Reply to: Selling IP to USA

[darrylmg]

These are 3 day courses so unfortunately not really an option... I find even short sessions on webex a painful experience so not something I would even attempt with longer training courses. It turns out they want to use this without actually paying me anything for it. They have their own training department and want to use the material themselves so they don't have to spend the time and effort developing their own.

I'm struggling with how to respond to this as their negotiations are starting a lot lower than I expected... Clearly it would be a flawed business model to give it away.

What if you license it to the uk subsidiary?
They pay you a yearly license to use the material, which includes using it in the US in the license agreement.
They would not own it or the copyright.

[TheFaQQer]

It turns out they want to use this without actually paying me anything for it. They have their own training department and want to use the material themselves so they don't have to spend the time and effort developing their own.

I'm struggling with how to respond to this as their negotiations are starting a lot lower than I expected... Clearly it would be a flawed business model to give it away.

A simple two word answer would be my starting point.

If they think they can do it better and cheaper than your offering, then they should be invited to do that. Why would you give it away when you can sell it?

[sartois]

On another note, is it possible you could devise an electronic delivery method?
Like a webex?
You wouldn't need to be physically present then.

These are 3 day courses so unfortunately not really an option... I find even short sessions on webex a painful experience so not something I would even attempt with longer training courses. It turns out they want to use this without actually paying me anything for it. They have their own training department and want to use the material themselves so they don't have to spend the time and effort developing their own.

I'm struggling with how to respond to this as their negotiations are starting a lot lower than I expected... Clearly it would be a flawed business model to give it away.

[darrylmg]

On another note, is it possible you could devise an electronic delivery method?
Like a webex?
You wouldn't need to be physically present then.

[darrylmg]

Don't forget to account for the vat on that.
No good if you're on the FRS and close to the limit.

[malvolio]

Selling price is a function of (the cost to develop it at hours spent) x (twice your best rate - you wrote it in your spare time remember so a double whammy on costs) + (the cost to deliver the training x however many sessions you will deliver) x (how long the package will remain relevant to the market in years) x (how many other organisations would potentially take the same training).

Calculate that, working each new potential organisation at the same as your current sales price.

Add 100%. Then add 40% profit margin and inflate a 5% a year for the duration.

That's your starting point.

[sal]

Well I have no chance of either protecting it or controlling it should it venture to the US... so selling it is the only option really I would think. I like your suggestion of 4x current revenue... which feels like way too much which means it's probably the right price!

You are the sole supplier of said product. Which have a proven track record and the customer was happy with the current price per trainee. You are selling them the opportunity to train infinite number of employees in the future.

If they think the price is too high, they will negotiate to lower it. If they think the price is too low, they will not negotiate to increase it...

[sartois]

Just calculate the amount you already received from the UK training sessions, multiply it by 4 and ask them for that amount. You will lose the potential future revenue, but you will get a nice lump sum.

Trying to hold on to the materials, and demand a royalty for each person trained using them is probably the best scenario, but it all depends on your ability to control and enforce your rights on such small scale overseas.

Well I have no chance of either protecting it or controlling it should it venture to the US... so selling it is the only option really I would think. I like your suggestion of 4x current revenue... which feels like way too much which means it's probably the right price!

[sal]

Just calculate the amount you already received from the UK training sessions, multiply it by 4 and ask them for that amount. You will lose the potential future revenue, but you will get a nice lump sum.

Trying to hold on to the materials, and demand a royalty for each person trained using them is probably the best scenario, but it all depends on your ability to control and enforce your rights on such small scale overseas.

[malvolio]

Thanks... I am feeling very out of my depth with this.

On one hand the time and effort I put into developing it has paid for itself now. If the demand dried up and they never booked another one then I have still done very well out of the initial time investment. On the other hand if I was to be able to sell it in the US then it would be very lucrative as the number of US employees is 4 times the amount in the UK, which would mean 4 times the profit. Because it is so niche and my marketing budget is zero I haven't been able to sell it to any other companies in the UK of a similar nature.

I guess sub-contracting to the USA would be an even bigger, more complicated minefield.

A corporate lawyer is probably out of the question... unless there is a £100 a month option similar to the accountant!

Thanks for all the feedback, certainly something to chew over and read up on. I am so wary about giving them all the materials as once that happens I lose control of it. At the moment I get manuals printed in advance, protected PDFs, protected VMs and do not distribute the trainer materials. If I hand it over by selling then I lose whatever control I have and would have no way of knowing how many times it was used or what they did with it. This would also make me a non essential component of delivery in both the US and the UK as there would be nothing to stop them from finding someone cheaper to deliver (an internal employee for example).

In many ways I wish they hadn't asked. I don't want to say no as the relationship I have with them is excellent... and for the reasons above I don't want to say yes either...

Alternatively, you could always sell them the whole business as a going concern. A few million dollars plus equity shares ought to do it if it has UK and US market potential...

[sartois]

Precisely. You are selling use of the material for a limited purpose only, not the material itself. Also, be very clear which country's legislation you are using and what penalties are applicable for non-compliance.

I suggest you need the help of a corporate lawyer...

Thanks... I am feeling very out of my depth with this.

On one hand the time and effort I put into developing it has paid for itself now. If the demand dried up and they never booked another one then I have still done very well out of the initial time investment. On the other hand if I was to be able to sell it in the US then it would be very lucrative as the number of US employees is 4 times the amount in the UK, which would mean 4 times the profit. Because it is so niche and my marketing budget is zero I haven't been able to sell it to any other companies in the UK of a similar nature.

I guess sub-contracting to the USA would be an even bigger, more complicated minefield.

A corporate lawyer is probably out of the question... unless there is a £100 a month option similar to the accountant!

Thanks for all the feedback, certainly something to chew over and read up on. I am so wary about giving them all the materials as once that happens I lose control of it. At the moment I get manuals printed in advance, protected PDFs, protected VMs and do not distribute the trainer materials. If I hand it over by selling then I lose whatever control I have and would have no way of knowing how many times it was used or what they did with it. This would also make me a non essential component of delivery in both the US and the UK as there would be nothing to stop them from finding someone cheaper to deliver (an internal employee for example).

In many ways I wish they hadn't asked. I don't want to say no as the relationship I have with them is excellent... and for the reasons above I don't want to say yes either...

[tractor]

..

A visa is needed for any "productive" work, broadly defined as anything other than attending meetings, giving presentations etc.

No need for any IRS forms - this is a myth. Unless your company is a "US person" or has "US source income", it is outside of the scope of any IRS reporting requirements. In most cases, neither of those apply (note that, in simple terms, US source income relates to the origin of the work, i.e. outside the US, and not the payment).

Thanks, that helps and clears up at least one gap in my knowledge!

[jamesbrown]

Unless it has changed, you used to need a visa and a Federal Tax ID which was a nightmare to obtain. I was up on it before, as a colleague used to trade regularly and he had to jump through so many hoops that he began to wonder whether it was worth it - it actually wasn't in the end.

That was why I posted link, because it should be the most up to date info.

A visa is needed for any "productive" work, broadly defined as anything other than attending meetings, giving presentations etc.

No need for any IRS forms or tax ID - this is a myth (propagated by companies that don't understand the reporting requirements). Unless your company is a "US person" or has "US source income", it is outside of the scope of any IRS reporting requirements. In most cases, neither of those apply (note that, in simple terms, US source income relates to the origin of the work, i.e. outside the US, and not the payment).

[tractor]

...

Agreed on the UK subsidiary, but a nightmare in what sense? I do it all the time, although not selling IP I admit... insurance is a bit of a hassle, but most clients are pragmatic on contractual terms etc.

Unless it has changed, you used to need a visa and a Federal Tax ID which was a nightmare to obtain. I was up on it before, as a colleague used to trade regularly and he had to jump through so many hoops that he began to wonder whether it was worth it - it actually wasn't in the end.

That was why I posted link, because it should be the most up to date info.

[jamesbrown]

Also, make sure that you are selling a non-exclusive licence to use the materials to train their own staff, no other rights included.

You don't want to sell them the training materials and then have them sell the training course onwards, without giving you some of the money.

Yes, the OP would benefit from professional input in negotiating the T&C.