Business and Technology Consulting

Intellectual Property and Software: Yours, Mine, or Ours?

During a software selection project, I assisted a client in some process improvement, RFP development, and vendor evaluation. The client asked me to participate in a conference call with their attorney as they prepared the term sheet for the software vendor. The attorney raised the issue of intellectual property (IP) stating that the IP should belong exclusively to the client and that the vendor should be precluded from its usage.

Having been on both sides of this issue, I had argued in favor of or against the IP clause based on my then-current position. As a client seeking software customization, you should consider the following before you negotiate an IP clause:

  1. Does the customization involve algorithms that may provide you with a competitive edge?
  2. Is their a potential market for the IP/customization?
  3. Does the cost of protecting the IP exceed the benefits (i.e. competitive value)?
  4. Are you willing to invest beyond the development cost in order to achieve the potential market value?

As an example, consider a financial services firm that has devised an algorithm for predicting undervalued options. They may consider this algorithm proprietary and conclude that it provides them with a competitive advantage. In another instance, a company may have contracted for the development of an interface between two popular software packages. They may conclude that other companies would be interested in this interface and that it is worth an investment in marketing.

Clearly, each case should be decided individually. Which example describes your experience with IP?

(C)Copyright 2005, James T. Moran & Associates. All rights reserved.