There’s a new issue to worry about in your company’s supply chain. Besides screening for environmental, labor, health, and safety concerns, the use of unauthorized intellectual property by suppliers is a “very important issue for people to watch,” Arthur Mitchell, senior counselor at White & Case told CorpCounsel.com. The firm recently released a research paper entitled, “The Emerging Risks of Unauthorized IP in Your Supply Chain and How You Should Respond” [PDF].
Mitchell warns that companies with “very long global supply chains” are at risk of steep legal and reputational ramifications from federal or state governments, such as monetary damages or blocking goods from importation, if they are found to be vicariously liable for the use of unauthorized IP by one of their suppliers. The IP can include patents, copyrights, utility models, and trade secrets that have not been authorized or paid for. Because liability may attach due to a supplier’s infringement, and not an action done by the company directly, “even companies with rigorous IP compliance programs” may be exposed, according to the paper.
Mitchell and his colleagues make five suggestions about how to mitigate risk of an “infected supply chain.”
1. Know your supply chain
Knowing your supply chain can be as simple as checking into the reputation of your suppliers, and as burdensome as a third party audit, depending on the size of your company. According to the report, many international companies are already monitoring their supply chains to comply with four UN Global Compact areas: human rights, labor, environment, and anticorruption. If the company is doing these things anyways, “add IP to your list” of areas to monitor suggests Mitchell.
