Other > IP Forms and Agreements

Right of Last Refusal

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Jeff Rowberg:
Hey everyone,

I'm in the process of entering an invention on the Untitled Invention Show coming up on the History Channel. They actually sought me out and asked me to apply, so I figure I have a decent chance at some good publicity and possibly some investment. However, I'm wondering about part of the agreement they want me to sign as a precursor to getting on the show. Part of what I might get out of it is a decent real investment from the show's hosts. They ask for the right of First Negotiation (understandable and reasonable, I think), but they also ask for the right of Last Refusal, which appears to go on forever. Here's the relevant contract language:


--- Quote ---4. I hereby grant to you the exclusive and irrevocable right and option (the “Investment Option”) to invest in, develop, take to market and/or otherwise exploit the invention contained in the Submitted Materials subject to the terms of this paragraph. Specifically, you shall have a “First Negotiation” right and a right of “Last Refusal”. As used herein, the right of “First Negotiation” means that if, I determine that I wish to offer the Submitted Materials for investment and/or sale, I shall notify you of such desire in writing and immediately thereafter negotiate with you with respect to any investment in the Submitted Materials and/or sale of same. If, after the expiration of sixty (60) business days following your receipt of such notice from me no agreement has been reached, then I shall be free to negotiate elsewhere with respect to the investment and/or sale of the Submitted Materials or any interest therein, subject to your Right of Last Refusal as defined herein. As used herein, the right of “Last Refusal” means that if we fail to reach an agreement with one another pursuant to your Right of First Negotiation concerning the Submitted Materials or any interest therein, and I make and/or receive any bona fide offer for investment and/or sale of the Submitted Materials or any interest therein, then I shall give you written notice of such offer specifying the details and terms thereof including without limitation the name of the offeror, the proposed financial terms and all other terms of such offer. During the period of thirty (30) business days after your receipt of said notice, you shall have the exclusive option to license or acquire, as the case may be, the Submitted Materials or the interest therein referred to in such offer upon the same financial terms as are set forth in such offer, it being agreed that the terms shall not require the performance by you of terms which are not capable of performance on a financial basis. If you elect to exercise said option, you shall notify me of the exercise thereof within said thirty (30) business day period. Otherwise, I shall be free to accept said bona fide offer, provided that, if any such proposed offer is not consummated within thirty (30) calendar days following the expiration of said thirty (30) business day period, your option shall revive and shall apply to such proposed offer again and to each and every further offer or offers at any time received by me relating to the sale and/or investment in the Submitted Materials or any interest therein. Your option as described herein shall continue in full force and effect pursuant to all of the terms and conditions of this paragraph for so long as I retain any right, title or interest in or to the Submitted Materials, and your option shall inure to the benefit of you, its successors and assigns, and shall bind me, my heirs, successors and assigns.
--- End quote ---

I understand the desire for the right of Last Refusal, but it seems wrong that it should go on forever. Is that typical? Abnormally greedy? Should there be some limit on it, like a year or 3 years or 5 years? It seems like it's more of a negative for other investors than for me exactly, though by shrinking the pool of interested 3rd parties, it's inadvertently hurting me as well. It does at least appear that there aren't any restrictions on the 3rd-party negotiating terms (e.g. I can't make any lower offers than their first offer or something).

I'm not exactly rolling in investors right now, so part of me thinks I should take whatever I can get. I don't want to do something stupid and permanent though.

You can read more info and the whole application and contract if you're interested here: http://inventorspotforum.com/viewtopic.php?p=30053

Any help you can give me would be much appreciated.

    Jeff

Snowroller:
Hey Jeff,

I am in the exact same position than you and i understand your worries but i ordered a document study from my patent agency (costing around 100$ for a 5 pages contract study) that will give me an answer on the potential danger of threat this release appears to be. Have you visited the  T Group Productions website ? (...)

Maybe i worry uselessly because i have a ''Request for a Grant of a Patent'' from the London office (temporary/countdown IP protection) but i stay vigilant, never forget this wiseman saying
: Homo homini lupus est.
Defend yourself !
Cheers mate!

MYK:
If I am reading that correctly, the "Right of Last Refusal" isn't indefinite;  the time limit resets only if you fail to complete the agreement with the third party within 30 days.  This prevents them from losing their rights if you start a deal, they refuse to meet the same terms, and then the deal falls through -- or if someone were to collude with a third party to make an offer that the pair agrees in advance will never be completed, for the purpose of forcing termination of the "Right of Last Refusal".

More concerning to me is the notion that they insist on being released from non-financial components of a deal:

--- Quote ---the terms shall not require the performance by you of terms which are not capable of performance on a financial basis.
--- End quote ---
So, they don't have to negotiate fruit-basket-to-fruit-basket, they only have to negotiate fruit-basket-to-apples.  If they can give you just as many apples as are in the fruit basket, then their offer is to be considered "as good as" the fruit basket, even though their offer omits the kiwifruit, pineapples, mangoes, papayas, rambutan, and the basket itself.

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