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Input on sale of webstore that has licensed a name

     
10:42 pm on Sep 29, 2010 (gmt 0)

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Let's say a webmaster (Jim) is in negotiations with an author (Bob) to license his book name "Example123" and use it for a web store. Bob would have no active involvement in the store. They have agreed to a royalty %, but are stuck on the terms if Jim sells the store to someone else. What are the typical arrangements in this scenario?

One thing about which Bob is rightfully concerned: the store may sell to a competitor that might shut the store down, and then Bob will lose the royalty income. Thank you in advance for your input!
11:09 pm on Sept 29, 2010 (gmt 0)

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If I were Bob, I would probably make the license non-transferable. So if someone wanted to buy the store, the new owner would have to renegotiate with me for continuing to license the name. That would be less favorable for Jim, so I suspect Jim would want to decrease the royalty amount paid for Jim because of that.

Actually, if I were Bob, I would more likely want to register the domain name myself to keep control over it. So Jim could sell the site, but the domain would still belong to me (again, the new owner could negotiate a similar contract for using the domain name).
7:03 am on Sept 30, 2010 (gmt 0)

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This can vary according to the jurisdiction. The licence should define which jurisdiction will apply in the case of dispute.

Of course if Jim signs on behalf of an incorporated business then a change of ownership of the company will not affect the licence.
7:51 am on Sept 30, 2010 (gmt 0)

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@LifeinAsia: Making the license non-transferable and requiring renegotiation would make it too unfavorable for Jim. Let's say, as I wrote before, "the store may sell to a competitor that might shut the store down, and then Bob will lose the royalty income". Bob will probably anticipate that, and demand an increase of the royalty to, say, 20x, preventing the sale. Jim is SOL...no sale.

How about this simple, opposite solution: Jim and Bob agree that the license/royalty % shall survive and be preserved after any sale.

@piatkow: sorry not following you on the second para. Please explain.
11:10 am on Sept 30, 2010 (gmt 0)

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sorry not following you on the second para. Please explain.

A limited company retains its identity regardless of any change of ownership. If Jim's business is incorporated then selling it to Joe does not affect the licence.

A problem of course is that if somebody else acquires the license they can simply stop publishing and cut off the royalties. Not likely? I know of one businessman sitting on a large back catalogue of recordings.

Another thing in the licence is to ensure that you are only licensing one feature and not cutting off your right to publish in another format. Or giving the licensee the right to publish in other formats without paying a royalty. Hire a lawyer!

EDIT
I have just realised that I have been switching between English and American spellings in that post. I really can't be bothered to go back and correct that.
/EDIT
3:41 pm on Sept 30, 2010 (gmt 0)

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Jim and Bob agree that the license/royalty % shall survive and be preserved after any sale.

But with that agreement, Jim can still sell to someone who shuts down the site. The license/royalty % still survives, but 20% of $0 is $0.
8:30 pm on Sept 30, 2010 (gmt 0)

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You could add a clause stating that if royalty payment falls below a particular threshold for X months in a row, the license stands terminated.

I am not a lawyer and can't say whether such clause would stand the law of the land.
 

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