NEGOTIATIONS AND LICENSING

NEGOTIATIONS AND LICENSING

1. Objective

   • achieve an outcome, where each side is clear on what it is giving and receiving from the agreement and,

2. The Team

   • Assign a small team at least two people to be involved in the negotiations
     • Determine who will conduct the negotiations and the process scheme to use
     • You must accept or reject the proposals during the negotiation

3. Negotiating

   • Process where they meet several times to discuss and enter into license agreement
   • Begins
     • Discussion on the main points that should be agreed
     • When the points are agreed they enter into a formal contractual agreement
     • Adjust the contract to requirements of law
       • Must fulfil
         • Terms of exchange specified for the bargain
         • Something of value exchanged
         • Mutual exchange
   • The license agreement
     • The licensor agrees to provide the licensee with the use of his property
     • The licensee agrees to pay the licensor a fee

4. The Terms

   • Licence Fee
     • License fee: fixed charge paid by all licensees
   • Royalties
     • Additional payment to the license fee
     • Based on a unit, volume or sales weight
   • Setting the Royalty Rate
     • Pay attention to the final use of the product
     • Consider some approaches
       • For stand-alone products or processes, base the royalty on the sales price of the product, a unit weight, or a unit volume
       • Set the royalty as a precise cash amount per unit/volume/ weight sold
       • Set the royalty as a percentage of the profit
       • For compound products or processes, base the royalty on the percentage contribution of the licensed technology to the total manufacturing cost of the final product
   • Minimum Royalty
     • Minimum royalties may not be achieved for several reasons
       • The product or technology is completely new and both the licensor and licensee had unrealistic market expectations;
       • The licensee is too small or specialised and cannot service the targeted markets
       • The product or technology shows problems
   • Resetting Minimum Royalties
     • In the event that the minimum royalty is not achieved, partners usually build some scope into the licence

5. Heads of Agreement

   • Heads of Agreement – Licence
     • Parties
     • Start date
     • Duration
     • Nature of licensed IP
     • Work schedule
     • Costs
     • Payment schedule
     • Termination:
     • Dispute resolution:

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