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What to do to Limit Customers from Becoming Competitors

They almost lost it all and no one saw it coming.

American Superconductor, a MA-based company, was quickly gaining recognition for their successful business in technology that utilized wind for energy. They established a relationship with the Chinese- based company Sinovel who was at the time one of their largest customers. In fact, Sinovel made up three-quarters of the company’s revenue. Through these transactions and many others, American Superconductor was regarded as the poster child for businesses everywhere on how to tap into a foreign market well and maintain international relations. Yet everything was not as it seemed.

One day, Sinovel refused to pay millions for product they had ordered from American Superconductor. It was unlike them and quite unusual. When their reason for declining the electric equipment was vaguely communicated, an investigation ensued. It revealed that Sinovel had offered close to $2 million to an individual who worked at a subsidiary of American Superconductor to obtain trade secrets of the technology so that they could sell a pirated version of wind turbines themselves. It was a massive blow to the company. Their revenue plummeted significantly, and they were forced to lay off hundreds of workers – leaving others with little confidence in job security. What once was a company worth over $100 million and heralded by the President of the United States himself, was now fighting for their own identity with all that they had left.

Fortunately, American Superconductor is still in operation today and as of 2018, Sinovel had been ordered to pay $59 million in retribution. Their story on intellectual property theft is one that all business owners should consider. There are several questions business owners can ask themselves to limit something similar from happening to them in areas they might not have thought about before.

  1. Is Google Working for You? – Google Alerts is a tool that is largely beneficial for your business. Not only can it assist in tracking online business performance, but you can also receive alerts relevant to your own intellectual property. You can set up sources and terms whose activity will be emailed to you on a customizable basis, to keep you aware of any trademark infringement. This can also be a regular way of staying up to date on industry news and competitor activity. Google Alerts as a trademark monitoring tool is free and yet, far too few businesses are taking advantage of what it can do for them.
  2. Have You Protected Everything? – Think about the details of your business for a moment. Has your website been copyrighted? Have patents been renewed? Have non-disclosures been signed by employees and vendors? Have you searched the internet to see if anyone is mis-using your business logo? You can easily check this by dropping an image of your logo into the Google search engine and examining the results for any place where that image appears that is not associated with your own online presence. Don’t make it easy for competitors to take what’s not theirs and claim it as their own. Are your customer lists readily accessible through your website? If so, you have given competitors permission to contact and potentially redirect clients away from your business. If there are drawings and blueprints of business projects, do they reside on your website for all to see? Are these plans and other company images watermarked when sent out? Focusing attention on protecting these places where intellectual property resides better prohibits compromise to business value and identity.
  3. What If This Were You? – According to Digital Guardian, “Often times companies aren’t aware they’ve been victims of cyber-attack, especially when it involves the theft of intellectual property…This makes tracking incidents of IP theft, and their impact on companies, exceptionally difficult.” The risk of intellectual property theft escapes no one. Imagine if American Superconductor were your own business. You would want to be aware from the moment any kind of breach happens, because if not, you might keep conducting business as usual while the core of all that you’ve worked for slowly deteriorates at the hand of someone else. IP theft impacts various businesses differently. Hence, how would it individually affect yours? How is your business value constructed and distributed amongst the various areas of your intellectual property?

When there is a crisis, the answers for survival are heavily found in the response. Yet, what is done to prevent the crisis from occurring in the first place speaks volumes about what value means to those who have taken the proactive measures.

Some companies have used investment bankers to identify and value IP. Assure you have a tangible list of your intangibles with a firm you trust.