NEGOTIATIONS AND LICENSING

NEGOTIATIONS AND LICENSING

1. What is the objetive?

   • Both sides to identify clearly what each wants from the commercial arrangement they intend entering into
   • The objective is to achieve an outcome, where each side is clear on what it is giving and receiving from the agreement
   • that each party is content with the final deal reached and has gained a sense of trust and fairness from the other.

2. The Team

   • 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
     • Identify the colleagues, and any consultants
     • Work out a clear role for each in the discussions
     • Decide on who will lead the negotiations and outline the process the team should follow

3. NEGOTIATING

   • The process begins with discussion on the main points that must be agreed and usually extends over a period of time
     • It is important to avoid beginning negotiations with the exchange of a template licence agreement as the initial draft document
     • The contract must fulfil three essential elements
       • Terms of exchange specified for the bargain
       • Something of value exchanged
       • Mutual exchange
   • It concludes with the introduction of a draft agreement, when the main points have been agreed.

4. THE TERMS

   • Licence Fee
     • ‘lump sum’, ‘down payment’ or ‘upfront fee’
   • Royalties
     • royalties are paid in addition to the licence fee
   • Setting the Royalty Rate
     • In setting the royalty, consideration must be given to the end-use or application of the product or technology
   • Minimum Royalty
     • May be appropriate in a situation where the technology is at the pre-market stage and there is a good demand for it from several competitors
   • Resetting Minimum Royalties
     • The cancellation of the licence is an option, or reverting to a non-exclusive licence where an exclusive licence exists

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