How To Avoid One Of The Biggest Consulting Agreement Mistakes

consulting agreement mistakesWhen putting together a consulting agreement for your services, it’s common to focus on scope of work, milestones, payments, and other important issues that are essential to having a good working relationship with your client.

Intellectual Property

However, consultants frequently forget to address intellectual property (IP) ownership. And this can be a disaster.

Here’s why…

Most clients will assume that because they pay for your services, they own any intellectual property created by you when performing your services.

On the other hand, as part of systemizing your business, you’ll want to retain ownership of essential intellectual property so that you can recycle it on projects for other clients. After all, it’s inefficient to reinvent the wheel every time you consult for a new client.

So, what’s the solution?

The answer to that question depends upon a few factors.

Essential IP

If the intellectual property is vital to you providing services to other clients, then you’ll want to retain ownership of it and grant a limited license to the client to use it. The scope of that license will depend upon what you’re comfortable with. For example, will the license be transferable if the client’s business is acquired by a third party?

Non-Essential IP

What if the IP isn’t essential to you rendering services to other clients but you want to keep it anyway because it makes your work easier? You can insist upon ownership or craft a consulting agreement that transfers ownership to the client but also grants you a broad license to use the intellectual property in the future.

Now if you’re going to relinquish ownership of important IP, it’s common to charge a premium to the client for that. For example, it’s not unusual to charge 3x what a license would cost the client instead of ownership.

Hybrid Option

Of course, in a few cases, it makes sense for each party to own some of the intellectual property created as part of the consulting while licensing rights to each other.

Help Preparing a Consulting Agreement

An experienced business contracts lawyer can craft a consulting agreement template that’s right for you to use with your clients, including options for ownership and licensing intellectual property. If you need help with a consulting agreement, it’s probably time to set up a phone consultation with Business Attorney Mike Young.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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