Your Supplier Copied Your Design and Is Selling It to Your Competitor

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Suppliers copying buyer product designs is one of those things that everyone in cross-border OEM manufacturing has either heard about or dealt with firsthand. The typical scenario goes like this: you hand over CAD files and tooling drawings, work with the factory for a year or two, then one day you find a listing on Alibaba.com or 1688 that looks almost identical to your product. The seller is your OEM factory, or a company connected to them. Priced lower than your own FOB.

This happens every year. In 2024, Chinese customs seized 41,000 shipments of suspected infringing goods, and public security agencies opened investigations into more than 37,000 IP-related cases (per the State Council Information Office’s 2024 IP protection briefing). How much of that is tied to design copying within OEM relationships specifically, there’s no official breakdown. But from the cases I’ve worked on, the share is not small.

Your NDA probably won’t protect you

A lot of foreign buyers sign an NDA before working with a Chinese factory. Good instinct. But in the context of cross-border OEM work, a standard NDA is too narrow to do much good. So narrow that signing one can create a false sense of security.

Here’s why. An NDA covers one thing: confidentiality. It says the other party can’t share your information with third parties. But when you’re dealing with Chinese suppliers, the biggest risk usually isn’t that your information leaks to someone else. It’s that the supplier uses your own design files to tool up, produce, price, and list the product themselves. They didn’t tell anyone. They just did it. An NDA doesn’t cover that.

In cross-border sourcing, there’s a more targeted contract tool called an NNN agreement — Non-Disclosure, Non-Use, Non-Circumvention. It adds two protections an NDA doesn’t have: it prohibits the supplier from using your information to manufacture competing products for themselves or anyone else (Non-Use), and it prohibits the supplier from going around you to contact your customers or distributors directly (Non-Circumvention). NNN isn’t some new invention. Law firms that do China supply chain work — Harris Sliwoski, Clark Hill, King & Wood Mallesons (金杜) — have been writing about this tool for at least fifteen years.

Term NNN agreement

An NNN adds Non-Use and Non-Circumvention to an NDA’s Non-Disclosure. It is a contract practice tool, not a statute: enforceability in China comes from Chinese governing law, a Chinese-language text, and a Chinese forum.

Beyond the scope problem, most NDAs drafted by foreign lawyers also have two enforcement issues. First, they’re governed by foreign law (California law, English law) and specify foreign courts for disputes. China is not a party to the Hague Judgments Convention. Foreign court judgments are essentially unenforceable in China. Second, they’re in English only, with no Chinese version. Chinese courts don’t refuse to look at English-language contracts, but the judge interprets based on the court’s own translation. Your original English wording doesn’t bind them.

I worked on a case like this. A California company had signed an NDA — English-language, governed by California law, jurisdiction in the San Francisco County Superior Court. The supplier was in Dongguan. They used the buyer’s drawings to make a second set of molds and supplied another American customer for two years. When the company found out, they hired a Chinese lawyer to review the NDA. The lawyer’s assessment: this document has no enforceability in Chinese courts.

Eight hundred dollars in legal fees to confirm that the twelve-hundred-dollar agreement was useless.

Four things your NNN agreement needs to get right

The three layers of NNN protection — non-disclosure, non-use, non-circumvention — are necessary but not sufficient. The agreement also needs to satisfy certain conditions before it’s actually enforceable under Chinese law.

Chinese-language version. Ideally bilingual, with the Chinese text controlling in case of conflict. Chinese courts will work with English-only contracts, but the judge relies on the court’s translation. If your key clause gets distorted in translation, you have zero recourse.

Governed by Chinese law, with disputes resolved in a Chinese court or Chinese arbitration institution (CIETAC, SCIA, etc.) or the Hong Kong International Arbitration Centre. Reason was explained above: foreign judgments can’t be enforced in China. But Chinese arbitral awards can be enforced in all 172 New York Convention member states — we covered this in detail in part four of this series.

Specific liquidated damages clause. Chinese law under Article 585 of the Civil Code (民法典) allows parties to agree on a fixed penalty for breach. The Supreme People’s Court’s 2023 Interpretation on Contract Law General Provisions (法释〔2023〕13号), Article 65, clarifies that penalties exceeding actual losses by more than 30% may be reduced by the court upon request. So the number needs to hurt but be reasonable. I usually recommend a specific figure — say, RMB 500,000 — because tribunals can process that much faster than “compensate all losses.”

Statute Civil Code Art. 585

Parties may agree on a fixed liquidated-damages sum or a calculation method for breach. If the agreed amount is excessively higher than actual losses, a court or arbitral tribunal may reduce it on request. PRC Civil Code - SPC

Extend obligations to subcontractors and affiliates. Many factories outsource certain processes to smaller workshops or ship through related companies. If your NNN only binds the entity that signed, its subcontractors aren’t restricted at all. Your design files walk in the front door and out the back.

Legal fees for an NNN agreement run about $500 to $1,500. Compare that to what you’re spending on tooling — typically tens of thousands of RMB — and the number isn’t worth hesitating over.

The revised Anti-Unfair Competition Law (反不正当竞争法), passed by the NPC Standing Committee on June 27, 2025 and effective October 15, 2025, provides administrative fines of RMB 100,000 to RMB 1 million for trade secret infringement, or RMB 1 million to RMB 5 million in serious cases, together with confiscation of illegal gains. It is not a substitute for a well-drafted NNN agreement, but it is part of the enforcement framework.

Who owns the mold — what the contract says matters, what it doesn’t say matters more

Mold disputes are one of the most common and most frustrating problems in cross-border OEM. You paid for the mold. You think it’s yours. The factory has it sitting in their warehouse. They think it’s theirs.

Chinese law does not have one statute that answers every mold dispute. General movable-property, contract, and work-contract rules may all matter. The tooling agreement and payment record are central, but so are the transaction structure, the identity of the mold, the agreed title-transfer point, the basis on which the factory continues to possess it, and any qualifying unpaid charges. Neither “I paid for it” nor “it is in our factory” answers the whole question by itself.

The problem is that many OEM contracts are extremely vague about mold ownership. Or don’t mention it at all.

Your contract should include at least five things:

Ownership — state whether and when title transfers to the buyer, and whether the supplier thereafter holds the identified mold only as custodian.
Use restrictions — the supplier may only use the mold to produce the buyer’s contracted products. Not for themselves, not for any third party.
Physical marking — engrave the buyer’s name and a unique ID and keep a signed tooling register. Marking is useful identification evidence, but it does not decide title by itself.
Return obligation — define the release triggers, deadline, condition report, related files and parts, transport, and how any claimed unpaid tooling-related charge or lien will be handled.
Consequence of non-return — tie liquidated damages to likely replacement cost, production delay, transfer expense, and other provable loss. Under Article 585, a court or tribunal may adjust an agreed amount, so there is no universal mold-value multiple.

One legal detail on liens is worth knowing. Article 783 of the Civil Code (承揽合同, work contracts chapter) states that if the ordering party has not paid the contractor’s compensation or material costs, the contractor may retain the completed work or refuse delivery unless the parties agreed otherwise. That does not mean any disputed invoice lets a factory hold every mold. The claimed debt, its connection to the tooling, the contract language, and the parties’ payment records still need to be examined.

Statute Civil Code Art. 783

In a work contract, if the ordering party has not paid the agreed remuneration or material costs, the contractor may retain the work product or refuse delivery, unless the parties agreed otherwise. PRC Civil Code - SPC

If title and the return obligation are clear, no qualifying amount remains unpaid, and the factory still refuses release, the refusal may be a breach supporting a claim for return and damages. The forum still needs to examine the ownership evidence, possession chain, any asserted lien, and the agreed dispute clause.

A mold dispute I worked on, in Huizhou. The buyer was a German outdoor lighting brand. They’d paid RMB 180,000 for the mold. The contract said ownership belonged to the buyer. Then a quality disagreement soured the relationship, and the buyer wanted to switch factories. After receiving notice, the supplier locked the mold deep in their warehouse and said they wouldn’t release it until “the quality dispute is resolved.”

After receiving the demand letter (催告函), the supplier’s response was: yes, you paid for the mold, but we maintained it for two years, and you haven’t paid maintenance fees. So we have a lien.

There was nothing in the contract about maintenance fees, which weakened the factory’s position. But the parties still spent three months arguing about the legal basis and amount of the claimed debt. The mold was eventually recovered, but during those three months the buyer’s new supplier could only wait.

A better contract would have required the factory to itemize any tooling-related charge, limited or waived retention rights for defined claims, and required release against payment of undisputed amounts or agreed security for a genuine dispute. That would not guarantee instant handover, but it would leave far less room to use the mold as leverage.

Registering your design in China costs less than you think

A lot of foreign buyers either don’t know about China’s design patent system, or they know about it but assume it’s too much trouble.

It isn’t much trouble. And it isn’t expensive.

CNIPA’s official filing fee for a design patent (外观设计专利) is RMB 500. About $70. Registration fee is RMB 600. Annual fees for the first three years are RMB 600 per year. Add agent fees and translation costs, and the total from filing to certificate runs between $450 and $2,000.

Examination time? Four to six months. Design patents in China only go through formal examination, not substantive review. Much faster than invention patents.

Protection lasts 15 years from the filing date (under the Patent Law revised in 2020 , effective June 1, 2021).

Statute Patent Law Art. 42

The term of a design patent is fifteen years from the filing date, extended from ten by the fourth amendment adopted October 17, 2020 and effective June 1, 2021. Patent Law - CNIPA

China also formally joined the Hague Agreement for industrial design registration (1999 Act) on May 5, 2022. That means you can file one international application through WIPO and get design protection in China and 90-plus other Hague member states simultaneously. Per CNIPA data, Chinese applicants’ Hague filings grew from 1,286 in 2022 to 2,223 in 2024.

The critical point: China uses a first-to-file system. Whoever files first gets the rights. Doesn’t matter if you’re the original designer. If your supplier files a design patent on your product before you do — I’ve seen it happen — you become the infringer.

So the approach is straightforward: register the design patent with CNIPA before you send the CAD files to the factory. RMB 500.

There’s another option most people don’t think about: copyright registration. If your design has artistic elements, you can simultaneously register copyright with China’s National Copyright Administration. Copyright exists from the moment of creation — you don’t need to register it to have protection — but registration makes proving ownership much easier. Copyright protection lasts 50 years, longer than a design patent. You can hold both at the same time.

Foreign companies win IP cases in China more often than you’d expect

“Chinese courts will side with Chinese companies.”

I’ve probably heard that three hundred times. I understand why people think it. But the numbers say something different.

The Supreme People’s Court’s 2024 white paper on IP judicial protection: Chinese courts concluded 543,911 IP cases that year, including 8,252 first-instance cases involving foreign parties. Foreign plaintiffs’ win rates in civil IP infringement cases ranged from 68% to 77%. A study from the Beijing Chaoyang District Court covering 2014 to 2022 was more specific: in 117 cases where a foreign plaintiff sued a Chinese defendant, the foreign party won about 77% of the time (this data has been cited by international IP firms including Spruson & Ferguson).

For patent cases specifically, foreign patent holders had an overall win rate of about 65%. In certain sectors — telecom standard-essential patents, for instance — the rate went as high as 90%.

In 2024, Chinese courts applied punitive damages in 460 IP cases, a 44.2% increase year-on-year (per the SPC white paper). The Supreme People’s Court awarded a total of RMB 873 million across 18 cases. The largest single award: Zhejiang Geely v. WM Motor, a trade secret case (SPC final ruling, April 2024), with total damages of RMB 640 million including a 2x punitive multiplier.

Under the current Patent Law (Article 71) and Trademark Law (Article 63), statutory damages cap at RMB 5 million. But if the court finds intentional infringement with serious circumstances, punitive damages can be 1 to 5 times the base amount. No ceiling.

These numbers don’t mean every foreign plaintiff will win. But they do make one thing clear: rather than complaining from overseas that “China doesn’t protect IP,” register your rights in China and use the Chinese legal system to enforce them. The system itself isn’t your enemy. Not having registered is.

Your supplier is selling your product on Alibaba — can you get it taken down?

Yes.

Alibaba runs an Intellectual Property Protection platform (IPP Platform). Rights holders can register and submit infringement complaints, attaching IP certificates and evidence. The accused seller has 3 business days to respond. No response means the listing comes down automatically.

Between July 2023 and June 2024, 96% of infringement complaints were processed within 24 hours. Alibaba’s AI systems proactively removed three times as many infringing listings as were reported by rights holders — over 430 million listings cumulatively.

If your supplier acquires customers through Alibaba.com, a platform complaint is real pressure. Repeat offenders get their stores demoted or permanently shut down. For a factory that lives on online traffic, that’s a serious hit.

But there’s a prerequisite: you need registered IP. Without a design patent or trademark registration, your complaint is unlikely to be accepted. Which brings us back to that RMB 500 filing fee.

Split manufacturing — don’t let any single factory see the whole picture

If your product has genuinely high-value design or technology, there’s one operational strategy that works better than any contract: split manufacturing.

One factory makes the housing. Another does the circuit boards. A third handles packaging. Final assembly happens at your own warehouse or with a trusted partner. No single factory has enough information to replicate the complete product.

This approach adds logistics complexity and management cost. But it solves a fundamental problem: even if one link in the chain leaks, the leaker can’t copy your finished product.

Under China’s Anti-Unfair Competition Law (反不正当竞争法), Article 9, trade secret protection requires that the rights holder took “reasonable confidentiality measures ” (合理的保密措施). The SPC’s 2020 Judicial Interpretation on Trade Secret Cases (法释〔2020〕7号), Article 5, lists six types of recognized measures, including signing confidentiality agreements and restricting the scope of access. Split manufacturing falls squarely under “restricting the scope of those who can access or obtain the trade secret.” If you’ve both signed an NNN and split your production, the “reasonable measures” element is basically covered in any future trade secret case.

Statute AUCL Art. 10 trade secrets

In the 2025 revised Anti-Unfair Competition Law (effective October 15, 2025), the trade secret provisions moved from Article 9 to Article 10; the definition still requires that the holder took corresponding confidentiality measures. AUCL 2025 - CNIPA

A client of mine in consumer electronics had a product that was selling well, but two years earlier one of his factories had copied one of the models. He ended up splitting the five key components of the core module across three different factories, and moved final assembly back to a small warehouse he rented in Shenzhen. Costs went up about 8%. No copying problems since. His words: “8% to sleep at night.”

Trademark squatting — another gap you might not have covered

Your supplier might not stop at copying your product design. They might also register your brand name as a Chinese trademark.

China’s trademark system is also first-to-file (Trademark Law, Article 31). Whoever files first gets the rights. Between 2023 and 2024, more than 7,000 Chinese trademark applications were flagged as suspected bad-faith filings targeting foreign brands.

The cost gap between prevention and recovery is steep. Proactive registration runs about $4,500 to $9,500 per year (core marks plus defensive filings). Recovering a squatted trademark through opposition or invalidation proceedings can easily exceed $36,500 to $78,000.

And you need to register more than just your English brand name. Chinese transliterations, Chinese translations, and any Chinese name consumers might spontaneously use — all of these need to be covered. The 2019 Trademark Law revision, Article 4 , added a provision: “Malicious trademark registration applications filed without intent to use shall be rejected.” CNIPA rejected 205,000 malicious trademark applications in the first half of 2024. But the opposition-stage success rate was only about 59%. Not every bad-faith filing gets caught.

Statute Trademark Law Art. 4

The 2019 amendment provides that malicious trademark registration applications filed without intent to use shall be rejected. CNIPA applies it to refuse bad-faith applications at scale. Trademark Law 2019 - WIPO Lex

Safest approach: register your trademarks in China before you engage with any Chinese supplier.

A realistic protection plan

If you’re handing product designs to a Chinese factory, do at least these five things:

Sign an NNN agreement, not just an NDA. Chinese-language version, governed by Chinese law, with a specific liquidated damages clause. Cost: $500–1,500.
Register a design patent with CNIPA before you send CAD files to the factory. Cost: $450–2,000. Timeline: 4–6 months.
Register Chinese trademarks — English name, Chinese name, major variants. Complete before the OEM relationship starts.
Write clear mold ownership terms — title transfer, custody, use restrictions, identification, return procedure, and treatment of claimed liens or unpaid tooling charges.
Consider split manufacturing for high-value products — no single factory sees everything.

Together, these five things cost roughly $2,000 to $5,000.

Compare that to losing exclusive control of a product line, or litigating an IP case in China — even one you’re likely to win — and the time and money involved are an order of magnitude higher.

If your supplier is already using your designs to supply someone else, or you’re worried it’s about to happen, get in touch directly. I can review your contracts and registrations and give you a concrete enforcement plan.

References

Supreme People’s Court, PRC Civil Code, including Articles 585 and 783: https://www.court.gov.cn/zixun/xiangqing/233181.html
CNIPA, Patent Law of the People’s Republic of China (2020 Amendment), including Articles 9 and 42: https://english.cnipa.gov.cn/col/col3068/index.html
CNIPA, Anti-Unfair Competition Law of the People’s Republic of China (2025 Revision), including Articles 10 and 26: https://www.cnipa.gov.cn/art/2026/5/20/art_104_206437.html
WIPO Lex, Trademark Law of the People’s Republic of China (2019 Amendment), including Articles 4 and 31: https://www.wipo.int/wipolex/en/legislation/details/19559
WIPO, Hague System for the International Registration of Industrial Designs: https://www.wipo.int/hague/en/

This article is the sixth in the “China Supply Chain Disputes — What Every Buyer Should Know” series. Previous: How to Prepare Evidence That Actually Holds Up in Chinese Arbitration. Next: Tariffs Jumped 25% Mid-Order — Who Bears the Loss?.