Monday, June 29, 2009

We Have Questions! (Part 1)

"What shall I write about today?" is always a vexing question.

Happily, readers have come to my rescue with a variety of tough questions. I'll start with two:

1. What clauses would you recommend to protect, assist with and reduce the costs associated with software compliance audits?

To limit the likelihood of "fishing expedition" audits, I typically use language such as:

"Vendor may audit Customer's compliance with this Agreement no more than once each year during the Term hereof. Such audits shall be:

  • Conducted by properly trained personnel and in a manner designed to minimize disruption of Customer's business operations;
  • Restricted to those records, files and machines as are reasonably necessary to provide accurate verification of Customer's use of the licensed software; and,
  • Solely at Vendor's expense."
Vendors might respond "We need a right to audit more than once a year if we receive credible evidence of license violations," and "If we discover a significant violation, Customer should pay for the cost of the audit." These are commercially reasonable requests, but need not be "freebies." If an audit discloses a violations, it may make sense for customer to pay for the audit cost, and pay the necessary additional license fees, but nothing more. Unless the audit discloses deliberate attempts to pirate vendor's software, customer should not incur additional penalties.

The best response to an audit, however, is to maintain careful records of licensed and installed software and to actively enforce policies against the use of unauthorized software. If you know what you have "in house," you will have no need to worry when the auditor knocks at the door. And, if you can present the auditor with complete records that answer all his/her questions, you may very well cut down the time needed for the audit.

2. Please comment on ways to protect a creative invention while searching for funding.

The short answer is "Consult a patent attorney."

A patent attorney is an attorney registered to practice before the Patent and Trademark Office. They are trained in the rules governing what can, and cannot be patented, and in the procedures for filing a patent (in legal-speak, "prosecuting an application). I am not a patent lawyer, but I can comment on the obvious pitfalls.

Create an invention disclosure.

Write up a narrative describing what you invented, when and how. Have your signature notarized and lock the original away in a safe place. Share only photocopies, not the original.

Use a nondisclosure agreement.

Before you disclose the invention to anyone, require them to sign a nondisclosure agreement.

Beware of the "on-sale bar."

Once you publicly disclose the invention, or offer it for sale, the clock begins to run. If you do not file for patent protection within 12 months, you can lose your all right to patent protection.

Be prepared for rejection

If you approach large corporations, be prepared to be turned away without any opportunity to make your pitch. They may have someone already working on a similar invention. If they look at your idea, they could be opening the way to an expensive and frustrating lawsuit.

Remember Rollin White

Rollin White invented the "bored through" revolver cylinder used in modern handguns. He sold his patent to Smith & Wesson and probably expected to die rich and happy. But he overlooked the clause in the sale agreement that required him to sue all those who might infringe on the patent. Despite earning a fortune, Mr. White died so broke that we don't even have a photo of him. He spent it all on lawyers and lawsuits.

Which brings us back to my first point: Talk to a patent attorney. It will be money well spent.


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