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  • Writer's pictureBoyd Jones

The Case of the Counterfeit Chinese Factory

Doing business in Asia is always daunting; to paraphrase the wise folks at Technomic Asia: In Asia, anything is possible but nothing is easy. A case in point is the Intellectual Property journey of a North American medium-sized manufacturer (let's call them ABC) with extensive exposure to China in terms of its supply chain. In short, by collaborating with Strategic Sourcing, ABC was able to uncover and rectify an egregious Intellectual Property Right infringement surreptitiously undertaken by a group (let's call them FakeABC) affiliated with one of their distributors.

Our work for ABC was focused on optimizing their supply chain in Asia but also included monitoring of their IPR (Intellectual Property Rights) exposure pursuant to their supply chain. First, as we worked on a strategic partnership for ABC with an entity with an incredible distribution network in China, we discovered products branded as ABC being sold in the wild. Cautiously, our on-the-ground team investigated and discovered a small-scale factory (FakeABC) that was making and selling ABC-branded products throughout China. As is our procedure, we then conducted a thorough search of trademark databases and determined that FakeABC had indeed registered several of ABC's decades-old and valuable brands in China. In China (as it some other countries) trademarks can be registered on a first-come/first-serve basis -- and local authorities and courts often defer to local individuals and businesses with even the flimsiest arguments for doing so. We also discovered FakeABC's website and posts to e-commerce sites.

(Aside: If you have not registered your trademarks in key foreign markets including the jurisdictions of your manufacturing and other supply-chain partners abroad, please do so immediately. We can help.)

In this case, ABC was lucky. FakeABC admitted its nefarious undertakings with an excuse of "we were just planting a flag for ABC in China to protect their trademarks from others." After admission, FakeABC agreed, pursuant to a confidential settlement, to cease business operations and sell its Chinese trademarks to ABC itself. Strategic Sourcing worked fist-in-glove with ABC and third parties (e.g., lawyers) to drive this case to an amicable conclusion.

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