As noted in our recent blog posts, The Rise of Next-Gen Business Process Outsourcing and Key Contracting Issues to Consider, the core premise of next-gen business process outsourcing (BPO) includes (1) the leveraging of automation, bots, performance tools, and other technology to transform and optimize workflows and business processes and (2) the implementation of solutions to collect and analyze data to improve user experiences and business outcomes. Next-gen BPO drives the development and implementation of transformative technology and the generation of critical business data. As such, the identification of key intellectual property (IP) and the allocation of IP use and ownership rights invariably becomes a gating issue in contract structuring and negotiations.
While certain IP categories tend to be common across BPO transactions, the scope of a next-gen BPO transaction may give rise to unique IP or unique IP considerations. The parties should consider carefully what IP is being created, generated, modified, enhanced or provided in connection with the services and, of this, which IP is critical or competitive to the party’s business and important for a particular party to own or restrict the use by others.
For example, a financial and accounting (F&A) transaction may yield different IP concerns than a human resources (HR) or procurement BPO transaction, and the ownership of IP rights in a research and development (R&A) transaction may be the most discussed point in the deal.
There are generally two categories of IP at a high level in a BPO transaction: (1) preexisting IP (i.e., the IP that a party brings to the engagement and that was created or obtained independently of the transaction prior to the effective date of the agreement) and (2) newly developed or provided IP. Customers and suppliers should identify and taxonomize the main categories of IP that may be developed or provided by the supplier, either itself (whether proprietary or licensed from third parties) or jointly with the customer.
Categories of “new IP” that may not be typically considered but which are gaining more attention in next-gen BPO transactions include the following:
- Bots and other automation tools
- AI tools and modifications
- Algorithms
- Quality enhancement tools
- As-is and future state workflow and process documentation
- Scripts
- Knowledge bases
- Configurations
- Integrations and interfaces
- Incident management and service management tools (including enhancements to existing tools)
- Training and user manuals
- Input data
- Output data
- Performance data (including tool performance)
- Transaction data
- Aggregated data
- Feedback
Once the key IP categories are identified, the parties will need to consider and negotiate ownership and use rights. Discussions often focus on investments made, the sensitive or competitive nature of the IP and the potential use cases. Third-party IP which is embedded within new IP could impact the parties’ negotiated outcomes, such as license restrictions on usage in particular fields—it is important that during scoping and planning the parties account for such restrictions.
Discussion of IP, while daunting in some transactions, is a key part of next-gen BPO. With no real “industry standard” for new types of IP yet emerging and a potential shift in thinking with some “as-a-service” or cloud-based offerings, customers and suppliers will need to carefully consider the IP issues, taking into account existing and potential future business needs.