Upload – Collaboration and Product Development – a match made in heaven?

There comes a time in life when, for most of us, our thoughts turn to looking for a partner. Someone with whom we can share our life, laugh and cry, discuss our innermost thoughts and plan for the future. Many technology companies will at some stage have similar thoughts.

Maybe not a partner for life, but a partner who will help to take them to the next level, who will bring additional expertise (and often money!) to the table. But whether it is life or business, you want to ensure that it is a match made in heaven. If it isn’t, you may have to deal with the consequences!

As a technology company you may be approached by a potential partner or you may make the initial move. However the introduction comes about, it is often a good idea to conclude a ‘heads of terms’ and a non-disclosure agreement. The NDA will allow you to discuss ideas, plans and trade secrets whilst deciding whether and how to proceed with the relationship. The heads of terms will set out the main commitments that each of the parties will be making and how they envisage the relationship developing. These commitments (apart from confidentiality) should not be legally binding so that both parties can go their separate ways if need be and with minimal disruption.

But don’t get too tied down on the details in the heads of terms. Those details will come in the more complex and legally binding collaboration agreement (or whatever name the parties choose to give it). Don’t be tempted to rush into the relationship until this agreement has been concluded or to proceed solely on the basis of the heads of terms. A good deal of management time will be needed to negotiate and conclude the details in the collaboration agreement.

In any collaboration it is important to work out what each of the parties will be bringing into the relationship, whether that is initially or at some point in the future. It could be people and expertise, know-how and intellectual property, equipment and materials, or financial capital. Ideally there should be a balance between what is being contributed, and the risks and rewards associated with the agreement should reflect the respective contributions.

Fail to plan, plan to fail. It may sound obvious but it pays dividends to spend the time developing a robust plan for what the collaboration is intending to achieve. This is particularly important where product development is concerned. More often than not the plan will form an integral part of the main agreement, so make sure that not only is it detailed but it also contains contingencies and dependencies. No one knows at the outset just how things will turn out, but a decent plan should ensure that both parties are ‘singing from the same hymn sheet’. Quite often milestones in the plan are linked to additional financial contributions and other contractual obligations.

A product development arrangement will almost certainly involve the creation of intellectual property rights, often referred to as foreground IP. If both parties are likely to create foreground IP then it is important to define these rights and who will own them. Cross-licensing of the IP rights may also be necessary. Sometimes there are joint IP rights where some IP is created jointly by both parties. The agreement needs to spell out how any joint IP rights may be used and exploited, and the extent to which consent is required from the other party. IP rights can be quite complex but it pays to deal with the issues at the outset rather than have to argue over IP rights in the future.

At the start of any relationship no one really wants to focus too much on what might go wrong. As lawyers though that is one of our roles, to ask the tricky ‘what if ’ questions and to ensure that the provisions in the agreement reflect the risks involved. Issues around risk and liability require a good understanding of the relevant technology or products that are being developed, and as technology lawyers we are better placed to advise on these issues and offer pragmatic solutions if we are first involved in the deal in its early rather than later stages.

Consideration also needs to be given to when the relationship might end, in what circumstances and what the consequences should be. Of course it is hoped at the outset that the relationship will be a successful one (and in the context of a commercial agreement that can be measured against agreed criteria) but no one has a crystal ball and can predict what might happen, despite the best intentions of both parties. Again, it is worth spending the time to think about this before the agreement is signed or risk leaving ‘open’ issues to be argued over in the months or years to come.

So if you are a technology company looking for a collaboration partner or thinking about whether a potential partner would be a suitable match, if it can’t be a match made in heaven it could be a successful arrangement of convenience. That’s ok, isn’t it?

This article is from the July 2020 issue of Upload, our monthly newsletter for professionals with an interest in technology. To download the latest issue, please visit the newsletter section of our website. For further information please contact a member of Birketts’ Technology Team.