Now more than ever, technology companies are utilizing tax-exempt non-profit organizations to grow market share and platform adoption, to increase sales of complimentary services and products, and to control market standards. This trend has broad implications for both large and small technology companies, and any company seeking to form strategic alliances with technology-oriented non-profit organizations should carefully consider the partnership agreements, intellectual property licensing, and other business law planning necessary to ensure a positive outcome.
Smart phone technology companies are a prime example of for-profit ventures making significant use of non-profit organizations, with more than 50% of smart phone operating systems being held or managed by non-profits. In addition to donating intellectual property and tax-deductable monetary contributions, these private companies are also donating staffing and services to non-profit organizations. Technology companies benefit from these contributions in multiple ways.
First, companies may donate their intellectual property to gain user adoption for technology platforms, products, and services. Third-party developers use open source software (OSS) owned and managed by non-profits to build ancillary products and services. These additional products and services encourage and enable user adoption of the underlying, contributed systems from a multitude of different sources – requiring significantly less development and marketing from the contributing company.
Second, non-profit ownership of the contributed intellectual property also provides incentives and security to third-party developers. First, they know that the products and services they develop won’t be expropriated for another company’s use at the third-party developer’s expense. Second, they know that the continued success of their ancillary product or service isn’t subject to risks associated with the longevity or solvency of the companies that develop and contribute open source software.
Third, non-profit organizations provide a neutral, common ground where competitors can collaborate to set industry standards. Technology companies using stand-alone systems or products and services that don’t conform to standards set by the corporate sponsors behind the non-profit organization can be effectively “squeezed out” of the market and marginalized in relevance.
The use of non-profit organizations in the technology sector has significant implications that are relevant to companies of all sizes. Smaller firms should consider how their participation with these non-profits may provide a secure and low-cost launching pad for their products and services. Larger firms should consider whether non-participation may make them vulnerable to the aggregated forces of their competitors.
Read more articles about intellectual property, technology development in Austin, Texas, and business law relevant to technology at The Blake Firm Business Law Blog.