NEGOTIATING GUIDELINES AND TIPS

NEGOTIATING GUIDELINES AND TIPS

1. Negotiating a technology licensing agreement is the art of reaching an agreement where the licensor grants and the licensee acquires the right to use the licensor's technology on specified terms and conditions

   • The objective is to set the basis for a mutually satisfactory and ultimately rewarding future relationship. That is, a "win-win" outcome as opposed to a "win-lose" outcome (which, in effect, is a "lose-lose" outcome)

2. THE PROCESS OF NEGOTIATING A LICENSE AGREEMENT

   • The negotiation process involves four distinct phases: preparing, discussing, proposing and bargaining.
     • The Preparation Phase
       • This is probably the most important, in that it is almost impossible to recover from, or overcome, inadequate preparation
         • To clarify and focus the discussions, the following considerations may be usefully followed
           • Having gone through a preliminary analysis of its business objectives and decided that a licensing agreement would further that objective
           • Similarly, what would the other party be expecting to achieve from the discussion and to what extent does it differ or overlap with what one wants to achieve
           • The lead negotiator would preferably be one who understands the overall business strategy. He or she would, ideally, be assisted by a team consisting of experts from the financial, legal and technical areas
           • Prepare a summary of the key commercial issues to be covered in the license agreement and the position of the party on each such issue
       • Preparation includes all that has been discussed thus far in this Manual.

3. The Discussion Phase

   • This is usually characterized by the licensor promoting the merits and the opportunity offered by its technology, and the potential licensee reviewing documentation and information under a confidentiality agreement

4. The Proposing and Bargaining Phases

   • In the proposing phase, the parties are exploring the possible relationship and the principal commercial terms
   • lt is too easy for the inexperienced negotiator to agree to a proposal, and to then make a separate proposal- and be surprised when it is rejected

5. THE GOLDEN GUIDELINES OF NEGOTIATION

   • Guidelines are the principles that aim to provide the negotiator with a practical framework for the conduct of a negotiation
   • Rather, the failure to follovv or achieve a guideline is intended to alert the negotiator to the need to have an understanding of the current position and perhaps the need for additional or different actions
   • Establish the Maximum (or Best) Position, and the Minimum (or Worst) Position in Respect of Each Issue
     • This is pati of preparing for the negotiation and identifying and ranking the issues of importance to oneself, as well as anticipating those likely to be important to the other.

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