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Subject: |
Software Licensing For Beginners |
| Date: |
2009-09-14
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Software Licensing For
Beginners
By Cliff Ennico
www.creators.com
"I was laid off from a high-level information technology (IT)
position last year. In the course of looking for a new job, I
subscribe to a number of data base products. Just fooling around
on the computer a while back, I developed a software application -
really a simple subroutine - that makes one of my data base products
easier to use. I showed this product to the company that
publishes the data base, and they absolutely fell in love with
it. They've asked me if I'm willing to let them put it up on
their website and let their customers download it as an "add on” to
their subscriptions to the data base. Sounds like a good idea,
but I would like to make some money from this. The data base
company is a small "Mom and Pop” business and I don”t think I can ask
for a ton of money up front."
Congratulations, my friend - you are now in the
software business!
There are two ways you can make money from a product
like this.
First, you can sell the software outright. The
data base company would pay you a fee for your customized application,
and they would then own the rights to it. If this product is
something only users of this particular data base would use, then an
outright sale might make sense. The two problems with an outright
sale are (1) as you point out, this company might not have the funds to
pay you a decent price, and (2) once you sell it, that's it - you don"t
get any piece of the product's future growth. Because this
company is small, and probably doesn't have the technical staff
necessary to keep this product up to date, you might be able to
negotiate a consulting agreement under which the company will pay you
by the hour for any necessary technical supports, software upgrades and
other necessary work you perform to keep "their" product marketable.
I think the better approach in this situation would
be for you to license your software application to the data base
company. Unlike an outright sale, you wouldn't get any money up
front, but you would receive some money each time someone downloads
your product from the data base company's website.
Here's one way it could work:
- you and the data base
company would sign a standard software license agreement, giving the
company the right to sublicense your software application to their
subscribers - this would be a "nonexclusive" license (so you could
license the product to other data base companies);
- when anyone downloads your
software as part of their subscription to the company's data base, they
would pay a "licensing fee" to the company, which would remit a portion
of that fee to you;
- in addition, you could offer
the company's customers a "maintenance and support" package in which
you would provide tech support, product upgrades, and other benefits in
exchange for an annual subscription fee - like the "licensing fee," the
customers would pay the annual fee to the data base company, which
would then pay you a portion of the fee;
- should any customer require
assistance with installing your product or other "consulting" type work
to customize your product to their computer system, you would charge
the customer directly by the hour for that, and the data base company
would not receive a portion of that fee.
To draft this
agreement, you will need an attorney who is familiar with software
licensing and distribution contracts. Not every business or
contract lawyer will be familiar with these. Call your local bar
association and ask to speak to the chairperson of their "Computer and
Technology Law" section - this person probably can refer you to several
section members with offices in your area. To find a computer
lawyer online, check out www.lawyerfinder.com/lawfirms/practice/66/computer-lawyer.htm,
or go to www.findlaw.com,
click on the "find a lawyer" prompt, and search for a "Computer Law"
specialist in your city and state. But beware: these online
services will direct you primarily to established law firms who will
charge higher fees than solo lawyers or smaller firms.
You should expect to pay between $500 and $1,000 to have the necessary
contract drafted, but if the data base company has hundreds of
subscribers, and you price your product properly, you should be able to
make the fee back in no time.
Just be sure the data base company gives you contact information for
their subscribers who have downloaded your product. Who
knows? Once these subscribers become "hooked" on your product
they probably will want to know what other software solutions you may
have available. That will give you an incentive to develop some
other related products they might find useful, and you can market them
directly to your customer list without having to share any of your
revenue with the data base company.
Cliff Ennico (cennico@legalcareer.com)
is a syndicated columnist, author and former host of the PBS television
series 'Money Hunt'. This column is no substitute for legal, tax or
financial advice, which can be furnished only by a qualified
professional licensed in your state. To find out more about Cliff
Ennico and other Creators Syndicate writers and cartoonists, visit our
Web page at www.creators.com
or visit succeedinginyourbusiness.com.
COPYRIGHT 2009 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE,
INC. Permission granted for use on DrLaura.com.
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