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3 Tips for Protecting your Intellectual Property (IP) When Outsourcing your Software Development

Thinking about outsourcing your software development? Outsourcing is often cost and time effective, but it is important to ensure that your intellectual property (“IP”) is sufficiently protected in the process. IP is an umbrella term for various types of rights individuals or businesses can have regarding their brand, inventions and creative work. The theft of intellectual property is a serious concern, as the illegal use of IP can result in economic and developmental costs that are often never recovered.

There is no sure-fire way to keep your IP under lock and key, but here are some tips to remember to reduce your risk and maintain your competitive advantage when outsourcing your software development.

1. Know what you are Outsourcing

The first step to protecting your IP is to know what you are choosing to outsource. Andrew Berger, Intellectual Property Attorney, explains you should always: “Identify what your IP consists of, who controls it…[and] who adds or enhances it.” Remember, IP can be anything from copyrights to patents to industrial design and can be in the form of software code, databases or even something as simple as notes in a notebook or visualizations on a whiteboard. You must know what your IP is before you begin your project to ensure it is properly protected from the beginning. For more information on what is considered intellectual property around the world and examples of these, please go to the World Intellectual Property Organization website. To read more about different types of intellectual property in relation to software development, please read Saper Law’s post “Five Things Every Software Developer Should Know About Intellectual Property”.

2. Location

Once you have decided what your IP is, it is time to choose the location you wish to outsource. It is important to remember that U.S. IP protection only extends throughout the territory of the United States and has no effect in any foreign country. Almost every country, and even regions within those countries, have different IP laws. It is the responsibility of local governments to warn U.S. companies of the extent of IP protection, however, not all countries respect IP and you must understand which countries have stronger protections before choosing your location. Here is a brief comparison of Latin America and Asia in regards to IP protection:

Latin America

It is a common misconception that Latin America doesn’t have up-to-date IP laws like the United States. With the exception of Venezuela, most of Latin America has made significant progress in IP protection in the last 3 decades and the region is now one of the fastest growing IP sectors in the world. Latin American governments are committed to raising their standards, as IP protection is important when seeking growth, investment and commercialization. Roger Correa, Compliance Marketing Director of the international IT industry group Business Software Alliance, says Latin America has a “high degree of appreciation for intellectual property. Governments are fostering the efforts of international software companies and pushing to develop local companies as well.” Nearshore America’s further explains: “Countries such as Costa Rica are significantly improving their efforts to combat intellectual property theft, and Chile, which is traditionally the region’s biggest intellectual property offender, has been making recent improvements.” Despite some challenges due to the increasing size of the market, things are getting significantly better in the region and are much better than traditional offshore locations. To read more about how Latin America is tackling IP protection please read this roundtable by Intellectual Property, Corporate and Commercial Law Firm Olivares.

3 Tips for Protecting your Intellectual Property When Outsourcing your Software Development


Things become much more complicated when outsourcing to Asian countries such as India or China. According to the U.S. Embassy China, although there has been an increased commitment of central governments to tackle IP problems: “Enforcement measures taken to date have not been sufficient to deter massive IPR infringements effectively. There are several factors that undermine enforcement measures, including China’s reliance on administrative instead of criminal measures to combat IPR infringements, corruption and local protectionism, limited resources and training available to enforcement officials, and lack of public education regarding the economic and social impact of counterfeiting and piracy.” In other words, although IP laws do exist in China, it is very difficult to have these laws enforced.

India suffers from much of the same problems as China. India was recently voted the 2nd worst in the world at protecting Intellectual Property according to the U.S. Chamber of Commerce’s Intellectual Property Index. Business Standard explains: “The continued use of compulsory licenses, patent revocations, and weak legislative and enforcement mechanisms raise serious concerns about India’s commitment to promote innovation and protect creators.” For more information on how to protect your IP rights overseas, read this article from the U.S. government.

3. Outsourcing Partner

Finally, we suggest you choose an outsourcing partner to better ensure the success of your project. It is highly unlikely that a U.S. company seeking to outsource in a specific location for the first time will be able to assess the legal landscape thoroughly enough to ensure proper protection and the importance of choosing a reputable partner cannot be stressed enough. A partner that is familiar with the local culture, laws and varied nuances of your selected location will save you time and money navigating governmental processes and avoiding misappropriation.One of the best ways to ensure your IP is protected is by working with a company that is U.S. owned and managed, thus falling under U.S. jurisdiction. A U.S. based vendor that is experienced in outsourcing development will understand how to protect your intellectual property under U.S. law, thus avoiding any mishaps in the country you wish to outsource. This is why, at Gorilla Logic, we have a nearshore location in Costa Rica, but our offices are based out of Boulder, CO. To read more about why we chose Costa Rica as our nearshore location, please see my previous post. To read more about IP protection and outsourcing contracts please see this article by Claudia Jelea, attorney-at-law specializing in copyright, trademarks, e-commerce, IT&C and personal data protection.

Outsourcing your software development is often an effective method for reaching your goals, but you must remember to sufficiently protect your IP in the process. If you have any questions about IP protection and outsourcing please contact us here. At Gorilla Logic we can help you with all of your nearshore or onshore outsourcing needs. 

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