Keep IP on a short leash: IBM

Legal quarrels between vendors and enterprises over intellectual property (IP) rights surrounding the creation of new software can be avoided if users figure out what they want earlier, and speak to lawyers later, a senior IBM executive has argued.

IBM Australia's director for e-business on demand Paul Kenny said users entering negotiations around systems development need to worry about issues like intellectual property up-front and raise them early with vendors to avoid getting bogged down in costly legal arguments at later stages of either contract negotiation or roll-out.

"[Enterprises] have to determine where the IP comes from [early in negotiations]. Often when that happens first is when the lawyers talk. You don't want to do that in the first instance. You want to discuss it principal on principle, business to business," Kenny said.

Kenny's comments came in relation to a series of questions raised by Computerworld readers (CW August 16,) about what they may have to give up in order to reap the rewards of more flexible systems management offerings such as IBM's On Demand.

IBM vice president for e-business on demand, John Lutz was slightly more forgiving of the legal community, saying IBM was more conscious than ever that its customers needed clarity and choice about intellectual property. However, Lutz said that IBM was not always prepared to cede IP rights in case it would find itself unable reuse solutions it innovated for clients.

"There are models of innovation where we and [IBM] hang onto the IP. We know we have to work within a continuum [of different IP scenarios]. Sometimes people want a range of models," Lutz said.

While never shy of charging handsomely to sort out IP wrangles, some lawyers agree with IBM's view that many IT customers think about IP at the last minute of negotiations.

Gadens Lawyers special counsel for IP and technology, Andrew Perry, said IP concerns within IT deals are frequently raised for the first time only when lawyers look over contracts.

"It's useful when clients have decided what they want to do with IP - they often come to us after having agreed on the key commercial terms [of a contract] without looking at who will own the IP, which means you have to reopen the contract negotiation. All of a sudden you are reopening prices and that becomes a sticking point," Perry said.

Medium-size enterprises, along with line managers at large companies, were among the worst offenders for thinking of IP last, Perry said, which often resulted in friction between business units and in-house or external legal services.

Frustrations aside, Perry warned enterprises needed to be wary of wich company ultimately owns the data or the data format as distinct from any application programming.

"If the supplier is going to own the IP on the application, the source code should often still be placed in escrow in case the supplier becomes insolvent or no longer wishes to support the product," Perry said.

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