license negotiation workshop for tech transfer professionals real-world tactics for maximizing...

License Negotiation Workshop for Tech Transfer Professionals

Real-World Tactics for Maximizing Licensing Revenue

May 14, 2009

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Phases of Deal-Making

Marriage

Dating

Courting

Bliss or Bust

Deal-Making

Pre-Negotiation

Negotiations

Alliance Management

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Less than Maximum Revenue?

Maximize portfolio revenue► Focus on higher priority deals► Increase deal flow

Larger, non-revenue issues Reputation

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Pre-Negotiation Phase

Technology Assessment Marketing Due Diligence Stakeholder Analysis Needs / Wants Identification Valuation / Comparables Negotiating Style BATNA

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Before The Negotiation

Technology Assessment Marketing

► Group► Targeted► Organizational Selling

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Before The Negotiation

Technology Evaluation ► Verified interest before term sheet► Think like a product manager► Tipping point

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Due Diligence

Background on Potential Licensee► Market Cap► Product Lines► Competitors & Product Lines► Pain Points

Sources of Information► Business Databases ► Market Reports► Web Searches► Colleagues & Industry Contacts

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Needs / Wants

Identify Needs► Those issues that are required to close/sell the deal

• Patent expense reimbursement• Publication rights• FMV when compared with other internal deals

Identify Wants► Those issues that would be nice to have

• Upfront fee v. equity• Anti-dilution protection• High end of royalty rate range

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Valuation & Comps

Valuation► Rules of thumb► Risk-adjusted NPV

Comparables► Terms and license structure

Sources► Internal► External

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Stakeholder Analysis

Those individuals that have a stake in the deal Important to identify all stakeholders Internal

► Your immediate supervisor► Superior with signature authority► Inventors► Department heads► Legal department

External► Potential licensee► Co-owners of the IP► Funding agencies► Regional development organizations

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Negotiating Style

Determine the long-term relationship needed Long-term:

► Mutual respect► Initial offer should be reasonable

Short-term:► Seek maximum value

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Negotiating Style

Principled► Keep emotions in check► Counter their emotions with a lack of emotion

Consultative Appropriate to the situation

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BATNA

Consider key stakeholders Scenarios Compare Anticipate theirs

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Questions & Answers

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Negotiation Phase

Negotiation Goals Determine Participants Positions v. Interests Anticipate their BATNA Create Options Update Key Stakeholders Relationship Commitment to the deal

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At the Table

Determine who from other side is attending Understand the scope of IP being licensed Lawyers Agreement is not essential! Clarify negotiating authority Review goals and assess progress Take good notes and summarize understanding

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At the Table

Start with a term sheet Focus on interests, not positions

► Question their positions, explain your interests Force focus to interests

► Summarize your view of their interests Suggest options that do not give away value Beware of unilateral negotiating

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Common Tactics

End Run (aka. High Hat)► Keep all internal stakeholders updated

Others have accepted these terms► Highlight differences between deals

Cherry picking terms► Summarize all terms as discussing each

Check with a superior► Ask to negotiate with directly

Righteous Indignation► Press them to explain their position

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Key Deal Terms

Downpayment Milestones Rate Minimum Equity

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Away from the Table

Keep stakeholders in the loop► Prevents an end-run

Sell the deal to all internal stakeholders► Preps them for agreeing► Helps prevent buyers remorse

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Post-Negotiation

Legal Review & Execution Compliance Long-term Relationship

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Resources

Getting to Yes, Negotiating Agreement Without Giving In – Robert Fisher & William Ury

Getting Past No, Negotiating Your Way from Confrontation to Cooperation – William Ury

Strategic Selling, Miller Heiman

LES & Vantage Partners Course – Advanced Negotiations Skills

Bentley, MacWright, and Ritter presentation - Dirty Little Tricks People Play in Licensing

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Questions?

Michael Villalobos John GeiklerCleveland Clinic VTIPvillalm@ccf.org jgeikler@vtip.org216-445-0812 540-443-9228