Hi, We are a start-up company that licenses software and gets a percentage of net sales. To make sure we get the percentage of the sales, we ask for a copy of the contracts. However, one client told us that the licensing fees of their clients is confidential, so we have to trust them. What can be done in these cases? In revenue based deals, how can I make sure I got the right revenue and we are not taken advantage of?

Hi ,as a corporate lawyer I have dealt many times with licensing agreement and there are two things that are typically a part of these kind of agreements: A. the first one is auditing rights - that allows you to check the other side's books at all time including by a professional auditor (and if there are big discrepancies between what was reported and the actual sales they need to pay not only the difference, but also interest, a penalty and the fee of the auditor). B. you sign a mutual NDA that the auditor is obligated by it as well. They can quietly reveal their fee as you are obligated to keep it confidential or at least someone on your behalf can review it.
The question is, if you are getting a percentage - won't you know there fees anyway? What is their alternative? If you want, you can make an estimation and charge them a fixed licence fee.
My guess is that you don't want this to fall through so you need to find a creative solution.
Good luck

Answered 5 years ago

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