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Insisting on the right to consent to an assignment might be shooting yourself in the foot, sales-wise

In a prior life, I was general counsel of a software vendor. Once we were negotiating an enterprise license agreement with a big customer.

The customer wanted the right, if it ever sold off a division or a subsidiary, to peel off a suitable number of user licenses for the software (previously paid for) and assign the licenses to the buyer as part of the asset package.

I assumed our sales people wouldn’t want to agree to this. I figured they’d insist on our having the right to consent to any assignment at all, with the price of consent being a transfer fee.

I was wrong.

One of our sales execs patiently explained that, if the customer were ever to sell off a division or subsidiary, and wanted to include some of its paid-for licenses in the transaction, the last thing we’d want to do is to stand in the way demanding a fee. All that would do, he said, is encourage the sold-off division or subsidiary to go out into the marketplace to see what other software might be available. We’d then find ourselves in competition again, just to be able to stay in place in an account we had sold long before.

It’d be far better, the sales exec said, if the sold-off division or subsidiary’s people were to happily continue using our software, friction free. Other potential users at the new-owner company would see this, and we’d have entrée and opportunity to sell them even more licenses.

As a result, we didn’t just agree to the customer’s request that one time — we revised our standard enterprise license agreement form to permit customers to do this. (That was one of the reasons our customers’ legal people loved our standard contract.)

Lesson learned: It’s not always enough to ‘think like a lawyer’ — you might not know what really is in the client’s long-term best interest.

FOOTNOTE: See the FirstDrafter Assignments clauses for sample provisions.

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