Unfortunately, the globalization of the economy has lead to the globalization of organized crime and organized theft of intellectual property. This burgeoning trend is fueled by increased production in emerging economies with varying degrees of IP legal protection, corruption and government involvement as well as cheaper, more advanced technology and the potential for windfall profits with little comparative risk.
Building an ironclad IP protection program starts with a sound and proven blueprint to guide efforts and avoid missteps utilizing available resources, regardless of budget (assuming IP rights protection is ensured through registration in countries of business). There are three major areas of concentration necessary for an effective IP protection program.
HARNESS INTERNAL AND EXTERNAL RESOURCESTalk to people “in the know” to establish a communication network to assess the problem and create an ongoing information flow. Essential internal partnerships include:
- Legal: Oversee, review and revise contracts and provide counsel to the program.
- Security: Drive the program or collaborate with designers to identify common interests and resources to secure all assets.
- Risk Management: Have information on insurance, claims and risks to mitigate exposure, save on premiums and leverage RM expertise.
- Licensing: Understand operations of legitimately licensed and authorized entities, make recommendations on licensing issues affecting counterfeiting or diversion, and generate leads.
- Buyers: Develop good buying practices by refraining from buying counterfeit product in retail operations. Become familiar with brokers, vendors, jobbers and the sell-off process.
- Design: Protect designs and establish controls in the design process.
- Sales: Identify field issues and establish the best practices and controls.
- Production: Get to know brokers, vendors and jobbers, and understand legitimate production methods, obtain support on specific investigations and generate leads.
- Compliance: Provide background information on vendors and generate leads.
- Distribution: Understand supply chain practices, integrity and vulnerabilities.
- Sell-offs: Understand established practices for sell-offs and participate in the process to prevent counterfeiting and diversion.
- Information Technology: Develop, manage and secure information and processes through information systems.
- Public Relations: Coordinate media coverage for the IP enforcement program to the company’s best advantage.
While internal relationships are essential to program success and reach, so are external ones. Essential external partnerships include:
- Investigators and Consultants: Develop field resources according to industry and geography.
- Law Enforcement: Establish contacts for prosecutions.
- Informants: Gain inside information into your industry.
- Customers: Give customers a means of reporting IP theft.
- Vendors: Control rogue vendors and establish cooperation and compliance.
- Manufacturers: Identify large-scale infringes (often competitors) and establish cooperation and compliance for manufacturing activities.
CONDUCT AN INTERNAL AUDITThe next step in IP safeguarding is to conduct an internal audit of existing business systems by collaborating with these entities to address vulnerabilities:
- Legal: To add more controls for Master Services Agreements and Vendor Agreements, audit provisions and penalties and look for funding opportunities.
- Licensing: Same function as above.
- Security: Whether Security drives the program or not, a top-down evaluation of all security procedures related to IP security must be conducted to assure the best practices.
- Sales: Establish a leads reporting program and due diligence on potential and existing customers for timely intelligence from the field.
- Production: Collaborate with Legal, Buying and Compliance to communicate standards, audit provisions, sub-contractor limitations and disposal procedures in sourcing or vendor agreements. Develop a program to help control and audit use of raw materials and piece goods and audit sourcing process.
- Compliance: Coordinate with Compliance on human rights and production audits to include IP issues.
- Distribution: Evaluate supply chain exposures from theft and subversion or systems failure and make recommendations on process solutions or technological fixes.
- Buying: Establish procedures for buying “clean” merchandise and help investigate vendors, design theft and sell-off issues.
- Design: Communicate with the design team to develop procedures for safeguarding designs, especially in pre-production stages, to establish controls and accountability in this process and in their physical spaces.
- Sell-offs: Partner to develop secure excess goods disposal processes and investigate infringements by jobbers, Internet wholesalers and manufacturers.
- Public Relations: Seize the opportunity to promote positive corporate social responsibility, products and brand image through IP enforcement.
- Information Systems: Involve IT to analyze and protect against exposures to IP theft or infringement and to investigate violations.
ESTABLISH A BUDGETPresuming your company is using an existing in-house resource or consultant, the IP Protection Program has not cost more than a hired hand. To be truly effective, the user needs a funded, dedicated budget based on careful analysis of the problem scope, market and bottom line impact and resources available. Consider ways to balance administration costs between in-house and outside resources, and remember that it is critical to include funding investigations.
To develop a partially self-sustaining program, try implementing a civil recovery process to deter infringements and recover costs. Costs can also be shared through industry coalitions and/or licensee and/or distributor subsidies. Outsourcing, though, can be the most cost-effective paradigm. Reputable, established vendors with large IP clientele bring the best practices and professionally supervise and negotiate investigations, as well as limit liability.
There are also product security solutions to combat counterfeiting and diversion, such as marking and tracking technologies to identify genuine product and its origins.