April 25, 2018 April 25, 2018 In-House Counsel Conference

Transcription

1 NEGOTIATION CONSIDERATIONS April 25, 2018 April 25, 2018 In-House Counsel Conference

2 Presenters: Katherine Kelton, General Counsel & Corporate Secretary, Staywell Ian Wallace, Senior Director, Legal & Regulatory Affairs, Lassonde Pappas and Company John M. Neclerio, Partner & Chair of the Technology Transactions, Licensing and Commercial Contracts Group, Duane Morris, LLP Wendy M. Simkulak, Partner, Duane Morris, LLP

3 Four Traits Possessed by Successful Negotiators: 1. People who set high (but realistic) goals for themselves; 2. Capacity to Develop Confidence in their own Positions; 3. Ability to Put Themselves in the Shoes of their Adversaries; and 4. Ability to Listen and Ask Questions of Their Opponent. Charles B. Craver, The Negotiator Magazine, November 2012

4 What is a good negotiation? DILBERT 2013 Scott Adams. Used By permission of ANDREWS MCMEEL SYNDICATION. All rights reserved.

5 Several Factors for a Successful Negotiation: Before the Negotiation: 1. Prepare Ahead of Time and Do Your Research / Homework 2. Use the Power of the Draft Document 3. Take Control Control the location, timing, topics and pace of negotiation may create an advantage.

6 Several Factors for a Successful Negotiation: Before the Negotiation: 4. Know What You Want and Prioritize or Frame Your Negotiation on a Few Key Points Know your top objectives Nothing is for Free (i.e. Don t Give Anything Away Without Setting Yourself Up to Get Something in Return) 5. Know When You Are (and always be) Willing to Walk Away or BATNA (Best Alternative to a Negotiated Agreement) 6. Know the Other Side and Be Prepared

7 Several Factors for a Successful Negotiation: During the Negotiation: 7. Find Points of Agreement and Prepare Options for Mutual Gain or Show the Other Side How their Needs will be met (i.e. Offer benefits to the Other Side for Accepting Your Requests) Make the other Side feel like you were being reasonable 8. Convey Confidence and Not Cockiness (and Don t be afraid to ask for what you want) 9. Aim High and Expect the Best Outcome / Be Positive 10. Be a Good Listener

8 Several Factors for a Successful Negotiation: During the Negotiation: 11. Use Facts and Not Feelings - Getting to Yes Separate the people from the issues and try to problem solve and neutralize conflict by sticking to objective and easy-tojustify principles of fairness. Also, don t take the other person s behavior personally. 12. Question Rather Than Demand If the other party is taking a hard line on an issue, ask them why? Ask open ended questions to get the other side talking about a subject. 13. Create a Collaborative Tone and End on a Positive Note When you have agreed on something, say thank you.

9 Several Factors for a Successful Negotiation: During the Negotiation: 14. Break the Negotiation into Parts reach an agreement on each part separately 15. Do Not Put Off the Harder Topics You should make everyone aware that they exist and that there is an expectation at the beginning that, if you are going to go through the trouble of working through other issues, when you get to the harder ones, there is an expectation that each side will be reasonable. David A. Wachtel, Hautacam Consulting Inc., 2004 Ed Brodow, The Negotiator Magazine, February 2015

10 Negotiation Scenario #1: A licensor is licensing SaaS software to a licensee and will be hosting the licensee s data on its platform. The agreement licensing the SaaS software has a limitation on liability provision that limits the Licensor s liability to 3 months of charges, which is a somewhat unreasonable limit. I know that I am handling your sensitive consumer data but it is the policy of my company that we limit our liability to 3 months of direct damages As the licensee, what do you do?

11 Negotiation Scenario #1: Extreme Initial Demands/Offers Explain why such a term might be unfair to your company.

12 Negotiation Scenario #2: I know that you are not happy with 3 months of direct damages as a cap for a breach of consumer data. If you can agree that the exception only applies for our gross negligence for a breach of your consumer data, I might be able to get a limitation for this up to 500k, but I don t have the authority for this and will need to check with my client. If you can make this commitment to me though, I can look into it for you. When the licensee agrees to make the commitment that the exception to the limitation is just for licensor s gross negligence for a breach of consumer data, the licensor then comes back and says that the client has only authorized 100k for that commitment. Note though that licensee may have, in its mind, made a commitment that the exception will only apply to the licensor s gross negligence. As the licensee, what do you do?

13 Negotiation Scenario #2: Limited Client Authority When the licensor makes the statement that it will look into it if the licensee can make the commitment, the licensee may wish to say You can look into it, but I am not sure on my end that I can agree to the limited exception for gross negligence and will need to reserve the right to also go back and discuss it on my side.

14 Negotiation Scenario #3: Licensee says I know that we agreed to a cap of 12 months of fees and an exception for your gross negligence up to 500k for direct damages and we were all ready to do it, but I had my client take a look at it and someone in a business unit raised the issue that we would want to recover some costs in such a case that may not be direct damages so we will also need the same type of an exception for the limit on type of damages. If you are the licensor, what do you do in response?

15 Negotiation Scenario #3: Nibble Technique You know that my client has some concerns of their own and, if we are going to accommodate this change, we can do it, but we may have a few other items that we d like to revisit.

16 Negotiation Scenario #4: Counsel for a big company that is a licensee of software says to a small software vendor that it is standard deal terms in the software industry to get an exception to a limitation on liability for gross negligence and willful misconduct and breach of confidentiality. If a company emphasizes it is only asking for standard deal terms, the burden now shifts to the other party to have to argue that there should be an exception to standard deal terms (i.e. there should not be an exception to the limitation for gross negligence and willful misconduct and breach of confidentiality). As the licensor software vendor, what should it do?

17 Negotiation Scenario #4: Standard Deal Terms When someone takes this approach, focus on the facts of your situation and don t worry about what the other party says is standard deal terms.

18 Negotiation Scenario #5: Look, I m tired of having to explain this issue to you. We cannot agree to give you a fixed fee for the project. We simply do not do that type of a thing. Slam fist down on table. What do you do?

19 Negotiation Scenario #5: Anger / Aggressive Behavior / Irrational Behavior Sit quietly until the person s anger has subsided and then tell them the reason why it may be difficult for you and your company to proceed with a project that could have the potential to blow past a pre-approved budget and ask them whether they have any ideas about solving both of their issues?

20 Negotiation Scenario #6: Sometimes, when the attorney for the other side does not know what to say because they are not familiar with the law, they may just say no. For example, an attorney for a company that is hiring a consultant might say I need to own all of the rights to the deliverables that you create for me on the project and any other intellectual property that is developed during the work. You, counsel for the consultant, might then say Can my client assign over to you a right to the deliverables and other intellectual property developed during the work, but make clear that my client owns anything that it previously developed and any improvements and also gets a license back from you to any other intellectual property that is developed during the work. The attorney for the company may then just say no. What do you do?

21 Negotiation Scenario #6: Just Saying No You might then ask them why they are saying no and have them explain their position to you and if it then becomes clear that they do not understand it, tell them that it is very important to your business and explain why and tell them that you would appreciate it if they could consider it further.

22 Negotiation Scenario #7: Consulting company counsel and owner counsel are negotiating a services contract for the design of a website where owner counsel knows his client wants to own all of the deliverables and the rights to any other IP created during the website project, but the services agreement initially says all the IP will be owned by the contractor and licensed to company. Rather than directly argue these points, owner counsel says he doesn t understand the provisions. Contractor counsel then begins to explain it to him. During this explanation, contractor counsel confesses that he can give owner the deliverable but that he really needs to continue to have rights in what the contractor used to create it and any improvements on it, and then explains that consultant can assign the deliverable and grant a very broad background technology license to the company for the IP the consultant used to create the deliverable. If you are contractor counsel, what should you have done?

23 Negotiation Scenario #7: Incompetent Counsel (Who are Really Very Competent)! If you are counsel for the contractor, explain your position but don t try to show the other lawyer what you know and wind up giving away more than what you intended at the beginning.

24 Negotiation Scenario #8: A licensor negotiator #1 presents a limitation on liability provision with a 12-month of fees cap on its liability (approx. $100,000) and a reasonable exception for breach of consumer data is a second cap at $1,000,000 and the licensee is happy with this proposal. Then, licensor negotiator #2 looks at it and says that $1,000,000 is much too high, and demands that the second cap has to be $250,000. When the licensee is about to get upset, licensor negotiator #1 calms down licensor negotiator #2 and requests additional concessions (say, $500,000 for the second cap). When licensor negotiator #1 obtains this better term than $250,000, the licensor negotiator #2 attacks the $500,000 second cap amount by then saying he cannot agree to it unless it is only for gross negligence claims. So, the other side works so hard to please licensor negotiator #2 that it forgets that it just went from 1,000,000 as a second cap for the exception for claims of breach of consumer data to $500,000 as a cap and the fact that the $500,000 second cap just covers the licensor s gross negligence. What do you do?

25 Negotiation Scenario #8: Good Cop / Bad Cop As the licensee, you should take a step back from this exchange and think about what it is that you want.

26 Negotiation Scenario #9: A vendor says to a buyer, I d really like a 5 year term, but I can live with a 4 year term or even a 3 year term if a 3 year term is the best that your company can do. If you are the buyer, what should you do?

27 Negotiation Scenario #9: Convincing the other side that they won For the buyer, there might be a tendency to go with the 3 year term thinking that you won a concession from the vendor when the reality was that the vendor was willing to live with a 2 year term and a 3 year term was really excellent for it. For a buyer, you should think about what is best for your company and not fall into the trap of thinking that you are happy with 3 years because you won the discussion concerning 3 v. 4 or 5 years since 3 years is better than 5 years or 4 years. In other words, you should consider whether 1 year or 2 years is better for your business and not be concerned with what the vendor has laid out for you.

28 Convincing the Other Side they Won! DILBERT 2004 Scott Adams. Used By permission of ANDREWS MCMEEL SYNDICATION. All rights reserved.

29 Common Nonverbal Signals 1. Facial Expressions Taut Lips = anxiety Subtle Smile = relief 2. Flinch uncontrolled response to inadequate offer 3. Wringing of Hands / Running Fingers Through Hair - Frustration or tension 4. Eyes Wandering / Looking at Watch Boredom or disinterest 5. Hands Touching Face / Stroking Chin / Playing With Glasses contemplation 6. Steepling (Hands Pressed Together with Hands or Fingers Pointing Upward) / Leaning Back With Hands Behind Head Confidence

30 Common Nonverbal Signals 7. Placing One Hand Behind Head - Distress 8. Open / Uplifted Hands with Palms Facing Out Nothing more to concede / final offer 9. Crossed Arms defensive position 10. Covering and Rubbing One s Eye Disbelief 11. Rapid and Elevated Speech Anxiety and stress 12. Placing Hand Over Mouth Lying Charles B. Craver

31 Special Tactics to Negotiate by Phone: 1. Strategically and comprehensively prepare Because it is a phone discussion, sometimes people fail to prepare as much as they should. 2. Set a goal and design a strategy for each conversation 3. Take detailed notes of the call, especially of commitments You may want to have a colleague or assistant sit in on the call 4. Actively listen and interact and don t multi-task while sitting in your office Marty Latz, The Negotiator Magazine, May 2013