THE DISASTER OF LEAVING INDUSTRIAL DESIGN UNPROTECTED: WHAT IS THE TRAP OF NEGLIGENCE, AND WHAT LESSONS CAN STARTUPS LEARN ABOUT COMMERCIAL ASSET DEFENSE?

1. Summary of the Real-Life Situation

Mr. M and Mr. K are two founders and long-time close neighbors in the [LOCAL] residential area. In 2024, they pooled their capital to establish TechDesign Digital Solutions Joint Stock Company [LOCAL]. Mr. M served as Chief Executive Officer (CEO), overseeing business strategy and administrative procedures. Mr. K served as Technical Director, responsible for component design and technology infrastructure. Out of neighborly trust, Mr. K entrusted Mr. M with full responsibility for intellectual property protection procedures.

In early 2026, Mr. K successfully designed an exceptionally refined and distinctive industrial design for a smart card reader casing. As soon as the product entered the market, it generated substantial quarterly revenue. Seeing this, a competing company immediately made molds and copied 100% of the product’s external appearance, selling it at a lower price. When Mr. K subsequently reviewed the company’s legal protection arrangements, he was shocked to discover that Mr. M had previously handled the process carelessly and superficially and had never filed an application for protection of the new product design with the Intellectual Property Office of Vietnam. The competitor openly appropriated the exclusive-looking device, causing TechDesign [LOCAL] to lose 80% of its revenue. The company’s financial operations froze, and its core project collapsed completely.

The founders’ joint capital was wiped out, and Mr. K was furious. He demanded that Mr. M compensate the company for the entire economic loss from his personal assets. Their long-standing neighborly relationship immediately broke down. The two families engaged in heated arguments and exchanged serious insults in the neighborhood. They threw dirty substances into each other’s homes, disturbing public order and forcing the local police to intervene.

2. Legal Perspective – “A Strong Shield”

From the perspective of civil, enterprise, and intellectual property law, an industrial design is granted exclusive legal protection only after a protection title has been issued; a manager’s disregard for the filing procedure may constitute a serious breach of the duty of care.

• Principle of establishing rights to an industrial design: Under Articles 6 and 87 of the 2025 Intellectual Property Law, industrial property rights to an industrial design are established on the basis of a decision granting a protection title by the competent state authority through the registration procedure. Unlike copyright, an industrial design is not automatically protected without an application securing an early priority date. The competitor’s copying of the device while TechDesign [LOCAL] had no protection title exposed a loophole caused by Mr. M’s negligence. Such carelessness constitutes a breach of the duty to exercise management authority properly under Article 162 of the 2020 Law on Enterprises, undermines the company’s intangible asset protection framework under Article 122 of the 2015 Civil Code, and deprives it of the right to bring a claim for non-contractual damages under Article 584 of the 2015 Civil Code.
• Civil liability of the enterprise manager: Under Article 165 of the 2020 Law on Enterprises, managers are required to perform their duties honestly and with the highest level of care to protect the company’s interests. Mr. M’s decision to rush into large-scale commercial production before securing legal protection for the product’s design constitutes a direct management error. Under Article 585 of the 2015 Civil Code, Mr. M has a legal obligation to bear responsibility and compensate the company and shareholder K for the entire economic loss from his personal assets [V02Q6Y].

3. Psychological – Educational – Management Perspective – “The Human Key”

Psychological and Educational Perspective

• Short-term achievement-driven ambition creates complacency and procedural negligence: Mr. M was too eager to launch the product and generate sales quickly, so he chose to bypass administrative stages. His focus on immediate cash flow led him to underestimate the barriers needed to protect the intangible assets and intellectual effort invested by his neighbor and business partner in creating the design. When the incident occurred, Mr. K fell into panic, fearing the complete loss of his family’s accumulated assets, which triggered intense suspicion and destroyed their long-standing neighborly relationship [V02Q6Y].
• Insufficient education in industrial design ownership and protection: Many startup business operators hold a mistaken belief: “I came up with the product, I make the molds and sell it every day, so it is obviously mine. Who would dare copy it?” [V02Q6Y]. They lack adequate education on administrative compliance and respect for the rule of law in business. They confuse everyday ownership of physical property with the obligation to establish legal protection for the commercial identifiers and intangible assets of a legal entity.

Management Perspective

• A fatal failure in external intellectual property registration risk management: Mr. M effectively bet TechDesign’s survival on the voluntary restraint of the free market. Managing a business without a system of protective barriers is self-destructive. The absence of procedures for reviewing designs and filing applications to secure exclusive rights neutralized the manager’s protective safeguards against hostile copying by competitors.
• A critical gap in the process for approving new product components: TechDesign [LOCAL] had no procedure governing the release of new product designs. A properly managed enterprise should require that every new component design be accompanied by a written similarity-search report before manufacturing or marketing. It should also require a record of the industrial design application filed by the legal department and written approval from the Board of Directors through a dual-signature resolution before bank funds are released.

4. Comprehensive Solutions from Expert Nguyễn Hữu Long

Step 1: Reconcile the Neighborly Dispute and Contain the Crisis Caused by the Device Copying (Short Term)

• Emergency neighborly mediation: Mr. M and Mr. K must immediately stop throwing dirty substances into each other’s homes to avoid potential action for disturbances of public order under the 2015 Civil Code. Mr. M should remain calm, set aside his ego, and proactively invite the neighborhood leader to mediate a private meeting. The goal is to prepare a written mediation record and a commitment to protect both families before addressing the economic dispute [V02Q6Y].
• Urgent filing and review of unfair competition barriers: Mr. M, in coordination with a lawyer, should immediately file a supplementary industrial design application with the Intellectual Property Office of Vietnam to secure the earliest possible priority date. At the same time, based on the 2018 Competition Law, he should issue a written notice requesting e-commerce platforms to remove the competitor’s products on the grounds of conduct that falsely imitates commercial indications and confuses customers, thereby temporarily containing revenue losses and helping rescue the business.

Step 2: Restructure Governance Procedures and Reimburse Internal Capital (Medium Term)

• Agreement to assume personal financial responsibility for the mistake: To cover the budget shortfall and ease internal anxiety, the parties should sign a supplementary agreement under the 2015 Civil Code. Mr. M should voluntarily offset the loss with his existing personal assets or reduce his future dividend entitlement to secure his obligation to fully reimburse Mr. K for the losses caused by his negligent management, thereby rebuilding trust and restoring clean cash flow for the company [V02Q6Y].
• Issue an IP Due Diligence Policy and dual-approval mechanism: Immediately draft and issue a new Corporate Industrial Design Policy based on the 2020 Law on Enterprises. It should establish a strict deadline and prohibit the release of production or marketing funds for any new component until written confirmation has been received that an application has been filed and an application number has been issued by the competent authority. Every commercial tendering and contracting process must include a quarterly cross-review record signed by both founders to ensure 100% control.

Step 3: Long-Term Lessons on Separating Personal Feelings from Business Assets

• Clear-cut industrial design protection is the most sustainable way to protect capital: The hard-earned lesson for managers is: “If a startup’s product design is not clearly defined and tightly secured through written barriers to exclusive protection, a founder’s rush to market will automatically burn down the entire enterprise” [V02Q6Y]. Clarity and discipline in managing the company’s strategic commercial assets, together with respect for the legal framework from day one, do not waste money. On the contrary, they are the only shield capable of protecting personal assets, safeguarding business capital, and preserving strong neighborly ties through the storms of the marketplace.

EXPERT PERSPECTIVE

• This article was developed based on the professional consultation and advice of MSc. Nguyễn Hữu Long – an expert in Leadership, Law, Psychology, and Education. Through an integrated, multidisciplinary approach, we provide not only a strong legal shield but also comprehensive risk-management and psychological-empathy solutions for the sustainable development of the community.
• If you or your organization are facing similar difficulties involving land or educational matters, please contact us through the hotline or leave a question on our website, <Link url=”https://tuvanphapluattamlygiaoduc.vn” title=”tuvanphapluattamlygiaoduc.vn”/>, or call 0898.627.762 for timely support.