China’s Evolving Manufacturing Landscape
Rising geopolitical uncertainties around China have transformed the landscape of Chinese manufacturing and IP asset protection. This post examines the escalating challenges faced by Western enterprises, and provides steps companies should take to safeguard their products and intellectual property from increasingly desperate Chinese factories. It focuses on essential, yet frequently undervalued, mold ownership agreements.
Geopolitics Increases Your China Manufacturing Risks
For obvious reasons, Chinese manufacturing companies are concerned about the state of China’s relations with the countries from which the bulk of their product buyers come. In turn, this has changed how they the Western companies for which they make products. In particular, Chinese manufacturers now view their foreign buyers as likely to eventually leave China and that makes them less interested in trying to maintain a long-term relationship. Most importantly, this has made Chinese factories more likely to seek to quickly steal whatever they can from their Western product buyers.
Chinese Factories Are YOUR Competition
My law firm’s international manufacturing lawyers constantly get emails from Western companies whose products are being copied by Chinese manufacturers only weeks after they first met with those manufacturers. Chinese manufacturers have always escalated their IP thefts when they believed they could make more money selling YOUR product than they could making your product for you.
In the old days, this usually took years and a deteriorating relationship between buyer and Chinese manufacturer before Chinese manufacturers would start directly competing. But now, with long term Chinese manufacturing profitability declining, Chinese maufacturers are far more often and far more rapidly choosing to steal their product buyers’ IP and compete with them. See Your China Factory is Your Toughest Competitor.
The Power of China Mold Protection Agreements
What’s all this got to do with mold ownership agreements? A lot.
One of the best ways to stop or slow your Chinese manufacturer from competing with you is by legally blocking it from using your molds for anything other than making products for you. There are many ways to accomplish this, but one of the best ways is with a relatively simple mold ownership agreement that makes clear your molds belong to you, and your manufacturer cannot use them for anything other than making product for you, nor can it retain your molds once you request their return.
By unequivocally asserting your mold ownership and expressly mandating their use solely for your products, these contracts ensure your manufacturer returns the molds upon request, forestalling ambiguity and misuse.
Precisely crafted mold protection contracts prevent your Chinese manufacturers from engaging in unauthorized production with your molds. By establishing your ownership and explicitly prohibiting any use other than for your products, these agreements ensure your Chinese manufacturer returns your molds, without ambiguity or potential for misuse.
China Manufacturing Protections
Increasing geopolitical tensions with China requires extra vigilance to protect your intellectual property when manufacturing in China.
Mold ownership agreements are an excellent and relatively inexpensive first line of defense, but they are most effective when part of a broader strategy that includes trademark, patent and trade secret protections as well. See Protecting Your Product From China: The 101.