20213056
Description
Mind Map by Yulieth Guzmán Bermudéz, updated more than 1 year ago
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Created by Yulieth Guzmán Bermudéz
about 5 years ago
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NEGOTIATIONS AND LICENSING
By: Yulieth Guzmán
- 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.
- 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.
- 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.
- 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).
- 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.
- THE TEAM It is unwise to
negotiate on your own, as
points and issues may arise
that you are either unsure of
or misinterpret.
- 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, you think
should be involved in the
negotiations and 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 in accepting or rejecting proposals
during the negotiation.
- Include break-out time to review and
discuss points in private and for the
team to agree on specific terms.
- You may need to seek clarification from
your management board to resolve
difficult issues where terms may not be
acceptable to your own organisation
- To conclude terms, he must
be convinced that the deal is
right for his organisation.
- 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.
- NEGOTIATING The process of negotiation is
frequently informal and, typically, is not
completed in a single meeting of the
parties around the table.
- 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.
- 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.
- It concludes with the introduction
of a draft agreement, when the
main points have been agreed.
- It is important to avoid
beginning negotiations with
the exchange of a template
licence agreement as the
initial draft document.
- 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
- 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
- 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.
- The licensor may want
to include a minimum
annual royalty in the
terms for negotiation.
- 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.
- 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.
- 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.
- 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)
- 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)
- Minimum Royalty The licensor should have
an expectation of achievable annual sales.
- 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.
- 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.
- 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.
- 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.
- Licence Parties: The
registered legal name and
location of the parties.
- Start date:
Commencement of
licence.
- Duration: Agree the
appropriate term for the
licence
- 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.
- 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).
- Lump sum/royalties (minimum royalties):
Negotiate the licence fee and royalty rate as
discussed in the section above.
- 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
- 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.
- 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.)
- 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.
- Exclusivity: Exclusivity can be granted without
giving away exclusive rights to the whole IP..
- Licence Parties: The
registered legal name and
location of the parties.
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