The Hidden Battle for IP Protection in Alliances

Predatory partners can extract valuable intellectual property and learn the practices companies use to protect it. Here's why companies need a multilayered defense.

- By Jens-Christian Friedmann, Dovev Lavie, Linda Rademaker, and Andrew Shipilov

STRATEGIC ALLIANCES ARE INDIS-pensable for accessing specialized resources, capabilities, and know-how that companies cannot easily develop in-house. However, despite being critical for innovation, alliances can be fraught with distrust, particularly regarding concerns about losing intellectual property (IP).

A telling case is the failed alliance between American Superconductor Corp. (AMSC) and wind turbine producer Sinovel. AMSC provided essential software for Sinovel’s turbines, but Sinovel reverse engineered the software to introduce its new turbines without AMSC. This IP leak led to a devastating 84% drop in AMSC’s stock, forced the company to cut 700 jobs, and wiped out $1 billion in shareholder equity.¹

In another recent case, sportscar maker Saleen Automotive accused its joint venture partner of filing 510 patents based on proprietary Saleen technologies and trade secrets worth $800 million, without crediting Saleen’s inventors.²