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Stakes High For MSPs That Don't Guard IP

Experts say solution providers can face huge legal fees and other losses by failing to adequately identify and protect intellectual property.

Not so long ago, most managed services providers (MSPs) had very little to protect in the way of intellectual property (IP).

Fast-forward a few years and MSPs are orchestrating all manner of sophisticated IT functions and environments, often by employing nifty technical strategies, clever scripts and a range of other novel engineering solutions.

All-the-better if those tricks of the trade can be bottled and resold to future customers.

“Technology solution providers are seeking ways to develop ‘repeatable’ solutions, ones that can be sold and deployed for multiple clients without requiring their teams to start from scratch each time,” wrote Heather Clancy, in an article for TechTarget. “This has become especially important in the age of cloud and managed services, which often share some sort of data center or hardware capacity behind the scenes.”

Growing need for IP protection

Experts say identifying and protecting the intellectual property of MSPs, their clients and partners has never been so important.

“It could be from the processes and solutions that they offer,” said technology attorney Brian L. Kirkpatrick, of Grapevine, Texas-based Kirkpatrick Law PC. “Are they offering custom infrastructure, custom applications, custom tools?

“All of these things are being customized to improve the customer experience.”

Skillful management of that IP can enable an MSP to save time and money onboarding clients and optimizing new customer environments, and provide innumerable other monetization opportunities.

But while service offerings and technical abilities have evolved dramatically in recent years, the legal underpinnings of the relationships between vendors, providers and managed service customers haven’t always kept pace.

Often, MSPs use pro forma, generic contracts - many downloaded from popular, self-help legal websites like LegalZoom and Rocket Lawyer, Kirkpatrick said.

“It comes to me and … there’s really no tailoring to the type of business or the type of client that you have,” he said. “You could be missing some really hot-ticket items.”

Few of those standardized contracts, for example, contain the specific, robust language required to adequately protect the intellectual property of the MSP, or clearly delineate the legal boundaries that ensure an MSP isn’t infringing on the intellectual property of a vendor or client.

Stakes are high

To be sure, taking each new contract to a lawyer isn’t cheap.

“Spending about $2,500, you can have your own contract reviewed and revised to really customize it to what you’re doing,” Kirkpatrick said.

That amount would more than double what most MSPs spend on acquiring each customer, according to new research from CompTIA, the Computing Information Technology Industry Association.

Of course, some IP disputes prove much more costly.

“We’re talking millions in the loss of your IP if you don’t have your own IP protected and someone infringes on it,” Kirkpatrick said.

MSPs could also suffer financial damage by violating the intellectual property of a customer or vendor – even if that violation was unintentional.

In fact, it’s important for solutions providers to ensure that every likely IP contingency is addressed and clarified in writing, experts say.

“That’s when lawyers really start to make money,” Kirkpatrick said, “when something is unclear and undefined.”

 

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