"What if you get hit by a bus?"
I'm negotiating a B2B licensing deal for some technology.
I typically license it as a managed service, and don't share code, because I want to protect trade secrets.
A new potential client is hoping to build a lot of his service around my technology, and wants the source code. "What if you get hit by a bus?" "You're a small shop, what if you can't give me the desired uptime / SLA?"
How do you respond to these client concerns? I understand how, as a businessman, he wants to minimize risk, since my technology might become a crucial part of his offering. But I also can't just hand out the source.
License Open Source Licensing SLA
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"What if you get hit by a bus" is a lot different than "SLA/up-time". You need to address those separately. – Tim J 14 years ago
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Set up an escrow agreement for the code. Make sure you have a separate SLA agreement in place. Sounds like this guy will try to screw you. – Joe 14 years ago
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Joe's right. You want to be careful about your intellectual property and the triggering events for the escrow. In the mid-70s, I worked for one of the pioneers of liquid crystal chemistry. They signed a deal with a very large Japanese calculator firm that said if my employer couldn't meet demand, they had to turn over the technology. Right after it was signed, the Japanese firm flooded the company with far more orders than could be filled. A few weeks after the Japanese chemists finished training on how to manufacture our liquid crystals, the company closed its doors. – Bob Murphy 14 years ago
2 Answers
If your client is willing to pay for it, you escrow your code with a neutral third party. There are many firms that will provide this escrow service. You write a contact that specifies exactly when and how the source code will be released from escrow.
You basically place your software package's source code with a neutral third party. This party will release the source code to your customer under certain specified conditions. (One example might be your company goes bankrupt.) There are hundreds of companies that provide this service. Here are just a few.
Iron Mountain
Escrow Associates
Escrow Tech International
Typically you sign a contract that specifies under which conditions your software source code will be released to the other party. These services charge a fee. You typically have the big company, that is worried about what happens if you vanish, pay for the escrow fee. You also need a attorney to review this contract and you need to consider those legal fees as part of your bid to this company.
Finally, note that while your client may be quite happy with the escrowed software, programmers know that the source code is only one minor portion of a product. Getting something to work with just the source code is going to be difficult at best.
See question:
You can offer code escrow. He can choose the service and pay for it. Or he can hand you a boatload of cash and buy/license the IP
EDIT - I would push for selling a source license. However, you retain ownership and the license he gets is limited for specific use(s). You can get more revenue that way and he reduces risk.
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Why push for a source license? I have trade secrets that can get out. Also, I want to price based on usage volume. It is hard to determine the usage volume if its on their servers. – John 14 years ago
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Not sure what "trade secrets" you might have but if they violate the license then you sue for damages, or some other agreed upon amount int he license agreement. You might also be able to stipulate that they buy insurance for this (not sure if that is possible). You can determine use based on audits - he is responsible for accurate auditing. I guess "push" is a strong word - I take that back - but your concerns can be dealt with, though suing after the fact is not really desirable. – Tim J 14 years ago
