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'[PIC]:Royalties'
2003\05\30@222025 by Jinx

face picon face
Hope this isn't a "how long is a piece of string ?" question but

What arrangements have people made wrt royalties from
s/w embedded in products that they developed ? I've heard
the figure of ~3% bandied around, but what does this relate
to and/or how is applied - nett, gross, other ?

If a project is developed for a client for a certain cost, eg a
number of hours at an hourly rate, would you perhaps reduce
the hourly rate (perhaps to encourage the client to use one's
services) and factor in a royalty deal or some other piece of
the product to recoup in the long run ? Obviously people's
drive and ability to get a product to market is a big variable
that, if one chose the long road, could lead to smiles on dials.
Or, more likely, not

Simply relinquishing the s/w on job completion and moving on
to the next seems a little wussy for a volume product

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2003\05\31@070559 by Bob Axtell

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At 02:21 PM 5/31/2003 +1200, you wrote:
>Hope this isn't a "how long is a piece of string ?" question but
>
>What arrangements have people made wrt royalties from
>s/w embedded in products that they developed ? I've heard
>the figure of ~3% bandied around, but what does this relate
>to and/or how is applied - nett, gross, other ?

They have, and can. The idea is that the royalty is really your
continuing support of their product in the future. So they will
like the idea

>If a project is developed for a client for a certain cost, eg a
>number of hours at an hourly rate, would you perhaps reduce
>the hourly rate (perhaps to encourage the client to use one's
>services) and factor in a royalty deal or some other piece of
>the product to recoup in the long run ? Obviously people's
>drive and ability to get a product to market is a big variable
>that, if one chose the long road, could lead to smiles on dials.
>Or, more likely, not

The problem is, are they trustworthy? will they pay your royalty
correctly without a fight? Are they good businessmen, or will
they smoke up the profits?

>Simply relinquishing the s/w on job completion and moving on
>to the next seems a little wussy for a volume product

Here's something that DOES work. Develop the firmware at
NO direct cost to them. Then, sell them the PIC already
programmed with the security bit blown, at a rate that will
allow you to recover your money. I'd suggest that the first
100 would cost them $30 each, then $15 thereafter. They
don't have ANY control over the code, and they can't steal
it.

Flames, anybody?

--Bob Axtell




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2003\05\31@074357 by gtyler

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Wish I could! (charge that much). I charge about $25 an hour, what do people
in other parts of the world charge?

{Original Message removed}

2003\05\31@075703 by Bob Axtell

face picon face
In AZ, $70/hr to $100/hr if you have an office. Never less than $60/hr US.

--Bob

At 01:44 PM 5/31/2003 +0200, you wrote:
>Wish I could! (charge that much). I charge about $25 an hour, what do people
>in other parts of the world charge?
>
>{Original Message removed}

2003\05\31@083029 by Jack Smith

picon face
Excellent idea.

However, expect some resistance as selling pre-programmed chips makes the
manufacturer dependent upon a sole supplier and it shifts the balance of
power sharply towards the developer, a situation most manufacturers are less
than thrilled with.

A common solution is a code escrow deal, whereby the developer places a copy
of the commented source code and other documentation with a third party
escrow agent. The manufacturer has access to the code under certain
conditions specified in the contract, e.g., death of developer, bankruptcy,
inability to adequately support, etc.

The contract negotiations center around the conditions under which the
escrow is broken. The escrow agent will almost always want a court order
before turning the source code over to the manufacturer, for the escrow
agent's protection.  If you do a Google search for "code escrow" I suspect
you will find quite a few sample code escrow agreements.

The code escrow solution is far from a perfect answer, as it simply
postpones an argument or lawsuit. But I've seen it work in contracts I've
negotiated where neither side fully trusted the other.  It lets a deal get
started and allows trust to be built up.

Jack


{Original Message removed}

2003\05\31@110937 by Mike Harrison

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On Sat, 31 May 2003 08:00:04 -0400, you wrote:

{Quote hidden}

Another possibility is to find a distributor that offers a device programming service, or a
third-party programmer. You set up a deal whereby the programming house holds the code. The mfr
places an order for programmed parts with them at a price that includes your royalty, which the
programmer then sends to you. I've not heard of anyone doing this but it seems to be a reasonable
solution - you don't have to program chips - the disti handles everything under their QA program,
and the mfr is ensured a supply if you're on holiday, fall under a bus etc.

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2003\05\31@145319 by Jack Smith

picon face
a
Another possibility is to find a distributor that offers a device
programming service, or a
third-party programmer. You set up a deal whereby the programming house
holds the code. The mfr
places an order for programmed parts with them at a price that includes your
royalty, which the
programmer then sends to you. I've not heard of anyone doing this but it
seems to be a reasonable
solution - you don't have to program chips - the disti handles everything
under their QA program,
and the mfr is ensured a supply if you're on holiday, fall under a bus etc.



That's a good solution that addresses a significant part of the problem. It
doesn't fix the support issue, as that requires the commented source code.
But, for many embedded systems code support isn't that important once the
original work is done and the design is verified. The primary concern there
is additional copies, on a reliable basis, of the  final design, without
hold-up games. (I've decided not to deliver any more programmed chips unless
the price is increased, etc.  While the purchaser may be able to enforce a
contractual right to the agreed price, the time pressures inherent in
litigation work more against the purchaser, who has product to ship, perhaps
to meet his own contractual requirements.)

Most of the contracts I've help negotiate have had major code support,
updating and customization requirements, so it's hard to get away from
needing a "warm and fuzzy" feeling about your code supplier and his
longevity. That's where the one-man software company is at a significant
disadvantage in the view of many corporate purchasers.

Jack


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2003\05\31@165832 by Bob Barr

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On Sat, 31 May 2003 14:21:01 +1200, Jinx <@spam@joecolquittKILLspamspamCLEAR.NET.NZ>
wrote:

>Hope this isn't a "how long is a piece of string ?" question but
>
>What arrangements have people made wrt royalties from
>s/w embedded in products that they developed ? I've heard
>the figure of ~3% bandied around, but what does this relate
>to and/or how is applied - nett, gross, other ?
>

The gross is the gross; the net is whatever the accountant wants it to
be. :=)

I'd recommend basing royalty negotiations on the gross. It's much more
straightforward. Do you really want the VP's new Porsche coming out of
your royalties? If it's bought as a company car, it comes off the net
(and thus your royalties). Every company employee can get one and it
won't affect the gross (nor your royalties) at all.

Exact royalty percentages probably vary quite a bit. A few things to
consider: the effort you'll be expending,  the contribution your
software makes to the product's success, and any  ongoing support
requirements.

I'd also recommend having a contract provision to be able to
independently verify the company's sales figures in case of a
disagreement.


Regards, Bob

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2003\05\31@183402 by Matt Pobursky

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You can get screwed on the gross as well. All the company has to do is drop the price of the product (gross) and make it up with another attached "service".

I have a good friend who got bit with this scam. He designed a multi-
user OS for an OEM, for royalties based on gross sales $. After the systems began to sell well, the OEM gave away the OS and just charged more for the hardware and software maintenance. If you go the gross %
route, I'd make sure you have some sort of minimum value (per
unit) clause so they can't get you this way.

I think in 25 years I've seen every way an engineer can get screwed by royalties.

Matt Pobursky
Maximum Performance Systems
On Sat, 31 May 2003 13:58:02 -0700, Bob Barr wrote:
{Quote hidden}

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2003\05\31@210310 by William Chops Westfield

face picon face
   Another possibility is to find a distributor that offers a device
   programming service, or a third-party programmer. You set up a deal
   whereby the programming house holds the code. The mfr places an order
   for programmed parts with them at a price that includes your royalty,
   which the programmer then sends to you.

I'd love to hear if anyone finds such a service.  It seems pretty ideal
for a number of reasons, but I've never heard of a service that can
break out a royalty and send that profit elsewhere...  It potentially
solves the "source code escrow" issue as well...  (OTOH, I doubt whether
anyone wants to pay this third party as much as the service would cost
to provide.)


Speaking from the other side of things, having to track and pay per-box
(or worse) royalties is a real PITA for a large company selling a
diverse product set, with each device possibly containing multiple
pieces of licensed software.  DEC charges (used to charge) a per-port
royalty to companies who had licensed their LAT protocol, which doesn't
sound bad until you realize that we were selling products that were
expandable, and had (for instance) no way of telling whether the 16 port
expansion card was going into a box that was supposed to contain LAT or
not.  For that matter, we really didn't want to sell a separate version
of software (it would have ended up being different versions) containing
LAT just to enforce DECs royalty policy...  It was awful.  We did our
best and sent DEC money periodicly, and they never seemed to get pissed
off at us, but...  (It especially hurt because most of our competitors
hadn't bother to license the protocol from DEC at all...)

BillW

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2003\05\31@210621 by Olin Lathrop

face picon face
> What arrangements have people made wrt royalties from
> s/w embedded in products that they developed ? I've heard
> the figure of ~3% bandied around, but what does this relate
> to and/or how is applied - nett, gross, other ?

There are no rules as long as you and the manufacturer agree.  I've
occasionally been offered royalties in return for lowering my price, but so
far have turned them all down.  I guess that is because if a solid company
has a product they believe in, they don't want anyone attaching royalties to
their long term revenue stream.  So far in hindsight I've gotten the better
deal in each case by insisting to be paid up front.

> If a project is developed for a client for a certain cost, eg a
> number of hours at an hourly rate, would you perhaps reduce
> the hourly rate (perhaps to encourage the client to use one's
> services)

Never do that unless you're really really desparate.

> Simply relinquishing the s/w on job completion and moving on
> to the next seems a little wussy for a volume product

Maybe, but you can't decide that after the fact.  If someone paid you for
code, they have a right to use that code royalty free unless other
arrangements were made ahead of time.  You have to take some up front risk
if you want a chance at payback well beyond your standard rate for hours
spent.

Look at it from the manufacturer's point of view.  Why should they pay you
$100,000 for example long term for $10,000 work.  Usually the reason why is
that they don't have the $10,000 right now.  That's usually a bad sign that
nobody else thinks their gizmo will have any success, or that they are too
gready to let others help fund them.  Either way, you want to take the money
now.  There probably won't be a later.


*****************************************************************
Embed Inc, embedded system specialists in Littleton Massachusetts
(978) 742-9014, http://www.embedinc.com

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2003\05\31@211433 by Olin Lathrop

face picon face
> Simply relinquishing the s/w on job completion and moving on
> to the next seems a little wussy for a volume product

Something I forgot to point out last post.  The best outcome is when the
customer's product is successful and they make a lot of money from it.  With
such success, guess who they're going to call for the next project?  Except
this time it's a done deal and they won't try to quibble about the price.
They'll go straight to you, and you won't have to waste time writing
proposals and the like without getting paid for the time.  There's nothing
wussy about establishing a solid customer that keeps coming back for more.


*****************************************************************
Embed Inc, embedded system specialists in Littleton Massachusetts
(978) 742-9014, http://www.embedinc.com

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2003\05\31@211841 by Olin Lathrop

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> Wish I could! (charge that much). I charge about $25 an hour, what do
> people in other parts of the world charge?

We charge $110/hour for engineering work, less for technician, purchasing,
etc.  A few months ago we took a job for $85/hour because things were really
slow, but things have definitely picked up since then.


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(978) 742-9014, http://www.embedinc.com

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2003\05\31@212502 by James Caska

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Maybe microchip should offer this service.. Especially now they are
heading into the online e-commerce experience.

I for one would use this service..

James Caska
http://www.muvium.com
uVM - 'Java Bred for Embedded'



{Original Message removed}

2003\05\31@212710 by Bob Axtell

face picon face
I've been in this design game for a long time. The thought of royalties is
appealing
but probably not realistic for an electronic product.

Unlike a song, which is recorded ONCE and reproduced repeatedly without
being changed for 10-20 years, an electronic product is a constantly
evolving thing, like a young child growing up. Electronic products have a
short lifetime, and even then there will be constant revisions.

I still think the best way to get paid royalties is to supply the chips,
security link blown, at a price negotiated. Then, place the sources of all
revisions in a lawyer's safe, who, in the event of your untimely demise,
will sell the sources at a nominal price (or free).
But, Lord, I hate to deal with lawyers...

--Bob Axtell



At 06:02 PM 5/31/2003 -0700, you wrote:
{Quote hidden}

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2003\05\31@214640 by James Caska

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I wonder what the real risk of the engineers demise is compared with the
demise of the product making the $$ the opimistic manufacturer hopes
for.. Hmmm. Would be interesting to do the statistics on this one..

James Caska
http://www.muvium.com
uVM - 'Java Bred for Embedded'



{Original Message removed}


'[PIC]:Royalties'
2003\06\02@054540 by Alan B. Pearce
face picon face
>    Another possibility is to find a distributor that offers a device
>    programming service, or a third-party programmer. You set up a deal
>    whereby the programming house holds the code. The mfr places an order
>    for programmed parts with them at a price that includes your royalty,
>    which the programmer then sends to you.
>
>I'd love to hear if anyone finds such a service.  It seems pretty ideal
>for a number of reasons, but I've never heard of a service that can
>break out a royalty and send that profit elsewhere...  It potentially
>solves the "source code escrow" issue as well...  (OTOH, I doubt whether
>anyone wants to pay this third party as much as the service would cost
>to provide.)

Can Microchip provide this service? The ideal way would be that they supply
programmed chips direct to customers that you specify have a right to
purchase your code, and pay you the royalties?

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2003\06\02@101755 by Micro Eng

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damn......and I thought I was doing well at charge $40/hr.....


>From: Bob Axtell <RemoveMEengineerspam_OUTspamKILLspamCOTSE.NET>
>Reply-To: pic microcontroller discussion list <RemoveMEPICLISTTakeThisOuTspamspamMITVMA.MIT.EDU>
>To: EraseMEPICLISTspamspamspamBeGoneMITVMA.MIT.EDU
>Subject: Re: [PIC]:Royalties
>Date: Sat, 31 May 2003 04:55:12 -0700
>
>In AZ, $70/hr to $100/hr if you have an office. Never less than $60/hr US.
>
>--Bob
>
>At 01:44 PM 5/31/2003 +0200, you wrote:
>>Wish I could! (charge that much). I charge about $25 an hour, what do
>>people
>>in other parts of the world charge?
>>
>>{Original Message removed}

2003\06\02@101807 by Micro Eng

picon face
Arrow does this....they would supply pre-programmed parts to manufacturing.
Now of course it was code developed inhouse, so we owned it and they
supplied the raw parts as well.  But I would imagine they could work a deal
like this.


{Quote hidden}

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2003\06\02@102057 by Micro Eng

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Perfectly said Olin.  I strive for the relationship, build that up, and let
them know they have a good engineering source they can draw on.  My next
major project is based exactly on that.



{Quote hidden}

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2003\06\02@104112 by Tim McDonough

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>Here's something that DOES work. Develop the firmware at NO
>direct cost to them. Then, sell them the PIC already programmed
>with the security bit blown, at a rate that will allow you to
>recover your money. I'd suggest that the first 100 would cost
>them $30 each, then $15 thereafter. They don't have ANY control
>over the code, and they can't steal it.
>
>Flames, anybody?
>
>--Bob Axtell

Okay, as long as you're sure they will make it to production and you won't
end up doing a bunch of work for a dozen chips.

I have actually done this once and it worked well. My variation was that they
had to "pre-purchase" some processors (100 in my case) when #1 was delivered.

Tim

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