How to Protect Your Product Idea When Working with Overseas Partners? (Part 2/2)
As stated previously, it’s never an easy task to execute an idea, but copying one is simple. However, being proactive and taking actions beforehand can be of help significantly to protect it from being stolen/copied. Chances are your product becomes a mega global success and people can’t help but start “borrowing” your concept. However, that would be a different topic.
Having covered the ways to protect your product ideas, we will continue discussing how to protect your product while working with overseas partners.
1. Build defensible products
1）Blend software and hardware
The best way to protect a product is to connect it to an app. Consequently, specific features can work only with the app or with an internet connection. Such products are hard to copy because only the owners can access the underlying system.
You can also build firmware internally and plan for regular updates. Even if someone succeeds in hacking your product, once you find out, a firmware update will prevent further invasions. iOS is probably the best example. It is possible to copy the hardware, but software is exclusively available only at the discretion of the Cupertino team.
2）Apply for patent
You can defend products with granted patents. However, this is an expensive proposition as you have to put a rock-solid scope of protection in place to rely on this model. Obtaining such a patent requires experienced lawyers who will cost a fortune. Also, dealing with infringements is an expensive game that only money-printing machines like Apple and Samsung can afford to play. Often, this strategy is seen as a waste of time for most startups due to their financial status.
However, it doesn’t necessarily mean that you shouldn’t get a patent. You have to take the time and learn more about patents during the ideation stage to find out whether or not getting patented is a good option for your product.
For now, at least we can say that patents can’t be the only protective method for most products. Most of the time the best choice is to first look at other ways to protect your IP.
3）Keep delivering innovative products
Another model that has been proven to work is to build a brand and hit the market frequently with unique and innovative products.
Reverse engineering and manufacturing a batch of knock-offs will take an interloper 3-6 months, depending on product complexity. Then, it takes another few months for knock-offs to reach the market with no guarantee of acceptance, let alone success. That means you have 6-9 months to get the business up and running and the money to develop another killer product, then wow your customer base again.
It’s a complicated model that requires lightning-fast development and execution, but it can work.
2. Sign enforceable contracts
Paying lawyers to create impeccable contracts that you can enforce is probably one more expanse you are trying to avoid. However, if you’ve found a manufacturer that is willing to develop a product with you, or even better, sort out the whole supply chain. Be careful! This is where you will want to get a little help from them.
Chances are a manufacturer provides you a “contract” in English. These contracts might be so unprofessional and inaccurate that they clarify almost nothing. For example, there may be no specific terms and conditions regarding ownership of technical documentation, molds, and other hard goods or IP. Make sure you double, even triple check. Sometimes, manufacturers and suppliers in China will tell you that an invoice works as a contract…I mean, seriously?
Even if you insist on signing a proper contract, it still can get tricky. A manufacturer maybe provides you the contract written in both English (or language upon your request) and Chinese, but in fact, the English contract could potentially state completely different things from the Chinese one. If you end up in a Chinese court (unfortunately) and the contract is governed and construed by the laws of China, the English one will be most likely ignored.
It is an extreme case, of course, but it did happen. The point here is to remind you to be careful and smart when working with international partners. It’s impossible for you to be prepared for everything. The consequences of blindly working your way through the Chinese business and manufacturing ecosystems can be disastrous. That is why you need help from a trusted, professional and experienced organization in China.
3. Spread production over multiple suppliers
Spreading production over at least 2 suppliers is one of the most effective ways to prevent the unauthorized production of your product. If you manufacture different parts of a product in various factories and then do the final assembly in another factory, then nobody can possess the entire product documentation.
However, this will hold you accountable for the quality of each part. It will take more effort for you to communicate with several suppliers. Meanwhile, you will also need to ensure that quality and accuracy are up to par. Remember things will always go wrong, and that’s a fair part of the production process. Therefore, the ability to manage your Chinese suppliers is crucial. Primarily, you’ll have to conduct a lot of QC and troubleshooting with each supplier separately. This process can be incredibly strenuous and time-consuming if not handled by an experienced person or organization.
It’s true that China and other overseas centers of production have a history of IP theft and product copying. That said, the situation is improving, and working with trusted international partners is profitable, achievable and rewarding. The Chinese government will spare no efforts into strengthening your IP protection if you build a strategy based on local policies and regulations. However, it’s still necessary to be proactive and take extra steps to protect your product, service or IP.
Rather than avoiding the situation, it’s the best to face it head-on with the proper due diligence, preparation, and oversight. Protect your ideas, work hard, collaborate with the right (and good) people and your success is on the way. Always remember,
- An idea without execution is not worth much
- Share only as much as necessary with partners who don’t need to know more
- Always sign an NDA/MNDA when sharing product details with a potential partner
- Apply for a patent if your patent research shows that it makes sense
- Be 200% careful with your contracts with manufacturers
- When doing business directly in China, sign contracts in Chinese and make sure you understand what it says
- Get a trusted, experienced agent or partner in China or wherever you are aiming
- Build defensible products
- Spread production over multiple suppliers
What’s your experience/question(s)/thoughts on how to protect your product ideas and products when working with international partners? Leave a comment below!
To read the first part of the article, please click here.