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MenuWe've been approached recently by several large companies to license our content, platform and app. Looking for pros and cons?!
Biggest concerns are not getting what it's worth, giving away the keys to the kingdom, etc.
Filed under:
Licensing Negotiations:
Licensing Agreements, Licensing
3 answers
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10 years ago
Answers
ZR
ZR
Licensing a platform is a terrific way to generate revenue. We struggled to gain an audience to our site and didn't have the funds to market as heavily as we would have wanted.
In came the offers to license. Margins were tighter, but the exposure to new customers made a world of difference.
JJ
JJ
The first question you need to get clarity on is what does success look like for you? Once you have the answer to that question then you can use that filter to evaluate pros and cons.
Don't look for pros and cons until you have decided what success looks like for you.
Related Questions
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How to license with a revenue-based model?
Hello - I work as an in-house transactional attorney for a US-based website with 20 million monthly unique visitors around the world, and I've worked on several licensing and ad-rep deals for several countries in Europe, South America, Australia, etc. There are several ways to protect yourself, but at the end of the day you have to trust your partner that you they will want to be honest so you can continue doing business together. That said, you should give yourself an audit right. Not sure what the software is and if it directly correlates to sales, but if so see if you can track yourself or use a third party's tracking software so you can compare numbers with theirs. Also consider including in the agreement a dispute clause, something to the effect that if you dispute their report for a quarter they will have x days to provide you with sufficient evidence to reconcile the dispute to your satisfaction - if not, you can terminate the agreement. Another way to protect yourself would be to ask for a minimum guarantee, but depending on the deal that may be difficult to work in. As far as working internationally, I think the hardest part there is ensuring collections and that you are paid in US dollars. Stand strong on keeping venue and choice of law in the jurisdiction in which you reside, not in theirs. If you'd like to schedule a call to further discuss, I'm happy to chat, let me know! Best, JeffJR
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How do I go about getting my invention licensed by a big company?
First off, stop calling it an idea. (might be just that, but in licencing efforts you don't want to call it that). Second, what do you mean time is of the essence? This already started sounding risky. With that said, I believe you have two options, assuming that you can spend the next quarter reaching out and performing poorly in presentations and pitches to executives for licencing deals. 1. Learn the art of pitching and presenting, in my blog I have listed some books, one of them is presentations like Steve Jobs. Check it out here: unthinkeverything.blogspot.com (books are listed on the right) and hopefully secure a deal. The risk with this is that if you don't is time wasted. 2. Figure out a creative way to launch your innovation yourself, even if is simply to test for validation. It can be relatively inexpensive to do this (you didn't provide information on your patented idea so I can't help you on that yet). The upside of you launching your product or validation effort yourself is that it gives you exposure, it gives you business experience and most importantly it adds tangible value to your idea no longer putting you on the spot putting a random price point for it. This also makes it easier for you to approach companies and executives and if the licensing deal doesn't go through you have a business out of it. The reality is that if another business can make profit off a license, so can the owner of the product itself. Just have to figure out how.HV
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What range of percentage of net sales is reasonably to ask for.
This is always a question of who wants whom more. I've seen deals where the percentage was in single digits. The thing is, I've seen both deals where a LICENSEE ended up with a single digit percentage and deals where a LICENSOR ended up with a single digit percentage. It all comes down to your ability to convince the other side that you are bringing in so much to the table that the other side should get a smaller piece of the pie. Essentially, this depends on these factors: - whether you are well-known in the industry; - whether the other side is well-known in the industry; - the level of uniqueness of your product (if you've developed another minor variation of a product that already exists on the market, chances are the distributor will want a larger piece of the pie); - your level of desperation (it's one thing when you partner up with someone else who will commercialize your product simply because you can make more money by investing your time building new stuff; it's another thing when you have no realistic way to commercialize the product yourself, and if you don't find someone who can do it for you quickly, you'll starve...) MOST IMPORTANTLY, no matter what number you agree to, make sure you read the contract extremely carefully. Contracts can create rights and contracts can destroy rights. Contracts are more powerful than any rights vested in you by IP laws. So, the bottom line is: - Know EXACTLY what you are trying to get out of your contract; - Get your contract reviewed by an experienced lawyer, but make sure you tell the lawyer what it is you're trying to get out of the contract. Lawyers are not going to create "the right deal" for you. We're not going to tell you whether you should be getting 9% or 90% of the revenue. We're going to make sure that you understand whether the contract you are about to sign reflects what you think the terms of the contract are. You're welcome to schedule a call if you would like to discuss this in more detail. Cheers, AndreiAM
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How do you decide on which country to have the jurisdiction in when licensing software to international companies?
I'm not an expert on German law, so please take everything with a grain of salt. This is never an easy issue because there aren't many persuasive arguments on either side. What usually ends up happening is that the parties defer to a neutral jurisdiction, typically New York law/New York courts or English Law/London courts. The reason being that most major companies worldwide usually have some nexus to either New York or London, so it's something they can agree to. Your best argument for requesting US law is that you are a US company, and the fact that most German companies are still sometimes subject to US law. (Many online companies offer only US terms and conditions, so German companies just have to agree to it sometimes.) I would avoid at all costs agreeing to German law or jurisdiction. Civil law (Europe) is very different than common law (England, US, Canada, Australia etc.) both in terms of the law and procedures. If they won't agree to New York, then push England. If that fails, then delete the governing law provision altogether and you can fight it out if and when a situation in which matters arises. To answer your second question, if you agree to German law and a judgment is rendered against you: (1) having a German judgment against you if you don't have any assets in Germany is a bit useless, as there is nothing to seize if you refuse to pay. They can seek to have the judgment recognized in US courts. This is an expensive process and most companies won't go through the effort because effectively they have to relitigate the matter in the US to get the enforcement order. However, they can do so if they are so inclined. (2) If a judgment is rendered against your company, then my presumption is that as a director or officer, you can encounter issues in Germany if you ever try to enter. This is where I'm least knowledgeable but I'd guess that if a judgement of a court is ignored, then eventually the directors and officers can be subject to criminal proceedings for contempt. If that happens, you could be arrested in Germany if you ever try to enter. I'm just guessing at that last part, but you don't want to go down that road, even if I'm entirely wrong. RonanRL
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Should I be worried that a potential client wants us to guarantee that we will cover the litigation costs if they are sued for using our software?
I am a patent attorney generally on the patent owner's side. Signing such a clause should make you nervous. You don't want to be responsible for the major company's infringement. The major company is likely getting more benefit out of using your software than your company is making by selling licenses. The previous gentleman's answer is incorrect. Anyone can be sued for patent infringement if they make, sell, or *use* the claimed invention. It depends on the claims in the asserted patent. Based on experience, it's much more likely that the larger entity would be sued for infringement. A patent infringement case could cost anywhere between $350k-$5M+ USD. http://www.cnet.com/news/how-much-is-that-patent-lawsuit-going-to-cost-you/ In order to properly answer your question, I would need to know why you feel it's "very unlikely" that someone would sue the major company for using your software. If the major company won't back down on this provision, the best thing you can do is determine if you need IP (defense) insurance. If a patent attorney determines that it is necessary, raise the price of your license and get IP insurance.AP
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