Practitioner’s Section Patent License Negotiation: Best Practices

Practitioner’s Section Patent License Negotiation: Best Practices

1. The negotiation

   • software development stages
     • A typical software development process comprises several generic phases: requirements gathering and analysis, design, construction, testing, debugging, and deployment
   • software internal structures
     • The developer will then design software internal structures such as subroutines, flow charts, task divisions of modules, and definition of database structure.
   • program design
     • the developer starts transposing the program’s structural blueprint into the source code. The construction stage often requires the developer to be creative in conveying the blueprint into source code. The source code is subsequently translated or “compiled” into machine-readable object code.
   • classification
     • Conventional IP law suggests that the intellectual assets generated in the SDO process can be classified into five types of properties: preparatory materials, databases, derivatives, other works, and software programs

2. Preparing to negotiate

   • The Team
     • A deal team will generally include a Business Development Executive; a Scientific/ Technical Expert; a Decision Maker; and a Licensing Attorney. The Business Development Executive is often the leader of the deal team and responsible for keeping the negotiation process moving and ensuring the other team members fulfill their assigned tasks.
   • The Term Sheet
     • The process of creating this document will help team members understand and focus on the overall objectives of the agreement and avoid unfavorable terms.
   • Initial Team Meeting
     • The deal team should assess its own and the other party’s position. To do so, steps could include 1) reviewing the strength and breadth of patent protection to determine the proprietary position offered by the patents, 2) conducting a right-to-use study on potential commercial products to determine the value of the patents and whether a license to any third party patent(s) are required, and 3) reviewing the developmental stage of the patented technology
   • Deadlines
     • Major steps in the negotiation process for which preset deadlines may be: the initial meeting, drafting the letter of understanding, executing the letter of understanding, meeting to review the draft agreement, revisions to the draft agreement, finalizing the licensing agreement and executing the licensing agreement.
   • The groundwork for open dialog
     • In any negotiation, a nondisclosure agreement can provide security for both parties to maximize information transfer
   • Drafting the contract
     • By drafting the contract, a party is better able to evaluate any subsequent modifications or changes to the original draft and how such changes affect its primary goals.