IP Provisions in Consulting Contracts- Part 2

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 consultants viewpoint, the contract can limit their ability to bid for and perform future work. In my last blog we looked at ownership of the work product. This time, let’s look at the confidentiality provisions in consulting contracts and suggests some possible approaches for workarounds.

Confidentiality

Standard confidentiality clauses in consulting contracts can act as a way to prevent the consultant from using the intellectual property embodied in the project’s work product. Beware of standard confidentiality clauses providing that all project work product are “confidential information” that cannot be disclosed to third parties. These could prevent the consultant from re-using and adapting elements of the project for future clients.

The safest strategy is to strictly limit the “confidential information” concept to (1) proprietary documents and materials provided by the customer to the consultant (subject to the usual exceptions for public domain information and materials independently developed by the consultant) and (2) those specific elements of the project work product that the parties have agreed (in the IP ownership provisions) are to be owned and used exclusively by the customer.

Next time we’ll look at non-compete provisions in consulting agreements.