1. License Negotiation Workshop for Tech Transfer Professionals Real-World Tactics for Maximizing Licensing Revenue May 14, 2009

2. 2 Phases of Deal-Making Marriage Dating Courting Bliss or Bust Deal-Making Pre-Negotiation Negotiations Alliance Management

3. 3 Less than Maximum Revenue?  Maximize portfolio revenue ► Focus on higher priority deals ► Increase deal flow  Larger, non-revenue issues  Reputation

4. 4 Pre-Negotiation Phase  Technology Assessment  Marketing  Due Diligence  Stakeholder Analysis  Needs / Wants Identification  Valuation / Comparables  Negotiating Style  BATNA

5. 5 Before The Negotiation  Technology Assessment  Marketing ► Group ► Targeted ► Organizational Selling

6. 6 Before The Negotiation  Technology Evaluation ► Verified interest before term sheet ► Think like a product manager ► Tipping point

7. 7 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

8. 8 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

9. 9 Valuation & Comps  Valuation ► Rules of thumb ► Risk-adjusted NPV  Comparables ► Terms and license structure  Sources ► Internal ► External

10. 10 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

11. 11 Negotiating Style  Determine the long-term relationship needed  Long-term: ► Mutual respect ► Initial offer should be reasonable  Short-term: ► Seek maximum value

12. 12 Negotiating Style  Principled ► Keep emotions in check ► Counter their emotions with a lack of emotion  Consultative  Appropriate to the situation

13. 13 BATNA  Consider key stakeholders  Scenarios  Compare  Anticipate theirs

14. 14 Questions & Answers

15. 15 Negotiation Phase  Negotiation Goals  Determine Participants  Positions v. Interests  Anticipate their BATNA  Create Options  Update Key Stakeholders  Relationship  Commitment to the deal

16. 16 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

17. 17 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

18. 18 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

19. 19 Key Deal Terms  Downpayment  Milestones  Rate  Minimum  Equity

20. 20 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

21. 21 Post-Negotiation  Legal Review & Execution  Compliance  Long-term Relationship

22. 22 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

23. 23 Questions? Michael VillalobosJohn Geikler Cleveland ClinicVTIP villalm@ccf.orgjgeikler@vtip.org 216-445-0812540-443-9228