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January 19, 2012 01:32 PM

Categories: Licensing Issues

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ci_98yr

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Joined: 02/05/2007

Licensing gurus:

Appreciate if any one can give me some insights into the following situation:

We are "cash-strapped" startup (which startup isn't?, initially). We recently got a patent issued from USPTO. We have been engaging a major online services company which provides services to a mutual customer (for us the customer is still a beta-customer) for over a year.

Finally, they offered to license our technology but not our code or integration into our platform for some security reasons. It is very clear that they are interested in IP but not our s/w and probably for this reason they have been waiting. Our typical licensing to direct customer would an annual license $x/yr/user.

Besides this, we have huge market on several verticals.

I have some concerns and some ideas (crazy) on how going about..

Concerns:

a) Our product is designed with some secret  sauces so as to make our product/solution universal (else also works but we lose control and make a fuss of differerent implementations that end users get tired and eventually dont use our solution).

What can be done here while negotiating?

b) We dont know whats their time line to implement our technology. If we leave it open, they may not implement quickly that we may not get license rev immediately. Our idea is to get some cash to boot strap our startup and count the license rev later.

What is the best way or some options here?

c) They asked to open up our code so they can implement cleanly on their platform.

What are some caveats here?

d) If the licensing is based on volume of end-users, what sort of audit clauses we need  here?

e) How can we make sure, there is no pricing clash (their's towards end customers vs. ours towards end customers (not necessarily mutual customers)

what would be the main ones that we need to touch upon during first meetings?

any pointers, thoughts, highly appreciated.

Thanks a mil in advance for answeing.

Discussion:    Add a Comment | Comments 1-4 of 4 | Latest Comment

January 19, 2012 5:34 PM

I don't understand this part:

"It is very clear that they are interested in IP but not our s/w and probably for this reason they have been waiting. Our typical licensing to direct customer would an annual license $x/yr/user."

Um, squeeze me, but if you like my IP, and you can sell a bunch of services around my software, then why in the bloody blue blazes don't you want to buy my software?

However, your post is way complicated for an online discussion like this. If you can't get these guys to take the simple route -- i.e., buy some licenses -- then you really, really need to be talking to an attorney who specializes in software IP.

January 20, 2012 10:38 AM

Appreciate the feedback. Yes, an attorney will be involved at appropriate time.
Before that, we want some basic understanding and hence this posting.

>"Um, squeeze me, but if you like my IP, and you can sell a bunch of services >around my software, then why in the bloody blue blazes don't you want to >buy my software?"

If they buy licenses, the end-user sessions have to move back and forth from ours to theirs (applications) over internet. They dont want "touchpoints", but a fully monolithic one, on their platform. Besides (not that it matters) theirs is .Net and we are 100% Java (we have Java/.Net api s too). We even offered to colocate and hand over full control to them.

Any other feedback/comments on general understanding, esp from those experiences of "Software CEOs" would be great ( 'am not necessarily looking for legal language/jargon) but generic understanding and approach.

Thanks again.

January 20, 2012 11:34 AM

I think your answer will depend hugely on what your goals are for your company. E.g., do you want to be a product provider? If yes, then I'd tell them to Bite Me, and buy the damn licenses. Nicely, of course. E.g., do you want to cash out quickly? If yes, then we're negotiating an IP sale. E.g., do you want to just pull some cash out now? Or is market reach more important? Or recognition of your brand? In other words: It's kind of hard to advise you as to what kind of deal you want in this particular instance without knowing what your long-term strategy is for your company. And I still think a good IP attorney should be involved, now -- if s/he's good, this is the appropriate time, because s/he can provide advice far, far beyond writing a contract.

January 21, 2012 1:09 PM

Thanks again! Your last reply brings a lot of clarity for our strategy.

To give a bit background, we have been struggling to crack this market where few players dominate the services (call 'em channel providers/partners).
The one we got is first offer (all the other players have been playing wait and watch game, even though we exposed our solution to them a while ago).
The current player who offered to license our IP is a small player when compared to others in the same market.

In the order of priorities:
1. We are product company 2. We need market reach 3. We want to build brand name so we can penetrate into other markets with ease.

last but no least actually coming on top before No. 1 is "0" is, we need cash to engage other players. We are not a silicon bay-area company, where every mobile app or a facebook extension app developer gets
ton-loads of VC/angel capital in to their pockets to enjoy.

So, we want to get this first deal nailed. Yes, we might give in more than what we intended to, but not to the extent that we are stymied when forging deals with other players. At the same time, if we license our IP, we understand we lose control on product a bit. Perhaps, we will restrict them to some apps and ask for rights to their implementations based on our IP so we proactively make sure its a unified product/message that we are putting out to the customers (basically a least common denominator of our implementation and the first player's implementation based on our IP).

Any further thoughts from any corner, esp from CEO's experience/perspective, highly appreciated with many thanks.

Best.

Discussion:    Add a Comment | Comments 1-4 of 4 | Latest Comment

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