Some of the most important provisions in supply contracts today relate to the parties' respective rights to intellectual property (IP) in the product being supplied. These contract provisions are critical because suppliers and supply management organizations have strong, but often divergent, interests in IP. Suppliers play significant, and sometimes exclusive, roles in the design and development of the products sold to their customers. As a result, suppliers have an interest in protecting and retaining as much IP as possible to protect their investment and the value of their expertise. In many cases, the products being supplied are custom-made and are not available on the open market.
On the other hand, supply management organizations also want to obtain as much of the IP as possible so their organizations can either manufacture the product or have the product manufactured by a third party if the relationship with the original supplier dissolves. One way to merge these two divergent interests is the trend toward a joint development relationship. In a joint development relationship, both the supply management organization and the supplier make significant contributions to IP development while sharing in the costs and burdens associated with that development. In such a relationship, both parties can make legitimate claims to the intellectual property.
