Yulieth Guzmán Bermudéz
Mind Map by Yulieth Guzmán Bermudéz, updated more than 1 year ago
Yulieth Guzmán Bermudéz
Created by Yulieth Guzmán Bermudéz over 1 year ago


Mind Map on NEGOTIATIONS AND LICENSING By: Yulieth Guzmán, created by Yulieth Guzmán Bermudéz on 11/18/2019.

Resource summary

  1. The objective is to achieve an outcome, where each side is clear on what it is giving and receiving from the agreement and, importantly, that each party is content with the final deal reached and has gained a sense of trust and fairness from the other.
    1. It is essential that the licensor understands the licensee’s requirements and he should identify and clarify how the technology will meet the licensee’s needs.
      1. The licensee should have an appreciation of the commercial potential of the technology and be able to convince the licensor he has the capability to fully exploit it.
        1. Each party should decide in advance of the negotiations what its expectations are for the transaction and have set a minimum to the terms it is willing to accept (its fall-back position).
        2. THE TEAM It is unwise to negotiate on your own, as points and issues may arise that you are either unsure of or misinterpret.
          1. It is best to appoint a small team, which can be as few as two people, to address points on technology, manufacturing, legal, IP and finance, as required.
            1. Identify the colleagues, and any consultants, you think should be involved in the negotiations and work out a clear role for each in the discussions.
              1. Decide on who will lead the negotiations and outline the process the team should follow in accepting or rejecting proposals during the negotiation.
                1. Include break-out time to review and discuss points in private and for the team to agree on specific terms.
                  1. You may need to seek clarification from your management board to resolve difficult issues where terms may not be acceptable to your own organisation
                    1. To conclude terms, he must be convinced that the deal is right for his organisation.
                    2. NEGOTIATING The process of negotiation is frequently informal and, typically, is not completed in a single meeting of the parties around the table.
                      1. When they decide to enter into a formal licence arrangement, specific individuals from the team with a combination of technical and legal expertise are introduced on both sides to complete the deal and to sign a formal agreement.
                        1. The process begins with discussion on the main points that must be agreed and usually extends over a period of time, taking the form of conference calls and e-mail exchange of documents.
                          1. It concludes with the introduction of a draft agreement, when the main points have been agreed.
                            1. It is important to avoid beginning negotiations with the exchange of a template licence agreement as the initial draft document.
                              1. In the licence agreement, the licensor agrees to provide the licensee with the use of his property (more specifically, he makes a promise not to sue for infringement of his IP). In return for exchange of the valuable IP, the licensee agrees to pay the licensor a fee and/or royalties as consideration and the agreement specifies the terms and conditions for exchange of the bargain
                                1. As long as these elements are clearly laid out in the language of the agreement and the agreement is signed by both sides, then the parties have a legal duty to carry out their respective obligations as specified in the contract
                                  1. ou need to prepare financial projections for the business opportunity and calculate the net margin you expect to achieve on the sales price for products based on the technology.
                                    1. The licensor may want to include a minimum annual royalty in the terms for negotiation.
                                    2. THE TERMS Licence Fee The licence fee (also referred to as ‘lump sum’, ‘down payment’ or ‘upfront fee’) is a payment that, typically, is separate to royalty payments.
                                      1. However, for an unproven product or technology that is not yet commercially proven and which requires some further development by the licensee, the licence fee is often a result of negotiation and can be agreed in a number of alternative ways.
                                        1. The basis for the payment can be any, or a combination, of the following, but in any event it must be realistically supported by the scale of the new business opportunity being offered to the licensee: A once-off non-refundable fee; A number of fees paid on reaching agreed milestones – for example, signing of the contract, completed transfer of the technology, production of a successful prototype, manufacturability of the product achieved, sale of the first product, etc. (fees are paid upon achievement of incremental success)
                                        2. Minimum Royalty The licensor should have an expectation of achievable annual sales.
                                          1. A minimum royalty can be based on this market forecast. The minimum royalty also ensures that the licensee actively exploits the licence and does not use it as a blocking manoeuvre towards competitors.
                                        3. HEADS OF AGREEMENT Before any exchange of agreement templates begins, it is essential that a ‘Heads of Agreement’ is discussed and that agreement is reached on each of the important aspects of the planned interaction, be it a research collaboration, a licence agreement, a licence option agreement, patent exploitation agreement, or other.
                                          1. Licence Parties: The registered legal name and location of the parties.
                                            1. Start date: Commencement of licence.
                                              1. Duration: Agree the appropriate term for the licence
                                                1. Work schedule: Where work needs to be done, in transferring the technology from the licensor to the licensee, or where it is expected that one or both of the parties needs to do some specific development work to prepare the product for the market, it is essential that a well-defined work schedule is drafted and agreed by both parties before the licence agreement is drafted.
                                                  1. Costs: Who will incur the costs of a) the technology transfer and b) the development work (if any)? Who will pay the patent costs if any new patents are to be filed? (for example, joint patent applications).
                                                    1. Lump sum/royalties (minimum royalties): Negotiate the licence fee and royalty rate as discussed in the section above.
                                                      1. Payment schedule: Depending on the payments that have been agreed, also agree when the appropriate payments should be made. A licence fee may be pai
                                                        1. Licence option: If the agreement includes a licence option, specify whether exclusive or non-exclusive (see ‘Scope’ below). The option is granted on signing of the agreement. If the main agreement is a licence agreement, there may be an option in the licence agreement to licence some further aspects of the technology – for example, improvements, next generation products, additional patents, additional applications of the patents, additional territories, etc.
                                                          1. Option term on licence: In the case of a licence option, agree the term to allow time for the licensee to do due diligence on the patent applications and the technology and specify the event that triggers an exercise of the option – usually, the request of the licensee by a specific date, or on the submission of an evaluation report or some other action. MLA (Modern Language Assoc.)
                                                            1. Right of first refusal: The licensee is interested, but may not be ready to take a licence, so the licensor may decide to offer a right of first refusal – that is, on receiving an offer from someone else, he has to offer the licence to the first party. If the first party rejects the offer, then he can accept the second offer and grant a licence to the second party.
                                                              1. Exclusivity: Exclusivity can be granted without giving away exclusive rights to the whole IP..
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