Hi, I am developing a software prototype for a company using google glasses. The IP will belong to my company, and we will have a revenue-based contract. We will provide the software and the support to run the software. The other company will commercialize this software. What is the percentage of net sales that would be reasonable to ask for? Thanks.
This is always a question of who wants whom more. I've seen deals where the percentage was in single digits. The thing is, I've seen both deals where a LICENSEE ended up with a single digit percentage and deals where a LICENSOR ended up with a single digit percentage.
It all comes down to your ability to convince the other side that you are bringing in so much to the table that the other side should get a smaller piece of the pie.
Essentially, this depends on these factors:
- whether you are well-known in the industry;
- whether the other side is well-known in the industry;
- the level of uniqueness of your product (if you've developed another minor variation of a product that already exists on the market, chances are the distributor will want a larger piece of the pie);
- your level of desperation (it's one thing when you partner up with someone else who will commercialize your product simply because you can make more money by investing your time building new stuff; it's another thing when you have no realistic way to commercialize the product yourself, and if you don't find someone who can do it for you quickly, you'll starve...)
MOST IMPORTANTLY, no matter what number you agree to, make sure you read the contract extremely carefully. Contracts can create rights and contracts can destroy rights. Contracts are more powerful than any rights vested in you by IP laws.
So, the bottom line is:
- Know EXACTLY what you are trying to get out of your contract;
- Get your contract reviewed by an experienced lawyer, but make sure you tell the lawyer what it is you're trying to get out of the contract.
Lawyers are not going to create "the right deal" for you. We're not going to tell you whether you should be getting 9% or 90% of the revenue. We're going to make sure that you understand whether the contract you are about to sign reflects what you think the terms of the contract are.
You're welcome to schedule a call if you would like to discuss this in more detail.