Solution provider agreement issues: Protection of intellectual property

The evolving nature of relationships with customers and partners demands greater vigilance around your intellectual property.

Many technology solution providers are seeking ways to develop "repeatable" solutions, ones that can be sold and deployed for multiple clients without requiring their teams to start from scratch each time.

This has become especially important in the age of cloud and managed services, which often share some sort of data center or hardware capacity behind the scenes.

Developing repeatable solutions takes discipline, defined processes and documentation, of course. But it might also require solution providers to take a different approach to contracts in order to differentiate their company's intellectual property from that of its customers or companies it partners with.

"A lot of what your company does involves selling your time and brain power. We've faced some challenges lately with different clients about what this means," said Jennifer Mazzanti, president of eMazzanti Technologies, an IT services firm based in Hoboken, N.J. "We've revised how we think about this."

Just one potential example surrounds how a solution provider might structure contracts or service agreements for Hardware as a Service offerings, Mazzanti said.

These are situations in which the solution provider provides the physical server, thin client or desktop computer, and maybe the software licenses for the operating system and applications under a lease or subscription model.

Things can become tricky if a customer decides to break its contract, especially if care hasn't been taken to keep its data and software assets stored and backed up separately from those owned by the solution provider. Unless the solution provider agreement's language for ownership is spelled out carefully, a solution provider might be forced to jump through hoops in order to reclaim its rightful property, Mazzanti said.

Here are two very specific, simple ways that solution providers or MSPs can move to ensure protection of intellectual property.

Be up-front with customers

At the beginning of every formal engagement, Atrion Networking Corp. discusses ownership of the code underlying its applications and managed services with its clients, said Tim Hebert, CEO of the Warwick, R.I., company.

Atrion's policy is to retain the rights to all underlying code for an integration project or deployments, so that the same approaches can be used with other clients. If improvements or enhancements are made for one customer, they can often be applied to infrastructure elsewhere.

That means all of Atrion's clients have the potential to benefit from improvements that might enhance reliability or security. Similarly, a workflow or applications developed for one customer -- such as a document scanning and managing routine -- might be appropriate for others, with the proper customization, he said.

"We had one client in the past who didn't like this, and we had to spell things out differently in our contract," Hebert said. "But for the most part, people don't have an issue with this philosophy."

Hire a legal expert to help

Powersolution.com, a managed service provider in Ho-Ho-Kus, N.J., looked to outside legal help to rewrite its standard license agreements when it began offering applications more frequently using cloud infrastructure.

Aside from covering bases with customers, the company focused on clearly spelling out who owns what with Powersolution's hosting partners, said David Dadian, founder and CEO.

This isn't something you can do once per year and forget about. Although it's possible to use the same standard protection clauses as a starting point, a solution provider agreement should be scrutinized carefully for each new application or service that your company plans to introduce. So, legal discussions might need to happen at least once per quarter.

"You constantly need to revise this," Dadian said. "Especially when you come up with a new idea."

About the author:
Heather Clancy is an award-winning business journalist in the New York City area with more than 20 years of experience.

This was first published in February 2013

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