Imagine your company has been hard at work on a game-changing software application. You are eager to bring your new product to market, but have you stopped to consider your intellectual property rights? What about licensing terms, or potential risks and liabilities?
These crucial matters are all part of understanding technology transactions law. At SVT Law Advisors, we've helped dozens of organizations navigate legal issues in technology deals with over 25 years of experience working in technology law.
Today, we will help you understand technology transactions law and how it intersects with business, including technology licensing agreement basics. We'll also look at how to negotiate technology contracts. Let's begin!
Understanding Technology Transactions Law
Technology law is a constantly evolving field, with scores of new technologies upending the status quo each year. Businesses constantly adapt their strategies and business models to leverage these new technologies and remain competitive, while governments simultaneously change and adapt the law to new technologies as well.
Technology transactions law addresses how parties agree to terms involving the development, use, license and manufacture of technology.
Some key areas include:
Intellectual Property Rights
Intellectual property (IP) is the backbone of many organizations, and protecting that is paramount. Technology transactions law covers intellectual property rights like patents, trademarks, copyrights and other means for businesses to capitalize on their ideas through licensing and distribution agreements, non-disclosure, and other types of agreements.
Data Security and Privacy
Data security and privacy has become one of the most important areas in technology law. Keeping data safe from unauthorized access and use is a responsibility all technology companies have, and there are numerous regulations that companies must be in compliance with regarding data security. Technology contracts must specify how data breaches are handled, and how users are notified in the event of a breach. The handling of personal data must also be addressed.
Technology Contracts
Technology transactions law also covers a variety of technology contracts that are essential to business, including:
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Software License Agreements - Contracts that lay out the rules for how one organization can use software developed by another.
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Development Agreements - Legally defines the responsibilities of parties in a software development project.
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Cloud Computing Agreements - Define how cloud computing services like SaaS, PaaS, IaaS can be used by an organization.
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Indirect Sales and Distribution Agreements - These include referral, reseller, distributor, and OEM (original equipment manufacturer) agreements that define how one party can use and license another party's intellectual property to third parties in return for compensation to the original owner of the intellectual property.
These agreements are intended to clearly define the most important parameters of technology contracts, including ownership of intellectual property, payment schedules and terms, indemnification, and limitations of liability.
Proactively Avoid Legal Surprises in Technology Deals
Before entering into a working arrangement with another company, it's critical to have an expert in technology transactions law work with you to draw up your technology contracts. This will help avoid costly legal issues further down the line.
Some of the most common legal issues that can be proactively addressed with proper legal counsel include:
Improper IP Licensing
Some common missteps in IP licensing agreements include granting overly broad or restrictive rights; failure to specify rights such as sublicensing to other organizations; and lack of geographic limitations.
Cloudy IP Ownership
When multiple parties work together on a project, IP ownership of the end product must be explicitly stated to avoid potential conflicts and disputes. Failure to get these details in writing could lead to lengthy litigation.
Inadequate Security Measures
Not having proper security measures in place when working with new technologies can lead to data breaches, or unintended exposure of confidential information including source code, which can cause financial losses and reputational damage. Not only that, but you may be subject to fines from government agencies.
Unfair Payment Terms
Agreements should be fair to both parties. Negotiating technology contracts without help from an experienced technology lawyer can lead to one party feeling exploited or taken advantage of by excessive royalties or unfavorable payment schedules. This can result in the early termination or what might have otherwise been a long-term lucrative relationship.
Technology Licensing Agreement Basics
License agreements are a key aspect of technology transactions law. They are legal contracts which dictate the terms and conditions of how one organization may utilize the technology or IP of another organization.
Now let's examine technology licensing agreement basics.
License Grant
The license grant defines the scope of the use available to the licensee. The geographic regions in which the technology or IP can be used must be explicitly defined, as well as the sub-licensing rights.
Limitations of Usage
The agreement also thoroughly describes how the technology or IP can not be used. This includes restrictions on reverse engineering, re-selling or sublicensing the IP and other common limitations.
Fees
A licensing agreement must also state in detail the specific fees the licensee must pay to the licensor, along with any limits on price increases and payment terms like schedule and currency. Fees are based on criteria specific to the licensor's business model such as number of users, consumption, sales revenue, as well as milestones like a specific number of units sold. It is also possible to define “site” or “unlimited use” licenses” in a multitude of creative ways.
Term and Termination
A technology licensing agreement must also specify the duration of the license along with process for renewals and conditions defining when a party can terminate the license. These provisions also set each party's obligations after termination, such as returning technology and ending use of the IP.
A Brief Note on how to Negotiate Technology Contracts
Lastly, we'll review a few tips on how to negotiate technology contracts. A successful negotiation requires a careful balance between the needs of both parties, and a good understanding of your near and longer term strategic objectives in an ever-changing business and technology context.
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Understand Your Goals - You must clearly understand your desired outcome, including pricing models, and protection of your IP. Consider the leverage you have in relation to the other party, as well as demand for your product or service from other companies.
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Do Your Research - This includes studying industry trends, competitor offerings, and the overall market to determine ideal pricing models and amounts.
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Prepare for Negotiation - Create a plan that outlines your key negotiating points, concessions you're willing to make, and fallback positions. Be sure to include technology, finance and business development leaders from your organization, and seek help from a technology law expert to fortify your team.
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Be Willing to Compromise - Your dialogue with the other party should be open and honest. Your goal should be to seek a mutually beneficial relationship, which means a willingness to compromise on issues that don't make a substantial difference to your primary goal.
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Anticipate Counterarguments - Anticipate counterarguments by seeking to understand the other party's motivations and objectives. This will help you develop a persuasive response to any objections the other party has.
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Review Agreements Thoroughly - Once an agreement has been reached, ensure that the final agreement documents all agreed upon terms and conditions. Make sure there are no ambiguities that can lead to issues later. If you haven't already, involve a tech contracts expert to review any document before signing.
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Nurture a Long Term Relationship - A licensing agreement can be the basis for a long, fruitful relationship.
While this is a sketch of how to negotiate technology contracts, the circumstances of each business and agreement are constantly changing. We strongly advise consulting with an experienced technology transactions lawyer before negotiating any sort of technology license agreement.
Closing Thoughts on Technology Transactions Law
Technology transactions law is a subject that is as broad as it is complex. Negotiating contracts, licensing agreements, IP rights and other legal issues in technology deals requires specialized knowledge and expertise to be executed successfully.
At SVT Law Advisors, we have been helping organizations navigate the complexities of technology law for over 25 years. We are committed to helping our clients solve legal issues in technology deals, with exceptional legal counsel tailored to your needs. More than that, our collected experience has seen the success and failure of many businesses and business models. Let us leverage that knowledge and put it to work for you.
Before you enter into negotiations regarding any aspect of technology law, contact SVT for a free consultation. We can provide clear, and actionable advice to help you achieve your goals. Contact SVT today.
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