“Win-Win” Licensing Agreement:
Negotiating and Drafting Strategies
August 12 – 14, 2008
CTSW, P.C. © 2008 All Rights Reserved
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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Licensor/Designer and
Licensee/Manufacturers Perspectives
 Licensors Require Development and
Commercialization of Product. Licensees
Require Flexibility and Focus on ROI
 Diligence
 Monitoring and Reports
 Remedies
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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
Exclusive
Non-Exclusive
Semi/Co-Exclusive
Granting Clause
Licensor’s Reservation of Rights
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Territory: Worldwide or Specific Countries
Infrastructure and Abilities of Partner
Available Patent, Copyright and Trade Dress
Protection
Strategic Goals
Certain Rights May be Limited to Specific
Territories
Other 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
Control
Cost
Protection against competition
Managing 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 Payments
Milestone 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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Diligence
Performance 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 Matters
Indemnification
Sublicensing
 Licensor Concerns
 Licensee Concerns
Change of Control
Non-Competition
Governance and Monitoring
Licensor Support
Creative 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 Escalation
Non-Binding Mediation
Binding Arbitration
Judicial Intervention
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Presenter Biographies
 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.
 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
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