Managing the Relationship: Key Contractual Considerations When Partnering With Emerging Technology Companies In the Manufacturing Industry

As technology advances, many manufacturers are partnering with emerging technology-focused companies to help drive technological advances in their products. An example of this is in the automotive industry with the recent emergence of autonomous driving systems. While very exciting and potentially lucrative, these relationships present significant risks for established companies. As such, it is important to have an ironclad contract when entering into such a relationship. Some key contractual considerations include:

1. Protecting your intellectual property. With many of these partnerships involving integrated technology, it is important to establish unambiguously what intellectual property belongs to your company in the contract.
2. Inclusion of indemnification provisions. Indemnification is a key provision in most contracts, but should be a focal point in contracts with emerging companies. An example of an area where one would want indemnification is compliance with data privacy laws, which are ever changing and noncompliance can carry harsh consequences. 
3. Establishing a performable delivery schedule. While the  Pandemic’s supply chain issues have eased, the supply chain issues provide a valuable lesson to manufacturing companies. Delays can happen with emerging companies who may lack the resources of larger, more established companies. It is important to cross reference agreements with other entities for that particular product to ensure that you are meeting your obligations of other contracts. 
4. Drafting strong warranties. With emerging companies, there is likely not an established track record of performance. As such, it is important to include strong warranties of performance in any purchase contract to . 

These are just a few considerations to consider when entering into a contractual relationship with an emerging company in the manufacturing sector. Given the potential consequences alluded to above, which are not exhaustive, it is important to engage an experienced team of attorneys to help you manage the contracultural relationship from the outset.