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Safeguarding Intellectual Property When Collaborating With External Parties

by Bob Ertl updated August 15, 2023 Third Party Risk

Reading Time: 10 minutes

Intellectual property (IP) is the lifeblood of many businesses, comprising inventions, trade secrets, trademarks, copyrights, and other intangible assets. Whether it’s partnering with suppliers, outsourcing services, or engaging in joint ventures, sharing intellectual property (IP) with external parties is often necessary for growth and innovation. However, there is an inherent risk to the security and ownership of your valuable IP whenever you share it with trusted partners. Protecting your IP from unauthorized disclosure, theft, or misuse is crucial to maintain a competitive advantage, safeguard your innovations, and preserve your brand reputation. Organizations therefore must understand and take the necessary precautions to mitigate this risk. In this blog post, we will explore effective strategies for protecting your IP when sharing it with external parties.

Table of Contents

The Massive Risks Involved With Sharing IP With External Parties

Sharing intellectual property with external parties can carry significant risks. Intellectual property, or IP, encompasses creations of the mind, such as inventions, designs, trademarks, and artistic works, which are protected by copyright law. While sharing IP with trusted parties can be beneficial, and even critical, it is essential to be aware of the potential hazards associated with sharing IP. Here are just a few of the risks organizations face whenever they share IP:

Loss of Control: When sharing IP with external parties, there is a risk of the organization losing control over its use and distribution. The recipient, for example, may not adhere to the agreed-upon terms or may use the IP in ways that were not intended. This can lead to diminished value or even exploitation of the IP.
Theft and Infringement: Sharing IP with external parties increases the likelihood of theft or infringement. Unscrupulous individuals or organizations may misappropriate the IP for their own gain without proper authorization. This can result in financial losses, damage to reputation, and the need for costly legal actions to protect rights.
Dilution of Competitive Advantage: Intellectual property often provides a competitive edge in the market. Sharing IP may lead to a loss of exclusivity, allowing competitors to replicate or modify the IP, thereby diluting the original IP holder’s advantage. This can impact market share, profitability, and overall business sustainability.
Misalignment of Interests: When collaborating with external parties, conflicts of interest can arise. The recipient may have divergent goals or priorities that do not align with those of the IP owner. This misalignment can hinder progress, lead to disputes, or result in compromises that negatively impact the value and potential of the IP.
Lack of Confidentiality: IP is often considered proprietary and confidential information. Sharing it with external parties increases the risk of leaks or unauthorized disclosure, potentially compromising trade secrets, sensitive data, or valuable know-how. This can undermine a company’s competitive position or compromise future innovations.
Compliance and Regulatory Challenges: Different jurisdictions have varying laws and regulations concerning IP rights and their sharing. Engaging with external parties, particularly in international collaborations, can lead to complex legal and regulatory challenges. Ensuring compliance with applicable laws and protecting IP across borders becomes crucial but challenging.

Conduct a Risk Assessment Before Sharing Intellectual Property

Conducting a comprehensive risk assessment is a crucial step before sharing intellectual property with external parties. A risk assessment helps evaluate the potential risks and vulnerabilities associated with sharing IP, enabling the development of appropriate protection strategies. This assessment should encompass various factors, including the sensitivity of the IP, the trustworthiness of the parties involved, and the potential impact of IP compromise.

One aspect to consider is the sensitivity of the IP itself. Not all IP carries the same level of sensitivity or value. Some IP may be core to the company’s competitive advantage, while others may have lesser strategic importance. By understanding the sensitivity of the IP, you can prioritize your protection efforts accordingly. High-value and sensitive IP may require stricter controls and safeguards compared to IP with lower significance.

The trustworthiness and credibility of the external parties are also vital considerations. Thorough due diligence should be conducted to assess the reputation, track record, and past behavior of the potential collaborators. This evaluation helps determine if the parties have a history of respecting IP rights, maintaining confidentiality, and complying with relevant laws and regulations. Assessing the parties’ commitment to IP protection can significantly reduce the risk of unauthorized use or infringement.

Another crucial element is understanding the potential impact of IP compromise. What would be the consequences if the shared IP fell into the wrong hands? Assessing the potential impact involves considering the financial, operational, and reputational risks associated with IP theft, infringement, or loss of control. This assessment helps inform decisions regarding the level of control, security measures, and contractual provisions required to mitigate the identified risks effectively.

In addition to these primary factors, other aspects to consider during a risk assessment include the nature of the collaboration, the industry or market dynamics, and the regulatory environment. These factors can influence the specific risks associated with sharing IP and the necessary protective measures.

The outcome of the risk assessment should inform the development of protection strategies tailored to the identified risks. These strategies may include clear contractual agreements that address confidentiality, ownership, and dispute resolution, as well as the implementation of robust security measures to safeguard the shared IP. Regular monitoring and enforcement of IP usage should also be part of the ongoing risk management process.

Legal Protection Measures to Protect Intellectual Property

Implementing legal protection measures is essential for safeguarding IP when sharing it with external parties. There are several commonly employed legal measures that can help protect your IP rights and maintain control over your valuable assets.

Require Non-disclosure Agreements (NDAs) to Protect Intellectual Property

Non-disclosure agreements are contractual agreements that establish confidentiality obligations between parties involved in sharing IP. These agreements outline the scope of confidential information, including specific IP that is being shared, and impose restrictions on its use and disclosure. NDAs are particularly important when sharing sensitive or proprietary information with external parties, such as trade secrets or unreleased technology.

By requiring the signing of an NDA, you create a legal obligation for the recipient party to maintain the confidentiality of the shared IP. The NDA can specify the duration of the confidentiality obligations, the permitted uses of the IP, and the consequences of noncompliance. NDAs serve as a deterrent against unauthorized sharing of your IP and provide a legal recourse in case of breach.

Negotiate Intellectual Property Assignment Agreements

Intellectual property assignment agreements are crucial when collaborating with external parties, especially in joint ventures, research partnerships, or when engaging contractors or employees. These agreements ensure that any IP created or developed during the collaboration is appropriately assigned to the rightful party.

An intellectual property assignment agreement clarifies the ownership rights over the IP. It specifies that any IP generated or contributed by the collaborating parties will be assigned to a designated party or parties, depending on the agreed terms. This agreement helps protect your ownership and control over the valuable innovations resulting from the collaboration.

It is essential to draft clear and comprehensive intellectual property assignment agreements that cover all potential scenarios and ensure that all parties involved understand and agree to the terms. This prevents disputes over ownership rights in the future and helps maintain the integrity of your IP portfolio.

Issue Licensing Agreements to Protect Intellectual Property

Licensing agreements are legal contracts that allow you to grant limited rights to external parties to use your IP while retaining ownership. These agreements define the terms and conditions under which the external party can use the licensed IP. Licensing agreements are common when commercializing technology, trademarks, copyrights, or patents.

In a licensing agreement, you can specify the rights granted, such as the field of use, geographical limitations, duration of the license, and any restrictions or conditions on the use of the IP. You can also determine the licensing fees, royalties, or other financial arrangements for the use of your IP. Licensing agreements enable you to monetize your IP while maintaining control over its use and ensuring compliance with your established guidelines.

When drafting licensing agreements, it is crucial to clearly define the rights and restrictions, specify the enforcement mechanisms for ensuring compliance, and address any potential disputes that may arise. Regular monitoring and auditing of the licensee’s activities can help ensure the proper use of your IP and the protection of your rights.

By implementing these legal protection measures, you establish a solid foundation for safeguarding your intellectual property. Non-disclosure agreements, intellectual property assignment agreements, and licensing agreements provide clear guidelines, establish legal obligations, and help maintain control over your IP assets. When combined with other protective measures and a vigilant approach to IP management, these legal measures contribute significantly to the protection and preservation of your valuable intellectual property.

Protect Intellectual Property With Secure File Sharing Practices

Before sharing intellectual property with trusted partners, be sure you have secure file sharing practices and solutions in place. By following the measures listed below, you and your organization can mitigate the risks associated with unauthorized access, data breaches, and compromise of sensitive IP.

Implement Access Controls

Limiting access to confidential IP is a fundamental step in protecting your valuable assets. Implement strong access controls that grant permissions only to authorized individuals who require access for their specific roles or responsibilities. By employing role-based access controls (RBAC) or user-based access controls (UBAC), you can ensure that individuals have the necessary privileges to access specific IP and data.

Regularly review and update access permissions to align with changing requirements or personnel changes. This ensures that access privileges remain up to date and that former employees or collaborators no longer have access to sensitive information.

Encrypt Files in Transit and at Rest

Encrypting sensitive IP content provides an additional layer of protection, especially when it is stored or transmitted. Utilize robust encryption algorithms to secure the data at rest and in transit. Encryption scrambles the data, making it unreadable without the appropriate decryption key.

Ensure that encryption is applied to storage systems, databases, and file repositories containing IP. Encryption protocols, such as Transport Layer Security (TLS) or Secure Sockets Layer (SSL), should be used when transmitting IP over networks. Additionally, consider implementing disk encryption to protect the data stored on physical devices such as laptops or external drives.

Implementing strong data security measures, such as firewalls, intrusion detection systems, and regular security audits, further fortifies your information systems against potential threats. Keep all software and security patches up to date to mitigate vulnerabilities that could be exploited by malicious actors.

Utilize (and Enforce the Utilization of) Secure Communication Channels

When sharing sensitive IP information with external parties, it is essential to utilize secure communication channels to maintain confidentiality and integrity. Secure email systems that support end-to-end encryption can provide a secure means of communication. Encrypted email solutions use cryptographic protocols to protect the content of messages from interception or unauthorized access.

Virtual data rooms (VDRs) are another secure option for sharing IP. VDRs are online platforms that allow you to share documents and collaborate with external parties securely. These platforms typically offer features such as access controls, encryption, and audit logs to ensure the confidentiality and controlled distribution of shared IP.

For transferring large files or datasets, consider using secure file transfer protocols (SFTP) or secure cloud storage services. These services use encryption and access controls to safeguard the shared data during transit and storage.

In all cases, it is crucial to educate employees and collaborators about secure information sharing practices, including the proper use of encryption, secure communication channels, and the importance of protecting sensitive IP. Regular training and awareness programs can help reinforce secure information sharing practices throughout your organization.

Conduct Ongoing Monitoring and Auditing

Regularly monitor and audit the usage of shared IP to detect any unauthorized activities or breaches. Implement logging mechanisms, intrusion detection systems, and regular audits to ensure compliance with established protection measures. Promptly investigate and address any identified incidents or suspicious activities.

Develop Incident Response and Remediation Plans

Despite implementing preventive measures, incidents may still occur. Establish a well-defined incident response plan to address IP breaches or unauthorized disclosures promptly. By having a clear plan in place, you can respond promptly, minimize the impact of incidents, and mitigate further risks.

Here are key components to consider when developing an incident response and remediation plan:

Steps	Description
Incident Identification and Reporting	Define processes and mechanisms for promptly identifying and reporting potential IP breaches or unauthorized disclosures. Establish clear channels of communication to ensure incidents are reported to the appropriate personnel or teams.
Response Team and Responsibilities	Identify a dedicated response team comprising individuals from relevant departments. Assign specific roles and responsibilities to team members, ensuring each understands their responsibilities and is prepared to respond effectively.
Incident Assessment and Classification	Conduct a prompt and thorough assessment to understand the nature and scope of the incident. Classify incidents based on severity and potential impact to prioritize response efforts. Determine appropriate actions and resources needed.
Containment and Mitigation	Take immediate steps to contain and mitigate the impact of the incident. Isolate affected systems, suspend access to compromised IP, and implement necessary measures to prevent further unauthorized access or disclosure.
Forensic Investigation	Perform a forensic investigation to identify the root cause, extent of the incident, and vulnerabilities exploited. Engage experienced professionals to conduct a thorough investigation, preserving evidence and documenting findings.
Legal and Regulatory Obligations	Consult legal representatives to understand associated obligations. Evaluate breach notifications or reporting requirements. Determine steps to protect legal rights, such as pursuing legal actions against infringers or violators.
Communication and Notification	Establish a communication plan to inform internal stakeholders about the incident and actions being taken. Determine appropriate external communication levels considering legal obligations and reputational impact.
Remediation and Recovery	Develop a plan for remediation and recovery to restore normal operations and prevent future incidents. Implement additional security measures, conduct training programs, and reassess protocols and procedures to strengthen IP protection.
Lessons Learned and Continuous Improvement	Conduct a post-incident review to identify areas for improvement. Update the incident response plan accordingly. Document lessons learned and share them across the organization to enhance awareness and preparedness for future incidents.

Kiteworks Helps Businesses Protect Their Intellectual Property

The Kiteworks Private Content Network (PCN) helps businesses protect their intellectual property whenever employees share it with customers, suppliers, partners, or service providers. Kiteworks unifies, controls, protects, and tracks the exchange of IP, whether it’s shared by email, file sharing, managed file transfer, web forms, or application programming interfaces (APIs).

Kiteworks provides organizations with a robust and comprehensive set of security features to ensure IP is shared and stored safely, securely, and in compliance with data privacy regulations and standards. These features include:

Encryption: Kiteworks uses industry-standard encryption protocols, such as SSL/TLS, to secure the transmission of files between parties. This prevents unauthorized interception or tampering of intellectual property during transit.

Kiteworks offers flexible deployment options to meet diverse organizational needs. Kiteworks can be deployed on-premises, allowing complete control over the deployment environment for adhering to security and compliance requirements. Alternatively, organizations can choose a private cloud deployment, which combines the control of an on-premises deployment with the scalability and flexibility of cloud infrastructure. Kiteworks also supports a hybrid deployment model, where certain components are deployed on-premises, while others are hosted in a public cloud environment, enabling a balance between security and cloud-based collaboration advantages. Finally, Kiteworks is available as FedRAMP virtual private cloud in AWS for maximum security and protection.

User Access Controls: Kiteworks provides robust user access controls, allowing organizations to define roles and permissions for users accessing their intellectual property. This ensures that only authorized individuals can view, edit, or download sensitive information. Kiteworks supports multi-factor authentication, adding an extra layer of security to user accounts. This helps prevent unauthorized access even if login credentials are compromised.

Data Loss Prevention (DLP): Kiteworks incorporates data loss prevention features to prevent accidental or intentional leakage of intellectual property. DLP policies can be configured to detect and block the sharing of sensitive files or information outside authorized channels.

Watermarking and Digital Rights Management (DRM): Kiteworks supports watermarking and DRM capabilities, enabling organizations to embed identifying information or restrict usage rights on their intellectual property. This helps deter unauthorized sharing or misuse of confidential information.

Audit Logs and Activity Monitoring: Kiteworks maintains a detailed audit log, capturing user actions and file activities. This allows organizations to track who accessed, modified, or shared intellectual property, providing accountability and facilitating investigations if necessary, and capturing user actions and file activities.

Secure Collaboration Features: Kiteworks offers secure collaboration features like virtual data rooms, where external parties can collaborate on sensitive projects within a controlled environment. Granular permissions can be set to restrict actions and ensure that intellectual property remains protected.

Compliance and Certifications: Kiteworks adheres to industry standards and regulations, such as Cyber Essentials Plus and Network and Information Systems (NIS 2), General Data Protection Regulation (GDPR), and Health Insurance Portability and Accountability Act (HIPAA), ensuring the protection of intellectual property in line with relevant legal requirements.

To learn more about Kiteworks and how a Private Content Network can protect your IP, schedule a custom demo today.