As U.S manufacturers expand into international markets, they face greater threats to their intellectual property, making IP theft protection a must for exporters.
Threats to intellectual property come from competitors, rogue cyber attackers and international governments that choose to look the other way.
Theft and piracy usually come hand in hand with business growth and economic expansion. In the 1600’s, European businesses tapped the New World for raw materials and manufactured goods during an international economic expansion much like the one we are experiencing now. This growth launched the Golden Age of piracy in the high seas.
Back then, the attitude toward international crime varied depending on the economic interest of the countries involved. Superpower economies like Spain complained about it, while ascendant economies like England chose to ignore it. These days China is becoming notorious for intellectual property theft, but in reality, China is just the tip of the iceberg.
Intellectual Property Pirates
China is known to be very accommodating to intellectual property theft. A recent study by Fortune magazine found that 10 to 30 percent of China’s entire manufacturing economy thrives on producing knockoffs of brand-name articles produced in other countries. But they are not alone. Of the $320 billion the U.S. loses to IP theft every year, only 15 percent is committed by China.
The U.S. loses over $320 Billion each year to Intellectual Property theft.
Over the past decade, countries such as France, Brazil, and the former Soviet Union have developed a reputation for accepting corporate and industrial espionage as a way of promoting their economies. Manufacturers are lured to these countries by the promise of new markets or lower-cost supply lines, only to find their competitive edge eroded or completely eliminated when their intellectual property is stolen, copied and replicated at a lower cost.
The current environment leaves ambitious U.S. manufacturers with a difficult choice: expand into new markets and increase their exposure to IP theft, or retreat to a safe, but limited, market and pass up the opportunity for growth.
Manufacturers can safely navigate the waters of international trade and protect their intellectual property
Yet, there is a third choice. Manufacturers can safely navigate the waters of international trade and protect their intellectual property by tracking the flow of information in their companies, accurately assessing and predicting risk factors, and employing effective due diligence when teaming up with business partners.
Here are five things U.S. manufacturers can do to protect their intellectual property when they go global.
1. Know what you own
You can’t protect what you don’t know you have. Before establishing business relationships with foreign partners, manufacturers should take full stock of their intellectual property—including patents for inventions, trademarks and industrial designs—and assess their value by obtaining management and market audits.
Manufacturers that choose to valuate their IP using traditional accounting methods do themselves a disservice. IP value assessment uses social sciences along with traditional methods to determine value. When measured accurately, the true value of intellectual property is likely to be much greater than that ascribed to it by the traditional accounting calculation of goodwill on the balance sheet.
This increased value assessment comes with fringe benefits. A higher IP value raises the overall valuation of a company and helps facilitate more and cheaper access to capital.
2. Stay on top of paperwork
The process of registering intellectual property is one of those critical junctures in which private enterprise must engage head on with government bureaucracy—there’s no way around it. IP protection is an ongoing, multi-faceted, bureaucratic process riddled with critical deadlines and reams of paperwork that must be filled, filed and delivered in order to ensure government protection of your property.
For example, the U.S. government issues patents in provisional form, to be reinforced by subsequent filings running on strict deadlines. Fail to meet these deadlines and you lose your IP protection. To ensure protection of your property, you must prioritize the logistical process and stay in touch with the government agencies issuing your patents, trademarks and certificates.
3. Fortify your cyber defense
Cyberattacks have become a common method of stealing industry secrets. A company’s computer server is a treasure trove of information, and each employee that accesses the server is a potential portal into the system.
Many companies rely on IT contractors for their network security forgetting that the greatest vulnerability to their system is the employees that use it every day. Electronic jokes, greeting cards and chain emails cheerfully being passed around from one employee to another can install cookies on computers that allow the originator to read everything typed in real time on any computer that accepts it.
The best way to increase your IT security is not by building more firewalls but by educating your staff about the risks involved in opening and circulating foreign content.
When it comes to cyber security, your employees are the first line of defense.
4. Beware of corporate spies
Pretend you are a corporate spy. How would you spy on your company? Like most CEOs and directors, you are probably not a computer hacker, so you would probably use more traditional methods: going through phone records, fishing documents out of recycling bins, poring through research, and making contact with anyone who might casually let slip useful information. Even though cyberattacks garner most of the media attention, most corporate spying still relies on these traditional methods.
Intelligence agencies deal with this problem by managing their information on a need-to-know basis. This strict doctrine is how companies like Apple have managed to protect their intellectual property even under intense scrutiny. In fact, Apple applies a need-to-know rule over all of its operations—from design teams to component suppliers and manufacturing partners.
An added benefit of a strictly limited chain of information is that once a breach happens, it is much easier to track down where and how it happened.
5. Review your supply chain
The days of choosing a supplier based simply on price and reliability are unfortunately over. A supplier with lax security measures who has access to your intellectual property can be a critical risk. For this reason, IP-centric corporations like Microsoft have begun to evaluate their suppliers’ IP protection on equal footing with price and timeliness.
Microsoft is a blue-chip multinational corporation with a lot of negotiating power, but even small companies can insist on security standards when negotiating with potential foreign partners. Instituting these standards can serve as a filter, quickly eliminating prospects that are not willing to take the necessary measures to protect your IP.
The access to new markets is enticing, but to successfully take advantage of it manufacturers must become more vigilant about their exposure to IP theft. You cannot eliminate risk, but you can mitigate it to an acceptable degree.