WHO OWNS CUSTOMER FEEDBACK? – Proper use of customer feedback clauses

In our customer-driven economy, the value of feedback from customers cannot be overstated. Consider alone the sums expended on conducting focus groups, surveys, beta and free launches - all for the purpose of gathering input from users in order to help improve, and in some cases, actually design products and services. Gone are the days when businesses paternalistically dictate to users what’s best for them. Businesses that understand the desires of their customers and that can quickly implement and rollout products and services meeting those desires will have a critical advantage over competitors. This is true in business-to-business market as well as in business-to-consumer markets.

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So who owns customer feedback?

Customer feedback may or may not be something ownable as intellectual property or restrictable as a trade secret. If it’s not ownable, then you can do what you want with it, but if it is ownable, then you will need rights from the person or company providing that feedback. The last thing you want is to incorporate into your product or service a suggestion or improvement originating from a customer, and then finding yourself on the receiving end of a customer claim for compensation for revenues derived from using that suggestion or improvement.

The simplest way the issue of ownership of feedback is handled is by inserting a “Feedback Clause” into an agreement that the customer enters into. This clause should be included in online terms and conditions, an end user license agreement, a beta test participation agreement, evaluation agreement, collaboration agreement or any other similar type of agreement under which feedback might be solicited or received.

Drafting feedback clauses

A feedback clause can grant you a broad license to use feedback or grant you ownership in the feedback.

Broadly drafted license rights can give you equivalent use rights as ownership.  A broad license grant would include a non-exclusive, perpetual, irrevocable, worldwide, royalty-free license to use any feedback or modifications suggested by the customer.

An assignment of ownership has the advantage that these rights can be exclusively exercised by you. However, for this same reason, an assignment of ownership is likely to be objected to by the customer because the customer runs a risk of inadvertently granting exclusive rights in ideas that the customer may want to use in its own products or services. Nevertheless, there are circumstances where actual ownership of feedback would be preferred and therefore should be considered.

A feedback clause should also state that the feedback is to be considered not confidential information of the customer so that there are no disclosure or use restrictions on the feedback.

Bottom Line:

In order to properly draft a feedback clause, the circumstances must be evaluated to determine whether  ownership or a license should be granted, and if a license, then how broad the license should be. Customers entering into agreements with such clauses should inform their employees about such clauses to prevent rights in company intellectual property from being granted to a third party inadvertently.

 

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William Galkin manages GalkinLaw. Mr. Galkin has dedicated his legal practice to representing Internet, e-commerce, computer technology and new media businesses across the U.S. and around the world. He serves as a trusted adviser to both startup and multinational corporations on their core commercial transactions.

  
                                                                                                         
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