In today’s competitive global marketplace, products and technologies are being developed at an extraordinary rate, resulting in numerous challenges to intellectual property (IP) protection in new markets. As a result, protection of IP assets has never been more important to businesses. It is therefore important to develop effective strategies to protect IP rights, not only to protect valuable assets but also to safeguard the products, processes and creative inputs from which the profits of the business emanate. The following are few crucial steps to consider before expanding into new markets.
1. Conduct due diligence of foreign partners. You need to check carefully into your foreign partners’ backgrounds and always remain diligent, keeping an eye on not just the foreign partners but also the market. Remember, even in countries with effective judicial systems, legal action is still costly and time consuming. One best practice is to break the manufacturing process into several discrete operations that are located in different facilities so that no single entity has access to all of the company’s secrets. In other words, avoid putting all of your eggs in one basket. Of course, the final assembly should remain under the control of the IP owner. It is also a good practice to have a trustworthy manager or representative onsite, year-round.
2. Airtight contract drafting. You should carefully work on the terms of the contract with foreign partners. Specifically, you need to clearly spell out the obligations of the foreign partner and carefully define what constitutes a material breach and what remedies will apply in the event of such a breach. Be careful to distinguish trademarks and patents from proprietary matters and trade secrets. Any failure to carefully distinguish between proprietary information, trademarks and patents can lead to problems down the road. Be sure that you include provisions for choice of law and venue that are not only strong and enforceable, but that are also realistic and consistent.
3. Obtain Non-Disclosure Agreements from Foreign Partners. Make sure to obtain non-disclosure agreements from foreign business partners. Strict agreements not to compete, to preserve trade secrets, and to refrain from conflicts of interest are legally enforceable in most jurisdictions. Also, simply having a signed agreement may have at the very least some deterrent effect.
4. Do not use standard licensing agreements. A standard licensing agreement that works in your country may not be adequate in other countries. For example, China’s technology laws are more favorable to a local licensee, and consequently may restrict a foreign licensor from claiming any rights or benefits derived from the indigenous improvements or modifications made to the intellectual property. Therefore, a foreign licensor must exercise caution and consult with legal counsel in order to craft a licensing agreement and a corporate structure for such an IP transfer which maximizes legal protections for the licensor and addresses local legal loopholes.
5. Register IP Rights in key foreign markets. Most IP rights are territorial, meaning, for example, a U.S. patent or trademark only provides protection in the United States. To be able to enforce your IP rights in other countries, you need to secure protection of that IP in those countries – often through registration. Begin by registering in your home country. Before you can register your IP, it is recommended that prior right searches be conducted before the relevant authorities to ensure that the intended use is not conflicting with any prior rights. For many countries, search reports can be obtained online while others may require review of local trademark office records.
6. Protection under international treaties. The United States and many other countries, including Europe, Japan and Australia are parties to several international treaties. These international treaties allow the IP owner to extend those rights to member countries.
7. Record with customs. Next, record your rights with the customs. For example, in the U.S. you can record your registered trademarks and copyrights with the U.S. Customs and Border Protection. US Customs uses the information to actively monitor shipments and prevent the importation or exportation of infringing goods. Similar processes exist in most countries worldwide.
These steps may not ensure success of new market expansion efforts, but they are likely to dramatically improve your ability to protect your rights abroad and to avoid costly problems down the road. In today’s global marketplace, IP protection should be an important part of a company’s overall business strategy.