By Gerald T. Welch, Principal
Dallas patent attorney Jerry Welch highlights the need for growing businesses to use development or consulting agreements when working with outside parties to develop new technologies in his new article for the Dallas Business Journal.
In the article, titled “Avoid setbacks when developing technology outside of your company,” Welch uses the example of a curtains manufacturer that hires an outside business to develop a new powered curtains motor based on one of its existing designs. In the example, the outside developer creates a new motor but the two parties fail to reach an agreement on supply terms and mutually part ways. A new developer is then hired to create a motor that turns out to be a commercial success.
When the original developer sees the new product, however, he claims both parties are infringing his patent for the original motor as well as his patent application for the new technology that he was paid to develop.
What should the curtains manufacturer have done to prevent this?
Although they entered into a confidentiality agreement with the original developer to protect the rights of both parties, a development or consulting agreement should have also been used. Importantly, this type of agreement addresses any concerns over the developer’s existing technology or patents, as well as the rights to any new technology that is developed independently by the developer; that is developed independently by the purchaser, or that is developed jointly by both.
A proper development agreement will also address licensing and ownership issues. For example, an attractive alternative to having all of the new IP rights assigned to the purchaser is to instead grant the purchaser an exclusive license to use the technology in their market while allowing the developer to license it to other companies outside of that business area. This offers a win-win scenario for both parties.
The bottom line, Welch says, is that “No matter how big or small your company, the issues, risks and opportunities are always the same and need to be dealt with in a comprehensive development or consulting agreement to ensure that you are in the best position to commercialize your new technology without interruption.”