IP Provisions in Consulting Contracts- Part 5

By Debby Winters

Consulting contracts can be for work performed by an outside service provider or consultant, like market research, product design, product development, software implementation, employee benefit plan administration, and the list can go on. The consultant can begin to negotiate the consulting contract once the project proposal is accepted. Many times these contracts, as prepared by in-house counsel, are one-sided with intellectual property provisions that can be a disaster for the consultant with regards to future work. Believe me, I’ve been that in-house counsel drafting these contracts. The goal of in-house counsel is to protect your company but looking at these contracts from the consultant’s viewpoint, the contract can limit their ability to bid for and perform future work. In my last two blogs on this subject,  we looked at ownership of the work product and confidentiality provisions. This time, let’s look at the legal departments that large companies have and explore ways to deal with them.

Business People vs. Legal Department

As our final part on IP provisions in consulting contracts, we will talk about dealing with large entities and the competing factions within them.

When negotiating consulting contracts with large companies, the roadblocks that arise in the IP provisions are often driven by an in-house legal department that insists that certain provisions are “standard practice” or (if the lawyers are being honest) “that [big company] always gets this language” because of its inherent leverage over the consultants.

The business people at the customer who your client knows will often have a more nuanced view of the issues because they understand better than the lawyers (1) that the consultant landed the project because of its prior experience in the industry and (2) in most cases, the consultant’s services will be an adapted version of what has already been provided to competitors in the industry and not entirely newly created materials.

Whether to make an end-run around the in-house lawyers by having your client plead its case to the businesspeople is a judgment call. Depending on the corporate culture at the customer, the lawyers may have the last word on the IP issues or will instead be expected to take direction from the businesspeople. Try to get a sense of that culture before using your client to resolve disputed contract provisions, because a perceived breach of protocol may ruin your working relationship with the in-house lawyers.

On a related topic, you should counsel your consultant clients not to engage in the classic magical thinking about onerous, one-sided contract provisions as a way to shortcut the negotiations-  namely, that the customer businesspeople they know would never enforce the provision against them. If the contract clause is worth fighting about, your client should raise it with the customer and then assume that whatever version ends up in the final agreement can, and will. be enforced against them.

IP issues in consulting contracts are complicated and almost never one-size-fits-all. The range of what provisions will ultimately be acceptable to the parties will always depend on the specific context in which the negotiation is taking place, for example how competitive was the RFP process? How much profit is inherent in the pricing? How crucial are the services to the customer? How badly does the consultant need the work? The topics outlined ?above are not an exhaustive list, but they ?do represent the most common examples ?of the contentious IP issues that consultants and customers fight about in their negotiations.

Good luck with your IP provisions in your future consulting agreements!

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