Help me sell my software without getting screwed

December 11, 2006 6:28 AM

The company I work for has expressed interest in purchasing a software product I've been developing privately. How do I go about doing this so I don't get screwed?

I've worked for this company for several years as a system administrator. The product in question is a web application I'm developing using Ruby on Rails. I have absolutely zero experience in selling software so I'm completely lost here. What are my options?

For what it's worth it's a semi-niche product but I think it has some potential to be sold to other companies as well.

posted by saraswati to technology (9 comments total)

as in purchase the rights? or purchase licenses?
posted by jruckman at 6:50 AM on December 11, 2006

They haven't specified so that's kind of what I'm asking. Is it safer for me to just sell them the rights and absolve myself of it or suggest licensing it to them? The pro for licensing is that I could then potentially license it to other interested companies, but what does that obligations does that open me up to?
posted by saraswati at 7:00 AM on December 11, 2006

err replace "what does that" with "what kind of"
posted by saraswati at 7:01 AM on December 11, 2006

I don't know much about selling software either, so this is just my personal opinion. But I'd go for licensing, simply because I'd want the freedom to sell it around, and not have to worry about building off the code to make additional applications in the future.
posted by jruckman at 7:08 AM on December 11, 2006

(Incidentally, this is a law question, not a technology question. Add some "licensing" and "intellectualproperty" tags?)

Hm... profile indicates you're in Canada, so I'll just discuss general strategies rather than particular contract/copyright doctrines.

The best situation for you would be to give the company a non-exclusive license to use the software. That's the most similar to the transaction most people think of as "buying" software -- one pays the vendor for the privilege of using it, but doesn't expect that nobody else will have access to the same software. Ideally, you'd set up some sort of periodic payments in return for constant upgrades to the latest version, or something.

The advantages to this scheme would be that it would let the business use your software, which they're interested in, but it wouldn't impair your rights to develop and re-license the software going forward. In addition, if you manage to get periodic payments rather than a single fixed fee, it gives you some predictable income down the road that you could rely on to justify dedicating some time to improving (and maybe marketing) the product.

What obligations would you invoke upon yourself? In a voluntary license/contract transaction, it's largely up to the parties. There may be some non-waivable warrantees in Canada that I'm not familiar with, but in general as long as both parties agree to clearly-defined terms, then they get to define their own obligations.

It seems like selling the product outright (as in, transferring the underlying copyright/patent/whatever) is a much worse idea because it would allow the company to do all the third-party licensing and reap the profits, instead of you. Unless the company is a software company and that's what they do, they probably wouldn't even be good at it and the potential might just go to waste. Furthermore, even if you don't care about profit, they would have the right to take your pet project in whatever direction and you would totally lose control of it (even if they kept you on as a developer for a while).

And just to reemphasize: I'm not a lawyer, I'm definitely not a Canadian lawyer, and you should probably talk to a lawyer. You can probably get an initial consultation for free or a low fee, and it would probably be worthwhile just to get a firmer feel for what your options really are. Then, once you get an idea of how likely this transaction is to go through, and how much the potential license fee is, you can determine what portion of that fee you're willing to spend on legal advice and get someone to write up the agreement for your if the size of the transaction merits that.
posted by rkent at 7:16 AM on December 11, 2006

Lawyering up would be a good idea in this case because you may be exposed to liability if your employment contract or policy has a no-moonlighting clause. There are also problems related to your fiduciary duties to your employer: if you sell your product to a competitor, you are acting disloyally.
posted by Saucy Intruder at 7:45 AM on December 11, 2006

I would agree with Saucy, you better check for a clause regarding anything you do while employed by them being their property.

I would also second the non exclusive lisence route.
posted by imjosh at 8:19 AM on December 11, 2006

I Nth looking into employment clauses. No idea what the situation is in Canada but in the US there's been a fair number of court victories for employers laying claim to works done by employees in their off time, whether or not they ever used any employer resources to create their product.

You may have a very cordial relationship with them but if there's a power imbalance in this regard then you're potentially in negotiations with someone holding a pistol under the table; maybe they're not interested in using it but then again, maybe they haven't started getting a result they find unpleasant yet.

If they're capable of asserting legal ownership of your work then you should go into this discussion knowing that, and you should consider the repercussions of that fact before you actually put the software into their hands. They could write you a check that's a reasonable price for one install of this but not for the right to turn around and resell it to the world. If they can assert that ownership then you might want to reconsider putting a copy into their hands.
posted by phearlez at 8:27 AM on December 11, 2006

If they want an exclusive license, maybe try and get part cash and part stock. Then if it becomes highly successful you know you haven't been cheated.

At least that's the option I'd explore.
posted by sipher at 5:31 PM on December 11, 2006