Searching \ for '[OT]: Licencing products' in subject line. ()
Make payments with PayPal - it's fast, free and secure! Help us get a faster server
FAQ page: www.piclist.com/techref/index.htm?key=licencing+products
Search entire site for: 'Licencing products'.

Exact match. Not showing close matches.
PICList Thread
'[OT]: Licencing products'
2000\11\08@154609 by Snail Instruments

flavicon
face
Hi all,

I seek advice on 'doing business'. Over the last year or two I have
developed several products for certain company. These products are low
volume, 10-30 pc a year, some of the designs didn't pass beta tests and
were abandoned at prototype stage. These designs have very limited use for
anyone else but this particular company. (All of them include one or more
PIC micros. :-)

I did all the development at own risk and charged only for delivered
working products. As you would expect, the material cost makes relatively
low share of the total, say 25%. Some of these products turned out to be
successful and they started to produce a good income for me (shall we call
it a profit?), as the manufacture is much less work then was design and
programming.

Now this company wants me to sell these successful designs (and they intend
to manufacture them themselves) and pay me some 15% of the original cost as
a license fee. This way instead of earning 75% of total price for assembled
product (though some work is involved) I'd get 15% for doing nothing.
Further more I loose control over the quantity of products manufactured
relying on their good will to pay me for the license. It doesn't look much
advantageous :-(

I'd be grateful for any advice anyone can give me. (A CC to spam_OUTsnailTakeThisOuTspamiol.cz
would be appreciated, since I'm subscribed to the digest.)

TIA,

Josef


=======================================================================
Electronical devices for chemical laboratory, custom electronics design
-----------------------------------------------------------------------
Snail Instruments                      Josef Hanzal, M. S.
Vojanova 615                           phone/fax: +420-311-624433
266 01 Beroun                          e-mail: .....snailKILLspamspam@spam@iol.cz
Czech Republic                         URL: http://www.vitrum.cz/snail/
GPS: 49deg58'28" North, 14deg 4'35" East
=======================================================================

--
http://www.piclist.com hint: PICList Posts must start with ONE topic:
"[PIC]:","[SX]:","[AVR]:" =uP ONLY! "[EE]:","[OT]:" =Other "[BUY]:","[AD]:" =Ads




2000\11\08@163300 by steve

flavicon
face
> (All of them include one or more
> PIC micros. :-)

> Now this company wants me to sell these successful designs (and they intend
> to manufacture them themselves) and pay me some 15% of the original cost as
> a license fee. This way instead of earning 75% of total price for assembled
> product (though some work is involved) I'd get 15% for doing nothing.
> Further more I loose control over the quantity of products manufactured
> relying on their good will to pay me for the license. It doesn't look much
> advantageous :-(

If you doubt their integrity, you can offer them the service of
providing them with preprogrammed (and secured) micros at cost plus
15%. If the volume gets up you can have microchip do it for you and
they will ship the parts to the customer and a cheque to you.

If they want to buy the rights, negotiate based on what you would
earn if you continued to do it. You'll have to do some math in
advance and adjust the figures to give you an advantage. For example,
they will have told you a large potential volume to start with and
now that number will have dropped. On the other hand, if you think
hard, it probably cost you 20% more than you thought to develop it.
They also probably think that you are making a killing on the markup
but probably don't think it is as much as it really is. Pick a number
that meets their expectations but leaves you a bit of room. Also make
sure you know your absolute bottom line before you start talking.

Along a similar line, does anyone have example licensing costs for
things like RTOS's, TCP/IP stacks, etc ? I have no idea what is
commonly charged on a per unit basis for these things.

Steve.
======================================================
Steve Baldwin                Electronic Product Design
TLA Microsystems Ltd         Microcontroller Specialists
PO Box 15-680, New Lynn      http://www.tla.co.nz
Auckland, New Zealand        ph  +64 9 820-2221
email: stevebspamKILLspamtla.co.nz      fax +64 9 820-1929
======================================================

--
http://www.piclist.com hint: PICList Posts must start with ONE topic:
"[PIC]:","[SX]:","[AVR]:" =uP ONLY! "[EE]:","[OT]:" =Other "[BUY]:","[AD]:" =Ads




2000\11\08@181743 by Bill Westfield

face picon face
   Along a similar line, does anyone have example licensing costs for
   things like RTOS's, TCP/IP stacks, etc ? I have no idea what is
   commonly charged on a per unit basis for these things.

The DEC LAT license (Local Area Transport - a DEC proprietary protocol
for connecting terminals to computers) was something like $15,000 for 5
(?)  years, plus $15 per async port for terminal servers up to 64 ports
(above 64 ports you paid the 64-port cost.)  We considered this really
obnoxious.  Keeping the accounting for per-port royalties was/is quite a
pain in the butt.  You'll notice that RTOS vendors that DON'T charge a
per-copy royalty advertise that as a major "feature."  It is.  (This
didn't include code.  IIRC we licensed code from a separate vendor for
about $25k, plus maintenance.  Things became somewhat muddied when the
code supplier became DEC's licensing agent.)

There were three patents for V.42bis compression, from three separate
companies (I hear this has changed now, though.)  IIRC, one was $10k,
and two were $15k.  (This doesn't include code or anything.)

Don't know whether that's useful or not...

BillW

--
http://www.piclist.com hint: PICList Posts must start with ONE topic:
"[PIC]:","[SX]:","[AVR]:" =uP ONLY! "[EE]:","[OT]:" =Other "[BUY]:","[AD]:" =Ads




2000\11\09@040632 by Snail Instruments

flavicon
face
Hi Steve,

thanks for your response. Comments/questions follow.

{Quote hidden}

Unfortunately your idea to deliver preprogrammed protected micros is not
workable - I choosed 16F87X, because they are field upgradeable and made
this an advantage of the design. At the other hand they cannot be secured
at the same time.

>If they want to buy the rights, negotiate based on what you would
>earn if you continued to do it. You'll have to do some math in
>advance and adjust the figures to give you an advantage. For example,
>they will have told you a large potential volume to start with and
>now that number will have dropped.

Question is - do I have to sell the designs? I believe they belong to me
and since there was no agreement on selling them in future, I am not
obligated to do so. Right? If I do so, I am the one, who sets the price.

>On the other hand, if you think
>hard, it probably cost you 20% more than you thought to develop it.

Could you elaborate on this a little bit more? Are you saying, that the
cost of development is easily underestimated? Or did I understand it wrong
way.

>They also probably think that you are making a killing on the markup
>but probably don't think it is as much as it really is.

It may look so, but only on _successful_ designs. Of course noone cares how
much I loosed at the abandoned ones.

>Pick a number
>that meets their expectations but leaves you a bit of room. Also make
>sure you know your absolute bottom line before you start talking.

Thats what I did, but they replied that as far as they know the usual
licence fee is in the order of single percents and never more then 10%. So
these 15% is 'very favourable'. It is hard to argue about usual percentage
for products, which are manufactered at 10-30pc a year with expected life
for 2-3 years.

Josef


=======================================================================
Electronical devices for chemical laboratory, custom electronics design
-----------------------------------------------------------------------
Snail Instruments                      Josef Hanzal, M. S.
Vojanova 615                           phone/fax: +420-311-624433
266 01 Beroun                          e-mail: .....snailKILLspamspam.....iol.cz
Czech Republic                         URL: http://www.vitrum.cz/snail/
GPS: 49deg58'28" North, 14deg 4'35" East
=======================================================================

--
http://www.piclist.com hint: The list server can filter out subtopics
(like ads or off topics) for you. See http://www.piclist.com/#topics




2000\11\09@064032 by mike

flavicon
face
>>If you doubt their integrity, you can offer them the service of
>>providing them with preprogrammed (and secured) micros at cost plus
>>15%. If the volume gets up you can have microchip do it for you and
>>they will ship the parts to the customer and a cheque to you.
>
>Unfortunately your idea to deliver preprogrammed protected micros is not
>workable - I choosed 16F87X, because they are field upgradeable and made
>this an advantage of the design. At the other hand they cannot be secured
>at the same time.
In which case your contract with them should have a provision to allow
you to audit their records relating to that product, even if you never
plan to do this it should make them more likely to be honest. Also
agree a formal method and timescale for payments and recordkeeping -
maybe synchronise it to their bookkeeping periods to make it easier
for them.  In my experience, sloppy administration can be more of a
problem than dishonesty when royalty payments are involved. Also make
it a condition in the contract that you reserve the right to revike
the license and withold technical assistance etc. if payments are
late.
>>If they want to buy the rights, negotiate based on what you would
>>earn if you continued to do it. You'll have to do some math in
>>advance and adjust the figures to give you an advantage. For example,
>>they will have told you a large potential volume to start with and
>>now that number will have dropped.
>
>Question is - do I have to sell the designs? I believe they belong to me
>and since there was no agreement on selling them in future, I am not
>obligated to do so. Right? If I do so, I am the one, who sets the price.
No, but it's one way to avoid all the issues over royalty verification
- it's a gamble - if they sell loads you might get less in the long
run than with a royalty deal, but if not you get a guaranteed sum. Another possibility might be a periodic license, say a fixed sum per
year.
If they are worried about the cost of royalties if production volumes
increase you could have a staged arrangement, e.g. $x for the first 50
units, $x-20% for subsequent ones etc.
>>Pick a number
>>that meets their expectations but leaves you a bit of room. Also make
>>sure you know your absolute bottom line before you start talking.
>
>Thats what I did, but they replied that as far as they know the usual
>licence fee is in the order of single percents and never more then 10%. So
>these 15% is 'very favourable'. It is hard to argue about usual percentage
>for products, which are manufactered at 10-30pc a year with expected life
>for 2-3 years.
Exactly - the royalty is whatever you want it to be, but if you ask
too much they could ask someone else to redesign it for them. What constitutes a 'reasonable' licence depends on what proportion of
the products 'end-value' is attributable to your software, and how
unique or clever your software is.
The other thing to remember is that if they consider that you are
dealing with them reasonably and fairly, you will probably get more
work from them in the long term. This is likely to be worth far more
than a few extra cents on the royalty.
--
http://www.piclist.com hint: The list server can filter out subtopics
(like ads or off topics) for you. See http://www.piclist.com/#topics




2000\11\09@070605 by Simon Nield

flavicon
face
>Exactly - the royalty is whatever you want it to be, but if you ask
>too much they could ask someone else to redesign it for them.

"Bulls feed, bears feed, pigs bleed"

(to do with the stock market and not being greedy... no idea who coined the phrase.)


Regards,
Simon

--
http://www.piclist.com hint: The list server can filter out subtopics
(like ads or off topics) for you. See http://www.piclist.com/#topics




2000\11\09@075247 by Andrew Kunz

flavicon
face
Josef,

Congratulations on successful products.

If they are only selling 15-30 units per year, they should expect to pay a
higher percentage.  Perhaps another alternative would be for you to ask for a
fixed figure per year which corresponds to roughly 25 units royalty for the
expected production lifetime of the product (how long they expect to be building
it).

This would give them an incentive to increase sales (not a bad idea) and allows
them to budget a fixed amount to you, rather than a variable amount.  It gives
you a guaranteed income (accept payment no less than 4 times per year) even if
it is not as much as you _could_ make.  It may allow their accountants to shift
the expense of your payment from one area to another.

Most importantly, it shows them you are reasonable because you are taking less
than the 30 unit royalty and helping them to see you as someone who is willing
to negotiate.

Regarding "control" of the design - forget it.  Let the customer do with it as
he pleases, but in your contract you reserve the right to continue development
on the product w/o encumbrance to them, the right to use the design (hardware
and software) in whole or in part as part of other products you develop, and you
must reserve the right of first refusal to implement any design changes they may
require.  This will encourage them to continue to deal with you in the future,
but does not make them feel you have absolute dominance over them.  It also
gives you the freedom to NOT work for them on an upgrade if you feel it is not
in your best interest - you simply do not exercise your right to work on it.

I've been in the same situation a few times myself.  Some have turned out VERY
good, others very BAD.  It is of utmost importance that you let them know you
are professional in your dealings with them, and whether they are bad to you or
not, you should continue to help them if they do find a problem.  That's the
hardest part.

In the USA, it is important to keep royalty payments as "royalty" for tax
purposes, as this is taxed at a much lower rate.  I don't know if the Czech
Republic has a similar law, but it would be something to check with and include
in your contract if it is to your advantage.

Hope it works well.  Please keep us informed.

Andy

--
http://www.piclist.com hint: The list server can filter out subtopics
(like ads or off topics) for you. See http://www.piclist.com/#topics




2000\11\14@023015 by John

flavicon
face
Hello Josef & PIC.ers,

You don't need to rely on trust if you are uncomfortable with it.

What income can you derive from the products if the manufacturer
fails to sell any?  Seems they would like to take no risks of their own
at all & don't mind how far *your* neck is stuck out...


{Quote hidden}

best regards,   John

e-mail from the desk of John Sanderson, JS Controls.
Snailmail:          PO Box 1887, Boksburg 1460, Rep. of South Africa.
Tel/fax:            Johannesburg  893 4154
Cellphone no:   082 469 0446
email:                jsandspamspam_OUTpixie.co.za
Manufacturer & purveyor of laboratory force testing apparatus, and related
products and services.

--
http://www.piclist.com hint: The list server can filter out subtopics
(like ads or off topics) for you. See http://www.piclist.com/#topics


More... (looser matching)
- Last day of these posts
- In 2000 , 2001 only
- Today
- New search...