When considering sourcing from China, a number of Amazon sellers have one key concern: knockoffs and patent infringement. One of China’s perceived weaknesses is the regularity of intellectual property (IP) infringement. While IP infringement is not as widespread as we’re made to believe, it’s still a potential risk with improper sourcing practices.

You want to ensure that you import and sell legal goods with legal production processes. This includes ensuring your product does not infringe on any patents or trademarks in your sellable markets.

You also want to protect your own intellectual property, if applicable. Overseas production can make some inventors weary because they feel they’re “giving up rights” to their IP.

But with certain precautions, you can avoid intellectual property infringement altogether. This ensures you don’t run into legal concerns of infringement and others’ don’t infringe on your IP as well.

What Is Intellectual Property Theft?

Intellectual property theft is when one person or business holds the “rights” to a brand name, product, design, or idea and another business uses those rights illegally. This can be detrimental for both sides.

The person who owns the rights could have a severe loss of business. For examples, their clients may start buying knockoff products from the other false business by accident. This not only causes the rights holder to lose revenue, it can also ruin their reputation and client loyalty if the knockoff products are sub-standard.

The infringer can also have serious effects if the rights owner goes after them. Infringement lawsuits can be hefty, often bankrupting small businesses and individual sellers. Even if the infringement is accidental, it can kill your Amazon business.

Recommended Read: Amazon Seller Suspensions and Baseless Rights Owner Complaints

There are three types of intellectual property: copyrights, trademarks, and patents.

Copyrights

Copyrights protect artistic works, like poems or songs. This is usually not applicable to imported products, but it can be relevant to the copy on your Amazon listing. Others may infringe on your copyrights if they steal your Amazon copy for their own website, for example. However, this is often harder to prove ownership over, especially if there are multiple sellers on your Amazon listing.

How To Avoid Intellectual Property Infringement With Chinese Sourcing copyright stamp

Trademarks

Trademarks protect your unique brand and logo. This is the ® symbol you see with formally registered trademarks. You will see next to those brands that haven’t yet registered their brand or received approval. Trademarks last indefinitely.

Trademark infringement can occur when an individual or business:

  • Sells a separate, non-branded product (knock-off) under the trademark brand’s name
  • Sells a similar product or knockoff under a similar brand name (like Guci instead of Gucci)
  • Sells a trademark brand’s product without approval

Patents

Patents are used for product designs, functional descriptions, packaging design, and specific inventions. This grants an inventor exclusive rights to their invention or trade secret for 20 years. Often, an entire product won’t be patented, but certain parts or mechanisms will be. This means you can make a similar product but you can’t utilize that specific patented piece.

Patent infringement occurs when you make, sell, import, or use another’s patented product or invention. Patent infringement can also occur if you produce and sell sub-standard knockoffs. (If you sell these knockoffs under the branded name, you can also be infringing on the trademark.)

Patents are usually not worldwide unless the inventor has filed under the PCT International Patent System. Patents are often based in a single country or market. A patent in America does not hold in China and vice versa.

Thus, if a product has an American patent, it is not illegal for you to make that product in China. However, if you try to import or sell the product in America, you are infringing on the American patent.

In America, we’re highly aware of intellectual property and the consequences of infringement. In other parts of the world, though, IP is less severe or considered. For example, in China, knockoffs are much more commonplace in the market. There are fewer regulations and patents to monitor these kinds of infringements. Thus, a Chinese factory may not see a problem in creating a patented product to sell to you.

What Happens If You Infringe?

You should never knowingly infringe on another patent. This will cause serious legal ramifications with consequences ranging from Amazon suspension to personal loss and debt.

If you do infringe, you’ll usually get a cease and desist letter first. If you stop making and selling the product, the problem usually goes away. However, in some cases, it can become a serious and expensive liability.

It’s critical that you avoid selling patented products or trademarked brands at all costs.

If someone else infringes on your patent or trademark, you’ll likely want to hire a lawyer to send a cease and desist and approach the situation in an aggressive and legal manner.

Below we’ll take a look at the ways you can ensure you don’t infringe on another’s intellectual property and also how to prevent others from infringing on your IP, if applicable.

1. Work with credible suppliers.

It is always a trade-off between big manufacturers and small manufacturers. Intellectual property security is one of the most important factors. Big manufacturers are usually highly regulated and they will keep their promise once they signed the contract. Think about this, big manufactures in China usually earn over $10 Million per year. They have no incentives to break the law for that extra $10,000.

Meanwhile, small manufacturers might still be fighting for the break-even point. They are located in remote areas where law enforcement is relatively weak. Thus, we have seen some case in which manufacturers stoled the ideas and started to sell the product themselves.

What’s more, credible and experienced companies in China better understand trademarks and patents. Smaller businesses may not have the same expertise when dealing with international patents. Working with reliable partners makes sure that your factory does right by you, never infringing purposefully or accidentally.

Keep in mind that it’s not the supplier’s responsibility to know the patents in your country. It’s your job to make them aware of potential patents and provide them with regulations and standards to avoid infringement. You need to provide as much information as possible so they know what materials, parts, and processes to avoid during production. A credible supplier will follow your instructions to the letter to ensure they don’t infringe on those patents.

In general, This is the type of problem that you have to work closely with your supplier to solve it together. If you have selected a reliable supplier, your life will be easy.

2. Sign a contract.

Contracts can help ensure that your supplier meets these standards and avoids infringement. Your contract can outline exactly how to make a product in a way that doesn’t infringe on any patents. You may also want to attach applicable patents and patent descriptions as appendices in the back of your contract for further reference.

Be sure to include a penalty clause, which outlines consequences if the manufacturer violates the contract, or produces infringing products.

Learn more with 11 Must-Haves On Every Sourcing Contract.

How To Avoid Intellectual Property Infringement With Chinese Sourcing woman hand signing contract

3. Include a non-disclosure.

Your contract should also include a non-disclosure agreement (NDA). The NDA is a confidentiality agreement that ensures your supplier can’t talk about or use your intellectual property for their own purposes. This helps protect your products and ideas from infringement by the factory or others businesses.

This NDA should protect any business information and IP, including trade secrets. You should also specify that your manufacturer doesn’t have a license to produce your product unless it’s delivered directly to you. This prevents your factory from doing a “midnight run” of your products and selling them to other clients without your knowledge.

Not all suppliers will sign NDAs, especially if you’re a small business. We recommend working with a sourcing firm like Ask Idea Sourcing to negotiate these contract minutiae for you.

Keep in mind that an NDA doesn’t stop your supplier from infringing if they want to. They can still make your product or give your idea to another company. If you don’t own the rights to your IP in their market, there are little consequences for breaking an NDA.

Thus, you need to register your intellectual property.

4. Register your IP.

If you want to protect your own invention, design, or product, you should consider patenting it. If you have a personal brand, trademark it. You should register your intellectual property in all potential markets, including the U.S. and China. Patents are most often recognized nationally, which means you’ll need to register in multiple countries for full protection.

Recommended Read: How To Lawfully Import Your Products From China

5. Know your industry.

You should be aware of the key products and brands in your industry. This will help you determine if your product samples are potential knockoffs or infringements. You should know how to spell key brands’ names and the specifics of their products, like their logos and designs. If you can notice product differences in your samples, you’ll be able to spot infringements before you put them on the market.

For example, you may get your product and see that it says “Guicci” on it. You know not to put this fake Gucci bag on the market. (You would also know not to sell this because you might need permission or licenses to sell Gucci products online.)

Note that it is against the law to sell knock-offs with slightly different brand names, like Guicci instead of Gucci. This confuses the consumers and is considered product infringement.

You should also be aware of these differences to avoid selling legal knockoffs that can anger your customers. After a patent expires (after the 20-year period), the market is usually flooded with copies of that product. While this is legal, customers can often get frustrated if they accidentally purchase knockoffs instead of the original.

It’s okay to sell non-patented copycats—but don’t pretend to be a certain brand or sell a “branded” knockoff.

How To Avoid Intellectual Property Infringement With Chinese Sourcing laptop search engine searching for patent

6. Search for related patents.

Most companies will publicly display the patents that they hold. If you can find a patent registration number, you can Google it to search Google’s patent database for a full description. If you don’t have access to the patent registration, you can Google “patent + company name + description” to start searching for relevant patents.

This is an easy way to start finding patents related to your product. It’s critical that you know all related patents and their specificities so you avoid accidentally infringing.

7. Be proactive.

Fight against your own IP theft with strong management. Hire a sourcing partner or legal advisor to watch the market for you, so you’re always aware of potential infringement.

Take preventative measures against potential IP infringement:

  • Don’t share your IP info with anyone who doesn’t sign a contract.
  • Don’t share design ideas in full at trade shows.
  • Use technology that deters cyber theft and keeps your information protected.
  • Use multiple partners and suppliers to create different aspects of your products, so only a few individuals see the whole product creation start to finish.
  • Establish a method of responding to potential violations.
  • Perform ongoing inspections in your factory to maintain compliance and product standards.

The Bottom Line

If you are sourcing from China, be sure to make your factory well aware of potential patents and trademarks to avoid infringement. If you have your own product or brand, be sure to patent and trademark it appropriately to protect your business.

When possible, focus on private labeling non-patented or partially-patented products. Never sell a product that could come up in a patent gray area. It’s not worth the legal and financial consequences if something were to happen.

Infringement and sourcing legalities can feel overwhelming and daunting.

So don’t do it alone.

Contact Ask Idea Sourcing now to find credible suppliers and avoid product infringement at the source. We look forward to speaking with you.