>>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.=20
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.=20
>>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.=20
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.=20

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.=20

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