A Penny for your Software Licensing Thoughts?

Preliminary Thoughts for Founders When Licensing their Intellectual Property

What rights do you have in the Intellectual Property (IP) and what rights can you sell?

This may seem like an easy question to answer. As a founder, you own your IP, right?  Has proper care been taken in getting every employee and independent contractor who worked on the creation of the IP to assign their rights in the technology to the company?  Does the software include open source code that would require the company to also open source any derivative work product?  Is the software dependent upon a third party license that may require third party approval to sublicense the software?  Depending on the circumstances, there may be additional questions to ask and answer, but I think we have at least earned our preliminary penny here.

What should you sell?

Now that you have determined what you own and what you can sell, it is time to identify what you should sell, the parameters of the software licensing agreement.  The deal may not go through if you sell too little, but selling too much could have major adverse impacts on your company. Work together with your attorney to determine the proper limitations to the scope and duration of the license to protect your company.  Think – How do I use this IP?  How would use of the IP by a competitor affect my business?  Do I want the ability to sell the IP to more than one purchaser?  How can I ensure that my brand, marketing and goodwill are protected?  When in doubt, think small.  What is the smallest bundle of rights that the opposing party needs for its business purposes to close the deal?  Am I, as the seller, willing to sell that limited amount of rights in exchange for the purchase price? What would be the overall impact of the sale on my company?

Final thought. Sometimes a dollar spent on an attorney in the beginning, saves more than 100 pennies in the end.

This article is for informational purposes only and should not be taken as legal advice. It may not reflect the current law or the law in your jurisdiction. When acting upon the information presented herein, seek advice of counsel in the relevant jurisdiction.

Published by Catherine Edmunds

Business attorney, specializing in corporate and securities matters.

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