Your intellectual property may be one of your chief concerns in a supply chain relationship but, with some care, your secrets can stay safe
The crucial word in many supply chain relationships is “trust”. Big companies sourcing components or materials from smaller firms want to know their intellectual property (IP) isn’t leaking out, perhaps into the hands of competitors. Small firms with good ideas would like credit for them and assurance they won’t be ripped off.
Technology can help but, “in essence,” says Lara Quelch, senior IP consultant with business advice group KPMG, “it’s knowing who you’re dealing with”.
That means getting local information on potential suppliers in distant places and using the internet to research people and companies.
“The level of due diligence you do will depend on your budget,but you’d be surprised how much you get if you dig around,” says Quelch.
There are also legal processes. “I always say to organisations that before they speak to someone they should get a non-disclosure agreement (NDA) put in place,” Quelch says. “It puts them on notice that you’ve got valuable information and that you’re aware of its value. But the problem with them is that they’re difficult to enforce – and if they’re breached, the information is out there anyway, so what is your remedy?”
Copyright and patent laws offer other ways to protect IP, but copyright infringement is “sometimes difficult to demonstrate”, and patenting is expensive.
The fundamental, though, Quelch believes, is to take a systematic approach towards classifying the IP you have in products and processes: identifying what the “crown jewels” are and what the vulnerabilities might be. If new IP is going to be generated in a contract, sort out beforehand what belongs to whom as well.
“If you understand what it is you have to give away in dealing with a supplier, then maybe you’ll break it down, and give a bit away in the tendering process, a bit more at qualification, and so on,” she says.
“Don’t underestimate the practical controls you have, ensure employees know what they can pass on, and what they can’t.”
But you have to keep checking. “I spoke to a company recently that said it did nothing without an NDA in place, but I then asked if they monitored exactly what they let out of the door, and they said no.”
Your intellectual property may be one of your chat concerns in a supply chain relationship but, with some care, your secrets can stay safe