In this presentation, FMC’s Gal Smolar discusses an introduction to the legal aspects of customer acquisitions for startups. The presentation focuses on customer acquisitions, acquisition contracts, trends, right to data, restrictive covenants, exclusivity, joint development and customer acquisition tips. Gal Smolar is a partner in FMC’s Vancouver office. Gal is a Practitioner of Foreign Law and brings to Fraser Milner Casgrain his broad international experience in commercial and corporate law and in particular in the field of technology.

1. AN INTRODUCTION TO LEGAL ASPECTS OF
CUSTOMER ACQUISITIONS FOR STARTUPS
The presentation contains examples of the kinds of issues companies looking at entering into
agreements in connection with new customers could face. If you are faced with one of these
issues, please retain professional assistance as each situation is unique.
Presented by: Gal Smolar
Twitter: @FMC_Technology
December 17, 2012
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2. CUSTOMER ACQUISITIONS
• The processes and procedures used in acquiring the business
of new customers.
• Who are your customers? What legal terms should govern
your relationship with them?
– Individual Online Users / Terms of Use and Privacy
– Agents / Resellers / Distributors/ VARs /JVs
• What challenges are you faced with each type of customer?
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3. TYPICAL ACQUISITION CONTRACTS
• General Terms and Conditions (Web)
– Typical online terms of use accepted by continuing use of site / service
• Subscription Agreement (e.g. SaaS)
– Based on providing access to proprietary software hosted by a third
party
• License Agreement (Software)
– Traditional software license terms
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4. TRENDS
Right to Data
 Data as an IP asset
 Restrictive Covenants
On the path to a M&A transaction
 Non Compete / Exclusivity
What does this mean to your company?
 Joint Developments
Who owns what?
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5. RIGHTS TO DATA
• End User:
"any individual or legal entity who has been registered via the Platform
either through: (X) an unique API provided to Subscriber, or (Y)
registration through Subscriber’s Web Site“
The term “Subscriber” refers to the user of the SaaS platform.
• End User Data:
"any data of any type which is provided by an End User in connection
with the use of the Platform"
• Rights to End User Data:
"Subscriber shall retain all right, title and interest (including any and all
intellectual property rights) in and to the End User Data, and hereby
grants to Vendor an indefinite, non-exclusive, worldwide, royalty-free
right to use, copy, store, transmit, modify, create derivative works of
and display the End User Data as required by Vendor from time to time
in connection with the Platform."
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6. RIGHTS TO DATA (Cont.)
• No Rights:
"Vendor shall, to the extent consistent with and in accordance with
applicable Privacy Laws in the applicable territory, collect and internally
utilize the End User Data solely to meet its obligations under this
Agreement and for no other purpose."
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7. RESTRICTIVE COVENANTS
• Participation Right:
“Licensee has the right to purchase, acquire or otherwise participate in
X% of all or any part of any New Offering that Vendor or any of its
subsidiaries or affiliates or any of their respective successors may
consummate from time to time during the Term of this Agreement."
• Buy Out:
"If at any time during the Term, Vendor receives a bona fide offer from
a prospective purchaser (“Prospective Purchaser”) to purchase any or
all of its assets (“Subject Assets”), within seventy-two (72) hours of
such receipt, Vendor shall provide a written notice to Licensee of such
bona fide offer (the “Offer Notice”). Licensee shall have fifteen (15)
Business Days after receipt of the Offer Notice (“Exclusivity Period”) to
deliver to Vendor a term sheet proposal for the acquisition of the
Subject Assets. Vendor shall refrain from further negotiations with the
Prospective Purchaser during the Exclusivity Period."
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8. RESTRICTIVE COVENANTS (Cont.)
• Rights in New Technologies / Right of First Negotiation (ROFN):
"If Licensor develops a New Product, then during the period commencing from the Effective
Date and ending on [ date ] ("ROFN Period"), Licensor shall give written notice to Licensee
which shall include a description of the New Product and Licensor shall not during the period
commencing from the Effective Date and ending upon the End of ROFN Period engage with
any third parties regarding the opportunity to evaluate, license or acquire the New Product
unless Licensee fails to timely deliver a Right of First Negotiation Notice. If Licensee shall within
twenty one (21) days of such notice deliver a written notice (the “Right of First Negotiation
Notice”) to Licensor that Licensee desires to obtain certain rights to the New Products, then
Licensor and Licensee shall negotiate exclusively and in good faith to effect such license for a
sixty (60) day period following the Right of First Negotiation Notice."
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9. NON COMPETE / EXCLUSIVITY
• Be aware of any restrictions on your ability to compete or offer
services or products to third parties.
• Look out for Confidentiality provisions as they may suggest a
non-compete obligation (NDA, MNDA, CDA, etc.)
• Exclusivity – Territory, Products, Markets.
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10. JOINT DEVELOPMENT
• Information Sharing: Customer Ownership:
"Licensor will, during the term of this Agreement, promptly disclose and describe to Licensee all Technology and
Intellectual Property Rights developed, conceived, made, and reduced to practice by Licensor related to the Technology,
including all new Inventions and all improvements related thereto."
• Splitting Ownership:
"The parties may from time to time engage in joint development of new products for [ omitted ] (the “Joint Development
Products”) pursuant to a written and executed joint development protocol which shall, amongst others, define the Joint
Development Product and each of the party’s responsibilities (the “Joint Development Protocol”). Developments jointly
made by Licensor and Licensee, as proven by competent evidence and the Joint Development Protocol, that are related
to: (x) the [ omitted ] of any Joint Development Products shall be owned solely by Licensor; provided, however, that
Licensor grants Licensee a non-exclusive royalty-free license to make, use, sell and/or import the Joint Development
Products; and (y) the [ omitted ] developed for dispensing Joint Development Products shall be owned solely by Licensee;
provided, however, that Licensee grants Licensor a non-exclusive royalty-free license to make, use, sell and/or import
such joint development only with respect to dispensing Joint Development Products."
• Customer Ownership:
"The Parties further agree that Licensee shall solely own and have exclusive worldwide right, title and interest in and to: (1)
all Updates created by Licensor and (2) any Extensions, Content or modifications to the Tool that are jointly developed by
Licensor and Licensee, and to all Intellectual Property Rights related thereto"
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11. Customer Acquisition - Tips
• Strategy
– What to license? Should we own the data?
• Relationship
– Pre-contractual matters
• Expectations
– Clarity on terms and conditions
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12. THANK YOU!
Gal Smolar
20th Floor, 250 Howe Street
Vancouver, British Columbia V6C 3R8
Direct Line: (604) 622-5161
Email: Gal.Smolar@fmc-law.com
Twitter: @FMC_Technology