How to Protect Your Product Idea When Working with Overseas Partners? (Part 1/2)
Nowadays, the pace of innovation accelerates and the production economy becomes global. It’s increasingly common to work with overseas partners for development and production, especially for electronics and smart devices. Sharing business data and product details with partners come with a risk – ideas and intellectual property could be compromised, copied, or even stolen. Ultimately, it is your responsibility to protect your product idea. This article will identify the fundamental problems of intellectual property theft and copying. In addition, we will propose suggestions on how to protect product ideas and products if you run a startup that is new to working in China or other foreign markets. It’s a long story, but we’ll make it as brief as possible.
Intellectual property thefts can happen anywhere, not just in China.
Clearly, money is the primary motivation for people to copy products and steal intellectual property. Truth is, many successful businesses were built on stolen ideas. It’s not news that Apple has been guilty of its instances of creative “borrowing.”
There are thousands of examples of intellectual property theft all around the world. In the end, the problem is multi-faceted. Not only do manufacturers copy popular products, but also those in distribution channels have been accused of lifting ideas. There will always be an “opportunist” willing to ask a factory for reverse engineering to produce a knock-off.
As a developing country and the manufacturing center of the world over the last few decades, the protection of intellectual property in China has long been problematic. 15 or 20 years ago, it was almost impossible for Chinese authorities to enforce intellectual property laws. There were “villages” in China with thousands of manufacturers producing similar products. In such an ecosystem, one factory often sold components that another factory manufactures. Furthermore, many production facilities shared distribution networks and clients with other companies and individuals. The complicated web of relationships in China made investigations incredibly hard and collecting evidence seemed impossible, let alone opening a case for intellectual property theft.
With a fast-growing economy, a surging innovation sector and a population of 1.4 billion people centered in large manufacturing areas, it’s no wonder that business operates fast and loose in China.
Naturally, this situation presents unique problems that seem difficult to overcome for those who are accustomed to working in mature and structured economies with well-developed IP laws.
For the most part, China has changed its previous copying mindset and is growing to become a new center of innovation. However, there is still chance that your product idea can get stolen and every company and team must know how to protect themselves.
What is a product idea?
Many people see a product idea as a napkin sketch with a couple of comments on it, or maybe 2D graphics with a short of description. But this is just a concept idea. Before turning it into a successful business, a lot of work is expected to be done so that we can develop the idea more thoroughly.
A team has to research and confirm many things before jumping into the costly product development process. The scope of work concerning idea development can vary from a few weeks to a few months’ of work. Many things need clarity before kicking off product development including problem research, use cases, specifications, business model, value proposition, and the task list goes on and on.
To define all of these requires intensive research and documentation. These documents are an asset – intellectual property. It takes a great deal of work to create those documents, and it’s going to be worth it due to their real value.
Nobody needs undeveloped ideas
Your research might be helpful for someone who wants to take over the project. In fact, not many people might want to do that. You might have come up with some great solutions. However, an idea is worth nothing if no one can execute on it. Have you ever wondered why investors only fund instead of starting their own business or product lines?
Developing a new product and creating the whole business is taxing, costly and comes with tons of uncertainty and risks. Ultimately, unless customers start pouring in, you don’t know if it is going to be a success or not. That’s why it’s unlikely that anyone will steal your idea at an early stage in the development process.
Why share your idea at all?
The fact is, you have to step out of your garage and laboratory and share your idea with others. There are three essential reasons why you want to share them at early stages:
- Market research – approach your target audience and tell them what you want to make and how much it will cost. Now, observe and analyze their reactions. If they seem excited and willing to support you, it’s valuable data to help validate your idea.
- Product Feedback – asking people for feedback can improve your product quickly and significantly, even when it’s just an idea. You have a better chance to learn what matters to them.
- Partners – get some R&D engineers who can give you advice regarding development and manufacturing timeline and costs. Then, you will need lawyers, marketers and other business partners to answer questions related to their expertise.
In short, by sharing your product idea, you’re engaging with your customers and those who could help you make your business happen.
How to protect a product idea you’ve shared?
Here are three ground rules you should follow:
- Always sign a Non-Disclosure Agreement (NDA) or Mutual Non-Disclosure Agreement (MNDA). To discuss with people about the idea, sometimes you’ll have to share a significant amount of product details. Inevitably you will expose sensitive information such as the market niche, product features, unique technology solution, etc.. An NDA or MNDA will help protect these types of information from unauthorized disclosure.
- Apply for a provisional patent that puts you in the “patent pending” status. Provisional patents could give inventors and companies the time (12 months) to research and develop ideas. After that, you can file non-provisional patent applications. That said, regardless of pending patent status, you should sign an NDA or MNDA. IP laws and regulations are a huge and complex topic. Before you get on that path, you have to educate yourself.
- Limit the amount of information you share with others. If people have only a small piece of the whole puzzle, they can’t do much with it. On top of that, they still need the time, effort and resources to execute upon any idea they encounter.
In the end, put yourself out there in the vast and wild internet world. Most Indiegogo and Kickstarter campaigns share their ideas by asking the crowd for support. In the startup world, a successful crowdfunding campaign is a significant milestone. Backers take chances and pay a startup for pre-orders of the product. They don’t have any guarantee of the product itself and when you will deliver them. A successful crowdfunding campaign is a green light for the market validation. Besides, running a crowdfunding campaign is an excellent way to raise your brand awareness.
With the proof of market demand, partners and investors are more willing to work with you. Sometimes even to give you an extra push, though one should never expect it.