Selling a technology solution to competing clients demanding exclusivity
Our client had developed and owned a technology with an application in retail supply chain management. The technology enabled retailers to substitute an existing physical consumer product line with our client’s technology-based solution. The investment required by the retail customers was extensive: on a full roll-out, for those retailers being targeted, the required investment for each retailer amounted to more than £10 million.
Ordinarily, for an investment of this size, any customer would require ownership and control of the intellectual property. However, our client could not successfully run a business with just one client: it needed to be able to take that same technology and sell it to other retailers. This was further complicated by the fact that all the potential retail customers were competing with each other in relation to the particular product line, and that ongoing support from our client would be required to operate the business underpinned by the technology.
The challenge was to establish relationships with retail customers that gave the customer full control and “ownership” of the technology and its ongoing development, while enabling our client to “sell” that same technology to the retail customer’s competitors, as well as creating a workable internal structure to provide comfort to retail customers regarding confidentiality and trade secrets.
What we did
We created a contract framework as follows:
- All the intellectual property in the technology was retained and owned by our client.
- A 99-year licence was granted to the retail customer, thereby giving them a proprietary interest in the technology and certain other rights in the nature of a proprietary interest, but which did not derogate from our client’s underlying intellectual property ownership.
- Very few restrictions were placed on our client’s ability to sell to other retailers.
- Detailed software escrow arrangements were put in place requiring the escrow to be continually updated as the software was updated, with a complete refresh every six months.
- An internal management structure was created that enabled and preserved full confidentiality of customers’ trade secrets.
The resulting contractual documentation amounted to well over 100 pages, but this then enabled our client to sell its technology to the broadest market possible, being supported by a number of major retail groups spanning the UK, US and Canada, which were competing with one another in their respective markets.