Insights
Top 10 Licensing Do's and Don'ts
| # | Do's | Don'ts |
|---|---|---|
| 1 | DoWork with multiple potential partners in a structured process, if the demand can be generated | Don'tLet one partner speed you up too much, or let another slow you down |
| 2 | DoUnderstand the value of your technology based on comparable deals and how you fit with other firms' needs and goals; you want to prepare the first draft of the term sheet | Don'tDraw a line in the sand around a single deal element like royalty rate – it's the overall package that counts |
| 3 | DoKnow your market and how you satisfy unmet medical needs plus your distinctive competitive position; build target product profile and go/no go criteria | Don'tProject clinical data showing statistically significant separation between active and placebo groups based on a planned clinical trial [Yes, I saw this at JPMorgan!] |
| 4 | DoMake sure you understand the strengths and weaknesses of your patent portfolio; shore it up before you start talking to third parties | Don'tTell potential partners you have no IP challenges on obviousness, inventiveness or infringement grounds, unless you've done your homework |
| 5 | DoUnderstand that the value of your technology is what a third party is willing to offer you for it today | Don'tAccept predatory offers: e.g. “We've got $1 million left in our research budget if we close the deal before year-end” – decline unless that valuation is one you can live with long-term |
| 6 | DoUnderstand the value of a proposed deal both for you and for your partner. Hire an experienced spreadsheet jockey to model economics | Don'tTell pharma partners you will garner a 32.4% market share and peak sales of $3.5 billion – unless you've really done your homework! |
| 7 | DoFirst be calm and analytical. Only later be passionate and emotional. | Don'tLicense your whole company to a single partner without exacting a control premium |
| 8 | DoHave a credible and real alternative option until the final contract is executed | Don'tAssume that contract drafting is transparent or fair: their lawyer is earning $1,000/hour for a reason |
| 9 | DoGive one person authority to negotiate the best deal they can, subject to CEO and board approval | Don'tHave a committee negotiate the deal |
| 10 | DoInsist on a “use it or lose it” clause where the license reverts to you if commitments are not honored | Don'tPlan to slice the field of use as thinly as Prosciutto di Parma! |
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