I'm not a lawyer but I own/run a software company. We have a few Fortune-500 clients and went through brutal contract negotiations with all of them. I've learned to love reading and negotiating contracts; there is an internal structure to them similar to software. There are legal equivalents for most programming concepts: variables, functions, OOP, etc. But I digress.;-)
Get a lawyer.
You shouldn't be negotiating with your intellectual property (or anything else really) without having proper counsel. When you hire a lawyer, make sure to ask them specific questions about source code deals they've done in the past. Most of the contract and ip lawyers out there haven't done source code negotiations--they don't teach something this specific in law school, they need experience. If they can't bore you to tears with war stories about the weaknesses of Chapter 11 escrow triggers, keep looking.
But a lawyer can't negotiate the major deal points.
You have to negotiate the business side of the contract. With these it's all about leverage. For the major ip deal points, there are two ends of the spectrum (ie things that are good for you at one end and things that are good for the client at the other). Depending on who had the leverage, we used to move up and down this list in each negotiation. ------------ BEST FOR YOU (LICENSOR)
1. JUST SAY NO: No source code rights whatsoever.
2. ESCROW: Source code held in escrow by third party and released only when certain conditions are met. Common conditions (in order of licensor preference) are:
a. Licensor ceases operations (Chapter 6?);
b. All above, plus if licensor goes bankrupt (Chapter 11);
c. All above, plus if licensor violates the Service Level Agreement section of the contract (% uptime, accuracy of software, etc. items will be custom for your particular software/service/industry);
d. All above, plus if licensor breaches Reps and Warranties section of contract;
e. All above, plus any material contract breach.
3. CONDITIONAL RIGHTS: Once they have the source code, whether after triggering one of the escrow conditions or immediately upon contract signing (if you couldn't get the escrow), there are several ways you can restrict their use.
a. Only Licensor's employees can only use source code and derivatives ie they cannot resell to third parties;
b. Licensor must continue paying you your licensing fees on use of the source code and all derivatives even if you breach the contract;
c. Same as a. but if you breach the contract they only have to pay you a percentage of the fee;
d. Licensor can have the source code but any modifications must be done by you at your normal consulting rates;
e. Licensor owns the source code and all derivatives;
f. No limitation of liability for breaching (a) or the confidentiality clauses in regards to your code (no sane company would agree to no limit but the number should be extremely high--an order of magnitude beyond what you're actually charging them for the software).
4. BEND OVER: Free and clear rights to source code with no restrictions.
BEST FOR CLIENT (LICENSEE) ---------------
Hmm. I hadn't meant to write an essay on this. Anyway, I hope this helps. You said escrow wasn't an option but fight for it anyway--I never signed a contract with ip rights that didn't have escrow protection.
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I'm not a lawyer but I own/run a software company. We have a few Fortune-500 clients and went through brutal contract negotiations with all of them. I've learned to love reading and negotiating contracts; there is an internal structure to them similar to software. There are legal equivalents for most programming concepts: variables, functions, OOP, etc. But I digress. ;-)
Get a lawyer.
You shouldn't be negotiating with your intellectual property (or anything else really) without having proper counsel. When you hire a lawyer, make sure to ask them specific questions about source code deals they've done in the past. Most of the contract and ip lawyers out there haven't done source code negotiations--they don't teach something this specific in law school, they need experience. If they can't bore you to tears with war stories about the weaknesses of Chapter 11 escrow triggers, keep looking.
But a lawyer can't negotiate the major deal points.
You have to negotiate the business side of the contract. With these it's all about leverage. For the major ip deal points, there are two ends of the spectrum (ie things that are good for you at one end and things that are good for the client at the other). Depending on who had the leverage, we used to move up and down this list in each negotiation.
------------
BEST FOR YOU (LICENSOR)
1. JUST SAY NO: No source code rights whatsoever.
2. ESCROW: Source code held in escrow by third party and released only when certain conditions are met. Common conditions (in order of licensor preference) are:
a. Licensor ceases operations (Chapter 6?);
b. All above, plus if licensor goes bankrupt (Chapter 11);
c. All above, plus if licensor violates the Service Level Agreement section of the contract (% uptime, accuracy of software, etc. items will be custom for your particular software/service/industry);
d. All above, plus if licensor breaches Reps and Warranties section of contract;
e. All above, plus any material contract breach.
3. CONDITIONAL RIGHTS: Once they have the source code, whether after triggering one of the escrow conditions or immediately upon contract signing (if you couldn't get the escrow), there are several ways you can restrict their use.
a. Only Licensor's employees can only use source code and derivatives ie they cannot resell to third parties;
b. Licensor must continue paying you your licensing fees on use of the source code and all derivatives even if you breach the contract;
c. Same as a. but if you breach the contract they only have to pay you a percentage of the fee;
d. Licensor can have the source code but any modifications must be done by you at your normal consulting rates;
e. Licensor owns the source code and all derivatives;
f. No limitation of liability for breaching (a) or the confidentiality clauses in regards to your code (no sane company would agree to no limit but the number should be extremely high--an order of magnitude beyond what you're actually charging them for the software).
4. BEND OVER: Free and clear rights to source code with no restrictions.
BEST FOR CLIENT (LICENSEE)
---------------
Hmm. I hadn't meant to write an essay on this. Anyway, I hope this helps. You said escrow wasn't an option but fight for it anyway--I never signed a contract with ip rights that didn't have escrow protection.
-Flemlord