Intellectual property theft in supply chains

January 16, 2016 by

Due diligence and supply chain integrity for IP protection

The European Commission has launched a public consultation to analyse the way business safeguard and manage intellectual property (IP) rights in their supply chain. Intellectual property theft in supply chains is a big problem for companies and the European Commission wants to know what monitoring tools and due diligence procedures companies use to minimise the risk of intellectual property theft. Commercial-scale IP infringements are a global phenomenon.

Intellectual property theft in supply chains can have devastating effects on company reputation and profits. In some cases, such as those involving counterfeited or substandard knock-offs, intellectual property theft can also pose health and safety concerns for consumers, and the associated liability risk. For instance, surgical tools that break in a patients body pose obvious health risks.

Intellectual Property Theft in supply chains – economic impact

Intellectual property theft has also an impact on the wider economy. Intellectual property (IP) is a key driver for innovation, economic growth and investment in Europe. Replica products that infringe IP right have a crippling effect on the economy. In 2013 over 86 854 cases involving suspected intellectual property rights infringement were stopped by customs at the EU external border. The estimated value of the equivalent genuine products is over 1,2 billion Euro.

intellectual property theft


Source: Source: Report on EU customs enforcement of intellectual property rights at EU border, 2013

Chinas as a main suspect

China remains the main suspect when it comes to intellectual property theft in the supply chain. A core component of China’s successful growth strategy is acquiring science and technology. Sometimes this is done by legal means and sometimes by illegal means. In fact national industrial policy goals even encourage IP theft and Chinese business and government entities are involved in this practice. There are also apparent biases in the Chinese patent and trademark systems that weakens the protection of foreign owned intellectual property.Source of IP

Given the seriousness of the matter, The European Commission states that the results of the consultation will allow for the mapping and the promotion of best practices as well as the elaboration of EU supply chain integrity schemes including a “due diligence toolbox” for IP intensive companies. The Commission adds that the consultation is part of the “Follow the Money strategy” announced in the European Single Market Strategy in view of preventing IP infringing products and services from penetrating markets.