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6 key components to a successful license negotiation that TTOs sometimes let slip

In her recent blog post, Danielle McCulloch, vice president at tech transfer firm Fuentek, offers six key components of licensing negotiations that are sometimes forgotten by tech transfer professionals:

  1. Value is more important than price. Attempting to tag a price on a technology usually yields a number that’s too high or too low; instead, TTOs should put a value on the deal. If a company asks what the cost would be to license a technology, ask what value your technology brings to the market, how the company will use it, and what the specific circumstances of the market are.
  2. Let the licensing prospect make the first offer. “Remember: You hold the technology they want, so you get to set the rules of the negotiation,” writes McCulloch. After a company inquires about a technology, TTOs should put together a basic term sheet for the prospect to fill out and submit as an application for a license. “This first step puts the TTO in a position of power, because the application sets the floor for the negotiations,” McCulloch says.
  3. Grant exclusivity judiciously. It is understandable that companies want to protect their license through an exclusive agreement, but what if other companies express interest in your technology? Consider a field-of-use exclusive license, which provides the protection companies want while maintaining the flexibility to secure additional licenses to cover additional markets.
  4. Use caution in setting the royalty rate. When looking at the royalty rate, consider both the percentage of the total product and the portion of the product portfolio that the technology will impact. A rate might look reasonable until you realize it’s too low given how crucial the technology is to the company’s product line, for example.
  5. Rethink the concept of the “counter-offer.” Once a prospect makes the first offer to set the floor for negotiations, a counter-offer sets the ceiling — the offer won’t go higher than this. But rather than structuring a detailed counter-offer, enter into a dialogue with the prospect about the proposed terms that need adjusting. It can be an intimidating conversation, so McCulloch recommends having a few rehearsed responses and requests on hand.
  6. Both sides want the best deal possible. It’s helpful to approach a deal from both yours and the licensee’s perspective; it empowers you to negotiate more effectively and get the best deal for your organization. “And remember,” writes McCulloch, “the person on the other side of the negotiating table is doing the same thing. We don’t assume their first offer is their best offer.”

Source: Fuentek

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