Your enemy won’t do you no harm
Cause you’ll know where he’s coming from
Don’t let the handshake and the smile fool ya
Take my advice I’m only try’ to school ya

From the song, “Smiling Faces,” by the Temptations

You know how when you buy a new car, you immediately start seeing your same car on the road all the time?  I have been going through a bit of that as I have been preparing for two speeches I will be giving soon on protecting intellectual property in China.  One of the things I plan to emphasize is how so often it is your own employee or partner who steals your IP and companies far too often fail to prepare against such theft. Since coming up with that as one of the themes for my talks, I seem to have been hit with a plethora of examples backing me up.

First, I got a call from a company who wants to sue its former employee and his new company for having stolen critical IP.  We are still looking into the viability of that lawsuit so I cannot really speak to that.  Then, just today, I received an email from a friend — a very thoughtful and veteran China consultant based in China — who wrote of how “it’s always the employee who causes IP problems in China.”  His email included a link to a Time Magazine article, entitled “China’s Talent War,” that spoke of the problems foreign (and domestic too) companies face in retaining their China talent and the IP problems that often accompany an employee who leaves:

But the consequences in China of not trying to retain talent can be severe. Not only, as Alcatel-Lucent’s Singh-Molares says, is it “deeply disruptive” to an organization to have to constantly retrain new people, but the issue can also have a competitive impact far beyond that. Intellectual-property protection in China remains porous: a survey for the American Chamber of Commerce in Shanghai released earlier this spring showed a vast majority of respondents saying there had been “no change” in intellectual-property-rights enforcement in the past year, despite repeated assurances by the central government in Beijing that China would crack down on piracy. The same survey ranked retention of talent far and away as the biggest human-resources challenge that companies face.

That’s hardly a coincidence. The two issues are inextricably linked. In 2008 an employee named Xiang Dong Yu quit his job as a product engineer at the Ford Motor Co. and joined a Chinese competitor, bringing with him 4,000 documents he had downloaded onto his computer. Xiang later made the mistake of traveling to the U.S., where he was arrested and prosecuted. But the brazenness of the theft and the reality of China’s uneven enforcement record is what lingers for many top executives. “That kind of thing still happens all too often here,” says the China chief of one American high-tech firm. “Every night at the close of business, those are your secrets walking out that door.”
What can you do as a company doing business in China or with China?  The first thing is to be cognizant of the problem and not ignore it simply because you find it distasteful to distrust your own people. The second thing is to set up systems to try to minimize opportunities for those close to you to steal your IP and to minimize the damage any such thefts will do to your company. In other words, avoid giving all of the keys to your kingdom to any one employee.  The third thing is to take all necessary legal steps to position your company to be able to sue anyone who steals your IP. The way to do that is through contracts protecting your trade secrets and by registering your IP in China.

You have been warned….