Chinese factories are stealing intellectual property much faster after the signing of the Phase One trade deal with the United States, as the decoupling with U.S. supply chains is accelerating.
Once a U.S. company’s trademark is registered by a local company, Chinese law gives the local ownership rights to stop products from being produced for international export at the border and prevent them from leaving China. Several U.S. companies have been forced to pay significant dollars to get trademarks “back” and to get goods flowing out of China again.
American attorneys working on new cross-border deals in China are warning that American companies tend to send emails to a Chinese company inquiring about the possibility of having that firm manufacture its products; and then after a day or two later, that Chinese company will file to register the American company’s trademark in China. Several Chinese companies have sold foreign patented and trademarked products worldwide before they even sell one of the products to their foreign corporate customer.
At the height of the Sino-U.S. trade war in November, the goods deficit with China fell by 7.9 per cent, according to data released by the U.S. Census Bureau. With the 20.84 per cent fall in Chinese exports to the United States versus a year ago, American purchases of Chinese goods are the lowest since March 2013.
Chinese factories expect that many of their current American clients will be leaving China in 2020; and any new U.S. clients will only be using them as “test kitchens” to develop products and then move production to another off-shore site when the product is fully developed and selling in volume.
China trademark lawyers comment that with local manufacturers desperately wanting to improve their profit margins, “what better way to do so than to sell a product under a prestigious or well-known American brand name.”
Once a U.S. trademark is registered by a local individual or company, the only guaranteed way to regain control of the intellectual property is to try to buy the brand name and logo from the Chinese party that has control of it.