Updated: Sep 13, 2022
You’ve received the offer of your career. You have an opportunity to license your technology in a deal that you are sure will take your company to the next level. Both sides are ready to actively start negotiations. Congratulations! This is awesome and definitely worth celebrating!
Here are 5 must know tips from a lawyer’s perspective that will help guide you to success!
1. Know your outcomes and priorities
What do you actually want out of this deal?
It may seem obvious, but once the initial excitement dies down and the work of
negotiating begins, it is critical to seriously consider your outcomes and priorities.
First, think about your individual outcomes as well as your team outcomes.
Second, list your priorities in order. Different companies have different priorities.
Third, keep your lawyers and negotiators in the loop. All negotiations involve give and take. Having a clear picture of your key outcomes and priorities will guide your negotiating team in ensuring you get the top priorities on your list.
2. Be Prepared
There is no such thing as being too prepared.
First, research the context of the deal.
The more you know about the context of the negotiation, the better you can anticipate and gauge what is a fair deal and what to expect from the other side. Finding information on the other party and on past licensing deals can be tricky because a lot of technology licensing agreements are confidential, and the information contained is not easily or publicly available. Additionally, technology licensing rates can vary depending on the type of project and technology involved. There are paid tools online like royaltyrange that can help you get a sense of what the practice may be, but you might want to pick a negotiation team with some past experience in the particular licensing area that applies to you.
Second, be prepared before each meeting.
The more prepared you are for each session with the other party, the more time and money you save. Before your team goes in, have a chat beforehand, so that everyone is on the same page on what needs to be achieved and ready to utilise the available time in the most efficient way.
3. Be Patient, but also watch your costs
Is your negotiation budget sufficient?
High stake licensing negotiations can take several months and sometimes years to conclude. It is critical to establish a sufficient budget and keep your company generating income.
First, put together a budget with sufficient resources ahead of time.
The bigger and more technical the deal, the longer the negotiation process may take. It almost always takes longer than you expect, and legal costs can escalate very quickly. Additionally, if you are negotiating a multijurisdictional licensing deal, you may have to engage lawyers or relevant experts from other countries. The process prior to licensing can be a significant financial undertaking for a small start-up. As a result, start-ups negotiating with larger, more reputable tech companies, tend to be at a disadvantage if they do not have the resources to sustain drawn out talks.
With realistic expectations and sufficient resources on hand, you can establish an ideal timeline to follow that will help determine your pace.
Second, keep your company operations running.
While the negotiations continue, keep directing resources towards running your company’s regular operations and generating income. It will not help to put your company on hold for a deal that is still uncertain. Until an agreement is signed, nobody can be absolutely sure that both sides will agree.
4. Do a thorough risk assessment
Give the other side the benefit of the doubt, but also don’t.
During the negotiation process, it is alright to assume that both parties want a fair, positive and mutually beneficial partnership. Note that although this is ideal, is not always the case. No matter how great things seem on the surface, make sure to do a thorough assessment of the risks involved.
One great method to use is to brainstorm while being guided by Murphy’s law. Murphy's law is an old adage that states that anything that can go wrong will go wrong, and at the worst possible time. Taking a honest look at the risks or ‘worst-case scenarios’ and planning for mitigation will guide your decision making and insulate you against any shocks on the way.
The higher the stakes, the more detailed your risk assessment should be. Better to prepare for a street fight and get a fair competition, than the reverse.
5. Watch out for a mismatch of business values
Values are highly underrated but can provide key insights.
Whereas all the technical elements of technology licensing are important to consider, a value mismatch can be the difference between an extremely positive experience and one that leaves a sour taste in your mouth. It is critical that your values and those of the other party are aligned enough to build the foundation for a positive partnership.
How do you determine if you and the other party have aligned values?
The negotiation process can reveal some relevant clues. Observe and pay attention to the underlying messages the other side is sending. These may be helpful indicators to determine whether your business values will align if you decide to go ahead and sign.
All that being said, any licensing negotiation is a great learning experience for your company and will help you better approach similar deals in the future.
With these five tips as your guide, hopefully you can put pen to paper and enjoy the fruits of your labour!
A comprehensive visual guide can be found below.
Definition of Murphy's Law - Cambridge Dictionary