The Emerging Risks of Unauthorized IP in Your Supply Chain and How You Should Respond

I. Introduction -

Most global companies manage their supply chains to avoid supply disruptions and to address environmental, labor, and health and safety concerns, among others, but these same companies are often not aware of the significant legal and reputational risks of “Unauthorized IP” in their supply chains. Recent developments suggest that pursuit by the US federal government, state governments and private claimants, resulting in damages, injunctions and import restrictions, are increasingly likely. These are in addition to the risks from boycotts, reputational harm and from (potentially critical) suppliers dropping out of the market. This White Paper describes the various facets of this emerging threat, particularly in the United States but also in Europe and Japan, for companies with Unauthorized IP in their supply chains, and makes recommendations for how forward-looking companies can manage these risks. These risks are most acute in the United States but, as in other areas of law, other jurisdictions may follow the US lead in this area.

“Unauthorized IP” is intellectual property whose use has not been authorized by its lawful owner. This intellectual property can take a variety of forms, including patents, copyrights, utility models, software and trade secrets. It might include the unauthorized (and even inadvertent) use of unlicensed software in business processes or the use of misappropriated trade secrets. Although there may be a question in a specific case whether the use of IP was authorized or not, for the purposes of this White Paper we will assume that a violation of such IP rights by the suppliers can be proven to have taken place.

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