Giving Your IP to China Out of Love

One of our China IP lawyers tends towards sarcasm, and in cleaning out my email stack I found this email:

Another company that loves China so much that they have already given all their IP to a Chinese company with nothing in return. American and European companies seem not to realize that if they teach a Chinese company how to make their product, it can be sold in China, S.E. Asia, India, the Middle East, Africa, Latin America and Japan and Korea even if they have a patent in the United States or the EU. They come to us AFTER they have given everything away. They do not realize China’s IP policy is to “assimilate” foreign inventions for China manufacturing and selling in jurisdictions where American and European patents and other IP registrations have no effect. This is not IP theft. It is a gift from the kind and benevolent American and European companies.

This email was written in response to the third company on the same day coming to us after having lost their IP and asking us to help them.

Not good.

Here’s the deal people.

Chinese companies right now are as desperate as we’ve ever seen them. They believe that their American and European “partners” are going to abandon them because of US tariffs and because of eventual decoupling. They realize this will damage their business, perhaps to the point that it cannot survive. They see themselves as desperately needing to do something to forestall this and appropriating the IP they’ve been given by their American and European “partners” is their solution. On many levels, this only makes sense, especially since so many of these Chinese companies are hurting economically. Just last week, both the Wall Street Journal and the South China Morning Post wrote about how badly Chinese manufacturing companies are doing these days.

It is YOUR job not to let this happen!

But how? Very simple. Do not reveal anything to your Chinese counter-party that you would prefer be kept secret unless and until you have done all that you can to protect it. This protection typically involves conducting due diligence on your Chinese counter-party, employing a China NNN Agreement, and securing a China trademark, China patent, and/or China copyright.

And, as we pointed out in China Contract Drafting Scams: From Bad to Much Worse, it is important you be certain that your lawyers who draft your China contracts and secure your China IP registrations are truly working for you and not for your Chinese counter-party. Sticking with the theme of American and European companies “gifting” their IP to Chinese companies out of love, I suggest you also read You Need an Enforceable China Contract no Matter how Much You are Feeling the Love.