You own a patent and are negotiating with a potential purchaser of the IP rights.
Many strategic questions arise in your head:
- Do I sell all my rights? Only part of them?
- Do I prefer licensing rather than selling my patent?
- In which territory and for which business will I grant a license?
- Does this transfer include know-how? How do I formalize this part of the partnership?
- What financial conditions can I consider? Etc.
While most of these clauses are determined on the basis of your exchanges with this potential partner, the financial question is often more sensitive. Indeed, you do not necessarily have all the data you need to move forward calmly on these issues and everyone defends their own interests.
Determining the value of the IP rights you wish to assign, or license, is a step you cannot overlook to deal with your potential partner when negotiating. Various parameters must be considred here, including:
- the legal status of your patent
- the technical positioning of the technology covered by this patent and its strategic nature in relation to your potential partner’s business,
- the competitive advantage that this patent can bring to your partner in its market,
- possibly the negative impacts that this partnership would have on your own activities, for example, the closure of other business opportunities,
- how the patent is likely to be operated by your partner (business model)
- the financial structure of the expected activities in order to determine the evolution of expected profits
- the probable operating life span,
- and of course the economic situation, your potential partner’s reputation, or the future synergies that could emerge from this partnership.
All these elements will allow you to better determine a value. This remains a sensitive exercise and different methods can be used to target the most relevant value range. Of course, this range provides only a guidance in your negotiation and you are free to push the price higher, at your discretion. This valuation process will provide you with a solid basis for discussion to move towards the price that you think is right and that your partner is also willing to pay.
Our online service ip-nuts.com can facilitate this valuation matter and provide a reference value. You can use the various questions asked in our process to guide the negotiation and establish a price with the direct contribution of your partner.
If you are interested in determining the conditions of a licence, you will then have to determine a possible upfront (an initial lump sum), in particular if it is an exclusive license in a given territory and industry, and a royalty rate (or royalties amount) that depends on usual market practices, but also and especially on the nature of the contract and the operating models you imagine.
