Automakers need to be more sensitive to a supplier's intellectual property rights when awarding contracts, according to a study by the suppliers' trade group.
Smaller auto suppliers without legal staffs are especially vulnerable to language in contracts that expands an automaker's right to a proprietary system or technology, said Neil De Koker, executive director of the Original Equipment Suppliers Association.
The association published the study of automaker contracts so suppliers can better understand what they're signing. The study also may help suppliers negotiate some of their own terms, De Koker said.
Intellectual property needs immediate attention because it's the main asset for many electronics and software companies that do business with automakers, De Koker said.
Automakers need legal protection to use the patented systems they buy. But De Koker said contract language sometimes is expanded, or at least vague enough, to allow the automaker to use a patented system in programs where the supplier is not involved, according to the study.
That can allow a competitor access to a patented part or system, De Koker said. "Intellectual property is the entire value of many suppliers," he said. "It's how they differentiate themselves."
A lot of suppliers aren't aware that they don't have to sign so many rights away to get business.
"Many companies negotiate different terms and conditions, or they just take exception and agree to disagree," De Koker said. "Meanwhile, the work goes on, and business is awarded."
David Liner, leader of the automotive team at the Detroit law firm Dykema Gossett PLLC, said the reaction from automakers has been positive. Liner helped the association present the study to 240 supplier executives at a workshop.
"The focus was not to dump on (automakers)," he said. "This was for suppliers to help them understand what they were agreeing to.
(Automakers) have made changes in the past in response to suppliers' counsel."
In general, the Japanese automakers in the United States have a more collaborative relationship with suppliers than domestic automakers, according to the study.
De Koker said that difference likely is cultural. Japanese companies depend less on attorneys to draw up contracts, and Japanese society in general isn't as litigious as American society.
But he said General Motors, Ford Motor Co. and the Chrysler group are starting to change.
Said De Koker: "I hope we can get beyond the culture and have more management-to-management contact with these relationships."