low-cost labor environment with proximity to the U.S. The company has manufacturing facilities in the cities of Brownsville, Texas and Matamoros, Tamaulipas, Mexico.
NovaLink’s near-shore Mexico shelter manufacturing services are the ideal solution for any company that wants to reduce costs associated with full-service manufacturing: from large, blue-chip companies with brand names to small and medium-sized firms with limited resources.
Novalink is one of the high-quality manufacturers that Shoreview has partnered with in Mexico to provide reshoring services to our clients. Contact them for more information on their services.