‘You will never get the license agreement your technology deserves, you get the licenses agreement you negotiate,” says David Wanetick, managing director at IncreMental Advantage, a valuation and consulting firm based at 4390 Route 1.
“With this in mind, it is important for inventors, licensing professionals, and intellectual property lawyers to constantly hone their negotiating skills.”
Wanetick presents “Negotiating Licensing Agreements for Maximum Returns” on Friday, August 21, at 1:30 p.m. at the Business Development Academy based at his Route 1 office. Cost: $595. E-mail email@example.com.
Among the tactical considerations that Wanetick suggests that inventors and owners of intellectual property consider the following:
Stay away from the negotiating table. “A general principle in negotiations is that if you wait to commence negotiations until you reach the negotiating table, you will have already squandered leverage,” says Wanetick. “Inventors can increase their potential licensing value before approaching licensing partners by further developing their technologies; conducting competitive intelligence into the potential licensees in order to determine how the technology can best meet their targets’ financial and strategic goals; and by generating buzz.”
Avoid approaching a potential licensee directly. “When inventors call licensing executives directly, their image in the eyes of the potential licensee deflates from being a successful inventor to that of a salesman.”
Adds Wanetick: “There are advantages of an intermediary approaching the licensee on behalf of the inventor. The intermediary likely has a relationship with the right people, or at least are more familiar with preparing the documents that the licensee will request to review. Licensees will take some comfort that the intermediary has vetted the technology and would not want to damage his reputation by presenting inferior technology.”
Prepare carefully for initial negotiating rounds. “A crucial step to take before negotiating is to coordinate your firm’s objectives and goals of the negotiations,” says Wanetick. Everyone from your team should be reading from the same script, otherwise you stand to be sabotaged by your own colleagues. It is often wise to make sure that you understand what your boss expects from the negotiations.
Generally, says Wanetick, “the licensee will allow the inventor to begin the dialogue. Allowing the inventor to discuss the technology enables the licensee to poke holes in the inventor’s arguments.
From the licensee’s perspective it is important to cut the inventor off if his projections are far beyond those of the licensee. Merely allowing the inventor to continue discussing his unrealistic expectations lends credibility to such expectations.”
The rule of thumb is that the more experienced the primary business players are, the longer they can wait to involve their lawyers.
Yet Wanetick cites John Goldschmidt, partner at Dilworth Paxson in Philadelphia, who believes that lawyers should be involved in the initial discussions. First, lawyers represent a form of legal validation, can put the patent in play, as well as substantiate the principal’s sincerity in seeing a deal through to fruition. Second, document drafting is often easier when an attorney has the benefit of participating in negotiations and understands the positions of both sides. Third, an unsophisticated potential licensor can unknowingly place himself into jeopardy.
The son of a surgeon in San Francisco, Wanetick majored in economics and political science at Bucknell, Class of 1988. He worked for Merrill Lynch in New York, then went off on his own, focusing on research, to do his own publications and newsletters. He lectures frequently, often overseas, and is the author of “The Power of Incermental Advantage.”
“Realize that negotiating is analogous to dating,” says Wanetick. “When selecting a mate you can not create a perfect partner by creating a collage of all of the best features from all of the people you have dated before. Rather, you must select from what exists. No one licensee will offer all of the most favorable terms that a collection of potential licensees promise to grant. Nonetheless, licensors have to select the best licensee from the pool of licensees that exist.”
Continuing the dating analogy Wanetick offers another piece of advice:
Bring a a chaperone. “Inventors should not participate in the initial negotiations alone. Bringing an experienced business person will help the inventor gain a deeper understanding of what the licensee’s intentions are for the given technology. It is more difficult for the licensee to renege on its promises when several people can recall them.”