Ip licensing practices for early stage companies traps for the unwary walter wright trinity law...

Traps for the Unwary in Traps for the Unwary in License Agreements: a License Agreements: a

Laundry List of Gotcha's for Laundry List of Gotcha's for Early Stage CompaniesEarly Stage Companies

Walt Wright, Managing DirectorWalt Wright, Managing Director Trinity Law Group LLCTrinity Law Group LLC

www.trinitylg.com 200 Lowder Brook Drive – www.trinitylg.com 200 Lowder Brook Drive – Westwood, MA 02090 781.329.0088 Westwood, MA 02090 781.329.0088

Delivered Before the Massachusetts Internet and Software Council on September 17, 2003

Business Practices and Legal Issues: Good IP Practices for Early Stage Companies

Emerging Companies:Emerging Companies:The Vital Role of The Vital Role of Software LicensesSoftware Licenses

Operations Operations Product DevelopmentProduct DevelopmentRevenueRevenue

Walter Wright, Managing Director, Rich May LawWalter Wright, Managing Director, Rich May Law

Emerging CompaniesEmerging Companies

As a LicensorAs a Licensor As a Licensee As a Licensee

Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com

Know your rights, Know your rights, risks, responsibilities risks, responsibilities

and opportunities.and opportunities.


Keep Your Goals In FocusKeep Your Goals In FocusAcknowledge Your RisksAcknowledge Your Risks

Focus On The OpportunityFocus On The OpportunityMake Practical AssessmentsMake Practical Assessments


Managing the Asset is Managing the Managing the Asset is Managing the RelationshipsRelationships

As a UserAs a UserAs a Reseller/BundlerAs a Reseller/BundlerAs a DeveloperAs a Developer


Software Asset ManagementSoftware Asset Management

SAM is an emerging disciplineSAM is an emerging discipline


Licensing Agreements Licensing Agreements Click Wrap & Shrink Click Wrap & Shrink

Wrap Wrap NegotiatedNegotiated

Licensing Agreements Licensing Agreements

MOUsMOUsAlliance Agreements & Joint Alliance Agreements & Joint

Ventures Ventures Co-Marketing Agreements Co-Marketing Agreements

Joint Development AgreementsJoint Development Agreements


The Laundry List


due diligence

payment options

warranties & covenants

proprietary rights

scope & specifications

assignment

service levels and maintenance

breach and remedies

What Bad Can What Bad Can Happen?Happen?


What Good Can What Good Can Happen?Happen?


Zeal Obscuring Zeal Obscuring RealityReality


Due DiligenceDue DiligenceFor legal & business protection For legal & business protection

ask and answer the right ask and answer the right questions:questions:

Does the other party to a licensing agreement have the Does the other party to a licensing agreement have the reputation, financial strength and future potential to make reputation, financial strength and future potential to make

the license worthwhile? the license worthwhile? Does the other party have the rights it is claiming to transfer? Does the other party have the rights it is claiming to transfer?

Are all rights being transferred that are needed to fulfill the Are all rights being transferred that are needed to fulfill the purpose of the deal ?purpose of the deal ?


Scope & Scope & SpecificationsSpecifications


The specification is the precise The specification is the precise description of what is covered by the description of what is covered by the license. It should be inclusive of all license. It should be inclusive of all necessary elements to achieve the necessary elements to achieve the

purpose of the assignment, but purpose of the assignment, but

should not be too broadshould not be too broad. .


Most critical element of the license Most critical element of the license agreement.agreement.

What the licensee may and may not do with What the licensee may and may not do with the intellectual property. the intellectual property.

Limitations include exclusivity, geography, Limitations include exclusivity, geography, industry sector, market, duration of the industry sector, market, duration of the license, renewal, and rights to make license, renewal, and rights to make improvements or modifications.improvements or modifications.

Walter Wright, Managing Director, Rich May LawWalter Wright, Managing Director, Rich May Law

The Scope Of The Scope Of LicenseLicense

Proprietary RightsProprietary Rights


Software Escrow Software Escrow AgreementsAgreements



Payment OptionsPayment Options

Payment can take many forms: cash, Payment can take many forms: cash, installment payments, promissory notes, installment payments, promissory notes, equity payable as a single issuance or in equity payable as a single issuance or in installments, and/or royalties. installments, and/or royalties.

Are royalty payments going to be based on Are royalty payments going to be based on unit sales, percent of gross revenue, or unit sales, percent of gross revenue, or percent of profit? percent of profit? Will there be minimum royalties paid? Will there be minimum royalties paid? Sliding-scale royalty payments? Sliding-scale royalty payments?

Royalty licenses could make a product too Royalty licenses could make a product too expensive to be competitive.expensive to be competitive.


Warranties & Warranties & Covenants Covenants

including representations, indemnification and including representations, indemnification and

disclaimersdisclaimers


Disclaimer of Disclaimer of WarrantiesWarranties


AcceptanceAcceptance


Service Levels And Service Levels And MaintenanceMaintenance


Confidentiality and Confidentiality and Trade SecretsTrade Secrets


Limitation of Limitation of DamagesDamages


Money in the Money in the MaintenanceMaintenance

Money Found.Money Found.Money Lost.Money Lost.


Dispute ResolutionDispute Resolution


PiracyPiracyLimited copyright protectionLimited copyright protectionNo patent protectionNo patent protectionCurrency & TaxesCurrency & TaxesUnited Nations Convention on United Nations Convention on Contracts for the International Sale of Contracts for the International Sale of Goods Goods CultureCultureEnforcementEnforcement


International

Wright’s Postulate: Wright’s Postulate: “Opportunity to be “Opportunity to be

generous and the right generous and the right to be ruthless”to be ruthless”


Document clearly and use a Document clearly and use a lawyer. lawyer.

@!#%&$@!#%&$Express your goals and Express your goals and

expectations--and create plans expectations--and create plans and benchmarks.and benchmarks.

Protect yourself. Your intellectual Protect yourself. Your intellectual property and proprietary property and proprietary

information and operational information and operational autonomy need protection.autonomy need protection.


The Hybrid: The Hybrid: Software/Data/Business Software/Data/Business Model/ Model/ License/Transfer/AllianceLicense/Transfer/Alliance


Counsel to Capitalists

A greater Boston law firm serving companies, investors and entrepreneurs throughout the United States and the EU. For over 55 years combined, clients have turned to Trinity Law Group lawyers for sophisticated legal and strategic counsel in a variety of complex transactions, business disputes and other legal matters Its complex and diverse practice embraces emerging and high growth businesses, venture capital, securities, licensing, mergers & acquisitions, contracts, technology, business services, e-commerce, intellectual property, and sustainable energy.

Trinity Law Group’s law and strategic counseling practice intensely focuses on the organizational, venture financing, operational and transactional requirements of entrepreneurs, emerging technology and information companies as well as representing venture capital funds and angel groups in investment transactions and executives in transition.

Walter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.com

Walter Wright, a Founder of Trinity Law Group, was named by Walter Wright, a Founder of Trinity Law Group, was named by Massachusetts Super Lawyers in Boston magazine as one of the Massachusetts Super Lawyers in Boston magazine as one of the top 100 attorneys in Massachusetts. Of the Top 100, he is one top 100 attorneys in Massachusetts. Of the Top 100, he is one of only 3 lawyers selected in the Business/Corporate category. of only 3 lawyers selected in the Business/Corporate category. He is named in the Corporate Counsel edition of Super Lawyers He is named in the Corporate Counsel edition of Super Lawyers as one of the “Top Attorneys in Corporate and Securities Law” as one of the “Top Attorneys in Corporate and Securities Law” across the United States. Walt Wright serves in significant and across the United States. Walt Wright serves in significant and vital capacities including lead general counsel, special counsel vital capacities including lead general counsel, special counsel and strategic advisor. He recently celebrated his 25th year of and strategic advisor. He recently celebrated his 25th year of practice. practice.


About Walter Wright

Walter A. Wright, III Trinity Law Group LLC

781.329.0088Email [email protected]

Fax 781.459.2683 skype wwrightiii

www.trinitylg.com.comwww.www.trinitytrinitylg.com/waw.html lg.com/waw.html

200 Lowder Brook Drive Westwood, MA 02110

Ip licensing practices for early stage companies traps for the unwary walter wright trinity law...

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