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Intellectual Property Infringement – One of the Top Supply Chain Risk

A very interesting article titled  Managing the Biggest Supply Chain Risk of All: Constant Change by Noha Tohamy of AMR Research rightly points out – that the biggest supply chain risk of all time is constant change.

The article also mentions that although being a manufacturing hub of the world, China contributes to the most risk to global supply chains, 9 out of top 15 risks. The top of the list is Intellectual property infringement followed by quality failure risk and security breach issues.
Intellectual property infringement is indeed the top rated risk by high-tech and discrete manufacturing companies. In December, during my speaking session at joint workshop on “Supply Risk Management” organized by SMI (Supply Management Institute, Germany) and IIM-B (Indian Institute of Management – Bangalore), this point was overwhelmingly brought out by some of the participants. Intellectual Property Infringement, in essence, is the unauthorized use or distribution of protected copyright, trademark, patent or trade secrets misappropriation. Failure to take action against counterfeits products would pose not only the risk of damage to organization’s brand value and public confidence, but also the risk of purchasing counterfeit products that do not meet the quality expectations of customers who mistake them for genuine products. Various counterfeit products are being discovered all over the world and examples of skillful counterfeiting are on the rise. Litigation costs in for a lawsuit often exceeds $1mn and this emerging exposure can have serious consequences on companies. Some of the popular measures to mitigate this risks are listed below. 

1.    IP Risk Management Audits wherever coverage is available.
2.    Direct visits to government organizations in places where counterfeit goods have been discovered in order to exchange opinions about methods of countering counterfeit products.
3.    Take advantage of the “well-known trademark” recognition to continue with countermeasures with the aim of achieving a fundamental solution to the problem of counterfeit products.
4.    Buy insurance policy protecting infringement of Intellectual Properties. Although, this is offered by a very select group of insurers and comes with many “fine prints”.

None of the measures are full proof. This risk needs to be assessed, measured and monitored all the time. During recession time, consumer buying behavior is dramatically changed. Cheaper product options coming to market using infringed IP pause a serious risk of threatening original product sales. It’s important for organizations to put emphasis on IP infringement in their supplier risk management program during recession.

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