Tuesday, March 30, 2010

The Bundle of Sticks

Intellectual property ("IP") types tend to describe IP rights as "a bundle of sticks."  The phrase is meant to illustrate that these rights may be parceled out in different ways to different parties.  Jo Author may sell the rights to publish her book to Acme Publishing, the right to film it to Mega Productions, permission to turn it into a TV series to Sitter In A Box.  She might even give a license to write sequels to Ghost Writers, Inc.  Neither should we forget merchandising - toys, action figures, games and clothing.  Jo would be a very astute business person.  Let us  hope her IP attorney is up to the task!

In the IT world we encounter the bundle most frequently in software licenses.  Indeed, a license is one of the sticks - it is permission to use the asset in a certain way, but not in others.  As a general rule, there is no such thing as implied IP rights.  If your contract does not contain a certain stick that you  happen to need, you don't have the right to use it.  Thus, a software license that grants use rights to a number of  named individuals is a problem  waiting to happen.  If one of those individuals leaves the company, may her successor use the software?  (The answer could well be "Of course.  For a price.")

As a result, a software acquisition requires a bit of care:

  • Does the grant of license permit all the uses you want/need?
  • Are there any restrictions that could be troublesome in the future, such as named users, named location, set number of users or named processor?
  • Do you have rights to back up copies?
  • May employees make a copy for home use?  May they access it remotely?
  • Do you have the right to make and distribute copies of the Documentation?
  • By the way, is the standard documentation sufficient for your needs or will you, or vendor, have to prepare something special?  If so, who will own the rights to that work product?
  • Will you pay a one time license fee, or are installments or renewals due over time?
  • If there are subsequent payments, what are  you getting for them?
  • Are you protected against unexpected price increases over time?
  • How will you, the customer, measure the performance and acceptability of the product?
  • When, and why, should you have access to vendor's source code?
  • Assuming you pay a one-time license fee, does that entitle you to any technical assistance or maintenance?  What are your options if smoke starts to rise from your data center as the vendor's car pulls out of your parking lot?
  • Are you permitted to tinker with the product?
  • If you tinker and wreck the system, is vendor required to come in and correct the mess?
  • If you tinker and create something spectacular, do you own it or does vendor?
  • If you create something spectacular from vendor's system, can you sell your new product?
  • Can you control vendor's actions if he/she learns something from you and creates something spectacular on his/her own?
  • If your unit is sold to another company, does the software go along, or must vendor agree to the transfer?
  • May you use the software to process information or perform other work for affiliates or subsidiaries?
  • May you freely transfer the software to one of your subsidiaries or affiliates?
  • Does the contract require vendor to do anything to keep the software current with the latest technology? (In all honesty, that should probably be the subject of a separate article.)
  • When, and why can vendor terminate your use of the software?
  • Do you need to give vendor any notice if you decide to stop using the software?
  • Does your license ever expire?
  • Does the license give you the use rights you want/need?
That last point is a duplicate, of course, but it is deliberate.  It is one of the most important questions to ask - Will this product solve my current business need AND does the written agreement give me all the rights I want and need?

BEFORE signing on the proverbial dotted line, make sure are getting all the "sticks" you need to solve your business problem.

No comments:

Post a Comment