Today, it is common for U.S.-based manufacturers to outsource manufacturing of their product line to countries with lower costs. Perhaps your company has already done so. While this business plan can increase short term profit margins, the company outsourcing its manufacturing to a foreign company is also in danger of exchanging these shorter term gains for the long term value embedded in its intellectual property rights. As an IP Strategist and owner of an IP Strategy and Consulting service, I can tell you that a well-thought out patent U.S. patent strategy can be the best protection when a company is engaging foreign manufacturers to make its product.
Let’s assume that your company is introducing a consumer gadget in the U.S. Business realities today likely require your company to manufacture the gadget in China and import it into the U.S. This plan makes good financial sense, but you are also likely concerned that your Chinese-national manufacturing partner will learn your company’s trade secrets and step out on its own to compete by selling your product design in the U.S. Although your company probably entered into a confidentiality agreement with your Chinese manufacturing partner, are you really prepared to litigate the agreement against this foreign company on its own turf? And, besides, if your partner steals your trade secrets, the damage already exists—you have given your Chinese manufacturing partner a blueprint containing your trade secrets and they are poised to knock-off your gadget into the U.S. to compete directly with your on your home turf.
If your company had the foresight and budget to file for a Chinese patent, you may think you have recourse against the manufacturer under Chinese law. But, as is reported frequently in the press, developing countries often are found to have spotty records of protecting intellectual property rights, especially when the patent holder is not a resident of that country. (See, for example: http://www.businessweek.com/globalbiz/content/mar2008/gb2008035_462577.htm?chan=top+news_top+news+index_global+business) So, even if you invest in patent protection in China (or another foreign country where you plan to manufacture your product), the reality is that, as a U.S.-based company, you are unlikely to enforce your intellectual property rights in that foreign jurisdiction.