When outsourcing, your startup business needs to ensure that all of the sensitive company information you have is well-protected. And one of the categories to pay special attention to is your intellectual property. But how do you do that exactly? Let’s take a closer look.
The IP Risks You Face When Outsourcing
To understand why intellectual property protection is essential, you should know the risks. This knowledge will help you create better IP protection systems and ensure that your outsourcing partner will assist in the effort.
At its most basic, your intellectual property consists of all the data, business processes, employee knowledge, and other confidential information that your startup has. Note that this can be a bit arbitrary, as what your company considers part of its intellectual property can vary greatly. This creates one of the challenges of IP protection during outsourcing.
Because of that arbitrary nature, your startup company might not be able to provide your outsourcing partner with enough information about your IP. That can lead them to mishandle those IPs assigned to them.
One of the significant risks at this point is a potential leak of your IP information. This can occur at various points during the partnership. For instance, they might inadvertently leave your information exposed during knowledge transfers
Active Risks
Various parties can take advantage of such openings to get access to your intellectual property. More unscrupulous ones like copyright thieves take an active approach to access your IP information, such as through hacking and other data theft tactics.
On the other hand, there are also internal risks that you might encounter when engaging with an outsourcing firm. The firm might intentionally or unintentionally violate the terms of your patents and IP. Such situations can create additional risks, including:
- The legal costs of pursuing or defending against an IP infringement case
- Damages and settlement costs resulting from such cases
- The loss of the IP’s value due to the results of the case
- Potential trust issues between you and the outsourcing partner due to the violations
These risks can have far-reaching consequences that will affect your business. Because of these, you need to lay down your IP protection strategies right from the very start of the outsourcing relationship.
Safeguarding Your Startup Business IP
The first step to do is review the IP your startup business owns. There are several types of IP you will need to take into account.
- Copyrights: These cover any creative output that your company produces, including images, text, and videos you produce for the business.
- Utility Patents: If you have new inventions or improvements on your existing ones, these will protect both.
- Trademarks: These protect any brand identification marks you have, like brand names, logos, or even slogans, It can also cover product names that you have registered.
- Trade secrets: These pertain to the technical data you have that relates to your internal processes. They can be user data, research data, or even algorithms.
- Industrial design rights: They cover the physical appearance of products you have, including their shape, weight, and mechanism.
Depending on the nature of your business, you might have different patent types in your inventory. Note that not all of these would be accessible to an outsourcing provider. Identifying which ones are will help you devise the right IP protection strategy. For instance, if you outsource marketing tasks, the provider will most often utilize your copyrighted materials.
Doing Your Due Diligence
Before you even sign up for a provider, you should already look into the protection strategies provided by candidates. Start by investigating their overall risk reduction and management strategies. See to it that they have ample data protection to ensure that your IP information will not leak.
Image from Silver Bullet Risk.
Additionally, look into their internal work processes. You need to check if they send out some work to subcontractors. See the measures they do to safeguard your IP here. This is important because you have less control over how these subcontractors use your information.
Check with the provider’s legal representatives to confirm these security measures. You might also want to visit their office, if possible, to verify further,
Creating The Binding Agreements For Your Startup Business
Once you have signed up with the provider, you need to establish binding agreements regarding the use of your intellectual property. For this, you will need two documents.
A Comprehensive IP Clause In Your Contract
When drafting your outsourcing contracts, pay special attention to the IP-related clauses in the terms. Some of the important ones that you need to state clearly are the following.
- Requirements for the management of sensitive data and IP information
- Confidentiality provisions covering IP, trade secrets, and work processes
- The jurisdiction where your copyright claims will be applicable. If you are outsourcing internationally, you might need to cover multiple countries.
- Ownership rights regarding any intellectual property the outsourced party develops for you during the partnership.
Beyond these general clauses, you might also need to draft special ones for your particular outsourcing case. Consult a legal expert on intellectual property to lay down these specific clauses and make them enforceable.
A Non-Disclosure Agreement (NDA)
NDAs are another essential safeguard for your IP when outsourcing. When writing these, word them broad enough to cover all of the outsourced work’s scope. But it should be specific so that outsourced providers know exactly what they are not allowed to share or have access to. Define what information they are not allowed to keep as well.
Image from Pleaders.
Once the outsourcing contract ends, it is a good idea to conduct an exit interview with the provider This helps both of you review all of the provisions of the NDA and reiterate what the contractor needs to do. Both you and the provider should also run an inventory of the IP they had used and accessed to account for everything.
Documenting Everything
This might seem obvious but proper documentation also plays a big role in protecting your intellectual property. As such, you would want to establish comprehensive documentation protocols. Ensure that all communications are logged and all the tasks done are listed.
You would also want to document different project notes. These would be useful in case of any disputes. You can also review these to see any areas that you can improve for future project implementations. However, make sure that your documentation process is not cumbersome so that your outsourcing partners can readily comply with it.
Protect Your Intellectual Property For Startup Business Success
Protecting your intellectual property is tantamount to protecting the very success of your startup business. Thus, you should put a strong effort into accomplishing it. And for that, you also want a partner who will do their part. We at Virtua Solutions understand how important that is to you and are ready to help you. Sign up with us today.
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