Worried About your Intellectual Property in China?SRI can help.

You've heard all the stories.80% of the world's pirated goods come from Chinese factories.Chinese factories steal everything from computer codes to government information to entire Jeeps and factories!Well, unfortunately, it's all true.And it gets worse.Culturally, the Chinese don't recognize individual ownership of IP and never have.For example, Confucianism praised scholars that could copy the work of a master-flattery was the highest compliment and the path to individual promotion.Mao and the socialist revolution then collectivized everything in the 1950's and spent twenty years stamping out the individual.And today, the government officially decries the theft of IP but also promotes the unfettered growth of the Chinese economy as the answer to social unrest and continued Communist Party control.Socially, attitudes are also slow to change in a world in which most Chinese see themselves as victims of the more advanced West.

Now, this isn't meant to be alarmist and we certainly aren't sugar coating anything.In a recent roundtable discussion on energy and technology in China the conclusion of multiple US experts was that IP theft is not a question of if, but rather when.This is just the reality of the Chinese situation.So if piracy is so ingrained in China, what can you do to protect your self and your IP from becoming just another statistic?

Protecting IP in China is actually quite a bit like protecting IP in the US.While in China there are definitely some unscrupulous factory owners, they by no means have a monopoly on dishonesty-e.g. Enron, Anderson, corporate theft/loses in the West, etc.No matter where you are employed theft is a part of business reality.Of course there are some extra precautions and safeguards to take when working over here.

First, as in the West, take all the legal precautions that you can.It's better to be safe than sorry.Take all legal steps in China to secure your IP.Now, the Chinese legal system is not yet consistent in its IP rulings, but it's getting better as it gains more experience.And, as domestic Chinese firms start to sue other domestic companies the legal structure is developing quickly.In addition to the domestic developments, China is trying desperately to ascend to the level of "developed nation" and needs to completely conform to the standards of the WTO by 2010.That means that your legal copyrights and trademarks will (in theory) have increasingly more weight in China as development continues.So make sure that all your legal ducks are in a row in both the West and China.

Second, like in the West, work with people you can trust.But the questions is: if you've never worked in China before, who can you trust? The key to trust in China is long term relationships.If you know others who are already working in China secure an introduction from them for a reliable partner in China.Someone that has already invested in a relationship will be much less likely to violate agreements and steal your IP.It goes without saying that the reason for theft is money-if your individual relationship is not worth as much as your IP to a Chinese factory, you could be in trouble.

One of the ways to secure a solid relationship is work with SRI.Since we have developed our network in Asia over the past 10 years, our relationships with factories are worth more than your individual project.And we continue to actively invest to maintain these relationships.This is the best safeguard that you can have-relationships and finances that will continue beyond any single project.

If you want to develop you own personal network in China you need to come to China to do it.Fax, phone and email will not cut it.And despite the simplistic claims of every tradeshow hosted in Asia, a one week whirlwind tour will not produce the quality relationships or the level of trust for you or your factory that you're looking for.Start thinking long term and plan to spend 3 to 6 months working on a daily basis with your Chinese partners.Not only will this time allow each side to build a relationship of trust, it will also allow each side to understand standards, personalities, processes and limitations-all of which are vital to a successful relationship.

Outside of the factories, some of the most important relationships that you will ever develop in China are your relationships with the relevant government officials.Possibly no one outside of the engineer who actually makes your product can affect the success of your venture in China more than can a single government official.While China is again (unfortunately) known for corruption we are not advocating bribing officials to allow you to do what you want.Rather SRI's position is to follow the law and promote mutually beneficial relationships with officials that you will invariable interact with.Again this is not cozying up to corrupt officials, rather we mean-know who you are working with and through.If you need specific regulatory permission or have to pay for special export visas on a consistent basis you should know the people that are the key decision makers for your specific products.

A third safeguard is to physically limit the transfer of IP to different locations or different times.By temporally or physically separating IP you ensure that no one has access to the entire set of information.Sometimes with smaller or simpler projects this may not be possible.But case specific variations of physical limitations are often just as effective.For example, limiting pieces of a package of simple items to different locations can decrease the likelihood of he entire set being stolen.Planning ahead and producing pieces for next year's production runs concurrently with present production runs allow you to completely hide the nature of future projects.At the very least this ensures that you are first to market.

Fourth, have a physical presence in the factory.If a visit once or twice a year is not enough to convince you of your factory's good intentions, then hiring a full time QA professional is a great option.While this may sound like a stretch for a SME, it can be done quite effectively and easily.If you've already registered your products in China then you know a lawyer or two that can help you register your own company in China and heir a couple local employees to keep on eye on things.If that's too much to bite off at this point, SRI can help you.Since SRI has a full time staff of college educated experienced QC managers we can act as your independent eyes and ears in a factory on a full or part time basis.Since we get paid by you and not the factory, you can trust that SRI will work for you.

Fifth, since you listened to our advice above you'll be on the ground when your factory does production.And when you're finished you can easily remove all molds and other process materials or machinery that you purchased for the production of you product.Removing the physical opportunity for piracy adds another layer of protection to your IP.

A final word of caution: piracy and IP violations happen all over the world-yes, in the West too.The advantage that the West has over China is the extensive and experienced legal system that can enforce IP laws after IP has been stolen.Don't miss your opportunity to take advantage of the unprecedented opportunities in China just because of irrational fear of theft.Don't go in blind either.Be prepared, be wise and work with people you can trust.

Good luck!

David Dayton

SRI-Your Branch Office in Asia.


David Dayton the owner of Silk Road International and currently lives full-time in Shenzhen China.He speaks English, Thai and Mandarin and has worked in Asia for more than 15 years.You can contact him at david@silkroadintl.net or at www.silkroadintl.net.
Return to List of Articles