The Licensing Foundation, a subsidiary of the Licensing Executives Society, has released a survey of U.S. and Canadian licensing activity in 2006 that offers insights not only into best practices in licensing, but also some of the key factors that cause deals to go sour. Here are a few highlights culled from the survey report:

• Though patent “trolls” — entities that accumulate patents in order to bring infringement suits or block competing technology development efforts — have been oft-cited as a growing concern, only a small percentage of respondents reported much impact on their licensing tactics. Just 6% have felt a “substantial” impact, and nearly 80% report no specific action designed to protect their IP from troll activity. Only 15 percent indicated that they had been proactively archiving prior art relevant to core technologies or key intellectual assets, 7% report participating in a joint defense agreement, and 5% have filed one or more re-examination requests on troll patents.
• Licensing deals with universities and government labs were ranked as among the least likely to “go bad” — defined as requiring substantial renegotiation, ending in litigation, or becoming abandoned. Not surprisingly, deals with start-ups ranked as most likely to run into trouble.
• Asked what, with the benefit of hindsight, they would structured differently in agreements that ultimately soured, licensing professionals cited business and technical milestones as the top problem areas, followed by field of use restrictions and degree of exclusivity. University and government lab licensors cited milestones to an even greater degree than other respondents.
• The top reasons cited for deals going bad were a change in one party’s business strategy, one party not putting enough effort into developing a product or technology, new information about the technology’s performance, and serious mistakes made in negotiation.
• A variety of best and worst practices in license negotiations are cited, with best practices focused on “doing your homework” in areas such as market knowledge, valuation, licensee goals, key decision makers, IP strengths, and competition. Also frequently cited were personal issues such as courtesy, face-to-face meetings, good communication, and flexibility. Worst practices were typically the flip side of those — lack of communication, inflexibility, and poor preparation, for example. Worst practices during contract negotiation included bait and switch, arguing, bullying, changing people on the negotiating teams, changing terms, delay, taking differences personally, letting ego affect the process, and nickel and diming.

To see the survey report, go to: Licensing Foundation Survey

Posted January 28th, 2008 under Tech Transfer

Write a comment