Afraid the factory will steal your designs?
This article is part of my Manufacturing for a Kickstarter series.
The fear of other people stealing your designs is real because the laws in other countries vary so much from the West. Just because you invented it or was the person to market it, doesn’t mean the judge will side with you.
The enforcement of such laws may also be weak in other countries due to favoritism towards their local companies or simply from a lack of professional resources for enforcement.
In any case, just because you have copyrights or patents registered in the West doesn’t mean it is carried over to other countries. If you are manufacturing goods in a country and you think that country would also want your product, you should consider applying for copyrights or patents in that country too.
While having copyrights may not necessarily protect you from theft, it protects you from bad people registering copyrights in their name and then kicking you out of the market!
Don’t show all your cards
Another aspect of protecting your secrets is to not reveal it at all.
KFC was famous for closely guarding their recipe and only shipping premixed ingredients to franchised stores. The franchises never knew the secret ingredients.
The idea is to have different factories make different parts of the product so that one factory cannot unilaterally make the whole product on their own.
This isn’t feasible for a lot of products and most factories have the expertise to perform reverse-engineering nowadays, but the idea is to not show all your cards so that the factory can’t copy you exactly.
Western Digital ensures the authenticity of their computer memory cards by producing unique stickers that go on each product that the user can scan the unique QR code with their phones and the website will tell the user how many times that particular code was scanned. This reveals whether the sticker was duplicated, which implies the product may be fake.
Deception and misdirection
Another way to protect your secrets is to hide the true value of it. The factory is less likely to rip off your product if they think it is only a low cost product or don’t even know what it is.
Did you invent some unique silicone attachments for dentists to use on braces? Tell the factory it is a silicone spacer to use in broomsticks.
Even if your factory tries to sell it themselves, they won’t find any buyers looking for silicone spacers for broomsticks.
You could even add additional design elements to the product to confuse the factory and when you receive them simply cut them off to reveal the true product.
Keep details private until the last minute
Only give whatever details your factory needs to get started and slowly reveal more details as manufacturing progresses.
For example, if you’re printing a picture or design on the body of the product, give them a low resolution image which they can use to calibrate their tools and produce test units and only give the high resolution image when they really need it. (But make the test image obvious or else they may print the test image on the bulk production!)
What has happened before was that a factory would quote a client 2 months to finish a shipment. But since they had all the details on hand, they secretly finished a small shipment within 1 month and sold it to someone else. By the time the client’s goods were ready to ship in 2 months, their merchandise was already being sold on the market.
Choose a factory based on speed, not cost
You can also accept that your products will be knocked-off and try to win by being fast.
Some factories are cheap but slow and if the factory is far away from your target market, the transport time will further exasperate it. If knock-offs are high in your field, consider speed as being your competitive advantage over cost. To ship a container from Southeast Asia to the United States takes on average 1 month. To truck a container from Mexico to the United States takes a few days.
Do a diligence check on the factory
Is the factory really a factory or just an agent? An agent will distribute your product details to multiple factories to find a better price. Take appropriate steps to “dress up” your product details so that people who only have a glance at it won’t be able to replicate it.
Sign legal contracts with the factory
Unless if all the legal paperwork is more expensive than the product itself, it helps to sign a contract with the factory in their country’s local language so that it can be used in court and serve as a deterent.
Hire a lawyer to include appropriate wording to protect your intellectual property.
File copyrights in foreign countries
Compared with a few decade ago, foreign countries now take intellectual property rights more seriously. However, laws vary and you should rely on proactive registration of copyrights rather than waiting for trouble and then fighting it in court.
Foreign courts typically favor local companies since it brings their community employment and pride. This puts foreign entities at a disadvantage. Filing for copyrights is not foolproof, but at least you get a 50% chance of success over 0%.