Preparing to negotiate

Preparing to negotiate

1. 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.

2. The Team

   • In many negotiations both parties will have a deal team. The deal team will conduct due diligence and negotiate the license.

3. Initial Tema Metting

   • 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 (e.g., spokesperson, technology review, business evaluation, record keeping).

4. The Term Sheet

   • It is often 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

5. Deadines

   • 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.

6. The GroundWork

   • 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.

7. 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 and places the other party in the position of defending every request to modify the drafted agreement.

8. The Negotiaition

   • 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.
   • Vauations Approaches
     • The value of the technology using the cost method is the cost of developing or purchasing the technology, though this does not reflect changes in the market or new information about the technology
   • Prioprietary Position
     • 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.
   • Exclusivity And Fiel of use
     • License exclusivity 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
   • Payment Terms
     • 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.
   • Right to Improvements
     • 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