ICT-supplier: know your contracts – protect your intellectual property

Your contracts reflect all modalities of the services you provide…

In the IT sector, the use of contracts is a well-adopted practice in comparison to other industries. This is not surprising, as our society is becoming increasingly digitised, but specific legislation is often still missing. As an ICT supplier, you are most likely confronted with several contracts on a daily basis. You understand the framework of these agreements concerning transfer of IP rights (Intellectual Property), time-and-material versus fixed price, KPI’s, service levels, and many other terms.

… But do these contracts, in their legal stipulations, really contain all agreements you are expecting?

Knowing what you want to fix in your agreements, and correctly finalising contract formalities is an important first step. However, this does not always guarantee your intellectual property is being adequately protected in the agreement. A solid IP agreement makes the difference with its level of detail and the way contract clauses are described.

Some examples to support this:

• You have commissioned the development of an independent subcontractor and then start to commercialise it. Are you sure you have also obtained      intellectual property rights for this module? Does the contract with the      subcontractor contain a clause transferring rights to the module over to you and is this clause formulated in a full and correct way making it binding? 
• You take part in a tender process process for the development of a software      application for a public company. The agreement stipulates you will remain      the owner of your standard application, yet all rights to customized additions are transferred to the client. How is this customization defined and are you not signing over rights to more than you envisioned?
• You close a deal with a large customer and agree on specific terms concerning deadlines, KPI’s, the description of your liability and other conditions. For the majority of the execution of the contract, you are commissioning a subcontractor. You have been working with this subcontractor for many      years and have a contract containing significant liability restrictions with them. During the project, deadlines and/or KPI’s aren’t met and your client is issuing a claim or taking legal action against you. Can this liability be shifted to the subcontractor in this case and what happens if they are insolvent? 
• Your application, that you are commercialising, has been developed entirely      based on opensource software. A client now claims they do not owe you remuneration for the use of this software, given the fact it is based on the opensource software. Is this claim correct?
• You are providing cloud services and are using servers of an American based      business for data storage of clients that process personal information. Your supplier is renting you the storage through a standard agreement. However, your customer is now asking you whether the American company is compliant with Belgian privacy legislation. What will your response be?

These examples demonstrate that intellectual property truly is a specific niche. What appear to be details can make a big difference. Our advice is to consult an expert to help you answer specific questions you may have concerning IP. At Grant Thornton, we always work to provide you with advice in clear terms, technically accurate, but understandable by non-legal professionals. Also when you are editing your own agreements, our goal will always be to work with you to build a tailored document, that is clear to both you and your contracting party.