By Jonathon Talcott

For many American product companies, global manufacturing has created extraordinary opportunities. It has also created a significant challenge: commoditization.

Today, businesses of virtually any size can access sophisticated overseas manufacturing, source and bring products quickly to market through e-commerce platforms, marketplaces, and their own distribution channels.

But that accessibility works both ways.

When dozens of companies can source similar products from the same factories, differentiation can disappear quickly. A successful product can be followed by competing versions, additional sellers and, eventually, pressure on price and margins.

Simply put, product sourcing is no longer the competitive advantage it once was. Access to products, factories, and global supply chains has become increasingly democratized. Product innovation, however, remains one of the clearest paths for companies looking to differentiate, grow, and compete in today’s market.

For growing product companies, this raises an important strategic question:

How do you build a sustainable competitive advantage when your competitors have access to many of the same manufacturing resources you do?

Increasingly, the answer may lie in changing the role of the American company from simply sourcing products to creating them, and then strategically protecting the innovations that create commercial value—primarily through intellectual property (“IP”) laws.

Buchalter’s work with our client, MakerFlo, provides an interesting example of that evolution.

Moving From Product Sourcing to Product Innovation

Based in Chandler, Arizona, MakerFlo is a growing supplier serving the so-called “maker” and personalization industry. This burgeoning industry includes businesses that use technologies like laser engraving, sublimation, and ultraviolate (UV) printing to create personalized custom products (e.g., a commemorative display or drinkware with your favorite team or other customized labeling).

Like many companies in the consumer product space, MakerFlo works extensively with overseas manufacturers.

The company began recognizing, however, that simply becoming better at sourcing products would not necessarily create a long-term competitive advantage. Factories can manufacture exceptional products, but the same global manufacturing infrastructure is increasingly available to competitors.

MakerFlo therefore began asking a different question: Instead of simply asking, “What products can we source?” the company increasingly began asking, “What products should exist?”

That change has had significant implications for its business strategy.

MakerFlo began examining existing product categories through the specific needs of its customers. Where were customers experiencing frustration? What functionality was missing? Could products be redesigned to make them easier to personalize? Could additional decorating area be created? Could components be redesigned or combined in ways that created new functionality?

Those questions, among others, began producing concepts that were not simply selections from an existing factory catalog.

They were products MakerFlo was helping create. And that brought another important consideration right to the forefront: intellectual property.

Bringing IP Into the Product Development Conversation

One of the mistakes companies can make is waiting until a product becomes successful before considering intellectual property protection. By that point, important opportunities and legal rights may have already been lost.

An alternative approach is to make intellectual property part of the product development process itself.

Through our work with MakerFlo, Buchalter has worked alongside the company as it evaluates innovations and develops its intellectual property strategy—from the moment they come to mind.

That process can involve examining potentially protectable features, evaluating prior art, product names, and other product features to gauge the appropriate and optimal forms of intellectual property protection around commercially important innovations. Patents protect product designs and functionality and are one of the most valuable (and expensive) pieces of IP. Patent prosecution itself can also be an iterative process.

The United States Patent and Trademark Office may identify prior art or challenge the patentability of particular claims. Counsel and the inventor must then analyze what came before, identify meaningful distinctions, and determine whether and how the claimed invention can appropriately be differentiated.

That exercise can be valuable beyond obtaining a patent.

It forces a business to answer an important question:

What is actually innovative about this product, and why does that innovation matter commercially?

At Buchalter, this is central to how we approach patent strategy with our clients. The objective should not simply be accumulating patents. Intellectual property strategy should support business strategy.

A Patent Is a Business Asset, Not a Trophy

Receiving a patent is not the ultimate objective. Creating commercial advantage is.

A patent protecting something customers do not value may have limited strategic importance. Conversely, intellectual property protecting a feature central to why customers choose one product over another can become a critical business asset. That is why companies should consider intellectual property through a commercial lens.

Which features differentiate the product?

Which innovations are likely to matter to customers?

Which aspects could competitors attempt to replicate?

How difficult would it be to design around the protected innovation?

Where does the intellectual property fit within the company’s broader product roadmap?

And does the potential commercial value justify the investment required to obtain and maintain protection?

These are business questions as much as they are legal questions.

Buchalter’s IP practice focuses on aligning patent, trademark, trade secrets, and copyright portfolios with business objectives and concentrating protection around features capable of supporting commercial success and sustainable competitive advantage. MakerFlo’s evolution illustrates why that distinction matters.

Competing With Overseas Manufacturing Does Not Mean Abandoning It

There is another important lesson in MakerFlo’s strategy. The solution to increased competition from overseas products and overlapping manufacturers is not necessarily to stop manufacturing overseas. Rather, global manufacturing remains an extraordinary resource for American businesses.

The strategic question is where the value is being created and who owns it.

Consider two models. In the first, an American company identifies an existing product from an overseas factory, imports it, applies its branding and sells it. A competitor may potentially find the same or a substantially similar product and even use the same manufacturer (it happens).

In the second, the American company understands the customer, identifies an unmet need, develops the product concept, engineers the solution, builds the brand and engages its counsel to protect appropriate innovations. An overseas factory may still manufacture the product, but manufacturing is only one component of the value chain.

The American company owns the customer relationship, product concept, brand, market knowledge and, where appropriate, intellectual property.

That is a fundamentally different competitive position. The goal is not necessarily to out-manufacture China. It is to become better at identifying, creating, and owning the innovation that manufacturing brings to life.

Smaller Companies May Have an Innovation Advantage

Innovation is often associated with large corporations, extensive research departments and substantial development and legal budgets.

But smaller businesses can possess an important advantage: proximity to the customer.

They hear complaints directly.

They attend industry events where customers demonstrate how products are actually being used.

They see customers modifying products themselves because existing solutions do not quite work.

They understand the small frustrations that may never appear in a market research report.

Those observations can become valuable sources of innovation.

For example, MakerFlo’s position within the maker community gives it access to precisely that type of feedback. The opportunity is to turn those observations into a repeatable process:

Listen. Identify the problem. Develop the solution. Evaluate the innovation. Protect what matters. Bring it to market. Learn from the customer. Repeat.

Over time, that process can begin transforming a distributor into something very different: an innovation-driven product company.

Building Multiple Layers of Defensibility

Patents are also only one part of that strategy.

Depending on the product and business, companies may need to consider utility patents, design patents, trademarks, copyrights, trade secrets, licensing arrangements and other forms of intellectual property protection.

Brand equity creates another layer.

Distribution creates another.

Customer relationships, contractual arrangements, proprietary knowledge, and speed of innovation can create additional layers.

The strongest competitive position may therefore not depend upon a single patent preventing every competitor from entering a category.

Instead, companies can build multiple layers of differentiation over time that collectively make the business increasingly difficult to replicate and, thus, compete with. For companies operating in highly commoditized markets, that distinction can be significant.

From Importer to IP Owner

Perhaps the most interesting part of MakerFlo’s story is that this transformation did not begin with the creation of a massive research and development department. It began with a change in mindset.

Rather than assuming that the products currently available from manufacturers represented the boundaries of the market, the company began looking for opportunities to create something better.

That is a transition many product companies can consider.

An importer can become a product developer.

A distributor can become an inventor.

A reseller can become an intellectual property owner.

And a company competing primarily on price can begin competing on innovation.

The Opportunity for American Product Companies

Global manufacturing will continue to become more sophisticated, accessible, and ubiquitous. Artificial intelligence, digital marketplaces, and increasingly efficient supply chains will likely make it even easier for companies to identify successful products and bring competing versions to market.

That reality reinforces a fundamental shift: sourcing is becoming easier to replicate, while meaningful innovation remains difficult to replicate.

For American product companies, the opportunity is not necessarily to retreat from global manufacturing. It is to rethink where their competitive advantage comes from and focus securing IP protection for that advantage.

The strongest businesses may combine the best capabilities of global manufacturing with something much harder to commoditize: customer insight, creativity, product innovation, brand and ownership of intellectual property.

MakerFlo’s journey provides one example of what that transition can look like. The company continues to manufacture products globally, but it is increasingly focused on creating the products it believes should exist rather than simply selling the products already available. From an intellectual property perspective, that is an important distinction.

Companies should not pursue innovation simply because they want to hang a patent on the wall. They should innovate because solving meaningful customer problems creates value. Then, when those innovations create genuine differentiation and commercial opportunity, intellectual property can step in to protect and strengthen that advantage.

Product sourcing alone is no longer a moat. Product innovation can be.

For companies competing in increasingly crowded product categories, the objective should not simply be to win the commodity race.

The better strategy may be to create something that gives customers a reason not to treat your company like a commodity in the first place.

This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.