Protecting IP in an Outsourcing Deal

Excerpted from: Intellectual Property Deskbook for the Business Lawyer
Edited by Sharon K. Sandeen and the Committee on Intellectual Property

While outsourcing transactions with domestic providers pose risks, such risks are even more profound when the service provider is located abroad. Many Asian countries, including China and India, have weaker intellectual property laws, less transparent and efficient courts, and less predictability in the process. In addition, the lack of recordkeeping burdens a company from conducting its usual due diligence.

Traps for the Unwary

1. Don’t assume that the laws and law enforcement mechanisms of other countries are the same as in the United States or that a judgment obtained in the United States will be enforceable in another country. Although most countries of the world are members of the World Trade Organization and are subject to the provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS Agreement”), the recognition and enforcement of IP rights still vary widely.

2. The standards for IP ownership that apply in the United States (e.g., the work-for-hire doctrine) do not necessarily apply outside of the United States. As a general rule, U.S. companies should expect the laws of other countries to be more solicitous of employee rights (including moral rights) and less supportive of noncompete agreements than U.S. law.

3. Using legal terms of art that are well known in the United States is not recommended if those terms are not known or used in other countries. For instance, whereas secret information is generally referred to as “trade secrets” in the United States, it is referred to as “undisclosed information” in the TRIPS Agreement.

4. Patent and trademark rights are nation-specific. If you have not applied for and obtained patent and trademark rights in countries other than the United States, you don’t own such rights in those countries.

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