Protecting Your Intellectual Property
The AV industry is waking up to the broad issue of intellectual property (IP) ? the tangible and occasionally intangible products of designers of all stripes at AV systems solutions providers. Potentially encompassing everything from software to shop drawings to project design specifications, intellectual property is emerging as the essence of the ?product? that industry players are selling. As such, it's increasingly being recognized as something worthy of protection, or at least appreciated for its value and wisely managed.
Up until several years ago, HB Communications, Inc., a North Haven, CT, integrator didn't spend much time worrying about source code issues. But as software applications grew and it learned how valuable and vulnerable its source code was to being recycled, the company began taking steps to protect it, says Jim Smith, the company's director of strategic initiatives.
Smith said he began to appreciate what was at stake when HB was tapped by a former client to finish up work on a project another integrator it hired couldn't complete. “They asked us to come in and help program the system, and when I opened it up my name was on the source code that I developed for a previous job we did for them,” Smith says.Licensing vs. selling
To better limit access to source code or ensure that it reaps its full value, HB now either confers software licenses to some customers or sells it outright. Under a licensing deal, the client is granted use of the software within the scope of the contracted project only. HB retains ownership of the source code, while the client is given the compiled code, Smith says.
Under the sale scenario, HB tacks on an extra charge for the source code developed in the context of a particular project. Such a sale effectively gives the client and integrators it may ultimately hire the right to use the source code on future projects.
“Which way we go is on a case-by-case basis,” Smith says. “There are some clients we don't want to give the source code to at all. If I execute a licensing agreement with someone we'll expect them to execute a similar document with someone else they may hire. When we sell the source code we can end up charging a significant amount for it; some clients might say a ridiculous amount, but we've usually invested a ridiculous amount of time developing it.”
Smith says the source code charge, calculated on the basis of labor expended to produce it and expected future value to the client, can be as high as $5,000. Programming, Smith says, is accounting for a growing percentage of system development costs. Five to six percent is now the norm, he says.
To some integrators, software-related IP is so valuable that they strongly resist selling it. Cruz, of integrator Technology Partners, says he tries to price it out of the reach of most clients because of the time and money invested in developing it. “You can't charge effectively for releasing your IP rights,” he says.
In the event a client wants to own the source code, Cruz says he'll commonly agree only to a co-ownership arrangement. When presented with a price for ownership, Cruz says, “19 out of 20 times the client will go with a licensing arrangement.”Impact on client relations
One of the downsides to software licensing in the eyes of AV integrator clients is that the arrangement limits their future options. Without full access to the source code, the end-user community argues, they're effectively bound to re-hire the integrator that performed the initial job if they want to build on that initial work. And, in the event the integrator goes out of business, their access to source code is further jeopardized.
To address the issue of possible business failure, some integrators are placing the source code in escrow. Mike Vergauwen, chief operating officer for Audiovisual Inc., a Minneapolis-based integrator, says such arrangements give the end-user assurance that their hands won't be tied.“
“A client may not want to be beholden to us or they may fear that we could go out of business, so we'll put all of the code in third-party escrow, which will enable the release of it to them in that event,” he says.
Not all integrators, however, worry about parting with source code or other intellectual property. Some still approach the business as one that revolves around pleasing clients. If they want the source code, fine, some say. Such an attitude, they contend, helps ensure they'll get rehired for future work.
“I think it's better just to give the source code to customers,” says Mario Maltese, CEO of Audio Visual Resources, a Williston Park, NY, integrator. “We think customers pay for that code in the price they pay us. A lot of integrators hold that code close to the vest, but we believe we cover the cost of that source code in how we price our services. If you're worrying about protecting this kind of intellectual property, you're not doing something right.”
Tom Zind is a freelance writer and researcher based in Lee's Summit, MO. He has written for a variety of business-to-business publications and can be reached at email@example.com.