How to combat product piracy

Facing product piracy is a reality for Australian firms in today's increasingly global manufacturing industry, Hartley Henderson writes.

Facing product piracy is a reality for Australian firms in today’s increasingly global manufacturing industry, Hartley Henderson writes.

Piracy of intellectual property and the copying of products, particularly emanating from China, is a continuing issue for many manufacturers.

Such products are often of inferior quality, may not be sold with the standard manufacturers’ warranty, and technical support can be lacking.

Melbourne-based company, FCR Motion Technology, an Australian distributor of Motovario industrial gearboxes, recently released a new NMRV Power series of worm and heli cal-worm Motovario gearboxes onto the Australian market.

According to the company’s director, Larry Rigoni, the new gearboxes have a distinctive patented angular shape which differs from the traditional square look to differentiate the latest range from unauthorised copies that have been introduced into the market in recent times.

“About 15 years ago Motivario sought to have the aluminium gearbox housings made in China. Their co-operation with the local supplier did not last long, and it was after this ended that the copies began to appear on the market. Some carried the origi nal Motivario name, others were rebranded,” Rigoni told Manufacturers’ Monthly.

“Over the last seven years, copying of Motivario products has become very prevalent and patents appear to be ineffective in China. These pirated products are sometimes hard to pick and come onto the market some 30% cheaper that the original product.

“The quality of these products can be inconsistent as the cost savings are often achieved by the use if inferior materials and quality control is not always automated. Problems include leaking oil seals, noisy bearings, porous casings, and premature failure of the bronze crown wheel.”

Protecting intellectual property

Ai Group chief executive, Heather Ridout, says no compa nies or sectors are immune to IP breaches and recent internation al cases have demonstrated this.

“The impact on businesses, including manufacturers, is great as failure to properly protect IP can easily result in copycat prod ucts/processes and lead to lengthy and very expensive liti gation to try and claim owner ship,” she said.

“Ai Group is helping more and more businesses to understand what constitutes IP and the need to protect it. While protecting IP rights in Australia is important, IP rights are jurisdictional, so this doesn’t mean that a compa ny is protected in all the markets it manufactures in or exports to.

“It’s a complex regulatory envi ronment, so when operating internationally it is also impor tant to utilise experts — go through an attorney or agent in the relevant country. It is impor tant to search and file applica tions in each country of interest.

“Although traditionally it has been difficult to enforce IP in Asia, foreign companies are now being increasingly successful against copycats in China. But it’s not all one-way. IP litigation in China grew by 35% from 2007 to 2008. This has been driven by Chinese companies suing foreign entities in China, to protect ‘their’ IP.

“With more companies operat ing in or exporting to China, IP Australia has developed specific information on the challenges for protecting IP in that country. It is advised that before operating in China, businesses should undertake an IP audit to accu rately assess what needs to be protected. It is then important to develop strategies to protect a company’s IP that are tailored to its individual situation and the unique challenges provided by the Chinese IP environment.”

Market entry strategy

Christopher Wright, Austrade’s Senior Trade Commissioner in Shanghai, emphasises that pro tection of a company’s intellectu al property, trademarks and the like, are a vital part of any mar ket entry strategy.

“Austrade recommends that companies familiarise them selves with the Intellectual Property Rights (IPR) protection mechanisms and regulation in whatever markets they are con templating. This applies to China as well as other markets,” Wright said.

“In the event of counterfeiting, which normally takes the form of misappropriating a company’s trademark, companies need to be able to access IPR protection measures available under local law. In many markets, this may mean that a company must take out local trademarks in order to access local IPR protections.

“While there have been some reported instances of counter feiting of Australian goods in China, this has not stopped com panies from pursuing market development and adopting strategies to counter IPR infringements. Austrade and other agencies of the Australian Government in China likewise monitor IPR conditions in the market, on occasion working with firms to develop approaches to specific IPR issues.”

Have you been a victim of product piracy? Tell us your story by commenting below, or on Twitter @manmonthly.

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