Using Upfront IP Licensing To Reduce Future Supply Chain Disruptions

Supply Chain Disruption Series: Article 6

Companies often enter into supply agreements for component parts that are covered by or produced using a supplier's intellectual property (IP) rights, but do not give enough thought to IP licensing. In the face of supply chain disruptions and the associated need to investigate second-sourcing and in-housing options, suppliers may be keen to capitalize on those rights to prevent such production of their proprietary parts. For example, the supplier may assert that the component part is covered by a patent or that second-sourcing or in-housing by the customer would use the supplier's "know-how." As a result, supplier's IP rights, usually an afterthought in the context of ordinary supply arrangements, have now been thrust to the forefront of consideration in many industries.