Preparing to negotiate

Laura Andrea Medina Rangel
Mind Map by Laura Andrea Medina Rangel, updated more than 1 year ago
Laura Andrea Medina Rangel
Created by Laura Andrea Medina Rangel almost 3 years ago
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Mind Map on Preparing to negotiate, created by Laura Andrea Medina Rangel on 10/10/2018.

Resource summary

Preparing to negotiate
  1. A key to any deal is for each party to have an understanding of what they want from the deal. Thus, effective negotiation begins with effective preparation. Effective preparation includes assembling the right team, preparing a heads of agreement, defining guidelines for the process, negotiating honestly, and drafting the contract.
    1. The Team
      1. It will be formed by a Business Development Executive; a scientific / technical expert; a decision maker; and a license lawyer. Scientific and legal roles can be filled by multiple team members. The business development executive is often the leader of the team and is responsible for keeping the negotiation process moving and for ensuring that other team members comply with the assigned tasks.
      2. Initial Team Meeting
        1. It is important that the deal team meet and reach an understanding of the business motivation for the deal and the responsibilities and role of each team member during the process
        2. The Term Sheet
          1. is helpful for parties to exchange a term sheet prior to the initial negotiation meeting. The term sheet typically covers the major issues in a potential deal in outline form, including: the licensed product or process; licensed territory; license fee and royalty; technical information and training required to develop and manufacture, sell and service the licensed product, and who will be responsible for same; sales and service support; degree of exclusivity, and duration of the license.
          2. Deadlines
            1. Establishing preset deadlines for each of the major steps in the negotiation process is important because it forces the other party to reveal its true intentions and interests in the licensing agreement.
            2. The groundwork for open dialog
              1. In any negotiation, a nondisclosure agreement can provide security for both parties to maximize information transfer. Some key terms include license and scope, enforcement rights, the financial arrangement, additional patent prosecution and maintenance costs, ownership of improvements, liability, indemnification, and warranties and representations.
              2. Drafting the contract
                1. 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 and places the other party in the position of defending every request to modify the drafted agreement.
                2. The negotiation
                  1. The terms of a licensing contract reflect the allocation of risk between the parties of the potential future development and marketability of the patented technology. A licensor that has taken a molecule through one or more phases of a clinical trial, or has the financial 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 licensing agreements with other licensees of different strengths that can compete in other markets. A licensor without these resources, financial or otherwise, will often be in a weaker bargaining position.
                  2. Valuation approaches
                    1. A business school/MBA approach to valuation often uses one of three methods: the cost method, the market method, and the income method.
                    2. Proprietary position
                      1. A weak proprietary interest 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. Such a patent does not offer significant market strength because it is either incapable of keeping products or services using similar technology off the market or potentially could be invalidated
                      2. Developmental stage of invention
                        1. of invention. Patented inventions that are in the early stage of development often require substantial investment and development before a commercially viable product is produced.
                        2. Exclusivity and field of use
                          1. refers to whether the licensor has licensed the invention/technology to multiple licensees, whereas the field of use is the circumstances for which the licensor has granted the licensee permission to make, use and sell the patented technology.
                          2. Payment terms
                            1. There are several forms of payment that licensing parties can negotiate to compensate the licensor for the patented technology. For example, when a University is the licensor, a typical license will include a signing fee, reimbursement and ongoing payment of patent prosecution costs, milestone payments, minimum annual royalties and a percentage royalty on sales.
                            2. Rights to improvements
                              1. Parties should negotiate provisions to address the ownership of any current or future improvements of the technology. A licensee will want the right to use any variation of the technology claimed in the patent and developed by it or the licensor after the license agreement is entered into so that it does not need to renegotiate a license if the uses become desirable to it. Where improvements are developed by the licensee after the signing of the agreement, the parties will need to negotiate who will own the rights to the improvements.
                            3. LAURA ANDREA MEDINA RANGEL
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