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Date ArticleType
5/11/2017 Member News
Property Protection: How small firms can learn to recognize and head off product piracy

Property protection
How small fi rms can learn to recognize and head off product piracy.

BY JAMES CHAN, PH.D.

Most American businesspeople understand that the theft of intellectual property is a big problem—one that costs U.S. firms $300 billion a year. For decades, I have counseled my small and mid-size clients that this is a problem that should concern them … but not scare them away from doing business overseas.

Recently, though, we have seen a new kind of threat—one that comes not from upstart foreign manufacturers and distributors but from the companies that have historically been our best customers. Companies that have prospered from selling components to multinational companies based in North America, Europe and Japan are getting squeezed.

What had been a collaborative process has now become more adversarial, as some multinational customers have tried to exploit my clients’ valuable design capabilities and production methods, ultimately by contracting with low-cost Asian manufacturers to actually produce the product. Our oldest and best customers, some of the top companies in the world, aren’t the kind of pirates we usually worry about; but when they exploit our expertise while not allowing us to make a profit, the threat is just as real.

Not all multinationals do this, naturally, but I have been hearing of more and more examples, so please be forewarned. My clients have had some success in dealing with this situation, at least so far. Companies will need to assess their own situations and develop their own strategies and safeguards. But the first step is to realize that the problem exists.

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