Traps for the Unwary in Traps for the Unwary in License Agreements: a License Agreements: a Laundry List of Gotcha's Laundry List of Gotcha's for Early Stage Companies for Early Stage Companies Walt Wright, Managing Director Walt Wright, Managing Director Trinity Law Group LLC Trinity 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
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Ip licensing practices for early stage companies traps for the unwary walter wright trinity law group
Document clearly and use a lawyer. @!#%&$Express your goals and expectations--and create plans and benchmarks.Protect yourself. Your intellectual property and proprietary information and operational autonomy need protection. Trinity Law Group
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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
Joint Development AgreementsJoint Development Agreements
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
The Laundry List
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
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?
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
What Good Can What Good Can Happen?Happen?
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Zeal Obscuring Zeal Obscuring RealityReality
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
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 ?
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Scope & Scope & SpecificationsSpecifications
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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. .
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
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
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
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.
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Warranties & Warranties & Covenants Covenants
including representations, indemnification and including representations, indemnification and
disclaimersdisclaimers
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Disclaimer of Disclaimer of WarrantiesWarranties
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AcceptanceAcceptance
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Service Levels And Service Levels And MaintenanceMaintenance
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
Confidentiality and Confidentiality and Trade SecretsTrade Secrets
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Limitation of Limitation of DamagesDamages
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Money in the Money in the MaintenanceMaintenance
Money Found.Money Found.Money Lost.Money Lost.
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Dispute ResolutionDispute Resolution
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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
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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”
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
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.
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
The Hybrid: The Hybrid: Software/Data/Business Software/Data/Business Model/ Model/ License/Transfer/AllianceLicense/Transfer/Alliance
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com
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.
Walter Wright, Attorney -Trinity Law Group LLCWalter Wright, Attorney -Trinity Law Group LLCwww.trinitylg.comwww.trinitylg.com