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require CPG to terminate the management agreement; (3) CPSG, Inc.
did not have the financial resources to fund the development; and
(4) petitioner had the financial resources to develop the
software technology.
On October 1, 1995, petitioner, in his individual capacity,
entered into a development agreement with his wholly owned
corporation, CPSG, Inc. According to the terms and conditions of
the development agreement, petitioner covenanted to provide
software research and development to improve, enhance, modify,
and change the software technology in his reasonable discretion
and at his sole expense. The contract granted CPSG, Inc. the
right to cancel the agreement at anytime with 1 month’s notice.
The product of petitioner’s R&D efforts was what the parties
termed the “developed technology”. Pursuant to the terms of the
contract, petitioner retained all rights, title, and interest in
the developed technology.7 Simultaneously, under the development
agreement, petitioner granted CPSG, Inc. a nonexclusive license
to the developed technology in exchange for 36 quarterly payments
in an amount equal to the greater of 10 percent or $26,250 from
the sale, grant of licenses, or commercialization of products
that incorporated the developed technology during the period
7Petitioner testified that this was one of the primary
reasons for conducting the development on his own behalf;
personal ownership rights, outside of CPSG, Inc., would give him
leverage over CPG and the syndicates.
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