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> The bare minimum for the company should be a permanent non-revokable license for the patent. He may want it to be non-sublicensable and non-transferable, whic

> The bare minimum for the company should be a permanent non-revokable license for the patent. He may want it to be non-sublicensable and non-transferable, which are reasonable requests. I think this is the most important thing in your response. Hopefully, OP listens and lifts it with his co-founder.

anonymoustache 7y ago
Thank you! This could be a solution–I'll research this and discuss with my cofounder.
- djweis 7y ago
  This will also put your co-founder in 100% control of whether or not an exit will happen. You won't be able to sell the business if a critical patent doesn't come along with it.
davismwfl 7y ago
This is the correct answer on the patent. I have done this personally, where I held the patent and licensed it to the company and the terms were such that it was a permanent license but upon any non-exit dissolution event the license was cancelled and I maintained ownership. Investors were fine with that because the company had exclusive rights to the patent (but could not sub-license) and in the case the company crashed and burned (which it did) I maintained ownership of the patent and the ability to license it or sell it or whatever. There are some terms you have to watch around new patents generated from the base patent. We had a patent attorney help us get the terms right so that no one got hurt but I was able to maintain ownership over the original patent. In my case, essentially, derivative patents were owned by the company although I had first right of refusal to purchase them upon a dissolution event. Also, we had a term that upon the successful acquisition of the company the company had the right to purchase the patent rights from me at a fair market price not to be less than a specified value. The purchase term in the contract was good and helped investors feel good about it because I didn't make the minimum purchase value crazy, it was a very fair term and nothing insane. If that minimum value was out of touch with reality this could be considered a poison pill to any acquisition, which is the last thing you want to do to a company. To be clear, I think the OP's friend thinking his patent is worth >$100M is crazy talk at this point, and he needs to be more realistic with the true value. I've seen many people make these kinds of claims and generally that is a major warning sign IMO. In the best case, he could just be a young person not knowing how to value things, or he could be someone who doesn't understand how business & patents work. Just having a patent granted doesn't make it valid, defensible or valuable, many patents exist that are worthless and would crumble under the slightest challenge. IMO, the OP is correct to be nervous about this situation but it should be fairly easy to resolve if his friend isn't unreasonable. The inventor just needs to provide a full license to the company along these lines.

anonymoustache 7y ago

Thank you! This could be a solution–I'll research this and discuss with my cofounder.

djweis 7y ago
This will also put your co-founder in 100% control of whether or not an exit will happen. You won't be able to sell the business if a critical patent doesn't come along with it.

davismwfl 7y ago

This is the correct answer on the patent. I have done this personally, where I held the patent and licensed it to the company and the terms were such that it was a permanent license but upon any non-exit dissolution event the license was cancelled and I maintained ownership. Investors were fine with that because the company had exclusive rights to the patent (but could not sub-license) and in the case the company crashed and burned (which it did) I maintained ownership of the patent and the ability to license it or sell it or whatever. There are some terms you have to watch around new patents generated from the base patent. We had a patent attorney help us get the terms right so that no one got hurt but I was able to maintain ownership over the original patent. In my case, essentially, derivative patents were owned by the company although I had first right of refusal to purchase them upon a dissolution event. Also, we had a term that upon the successful acquisition of the company the company had the right to purchase the patent rights from me at a fair market price not to be less than a specified value. The purchase term in the contract was good and helped investors feel good about it because I didn't make the minimum purchase value crazy, it was a very fair term and nothing insane. If that minimum value was out of touch with reality this could be considered a poison pill to any acquisition, which is the last thing you want to do to a company. To be clear, I think the OP's friend thinking his patent is worth >$100M is crazy talk at this point, and he needs to be more realistic with the true value. I've seen many people make these kinds of claims and generally that is a major warning sign IMO. In the best case, he could just be a young person not knowing how to value things, or he could be someone who doesn't understand how business & patents work. Just having a patent granted doesn't make it valid, defensible or valuable, many patents exist that are worthless and would crumble under the slightest challenge. IMO, the OP is correct to be nervous about this situation but it should be fairly easy to resolve if his friend isn't unreasonable. The inventor just needs to provide a full license to the company along these lines.