Question
Hi,
We are a start-up company that licenses software and gets a percentage of net sales. To make sure we get the percentage of the sales, we ask for a copy of the contracts. However, one client told us that the licensing fees of their clients is confidential, so we have to trust them. What can be done in these cases? In revenue based deals, how can I make sure I got the right revenue and we are not taken advantage of?
Answer
There is usually a reporting mechanism that includes non-identifiable information. Besides, If they are a reseller of your products then you have a right to know who the end user licensor is for contract and legal purposes. I would make this a requirement in order to work with you.
Plus you should have a good non-circumvention type clause with some sort of liquidated damages to ensure there are adequate remedies if you find out that this is happening.
Let me know if you would like to review some more options,
Thanks,
Madhu
