Protecting your intellectual property rights when outsourcing.

In today’s global economy, outsourcing is a well-established occurrence. Outsourcing, which was once associated with large, international corporations, is now becoming more popular among companies. Cutting costs, resolving capacity challenges, and retaining a clear focus on the core company are some of the main reasons for outsourcing. Outsourcing, on the other hand, raises a fundamental question: how can I safeguard my intellectual property rights (IPR) — both current IP and any new IP created?

Whatever the nature of your development project, you will inevitably share some of your intellectual property with your outsourcing partner. Software, data, apps, and requirements documents are examples of sensitive information. Poor planning can lead to IP theft or misappropriation, despite your company’s best efforts.

• The following are all examples of intellectual property:
• Patents involving software processes and functionalities
• Patents on design safeguard your graphical user interface (GUI).
• Trademarks – safeguards your company’s name, logo, or tagline.
• Copyright – ensures that your source code, website, and sales materials are all protected.
• Technical information, user data, corporate processes, research data, and other trade secrets are all protected by trade secrets.

So, how can you handle potential IP concerns without jeopardizing your company’s ability to benefit from outsourcing?

Plan your IP strategy.

Before you embark on the outsourcing craze, make a list of the IP that will most likely be exposed. Make sure you can share the required IP with your outsourcing vendor if you have third-party license agreements. Strengthen your IP portfolio by registering and filing patents, trademarks, and copyrights where appropriate.

Consider establishing an initial outsourcing scope of work that does not expose your core IP. After you’ve established a good working relationship with an outsourced vendor, you can broaden the scope with more confidence in the safety of your business-critical patents.

Include IP in your due diligence.

Determine the following as part of your due diligence investigation:

Will your company retain ownership of all IP developed or created as a result of the outsourcing relationship? Which procedures and regulations will ensure that they remain your property?

Is it possible that the outsourcing provider will control all IP, requiring you to acquire ownership via license agreements? What steps will you take to make it happen?

Will both parties own IP that is created through a legal agreement based on their respective business needs? Who will draft this agreement, and how will it be implemented?

Important IP issues to consider when entering into outsourcing agreements

When it comes to crafting the outsourcing agreement, there are a few IP-related issues that need to be addressed. The agreement should, for example, include thorough, enforceable non-disclosure and non-compete clauses. These concerns are especially critical if your IP contains trade secrets.

IP ownership is also a significant concern. Not only should the ownership of the current IP be transparent, but so should the ownership of any new IP have developed throughout the outsourcing process. Newly developed intellectual property is usually classified as “works for hire” that belong to the company that paid for the work. However, it’s not uncommon for outsourcing agreements to include provisions for joint licensing of new intellectual property. That’s fine as long as it’s written out clearly and both sides understand it.

A company’s intellectual property is frequently its most valuable asset. The cost of failing to preserve intellectual property is considerably greater for small and medium-sized businesses, because it may be the only tangible asset they have. By following the measures to secure your intellectual property, you might be well on your way to outsourcing developers.