An entrepreneurial company may face an early decision as to how it can afford to develop new technology, particularly new technology that does not fit within the technical specialties of that entity. Whether a new company needs to develop a new website, new software, or a compatible piece of technology, that company might consider entering into a contractual alliance with another party to develop that technology.

An entity may want to hire an independent contractor in an arrangement in which the entity merely provides advisory development. In other situations, the entrepreneurial entity may be looking to work cooperatively with another entity on a true joint development. Finally, two parties may even want to enter into a true joint venture that results in a brand new entity. In any of these situations, there are some key considerations.

While there are many important issues to consider for an entrepreneurial entity, we typically find that these are the five most important issues for your consideration:

  1. R U Mine?”: For this new relationship to work, you need to find a true partner. You need to find an entity that has the same goals. In fact, it really helps if you actually like your joint developer.
  2. Mo’ Money Mo’ Problems”: While it is important to know each party’s roles in the joint development, it is equally important to know which entity is funding each component of the development. Your agreement should set forth a clear schedule of development and the entity that funds each component of that schedule.
  3. What I Got”: Your agreement should clearly delineate the technology that each party owns at the time of the execution of the agreement. This will avoid arguments down the road.
  4. Sweet Child O’ Mine”: Perhaps most important, you need to ensure the joint development agreement clearly identifies intellectual property ownership of the new developments. Depending on the relationship, one party may own the new technology. There may even be royalty payments that result from the commercialization of the technology. It is essential to clarify the ownership and commercialization of the new technology.
  5. Please Don’t Go”: Finally, neither party wants to consider the inevitable end of the relationship, but that time will come. Obviously, this issue is important when a new entity is formed, but it can be equally important in a joint development situation in which the parties stay separate. For the sake of both parties, please make sure that the termination and expiration provisions are understood by both parties.

A joint development relationship can be mutually beneficial. The parties should make their expectations clear to avoid tears at the end of that relationship.