Scale Up Skeletons #1 – IP Theft

As we approach Halloween, I’ve pulled together a few short lessons from skeletons that have jumped out at me over the years to disrupt the growth journey in companies that I’ve been involved with, together with reflections on what I would do differently next time around.

This first one is a biggie…

The story:

I’ve seen blatant IP theft twice during my career – once from an insider and once from a supplier.  With the insider (previously a trusted colleague), it enabled a competitor company to be established in China which at the time was our biggest market.  In the case of the supplier, they took our know-how and teaching and used it to become a competitor selling an equivalent technology with a different business model.

The impact:

In both cases, the impacts on the business were substantial and multi-faceted.  The financial impacts were significant in both cases as the new competition dramatically drove down pricing (and, arguably, value in the customers’ mind as the technology appeared more of a commodity).  The costs of the legal battles were enormous, as they involved international teams of lawyers to cover the multiple jurisdictions where we operated.  More importantly, the legal battles also consumed huge amounts of time and energy for senior management, which inevitably led to other areas of the business suffering or not progressing as fast.  Ultimately, each of these events had a permanent and negative impact on the growth of the business.


After these incidents, we put in place some simple, low-cost measures such as using code-names for the key chemicals used in the process.  We did this right from the start during the R&D stage, so that by the time a process was being scaled-up, the code-name was already embedded around the business.  It also made life easier for the non-chemists too, as they had simpler labels to work with rather than trying to remember or pronounce full chemical names.

With hindsight, it was also wrong to fully outsource equipment build and testing to a single sub-contractor.  At the time, it seemed like a great business decision… the risk for a complex set of equipment builds was shared, and the delivery time was shortened by shipping directly from our sub-contractor rather than bringing equipment to our factory for final assembly and testing.

It’s also worth paying close attention to relationships… would a fully engaged and motivated employee even have considered setting up as a competitor?  Would a trusting supplier who felt they were sharing fairly in the benefits of a business relationship be motivated to risk everything by competing directly with their customer?

At the end of the day, patents are necessary for the time you do need to go to court.  They should not, however, be considered a method for protecting your intellectual property… it is the day-to-day behaviours and decisions that will do this.

In the next instalments of this blog, I’ll cover markets and the importance of being in the right ones at the right times.

Telegraph Materials offers advisory services and practical support to fast-growth businesses bringing new materials-science based technologies and processes to international B2B markets.  For more information, see

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