A manufacturer may produce your product for the competitor or even produce counterfeit products if you are not protected. It is easy for them to manufacture a counterfeit product because all the molds and processes are already setup. Hence it is easy for them to sell or give your models to another factory to have your product produce by them.
China is known of being notorious in infringing intellectual property rights especially with companies wherein their intellectual property rights are not properly protected. The reality is that China does not seriously follow the Intellectual Property (IP) protection unlike with the other parts of the world. Moreover, it is not ingrained in their culture.
It was said that China can still be a safe place to manufacture if there is proper protection of intellectual properties rights. China legally has to enforce IP protection and right steps should be taken.
Here are some ways to protect goods from counterfeiting:
Screens, Designs, Utility Models and Molds are Your Property
In the contract it should be clearly stipulated that all screens, designs, utility models and molds are 100% your property. Product should not be reproduced, sold or showed to anyone else unless there is an expressed written permission from the owner of the product. Ask for the assistance of a Lawyer before entering into a contract.
Register Trademarks, Patents and Copyrights in China
Register your trademark and or patents in the proper agency that has jurisdiction of registering of trademarks and patents to be protected from counterfeiting.
Even though the trademark and or patent of the product is already registered in USA still the same should be registered again in China otherwise the product is not properly protected from counterfeiting.
Research Lawsuits against Your Manufacturer
Employ a Lawyer to conduct research to the manufacturer to determine whether or not the manufacturer had been sued before or if s/he has pending case/s in the court specifically if the case pertains to intellectual property issues. In this case you can decide not to continue to enter a contract with him.
Any manufacturer you work with should be required to sign a non-disclosure agreement (NDA) that stipulates what they can and cannot disclose to other parties. Make sure that your intellectual property is confidential and that if there will be any breach from the stipulations in the contract there will be a corresponding sanction that must be enforced to the violator.
Shut Down Counterfeit Operations
If you caught any entity that I selling a counterfeit products immediate action should be taken. The best way to do it is to shut down the company that producing and selling counterfeit products.
The most common and fastest way to shut it down is to file for administrative enforcement. This will get the operation shut down quickly, though you won’t receive any settlements for damages caused. The other way is to file a case either civil or criminal charges.
If you find counterfeit products on the market, you should immediately order an IP inspection of your factory to figure out if the breach came from them. Your contract should stipulate that unexpected IP inspections be allowed.
Outsourcing your production to China is riskier than manufacturing at home from an IP point of view. However, if you take the right steps to protect your product from counterfeiting, you can minimize the chances of intellectual property infringement by registering the product in the proper agency.