Tools for Technology License Negotiation (Patent/Copyright)

Transcription

1 Tools for Technology License Negotiation (Patent/Copyright) Mark Reeves Oak Ridge National Laboratory Albuquerque, New Mexico April 26, 2010

2 2 Agenda Strategy Development - Technology-based Strategy - Company-based Strategy The License Application - Business Plan Pro Forma Financials - IP Valuation Calculation Term Sheet Questions

3 Disclaimer! The course will: - Provide tips on what has worked in the past when negotiating licenses and other agreements - Share tools that have been successful - Help you avoid the effects of misinformation or lack of information Not the only way to do this business PLEASE SPEAK FREELY DISAGREE, OFFER ALTERNATIVES, ASK QUESTIONS! 3

4 4 Agenda Strategy Development - Technology-based Strategy - Company-based Strategy The License Application - Business Plan Pro Forma Financials - IP Valuation Calculation Term Sheet Questions

5 5 Strategy Development Develop a Formal, Technology-based Licensing Strategy Good way of recording data about the technology portfolio and the institution s goals in licensing Offers a way to allow management and inventor participation/approval in developing the strategy - Keeps everyone on the same sheet of music - Could be very useful if future internal disputes arise Will be a living document (many updates as new data are gathered)

6 6 Strategy Development (Cont.) Develop a Formal, Technology-based Licensing Strategy (Cont.) An internal formal document, with management approval Documents the: - State of the intellectual property/technology - Market - Competition - Fields of use - Candidate licensees - Pricing parameters - Other key factors

7 7 Strategy Development (Cont.) Attachment A Technology-based Licensing Strategy Template

8 8 Strategy Development (Cont.) Qualify the Partner Assume we have an expression of licensing interest and need to formulate a term sheet (i.e., outline of proposed license agreement) We re looking for an indication of ability to perform

9 9 Strategy Development (Cont.) Qualify the Partner (Cont.) Diligence on prospective licensee(s) - Dun & Bradstreet reports - Company website - SEC filings ( Yahoo! Finance, Motley Fool, etc. - Google them! - Income statement & balance sheet

10 10 Strategy Development (Cont.) Qualify the Partner (Cont.) Diligence on prospective licensee(s) (Cont.) - Formal market opportunity analysis - Proprietary databases - Market reports - Etc. - History on new product introduction - Technology licensing history - Dirt? - Stable market player Reference librarians are a superb resource!

11 11 Strategy Development (Cont.) Update Licensing Strategy to Company-based In addition to information already in the Technology-based Licensing Strategy, document company-specific information that may be: - Critical in determining if this candidate is a good licensing prospect - Very useful during any negotiations that may ensue

12 Strategy Development (Cont.) Attachment B Company-based Licensing Strategy Template 12

13 13 Agenda Strategy Development - Technology-based Strategy - Company-based Strategy The License Application - Business Plan Pro Forma Financials - IP Valuation Calculation Term Sheet Questions

14 14 License Application A License application should provide you essential data from which to produce a term sheet. - Specific company data (company name, state of incorporation, contact info) - Verify the authority of the company s negotiator and signatory - Financial data (pro forma on revenues and margins based on products commercialized from your IP) provided by the candidate licensee - Information to help you with export control issues, exclusivity determination, fields of use, etc. Probably the most useful tool in the toolkit Discourages tire-kickers!

15 15 License Application (Cont.) From the license application and its associated business plan and pro forma financials, calculate the financial consideration: - Up-front fee - Minimum annual fee - % sales - Perhaps equity - Perhaps sponsored research Calculate the potential profits and use the 25% rule Base the term sheet consideration on their financials, where possible

16 16 License Application (Cont.) Attachment C Technology License Application Template

17 17 License Application (Cont.) Attachment D Execution Fee, Royalty Rate, and Minimum Annual Royalty Calculations Based on Business Plan Pro Forma Financials

18 18 Agenda Strategy Development - Technology-based Strategy - Company-based Strategy The License Application - Business Plan Pro Forma Financials - IP Valuation Calculation Term Sheet Questions

19 19 Term Sheet Term sheet should provide your first offer to candidate licensee regarding - Royalty rate - License fee - Expectations on licensee bearing cost of IP protection - Key legal terms (indemnification, warranties) - Sublicensing - Termination - Perhaps equity - Perhaps sponsored research - Etc. Calculate the potential profits and use the 25% rule Base the term sheet consideration on their financials, where possible Always ask for more than you expect to get

20 20 Term Sheet (Cont.) Attachment E Term Sheet Template

21 21 Agenda Strategy Development - Technology-based Strategy - Company-based Strategy The License Application - Business Plan Pro Forma Financials - IP Valuation Calculation Term Sheet Template Questions

22 Followup/Questions??? Mark Reeves Oak Ridge National Laboratory (865)