Many companies lose their China IP before they think they have anything to lose. They start with a promising product, a working prototype, a successful crowdfunding campaign, or a major customer waiting. They find a Chinese manufacturer that seems capable and affordable. They send drawings, CAD files, samples, formulas, tooling information, or other product details the factory needs to quote, sample, or produce the item. They may even sign a short MOU, NDA, purchase order, or “cooperation agreement” that feels harmless.
Then the relationship changes. The manufacturer starts using the product photos on Alibaba. A competing product appears online. The factory refuses to return the molds. The Chinese side claims it owns the improvements. A trademark filing appears in China in the factory’s name. The manufacturer says it will sign an NDA, but only after it already has everything it needs to make the product.
This is often when one of our China IP lawyers gets the call. The foreign company asks what agreement it should now use to protect its IP. By then, the answer is often that no agreement will undo what already happened.
Once your Chinese manufacturer has what you sent it, including the product files, tooling, customer pressure, and possibly a Chinese IP filing in its own name, your leverage has collapsed. You may still have options, but they will be slower and more expensive than the options you had before you disclosed the product.
This post explains how this happens, why ordinary NDAs and purchase orders so often fail in China, and what companies should do before they hand over the keys to their product.
China Manufacturing Has Changed. The Basic IP Mistake Has Not.
The China manufacturing environment is not what it was ten or fifteen years ago. Tariffs, export controls, and supply-chain diversification have changed the way foreign companies work with Chinese manufacturers. Many companies are reducing their China exposure. Others are trying to move production elsewhere. Some are staying because no other country can yet match China’s supplier base or pricing for their particular product.
Chinese manufacturers see this too. They know their foreign buyers will not be there forever. When a Chinese manufacturer believes it may not have the foreign customer for long, it may see value in owning or controlling the product itself. That can mean making it under its own brand, selling it to the customer’s competitors, filing for Chinese IP rights, holding molds hostage, blocking export, or using the foreign company’s delay and informality against it.
The basic mistake has not changed. Foreign companies still treat China legal protection as something to handle after the relationship becomes “real.” In China manufacturing, the relationship becomes real the moment you start thinking about disclosing meaningful product information.
“We’ll Get the China Agreement Later” Is Usually the Beginning of the Problem
Our China lawyers see versions of the same story again and again. A company has a product. It has been working with a Chinese manufacturer for months. The manufacturer has been helpful. The parties have exchanged drawings, samples, emails, and purchase orders. Nothing has gone obviously wrong, but then something feels off.
The foreign company asks the manufacturer to sign a real agreement. The manufacturer stalls, says the relationship has worked fine so far, or offers to sign a basic NDA. Sometimes it sends back a document that does not say what the foreign company thinks it says. Sometimes it points to a Chinese-language provision in an old MOU that gives it ownership of jointly developed IP. Sometimes it has already filed for a Chinese design patent or trademark.
The manufacturer is acting rationally based on the leverage it has been given. If you wait until after you have disclosed the product, paid for the molds, built the relationship, and lined up a major customer, your request for a contract is no longer routine paperwork. It is a demand that the manufacturer give up leverage it may already have. That is a much harder conversation.
The examples below are composites based on situations our China lawyers commonly see. Details have been altered to protect confidentiality and to focus on the business and legal patterns that matter.
The Trademark Filing That Blocked the Brand
A foreign company had spent years building a niche brand in the United States and Europe. It had a recognizable name and strong packaging. When it decided to manufacture in China, it assumed its foreign trademark registrations would be enough.
The company gave its Chinese manufacturer the brand name, logo files, packaging designs, and product inserts. The manufacturer made the first few production runs without incident. Later, when the company tried to expand sales into China and record its mark with China Customs, it discovered that someone in China had already filed the brand name as a Chinese trademark.
The filing was not in the manufacturer’s name. That was part of the problem. Chinese law gives a brand owner a stronger argument when its own manufacturer, agent, or representative files the brand name as its trademark. Experienced bad actors know this, so the filing is usually made by a relative or someone else who does not appear on paper to be connected to the manufacturer.
The manufacturer never admitted it had caused the filing. It did not need to. It simply acted as though it could make the problem go away. It said the trademark could probably be transferred back, but only if the foreign company agreed to a long-term exclusive manufacturing arrangement at higher prices. By the time the company discovered the filing, someone close enough to the manufacturer to be useful had turned a missing trademark registration into bargaining power.
China is a first-to-file country for trademarks. If you are going to manufacture in China, sell in China, or put your brand anywhere near a Chinese counterparty, your foreign trademark registrations are not enough. File in China before someone else decides to do it for you.
The “Improvements” That Became the Factory’s Product
A U.S. company had a promising industrial product but needed help making it easier to manufacture. A Chinese manufacturer agreed to refine the design. The parties signed a short cooperation agreement that said they would “jointly develop” the product and “share the benefits” of the project.
The U.S. company understood that language to mean the factory would help with manufacturability. The factory understood it to mean something very different. Over the next six months, the U.S. company sent drawings, test results, material specifications, and revised prototypes. The factory suggested changes to reduce costs and improve yield.
When the U.S. company later tried to move production to another factory, the first factory claimed ownership of the improved version of the product. It pointed to the cooperation agreement and argued that the final manufacturable design was the result of joint development. It also claimed the right to keep using the design because its own engineers had contributed to it.
The agreement left the most important question unanswered: what would the factory’s contributions mean for ownership?
If your Chinese manufacturer will help engineer, refine, test, or adapt your product, you need a product development agreement before that work starts. That agreement should say who owns the existing IP, who owns the new IP, who may file registrations, who may use the final design, and what happens if the project ends.
The Molds the Buyer Thought It Owned
A foreign company paid a Chinese factory to make molds for a new household product. The mold cost appeared as a separate line item on the invoice, so the buyer assumed it owned the molds. The factory never said otherwise.
For two years, the relationship worked. The factory made the product, shipped on time, and handled minor quality problems. Then the buyer found a second factory with better pricing and told the original factory to ship the molds over.
The original factory refused. It said the mold charge had only ever been a development fee, not a purchase price. It said the molds contained its own know-how and could not be transferred to another manufacturer. When the buyer pushed harder, the factory said it would release the molds only for a large “release fee” and one final order.
The buyer had paid for the molds, but it had never documented ownership, use rights, storage, return obligations, or penalties for refusal. By the time the dispute started, the factory had the molds, the know-how, and the production schedule. The buyer’s invoice did not solve any of that.
Mold and tooling ownership should be addressed with a Mold/Tooling Ownership Agreement before money changes hands. An invoice line item is not enough. The agreement should make clear who owns the molds, who may use them, where they must be kept, when they must be returned, and what damages apply if the factory refuses.
The Formula That Walked Out the Back Door
A skincare company had a formula and packaging it wanted a Chinese factory to produce. It signed what it believed was a standard NDA. Its U.S. counsel had used the same sort of agreement for years. The agreement was in English, and little attention was paid to the Chinese company’s legal name, affiliated entities, or company chop.
Production ran smoothly for over a year. Then a pricing dispute turned ugly, and the company found what looked very much like its own formula being sold by a different company, in different packaging, at a lower price.
When the company tried to enforce its NDA, it found the real problem. The entity that had signed the agreement was not the entity now selling the competing product. Same factory floor, same manufacturer in every practical sense, different name on the paper. The affiliate selling the product had never signed anything.
Corporate identity matters in China. Many Chinese manufacturing groups operate through multiple entities: one for contracting, one for exporting, one for domestic sales, and one that actually runs the factory. If your agreement binds the wrong entity, or only one entity when others also need to be bound, it may do little when the dispute starts.
By the Time There Is a Dispute, the Choices Are Usually Bad
When a Chinese manufacturer already holds the product information, the tooling, the brand, or a Chinese IP filing in its own name, the foreign company is usually choosing among bad options. Leaving China may be your cleanest legal path, but it may not be commercially realistic. Other countries may lack the supplier base, components, technical skill, pricing, or capacity the product requires, and moving production takes time the company may not have.
Trying to invalidate or block the Chinese manufacturer’s IP filing may be necessary, but it will not be quick or cheap. Even a weak filing can create commercial disruption and give the manufacturer leverage.
Sometimes the least bad option is making a deal with the manufacturer: asking it to assign the China IP back to the foreign company in exchange for continued orders, money, or some other concession. It is painful because the foreign company is effectively paying to recover rights it could have protected at the beginning.
Moving to a different Chinese manufacturer may be possible, but the old factory may refuse to release the molds, threaten the new factory, assert its filing, or otherwise make trouble. A new factory may not want to step into a dispute that could expose it to claims in China.
Good planning is what keeps your company off this list in the first place.
Why a Late NDA Usually Does Not Help
When trouble starts, Chinese manufacturers often offer to sign a China-specific NNN Agreement. To many foreign companies, that feels like progress. In most cases, it is just another document arriving too late. A late NNN does not usually fix past disclosure, transfer existing IP, or require the factory to return molds. It also may not stop the factory from using related companies or other channels unless the document was drafted for that problem and works in China.
For China manufacturing, the better starting point is usually a China NNN agreement: non-use, non-disclosure, and non-circumvention. The non-use piece matters because the main risk is often the factory’s own use of the product, not mere disclosure. The non-circumvention piece matters because factories and intermediaries may try to go around you to your customers, distributors, platforms, or suppliers.
Even an NNN agreement is not enough once the relationship moves into development or production. If the Chinese side will help develop the product, you need a product development agreement that makes clear who owns the existing IP, the new IP, improvements, and the right to file patents or other registrations. It also should say what happens if the project ends.
If the Chinese side will manufacture the product, you need a manufacturing agreement that covers the problems most likely to decide the dispute. That usually means quality standards, inspection rights, tooling control, subcontracting, and ownership of IP created or used during production. The agreement also needs a China-specific enforcement structure, because a right you cannot enforce is often not much of a right at all.
The document has to be designed for China. It should use the correct Chinese legal name of the Chinese party, be enforceable against the actual Chinese entity, and account for Chinese-language interpretation and Chinese enforcement realities. It should be signed and chopped properly. A polished English-language agreement with the wrong party and the wrong enforcement structure may look good in the file and do little when the dispute starts.
Bring in China Counsel Before the Product Leaves Your Control
Most domestic lawyers are not trying to hurt their clients. Many are excellent lawyers in their own systems. But China manufacturing is not a domestic commercial transaction with a foreign address attached to it. It runs on different rules entirely.
We often see companies that were represented by a domestic lawyer who told them they could start with “basic agreements” and bring in China counsel later. The problem is that “later” is often after the key disclosures have already been made. The lawyer may have drafted a standard NDA, reviewed an English-language MOU, blessed purchase orders, or assumed ordinary contract principles would carry the day.
The question is not whether the domestic lawyer is smart. The question is whether the lawyer knows how Chinese manufacturers use contract language, affiliated entities, tooling control, Chinese IP filings, and Chinese enforcement leverage. If not, the lawyer may not know when the deal has crossed from “preliminary discussion” into “client just gave away the product.”
When a company loses control of its IP because its lawyer treated China product development as a routine domestic contracting exercise, it should at least consider whether it has a claim against that lawyer. That is not the main point of this post. The main point is simpler: do not let the wrong lawyer decide when China-specific legal protection becomes necessary. It is usually necessary earlier than companies think.
What Companies Should Do Before Disclosing Their Product to a Chinese Manufacturer
Start with the right partner. This sounds obvious, but too many companies treat factory selection as a sourcing exercise only. Price, capacity, and responsiveness matter, but they are not enough.
You also need to know who the company actually is, whether it is licensed to do what it says it does, whether it has a reputation worth protecting, and whether you are dealing with the real manufacturer or an intermediary. Good Chinese companies are less likely to steal IP because they have something to lose: reputation, government relationships, long-term customers, export markets, and their own legal position. You cannot eliminate risk through due diligence, but you can often avoid the worst counterparties.
Protect your IP before disclosure. If you are going to reveal meaningful product information, use a China-focused NNN agreement before you send it. Do not wait until the factory has already quoted the project, improved the design, or started sampling.
Use a product development agreement before co-development begins. If the Chinese side will help engineer, refine, test, or adapt the product, define ownership before the work starts. That means existing IP, new IP, improvements, production know-how, and the right to file registrations in China or elsewhere.
File the right China IP registrations early. This may include trademarks, design patents, invention patents, utility models, copyrights, or customs recordals, depending on the product. China is a first-to-file country for trademarks, and delay can be costly or fatal. If you leave a filing gap in China, someone else may fill it.
Before production starts, put a real manufacturing agreement in place. This should cover more than price and delivery. Focus first on the terms that usually decide whether you can reject bad product, stop unauthorized subcontracting, get your tooling back, and move production without a fight.
Keep practical control over the tooling and supply chain. If the factory controls the molds, key components, packaging source, testing process, and export paperwork, it may be able to stop you from moving production even if you technically own the IP. Ownership provisions matter, and so do practical controls over where the tooling is located, who may use it, and what happens if the manufacturer refuses to release it.
Diversification Helps. It Does Not Replace IP Protection.
Many companies are moving some production out of China, and for some products that is the right answer. Manufacturing in Vietnam, Mexico, Thailand, India, Malaysia, or the United States may reduce certain China-specific risks. It may also create new risks, because every country has its own contract, IP, labor, customs, and enforcement issues.
Diversification can reduce China exposure. It does not fix a bad legal structure. Send unprotected product information to a factory in another country, rely on purchase orders instead of real contracts, skip registering your IP, and let the factory control the molds, and you can recreate many of the same problems outside China.
Some companies also try to protect themselves by compartmentalizing production: one supplier for one component, another supplier for another, and final assembly somewhere else. This can work for high-value products with sensitive technology, though it can also increase cost, complexity, lead times, and quality problems. Whether it makes sense depends on the product, the margins, the supply chain, and the value of the IP at risk.
Rapid innovation can help, but it is not the protection it once was. In some industries, staying ahead of copycats is a viable strategy. In others, a factory or competitor can buy the product, reverse engineer it, source the components, and begin selling a copy far faster than the original company expects. Speed helps, but legal protection still matters.
The Worst Time to Protect China IP Is After the Factory Has Your Product
Companies often think the China IP sequence is: find the factory, develop the product, start production, get traction, then clean up the legal documents. The sequence should run in the opposite order.
The better sequence is to vet the factory, put the right China agreement in place, register the right IP, control the tooling, and only then disclose and produce. It may feel slower at the beginning, but it is usually faster than trying to rescue a product after a manufacturer has filed for rights in China or refused to return molds.
Most China IP disasters, in our experience, are not caused by clever legal traps. They come from ordinary business optimism. The manufacturer seemed trustworthy. The first samples looked good. The price was right. The purchase orders worked for a while. The domestic lawyer said the paperwork was fine. Nobody wanted to slow down the launch.
China IP protection is not something you add later. It is something you build before the other side has what it needs. Secure the product before you disclose it. Document who owns the molds before you pay for them. Register the brand before someone else does. If your Chinese manufacturer will help develop the product, put the ownership rules in writing before development starts.
If any part of this sounds familiar, the next step is to have someone map out what has already been disclosed, what has been registered, who controls the tooling, and what leverage remains. Because once your manufacturer has your product, your tooling, and a filing in China with its own name on it, you have already lost the argument. You are not protecting anything anymore. You are trying to get it back.
