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Background -- tiny engineering company, doing a mix of consulting and contract jobs, and sometimes providing custom software tools. Customers are typically large companies with managers who are willing to pay for specialized expertise that their staff lacks. Normally we deliver either a report (and no code), or we deliver compiled code and retain ownership of our work.

Problem -- a new customer wants us to develop custom algorithms and code them. The customer wants to own or license the source for their internal use (not for resale). From the customer's perspective, this makes a lot of sense. With source they can continue development using our code as a working example--so we will also be teaching their less-experienced employees (and of course those employees may well leave and become competitors to us in the future). What might take us a couple of months would probably take their young employees a year or more, if they don't fail outright.

In the limiting case, we can offer to "work for hire" which has specific legal meaning in USA, equivalent to being covered by a traditional employee contract where the employer owns all the creative output of the employee, see: https://en.wikipedia.org/wiki/Work_for_hire [wikipedia.org]

A middle option is an exclusive--we don't do identical work for others. We can also quote non-exclusive which in this context means that once we have created the algorithms & code we could then license it to others (perhaps with some limitations to avoid competitors to our customer).

The Question is about setting the price(s) -- the more ownership they have, the higher price they expect to pay. But what are the multipliers? Compared to our normal projects where we keep the source, what is the premium for licensing the source to the customer?

If they want us to "work-for-hire", is that worth double what we would charge them if we retained ownership and could resell the code to a few others?

Legal -- ?? If possible, I would like to negotiate this contract without lawyers on either side. The customer is a large company, with internal legal staff (who have not reared their heads yet)...and we are tiny with none. Any pointers along these lines most welcome.

A footnote on our Market -- unlike shrink-wrapped software or apps, this software has a *very* limited market. Based on past experience, we might expect to license a few extra copies of this work over a several year period. Even at a very low (or free) price point, there just aren't that many people interested in this problem--except the few cases where it is critical to their corporate process.

Original Submission