Much can change when the “idea folks” with an innovative concept sit down with the “reality folks” running the fab shop (whether they’re metal bangers or software code writers) or the distribution network. Each stage of the development and commercialization process can, and should, add value from the knowledge of the people involved.
Many bridle against detailed contracts, fearing they intimidate and smother “team spirit” or slow the innovative process. In reality, they ensure innovation team members address complicated questions up front and align expectations. Detailed agreements with clear rights are not inherently onerous or one-sided. Parties can design mutually beneficial contractual relationships (“innovation” is not limited to product development). Invention vs. reduction to practice, design concept vs. physical drawings, idea vs. protectable creative content, flow chart vs. source code – these distinct “acts” create layers of rights vesting automatically in different parties, absent a written contract clearly vesting ownership in a specific party (or distributed among several). Well-drafted agreements ensure all understand their rights and obligations, preventing later disputes.
The same holds true for trends toward “outsourcing,” “specialization” and focus on “core competencies.” Nowadays, R&D and design tend to be separated from manufacturing, prototyping and even each other, with each function performed by separate entities focused on their core competencies to remain nimble, rather than trying to do it all. This means innovations will come from many sources during the concept-to-commercialization journey. Without clear preexisting agreements regarding ownership and revenue sharing, controls over information flow and IP prosecution responsibilities (i.e. application filing and costs), a minefield of ownership and rights disputes loom. These can delay launch, generate unnecessary lawsuits and spook investors, leaving a potentially great idea tangled up at the starting gate. Investors avoid sinking money into enterprises without clear ownership of their IP. Even shared ownership rights, with clear exploitation rights and revenue streams, are usually preferable to fuzzy rights that may lead to nothing of value – or worse, lawsuits over nothing of value.
Delaying formal agreements until joint efforts bear fruit may leave your company in a very vulnerable position. Delay can provide leverage for your “teammate” to extract painful concessions, because finding a new partner means delay and missing the market window. When your “teammate” recognizes this leverage, you may lose control of the very innovations constituting your company’s core value. Conversely, having clear agreements up front allows the “team” to collaborate more freely and to focus on creating value, rather than remaining defensive.
Addressing difficult questions up front with clear agreements among all parties results in less conflict, less distraction, less delay and less overall risk, thereby freeing resources to accelerate the innovation cycle. Yippy for everyone!
Mark Beatty is an intellectual property attorney with the law firm Rylander & Associates PC in Vancouver and a registered patent attorney. His practice includes patent, trademark and copyright prosecution, IP and business litigation, IP licensing, and advising businesses on IP matters.
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