RELATIONSHIP BUILDING One Key To Licensing Success

1. RELATIONSHIP BUILDINGOne Key To Licensing Success By Patricia A. Martone Fish & Neave LES NY Chapter May 20, 2003

2. My Perspective Is Based On My Personal Experience • Twenty-four years of experience as a trial lawyer before beginning a parallel career in 1997 as lead negotiator in major patent licensing campaigns. Have since negotiated about 35 agreements. • Litigation is about advocacy-persuading a judge or jury to find for your client. • Negotiation is about persuading another party to reach a mutually beneficial agreement.

3. Negotiation Is All About Closing The Deal • We all know that deals can fall apart at any time.

4. Reasons That Deals Fall Apart • Failure to reach agreement because parties are entrenched in their positions. • Surprise issues that pop up- in areas like scope of licensed rights, covenants not to sue, assignment clauses, etc. • Impact of persons in authority not at table. • Difficulties in reducing the agreement to writing • Failure to get final approval.

5. There Are “Best Practices” In Licensing, But No Hard And Fast Rules For Negotiation • In the Federal Courts there are the Federal Rules of Civil Procedure, Local Rules, Rules of individual judges, and Federal Rules of Evidence

6. There Is No Neutral Authority To Rule In Your Favor • Therefore, everything depends on the negotiator’s ability to persuade the other side in negotiations conducted without any “rules of engagement.” • Many negotiations are with companies located in other countries where culture plays a major role in the dynamic of a successful negotiation.

7. Uncertainty Increases With Negotiations In Other Countries • Culture plays a major role in the dynamics of a negotiation. • Culture can relate to “negotiation manners”, as well as different business practices and laws.

8. The Glue That Holds It Together Is A Good Working Relationship • If the negotiators establish a good working relationship they can make a deal. • Negotiators must demonstrate firmness and flexibility at the same time as they seek effective communication.

9. Relationships Must Be Built • Relationships must be built in the context of differing goals and styles. • For negotiations between parties resident in different countries, the relationship must also be built in the context of different laws and customs. • Japanese companies are particularly skilled at building such relationships. • Much of what I have learned on this subject has come from negotiating for and against Japanese companies.

10. Sophisticated Parties Study The Other Sides’ Negotiators • Good preparation for a negotiation includes study of other sides’ negotiators. • That study should encompass prior experience, background, personality and negotiating style.

11. Sophisticated Parties Select Negotiators With A PriorRelationship With The Other Side

12. Examples Of Prior RelationshipsThat May Prove Helpful • Successful completion of earlier deals with the same negotiator. • Prior working relationships. • University connections. • In my negotiations against Japanese companies, I frequently encounter my former students from the NYU Law School and former Fish & Neave associates.

13. Other Issues In Selecting The Negotiating Team • At least one team member should be a technologist. • For patent licensors, consider bringing the inventor at some point in the negotiating process. Shows confidence in position, plus allows the inventor to explain the value of the invention. • Bring a negotiation experienced interpreter for foreign negotiations even if the participants can speak English. Avoids misunderstanding and embarrassment.

14. Selecting The Venue For Negotiation • The convention is to hold at least first meeting at office of licensee. • If the licensee is in a foreign country, and you represent the licensor, accept that you may need to make multiple trips to the foreign country. • Avoid the temptation to try to “rush” the negotiation to avoid multiple trips. • The negotiating relationship is working well when, after multiple meetings, the parties take turns visiting each other.

15. Preparation For Negotiation In Foreign Countries • Learn the business customs of the country. • Learn the business etiquette of the country –what seat do you take at the table? Do you have lunch or dinner with the other side? • Business cards in the language of the country you are visiting are a nice touch.

17. Food And Beverages During The Meeting • When I was a young lawyer, my friends who were corporate lawyers told me about endless negotiations where no food was served in an effort to put the other side at a disadvantage. • Hungry negotiators are cranky negotiators. • If you are the host, and want a productive meeting, feed people in a reasonable way.

18. Conduct Of The Negotiation • Patience is a virtue. • Many people mistakenly believe that the more vigorously they advocate their position the better off they are. • A negotiation is not about winning an argument. If the other side believes they must capitulate to make a deal, it is unlikely to happen.

19. Patent Licensing Negotiations Usually Begin With Technical Discussion • Licensors would like to go directly to a discussion of money. • Licensees want to hear about the technical merits of the invention and infringement, so that they can attack these points and get a price reduction.

20. Telltale Signs That The Meeting Is Going No Where • The negotiators for the other side are unwilling to share their views on any subject • The other side asks lots of leading questions (most commonly done by lawyers) • Persons needed to negotiate are missing • Junior personnel are sent to start an argument

21. Establishing A Dialogue • Once both sides have stated their opening position there is little point in repeating these positions. • Start a discussion about a smaller point, and see how it goes. • Listen very carefully, even to casual remarks. Skillful negotiators deliver a subtle message.

22. Learn To State The Points Of Agreement • Good negotiators understand the need for clarity. • Good negotiators restate the points of agreement, and identify the points of disagreement.

23. Silence Is Golden • Don’t feel the need to talk continually. • Successful Japanese negotiation style includes the ability to sit still for two minutes without saying anything. • Those people with their eyes closed during the meeting are collecting their thoughts and energies.

24. Never Threaten • Everyone knows if litigation can result from a failed negotiation-threats only add to the perception that capitulation is needed to reach agreement. • Threats can also backfire if you don’t follow through.

25. Avoid Overstatement • Remember that people will check up on what you said. If you are proven wrong, it will affect your credibility.

26. The “Just Say No” Strategy • Decide before the meeting what is and what is not an acceptable agreement. • “Just Say No” in polite terms to unacceptable offers, but do not argue. • If arguments start, its time for a break.

27. If the Parties Reach An Impasse, It Is Time To Stop • If the other side is angry, hostile and/or abusive from the beginning of the meeting, make it a short meeting. If, for whatever reason, the other side refuses to enter into a dialogue, no deal is going to be made, at least for now. • Pack up your papers and leave, even if you traveled 7,000 miles and the next step is to sue.

28. The Last Issues To Be Resolved Before Closing Are The Hardest • Unless the negotiators for both sides can communicate with each other, it will be difficult to close. • If one party begins to balk, the negotiators for the other party must have established a sufficiently good relationship to confront and press the negotiators for the balky party.

29. Special Issues For Settlement Of Litigation • It will be difficult to settle litigation if lead counsel for both parties never speak to each other. • Therefore, if it is in the client’s interest to settle, lead counsel should be establishing a dialogue with lead counsel for the other side • Begin with discovery issues. Establish a track record for resolving issues.

30. More Litigation Issues • It is difficult to settle a case which is run by associates on both sides. • It is difficult to settle a case when the parties have personally attacked each other and their counsel. • It is difficult to settle a case where the parties have run up a huge bill fighting with each other.

31. Cases Are Resolved On The Merits • Judges dislike personal attacks and endless disputes. • The strategies that make settlement difficult also do not help in the courtroom. • Focusing on the merits puts you in the best position in both litigation and licensing.

32. Final Thoughts • Successful negotiators are perceived as fair and reasonable. • Successful negotiators have good people skills. • Successful negotiators are good listeners. • Successful negotiators know how to be good advocates for their position without being overly confrontational.

33. THE END