Previously, I wrote about Fee Structures in Consulting Engagements, which is the stuff that the consultants are primarily interested in. If the consultant / firm has any strategic skills, their next concerns will be about Intellectual Property (IP) rights.
Do you really think that they make it all up from scratch for each new customer? Of course not – like any other developer, they have a body of code (and/or project/process methodology) that has been created and refined over time, a “toolbox” they have used and re-used to make each project more profitable (and higher quality) than the last.
<aside> … and yet, how often have you seen midsize and Big-6 consultants come in with project plans managed with Excel spreadsheets, and issue tracking / project collaboration managed with a weak Access database? Kinda sad … </aside>
This issue is most pronounced in professional services groups that are offshoots of the original software developer – the implementation teams that will convert legacy data into the package, or integrate with other critical systems at your company. I know this because I used to be in that business – each sale brought in requirements that the new customer simply had to have, so we implemented the changes and incorporated big chunks of the new software into the next release of the product.
I’m not saying this is wrong – it’s common practice, generally accepted, and typically explained by the software publisher as a benefit to you (because you get to see all the improvements that other companies are contributing when you do maintenance patching and version upgrades). It’s just that I know the nature of this development; since it’s new art, there can be multiple starts and stops, which can get expensive. However, if I’m paying for the programmers’ time, then the vendor is getting free R&D work that they can turn around and monetize (infinite return!!) by including in their next release.
To address that issue, I like to clearly lay out my expectations around Intellectual Property in the Master Consulting Agreement (MCA). Please remember IANAL, but this has worked for me in the past, I think it’s pretty good …
All ideas, concepts, methods, procedures, processes, developments, inventions, discoveries, improvements and the like made, conceived or first reduced to practice or use by [contractor] under or arising out of this Agreement (collectively, “Ideas”) shall become or remain the sole and exclusive property of [my company]. Upon expiration or termination of this Agreement, [contractor] shall notify [my company] in writing of all such Ideas. [contractor] hereby assigns to [my company] all of its right, title to and interest all such Ideas, regardless of whether any patent application is or has been filed for such Idea. If so requested by [my company], [contractor] shall execute any and all documents and assist in every reasonable manner to assign and maintain [my company]’s rights and interests in the Ideas.
All writings, documents, reports, papers, drawings, tabulations, books, computer programs and other works written or made by [contractor] under or arising out of this Agreement (collectively, “Products”) shall become or remain the sole and exclusive property of [my company], except to the extent that any of [contractor]’s previously developed proprietary software (“Contractor’s Proprietary Software”) is embedded in the Products. Contractor’s Proprietary Software shall remain the exclusive property of [contractor] and [my company] shall have no ownership interest therein. [contractor] hereby assigns to [my company] all of its right, title to and interest in, including without limitation all copyrights on, all Products. If so requested by [my company], [contractor] shall execute any and all documents and assist in every reasonable manner to assign and maintain [my company]’s rights and interests in the Products. In addition, any Products which qualify as a “work made for hire” under the U.S. Copyright laws shall be a work made for hire and shall be owned by [my company].
This Section shall survive the expiration or termination of this Agreement.
A couple things to note:
- If the consulting firm has a decent laywer, they will notice how strong this language is – covers Ideas as well as Products. An Idea can be pretty powerful – like a concept for a data structure that simplifies BOMs for complex parts, or a new method for allocating product based on customer needs and product availability. Don’t underestimate the value of a Good Idea.
- Any decent product company (software publisher) will be hyper-sensitive about their own IP. Previously, I wrote about the importance of defining Bolt-Ons and Modifications in your Software License Agreement (SLA). Mirroring the SLA from that post, you can add the following to your MCA …
“Software” shall mean any software programs and Software Product Descriptions generally commercially available from [contractor].
“Modifications” shall mean changes, additions, updates, or deletions of programmatic code or functionality made by [contractor] made to the source code of the Software or which use the Software owner’s confidential or proprietary information.
Now, just add the phrase “Except for Modifications” in front of the Ideas and Products paragraphs above.
(Risk Sharing is next …)