Whether you sell products or services, you can make additional revenue by products licensing.
If you sell products, find complementary products available from third parties and license the right to sell them to your customers.
Depending upon the price point, a third-party product that you license can serve as an upsell, cross-sell, entry level product for your own product(s), or even be bundled with your products and sold together.
Of course, you can also license your products to be sold by others. Whether you receive a flat $XX per sale, a percentage of the sale, or some other revenue, it’s an easy way to generate additional cash flow while the third party handles the marketing and sales for you to their prospects and existing customers.
What if you only sell services? Chances are there are products that fit within your niche that can be licensed to sell.
Naturally, whether you’re the licensor or the licensee, the product license must make sense, i.e. be a natural fit for the licensee’s customers.
An experienced business lawyer can help you put together the right type of licensing and distribution agreement for what you plan to do that helps you maximizes profits while minimizing the legal risks.
A good patent lawyer will be able to help you determine whether your invention can be protected by registration with the U.S. Patent & Trademark Office (USPTO). As part of the process, you’ll learn the type of patent you’ll want to get to for your intellectual property.
What Is A U.S. Patent?
If the USPTO ultimately determines your invention a “new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof,” then the federal government will grant you the exclusive right to make, use or sell your intellectual property for 14 to 20 years, depending upon the type of patent. If others want to legally use your invention during that time, they have to pay you for the privilege (license) of doing so.
Like a unicorn, that really doesn’t exist. However, there are some circumstances justifying the need to file a provisional patent application (PPA) for your invention with the USPTO first, especially as the U.S. has now adopted a “First to File” (and no longer a “First to Invent”) patent system, in order to establish priority.
Note that if one files a PPA, it must be “converted” to a regular, non-provisional application within 12 months of filing the PPA, else the PPA is automatically deemed abandoned, i.e. you’ll lose the benefits of filing the provisional app and be statutorily barred from filing the non-provisional application thereafter.
Although a provisional patent does not exist (just a PPA), there are 3 types of patents the USPTO can issue depending upon what you’ve invented. Your Registered Patent Attorney will be able to identify the kind of patent you should seek and prepare the application for the USPTO to examine.
This may be the most critical part of a patent: the patent application!
It’s the properly drafted application that can maximize your property and legal rights.
Most patents are utility patents. In rare circumstances, a proposed invention may qualify for more than one type of patent, and/or qualify for copyright protection and/or trademark protection. A Registered Patent Attorney can help.
What Is A Registered Patent Attorney?
Not all lawyers can practice patent law before the USPTO. An attorney must pass a very difficult patent bar exam in order to become a Registered Patent Attorney (RPA). Although there are 1.3 million lawyers in the United States, only about 2% are Patent Attorneys registered with the USPTO.
The average length of time for a patent to be approved is almost 30 months from filing, but the actual time can vary greatly depending on many factors, like the complexity of the proposed invention.
What If Your Invention Doesn’t Qualify For A Patent?
You may learn from your patent lawyer or the USPTO that your intellectual property can’t be protected by a patent.
If that happens, your attorney can advise you on other possible ways to protect your IP, including steps to shield it, for example, as a trade secret. In other words, you still may be able to profit from your invention without having a patent for it.
If you already have an enforceable patent but someone is using a part of your invention without your permission, you should seek legal help from a registered patent attorney (RPA) immediately. Your patent lawyer may be able to enforce your exclusive rights via a court order (an injunction) to stop the infringement, force the infringer to pay you royalties and/or award you damages.
On the other hand, if you’ve been accused of infringing someone else’s intellectual property, you should immediately seek legal advice, preferably from an RPA, as one may be subject to the additional damages (up to three times compensatory damages) from “willful infringement.”
What About Trademarks?
Trademarks can be the most important asset of a company, e.g., one study determined that trademarks make up about 1/3 of corporate value. So, coming up with and then protecting your distinguishing word, logo, shape, sign, expression, etc., that distinguishes your products or services from others, may be a necessary and invaluable business decision.
Can A Patent Lawyer Also Help You With Copyrights?
Copyrights can be invaluable intellectual property for the creator of an original artistic or literary work, e.g., a movie, a song, a book, computer programs, photos, etc. Copyrights include the exclusive right to make, publish and sell your copyrighted property. There are distinct advantages to timely federally registering your copyright.
As noted by the Wall Street Journal in the editorial “A Joint-Employer McDouble,” both the federal government and class action attorneys are working hard to impose joint-employer liability on franchisors for alleged misconduct by franchisees with regard to employee claims.
Business Opportunity Licensors and Joint Liability
According to Business Lawyer Mike Young, the theories being used to shake down franchisors like McDonalds may also be applied to those who license rather than franchise their business systems. In other words, if franchisors can be held jointly liable as employers, it’s not too far of a stretch for the same legal arguments to be applied in suits against business opportunity licensors for claims made by licensees’ employees.
The National Labor Relations Board (NLRB) is attempting to impose joint employer liability under the theory that a franchisor indirectly controls at least some of a franchisee’s employees.
Ostensible Agency and Joint Liability
As noted in the Wall Street Journal editorial, it appears that plaintiffs’ attorneys may succeed if they can show that franchisee employees reasonably believed that franchisees were acting as ostensible agents for the franchisors when committing misconduct.
How to Reduce the Risk of Being Held Jointly Liable
License instead of Franchise
In addition to less regulatory burdens, licensing your business system (instead of franchising) reduces the odds you’ll be on the hook as a joint-employer. Unlike franchising, there are many ways to structure a business licensing deal so that a licensee’s employees don’t even know of the licensor’s existence.
“Lacking knowledge of a licensor-licensee relationship, it would be difficult for a licensee’s workers to argue joint employer liability under ostensible agency or indirect control theories.” – Dallas Internet Lawyer Mike Young
Indemnification and Defense
It may be appropriate for your franchise agreement or business opportunity license agreement to make it clear that if an employee of a franchisee or licensee brings a claim against you as an alleged joint employer, that your franchisee/licensee will indemnify and defend you against such a claim.
Written Employment Agreements and Policies
Of course, whether you’re a franchisor or a business system licensor, you may want to ensure that your respective franchisees and licensees make it clear in employment policies and any written employment agreements that you do not control their employees (directly or indirectly) and that your franchisee or licensee is not acting as your ostensible agent with regard to employment matters.
What you can learn from Rapper Jay Z’s alleged breach of contract
As a Dallas business lawyer, I find valuable lessons in breach of contract lawsuits involving sports and entertainment stars. Today’s example is Rapper Jay Z’s dispute with a Long Island perfume vendor that’s ended up in a New York state court lawsuit.
However, the vendor says Jay Z didn’t honor his contractual obligations to promote the fragrance to the public, such as mentions in social media and participating in interviews about the product.
Even if you’re rich as a successful rapper, the perfume company’s demands in court are enough to keep you awake at night wondering how to pay if you end up losing — $18 million in alleged damages, a demand for punitive damages, and other remedies.
So, what’s are the lessons to learn from this licensing deal gone bad?
1. Due Diligence
Whether it is a licensing deal or another contract that’s important to your company, performing due diligence on the other party is essential.
A simple Google search for “Jay Z lawsuit” would have revealed that the rapper has been involved in multiple lawsuits, including claims for breach of contract. Regardless of the merits of such claims, a litigation track record is a warning sign that you should prepare to end up in court if things go south…and use that factor to help you decide whether or not to go forward with the deal.
In contrast, if you were considering doing a business deal with NBA Hall of Famer Michael Jordan, due diligence would reveal that his litigation typically involves misuse of his name in advertising without compensation (i.e. someone wrongfully profited using his name without a license to do so). And when he’s donated the damages awarded to charity, it’s an indication that Jordan’s primary interest is in protecting his brand.
Without having the actual agreement to review, it’s unclear what was said (or left unsaid) about Jay Z’s obligation to promote the perfume. However, simple clear instructions in a contract for each party eliminates many misunderstandings that lead to lawsuits.
If I were the business attorney that prepared this licensing deal, I would have encouraged my client to insist on specific action items to be taken by the rap musician to market the fragrance.
For example, promotion in social media would have included specific identification of the media platforms (e.g. Facebook, Twitter, Google+, Pinterest), a minimum number of promotions for each platform, and ideally a timetable for such activities. If necessary, the business agreement would have provided for the company to create the content to be distributed by Jay Z in his social media accounts so that one of his assistants could simply copy-and-paste the material into the platforms for distribution.
If Jay Z was supposed to do interviews as part of the marketing campaign, the licensing agreement would ideally describe each media outlet conducting the interviews and set a base number of interviews as being acceptable.
3. Performance-Based Compensation
As with any business deal, it’s rarely a good idea to give the other party on the front end what he wants and then hope for performance to occur later.
The perfume seller could have tied the award of stock and stock warrants to specific measurable marketing and advertising activities to be done by Jay Z. For example, for every 10 tweets about the fragrance, the rapper would receive XX shares in the company. There could even be a bonus structure in place where Jay Z received additional compensation by exceeding the minimum promotional requirements and/or when perfume sales met certain targets.
No matter the type of deal, your business lawyer can follow these tips to help you get what you want without suing for breach of contract for damages.
Who owns the PPC (e.g. Google AdWords) accounts and the analytical data?
Who owns any custom coding that was done, including any APIs developed as part of providing services?
As a practical matter, you don’t want to be put in the position where you can’t use what you’ve created to provide SEM services to third parties. However, clients won’t be pleased to discover they paid you for SEM work and then you sold similar services to their competitor too. In short, they will feel cheated.
So what’s the solution?
Although there isn’t a one-size-fits-all answer to that, a good starting point is a provision in the SEM agreement where you retain ownership but provide a limited license to use the intellectual property (IP) you created for the client that enables you to license the same IP to others.
Some prospective clients will balk at this idea if they believe you’re going to sell the same SEM services to their competitors.
How do you respond?
First, explain to the prospect that the IP you create is the lifeblood of your business and that giving them exclusive ownership over key parts would in essence put you out of business.
If the prospective client still objects, offer a compromise that limits your use of the IP with one of their competitors for a reasonable period of time (e.g. 2 to 3 years). However, this should be a final offer not the starting point of negotiation.
Be careful when you do offer to restrict your future services to competitors. If the current prospect is a small fish, sometimes it’s better to wait for a bigger better deal with a large competitor of the prospect than be frozen out of that market for a few years because of a non-compete restriction.
Where do you get an SEM agreement?
Your Internet lawyer can prepare an SEM agreement that’s designed to protect your interests and can be customized on an as-needed basis to serve individual client needs in order to get a deal done that’s good for both you and the client.
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