Everyone knows that China is one of the hottest medical device markets in the world. However, intellectual property (IP) infringement is still a major concern and risk factor for Western device companies looking to enter or expand into the lucrative Chinese market. Although the Chinese government and companies have made an effort to improve IP protection in recent years, China is still one of the worst offenders in product piracy and IP violations.
Just these past few months, I have been working on a project in which a medical device company with several millions dollars in annual sales in China asked for me to look into a few Chinese devices that were suspiciously similar to a few of their products. Upon investigation, my team found that several employees of the client’s distributor company—including the president—were also working for the suspected copycat manufacturer, thus facilitating the copying. It is entirely possible that the Chinese distributor is not only pirating the product designs, but also is intentionally hindering our client’s sales and product re-registrations in China, because they are now direct competitors in the Chinese market. It is also strongly suspected that the copycat manufacturer has been copying products from several other Western medical device companies in addition to our client.
To avoid this kind of situation, there are several key things that medical device companies should keep in mind:
1. If your company has a Chinese patent on your key products, you may be able to stop copycat manufacturers from pirating your products via the Chinese court system. It is possible for foreign device companies to win in China’s courts, although the process will be slow and costly in terms of legal fees.
2. Do not sign up Chinese distributors without doing as much due diligence as you did when you got married. I mean this! You can never do enough due diligence in China, and multiple references are crucial in your screening process. Once you have chosen a Chinese distributor, work very closely with them—just kicking the tires three times a year is not enough. You need to be actively involved in distributor management.
3. Always camouflage key steps or materials used in your product when doing product registration. Do not trust anyone; every distributor in China has a brother-in-law that would like to make medical devices.
4. Make sure you keep the originals of all approval certificates and copies of all dossiers submitted, testing reports, etc. This is so that if you ultimately decide that you want to break off relations with your distributor and find a new one, you will not be at the mercy of your Chinese distributor who can refuse to cooperate and withhold your registration documents from you.
5. Make sure there is a buy back provision for all your registrations in your distribution agreement.
6. Try to come up with updated versions of your products every few years so that a copycat manufacturer cannot stay ahead of the technology in your specific medical area. If the importer continually sees new product offerings where they can continue to make money by distributing your products in China, they will have less incentive to copy.
Employing some or all the above tactics will help you prevent IP complications and succeed in China’s complicated medical device market.