Fall 10 - The Competitive Edge; How to Protect Your Intellectual Property
Many manufacturers and distributors are not aware that they have intellectual property to protect. After years of working at a company, managers can become so familiar with specific innovations, processes and trade secrets that they forget these assets are worthy of special protection. Or executives assume that the company’s important intangibles are protected under blanket copyrights or nondisclosure agreements.
But this is not always the case. Intellectual property is extremely valuable and can create an enormous competitive advantage. Here are some steps to help protect intellectual property from theft or exploitation:
Monitor exposure. What information are you sharing that should be protected? For example, in bid documents, does your company reveal proprietary information about how it integrates components? Does a bid describe a new product or innovation that’s in development? Does it share technical specifications that should not be disclosed to others?
Gather the executive team to discuss the circumstances under which your company shares its trade secrets. Once these potential “leaks” are identified, they can be plugged.
Use nondisclosure agreements. Unfortunately, bids often get shared with competitors and are used by potential clients to leverage price breaks or schedule accelerations. In the process, your company’s proprietary information can circulate unfettered.
To solve this problem, require bid recipients to sign nondisclosure agreements (NDAs) that prevent them from discussing your confidential bid information with others. Work with your corporate attorney to include language describing exactly how the information can be used. For example, an NDA may dictate that bid information can be shared with the customer’s employees on a “need-to-know” basis, or only for the purposes of responding to one specific bid.
For employees, too. The people working at your company must understand that their livelihoods depend on the business maintaining its competitive edge. Employees have an ethical responsibility to not divulge trade secrets. You can make it a legal responsibility as well by requiring them to sign nondisclosure agreements.
Nondisclosure agreements also help protect trade secrets and customer lists from ex-employees who try to set up a competing shop. Note, however, that the enforceability of these agreements varies from state to state.
Protect designs and processes. Patents provide protection for up to 20 years, so use them! Often, company executives make the assumption that someone has taken the lead on the patent process when the paperwork hasn’t actually been filed. Or, there may be so much happening around the shop that no one is really paying attention to protecting the important innovations being implemented.
Assign a team to assess intellectual property at the company and create a process by which these assets get the protection they deserve.
Don’t underestimate the value of the intellectual property in your company. Protecting it must be a priority.
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Manufacturing/Distribution Advisor is produced quarterly by Bober Markey Fedorovich’s Manufacturing/Distribution Services Team. If you would like additional information about the services we provide, please contact our team leader, Cindy S. Johnson, CPA, CIT at (330) 762-9785 or by email.