How to ensure your intellectual property remains protected when outsourcing.
In today's competitive market, outsourcing is an increasingly popular strategy, offering organizations the opportunity to save time and money in the manufacturing process. Although the benefits are numerous, outsourcing can also present challenges and risks, especially in regard to intellectual property. By taking proper precautions, selecting partners with care and maintaining a presence on the ground overseas, companies can maintain healthy working relationships while ensuring IP ownership remains in tact.
Proceed with caution
Companies must be proactive and forward-thinking before beginning an outsourcing relationship. By understanding risk prior to going overseas, firms can take the necessary protective steps prior to outsourcing, dramatically reducing the risk of sullying a positive working relationship further down the road.
According to Michael Bielski, a senior associate at ipCapital Group Inc., a Williston, Vt.-based intellectual property strategy consulting firm, the first step to reducing the risk of theft is to do a proper audit of the company's entire IP portfolio, including patents and trade secrets the organization holds. "Document what you own before the [relationship] takes place to prove that the invention was created by you," he says.
Questions of ownership—whether the firm or the subcontractor has the rights to the product or an invention—that may occur after outsourcing begins can also become a threat to IP security. "Anticipate any issues that will come up and address them before they arise and before money is on the table," Bielski recommends.
Although almost all processes in circuit board manufacturing can be done overseas, companies also should take stock of which products and trade secrets are most vital before making the decision to work with contractors. "Identify the critical areas that you wouldn't want your competitors to know about," Bielski says. "These may present valuable areas of invention that may not be worth the money not to outsource." After analyzing which parts of production or design can be completed internally, the company can then identify the services and production steps that are appropriate to be entrusted to other individuals.
For Alan Wong, president and CEO of Concord, N.H.-based Aavid Thermalloy LLC, which operates factories in China, India, Taiwan, Italy, Mexico and New Hampshire, also working extensively with contractors in various parts of China and Europe, outsourcing partners are chosen based on a variety of factors, including reputation of the contractors and if the work involved any processes that may be proprietary to the company. "We try to keep very close tabs on what we give and don't give them," Wong says. "What we would choose to outsource to them wouldn't be of critical competitive-advantage."
Wise choices
The ultimate users of many products manufactured overseas are located in the United States, making it easier to enforce patents and other legal rights if products are registered appropriately, Wong believes. However, if a product is sold in the country where it's manufactured, companies should investigate the differences in laws and available recourse options in that jurisdiction. "When we apply technologies to products sold in China," Wong says, "we need to have patents registered in China."
With so many options for global partnering, firms also may want to consider how receptive to foreign business the country they partner with has been in the past. For Wong, Asia has been a positive environment for business, especially in major commercial cities along the coast, such as Shanghai, where governmental jurisdictions support Western partners. "The government is very pro-foreign investors when you have technology or patent concerns," Wong says. "They are happy to help in making claims" should any IP problems arise.
Having the advantage
Unlike other industries in which few production steps are involved and trade secrets could be easily spread by any individual involved in the broader creation of a product, technologies in circuit board manufacturing are typically in proprietary manufacturing processes. As such, circuit board manufacturers can take advantage of the complex, multi-step production of their products and divide manufacturing steps between overseas partners, which can be sent back to the U.S. for completion.
"We find subcontractors with specialties in different areas," states Wong. "The electronics, chemical and mechanical parts [are] all sent to different subcontractors and are then assembled by members of our company." Stealing IP or design "would be very difficult to do," he says.
Building bridges
As with any business, whether at home or abroad, maintaining personal connections is vital to protecting property and maintaining positive relationships. "Have somebody on site evaluating how the intellectual property is being protected," Bielski recommends.
According to both Wong and Bielski, most IP problems can be prevented by addressing issues in preliminary stages, using common business sense, and knowing the strengths of the companies with whom you partner. "Pick what kinds of partners you want to work with, and take the necessary precautions," Wong recommends.
