How to protect IP while outsourcing to offshore location?

When a company decides to outsource their process to offshore markets, one of the biggest challenges they face is protecting their Intellectual Property (IP). Outsourcing by definition is the process of hiring the service of experts to carry out their business process more efficiently than them. As such the process involves sharing of IP data which has direct impact on the business.

Protecting your IP. Image source: locklizard

Generally a company’s IP is protected by the country’s IP laws where it has based its business. In such cases, it creates problem for the companies that outsource it process to offshore market.  Hence, it is always better to check with due diligence before signing the contract that involves IP exchange. Here are few guidelines to reduce the risk of IP sharing while outsourcing to overseas vendors.

  1. Identify the IP outsourcing and document them: IP of a company can come in any form. It can be copyrights, trademarks, trade secrets and patents. Companies planning to outsource to overseas vendor should identify all details related to IP. This will give a clear picture about how much of IP details are to be shared with outsourcing partner.
  2. Identify the owner of the IP and document it: The companies are advised to identify and document the owner and creator of the IP which they plan to share with the outsourcing partner.
  3. Consolidate the contracts related to IP:  It is necessary to consolidate all the contracts related to IP and cross check them with the legal compliance of the country to which the company decide to outsource. This should be done without any failure when the outsourcing contract involves technology transfer, licensing agreement and other confidential data.
  4. Do a thorough research on the IP enforcement laws of the offshore country: IP laws differ from one country to another. Companies planning to outsource to foreign vendors should research and understand the IP enforcement laws of the country where outsourcing partner is operating. It will work well if the companies engaged in outsourcing understand the dispute resolution mechanism of the offshore country and how different it is from their country’s IP laws.
  5. Include the IP provisions in agreement: Include IP related provisions in the outsourcing contract. Make sure to include that the companies will have joint ownership of the IP that the vendor creates during the course of the outsourcing agreement. Give details in the contract as to how the vendor will protect the IP, who will have access to data and in what circumstances, etc is good to avoid confusion at a later stage. Specify clearly in the contract that the company will have immediate access to IP in case if the contract is terminated before the term ends.
  6. Sign Non-Disclosure agreement (NDA): This is one of the inexpensive ways of protecting IP. Signing a NDA between an outsourcing company and service provider will ensure confidentiality and integrity of the IP.

As of now there are no laws that guarantee IP protection for a company that outsource business process to offshore locations. But companies can follow these general guidelines to reduce the risk of compromising their IP information while outsourcing to foreign vendors.

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