1. OVERVIEW OF LEGAL
STRUCTURES FOR
OUTSOURCING
January 20, 2004
Fred Greguras
Fenwick & West LLP
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2. MAJOR LEGAL STRUCTURES
Contract for services with an
independent entity
Build, operate and transfer
Contract for services with a
controlled subsidiary
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4. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
Service Agreement
Customer
Provider
Services
Payment
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5. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
U.S. corporation/foreign parent
Master agreement/single engagement
Independent contractor relationship
Performance requirements
Project with fixed price (“spec”)
Time and materials
SLA
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6. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY (CONT’D)
Use of employees or contractors
Confidentiality
Subsidiary issue
Assignment of Intellectual Property
Moral rights
Governing Law
Dispute Resolution
Tax Considerations
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Registration requirements 1403992.1
7. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY (CONT’D)
Time to Implement
Cost
Risk
Intellectual Property
Business
Crime
Privacy
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8. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE
Service Agreement
Customer
Provider
Dedicated Payment
Operation
Services
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9. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE (CONT’D)
Independent contractor
Separate/virtual facility
T&M pricing/cost plus pricing
Performance requirements
Use of employees or contractors
Confidentiality
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10. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE (CONT’D)
Assignment of Intellectual Property
Moral rights
Governing law
Dispute resolution
Tax considerations
Registration requirements
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11. CONTRACT FOR SERVICES WITH AN
INDEPENDENT ENTITY
DEDICATED OPERATION STRUCTURE (CONT’D)
Time to implement
Cost
Risk
Intellectual Property
Business
Crime
Privacy
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13. BUILD/OPERATE/TRANSFER STRUCTURE
(CONT’D)
Independent contractor
Virtual team with option to transfer team
and possibly facility at a specified cost
T&M pricing/cost plus pricing
Option pricing
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14. BUILD/OPERATE/TRANSFER STRUCTURE
(CONT’D)
Performance requirements
Use of employees or contractors
Confidentiality
Assignment of Intellectual Property
Moral rights
Governing law
Dispute resolution
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15. BUILD/OPERATE/TRANSFER STRUCTURE
(CONT’D)
Tax Considerations
Registration requirements
Time to implement
Cost
Risk
Intellectual Property
Business
Crime
Privacy
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16. CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY
Service Agreement Customer
Provider
(Parent)
(Subsidiary)
Services
Payment
Controlling
Shareholder
(Parent)
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17. CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY (CONT’D)
Control
Usually a general services agreement rather than
project oriented
Arms length contractual terms
Cost plus pricing (transfer pricing)
Performance requirements
Use of employees or contractors
Confidentiality
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18. CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY (CONT’D)
Assignment of Intellectual Property
Moral Rights
Governing law
Dispute resolution
Other tax considerations
Registration requirements
Time to implement
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19. CONTRACT FOR SERVICES WITH A
CONTROLLED SUBSIDIARY (CONT’D)
Cost
Risk
Intellectual Property
Business
Crime
Privacy
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20. SUMMARY
Blocking and tackling usually with an
international twist
Vendor’s track record
Intellectual property comes in many
forms
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