What not to do before licensing negotiations
“When I get ready to talk to people, I spend two thirds of the time thinking about what they want to hear and one third thinking about what I want to say.”
Imagine you’re in the midst of licensing negotiations and you start to notice little changes occuring. Perhaps the lead negotiator on the other side is not returning your calls or is becoming progressively harder to reach. Maybe the tone of the meetings between the two sides seems to have subtly changed and it’s not for the better. Or the opposing team seems to be putting less and less time, energy and resources into moving things forward. Uh oh. These are red flags that things are not going well. Worse, any time wasted by unnecessary delays could mean that your first-to-market advantage may be threatened. What can you do? Or, for that matter, what could you have done to avoid things doing downhill during important negotiations?
Taking the time to prepare for negotiations can have real implications for the outcome of the negotiations themselves. MaRS Advisor John Buckingham recently spoke at a MaRS Best Practices session on Setting the Table: Preparing for licensing negotiations, where he drew from his experience in alliance management including as a VP at Johnson & Johnson. Here are some critical things he encourages you to consider before you enter licensing negotiations:
- Know the interests of your partner as well as your own. At their best, negotiations are a mutual problem solving exercise. Your negotiations will be more successful if you can focus on both parties’ interests more than their positions in order to create options likely to satisfy both parties. Remember that the battles are less likely to be over money per se and more likely to be over who has more control or who takes on less risk.
- Know your alternatives. This is absolutely critical: Never go into a negotiation without knowing your alternatives. A good negotiator on the other side will figure you don’t know your alternatives or don’t have any (gasp!) and this will affect your bargaining position. Alternatives could include other potential partners or the ability and resources to do independently whatever you are thinking about doing with a partner. Having alternatives gives you negotiating room-to-move. Similarly, increase your bargaining position by keeping two parties at the negotiations table for as long as you can.
- Formulate persuasive arguments for your legitimate “asks” of the other side. What’s fair for the agreement? You can find out by looking at other precedents for these kinds of agreements in your industry. These benchmarks are needed both for you to make your asks convincing and for the other side to present to their stakeholders for their buy-in.
- Determine the consequences of any foot dragging on any side and put them in the agreement. Consider putting minimum royalties, minimum investment, or milestone triggers in there. For example, write it in that the agreement becomes non-binding if your partner blows the regulatory filing date you’ve agreed on. These legal consequences could be a life-saver if the partnership goes off the rails.
Whatever you do, before beginning negotiations, avoid doing nothing. Remember that the relationship starts from the instant that the parties start talking and any relationship built early on will carry forward to the future. Starting off in the right way can help you avoid any unwelcome surprises during the negotiations process and is imperative for the future success of the relationship.
Want to hear John’s four must-do tips before beginning licensing negotiations? Check out the video “4 Hot Tips for Preparing for Licensing Negotiations”.
Looking for more pointers on how to prepare for licensing negotiations? Watch the whole presentation at Setting the Table: Preparing for licensing negotiations.
Keri leads the strategic design, development, marketing and expansion of cutting edge business programs in the areas of entrepreneurship, innovation, marketing, HR, management and leadership at U of T’s School of Continuing Studies. See more…