Protecting Intellectual Property in the Global Supply Chain – “Biggest Bang for the Buck”
The discussion about protecting intellectual property rights (IPR) often is focused on the legal framework, the international laws of patents, trademarks and copyrights. Or, it is focused on protecting the digital data from Cyber security threats. But even with solid legal protections and IT systems, the “leak” of intellectual property in the supply chain has been a big problem for many global manufacturers. Some relevant facts:
- According to U.S. Department of Homeland Security, Intellectual Property Rights Seizures statistics, in 2014, total number of IRP related seizures was 55.7 Million and the total value of IPR related seizures (MRSP) was $250 Billion.
- According to the OECD report, “Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact”, in 2013, the value of imported fake goods worldwide was at $461 Billion in 2013, about 2.6% of the total imports in world trade of $17.9 Trillion. The top countries whose companies had their intellectual property rights infringed in the 2011-13 seizures were the United States, whose brands or patents were affected by 20% of the knock-offs.
- Up to 5% of goods imported into the European Union are fakes, according to the same OECD report.
- In the defense industry alone, the number of known counterfeit electronic products more than doubled from 2005 to 2008, according to a U.S. Commerce Department report released in January 2010.
With the increasing globalization in manufacturing, and the integration of Tier 1 and Tier 2 global suppliers in the product development process, the possibility of having intellectual property (IP) stolen or otherwise compromised are the biggest risks for global manufacturers, and it’s also the risk that they are ill-prepared to manage.
Currently, most manufacturers depend on two major processes to manage the risk:
- Manual, ad hoc paper process. It depends on people in the process to log the check out and check in of product samples. Since there are many departments, and many companies (prime contractors and their subcontractors) are involved in the process, it’s hard to enforce a consistent manual process. Frequently, people circumvent the process. It’s up to internal auditors to monitor and enforce the practice, and it can be very expensive for both the manufacturers and their suppliers.
- Segregate data access to different information systems, and have internal IT team develop and maintain that policy. This can inhibit the flow of information, and add burden to the internal IT team. In today’s environment of rapid product prototyping, this can be a limiting factor.
To effectively reduce the leak of intellectual property, manufacturers need to think about how to improve the tracking of IP sensitive physical and digital assets. They can’t rely on manual paper based processes. They can’t rely on building the walls for information access. They need to have a process, supported by an automated asset management system to enforce asset accountability and traceability, and the system and process needs to be streamlined and consistent globally across all touch points.
U.S. manufacturers have spent a lot of money to protect their intellectual property. But have they focused on “the biggest bang for the buck”? They have invested a lot in IT systems and legal contracts, but they can reap higher returns by improving the accountability in the flow of IP sensitive materials and information, because that’s where most of the “leaks” happened.
The risk of having IP stolen or compromised is a huge issue for manufacturers, but one that can be managed with proper diligence from an organizational and technology standpoint. With the right processes and systems in place, manufacturers can meet the challenges of leveraging a global supply chain without fear of having their most valuable assets, the ideas that eventually become profitable products, stolen or devalued.