Who Owns the IP? Is it Safe to Buy From China?

How do I find out who actually owned the IP for a product I want to buy in China? At least 15 different “firms” claim to manufacture a product that we are looking at. The products that they “manufacture” all appear to be identical, using the same chips, hardware, and enclosure. The only differences are the model numbers and the stickers on the devices. In addition, a European company claims to have patent rights on the product, selling the identical product for 3 times the price. How do we find out  if the manufacturer has the rights to the IP?

I’m glad to see you are doing the honorable thing and checking out the ownership of IP before you buy something.  Some buyers get into big trouble because they assume if there is a supplier selling something, the supplier is responsible if the product is in violation of patent or a counterfeit.  But that thinking is only partially correct and misses the key dangers.

Let’s look at two possibilities.

If the IP is registered IN CHINA to somebody else, then the China seller is offering counterfeit goods and is exposed to a lawsuit in China, even if they are exporting to a marketplace where the product is not IP protected.

If the IP is not registered in China, but is registered in the destination market, then the China supplier may not be exposed, but the importer of record (you) have massive exposure.

The supplier may say “there is no IP involved, buy from us, we sell overseas all the time.”  Easy for them to say, because they are not the importer or distributor or user into your country, if something goes wrong, the USA lawyers can’t go after a Chinese company in China with no assets in the USA. So the government and lawyers go after the easy target- you.

So, if I were in your shoes, the first thing I would do is to check to see who ones the IP in the USA for this product.  But even if the IP is unprotected in USA, you should still double check the ownership of the IP in China.  For example, if the European company owns the IP in EU and China, but not USA, you may not have legal exposure if you import to the USA, but you are still very exposed to supply chain drama if you purchase from China. Imagine if you place an order, then the EU company or PRC government raid the warehouse of your supplier in China. Those goods will be confiscated, your supplier may very well go out of business, and you just lost not only the money you had sent to the supplier, but now you have no orders to deliver to your clients.  In short, it can be a big mess, so you are wise to do the homework in advance and find out who owns the IP in the two key markets: your home country and your country of manufacture.

Hope this helps.  Let me know how things work out.  BTW, if you need a lawyer to help you check up on who owns the IP in China, just let me know, I sit on the board of advisors at www.AsiaBridgeLaw.com and would be happy to make some introductions for you.

Question answered by Mike Bellamy

Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). He is also the author of, “The Essential Reference Guide to China Sourcing” (chinasourcinginfo.org/book) and founder of PassageMaker Sourcing Solutions (www.PSSchina.com )



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