This post addresses the most important issues that are raised in negotiating software licenses.
I will assume that parties have agreed on pricing. (Otherwise, there is no point negotiating license terms!) In addition, I will ignore the lengthy legal “boilerplate” that appears in most software license agreements.
Four Critical Issues in Negotiating Software Licenses
In my experience, there are four issues that must be examined closely, and often result in much discussion, when negotiating software licenses. (more…)
This post is based on a question that I answered on OnStartups. Q. I’m in the process of closing a deal with a new client, and the only sticking point is the choice of applicable law. I am located in state A, the client in state B. My contract says it will be governed by the law of state A. The client wants to change this to New York. Why? Would doing so open my company up to any unintended side effects/liabilities (e.g., taxes)?
Several days ago, a Quora question and answer caught may attention. The question asked about things some lawyers do that break, rather than make, deals. I was intrigued by the response “[s]ending over very aggressive opening terms as a negotiating ploy”.
That is a situation I have faced only rarely – most of the time, my clients’ counterparties are pretty reasonable. When excessively unreasonable terms do appear, however, there is a simple response: I refuse to negotiate. Instead, I reply along the line of the following:
Several years ago, a friend lamented that he was not very good at negotiating on behalf of his professional-services business. He felt that clients were better at “bluffing” and other negotiating techniques than he was, so he often was paid less than he should have been. I told him the single most important thing he needed to know if he wanted to negotiate successfully:
You have to be willing to walk away.
I think the economy – and business confidence – are improving. The reason: During the past week, two of my clients received unsolicited acquisition overtures from well-known Bay Area companies.
I’ll readily admit that this? does not represent a statistically valid sampling of local businesses. Nevertheless, I find this development meaningful because the last time a client was acquired was years ago.
At the moment, I’m coaching these clients on negotiation tactics. Then, because I started working with each company after it was formed, we’ll make sure that corporate records are complete and up-to-date. (See What Must We Do if We?re Going to Be Acquired?)
I’m sad that I will lost valued clients, but I’m pleased that I will have a role in their successful exits – and that these transactions appear to be a sign that the business climate is improving.
Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
If your small technology company provides products or processes that might interest the U.S. government, you should know about the Small Business Innovation Research (SBIR) program.
The objective of SBIR is to provide qualified small businesses with opportunities to propose innovative ideas that meet the specific research and development needs of the federal government.
Eleven federal departments participate. These include, for example, the Departments of Defense (including the various armed forces), Education and Transportation.
While there is some variation among departments, SBIR generally is a three-phase process:
- Phase I – Technology feasibility is determined and contracts are valued up to $100,000, lasting from six to nine months.
- Phase II (awarded to successful Phase I contract winners) – The necessary R&D is accomplished to produce a well-defined product/process. These awards typically span 2 years to accomplish the primary research effort and are valued up to $750,000.
- Phase III – Commercialization of a Phase II project result using private sector or federal agency (non-SBIR) funding.
A start-up entrepreneur recently told me about the agreement he signed with the developer of his website. The agreement has what I consider, from the entrepreneur’s perspective, a most pernicious provision: Ownership of the website, and its intellectual property rights, does not pass from the developer to his client until the fee is paid in full.
I understand why developers like this type of provision: It gives them extra leverage to ensure that they are paid. (more…)
A couple of years ago I had one of my greatest thrills as an attorney.
My client owns several patents covering ways to improve the efficiency of certain types of lasers. We had succeeded in licensing a large company for one field of use. We were trying to sign up another company for a second field of use.
All business and legal issues had been resolved when, at the last minute, the licensee’s General Counsel demanded that my client convey, in addition to the patent license, certain broadly-defined rights to my client’s know-how. We refused, explaining that know-how never was part of the discussion, and if my client ever was interested in conveying know-how, it would come at a price. The parties then reached final agreement without the know-how provision.
When I prepare to negotiate an agreement for a client, I start by researching the other party so I can gain insights that might help me represent my client more effectively. The obvious starting point is the website for the other party, where I can quickly understand its business and see who its executives are. But I also look for legal information that typically is available only elsewhere.
Every state has a searchable database of the businesses that have registered with that state, either because the business was formed there or because it was formed elsewhere and registered to do business in the state. Each state includes in its database, at a minimum, information about the corporations and limited liability companies. Most states include information about other types of business entities, too.