IP Provisions in Consulting Contracts
IConsulting contracts can be for work performed by an outside service provider or consultant, like market research, product design, product development, software implementation, and employee benefit plan administration. The list can go on and 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. Let’s look at the legal departments that large companies have and explore ways to deal with 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 site 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 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 business people 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 business people. 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 business people 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 — e.g., how competitive was the Request For Proposals 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. If you need help in negotiating these clauses, let