By Gerald T. Welch, Principal
When seeking to develop technology for a business, only two sources are available: employees within your company or technology developers outside your company. In today’s competitive market, oftentimes companies must look to outside developers for the technology needed to stay current. The following column looks at a possible scenario that a company might face, and how to address the potential challenges that could present themselves when developing technology outside the company.
Example: You decide that you need to develop a more efficient motor for your product, powered curtains. You have identified a supplier that already sells motors that could be modified into a new product that would be well-suited for your new line of powered curtains. Under a standard confidentiality agreement, you provide the supplier with technical information including design specifications for the new motor and pay the supplier (developer) for developing the improved motor. The supplier develops the new motor and demonstrates its performance based on your specifications.
Problem: Although you are impressed with the improvements as the purchaser of services, you cannot agree on supply terms and decide to go to another supplier who manufactures the improved motor for you. You begin selling the new powered curtains, including the improved motor, with great success. Two years later, the original supplier discovers your success and sends you a letter claiming that you are infringing patents based on applications they filed covering the improvements that you paid to develop, and also pre-existing patents covering the original motor.