Companies Need to Watch out for Suppliers Who Infringe on Intellectual Property

January 6, 2017


Supply Chain transparency is all the rage these days. Or maybe “all the rage” is a bit premature. But companies everywhere are sitting up and taking notice of the fact that consumers are demanding more information about where their products come from. People want to be sure that the products they buy come from sustainable sources – seafood, for example. More than ever, consumers want to be sure that companies are using ethical labour practise in their outsourced manufacturing. And, as we’ve written about, companies are adopting new standards to track the source and labour conditions behind their products, sharing this data with consumers more than ever before.

But here’s a more unusual – and uncommon – supplier issue that doesn’t get talked about: what do you do if one of your Suppliers has stolen intellectual property to make some of its products?

The CBC recently reported about Jody Edwards, a watercolour artist based in St. Catharines, ON, who was shocked to walk into a Winners store and find the details from one of her paintings adorning a rack of shirts for sale. Edwards then found that Nordstrom and Marshalls stores across Canada were also selling her work. The CBC’s Go Public segment reported about Edwards’ efforts to reclaim the stolen images, and to receive compensation for her work. The sum of the story is that the retailers insisted that they weren’t responsible for the theft of Edwards’ intellectual property, and that the company who had manufactured and supplied the shirts should be on the hook instead.

The retailers did some work to put pressure on the supplier that had manufactured the shirts, but the CBC’s investigation found it was surprisingly difficult to track down the supplier. The retailers removed the shirts from sale, but at this point Edwards doesn’t have much of an avenue for restitution. As the CBC reports, the stores themselves aren’t legally liable for copyright infringement if they pull the offending shirts from sale once they’re aware that the shirts infringe on intellectual copyright. In the U.S., everyone involved in the supply chain of a product can be liable for copyright infringement. Not so in Canada.

We all know it isn’t easy making it as an artist. And this is just the latest example of a big recent phenomenon in the textile industry – suppliers who take others’ designs without permission, whether from high fashion or from blogs. Major fashion retailers (especially “fast fashion”) like H&M and Zara have landed in hot water for selling products that copied artists’ designs from the internet without attribution or compensation to the artists.

We don’t mean to vilify the retailers: they’re working in an extremely competitive industry, with fast turnover of product lines. We want to give them the benefit of the doubt, and assume that the retailers aren’t always intentionally copying designs, but rather unknowingly agreeing to sell copied designs.

But we do want to point to this as a big Supply Chain transparency issue that retailers need to think about. Retailers can’t pass the buck on to their suppliers when it comes to the theft of intellectual property, because the evolution of thinking over the past few decades shows that a company is its Supply Chain. Consumers are going to hold retailers accountable for the source of their products, and blaming suppliers is no longer an excuse. Companies need to take ownership over their suppliers’ respect for intellectual property in the same way that they’re taking more ownership over labour conditions and sustainability in their Supply Chains now. No major retailer would sell a knock-off electronic device, so why would they accept a knock off of an independent artist’s work? 


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