Navigating Product Licensing: Crafting Terms for Selling a Software Copy
As the owner of a thriving SaaS business in a niche market, I’ve been thrilled to witness our platform flourish over six years, evolving through direct customer feedback and ongoing development. Our subscription-based model has served us well, but now we’re facing an intriguing new challenge: a client is interested in acquiring a copy of our software. This move stems from their desire for increased control and ownership over a solution that’s integral to their business operations.
In response, we’ve crafted a strategy that allows us to split our product into two distinct entities:
-
The Original Platform: This will remain under our control, allowing us to continue offering, enhancing, and selling it to both current and prospective customers.
-
The Custom Copy: This will be a tailored version, isolated in terms of its source code, and fully transferred to the client’s ownership. We’re prepared to streamline this version by removing unnecessary components and incorporating bespoke functionalities as required by the client.
Although financial agreements are largely settled, we’re grappling with the complexities of establishing licensing terms that safeguard both the original and the new iterations. The client’s legal team has expressed concerns that ongoing updates to our main product might inadvertently render their version less competitive, thereby diminishing its value.
To navigate these waters, I’m reaching out to the community for insights. Have any of you tackled similar situations before? How can we structure the agreement to ensure both the original product’s integrity and the new offshoot’s value are protected? Your expertise and advice would be invaluable as we draft these crucial terms.
2 Comments
This is an interesting situation and one that requires careful consideration to strike a balance between your business interests and the client’s needs. Here are some practical suggestions and insights to navigate this complex scenario:
Consider including a clause that any enhancements or bug fixes developed by the client for their version should be communicated to you so you can assess whether they can be incorporated into your main product. Clarify ownership of such enhancements to avoid disputes.
Non-Compete and Non-Disparagement Clauses:
A non-disparagement clause could ensure that neither party uses language damaging to the other’s reputation or business activities, promoting a cooperative atmosphere.
Licensing and Usage Terms:
Consider including a revenue-sharing model if the client intends to commercialize their version to offset potential competition with your product.
Support and Maintenance:
Outline the responsibilities for ongoing support and maintenance of the spun-off product. Decide whether you will offer any support, and if so, under what terms or if they’ll assume full responsibility.
Future Development:
Include a provision that addresses how you will handle future feedback and development. If their enhancements greatly improve the product, discuss terms under which such improvements might be shared or co-developed, benefiting both parties.
Milestones and Transition Plan:
Discuss a detailed plan with defined milestones for transitioning the product to their ownership and any immediate changes required. Transition periods should be clear to avoid service disruptions for both parties.
Data Protection and Privacy:
Your situation presents a fascinating challenge that many SaaS founders may encounter as they scale. Crafting licensing terms that maintain the integrity of your original product while providing value to the client’s custom version is indeed complex but essential.
One approach you could consider is implementing a **tiered licensing model**. This would allow you to provide the client with certain privileges regarding updates and features while still retaining your rights to enhance the original platform. For instance, you could agree to provide them with key updates that pertain directly to their version, thereby ensuring it remains competitive without granting them full access to every new enhancement you roll out.
Moreover, establishing a **maintenance agreement** could help alleviate the client’s fears regarding future updates. This could outline your commitment to offering certain updates that they can opt into, ensuring their version remains aligned with market standards while still making it clear that new features for the original platform will not be transferred, maintaining its distinct competitive edge.
Additionally, consider including a **non-compete clause** that limits the client’s ability to resell or distribute the custom copy, barring them from leveraging your innovations directly against the original product. This will further protect both your interests and encourage the client to continue relying on your primary platform for ongoing enhancements.
Engaging with a legal expert familiar with software licensing is crucial — they can help tailor these agreements to be fair and protective for both parties while considering local laws.
It’s an exciting step, and I wish you the best as you navigate this new territory! Your dedication