OEM Manufacturing in China: Protecting Your IP from Copycats

Manufacturing products in China can save your business thousands of dollars. However, there’s one big problem that keeps many business owners awake at night. Copycats and counterfeiters are everywhere, waiting to steal your designs and ideas. In fact, manufacturing companies face 18% of all global IP theft incidents, making OEM manufacturing particularly vulnerable.

But here’s the good news: with the right strategies and legal protections, you can successfully manufacture in China while keeping your intellectual property safe. Moreover, China’s IP laws have improved significantly in 2025, offering better protection for foreign companies than ever before.

This comprehensive guide will show you exactly how to protect your IP when working with Chinese OEM manufacturers. Additionally, we’ll cover recent legal updates, proven protection strategies, and real-world examples that demonstrate what works (and what doesn’t). By the end of this article, you’ll have a clear roadmap to safeguard your innovations while leveraging China’s manufacturing strengths.

Understanding OEM Manufacturing in China: Opportunities and Challenges

What Is OEM Manufacturing and Why China?

OEM (Original Equipment Manufacturing) means outsourcing your product manufacturing to specialized factories. Basically, you provide the designs, specifications, and branding, while the factory handles the actual production process. Think of it like hiring a chef to cook your recipe—you own the recipe, but they do the cooking.

China dominates the global OEM market for several compelling reasons. First, the country offers incredibly low manufacturing costs compared to Western nations. Second, China has highly skilled workers who specialize in producing everything from electronics to textiles. Third, the supply chain infrastructure is unmatched—you can find suppliers for almost any component within hours of each other.

Furthermore, China’s “Made in China 2025” initiative is pushing the country toward high-tech manufacturing excellence. This means better quality control, advanced robotics, and improved production capabilities. As a result, many Fortune 500 companies continue to rely on Chinese OEM manufacturers despite rising concerns about IP protection.

The Dark Side: Growing IP Risks in 2025

Unfortunately, the same advantages that make China attractive also create significant IP vulnerabilities. Many OEM factories view your product designs as valuable assets they can exploit. Consequently, they might manufacture extra units to sell under different brand names or share your designs with competitors.

Recent economic pressures have made this problem worse. With factory insolvencies on the rise, some manufacturers resort to IP misappropriation as a survival tactic. In other words, when business slows down, copying successful products becomes tempting for struggling factories.

The risks extend beyond simple copying, too. Some unethical manufacturers will reverse-engineer your products, register your trademarks before you do, or sell counterfeit versions through online marketplaces. Therefore, understanding these threats is the first step toward building effective protection strategies.

Balancing Opportunity with Protection

Despite these challenges, thousands of foreign companies successfully manufacture in China every year. The key difference between success and failure often comes down to proactive IP protection. In essence, you need to treat IP security as seriously as you treat product quality or cost management.

Smart businesses recognize that spending a few thousand dollars on proper IP registration and legal contracts can prevent millions in losses from copycats. Moreover, China’s improving legal framework means your investments in protection now pay off better than they did five or ten years ago.

The bottom line? China remains the world’s factory for good reasons. However, you must approach OEM manufacturing with your eyes wide open and your IP strategy firmly in place. Otherwise, you risk teaching your competitors how to compete against you—using your own innovations.

Common IP Risks Faced by Foreign Companies in Chinese OEM

Trade Secret Theft: When Your Factory Becomes Your Competitor

Trade secret theft represents one of the most damaging forms of IP loss in Chinese OEM relationships. Essentially, this happens when your manufacturing partner uses confidential information—like formulas, processes, or technical specifications—without permission. For instance, a factory might study how you’ve engineered a unique product feature, then replicate it for other clients or their own brands.

This problem often starts innocently. You share technical drawings and manufacturing specifications because, naturally, the factory needs them to produce your products. However, without proper NDA protection and contractual safeguards, nothing stops unethical manufacturers from using that information elsewhere.

The risk intensifies when factories face financial difficulties. A 2025 industry report reveals that economic headwinds have turned IP theft into a “weaponization” tool for struggling manufacturers. In fact, some factories deliberately target successful foreign products to copy, viewing reverse-engineering as a faster path to profit than developing original products.

Trademark Hijacking: The “Bad Faith” Registration Problem

Trademark squatting—also called “bad faith registration”—occurs when someone registers your brand name in China before you do. Subsequently, they can legally prevent you from using your own brand in the Chinese market. Even worse, they might demand payment to transfer the trademark back to you.

China operates on a “first-to-file” system, meaning whoever files first owns the trademark, regardless of who used it first internationally. Therefore, your established brand recognition in other countries provides zero protection in China unless you’ve completed the trademark registration process there.

This isn’t just theoretical risk. According to recent data, trademark applications have surged as local entities quickly register foreign brands. Sometimes, your own OEM partner might register your trademark, creating leverage in contract negotiations or blocking your market entry entirely. Consequently, immediate trademark filing should be your first action before engaging any Chinese manufacturer.

Counterfeit Production: The Parallel Market Nightmare

Perhaps the most frustrating scenario involves your OEM factory producing genuine products during the day and counterfeit versions at night. This “parallel production” means identical products—made with your specifications and sometimes your materials—flood the market at lower prices.

These counterfeits hurt your business in multiple ways. First, they cannibalize your sales by offering seemingly identical products at discount prices. Second, they damage your brand reputation when the counterfeit versions have quality issues. Third, they make it nearly impossible to maintain premium pricing when cheap copies saturate the market.

Online marketplaces have amplified this problem exponentially. A factory can produce unauthorized copies and sell them through Alibaba, Amazon, or other platforms within days. Meanwhile, customers often can’t distinguish between authentic and counterfeit products until after purchase.

Other Critical Vulnerabilities

Beyond these major threats, several other IP risks deserve attention. Weak NDAs fail to prevent suppliers from sharing your information with other clients. Design patent infringement occurs when factories slightly modify your product appearance to avoid obvious copying charges. Additionally, lack of on-site oversight means you might never know when unauthorized production occurs.

Supplier circumvention presents another subtle danger. Your OEM partner might identify your component suppliers and approach them directly, cutting you out of future business. Similarly, they might discover your customer base through shipping documents and contact them with lower-priced alternatives.

Understanding these risks helps you build comprehensive protection strategies. Rather than feeling paralyzed by fear, you can take concrete steps to address each vulnerability systematically. After all, knowledge is your first line of defense against IP theft in Chinese OEM manufacturing.

China’s IP Legal Framework in 2025: Key Updates and Protections

The Territoriality Principle: Your Foreign IP Rights Mean Nothing Here

Before diving into specific laws, you must understand one fundamental principle: China’s IP system follows strict territoriality. This means your patents, trademarks, and design rights from other countries have absolutely zero legal standing in China. Therefore, even if you hold patents in 50 countries, you remain completely unprotected in China until you file registrations there.

Many foreign businesses make this costly mistake. They assume their established IP rights will automatically transfer or that international treaties provide blanket protection. Unfortunately, while China participates in international IP agreements like the Paris Convention and Patent Cooperation Treaty, these treaties primarily facilitate the filing process—they don’t replace the need for Chinese registration.

Consequently, your first action before engaging any OEM manufacturer should be registering your IP with the China National Intellectual Property Administration (CNIPA). Otherwise, you’re essentially handing over your innovations with no legal recourse when copying occurs.

2025 Legal Updates: Strengthening Foreign IP Protection

The good news? China has made substantial improvements to its IP legal framework in 2025, particularly for foreign companies. Most significantly, the revised Anti-Unfair Competition Law took effect on October 15, 2025, bringing major changes to trade secret protection.

This updated law strengthens penalties for trade secret misappropriation and introduces countermeasures against what China views as unfair foreign IP disputes. Additionally, it enhances protections for overseas intellectual property matters, addressing concerns that foreign companies have raised for years.

Furthermore, the State Council enacted new regulations on foreign-related IP disputes, which became effective on May 1, 2025. These regulations specifically improve dispute resolution mechanisms for overseas companies dealing with Chinese entities. As a result, foreign businesses now have clearer legal pathways when IP conflicts arise.

Key Patent Law Protections for OEM Relationships

China’s Patent Law of the People’s Republic of China (most recently amended in 2020, with 2025 enforcement updates) provides several critical protections for OEM manufacturers. Understanding these provisions helps you draft stronger contracts and enforce your rights when necessary.

These patent protections become especially important when working with OEM manufacturers. Specifically, they give you legal grounds to stop unauthorized copying and seek damages when infringement occurs. However, remember that these protections only work if you’ve actually registered your patents with CNIPA first.

Trademark Law: Stopping Copycat Products

The Trademark Law of the People’s Republic of China (amended in 2019, with 2025 enforcement updates) offers powerful tools against counterfeit production. For foreign companies dealing with OEM manufacturing, two articles deserve special attention.

Therefore, proper trademark registration isn’t just about brand protection—it’s about maintaining legal leverage over your OEM relationships and stopping counterfeit production before it starts.

Anti-Unfair Competition Law: Your Trade Secret Shield

The newly revised Anti-Unfair Competition Law (effective October 15, 2025) represents perhaps the most significant development for foreign companies in OEM relationships. This law specifically addresses trade secret protection, which is crucial when sharing confidential manufacturing information.

These provisions align with China’s 14th Five-Year Plan (2021-2025), which prioritized stronger foreign IP safeguards. Moreover, enforcement has improved dramatically—trade secret prosecution rates jumped by 34.2% in recent years, showing that authorities take these violations seriously.

The Practical Impact: 128 IP Protection Centers and Rising Success Rates

Legal frameworks only matter if they’re actually enforced. Fortunately, China has established 128 national IP protection centers specifically designed to help companies—including foreign businesses—enforce their rights quickly and efficiently.

More importantly, foreign plaintiffs now win approximately 77% of IP cases in Chinese courts, according to recent Beijing IP Court data. This success rate actually exceeds what many foreign companies achieve in their home countries. Consequently, the combination of improved laws and effective enforcement means your IP investments in China now offer genuine protection.

Nevertheless, all these legal protections require one critical first step: proper IP registration. Without Chinese patents, trademarks, and documented trade secrets, even the strongest laws can’t help you. Therefore, working with experienced IP counsel to establish your legal foundation should precede any OEM engagement.

IP Infringement Statistics in China: What the Data Reveals

Understanding the Numbers Behind OEM IP Risk

Statistics tell a powerful story about intellectual property protection in China. While some numbers reveal concerning trends, others demonstrate significant improvements in enforcement and protection. Therefore, understanding these figures helps you make informed decisions about manufacturing risks and protection investments.

The following table presents the most recent data on IP trends in China, drawn from official sources including CNIPA, WIPO, and Chinese court systems. These statistics are particularly relevant for foreign companies engaged in OEM manufacturing relationships.

Sources: China National Intellectual Property Administration (CNIPA), World Intellectual Property Organization (WIPO), Beijing IP Court, World Trademark Review

What These Numbers Mean for Your OEM Strategy

The 34.2% increase in trade secret prosecutions sends a clear message: Chinese authorities are cracking down on manufacturers who steal confidential information. This matters enormously for OEM relationships because trade secrets—like manufacturing processes, formulas, and technical specifications—are exactly what you must share with factories.

Similarly, the 77% success rate for foreign plaintiffs in IP courts contradicts the old narrative that foreign companies can’t win in Chinese courts. In reality, if you’ve properly registered your IP and documented infringement, Chinese courts increasingly rule in favor of legitimate rights holders regardless of nationality.

However, the statistic that should concern every OEM buyer is manufacturing’s 18% share of global IP theft. This sector-specific vulnerability reflects the inherent risk in sharing detailed product information with third-party manufacturers. Consequently, manufacturing companies must invest more heavily in IP protection compared to businesses in other industries.

The Enforcement Trend: From Paper Tiger to Real Threat

For years, critics dismissed Chinese IP laws as “paper tigers”—impressive on paper but toothless in practice. The recent statistics prove otherwise. Criminal prosecutions for IP violations have surged, with authorities pursuing not just civil damages but actual jail time for serious offenders.

Moreover, China’s 128 national IP protection centers provide rapid response mechanisms for rights holders. These centers can investigate complaints, facilitate mediation, and coordinate with law enforcement within days rather than months. Therefore, the combination of improved laws and efficient enforcement infrastructure means your IP rights now carry real consequences for violators.

The copyright registration surge to over 10 million also indicates that Chinese businesses themselves are becoming more IP-conscious. As the domestic market matures, Chinese companies increasingly respect IP rights because they’re building their own portfolios. This cultural shift, while gradual, reduces the tolerance for blatant copying that once characterized the market.

Reading Between the Lines: Areas of Continued Concern

Despite improvements, some statistics warrant caution. The 18% manufacturing theft rate hasn’t decreased significantly, suggesting that OEM relationships remain inherently risky. Additionally, the sheer volume of patent filings—5.01 million valid invention patents—creates a crowded IP landscape where navigating existing rights becomes increasingly complex.

Furthermore, statistics only capture reported and prosecuted violations. Many foreign companies never discover their IP has been stolen until counterfeit products appear on the market. Others discover theft but choose not to pursue legal action due to cost concerns or fear of damaging business relationships.

Therefore, while the data shows clear progress in China’s IP environment, it doesn’t eliminate the need for proactive protection. Rather, these statistics should encourage you to invest in proper IP registration and enforcement, knowing that the legal system now provides genuine recourse when violations occur. The question isn’t whether you can protect your IP in China—clearly you can. The question is whether you’ll take the necessary steps to do so before entering OEM relationships.

Proven Strategies to Safeguard Your IP in OEM Agreements

Strategy #1: Register Your IP Before Sharing Anything

The single most important protection strategy is registering your intellectual property in China before you share any information with potential OEM partners. This means filing patents, trademarks, and design registrations with CNIPA before your first factory visit or email exchange.

China operates on a “first-to-file” system, which means whoever files first owns the IP rights. Therefore, even if you invented the product or used the trademark for decades internationally, you have zero protection in China until you complete the registration process. Consequently, waiting until after production starts is essentially gambling with your entire business.

Many businesses hesitate because they worry about registration costs. However, registering a trademark typically costs between $500-$1,500, while a patent might cost $3,000-$8,000 including professional fees. Compare these amounts to the potential loss of your entire product line to copycats, and the investment becomes obvious. Moreover, registration fees represent a tiny fraction of your overall manufacturing setup costs.

Strategy #2: Draft Iron-Clad OEM Contracts with Specific IP Clauses

Your OEM contract serves as your primary legal shield against IP theft. Unfortunately, many businesses use generic manufacturing agreements that barely mention intellectual property protection. Instead, you need comprehensive contracts that specifically address Chinese law and include enforceable provisions.

Every OEM agreement should include three critical clauses: non-use, non-disclosure, and non-circumvention. The non-use clause prevents the factory from using your designs, specifications, or processes for any purpose except manufacturing your specific products. The non-disclosure clause prohibits sharing your confidential information with anyone else. The non-circumvention clause stops the factory from contacting your suppliers or customers directly.

Additionally, your contracts must clearly state that all IP rights remain your exclusive property. Specify that any improvements, modifications, or derivative works created during manufacturing also belong to you. Furthermore, include provisions for regular audits, production limits, and procedures for destroying tooling and molds when the relationship ends.

Perhaps most importantly, ensure contracts are signed by the factory’s regional office or headquarters, not just the local facility. This creates legal accountability at the corporate level and prevents factories from claiming “we didn’t know what the local office agreed to.” Working with experienced IP counsel ensures your contracts hold up in Chinese courts when disputes arise.

Strategy #3: Split Manufacturing Across Multiple Suppliers

One highly effective protection strategy involves splitting your production across multiple suppliers so that no single factory has the complete picture. Think of it like protecting a secret recipe by having different chefs prepare different ingredients—no one person knows the entire formula.

For example, if you’re manufacturing an electronic device, you might have one factory produce the circuit boards, another assemble the housing, and a third handle final assembly. Similarly, for mechanical products, different suppliers might manufacture individual components that you assemble elsewhere. This approach prevents any single factory from reverse-engineering your complete product.

Moreover, split manufacturing creates natural quality checks. When multiple suppliers must meet your specifications independently, you can compare their outputs to identify inconsistencies or unauthorized modifications. Additionally, if one supplier attempts to produce counterfeits, they’ll lack critical components needed for functional products.

The main drawback is increased complexity in logistics and coordination. However, the IP protection benefits usually outweigh these operational challenges, especially for products with unique features or high counterfeit risk. Furthermore, modern supply chain management tools make coordinating multiple suppliers much easier than it was even five years ago.

Strategy #4: Conduct Regular Factory Audits and Site Visits

Never rely solely on written contracts—regular physical inspections of your manufacturing facilities provide irreplaceable insights into actual practices. During these visits, you can assess security measures, observe production processes, and identify potential IP vulnerabilities before they become serious problems.

Schedule factory audits at least quarterly for high-value products, or bi-annually for lower-risk items. During visits, check whether the factory maintains separate, secure areas for your materials and products. Look for signs of unauthorized production, such as extra inventory, suspicious work shifts, or materials that exceed your order quantities.

Additionally, examine how the factory handles your confidential information. Are design files stored securely with access controls? Do employees sign confidentiality agreements? Are there cameras monitoring production areas? These details reveal whether your OEM partner takes IP protection seriously or merely pays lip service to it.

Furthermore, conducting unannounced visits occasionally can reveal practices that factories might hide during scheduled inspections. While this approach requires more resources, it’s particularly valuable for products vulnerable to counterfeiting. For comprehensive guidance on manufacturing IP protection strategies, consider consulting with specialists who understand Chinese factory operations.

Strategy #5: Obfuscate Sensitive Components and Processes

Even with the best contracts and factory relationships, you should never share more information than absolutely necessary for production. Therefore, obfuscating your most sensitive components, materials, or processes adds another protection layer that operates independently of legal agreements.

For instance, if your product includes a proprietary chemical formula, you might supply pre-mixed components rather than raw ingredients and mixing instructions. Similarly, for products with unique algorithms or software, you could provide encrypted firmware that the factory cannot access or modify. This approach ensures that even if the factory wanted to copy your product, they’d lack critical information needed to do so successfully.

Another obfuscation technique involves using coded part numbers and specifications that don’t reveal the component’s actual function or importance. This prevents factory employees from understanding which elements are proprietary versus standard parts. Consequently, even if someone steals your manufacturing files, they’ll struggle to replicate your product without additional information you’ve kept confidential.

Strategy #6: Register Your IP with China Customs

China Customs operates a powerful IP protection program that can intercept counterfeit products at borders before they reach markets. By registering your trademarks, patents, and copyrights with China Customs, you enable authorities to seize infringing goods during import and export inspections.

This protection operates automatically once registered—Customs officials proactively check shipments against their IP database and detain suspicious goods. They’ll then notify you about potential infringements, giving you the opportunity to confirm whether seizure is warranted. This system has proven remarkably effective, with Chinese Customs seizing millions of counterfeit items annually.

Registration with Customs costs relatively little compared to the protection it provides. Moreover, it creates a public record of your IP rights that can deter potential infringers. Many counterfeiters specifically avoid products registered with Customs because the seizure risk makes their operations unprofitable. Therefore, this registration should be part of your standard IP protection checklist whenever manufacturing in China.

Strategy #7: Leverage Improved Court Systems for Quick Enforcement

Finally, don’t hesitate to use China’s improved legal system when violations occur. With foreign plaintiffs winning approximately 77% of IP cases, Chinese courts now provide genuine remedies for infringement. Moreover, preliminary injunctions under Patent Law Article 66 allow you to stop unauthorized production quickly, before counterfeit products flood the market.

The key to successful enforcement is documentation. Keep detailed records of your IP registrations, contracts, communications with factories, and evidence of infringement. Photograph suspicious products, preserve online listings, and document the chain of custody for samples. This preparation enables your legal team to act swiftly when problems arise.

Additionally, consider working with experienced IP litigation counsel who understand Chinese court procedures. They can guide you through evidence requirements, calculate appropriate damages, and develop enforcement strategies that maximize your chances of success. Remember, the goal isn’t always a full trial—often, demonstrating serious intent to enforce your rights convinces infringers to settle or cease their activities.

Essential Legal Clauses for IP Protection in China

Understanding the Power of Specific Legal Language

Generic contract language rarely provides adequate protection in Chinese OEM relationships. Instead, you need specific clauses that reference Chinese law and create enforceable obligations under China’s legal system. Moreover, courts pay close attention to how contracts define IP ownership, confidentiality obligations, and remedies for violations.

The following clauses draw directly from Chinese intellectual property laws and have been proven effective in actual disputes. When drafting OEM agreements, working with legal professionals who understand these provisions ensures your contracts hold up when challenged. Furthermore, explicitly citing legal articles demonstrates to Chinese courts that both parties understood and agreed to specific legal obligations.

Ownership and Assignment Clauses

Your contract must unambiguously state that you own all intellectual property, including any improvements or derivative works created during manufacturing. Vague language like “the parties shall discuss IP ownership” creates dangerous ambiguities that Chinese courts might interpret against your interests.

This clause eliminates any argument that the factory gained IP rights through their manufacturing work. Additionally, the phrase “effective upon creation” prevents situations where factories claim they owned innovations until you requested assignment. Therefore, such precise language protects you even if your business relationship deteriorates before formal IP transfer occurs.

Non-Disclosure and Confidentiality Provisions

Confidentiality clauses must go beyond generic NDA language to specifically address Chinese legal requirements under the Anti-Unfair Competition Law. Remember, Article 9 of this law prohibits trade secret misappropriation, but only if you’ve taken reasonable measures to maintain secrecy.

Notice how this clause specifically references the Anti-Unfair Competition Law, demonstrating that both parties understood they were creating legally enforceable trade secret protection. Furthermore, the detailed obligations regarding security measures help you prove you took “reasonable measures” to protect confidentiality—a key requirement for trade secret protection under Chinese law.

Non-Use and Manufacturing Limitations

Your contract should explicitly prohibit the factory from using your IP for any purpose except manufacturing your specific products. Additionally, it should limit production quantities and require tracking of all manufactured units.

This clause prevents the common problem of “third shift” production where factories manufacture extra units to sell elsewhere. Moreover, the production tracking requirement gives you audit rights to verify actual quantities. Consequently, if you discover counterfeit products, you can compare production records to your orders and prove unauthorized manufacturing occurred.

Non-Circumvention and Relationship Protection

Factories often try to identify your suppliers or customers to cut you out of future business. Therefore, your contract needs strong non-circumvention provisions that prevent direct contact with entities you’ve introduced to the manufacturer.

The liquidated damages provision is particularly important because calculating actual damages from circumvention is often difficult. By specifying a predetermined amount, you create immediate consequences for violations. Furthermore, Chinese courts generally enforce reasonable liquidated damages clauses, making this an effective deterrent.

Tooling and Mold Ownership

Many businesses overlook the importance of explicitly owning the molds, dies, and tooling used to manufacture their products. Without clear ownership provisions, factories might claim these items as their property, then use them to produce counterfeit products after your relationship ends.

This clause ensures that when your relationship ends, the factory cannot continue producing your products simply because they still possess the necessary tooling. Additionally, requiring photographic evidence of destruction prevents situations where factories claim to have destroyed tooling but actually kept it for future unauthorized production.

Audit Rights and Inspection Provisions

Your ability to verify compliance depends on having strong contractual audit rights. These provisions should allow both scheduled and surprise inspections of the manufacturing facility and records.

The “with or without advance notice” language is crucial because it prevents factories from hiding unauthorized activities before scheduled audits. Moreover, making the manufacturer pay for inspections when violations are found creates financial consequences for non-compliance. For more detailed guidance on protecting IP in business relationships, consider consulting specialists who draft these agreements regularly.

Enforcement and Remedy Provisions

Finally, your contract should specify exactly what happens when violations occur, including specific remedies aligned with Chinese law provisions discussed earlier in this article.

This clause specifically references the legal provisions covered earlier, demonstrating that both parties acknowledged these laws would govern disputes. Additionally, stating that remedies are “cumulative” prevents factories from arguing you must choose between different types of damages. Therefore, you can pursue multiple remedies simultaneously, maximizing your recovery and deterrent effect.

Real-World Case Studies: Lessons from IP Wins and Losses

Success Story: New Balance’s Trademark Victory

New Balance’s landmark case against Chinese counterfeiters demonstrates how proper IP registration and aggressive enforcement can succeed in Chinese courts. The athletic shoe company discovered multiple Chinese firms were producing shoes featuring a similar “N” logo design that consumers confused with New Balance’s iconic branding.

Because New Balance had properly registered its trademark in China, the company could invoke Trademark Law Article 57, which prohibits unauthorized use of identical or similar marks. The Chinese courts ultimately awarded New Balance approximately $1.5 million in damages, sending a strong message to potential copycats.

The key lesson? Early trademark registration prevented hijacking and established New Balance’s legal standing. Moreover, the company’s willingness to pursue litigation aggressively demonstrated to other potential infringers that copying their brand would result in expensive consequences. This case illustrates that foreign companies can indeed win substantial judgments in Chinese courts when they’ve laid proper legal groundwork.

Failure Case: The Boot Design Copying Epidemic

In contrast, consider a U.S. company that created a popular boot design but failed to register design patents in China before engaging OEM manufacturers. Within months of starting production, several Chinese factories began producing nearly identical boots for competing brands and direct-to-consumer sales.

Because the original company lacked Chinese design patents, they had no legal basis to stop the copying. Furthermore, some copycats actually registered design patents for the stolen design, creating legal complications when the original company finally attempted registration. The market quickly became saturated with similar products at various price points, destroying the original company’s pricing power and brand positioning.

This failure highlights two critical lessons. First, design patents must be registered before sharing designs with manufacturers—waiting until after production starts is too late. Second, splitting production across multiple suppliers could have prevented any single factory from having complete design information. The financial impact of this oversight likely exceeded millions of dollars in lost sales and market position.

Success Story: 2024 China Customs Seizure

A European electronics manufacturer discovered counterfeit versions of their products being imported into China through various ports. However, because the company had registered their trademarks and patents with China Customs, authorities automatically flagged and seized the counterfeit shipments during routine inspections.

The Customs system notified the company about the seized goods, allowing them to confirm the items were indeed counterfeits. Subsequently, Customs destroyed the products and provided information about the importers, enabling the company to pursue legal action against the source. This proactive border protection prevented thousands of counterfeit units from reaching consumers.

The lesson here demonstrates the value of customs registration for IP protection. This relatively inexpensive step created automatic enforcement that operated without requiring constant vigilance from the company. Moreover, it demonstrated to counterfeiters that their operations faced seizure risk, discouraging future attempts.

Mixed Results: The Pretul OEM Case and Territoriality

The Supreme People’s Court’s ruling in the Pretul case created important precedents for OEM manufacturing. A Chinese factory manufactured products bearing a trademark for export to other countries, where the trademark owner had rights. However, the trademark wasn’t registered in China, leading to questions about whether manufacturing for export constituted trademark infringement in China.

The court ruled that pure export manufacturing—where products never enter Chinese commerce—might not constitute trademark “use” under Chinese law. This seemed favorable for OEM manufacturers. However, the court emphasized that if products entered the Chinese market or created confusion among Chinese consumers, full trademark liability would apply.

This case teaches nuanced lessons about territoriality. While OEM manufacturing solely for export might have different legal treatment, you cannot rely on this protection because: (a) products might accidentally enter Chinese commerce; (b) the legal analysis is complex and fact-specific; (c) OEM partners might sell products domestically without your knowledge. Therefore, proper Chinese trademark registration remains essential regardless of where you plan to sell products.

What These Cases Reveal About Strategy

Analyzing these real-world examples reveals consistent patterns. Companies that succeeded shared several characteristics: early IP registration before engaging manufacturers, willingness to enforce rights through litigation when necessary, and proactive measures like customs registration. Conversely, failures typically resulted from delayed registration, overconfidence in contractual protection alone, or failure to monitor the market for infringement.

Perhaps most importantly, these cases demonstrate that Chinese IP law actually works when used correctly. Foreign companies that treat IP protection as a strategic priority—not an afterthought—can successfully manufacture in China while maintaining control over their innovations. The question isn’t whether the legal system provides protection; the question is whether you’ll invest the time and resources to use it properly. For detailed guidance on trade secret protection strategies, examining additional case studies can provide valuable insights.

How YCIP Can Help Protect Your IP in China

Comprehensive IP Services for OEM Manufacturers

At Yucheng IP Law (YCIP), we specialize in helping foreign manufacturers navigate China’s complex intellectual property landscape. Our team understands that OEM relationships create unique vulnerabilities, which is why we’ve developed comprehensive service packages specifically designed for companies manufacturing in China.

Our patent and design services ensure your innovations receive proper protection before you share any information with Chinese factories. We handle everything from initial searches to filing, prosecution, and registration with CNIPA. Moreover, our experience with Chinese patent examiners helps us overcome objections efficiently, reducing delays that could leave your IP vulnerable.

Similarly, our trademark and copyright services protect your brands and creative works from hijacking and counterfeiting. We conduct comprehensive trademark searches to identify potential conflicts, file applications strategically across relevant classes, and monitor registrations to defend against oppositions. Furthermore, we register your IP with China Customs, creating automatic border protection against counterfeit imports and exports.

Contract Drafting and OEM Agreement Review

Generic manufacturing agreements rarely provide adequate IP protection in Chinese OEM relationships. That’s why YCIP offers specialized contract drafting services that incorporate the essential legal clauses discussed in this article. Our agreements reference specific provisions of Chinese law, creating enforceable obligations that Chinese courts recognize and uphold.

We also review existing OEM contracts to identify IP vulnerabilities before they become problems. Many foreign companies discover too late that their agreements contained loopholes allowing factories to use their IP for other purposes or failed to establish clear ownership of improvements and derivative works. Our contract review service identifies these gaps and recommends specific amendments to strengthen your protection.

Additionally, our licensing and transaction services help structure complex arrangements where you license technology to Chinese partners or acquire IP from Chinese entities. These transactions require careful drafting to ensure rights transfer properly under Chinese law while maintaining your strategic interests.

Enforcement and Litigation Support

When IP violations occur, quick and decisive action is essential. YCIP’s enforcement and litigation team has extensive experience pursuing infringement cases in Chinese courts and administrative proceedings. We understand how to gather evidence that meets Chinese court requirements, calculate damages that maximize your recovery, and develop strategies that leverage China’s improved enforcement environment.

Our enforcement services include cease and desist letters, administrative complaints with CNIPA, customs actions, civil litigation, and criminal prosecutions for serious violations. We also handle preliminary injunctions under Patent Law Article 66, allowing you to stop unauthorized production immediately rather than waiting for final judgments. This rapid response capability often proves decisive in preventing counterfeit products from flooding the market.

Moreover, our litigation success rate reflects China’s improving IP environment for foreign plaintiffs. With approximately 77% of foreign IP cases succeeding in Chinese courts, aggressive enforcement has become a viable strategy rather than a futile gesture. We leverage this trend to achieve favorable settlements and judgments for our clients.

Strategic IP Consulting and Risk Assessment

Beyond specific legal services, YCIP provides strategic consulting to help you develop comprehensive IP protection strategies aligned with your business objectives. We conduct IP audits to identify vulnerabilities in your existing portfolio, recommend protection priorities based on your product lineup and market plans, and create customized roadmaps for building robust IP positions in China.

Our risk assessment services evaluate potential OEM partners before you commit to relationships. We investigate factories’ IP compliance history, review their existing contracts with other clients, and assess whether their security measures adequately protect confidential information. This due diligence often reveals red flags that prevent costly mistakes before they occur.

Furthermore, we provide ongoing monitoring services to detect potential infringement early. Our team watches for suspicious trademark applications that might indicate hijacking attempts, monitors online marketplaces for counterfeit products, and tracks patent filings by competitors and manufacturers. Early detection enables proactive responses before infringement becomes widespread and difficult to contain.

Why Foreign Companies Choose YCIP

YCIP has earned the trust of numerous foreign manufacturers through our deep expertise in Chinese IP law and our understanding of international business needs. Our team includes attorneys with both Chinese legal qualifications and international experience, enabling us to bridge cultural and legal differences that often complicate IP matters.

Our track record speaks for itself: we’ve successfully registered thousands of trademarks and patents for foreign clients, recovered millions in damages through enforcement actions, and prevented countless IP violations through proactive protection strategies. Moreover, our client portfolio spans industries from electronics to fashion, demonstrating our versatility across different product categories and business models.

Perhaps most importantly, we understand the urgency of IP protection in OEM relationships. We provide rapid response services for time-sensitive situations, offer transparent pricing with no hidden fees, and maintain constant communication throughout every engagement. Our goal isn’t just legal compliance—it’s ensuring you can manufacture confidently in China while protecting the innovations that make your business valuable.

Take Action Today

The statistics and case studies in this article demonstrate a clear truth: IP protection in Chinese OEM manufacturing is both necessary and achievable. However, success requires proactive measures before problems occur, not reactive responses after copycats have already infiltrated your market.

Don’t wait until you discover counterfeit products on Alibaba or receive a cease and desist letter from a trademark squatter who registered your brand. Contact YCIP today for a comprehensive IP protection consultation. We’ll assess your specific situation, identify vulnerabilities, and develop a customized strategy that protects your innovations while enabling you to leverage China’s manufacturing advantages.

Visit our contact page to schedule your consultation, or submit our quick form to get a trademark application quote. Your intellectual property represents years of innovation and investment—protect it properly with YCIP’s expert guidance.

Frequently Asked Questions About OEM Manufacturing IP Protection

How can I protect my IP when manufacturing in China?

Protecting your IP when manufacturing in China requires a multi-layered approach. First and foremost, register all patents, trademarks, and design rights with CNIPA before sharing any information with manufacturers. Second, use comprehensive OEM contracts that include specific IP protection clauses referencing Chinese law. Third, consider splitting production across multiple suppliers so no single factory has complete product information. Additionally, conduct regular factory audits, register your IP with China Customs for border protection, and work with experienced IP counsel to enforce your rights when violations occur. Remember that China operates on a “first-to-file” system, meaning registration must happen before engagement, not after.

Is IP safe for manufacturing in China in 2025?

IP protection in China has improved significantly by 2025, making it safer than in previous decades but still requiring proactive measures. Recent legal updates, including the revised Anti-Unfair Competition Law and new foreign-related IP dispute regulations, have strengthened protections for foreign companies. Trade secret prosecutions increased by 34.2%, and foreign plaintiffs now win approximately 77% of IP cases in Chinese courts—better than success rates in many Western jurisdictions. However, manufacturing still accounts for 18% of global IP theft, reflecting inherent vulnerabilities in sharing confidential information with third parties. Therefore, while the legal framework supports protection, companies must still invest in proper registration, strong contracts, and active enforcement to achieve genuine safety.

What are the biggest IP risks in Chinese OEM?

The biggest IP risks in Chinese OEM relationships include trade secret theft (where factories reverse-engineer your processes and products), counterfeit production (manufacturing unauthorized copies for parallel markets), and trademark squatting (bad faith registration of your brand before you file). Other significant risks include “third shift” production where factories manufacture extra units beyond your orders, sharing your designs with competitors, and circumventing your relationships with suppliers and customers. Economic pressures have intensified these risks, as some struggling manufacturers resort to IP misappropriation for survival. Manufacturing companies face 18% of global IP theft incidents, making this sector particularly vulnerable compared to other industries. Additionally, weak NDAs and lack of on-site oversight often enable these violations to occur undetected until significant damage has already occurred.

How do I choose a trusted Chinese OEM with IP protection?

Choosing a trusted OEM partner requires thorough due diligence beyond price comparisons. Visit manufacturing facilities in person to assess their security measures, production controls, and overall professionalism. Check whether they maintain separate, secure areas for different clients’ materials and products. Request references from other foreign clients and verify their IP compliance history through industry connections or legal counsel. Look for factories that demonstrate understanding of IP protection and willingly discuss contractual safeguards rather than dismissing concerns. Additionally, prefer manufacturers with regional offices or headquarters that can sign contracts at the corporate level, creating accountability beyond just the local facility. Be cautious of partners who offer suspiciously low prices, as this might indicate they plan to profit from unauthorized production. Finally, work with IP professionals to investigate potential partners before committing to relationships.

What legal options exist for enforcing IP in China?

China offers multiple enforcement options for IP violations. Under Patent Law Article 66, you can seek preliminary injunctions and evidence preservation to stop infringement quickly. Trademark Law Article 63 provides damages up to triple the infringement profits, plus punitive measures for willful violations. The Anti-Unfair Competition Law Article 17 allows compensation for trade secret misappropriation, including investigation costs and increased penalties for digital violations. You can file civil lawsuits through Chinese courts, which have become increasingly favorable to foreign plaintiffs. Administrative actions through CNIPA or local IP bureaus offer faster resolutions for certain violations. Criminal prosecutions are available for serious IP crimes, with authorities increasingly willing to pursue jail time for major offenders. Additionally, customs seizures provide border protection when you’ve registered IP with China Customs. The key is working with experienced litigation counsel who understand Chinese court procedures and can develop comprehensive enforcement strategies tailored to your specific situation.

Conclusion: Protecting Your Innovations While Leveraging China’s Manufacturing Power

Manufacturing in China offers undeniable advantages: cost efficiency, skilled labor, and unmatched supply chain infrastructure. However, these benefits come with serious intellectual property risks that can destroy your business if ignored. As this article has demonstrated, copycats and counterfeiters actively target OEM relationships, with manufacturing companies facing 18% of global IP theft incidents.

Yet here’s the encouraging truth: you can successfully protect your IP while manufacturing in China. The country’s legal framework has improved dramatically, with foreign plaintiffs now winning approximately 77% of IP cases in Chinese courts. Trade secret prosecutions surged by 34.2%, and new regulations specifically address foreign companies’ concerns. Moreover, the strategies outlined in this article—early registration, robust contracts, split manufacturing, regular audits, and aggressive enforcement—have proven effective for thousands of foreign businesses.

The critical factor separating success from failure is taking proactive action before problems occur. Register your patents, trademarks, and designs in China before sharing anything with potential manufacturers. Draft comprehensive OEM contracts that incorporate specific legal clauses referencing Chinese law. Split production strategically and conduct regular factory inspections. Register with China Customs for automatic border protection. And when violations occur, enforce your rights decisively through China’s improved legal system.

Remember the case studies: New Balance won $1.5 million because they registered trademarks early and enforced aggressively. The boot company lost millions because they delayed registration until after copycats appeared. These outcomes weren’t random—they directly reflected strategic choices about IP protection priorities.

Your intellectual property represents years of innovation, substantial investment, and your competitive advantage in the marketplace. Don’t gamble with these assets by treating IP protection as an afterthought or trusting that “it won’t happen to me.” The statistics prove otherwise: without proper protection, your OEM partner might become your biggest competitor, selling copies of your products at lower prices while you bear all the development costs.

Take Action Now to Secure Your Innovations

If you’re currently manufacturing in China or considering OEM relationships, now is the time to assess your IP protection strategy. Review your existing contracts for vulnerabilities. Verify that all registrations are complete and current. Evaluate whether your factory relationships include adequate safeguards. And most importantly, work with experienced IP professionals who understand both Chinese law and international business needs.

At Yucheng IP Law (YCIP), we’ve helped countless foreign manufacturers protect their innovations while successfully leveraging China’s manufacturing capabilities. Our comprehensive services span from initial trademark and patent registration through contract drafting, factory due diligence, and aggressive enforcement when violations occur. We understand the unique challenges of OEM relationships because we’ve handled thousands of cases across every industry and product category.

Don’t wait until you discover counterfeit products flooding online marketplaces or receive demands from trademark squatters. Contact YCIP today for a comprehensive IP protection consultation. We’ll assess your specific situation, identify vulnerabilities you might not have considered, and develop a customized protection strategy aligned with your business objectives and budget.

For immediate assistance with trademark registration, submit our quick quote form to receive pricing and timeline information within 24 hours. If you want to learn more about our approach and expertise, explore our comprehensive service offerings or read about our track record protecting foreign companies in China.

Your innovations deserve protection. China’s improved legal framework makes that protection achievable. The only question is whether you’ll take action before it’s too late.

Manufacturing in China doesn’t have to mean sacrificing your intellectual property. With proper planning, strategic registration, robust contracts, and experienced legal support, you can confidently produce products in China while maintaining full control over your innovations. The companies that succeed in this environment aren’t the ones who avoid China—they’re the ones who approach it with clear-eyed awareness of risks and comprehensive protection strategies.

Let YCIP be your partner in navigating China’s IP landscape. Together, we’ll ensure your manufacturing relationships drive business growth rather than create catastrophic losses to copycats and counterfeiters. Contact us today and take the first step toward secure, profitable OEM manufacturing in China.

Additional Resources and References

External References for Statistics and Legal Information:

• China National Intellectual Property Administration (CNIPA) – Official statistics on patent and trademark filings: www.cnipa.gov.cn
• World Intellectual Property Organization (WIPO) – Global IP filing trends and China-specific data: www.wipo.int
• Beijing Intellectual Property Court – Foreign plaintiff success rates and case law: bjgy.chinacourt.gov.cn
• World Trademark Review – IP enforcement trends and prosecution statistics: www.worldtrademarkreview.com
• China Law Translate – English translations of Chinese IP laws and regulations: www.chinalawtranslate.com
• U.S. Patent and Trademark Office – International IP protection guidance: www.uspto.gov
• European Union Intellectual Property Office – Cross-border IP enforcement resources: euipo.europa.eu

Related Articles from YCIP:

• China’s First-to-File System: Why It Matters for Foreign Brands
• Common IP Mistakes Foreign Businesses Make in China
• Understanding Trademark Squatting in China
• E-commerce IP Protection Strategies in China
• Prevention Strategies: Stopping IP Theft Before Legal Issues Arise

This article is provided for informational purposes only and does not constitute legal advice. Intellectual property laws and regulations change frequently. For specific guidance on your situation, please consult with qualified IP counsel familiar with Chinese law. Last updated: January 2026.