What do I need to know before I sell a software license?

Question

I've developed a web-based application that a company is interested in licensing. I suspect they intend to appropriate the features they want, and add to their existing codebase, so a license is likely to be a one-time affair. Since it's interpreted at run-time, I'd have to turn over the source, and it's not immediately apparent that I can protect it in any way.

To add a layer of complexity, I've had a number of users express interest in using it as a service, so I've been working towards a subscription-based version. It's a niche market, so growth potential is limited, but I don't want to sell it short.

I typically sell my services hourly, so I don't know the first thing about licensing code.

The questions I'm struggling with are:

1. What should I charge?
2. What does a commercial software license look like?
3. How do I protect my work?

I'm sure there are a few dozen more I should ask. What should I be thinking about?

Thanks in advance.

--Thanks for the replies, all--

Answer 1

See a lawyer. If your selling a license and/or source to another firm you need to be careful what you may or may not owe at the end of this deal.

And look at it this way, you can bet the company has lawyers.

Answer 2

Answer this question: What are you afraid of? That they "steal" from you? As we Germans say: If you can trust someone, you don't need a contract. If you can't trust them, a contract won't save you.

So sit back and think of what additional benefit this could give you. If the company likes your software, might they be interested in paying you to adjust it to their needs? Could you get other paid work from them? Or hire you permanently? Is there a company around which has solved this problem already and which is willing to take you under the wing?

But as shooner said, if you're trying to run this as a one-man show, see a lawyer. Copyright law is a mess and never forget one thing: The world is ruled by lawyers and courts. If you don't make the correct sacrifice to these powers, they will ruin your life.

Answer 3

Really see a very competent lawyer. Apart from what the contract will state explicitly there are numerous regulations - laws and acts that may imply some very interesting things you might be unaware of. This implied things can cause you real pain if you don't take proper care of them.

Answer 4

See a lawyer that specializes in this field.

Answer 5

1. What should I charge? Ultimately you have to arrive at a figure you both can live with. Start by asking what value the buyer will derive from using your product as a guide. It's probably more than you think.

2. What does a commercial software license look like? It says whatever you want it to say, plus a bunch of standard legal boiler plate. As others have said, find a lawyer that specialises in software IP. Ask questions, If they keep saying they have to research it, it's probably a sign to look for another lawyer.

   Before you go to a lawyer have a clear idea about your goals. Here's a few things to think about:

   • what do you want to give the other party. What/how can they use your product.
   • limitation of liability
   • warranty. What warranty do you want to give
   • support. What support will you provide. Costs.
   • termination. How will the licence terminate and what will happen when it does
   • intellectual property. Who owns what
   • how will disputes be resolved
   • assignment. Can they other part assign the agreement to someone else. If so under what conditions

3. How do I protect my work? If you can't trust the other party you probably shouldn't do it. As Aaron said "If you can trust someone, you don't need a contract. If you can't trust them, a contract won't save you." You can write all the contracts and licences that you want, but if it goes wrong, litigating it is a painful business. Best not get in that position in the first place, or at least make sure the potential gains offset the risks.

Answer 6

The chances that an individual will be able to sell his software are slim. Consider giving it away for free using one of the open source licenses. This may substantially increase the number of the users of your software and may turn some of them into buying customers (i.e. prod support or customization).