Making Technology Law Simple

Negotiating Technology Sales Agreements

  • Agreements
  • Michael Lightfoot
  • No Comments
  • November 20, 2010

Negotiating Technology Sales Agreements

Derick Swanson frowns at the mountain of paper on his desk. His company provides an item scanner system with automated check stand hardware and the software to run it. Five years of stress and hustle have built a solid group of regular customers. All of them are small, independent businesses and after their initial purchase of one or two units, they ceased to contact him.

Fortunately, Derick landed a major deal with a national retail store that wanted to buy a thousand units from him to try out in their Northwest sector. For a week he dried his eyes on a computer screen typing out the sales contract. It covered ownership of the hardware and software, the payments, how the buyer would be in control of installation, everything he could think of. Derick sent it off.

Three days before the sale was scheduled to go through, Derick received the Everest of contracts that sits on his desk.

It is the Buyer’s “standard” contract, and out of its obscure depths it seems that he will lose all control of his invention, and he will be expected to deliver and install all one thousand units in a two-month time frame.

Much of the rest of the contract is legal jargon unknown to Derick. Another document asks for installation estimates, and average maintenance costs. Derick fears signing the document because he may be paid a small lump sum to give his Buyer the ability to completely take over his business.

On the other hand this is the biggest deal he has ever been given and if it goes well, it could make him a millionaire.

The majority of lawyers would say they can handle this situation and in many ways they could. General business documents like license agreements, and terms and conditions of sale, tend to be relatively stock from one deal to the next. However, if your business involves the sale or use of technology unique considerations come into play.

The larger the sale, the more important these options become.

Deep within the minuscule print of a forty-page contract, one may find a clause that requires the seller to provide three extra sets of hardware and software to be used as “hot spares”.

It may have one sentence that states all use and manipulation of these extra sets are delivered to the Buyer upon sale, so that while you maintain control over the original product, all the extra sets that were supplied, lose their protection.

One must also consider that, if your product involves a thousand dollars worth of equipment, this could accumulate quickly into a gigantic cost that was not originally expected. One quick signature and then if delivery isn’t made, your business suffers the consequence.

Just below that section you find a mandatory maintenance clause that sets up the Buyer with free maintenance for five years. Of course, this won’t be stated as clearly as it is here. Software coverage may be mentioned on one page, and hardware coverage on a completely different page. Rhetoric could warp the sound of it all stating the Buyer promises the seller to warrant the correct electrical and mechanical operation of the item sold for a minimum interval of sixty-two months, and these words after twenty pages of the same “legaleze” have become a swirling blender concoction in your mind. Without expertise, this tidbit slips by, costing your business mountains of potential revenue.

Five pages later, monthly updates rear into view to be provided remotely by the seller at no additional cost. Your business just finished the product and updates had not been anticipated for at least a year.

In the same paragraph sublicensing is mentioned, but no product is specified. Unsure what about your product would require a sublicense, you skip over it assuming this must be extra text that is only there because this document is used for many different types of deals. Big mistake.

Whether you own a mid-sized business attempting to close your first major sale, or a multi-million dollar corporation, you must understand that the subtleties of a technology contract negotiation are where the extra millions are made or lost.

No matter if you are the CEO wondering if the contract fits in with your company’s preexisting policies, or the CFO who worries about total cost, or the sales VP focused on the size of your commission, Michael Lightfoot will handle all your questions. Mr. Lightfoot traversed the spectrum of contract intensities, from start up firms, to multimillion dollar contracts between large corporations. His experience will drastically cut negotiation time and will keep both sides protected and satisfied.

For more information contact,
Michael Lightfoot, Attorney at Law
(847) 934-0604

Written in collaboration with
Will Spears,
Atomic Cocktail Magazine

All characters portrayed in this article are fictional. Any resemblance to actual persons or
companies is purely coincidental.