Is Sending My IP
Off-Shore Illegal?

That's a great question for a lawyer (which we are not). However, we know that American companies using offshore patent services often encounter common legal challenges.

Legal Risks of Offshore Patent Services

Outsourcing patent drawings offshore introduces risks such as data leaks, IP theft, or misuse in countries with weaker intellectual property protections. By working with a US-based provider, companies ensure their inventions remain secure and confidential.

Export control violations:

Exporting technical data related to U.S. inventions overseas for patent drafting without proper clearance from the Bureau of Industry and Security (BIS) may violate Export Administration Regulations (EAR) [2]. This could expose companies to legal penalties and potential enforcement actions.

Unauthorized practice of law:

If adequate supervision is not provided, offshore professionals conducting patent searches or drafting may be engaging in the unauthorized practice of law, which could lead to legal complications for the American company [4].

Tax and transfer pricing issues:

Offshore IP strategies may face scrutiny under transfer pricing regulations if royalties or payments are not aligned with fair market value, potentially leading to tax disputes or penalties13.

Quality-related legal issues:

Poor-quality work from offshore providers could lead to invalid patents or increased prosecution costs, potentially resulting in legal disputes or loss of IP protection15.

 

Compulsory licensing risks:

Some countries where offshore patent services are based have compulsory licensing laws, which could force patent owners to grant licenses under terms dictated by the foreign state, potentially undermining the company’s IP rights1.

Data breach liability:

Although not specific to patent services, companies using offshore providers may face legal battles and financial penalties in case of data breaches involving sensitive information3.

 

The High Cost of IP Theft​

A survey by Accenture found that 57% of companies have experienced IP theft in offshoring, with 34% attributing it to inadequate contractual protections.

A notable example of the devastating impact of IP theft is Nortel Networks, which suffered significant losses due to a breach that occurred over nearly a decade. 

During this time, top-level research, business plans, and employee emails were systematically stolen, enabling competitors to replicate Nortel’s products and strategies. 

This breach contributed to Nortel’s eventual downfall in 2009, highlighting the critical need for robust agreements and due diligence when outsourcing offshore.

Is It Worth The Risk?

Many patents involve technology that falls under ITAR (International Traffic in Arms Regulations) or EAR (Export Administration Regulations), which restrict the export of technical data. Sending patent-related work offshore—even unintentionally—can result in severe legal penalties. A US-based provider ensures full compliance with these regulations, keeping sensitive intellectual property protected.

ITAR Violations 
The DDTC handles civil enforcement of ITAR, while the US Department of Justice manages criminal matters. Violations can lead to civil and criminal penalties, including fines, debarment, license revocation, and loss of business opportunities.

Penalties

  • Civil: Up to $1 million per violation, debarment, and possible negotiated settlements.
  • Criminal: Up to $1 million, 20 years’ imprisonment, or both per violation, along with debarment.

EAR Violations 
Violations of the Export Administration Regulations (EAR) can result in criminal and administrative penalties, including denial of export privileges.

Penalties

  • Criminal: Up to 20 years’ imprisonment, $1 million in fines, or both per violation.
  • Administrative: Up to $300,000 per violation or twice the value of the transaction, whichever is greater.
  • Denial of Export Privileges: Prohibits participation in transactions subject to EAR.

Find a US-Based Patent
Illustration Company

Choosing a US-based provider for patent illustrations and intellectual property services is a strategic decision that ensures compliance, confidentiality, and higher standards.  While outsourcing isn’t inherently bad, a lack of transparency can lead to inconsistent quality, communication challenges, and, most importantly, security concerns.

See The List

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