PROTECTING IP

IP protection is emerging as another key topic in setting up international joint ventures. Both the benefits and risks associated with IP can be enormous because IP protections can literally decide a partnership’s failure or success. Indeed, the risks can transcend the joint venture; there have been situations in which a company has stolen its partner’s IP and then used it to compete globally against the partner’s parent company.

Despite such significant risks, IP is often a cornerstone of the joint venture, and IP sharing is a common feature in the process. It is used variously to convince a partner to join the venture, to improve the value creation of the venture, or to commercialize the IP as an outcome of the venture.  However, the vision for sharing IP must be accompanied by measures for protecting IP ownership throughout the life cycle of the joint venture.

IP protection was a major concern for a mature-market-based engineering company that set-up a joint venture in China to produce and commercialize power distribution products such as switchgears and transformers. The European partner transferred its core R&D know-how into a separate entity, in order to maintain full control of its valuable proprietary IP and to strictly limit the type of information being shared with the partner. At the same time, less-valuable IP at the application level—involving manufacturing, assembly and engineering know-how—was readily transferred to the joint venture to increase its efficiency. Additionally, some key components were imported from Europe or sourced from a separate joint venture in China, as a further protective measure.

The ultimate goal is to ensure that IP protection receives thorough consideration from the outset of the joint venture planning.

CONCLUSION

There’s no doubt that companies stand to reap tremendous benefits from international joint ventures. The opportunities can be hugely attractive both for established companies and for new start-ups in emerging markets. But the potential for failure should not be underestimated. The best way to enhance the odds of success is to draw upon the experience of others to design a solid set-up.