US-Based Tech Startups at Risk of Exploitation Through International Pitch Competitions

Key Takeaways

• While international pitch competitions offer tech startups exposure and funding opportunities, participating startups may risk losing control of their intellectual property (IP), having their data exploited, and having their talent poached by competitors.
• Companies are advised to work with counsel to identify and implement basic risk-mitigation steps related to participation in such competitions, including conducting due diligence on organizing entities, taking steps to secure IP rights, limiting exposure to proprietary and other sensitive data, and monitoring the market for potential infringements arising out of the competition.

U.S. and Canadian agencies have issued an advisory to alert tech startups that entities affiliated with the People’s Republic of China (PRC) government are exploiting international pitch competitions to advance the PRC’s tech industry. The advisory recommends steps for startups participating in such competitions to protect themselves against losing control over their innovations, talent, and technology.

According to the advisory, competitions organized by entities affiliated with the PRC government often focus on technologies and industries the PRC’s industrial policy prioritizes, including semiconductors, biomedicine, new energy, and high-end manufacturing. Competitions may require participants to make detailed disclosures in the application and contest phases, including data on patents; business, financial, and marketing strategies; and personal data and photos. And winners may be obligated to form a business in China in order to receive advertised prizes and investment. Compliance with these requirements puts at risk participating startups’ control over their IP, data, competitive business intelligence, production processes, and talent.

The advisory recommends that companies considering participating in pitch competitions organized by entities affiliated with the PRC government, including the China Association for Science and Technology, work with counsel to identify and take mitigation steps to reduce their exposure and risk, including but not limited to:

• Screening the entities operating the competition, as well as others involved in these events, for foreign government affiliation and funding before registering and pitching
• Reviewing the competition guidelines to understand how submitted data will be used
• Understanding the laws where the competition organizers and potential investors operate to determine IP rights and whether data may be subject to compelled disclosure to the government
• Considering filing for patent protection in the United States and in the host nation of the event before the competition
• Considering nondisclosure agreements or other legally enforceable controls to ensure appropriate handling of IP by anyone involved in the competition
• Limiting unnecessary exposure of details regarding the project and business
• Carefully reviewing all documents that competition organizers or investors may require for signature
• Taking security precautions to safeguard proprietary and otherwise sensitive data from unauthorized access
• Regularly monitoring the market for potential infringements related to pitched projects during and after the competition and being prepared to act

Perkins Coie lawyers with extensive experience advising on startups, data security, and intellectual property are available to guide tech-sector clients on these and other new challenges.