Businesses often come up with clever products only to discover someone already holds the patent to all or a portion of the technology needed to implement their idea. In order to create their product, they need to enter into a license agreement with the owner of the technology. Even if there is no patent involved, sometimes it’s faster to leverage someone else’s work than to redevelop it on your own.
Research First
Before you contact the company to open negotiations on licensing their technology, do some research first. Understand their business, how they’re currently using the technology, what other agreements they already have in place, and what you’re bringing to the table that is unique. Some businesses hold technology and license it out, focusing their efforts on research and development while letting others commercialize. Some businesses corner a specific market but don’t have the ability or interest in expanding to different industries or geographic areas. Gaining insight into the company, their interests, and their weaknesses lets you come to the table with a stronger proposal.
Craft Your Proposal
You have to start with the big picture and then work down to the details. Your proposal should outline the technology you’re interested in licensing and some key terms, such as whether it is an exclusive license or what the scope of the license will be, and what fees and royalties you’ll pay. You’re just getting a feel for the other party to see what type of agreement they are interested in big picture and then you can work down to the details.
It’s helpful to have a lawyer involved early in the process, however, so they’ll have a clear understanding of the goals of each party and can start putting together an agreement that reflects each party’s wishes. Contracts can get very much into the weeds of the agreement between you and the other party, but those details can become important over the years of a business relationship.
Take Your Time
Don’t be in a hurry to rush into a deal or you’re not likely to get a good deal. Before entering a negotiation, first know what you’ll do if you can’t reach an agreement. With this knowledge, then you’ll know when you should walk away from the table and how much you’re willing to negotiate. Negotiating the details of a license agreement will take time, especially if it’s a larger or more complicated agreement.
Having a positive attitude and looking for ways to collaborate often helps negotiations go smoothly. When both parties get something they desire out of the agreement, then things are likely to proceed smoothly. If one party “wins” the negotiation, then the on-going business relationship is likely to sour. The relationships you’re building now as you negotiate the agreement and work through the increasingly detailed terms is the relationship you’ll have going forward as you’re handling technology transfer and working towards new technology together.
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