Negotiation

Negotiation

1. The negotiation

   • The ter ms of a licensing contract reflect the allocation of risk between the parties of the potential futur e development and marketability of the patented techno logy. A licensor that has taken a molecule through one or more phases of a clinicaltrial, or has the f inan cial resources to do so, will likely be in position to negotiate narrow licensing agreements that incentivize development and marketing of the technology and that enable additional licen sing agreements with other licensees of different strengths that can compete in other markets
     • Valuation approaches
       • A business school/MBA approach to valuation often uses one of three methods: the cost method,the market method, and the income
     • Propietary position
       • A weak proprietary in te rest may exist where a patent is questionable in nature; one that covers only a very narrow technology, is very similar to other patented technology or was granted despite potentially not meeting the requirements for patentability
     • Exclusivity and field of use
       • License exclusivity refers to whetherthe licensorhas licensed the invention/technology to multiple licensees,
     • Development stage of invention
       • Patented inv entions that are in the early stage of development often require substantial investment and development before a commercially viable product is produced.
     • Payment terms
       • There are several forms of paym ent that licensing parties can negotiate to compensate the licensor for the patented techn
     • Rights to improvements
       • Parties should negotiate provisions to address the ownership of any currentor future improvements of the technology

2. Preparing to negotiate

   • A key to an y deal is for each party to have an understanding of wha t they want from the deal. Thus, effective negotiation begin swith effective preparation
     • The team
       • In many negotiations both parties will have a deal team. The deal team will conduct due diligence and negotiate the license
     • initial team meeting
       • In preparing for the negotiation, the deal team should i dentify, assess and prioritize the inte rests of their client
     • the term sheet
       • It is often helpful for parties to exchange a term sheet prior to the initial negotiation meeting.
     • the groundwork for open dialog
       • In anynego tiation, a nondisclosure agreement can provide security for both parties to maximize information transfer
     • deadline
       • Estab lishing preset Deadlines for e ach of the major steps in the negotiation process is important because it forces the other party to reveal its true intentions and in te rest s in the licensing agreement.
     • Drafting the contract
       • Commentators have suggested that the party drafting the contract is always in the more favorable position because that party will be in a position to ensure inclusion of desirable provisions an d places the other party in the position of defe nd ing every request to modify the dafted agreement.