After deciding on the basic corporate or contractual structure, the company should decide how best to strategically divide the manufacturing process. In the outsourced manufacturing context, the best process involves not only efficient manufacture, but also the most effective process to mitigate potential trade secret risks. Read more
Once the company selects a potential outsourced manufacturing partner, it should design a transaction structure that reinforces its commercial expectations and the manufacturer’s contractual obligations. Specifically, the company should structure the outsourced manufacturing transaction in a manner best suited to protect the company’s key intellectual assets (both registered IP and unregistered IP like trade secrets and know-how). Transaction structure considerations include both the particular corporate and contractual form of the relationship, and how the company will delegate the manufacturing process to the outsourced manufacturer. Read more
Perhaps the single most important part of outsourced manufacturing is to select a trustworthy partner. A company should not enter into any transaction unless it has a good basis to believe that the manufacturer will be an acceptable partner. This requires rigorous due diligence, including:
- Background checks of the manufacturer’s principal officers, directors, and key personnel.
- Audits of the manufacturer’s financial statements.
- Inspections of the manufacturer’s facilities.
- Investigations of the manufacturer’s supply chain and trading partners.
A company’s internal controls may help to ensure proper:
- Vetting and selection of the prospective manufacturer during the due diligence process.
- Negotiation of the outsourced manufacturing relationship.
- Management of the outsourced manufacturing transaction and relationship with the manufacturer.
Nearly all manufacturing processes involve a significant number of intellectual assets. These assets may include registered intellectual property (designs, patents, copyrights, or trademarks) or unregistered trade secrets, know-how, confidential information, or other intangibles. Read more
There are two common categories of outsourced manufacturing: toll manufacturing and contract manufacturing. While both these manufacturing options have distinct and clear characteristics, their strategic advantage is their ability to provide customers with valuable ways to save both time and capital on their product line development. Read more
Since the beginning of the industrial age, companies have outsourced part of the manufacturing process to third-party providers. In the twentieth century, as manufacturing processes became more complex and distribution more global, this trend accelerated.
By David Cohen & Donal O’Connell
“China national charged with stealing trade secrets” – U.S. Justice Department
“Chinese battery expert is charged with stealing trade secrets from US employer, as he prepared to join mainland firm” – South China Morning PostRead more
During the course of a United States litigation — whether under the new, federal Defend Trade Secrets Act (DTSA) or the older state-adopted Uniform Trade Secrets Act (UTSA) — it is required that a plaintiff provide a description of the trade secrets allegedly stolen. What constitutes an adequate identification of the stolen or misappropriated trade secrets depends on the nature of the trade secrets, the facts of the case, and the relevant jurisdiction. Read more
Contrary to popular belief — especially among business owners — trade secrets are not only found in top secret, highly-secure research labs. Rather, almost every business possesses trade secrets, regardless of whether the business is small, medium or large.
A trade secret is anything that is:
- Not generally known or readily accessible to the relevant business circles or to the public;
- Gives some sort of potential or actual economic benefit to its owner where the benefit derives from the fact that the thing is not generally known, and not just from the value of the thing itself; and
- Is subject to “reasonable steps,” depending on the specific circumstances, to keep it secret.
Historically, trade secrets, if even considered, were treated as an afterthought. If there was some sort of non-disclosure agreement on file somewhere, companies were satisfied and turned their attention to patents, copyrights, and designs.
This attitude is changing for a number of reasons.