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How to Protect Intellectual Property when Outsourcing?

While many might think it doesn’t take much to protect intellectual property when outsourcing, the reality is that there are different IP risks in software development. There are several aspects to consider before your organization can begin a nearshoring partnership and protecting IP information is definitely one of them. 

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Considering that the global spending on outsourcing could hit $731 billion in 2023 according to recent outsourcing statistics, it’s safe to say nearshoring practices will only keep increasing their popularity. This means the need for reliable outsourcing practices will also go up, as well as the number of those who will try to take advantage of nearshoring newbies. To ensure your company doesn’t risk its intellectual property when working with nearshore developers, it’s important to be well informed on the subject. That’s why we created a guide that covers everything you need to know about protecting your intellectual property while outsourcing. Keep reading to learn how to avoid IP risks in software development! 

Why does intellectual property need to be protected?

Protecting intellectual property when IT outsourcing is a must if your company is looking to promote and nurture innovation. Truth is, your processes and inventions can be stolen from you at any given moment if you’re not careful enough when it comes to them, especially while outsourcing part of your organization’s work. When companies fail to protect their ideas, there’s an everlasting lack of motivation to research and develop new procedures or products. 

Besides the need to protect intellectual property when outsourcing to foster innovation and spark creativity within your organization, there’s also a pressing need to retain ownership of your property. IP risks in software development include theft of your programming projects, whether that is a mobile app or a website, and the loss of all money related to that development product. 

What are the IP risks in software development? 

If your company is developing a software product, there are always a few IP-related risks that need to be addressed. These involve different aspects of the nature of the product and signify potential weak spots where your software IP could be stolen from your organization. 

Here are the 5 IP risks in software development that can happen while outsourcing:

1. Registered trademark IP risks in software development.

Everything from your company website’s domain and logo to the latest product’s image and name should be registered under an IP trademark. This is a huge part of what it takes to protect intellectual property when outsourcing because it ensures full legal protection of your business’s brand and related products or services. 

If your company fails to register any intellectual property related to its brand under a trademark, these assets could easily be replicated by hackers or unlawful outsourced workers. Then that would most likely lead to legal complaints and potential action on the subject if the trademark thieves refuse to cease and desist their actions. 

2. Copyright-related IP risks.

Most companies who seek to hire nearshore developers in Latin America and the rest of the world want to develop new software solutions, whether that is a new eCommerce feature for their online business or a unique app to support their subscription. It doesn’t matter which specific product your company needs to develop, copyright will protect intellectual property when outsourcing. 

If you fail to register your newly developed software products under the copyright act, any developer or other freelancer working on it could attempt to steal ownership of the project. While you can certainly take legal action if this happens, it’s always best to be proactive and protect the copyright of your intellectual property right away. 

3. Trade secret-related IP risks.

While selfless knowledge-sharing for the sake of innovation is always a positive occurrence, there are also some benefits to keeping some details a company secret. This is especially true when it comes to trade secrets, which are confidential techniques or devices used by a company to develop its products or services. These trade secrets usually give organizations a competitive advantage that allows them to distinguish themselves from their competitors and attract the most leads. A classic example of a trade secret is the formula of Coca-Cola. 

When it comes to IP risks in software development, trade secrets are intellectual property rights regarding highly classified information which may be sold or licensed. If your organization has any trade secrets, there’s a risk of them becoming available to anyone with access to your servers if you don’t restrict that information properly. 

4. Patent-related IP risks.

Talking about IP risks in software development, a software patent is an intellectual property patent on a specific piece of software, such as a particular computer program, software libraries, a certain user interface, or an algorithm. A company or individual can register the intellectual property of any software development product under a patent registration, if the software solution they’re looking to protect complies with the US patent eligibility guidelines. 

The thing about trying to protect intellectual property when outsourcing through patent registration is the risk of not being granted such patent protection. The patent eligibility guidelines in the US don’t exactly make it easy for software solutions to obtain a registration, leaving your intellectual property unprotected if you don’t act fast enough to guarantee other methods of IP safety. 

5. Open-source IP risks in software development. 

Open-source code is publicly available software with a source code that anyone can inspect, modify, and improve over time. This is free software for anyone to take advantage of its capabilities since it was released by its original copyright holder under a license that grants users the rights to use it. 

The major IP risk in software development related to open-source software when nearshoring is the possibility of copyright infringement under the use of a public license. This could happen when a programmer or other IT professional uses that open-source code for unlawful purposes or even tries to sell part or the entirety of it for a profit. 

How to protect intellectual property when outsourcing: 5 actionable steps

1. Ensure the procedures of potential nearshoring partners are legit. 

If you want to protect intellectual property when outsourcing, it’s absolutely essential for your organization to conduct due diligence on any nearshoring vendors being considered for a potential IT outsourcing partnership. The work included in this investigation should include the nearshoring agency’s reputation and information regarding any past breaches of its client’s intellectual property rights when outsourcing. 

Don’t hesitate to ask about the vendor’s IP protection measures, internal confidentiality as safety protocols, their vetting processes when it comes to developers, and their responses to any data breaches. It’s your company’s responsibility to ensure you partner with a reliable nearshoring vendor that takes actionable steps towards safeguarding your intellectual property at all times. 

2. Protect your servers and your confidential data. 

Your organization should 100% limit server and data access when first working with nearshore developers. Besides IP risks in software development, this also serves as a way to ensure the confidentiality of your internal information and your company’s long-standing history and clients. This is another method of protection of your intellectual property when outsourcing: keeping all company data stored on private servers that developers can’t access without explicit permission. 

Of course, you could grant your nearshore developers access to private company information over time if you consider them trustworthy enough and that data s essential for the development of one of their software projects. Otherwise, it’s the right choice to keep that information hidden from them just as you would with other new hires at your organization, whether they’re nearshore workers or part of the local in-house staff. 

3. Document all communications, especially regarding your intellectual property. 

Documenting all communications with a nearshoring vendor will ensure that, if an intellectual property breach were to happen, everything is out in the open thanks to the factual evidence. Avoid deleting emails and texts and keep a record of any paper documents if there are any. 

Also, don’t forget to download all relevant documents to at least two separate devices to ensure that information stays with your company forever. If there are any communications regarding measures to protect intellectual property when outsourcing, be sure to save them on a separate fail dedicated especially to IP-related information. 

4. Run background checks on developers (or have your nearshoring partner do it for you!). 

If your company is working with remote nearshore developers from Latin America or the rest of the world, it’s essential to run thorough background checks on them, not only to protect your intellectual property when nearshoring but also to ensure they are who they say they are. This is especially true when it comes to the usage of freelancing platforms to hire nearshore developers, as these sites run very poor background checks and identity verifications. 

Your company could opt for running the background checks through an internal HR team or you can also choose to leave that task for nearshoring professionals. Many IT outsourcing agencies have established background procedures that will ensure your remote developers don’t have any ill intent and won’t steal your intellectual property anytime in the future. For example, at Next Idea Tech, we have our own signature vetting process that not only tests a developer’s abilities but also assesses their character. 

5. Include an NDA, NCA, and a Letter of Intent in all contracts and signed documents. 

We know that sounds like a lot of signing to do, but we guarantee it’s worth your while. If protecting your intellectual property while outsourcing is a priority for your company, there are a few different documents you’ll definitely want to sign with your nearshoring vendor. First off w have an NDA or nondisclosure agreement. This document ensures your nearshoring agency and all developers who have access to your code and servers will not share any of that information with anyone outside the work circle. 

Secondly, an NCA or noncompete agreement should also be signed to guarantee some extra protection against IP risks in software development. This document legally prevents the nearshoring vendor and remote developers from sharing or informing of your company’s ideas, innovation, trade secrets, and other IP rights with your competitors. 

Finally, it’s always a good idea to sign a non-binding letter of intent with your nearshoring vendor and remote nearshore developers. This letter demonstrates an interest in cooperation between both parties and can be used as evidence in case your organization needs to file a formal copyright complaint later on. 

What to ask your nearshoring partner to protect your intellectual property while outsourcing

1. How will you protect my organization’s data?

2. What are the measures to ensure the confidentiality of all information?

3. Does my organization keep 100%of the rights to the software products developed?

4. Have you had any previous data breaches or IP rights conflicts?

5. What are your internal IP safety protocols? 

6. Is any of your agency’s work subcontracted? How do you safeguard your and our intellectual property?

7. How are the safety protocols when exchanging documents and sensitive information?

Looking for a trusted nearshore development partner? We’re here to help you hire developers and avoid IP risks in software development

At Next Idea Tech, we understand the importance of protecting intellectual property while outsourcing. Our company is familiar with the different IP risks in software development and we have taken all the necessary measures to ensure your organization won’t suffer any safety breaches during your nearshoring contract. 

Thanks to our signature vetting process and our IP confidentiality policy, you can trust your data is safe to create the next big idea for a development product or software service. Contact us today to learn more about how we can help you protect intellectual property when outsourcing!

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Posted on

August 6, 2022