A few days ago, Microsoft, the technology giant, filed a lawsuit against Foxconn, a Chinese OEM, for violating a patent agreement and not paying the patent fees in time.
Microsoft required that Foxconn pay for the due royalties, the audition fee and fee from consulting lawyers.
In response, Foxconn’s chairman Terry Guo said on his Facebook page saying that the timing for the lawsuit is suspicious and that this is Microsoft’s way to gain from US-China trade talks.
What is the lawsuit mainly about?
At issue is a dispute over royalty payments on the Android software used by Foxconn’s Chinese clients Huawei, Xiaomi, and Vivo.
Foxconn is not only the OEM for Apple, it’s also the OEM for many Chinese mobile phones such as Huawei, Xiaomi, and Meizu. These Chinese phones are using Android systems, which is developed on the base of the Linux system. And Microsoft owns many patents in the Linux system. This is where things started in the first place.
But as of now, exactly which patent is being used to sued against Foxconn by Microsoft remains unclear. Maybe we need to give it some time.
What the lawsuit mean to manufacturers looking for an OEM
IP infringement lawsuits are never uncommon between a manufacturer and their OEM. Even industrial giants such as Apple and Qualcomm were in numerous IP disputes before. That said, such disputes are not unpreventable, and there are indeed something can be done to repair the damages done, if any.
Even with the IP infringement risks, many businesses are still choose China or some Southeast Asian countries as the manufacturing destinations because of low labor costs.
On this front, the still on-going lawsuit does ring a bell to those of you who are looking for an OEM in the above mentioned countries and/or regions: What can you do to keep your business from falling into the trap of IP infringement?
Here are some areas that you can start from:
Know your OEM partner
We say OEM partner, instead of OEM supplier, because we believe that you and the OEM partner are in the business together for the win. So if you find that your supplier is not on the same page with you, it’s time that you should get yourself a plan B, be it finding a new supplier, or get help from other parties to make things right in your supply chain.
By saying know your OEM partner, we are saying that you need to do your homework before you reach out to and during your cooperation with your supplier. In some case, a technical due diligence is necessary, in other cases, a supplier or vendor assessment could suffice.
That said, it could be quite a challenge, especially when you don’t have much experience or knowledge about manufacturing and production in other countries. And sometimes, the cultural differences and barriers can make the cooperation a huge headache.
Here are some of the posts for your reference as to how you can get started: 10 key questions to ask a potential Chinese supplier , and 20 key questions to ask when doing manufacturing supplier assessment.
But there is totally no need for you to worry too much about it. The Insight Solutions Global team has years of experienced in the field, and they will ask the right questions to get the answers for your project. Not only so, they figure out viable solutions to fix whatever problems in your supply chain on the ground.
Airtight contracts and NDA
Never skip signing an NDA with your supplier. It’s quite strange that some companies in China would refuse to sign the NDA out of unclear reasons, but you need to be firmed on this, and reach out to a second supplier when necessary. Because an airtight NDA is always the first step to prevent you from falling into the traps of million unwanted things to happen in your supply chain.
The same goes with the contracts, with the specific details and such. Make sure your contract terms are specific about the IP ownership, and that the IP will only be used within the realm of the contract. It’s also worthy of noting that you also include terms that regulate how will things go when your cooperation ends.
Know your supply chain
Knowing your supply chain is never easy to do. It requires that you or your team to have the skills and experiences to fully understand what’s happening in the supply chain, and know what actions to take when things are going off the track. This is a lot easier said than done. Especially when your supply chain is located at a country or region where you have little knowledge about, because that means cultural barriers, language barriers, and to make matters worse, hidden costs and risks that you can’t see.
If you ever need help in finding a reliable supplier, or that you struggle to manage your supply chain, feel free to give us a shout out at Contact us, and we’ll jump in to help you out, with our years of experience and expertise in the field.
Protect your product IP
Even with what’s being said all done, there’s still risk that the situation between Foxconn and Microsoft will happen to you. And that leads to one of our strongest suggestions: Protect your product IP. This is especially important when you’re working with an OEM.
It’s quite a big topic to cover, so we’ll move on to the next section to cover more about it.
How can your protect IP working with an OEM?
Protecting your product IP could be different in terms of what product you have, what industry you’re in, and what country you’re making your product. That said, there are still some common solutions that you can take to protect your business from falling into the same trap as many ODMs.
Register your product IP
It’s necessary for your company to file IP protection for your product’s patent, designs and logos, especially when you’re working with an OEM who’re located in Asia, where the IP protection is relatively weak compared to that in western countries. It’s usual case that you might only produce your product in China, but you see the duplicate of your product selling in countries such as Thailand, Vietnam or Malaysia. This is never easy on any business.
Many Asian countries are adhere to the first-to-file system, i.e. the owner of the registered patent, logo or design is the first person or company that files the report for it. That said, it’s crucial that you register your product IP before you negotiate with your potential supply chain partners.
Internal IP protection strategy
It’s also important that you can manage well the internal IP protection in your supply chain.
Firstly, make sure that your OEM has signed NDA with their cooperation partners and their employees that regulates the treatment of your IP.
In some cases, some companies will choose to assemble or manufacture different parts of their products in different regions or countries. This is their way of reducing the risk of IP appropriation.
Moreover, you and your team should have the right to check things up in the supply chain, and manage product quality control. This will help to monitor the IP usage on the OEM’s side and help you adjust things when necessary.
That’s about what we have to say about protecting your IP when working with an OEM. Feel free to let us know what actions you’ll normally take to protect your product IP in the comment section. We’d love to hear more of your voice.
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