If your suppliers use unauthorized intellectual property, your business could take the hit. From attorneys at White & Case:
“Even if you own, or have the legal rights to use, all IP that you need to produce your own products or to deliver your services, you still could face serious legal and business consequences if any supplier in your supply chain uses ‘unauthorized IP’ (patents, copyrights, utility models, software, trade secrets, etc. that have not been authorized by the lawful owner and for which royalties have not been paid in accordance with relevant laws) at any point in its processes. […]
If any supplier in your supply chain, particularly one linked to Asia, is found to use unauthorized IP, then regulators, customers, competitors and others may perceive that your company is ‘benefitting’ from that use—and try to have your company held responsible.
In the United States, the Federal Trade Commission (FTC) has the authority to seek injunctive relief and civil penalties. The FTC has not taken significant enforcement action to date, but it is under pressure to address unauthorized IP use and is considering enforcement options. In addition, if a product violates Section 337 of the US Tariff Act of 1930, even inadvertently (by using unauthorized IP in the design, production, marketing or sales processes or integrating unauthorized IP into any component of the product), then the International Trade Commission (ITC) can issue an ‘exclusion order’ directing US Customs and Border Protection to block the product from importation into the United States—thus cutting off your access to all US markets.”
Read the full update, Do Your Suppliers Use Unauthorized IP? A Critical, Emerging Global Business Risk - White & Case LLP»