““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: jcohen@ctswlaw.com

Laurence S. Tauber

Cohen Tauber Spievack & Wagner P.C.

420 Lexington Avenue, 24th Floor

New York, New York 10170

Tel: 212.586.5800

Email: ltauber@ctswlaw.com

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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.