NEGOTIATIONS AND LICENSING

NEGOTIATIONS AND LICENSING

1. The purpose of any licensing negotiations is for both sides to identify clearly what each wants from the commercial arrangement they intend entering into.

   • THE TEAM
     • It is unwise to negotiate on your own, as points and issues may arise that you are either unsure of or misinterpret.
   • NEGOTIATING
     • The process of negotiation is frequently informal and, typically, is not completed in a single meeting of the parties around the table.
   • THE TERMS
     • The licence fee (also referred to as ‘lump sum’, ‘down payment’ or ‘upfront fee’) is a payment that, typically, is separate to royalty payments.
       • Royalties
         • Normally, royalties are paid in addition to the licence fee. They are based usually on a unit, a volume or a weight of sale – the ‘royalty base’.
           • Setting the Royalty Rate
             • In setting the royalty, consideration must be given to the end-use or application of the product or technology.
               • Minimum Royalty
                 • The licensor should have an expectation of achievable annual sales.
                   • Resetting Minimum Royalties
                     • In the event that the minimum royalty is not achieved, partners usually build some scope into the licence agreement for renegotiation of the minimum royalty on reasonable terms.
                       • GHEŢA, I. M. (2017). Theoretical and Methodological Considerations Regarding the Evaluation of Intangible Assets. (pp 373–376). Contemporary Readings in Law & Social Justice, 9(2). Retrieved from http://bibliotecavirtual.unad.edu.co/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=126542114&lang=es&site=eds-live&scope=site
     • Licence Fee:
   • HEADS OF AGREEMENT
     • is discussed and that agreement is reached on each of the important aspects of the planned interaction, be it a research collaboration, a licence agreement, a licence option agreement, patent exploitation agreement, or other.
       • Heads of Agreement – Licence
         • Parties:
           • The registered legal name and location of the parties.
             • Start date:
               • Commencement of licence.
                 • Duration:
                   • Agree the appropriate term for the licence (see ‘Duration’ under ‘Scope’ below).
       • Work schedule:
         • Where work needs to be done, in transferring the technology from the licensor to the licensee, or where it is expected that one or both of the parties needs to do some specific development work to prepare the product for the market.
           • Costs:
             • Who will incur the costs of a) the technology transfer and b) the development work (if any)? Who will pay the patent costs if any new patents are to be filed? (for example, joint patent applications).
               • Lump sum/royalties (minimum royalties):
                 • Negotiate the licence fee and royalty rate as discussed in the section above.
                   • Payment schedule:
                     • Depending on the payments that have been agreed, also agree when the appropriate payments should be made.
       • Licence option:
         • If the agreement includes a licence option, specify whether exclusive or non-exclusive (see ‘Scope’ below).
           • Option term on licence:
             • In the case of a licence option, agree the term to allow time for the licensee to do due diligence on the patent applications and the technology.
               • Right of first refusal:
                 • The licensee is interested, but may not be ready to take a licence, so the licensor may decide to offer a right of first refusal – that is, on receiving an offer from someone else, he has to offer the licence to the first party.
                   • Scope of licence:
                     • The licence should be made as specific as possible by using several parameters to define its restricted scope.
                       • Exclusivity:
                         • Exclusivity can be granted without giving away exclusive rights to the whole IP.
                           • Liability:
                             • The licensee provides product liability for any products it manufactures under the licence and indemnifies the licensor against any damages.
                               • Warranty on licensed patents:
                                 • The licensor is expected to provide certain warranties on the patents to which the licensee has certain rights.

2. GROUP:212032_2- Viviana Julieth Baquero

   • ASSESSMENT AND NEGOTIATION OF TECHNOLOGY - (212032A_614)

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