start-up a few years ago, I am not a lawyer. None of these suggestions
should be construed as legal advice. First and foremost, even if it is
only to do a final review of your contract, hire a contract lawyer. I
realize that the expense involved may seem like a hassle, but you will
be happy you did down the road. Trust me.
Key points to cover:
1) Who owns the ownership of the software - Make sure it is you who
retains the ownership of the software. They are licensing it. They go
under, sole ownership stays with to you. If they file bankruptcy, you
don't want your code base to be included in their assets. Don't allow
your code base to be placed in escrow. This could result in a long
legal battle down the road. Companies sometimes require this so they
can obtain ownership of the code base if you default on your part of the
contract.
2) Define non-performance conditions under which either party (or at
least yourself) can cancel the contract entirely - This should be
defined by either $ or volume performance goals. Don't let them tie up
your code if they are not producing results!
3) Define non-performance conditions under which they lose exclusive
rights and retain non-exclusive rights. You may want them to market for
you, but also have the option to market it if they don't meet certain
criteria.
4) Require monthly reporting on sales as well as monthly (or some other
explicit schedule) payment for services. Ask for quarterly, audited
financial statements. Or at least financial reviews which are not
audited by an outside accounting firm. You want to make sure the
company is both financially sound as well as making sure they are paying
you the proper amounts.
5) Explicitly define what YOUR obligations are with regards to upgrades
and support. If it is left open ended, you'll have limited legal
protection if they take you to court for not performing to their
standards. This should be defined by a limit on hours worked and rate
of hourly pay. If you are not careful, I could see you essentially
becoming their full-time employee.
6) By signing a contract to customize the software for their clients,
you could essentially become an employee of the companies. I'd ask for
50% of the revenues of that kind of a deal. Also, as another poster
stated, you don't want to be getting $15/hour for you hard work. Define
in the contract what the rate at which you will be "hired out".
7) Make sure you have protections in the contract to limit the amount of
customization contracts they can take on. They could potentially have
you working a 100+ hours per week without your say in the matter.
8) I'd assume they will want some kind of non-compete in the contract so
you don't go behind their back and do customizing on your own. Make
sure they can't do that either. Also, make sure the non-compete ends if
there are non-performance issues or the company goes under.
9) There is what is considered the letter of the contract and then there
is the spirit (or what is "intended" by the words) of the contract.
While a judge may take the "spirit" of the law into account, don't count
on it. Make sure your wording is air-tight. Define everything and
don't leave ANYTHING to chance.
10 through 25) Protect your interests, protect your interests, protect
your interests.
While we fortunately had pretty tight contracts at my old company, I
know of other folks that did not and got burned by it. Don't make the
same mistakes others do. Remember, the more time you put into the
contract now, the less likely you'll be spending time in court later.
HTH. Good luck!
--Jeff
Dave Phillips wrote:
> I'm sure they would have some sort of end-user agreement that protects
> them from that, but it would be important for me to have that in my
> agreement as well. Thanks for pointing that out!
>
>
> Dave
>
> ________________________________
>
> From: brobborb [mailto:[EMAIL PROTECTED]
> Sent: Monday, June 07, 2004 11:47 AM
> To: CF-Talk
> Subject: Re: Question about Licensing my CF Web Application
>
> What does this app do? What happens if this app was buggy somehow, and
> screws the client, and they lose $$. Who is at fault?
>
> -----Original Message-----
> From: Dave Phillips [mailto:[EMAIL PROTECTED]
> Sent: Monday, June 07, 2004 11:05 AM
> To: CF-Talk
> Subject: Question about Licensing my CF Web Application
>
> Hi all,
>
> I have developed a web application and have found a company that is
> wanting an exclusive license to manage, market, and sell subscriptions
> to my web application for me. I'm comfortable with the arrangement,
> but
> I'm unsure as to what to charge as a license fee.
>
> I have gotten them to agree to allow me to earn a royalty based on a
> percentage of the revenue they charge for each subscription. The
> number
> that has been thrown out is 30%. So for example, if they sell a
> subscription for $10 per month, I get $3 per month and they get the
> rest.
>
> I do not have to put up any money. I will be continuing to develop
> and
> enhance the application as well as supporting it technically.
> However,
> I will not be providing END USER support. I will provide support to
> the
> company that is marketing it. They will deal with the end users.
>
> I will also make myself available to customize the application for any
> of their customers, however, I'm sure they will charge extra for this,
> so in essence, I will get extra since I would get 30% of the revenue.
>
> My questions are as follows:
>
> 1. Is 30% a fair amount? What's the standard?
>
> 2. Does it sound like a good deal to you? Is there anything I
> should
> be asking for that I haven't mentioned?
>
> 3. Any other comments/suggestions?
>
> Thanks for your input. I welcome it. This is the first time I've had
> the privelege to do this, so I'm very excited, but want to be sure I
> do
> it the right way.
>
> Sincerely,
>
> Dave Phillips
> [EMAIL PROTECTED]
> ________________________________
> _____
> ________________________________
> ________________________________
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