NEGOTIATIONS AND LICENSING

NEGOTIATIONS AND LICENSING

1. THE TEAM

   • It is unwise to negotiate on your own
   • It is best to appoint a small team
   • Decide on who will lead the negotiations
   • Include break-out time to review and discuss
   • leading the team must understand the corporate issues and the limits beyond which he cannot

2. NEGOTIATING

   • The process of negotiation is frequently informal and, typically, is not completed in a single meeting
   • More usually, the parties meet several times to discuss
   • The process begins with discussion on the main points that must be agreed and usually extends
   • It is important to avoid beginning negotiations with the exchange of a template licence agreement

3. THE TERMS

   • Licence Fee
     • A once-off non-refundable fee
     • Payment as a security
     • unique commercial opportunity
     • Recognition on the part of the licensee
   • Royalties
     • royalties are paid
     • in addition to the licence fee
     • the ‘25% rule’ approach is used
   • Setting the Royalty Rate
     • consideration must be given to the end-use or application of the product or
     • Set the royalty as a percentage of the profit
     • provides an incentive to the licensee
   • Minimum Royalty
     • expectation of achievable annual
     • based on this market forecast.
     • that the licensee will do what is necessary to take it to market as early as he can, so that the minimum
   • Resetting Minimum Royalties
     • licence agreement for renegotiation of the minimum royalty on reasonable terms, but cancellation of
     • discusses some approaches to negotiating commercial terms

4. HEADS OF AGREEMENT

   • Heads of Agreement – Licence
     • Parties
     • Start date
     • Duration
     • Nature of licensed IP
     • Work schedule
     • Costs
     • Lump sum/royalties
     • Payment schedule
     • Right of first refusal
     • Scope of licence
     • Exclusivity
     • Liability
     • Warranty on licensed patents
     • Ownership of IP
     • Ownership of improvements
     • Infringement
     • Termination
     • Choice of law
     • Dispute resolution

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