Getting into a major supply chain? Protect the know-how you build along the way

Winning work in a major aerospace or defence supply chain can transform a regional manufacturing business.

Australian Aerospace Engineering in Albury recently expanded its maintenance, repair, overhaul, manufacturing and engineering capability and has been added to Lockheed Martin Australia's approved supplier network.

It is a good example of a regional business moving into a sophisticated national and international supply chain.

But those relationships can also create complicated IP questions.

Who owns improvements developed for a customer?

A manufacturer may start with its own equipment, processes and expertise.

A major customer may then provide specifications, technical data or designs.

Over time, the supplier may develop:

• new tooling;

• better manufacturing processes;

• testing methods;

• software;

• engineering solutions; or

• improvements that make production faster or more reliable.

Some of that knowledge may become commercially valuable.

The question is who owns it.

The answer will often depend on the contract.

Confidentiality works both ways

Suppliers may receive highly sensitive information from customers.

They may have strict obligations about how that information can be used, stored and disclosed.

But suppliers also need to think about protecting their own know-how.

A process developed over years of manufacturing experience may be valuable even if it has never been patented.

Giving a major customer access to that knowledge without clear boundaries can weaken the supplier's competitive advantage.

Read the IP clauses before the work starts

Supply agreements should be checked carefully for provisions dealing with:

• existing IP;

• newly created IP;

• tooling and designs;

• process improvements;

• technical data;

• confidentiality; and

• rights to use knowledge on other projects.

This matters well beyond defence.

Regional manufacturers supplying mining, energy, agriculture and infrastructure projects face similar issues.

Winning a large customer is valuable.

So is the knowledge your business builds while servicing them.

Make sure the contract does not unintentionally give that value away.