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Teaming Agreements Teem with Issues

Separately, two clients asked me to review “teaming agreements” that had been presented to them. In each instance, the client was proposing to “team” with another company that had complementary expertise so they could carry out, jointly, a sophisticated technical project for a customer.

A brief aside: I prefer the term “teaming” to “partnering”, which often is used by technology companies to emphasize how closely they will work with one another. My concern about “partnering” is that the term suggests the companies may be partners rather than independent contractors, potentially sharing unlimited legal liability for their joint business activities. Fortunately, my clients avoided that trap.

The two agreements were quite different in appearance, terminology and style. The first one came from a defense contractor in the United States. Every page was densely packed with text that set forth detailed legal and business provisions. The second agreement was provided by a systems integrator in Europe. As is often the case with European agreements, legal provisions were addressed briefly, using terms that are not necessarily common in the U.S., and there was a lot of white space on each page.

Despite these differences, the two agreements were similar in that they largely covered the same territory. Furthermore, in each case one party was to be the prime contractor (working directly with the customer), and the other was to be a subcontractor (working with the customer through the prime rather than directly).

Here are some of the most important points that my clients had to think about:

  • To what extent must or should the prime contractor identify the subcontractor to the customer?
  • What happens if the customer, for whatever reason, does not want the prime to work with the sub?
  • How will the scope of the sub’s responsibilities be defined?
  • How much control will the prime be able to exercise over the quality of the sub’s work?
  • Who owns inventions that are conceived by the prime? Or by the sub? Or jointly by both of them?
  • To what extent should payment to the sub be contingent upon the prime’s receipt of payment from the customer?
  • To what extent should the parties’ relationship be exclusive (neither the prime nor the sub will team with anyone else for the customer’s project)?
  • How can disputes be resolved quickly and effectively?
  • When and how may either party end the teaming relationship?

In each instance, the parties have begun working together only recently, so it still is too early to tell how successful the relationships will be. But I take comfort from knowing that we considered the right legal and business issues and created agreements that reasonably protect my clients’ interests.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.