THE MINISTRY OF FINANCE

UNIVERSITY OF FINANCE - MARKETING

FACULTY OF COMMERCE

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ESSAY

Subject: INTERNATIONAL BUSINESS NEGOTIATION

Topic: “NEGOTIATION IN LICENSE CONTRACT”

Class: CLC_20DTM03

Trần Hiếu Trung – 2021006554

Nguyễn Thanh Vy – 2021006557

Phạm Thị Hoàng Yến – 2021002090

Lecturer: MBA Ta Hoang Thuy Trang

Ho Chi Minh City, October 2022

Table of Contents
ABSTRACT: ................................................................................................................ 1

1. INTRODUCTION ................................................................................................... 1

1.1. What is license contract? ................................................................................... 1

1.2. Subject matter .................................................................................................... 2

1.3. Heads of Agreement .......................................................................................... 3

2. THE PROCESS OF NEGOTIATING A LICENSE AGREEMENT ................ 4

2.1. The Preparation Phase ....................................................................................... 4

2.2. The Discussion Phase ........................................................................................ 5

2.3. The Proposing and Bargaining Phases .............................................................. 10

3. THE GOLDEN GUIDELINES OF NEGOTIATION ......................................... 10

REFERENCES .......................................................................................................... 13
Negotiation in license contract

ABSTRACT:

Ideas, innovations and other expressions of human creativity are converted into
private propertyand protected by law through the intellectual property system. As
property, they are tradable assets. Licensing, the right granted by an owner ofsuch an
asset to another to use that asset while continuing to retain ownership of that asset, is an
important way of creating value with these assets.

Licensing creates an income source, disseminates the technology to a wider group

of users and potential developers and acts as a catalyst for further development and
commercialization.

1. INTRODUCTION

1.1. What is license contract?

A license agreement reflects certain fundamental concepts. First, it is the outcome

of a business strategy and is a business relationship. Both the licensor and licensee must
carefully consider whether entering into one or more licensing agreements fits into the
business plan of the company, whether the expected revenues would be sufficient to
justify the costs involved in engaging in licensing activity and whether the financial
terms make sense to both parties. These factors may seem obvious but they are well
worth mentioning. Accordingly, it is important that the parties' objectives are clearly
understood and are complementary, and there is a recognition of the mutual need to
ensure that the arrangement is successful. This will be assisted by an agreement which
appropriately and equitably addresses the main elements or key issues.

Secondly, a license agreement is a contract. This means that the legal requirements
for a binding and enforceable contract are necessary. These include that the parties have
the legal capacity and the intention to enter into a contract, that there is offer and
acceptance and that there is valid consideration, such as a payment on signing.

Thirdly, the feature that distinguishes a license agreement from other agreements
or contracts is that the subject matter is intellectual property, which the licensor grants
the licensee the right to use. Therefore, without intellectual property there is no

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technology licensing. There may be other important related issues covered either in the
same agreement or in a separate one, such as development, consulting and training,
investment, manufacturing, sales and so on.

A license may include the right to use a trademark along with rights to make, use,
sell, distribute and/or import a patented invention. A license may not mention a specific
patent by number, but rather provide the specifications of a product and grant all
intellectual property rights necessary to manufacture and sell such a product. In sum,
the categories cannot be too rigid, and an agreement can include additional rights such
as the carrying out of further research or developmentor the provision of technical
assistance.

1.2. Subject matter

The subject matter of a license agreement may include creations such as

inventions, confidential information, the creativity expressed in novels, plays, movies,
music, the names of goods and services, business identifiers, etc. These can be owned
and protected under intellectual property laws, which, to reiterate, include patents,
utility models, trade secrets, trademarks, geographical indications, industrial designs,
topographies of integrated circuits and copyright, as well as those that protect against
certain types of unfair competition.

The subject matter is the first main section of the license agreement and it will
have an important influence on the contents of the agreement. Thus, in a license
agreement involving computer software there are likely to be clauses specifying the
permitted use or application and requiring confidentiality to be maintained. In a
trademark license agreement, particular attention should be paid to controlling the
proper use of the trademark in advertising and marketing, and to maintaining the quality
of the product or service bearing the trademark. So, trademark license permits the
licensor to have access to samples, to inspect and the like. A common pitfall in license
agreements is for the licensee to neglect to obtain all of the rights that are needed in
order to utilize the technology. As the subject matter of a license agreement often
includes confidential information as well as inventions, as much attention as is devoted

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to the licensing of patents should also be devoted to such confidential information,

including know-how and licensed trade secrets. In this connection, it is important to
include in the agreement one or more clauses superseding the confidentiality agreement
entered into prior to the negotiations. such clause{s) would, inter alia, take into account
the following:

(a) Define what is meant by confidential information. Such a definition should,

preferably, include not only that which is disclosed to the recipient but other information
which it may receive or be made aware of as a consequence to the agreement;

(b) Ensure that the licensee has or undertaken to put in place procedures for
restricting the use of the information for the purposes as specified in the agreement and
safeguarding it against disclosure. This may also include the possibility of verifying or
auditing such procedures by the licensor or his authorized representative;

(c) Provide for liability in the case of accidental or negligent disclosure of the
information to third parties who are not subject to the provisions of the license
agreement and who are not otherwise informed of the confidentiality of such
information;

(d) Spell out the exceptions to the obligation, such as if the information is publicly
available, that is, it is already known or has become known to the recipient in a
legitimate manner or if it had been independently developed by the recipient;

(e) Clarify as to how long these provisions will continue after the termination of
the agreement and specify when the information should either be returned or destroyed.

1.3. Heads of Agreement

The Heads of Agreement (sometimes referred to as a Term Sheet or a Proposed

Basis of Agreement) document is an outline of the intention of the parties concerning
the terms of the proposed agreement and/or a summary of the key issues. lt is a useful
exercise for each party to the negotiation to prepare a Heads of Agreement document
which will serve to clarify their own positions, expectations and needs. lt will thus be

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an excellent basis for the negotiation. One version could be for internal use and the other
made available to the other party.

lt is important to keep in mind that, if the parties do not wish to be legally bound
by the Heads of Agreement document, that it expressly state it in writing to avoid any
confusion at a later stage. In order not to be constrained during the negotiation, it is
better to expressly opt to be not bound by it. In the example provided, it is explicitly
stated that the document will not bind the parties.

2. THE PROCESS OF NEGOTIATING A LICENSE AGREEMENT

2.1. The Preparation Phase

This is perhaps the most crucial because inadequate preparation is nearly

impossible to recover from or overcome. Preparation encompasses everything
mentioned thus far in this Manual. That is, both the licensor and licensee would have
determined by this point that a license arrangement is in keeping with their respective
business objectives for one reason or another. They would have identified each other as
potential partners with the ability to complement, strengthen, and realize each other's
business goals.

All of the information obtained so far during the bigger preparatory phase will
now be useful. The following considerations may be able to clarify and focus the
discussions:

After conducting a preliminary study of its business objectives and determining

that a licensing agreement would help that purpose, it is now time to precisely define
what the goal is and how it may be achieved.

The lead negotiator should ideally comprehend the whole corporate strategy. He
or she would ideally be supported by a team of professionals from the financial, legal,
and technical fields. Their duties and responsibilities must be specified, and each team
member must comprehend the overarching goal, and the big picture so that no one
person makes a spontaneous contradiction or compromise that has not been agreed upon
by the others.

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Prepare a summary of the important commercial problems to be addressed in the

license agreement, as well as the party's viewpoint on each such issue. This document
is known as a Heads of Agreement, Term Sheet, or Proposed Basis of Agreement. It is
also necessary to determine the maximum (or best) position and the minimum (or
worse) stance for each issue. It is frequently suitable to table the Heads of Agreement
to commence or advance the negotiations. When compared to a draft licensing
agreement, which could be much lengthier, issues can be negotiated more easily and
quickly with a Heads of Agreement of two to five pages.

The difference between conversation, proposal, and negotiation is normally clear,

but because the parties might move quickly through these stages, the distinction
becomes blurred. However, negotiators must always be aware of the stage of the
negotiation.

2.2. The Discussion Phase

Typically, the licensor promotes the benefits and opportunities provided by its
technology, while the potential licensee reviews documents and material under a
confidentiality agreement. The licensee may additionally express his thoughts on the
importance of the license to his business and why he is interested. This discussion is
still broad.

Advantage chart

Negotiating technology transfer is complicated because there are many key terms
and conditions for each term there can be many positions, from the most advantageous
position to the disadvantageous position best. Negotiators have the difficult task of
remembering many things main account and various positions, solve technical
problems and always must assess how the key provision affects the business objective
business of the license contract.

The position of retreat and the position of compromise

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For some key terms, you will have withdrawal positions that reflect a position
more unfavorable than the optimal position, but still acceptable for the item your
spending.

Or if there is a direct conflict between the parties' goals on one thing specific clause
that is not of too much importance to any party, the "compromise" on that provision is
completely impossible. You can accept the compromise on some key provision that is
in an unfavorable position (in the position of negative position in the graph), but is still
acceptable in the context where you will get better positions in other key terms.

For ex: It will be most beneficial when you obtain a license for all ownership
rights. The wisdom associated with a product that you want to produce or sell. It would
make sense best when you reach a permanent deadline. However, in reality, you can
only request a license for one area of technology or only a Patent because you do not
intend to exploit the in all areas of the Patent. And the license term may be limited to 5
years because, in fact, you may not need longer license period.

How can it be adjusted and changed?

In many cases, you can change the perception of the terms. This usually happens
because you know new facts. A position that is not clear at the outset, a creative
opportunity may arise throughout the negotiation process. This is sometimes called
“thinking out of the box” and relies on creativity to get out of the way if the parties
cannot find a way to compromise on a key provision. Be carefully when looking for
immediate creative alternatives, especially when you're tired or in a hurry to negotiate.

The paranoia about negotiation style

People often think that negotiation is influenced by negotiating style in a game of

wits or that style is a myth that leads to mistakes and wasted negotiation. Always enter
a negotiation thinking that your partner's negotiating team is just as determined and
skilled as yours.

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A successful negotiation requires that you and the negotiating team keep track of
the positions of key terms and regularly use the List of Terms as a guide.

Your ability to analyze and remember the relationship between key terms and your
business goals will bring success to negotiations. This is true for the following three
reasons:

First, you will know your position and the possible retreats and compromises.

Second, successful negotiation requires you to be able to explain clearly and

convincingly at the right time to the other party's needs and goals.

Third, careful preparation will increase your confidence and judgment. You won't
have to tell your partner to let them know you have real intentions. A clear
understanding of your business needs is the most effective way of expressing it.

The only factor that is critical to a successful negotiating team is thorough

preparation through the use of a List of Terms as a guide with a full understanding of
both sides' views on each item. key terms, as well as the strengths of each party in the
negotiation.

How to start negotiations?

It is very helpful to start the negotiation with a preliminary meeting. Your efforts
to reach procedural agreements during this meeting will help bring about initial success
for both parties. You can make and sign confidentiality agreements. During this
preliminary meeting, you can also introduce the partner to the business goals and views
on key terms.

Discuss and decide on a negotiation deadline and schedule. Discuss and decide
whether to negotiate face-to-face, by correspondence, all at once (for a period) or over
a longer period of time.

Usually, if there is a business deadline (e.g., research and development will start
at a certain time) it is best to agree to face-to-face negotiations within a certain period
of time.

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In an informal and low-key way, inform your partner of your business goals when
entering into a license agreement and ask him or her to do the same. Of course, neither
party will disclose detailed business information, and this is not the right time to discuss
the details of key terms. However, giving an overview of your goals will help build the
groundwork for negotiations (for example, our company is interested in this technology
because we see it as an opportunity to produce a product or service that we're interested
in). production and distribution of XXX in market Y, where demand is not yet met).

Place and methods to negotiation

If there is time pressure to close the negotiation, it is important to proceed with

face-to-face negotiations within a certain period of time. Negotiations that are
interrupted or subsequently carried out through correspondence tend to be protracted.
Therefore, a face-to-face negotiation with both sides agreeing on a schedule and
deadline is the most effective way to get to a conclusion.

The location of the negotiation is not the key issue. However, it is important to
have access to the documents you have gathered and the members of the negotiating
team. The location must also be convenient, close to the dining area and the restroom.
It is very helpful to have a laptop in the negotiation room to take notes and refer to the
list of terms and draft contracts.

Discussion

There is no special procedure for this job. Some negotiators like to go through all
the important terms first and then proceed to the general discussion without closing.
Others prefer to go through the main terms in order and try to reach agreement on each.
If an agreement cannot be reached, it is best to continue reviewing the Key Terms to
see what agreements can be reached and, eventually, to return to the more difficult
issues. Some negotiators want to immediately start with a draft contract; If possible,
you should avoid this method because you often have to use tactics to control the
contract situation and pressure to gain advantage on key terms. Try to convince the other
party to believe in the advantages of starting the negotiation with a List of Key Terms
as a powerful tool for both sides to clarify issues.

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Record the negotiation process

During a multi-day negotiation, you may want to exchange notes or stick to

temporary agreements to update explanations of the Terms and Conditions and pass on
a copy to your partner. the next morning for them to review.

When you make progress on a key provision, it is often helpful to restate the
parties' views and write them down. If something is reached, for example an agreement,
it is important to document it. During protracted negotiations, keep a record of the
preliminary content and agreements that have been reached.

The parties negotiate on all contents of the List of Terms, reach a preliminary
agreement on the main provisions and amend the List of Terms according to the
negotiation process. It is important to take breaks.

One member of the negotiating team must use a laptop to record amendments.
Some issues can linger if agreement cannot be reached and then it is often helpful to
move on to other issues to see what outcomes have been achieved.

The role of the lawyer

Ideally, it is important to involve an attorney from start to finish in the negotiation

process. If this is not possible, regular communication with legal counsel is required to
use the List of Terms and for legal due diligence prior to drafting a contract, as well as
during the drafting process. contract.

How to close the discussion and draft the license contract

If the parties have worked on a Term List and have recorded provisional
agreements, then, in theory, drafting a contract should not be difficult. Should not sign
the List of Terms. There are many standard templates for technology transfer contracts
and legal advisors can work diligently to draft a contract from a List of Terms.

For key terms, make sure you've reached a contract, not a mere agreement on some
future point. If a contract does not cover key terms, it may not be valid. Likewise, a lack
of clarity on terms often leads to business conflicts.

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Remember that a contract not signed by both parties is not a contract, except in
very rare cases. A common omission that should be avoided is assuming that the
negotiated written document is “sufficient” to commence implementation when one or
both parties have not signed the document.

2.3. The Proposing and Bargaining Phases

In the proposing phase, the parties are exploring the possible relationship and the
principal commercial terms.

During the bargaining phase, the question may become, "If we grant you an
exclusive worldwide license, you must double the sum payable on signing the
agreement," to which the licensee may respond, "If we double the down payment, one-
half is to be credited against future royalty payable to you on our sales of Licensed
Products." The Golden Rules of Negotiation are being used, and here is the If...

It is far too simple for an unskilled negotiator to agree to one proposal and then
propose another, only to be astonished when it is rejected. The negotiator has the
authority and opportunity to investigate and connect the issues to obtain a better solution
(at least on these issues). Another principle that emerges from this discussion is the
possibility of generating variables or establishing alternative options. There are
numerous options for resolving a dispute or reaching a mutually agreeable agreement.

All of the important phrases in the Agreement variables include, for example,
license exclusivity/geographical territories/scope of license/payment amounts and
timing/royalties, and with a little imagination, additional variables can be created, all of
which can be creatively managed so that the parties feel they have achieved an
agreement that meets their respective business objectives, which is a "win-win"
outcome.

3. THE GOLDEN GUIDELINES OF NEGOTIATION

Guidelines are the principles that aim to provide the negotiator with a practical
framework for the conduct of a negotiation. They are not rules, if transgressed must
mean the negotiation is at an end. Rather, the failure to follow or achieve a guideline is

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intended to alert the negotiator to the need to have an understanding of the current
position and perhaps the need for additional or different actions.

Aim for "Win-Win" outcome.

This is absolutely fundamental. License agreements invariably involve long-term

technical, commercial and personal relationships and, it follows, that for the
arrangement to be successful all parties need to be satisfied with the agreement reached.

Establish the Maximum (or Best) Position, and the Minimum (or Worst) Position
in Respect of Each Issue. This is pati of preparing for the negotiation and identifying
and ranking the issues of importance to oneself, as well as anticipating those likely to
be important to the other. This does not automatically mean that, if in the negotiation a
minimum position is not being achieved, the negotiator should discontinue negotiations.
Rather, being a guideline and not a rule, it requires the negotiator to be satisfied that, in
agreeing to a position that is less than the minimum, there are good reasons. Perhaps
new information has changed the minimum position which was established prior to the
meeting. Or, on another issue the negotiator has achieved an outcome better than the
maximum, and so overall and on balance the negotiator can accept a less than optimal
outcome on this issue. Or this issue is not that important to the negotiator, and/or it can
be justified because it is the last issue and overall agreement can now be reached.

Aim High, but Protect Your Credibility.

This is relevant to the previous guideline, and reflects that it is possible to accept
a lesser position whereas the converse (to increase an offer) is usually impossible.

Ex: If the official price for a new Mercedes Benz is $50,000 and a customer offers
$35,000, it would be only a moment before the sales person was talking to the next
customer. lt is all very well to aim high, but not so high that the offer is not realistic and,
in fad, jeopardizes, if not destroys, the customer's credibility. Rather, the customer
might agree to pay $45,000, and then proceed to negotiate for the first year services to
be free, for the warranty to be extended by a year, for the radio/CD system to be
upgraded, for a tow bar to be installed, and so on.

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Trade Variables That are Cheap for You but Valuable to the Other Party. This is
the best outcome.

Example: The independent engineer's report on he second hand-Mercedes being

purchased shows that repairs of up to $10,000 may be necessary. The customer might
offer to proceed with the purchase if the repairs are carried out and the garage might
agree to do this because the mechanics have little work on hand and spare parts are few
and are at wholesale prices. This is the best variable of all - it is valuable to one party
but is cheap for the other party

Finally, nothing is cast in stone. Everything is Negotiable.

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REFERENCES
(Organization, Exchanging Value: Negotiating Technology Licensing
Agreements: a Training Manual, 2005)

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