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Supply Chain’s New Role in Protecting Your IP

Intangible assets and intellectual property (IP) are increasingly important in today’s knowledge-based economy. Yet, all too often protection of a company’s intellectual capital is controlled by the legal department, with most companies failing to take effective action to protect IP. Instead, organizations will find value from basing IP protection on more proactive supply chain practices, and on embracing a holistic approach to target social, environmental, and ethical responsibility throughout the supply chain.

By ·

Intellectual property (IP) has become the coin of the realm over the last few decades. In a knowledge-based economy, organizations are creating value through creations of the human mind, which can be commercially used, and may take the form of copyrights, patents, trademarks, registered designs, and trade secrets. By some estimates, as much as 75 percent of most organizations’ value and revenue sources are in intangible assets, IP, and proprietary competitive advantages. Yet, the importance of IP is often overlooked by the supply chain.

While firms are adopting a more holistic approach to addressing social, environmental, and ethical issues, IP protection is rarely considered part of this approach at an operational level. Instead, IP protection is often managed by the legal department, with most companies failing to take effective strategic and operational action to lower their litigation risk and improve the likelihood of keeping their IP secure. In fact, a 2012 survey conducted by the Center for Responsible Enterprise and Trade (CREATe) with the Conference Board of Canada found that for 93 percent of surveyed companies, the legal department had primary responsibility for IP protection. Yet the same survey highlighted a lack of confidence in this traditional approach and a lack of results. Another hurdle limiting the effectiveness of IP protection strategies is the tendency of firms to operate in silos, with different organizational units determining their own IP strategy. 

Given the shortcomings of common strategies, it is not surprising that IP rights violations and the lack of enforcement are widespread, creating a serious problem for multinational firms. The magnitude of the problem has been especially significant in China, where in 2011 the software piracy rate for personal computers was 77 percent. The commercial value of this unlicensed software was US $8.902 billion, according to the 2011 BSA Global Software Piracy Study. The impacts of other IP violations are even higher. A 2013 report of the Commission on the Theft of American Intellectual Property estimates the scale of American IP theft reaches over US $300 billion per year. The International Chamber of Commerce estimated the global economic and social impacts of counterfeit and pirated products at about US $775 billion in 2008; this was estimated to more than double to US $1.7 trillion by 2015. In addition to financial losses, illicit activities harm company brands and reputations. And at a higher level, IP theft is undermining both the means and incentives for entrepreneurs to innovate, which can slow the development of new inventions and industries, impeding growth.

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By ·
Download Article PDF

Intellectual property (IP) has become the coin of the realm over the last few decades. In a knowledge-based economy, organizations are creating value through creations of the human mind, which can be commercially used, and may take the form of copyrights, patents, trademarks, registered designs, and trade secrets. By some estimates, as much as 75 percent of most organizations’ value and revenue sources are in intangible assets, IP, and proprietary competitive advantages. Yet, the importance of IP is often overlooked by the supply chain.

While firms are adopting a more holistic approach to addressing social, environmental, and ethical issues, IP protection is rarely considered part of this approach at an operational level. Instead, IP protection is often managed by the legal department, with most companies failing to take effective strategic and operational action to lower their litigation risk and improve the likelihood of keeping their IP secure. In fact, a 2012 survey conducted by the Center for Responsible Enterprise and Trade (CREATe) with the Conference Board of Canada found that for 93 percent of surveyed companies, the legal department had primary responsibility for IP protection. Yet the same survey highlighted a lack of confidence in this traditional approach and a lack of results. Another hurdle limiting the effectiveness of IP protection strategies is the tendency of firms to operate in silos, with different organizational units determining their own IP strategy. 

Given the shortcomings of common strategies, it is not surprising that IP rights violations and the lack of enforcement are widespread, creating a serious problem for multinational firms. The magnitude of the problem has been especially significant in China, where in 2011 the software piracy rate for personal computers was 77 percent. The commercial value of this unlicensed software was US $8.902 billion, according to the 2011 BSA Global Software Piracy Study. The impacts of other IP violations are even higher. A 2013 report of the Commission on the Theft of American Intellectual Property estimates the scale of American IP theft reaches over US $300 billion per year. The International Chamber of Commerce estimated the global economic and social impacts of counterfeit and pirated products at about US $775 billion in 2008; this was estimated to more than double to US $1.7 trillion by 2015. In addition to financial losses, illicit activities harm company brands and reputations. And at a higher level, IP theft is undermining both the means and incentives for entrepreneurs to innovate, which can slow the development of new inventions and industries, impeding growth.

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