China Mold Ownership and Mold Protection Agreements

For obvious reasons, Chinese manufacturing companies are incredibly concerned about the state of US-China trade relations and this worry is seeping into how they view the Western companies for which they make products. In particular, this worry is leading Chinese manufacturers to view their foreign buyers as likely to eventually leave China and that makes them less interested in trying to maintain a good long term relationship. It also makes Chinese manufacturers more likely now than even a year ago to seek to as quickly as possible steal whatever they can from their Western buyers.

My law firm’s international manufacturing lawyers have a front row seat to this because we constantly get emails from Western companies whose products are being copied by Chinese manufacturers only weeks after they first meet with those manufacturers. In the old days (of about a year ago), it usually took years and a deteriorating relationship between buyer and Chinese manufacturer before the Chinese manufacturer would start directly competing; Chinese manufacturers used to wait until they believed they could make more money selling YOUR product than they could making your product for you. Today, many Chinese companies are concluding that they can make more money selling your product from day one.

What’s all this got to do with mold ownership agreements? A lot.

One of the best ways to stop or slow your Chinese manufacturer from competing with you is by legally blocking it from using your molds for anything other than making products for you. There are many ways to accomplish this, but the best way is usually with a relatively simple mold ownership agreement that makes clear the molds belong to you and your manufacturer cannot use them for anything other than making product for you, nor. can it hold on to them once you seek their return.

There are a whole host of other things you can and should do to protect against your own China manufacturer, but a mold agreement is oftentimes a good and relatively cheap start. See Protecting Your Product From China: The 101. 

What are you seeing out there?