Seeking Someone to License the Heart of Your Company? 55
dcdukeu asks: "We're a small software company that is about to enter into an 'Acceptance Period' with a much larger company for the purpose of determining if they want to license the source code and intellectual property of our main product. This involves giving them our source code, whitepapers, and providing the technology transfer of how things work. Once they receive this they get 45 days to determine if they want to move forward and incur royalties plus payment minimums. What I want to know is if other people have dealt with this before and what would they recommend in terms of how we can turn our information over to them in a time sensitive way (e.g. after 45 days the documents they receive cannot be viewed any more). We are basically giving up everything we have and training them before they say 'yes' or 'no' as to whether or not they are going to move forward. Thoughts?" Unless there are numerous protections already in place to prevent the larger company from running with the information gleaned from this transfer, this so does not sound like a good idea. If you've been in a similar situation before, what suggestions would you have for dcdukeu?
Get Patent Protection, Now! (Score:3, Interesting)
Don't do it... (Score:2, Interesting)
As a rule this sort of practice sucks. If the product is good enough, sell it on your own. If the big company wants it, make them pay up front just to see everything, they can afford it. The only defence you have is to contact all of the competitors of the big company and make them aware of what you have and the current situation. Hopefully you can get a bidding war going.
In general make sure you have the CEO of the big company as a signatory on any documents, make sure they are witnessed etc. Make it clear that you will go after the company and the indivdual if you have any problems. You can't win against the CEO but you can drag him through the mud.
In a nutshell... (Score:2, Interesting)
0. A lot of the posts assume you're selling them the technology, not licensing it. You've got more flexibility in a licensing situation--in most cases there is no need for them to see the code at all, just to determine if it meets their needs. (see 2)
1. A patent is a very good idea, if you really have anything patentable. A provisional patent [uspto.gov] can be filed in a day and costs -lt $100. It lets you say "patent pending" and serves as a 12-month placeholder for a formal, expensive patent application. Even if you never follow through, or if your designs turn out to be unpatentable, if they don't know which parts are patent pending and which aren't, they'll be less likely to reproduce any of it.
2. Are they licensing your code as an engine or piece of a larger application? In other words, can you give them just an API? If so, obfuscate the code and give them a watered-down API doc that just gives them the methods they need to integrate with their systems. The goal is to hide as much of the internal architecture and actual methodology as possible.
3. A lawyer is essential. But, you'll never be able to prevent them, contractually, from creating a similar technology if they don't buy yours. Obviously, they need one, otherwise they wouldn't be thinking of licensing yours. You can, and should, use a contract to
4. Combine the review contract with the licensing contract. If they're serious about licensing, then make them go through the trouble of agreeing on and drafting all the terms of the licensing contract before they can touch anything. If you can swing it, spell out what specific, measurable conditions must be met during the evaluation. If they're met, the contract should allow for two options: licensing or consolation payment. If they're not met, then the contract could allow you some time (10 days, 30 days, whatever) to address the deficiency and satisfy the requirements--otherwise, you've got nothing to squawk about. While there's no such thing as a "standard" license, this approach is pretty standard.
5. Most importantly, trust your instincts. If someone (or a company) wants to screw you, they're going to find a way to screw you. If it doesn't feel right, don't do it. Even if it does feel okay, be prepared for anything. Either way, you'll be much more savvy next time. There's always a next time.