I wanted to put some context around my last blog
and emphasise the danger of entering into an unchallenged agreement exposes you to more than just financial risk.
Many SMEs allow their suppliers to own intellectual property they have paid to develop simply because the contract was not challenged. Often I hear SMEs say “we'll cover off who owns what afterwards as we just want to get going on the project”. Small businesses often assume if they are paying a supplier to develop something for them they will own it. This is the wrong assumption.
The developer or consultant will happily wait to talk ownership further down the line, as they are safe in the knowledge that in the absence of an agreement they own the developed intellectual property by default.
They have the perfect position. If they develop something you do not like, you are still paying their day rates. If what they have developed is set to deliver ground-breaking innovation in your industry, expect either a) the developer to attempt to resell what they have developed for you to your competitors (with the subsequent loss of your competitive advantage) or b) they offer you a great deal to ‘buy’ a right to use what they have developed for you for ever more. Let’s face it, neither approach is reasonable.
I am sure in the interest of long-term partnerships the majority of development companies would not operate like this. But why take the risk?
Make sure the developer agreement is reviewed and negotiated before the developer starts work. Agree who owns what from the outset. It will be a far easier and cheaper negotiation for you in the long run.
☛ Phil Machin is director at Bridge Procurement and previously held senior procurement roles at Burberry and COLT Telecommunications