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““Win-Win” LicensingWin-Win” Licensing Agreement: Agreement: Negotiating and Drafting StrategiesNegotiating and Drafting Strategies
August 12 – 14, 2008CTSW, P.C. © 2008 All Rights Reserved
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Presenters:
Y. Jerry Cohen
Cohen Tauber Spievack & Wagner P.C.
420 Lexington Avenue, 24th Floor
New York, New York 10170
Tel: 212.586.5800
Email: [email protected]
Laurence S. Tauber
Cohen Tauber Spievack & Wagner P.C.
420 Lexington Avenue, 24th Floor
New York, New York 10170
Tel: 212.586.5800
Email: [email protected]
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Strategies for Negotiating in Good Faith
Recognizing Respective Goals and Potentials
How to Incorporate Those Objectives Into Your Strategies
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Recognizing what Licensors/Designers and Licensees/Manufacturers are each Typically Looking for
Licensors - Royalty revenue Recognition and visibility Brand extension (product and territory) Exploit manufacturers’ manufacturing and commercialization
capabilities (including sales force) Licensees -
Brand recognition and cachet (piggy backing) New fresh product to differentiate itself from the competition Tap new customer base Maximize manufacturers’ manufacturing and commercialization
capabilities (including sales force)
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Licensor/Designer and Licensee/Manufacturer Perspectives
Licensors Demand Reasonable Value vs. Licensee Concern of Overpayment Managing financial risk Capping development and marketing
expenses; creating budgets Royalty reductions; reimbursement for certain
payments Ability to terminate
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Licensors Require Development and Commercialization of Product. Licensees Require Flexibility and Focus on ROI Diligence Monitoring and Reports Remedies
Licensor/Designer and Licensee/Manufacturers Perspectives
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The Ideal “Win-Win” Agreement:
Matches parties’ strengths to responsibilities and objectives Avoiding pitfalls of taking on responsibilities that cannot be
financed or are economically unsound Time frames for obligations – an effective due diligence clause Recognize true market for ultimate product
What are competing products? What sort of pricing will the market bear for the ultimate product?
Recognizing what everyone is looking for and not overreaching means expressing in good faith abilities, expectations, goals, and desires during negotiating process
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License Grant and Restrictions
ExclusiveNon-ExclusiveSemi/Co-ExclusiveGranting ClauseLicensor’s Reservation of Rights
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Territory: Worldwide or Specific Countries
Infrastructure and Abilities of PartnerAvailable Patent, Copyright and Trade Dress
ProtectionStrategic GoalsCertain Rights May be Limited to Specific
TerritoriesOther Issues (e.g. product leakage)
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Intellectual Property: Define Rights
Utility and Design Patents
Copyright Trade Dress Trademark and
Trade Name
Other IP Confidential and/or
Proprietary (trade secret)
Protecting Confidential Information
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IP Prosecution, Maintenance, Defense and Enforcement
ControlCostProtection against competitionManaging IP
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Compensation Structures
Royalty- Bearing License Fixed Sum Per Unit or Period Variable or Fixed Rate Based on Invoiced Amounts or Amounts Received Reductions, Credits, and Caps Bundling Licensees tend to only want to pay royalties on sales
in markets where there is patent or other protection
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Compensation Structures
Upfront PaymentsMilestone and other Payments
Based on sales levels
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Compensation Structures
Profit Sharing Net sales less cost of goods and
enumerated expenses Can be more lucrative than royalties Enhanced decision-making posture Beware of sharing losses
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Diligence
Standards Best Efforts Commercially Reasonable Efforts Reasonable Efforts Internal Standard
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DiligencePerformance Requirement
Minimum Sales or Profit Minimum Royalty Payments
Consequences True-up Convert to Non-Exclusive Reversion of Rights Liquidated Damages Termination of Specific Rights or Agreement
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Other MattersIndemnificationSublicensing
Licensor Concerns Licensee Concerns
Change of ControlNon-CompetitionGovernance and MonitoringLicensor SupportCreative Business terms to close a deal
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Termination
Grounds Standard Termination Provisions Licensee Contests Validity or Ownership of
Licensor’s Rights Commercially Unviable May Be Country Specific, Product Specific or
Complete Other
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Termination (Continued)
Effects of Termination Reversion of Rights Reimbursement of Certain Costs Survival of Sublicenses Access to IP and License to Use It
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Dispute Resolution
Internal EscalationNon-Binding MediationBinding ArbitrationJudicial Intervention
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Presenter Biographies
Laurence S. Tauber has practiced corporate, business and commercial law for over twenty-five years, with a principal emphasis on corporate and commercial transactions, intellectual property and licensing. One of the founding partners of CTSW, Larry has developed expertise in public and private company mergers and acquisitions law, leveraged buy-outs and corporate finance, asset-based lending and leasing (representing borrowers as well as banks and commercial lenders) and real estate law, and provided general corporate, business and securities counseling to both public and private corporate clients
Y. Jerry Cohen has been engaged in business and commercial law for over twenty years. Jerry counsels furniture manufacturers, designers and national, regional and local furniture retailers with their corporate, commercial, licensing and intellectual property transactions, as well as day-to-day matters. One of the founding partners of CTSW, Jerry routinely counsels clients in a wide range of transactions, including strategic alliances, joint ventures, licensing, marketing and distribution arrangements, acquisitions, divestitures, restructurings and financings. Jerry writes the online legal blog for Furniture/Today.