Product Development in a Flat World

Came across couple of interesting articles on LOI and work for hire clauses in outsourcing contracts from a legal point of view.

The “Work For Hire” clause:
A key concern for product company in outsourcing its product development is owership of IP for the product being development by the outsourcing partner. Many firms would like to accomplish this by insisting on a “work for hire” clause in the contract to ensure that it retains the copyright for the work being done by the partner. J. Patrick Toher and Shawn C. Helms, both attorneys at Jones Day in Dallas, TX explains in this informative article that the “work for hire” clause is ineffective in technology contracts and perhaps be detrimental to their interest. They conclude that:

In fact, the work for hire doctrine rarely if ever applies to the types of deliverables prepared under these types of contracts. The best approach is to include an appropriate intellectual property assignment in the contract, assigning the deliverables from the independent contractor to the hiring company.

You can download/read the entire article at http://www.metrocorpcounsel.com/pdf/2008/June/10.pdf.

Letters of Intent in Outsourcing
When negotiating a large outsourcing deal that takes time, companies may opt to enter into a Letter of Intent (LOI) to kickstart the outsourcing work in order not to delay the projects in question. W. Carter Santos, assistant vice president and outsourcing transaction counsel in the Global Sourcing Office at Equifax Inc., states in this article that the LOI is risky proposition for the product company that establishes the LOI with an outsourcing vendor. He lists a number of reasons why it is risky for the company and concludes that the LOI should be avoided in almost all cases. You can read the entire article at http://www.law.com/jsp/legaltechnology/pubArticleLT.jsp?id=1202421832700 (may require subscription).

Please do share any experiences or tips on negotiating or specific terms of outsourcing contracts by commenting on this post.