BRAND Archives - PassageMaker

Protecting intellectual property in China (Part 3 of 3)

April 1, 2014/0 Comments/in China Business Blog /by Mike Bellamy

How to go about protecting intellectual property in China

As the client’s purchasing agent on the ground in China, it’s not just factories that PassageMaker coordinates. For example, we often help clients register and monitor their intellectual property to ensure competitors (or sneaky suppliers) don’t gain control of the IP.

Below are excerpts from communications with some clients and potential clients. If you have questions about registering, protecting and monitoring your intellectual property, you may find the following Q&A of interest.

Part 3: Monitoring Intellectual Property

Aaron in Georgia asks: “I’m on a tight budget, how can I do some basic monitoring of my supplier’s factory to ensure they are not violating my exclusivity agreements and selling my product to other buyers?”

PassageMaker Representative:

As part of our vendor coordination services we often visit the factory in person. During these visits we look in the following places for the following reasons:

1. If there is tooling/molds which are to be used exclusively for your production, we check:

a) Where are the tools? If they are not stored in the right place at the right time, they may be in use at another factory running your parts for other buyers! For your reference, visit this page if you want to see some ways in which buyers were abused and how to protect your tooling/molds.)

b) How are the wear patterns on the molds? If you ordered 10,000 units but the tooling shows wear marks indicated a much larger production run…that’s a red flag your product is being sold out the back door.

2. We look in the sample room and check the company brochures (Chinese and English) to see if the product you have under the non-disclosure, non-compete agreement is being show for sale to other buyers.

3. It’s also a good idea to visit the warehouse and see where product is being shipped to. Often the brand and buyer is listed on the master cartoon. If we have a list of your competitors, we can keep an eye out for those names.

4. We can also walk the trade shows where your supply exhibits to check and see if your product is being shown to other buyers without your consent.

Even if you are overseas, you can still monitor your supplier in the following ways:

Have a friend contact the seller pretending to be interested in the product you have under exclusivity with the seller. If the seller is willing to take an order, that’s a big no-no.

Visit the factory’s website (in English and Chinese) and listings on GlobalSources.com and Alibaba.com to see if they are showing your product.

TaoBao.com is by far the biggest channel used by factories or factory staff to sell products out the backdoor. Check in periodically to see if your product is for sale and who is selling it!

Protecting intellectual property in China (Part 2 of 3)

March 25, 2014/0 Comments/in China Business Blog /by Mike Bellamy

How to go about protecting intellectual property in China

As the client’s purchasing agent on the ground in China, it’s not just factories that PassageMaker coordinates. For example, in the pre-production phases, we often help clients register and monitor their intellectual property to ensure competitors (or sneaky suppliers) don’t gain control of the IP.

If you have questions about registering, protecting and monitoring your intellectual property, you may find the following resources of interest.

Part 2: Protecting Intellectual Property

Here are links to blog posts about IP in China and a video tutorial explaining how to protect intellectual property.

Protecting your Intellectual Property

Private versus public in Chinese intellectual property

7 common questions asked when registering Intellectual Property: costs & steps

Black Box Assembly

Protecting intellectual property in China (Part 1 of 3)

March 18, 2014/0 Comments/in China Business Blog /by Mike Bellamy

How to go about protecting intellectual property in China

As the client’s purchasing agent on the ground in China, it’s not just factories that PassageMaker coordinates. For example, in the pre-production phases, we often help clients register and monitor their intellectual property to ensure competitors (or sneaky suppliers) don’t gain control of the IP.

Below are excerpt from communications with some clients and potential clients. If you have questions about registering, protecting and monitoring your intellectual property, you may find the following Q&A of interest.

Part 1: Registering Intellectual Property in China

Andy in California writes: “We currently manufacture products in China and US and are looking for help on getting a trademark in China.”

PassageMaker Representative:

Very wise you get your trademarks registered. China is a first to register rather than first to market system. So if your current suppliers register your logo/trademark before you do….they would own it, not you. Scary! The good news is it affordable and fairly simple to register logos and brand names. Plus once you are in the system, the courts will provide a lot more protection than if you were not registered.

Unlike some countries where an individual can file a patent, in China an approved registration agent needs to do the filling. We are happy to introduce an English speaking Chinese lawyerthat has helped our other clients get their IP registered. As you already have PassageMaker on retainer for supply chain management, our team in China can coordinate the lawyer as well, so you have one point of contact for China side items.

Based on similar projects in the past, we estimate that you can have the following done for under 1000 USD (the registration agency will invoice you direct, no fees added for PassageMaker as this is part of our supply chain service.)

The registration agent’s service, procedure and fee structure for the registration of a trademark in China is as follows:

Search in the database of China Trademark Office (CTO) to make sure the trademark has not previously been registered.
Organize the technical translations and prepare all documents.
Prepare and submit application to the CTO upon official confirmation received that no errors are found.
Follow the application and update as the application moves through the various bureaus.

Contract manufacturing in China: Fight gray channel imports!

March 8, 2012/0 Comments/in China Business Blog /by Mike Bellamy

The following is a case study on how to protect your brand and prevent gray channels out of China from cannibalizing your markets.

I was recently contacted by an overseas brand of electronics to help them understand how and why the marketplace was being flooded with defective merchandise made under their brand.

Background: Contract manufacturing in China

Buyer designs and distributes electronics around the globe under their own brand.

They have almost a dozen suppliers/ contract manufacturers in China.

Brand is very serious about quality, customer services and maintaining their margins.

They recently discovered their products for sale online in China and suspect this may be the source of un-authorized “gray channel” imports into their major markets in N. America and Europe. The gray channel exports are priced well below MSRP and appear to have serious quality issues and could impact the global reputation of the brand.

Step One: Investigation

Technical review of samples found in the unauthorized gray channels confirmed that the products originated among the brand’s contract manufacturers in China. The factories do not admit responsibility.

Key finding:

Further investigations confirmed that the majority of products in the gray channels were directly linked to the batches of production in China which were rejected by the buyer due to quality issues.

Strategy implemented by PassageMaker (the sourcing services provider brought in by the brand to investigate and solve the problem):

Purchase Order Templates were adjusted to clarify that rejected goods must be destroyed by supplier at their cost.

3rd Party Inspectors would be hire to record the destruction.

Client’s brand was registered in China. Previously registered only overseas. With the IP now protected in China. The brand holder can take legal action in China if needed.

3rd Party Investigators were retained to monitor both Chinese and English language websites like TaoBao.com and T-mall as well as the websites of the contract manufacturers to look for unauthorized products.

3rd Party Investigators were retained to monitor tradeshows in China and HK to look for unlicensed products.

Brand holder clarified its marketing materials and product packaging to state that only product purchased from authorized distributors are under warranty. In this fashion the demand side could also play a role in preventing gray channels.

Between production runs the tooling was removed from the factory and stored at a 3^rd party facility in China to avoid unauthorized production. (Visit “Tool & Die Steward.”)

Important Concepts:

Before the adjustments above, the suppliers were essentially selling rejects out the factory back door to subsidize their costs of production. In some cases, because of the tight quality requirements of the buyer combined with the poor quality system of the supplier, this back door income was a significant source of revenue for the suppliers. Cutting off this source of revenue was hard medicine for the supplier to swallow. Two methods proved successful to remedy the situation.

Some suppliers were dropped and a sourcing feasibility study was conducted to find more professional replacements suppliers who could meet targets for price, quality, lead-time and trust.

The suppliers worth continuing to do business with were given a sit down to explain why it was good for the supplier as well as the buyer to cut out the gray channels. Key points included:

Unlicensed products cannibalize revenue of the brand owners. If they lose money, they can’t place as many orders to the factory.

Brand holder is no longer tolerating unlicensed products and the parties involved face significant financial risk when caught.

The defective goods finding their way into the market are hurting brand reputation. If the brand reputation is gone, the orders for everybody will be lost.

Perhaps the most important message conveyed to the suppliers is that the brand wanted to have stable long term relationships with partners who could be trusted. To show their commitment to the suppliers, and to help the suppliers, the brand owners provided the following:

Accurate annual forecasting and projections. Suppliers love stability almost as much as they love volume.

Technical support and training to help suppliers upgrade their quality systems and finally understand that avoiding defects in the first place, not selling defects out the back door, is the best way to protect the supplier’s margin.

Periodic engineering reviews with suppliers to look for ways to reduce costs in production methods and materials, yet not compromise quality. These saving were shared between the factory and brand holder.

Interesting Side Note about www.TaoBao.com :

To our pleasant surprise, once ownership of the brand was confirmed to belong to our client, www.TaoBao.com was cooperative in helping to remove unauthorized product from their website. Moral to the story: register your brands and IP in China even if you don’t plan to sell there. Here are some blog posts and videos addressing how to register and protect your IP in China:

Protecting your Intellectual Property

Where can I find a partner to help distribute a product under my license for the IP?

China’s Legal System

Michael Jordan forgets to register his IP. Learn how not to make the same mistake.

Land Rover fails to register their IP (lessons for buyers)