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What Should Be Considered When Negotiating Payment Terms?

Payment terms can be structured however the parties can agree. It may be a one-time, upfront payment, or it may be monthly or annually. A licensee might pay a flat rate each month or it may vary depending upon the number of users of the technology.

A provision for collection of attorney’s fees is always a good idea. When I’m representing the licensor, I generally include a provision that they’re entitled to collect costs they’ve incurred while trying to collect payment. For instance, if they have to sue a licensee to receive payments, then they are entitled to collect their attorney’s fees. I think that it creates a good incentive to ensure that the licensee pays. It also makes it more worthwhile for a licensor to go after a licensee who hasn’t paid rather than deciding that it will be too expensive to collect payment.

The consideration for a contract might something other than money. The agreement can include cross-licensing; for example, valuable consideration could be given if I trade you my technology for yours, as long as we both get a basically equal benefit from that exchange. But a license for no consideration or benefit isn’t really a contract, so of course payment terms will always be a point of discussion.

At What Point Should I Hire your Firm To Draft Our Agreement Or Contract?

It’s never too early to hire a lawyer for contractual issues. We can help you decide on the front end what negotiation points are essential to you. We can help with the negotiations before the drafting begins, and of course we can draft your agreement. We can be most effective if we’re engaged at the earliest point of the process. We can make sure that the terms that have been negotiated will hold up in court and be legally supported. Of course, our goal is always to draft an agreement that is so clear and unambiguous that it will never end up in a courtroom, because both parties know their rights and obligations upfront.

How Do We Narrow a License In Terms Of Scope?

It is import for a license to make the scope of the license very clear. Can the licensee use the technology only for their own internal business purpose, or can they make it commercially available? Can they give a sublicense to subsidiary or affiliate companies? A licensor may limit the number of users, or base payment on how many users accessed the software. A licensor may also want to control how many copies a licensee can make. The most common reason that a license agreement ends up in court is that the licensee has been accused of exceeding the scope of the license. So, it’s crucial for both parties to have clearly defined the scope.

What Is The Best Time To Set Up A License Agreement For New Inventions Ideas Or Data?

If you have an invention, and your plan is to commercialize it through a licensing program, you should have a standard license that can be provided to customers as early as possible. It’s possible that once it meets the real world and clients start to interact with your invention or data, you might want to make changes to your license agreement, and there’s nothing wrong with that. There’s nothing wrong with having it evolve as time goes on, but you should begin that process as early as possible. Starting the process early will allow you to get a handle on the issues that are important to you as well as the matters that you’re willing to negotiate with your potential customers.

How Should We Address Limiting Liability In A Licensing Agreement?

Limitations on liability are one of the most heavily negotiated parts of an agreement. A licensor wants to limit all of its liability. The licensee wants to push as much responsibility as possible onto the licensor. A common way to compromise between those positions is to put a cap on the licensor’s liability, often seen as a multiple of the amount paid to the licensor.

Another factor that’s generally heavily negotiated is the kind of liability the licensor has if the software or technology infringes on a third party’s intellectual property. For example, patent infringement looks like strict liability, and it can affect everyone down the line. Everyone who’s in the chain of commerce, the licensor who distributed the technology, and the licensees who are using the technology can all get hit with a patent infringement suit. A licensee will want to be covered for that type of occurrence, and a licensor would rather not go out of business defending multiple all its customers from patent infringement suits that may or may not actually be successful. A licensee may refuse to accept liability for patent infringement. Other times, however, they’ll accept it, but only to the extent that there is a successful infringement suit. There are numerous ways that we can negotiate and consult, but this is undoubtedly one of the most heavily negotiated areas.

For more information on Payment Provisions In A License Agreement, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (615) 734-1188 today.