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1.1. Parties

1.2. Start date

1.3. Duration

1.4. Nature of licensed IP

1.5. Work schedule

1.6. Costs

1.7. Lump sum/royalties

1.8. Payment schedule

1.9. Licence option

1.10. Option term on licence

1.11. Right of first refusal

1.12. Scope of licence

1.13. Exclusivity

1.14. Liability

1.15. Warranty on licensed patents

1.16. Ownership of IP

1.17. Ownership of improvements

1.18. Infringement

1.19. Termination

1.20. Choice of law

1.21. Dispute resolution


2.1. Like as few as two people, to address points on technology, manufacturing, legal, IP and finance, as required. Identify the colleagues, and any consultants, you think should be involved in the negotiations and work out a clear role for each in the discussions. Remember don't negotiate on your own.


3.1. Licence Fee: the licence fee is usually a set fee which all licensees pay.

3.1.1. A once-off non-refundable fee;

3.1.2. A number of fees paid on reaching agreed milestones

3.1.3. A fee paid on signing of the licence agreement, but deductible against the first royalty payments

3.1.4. Cost of patents to date or cost of research to date

3.1.5. A lump sum

3.1.6. Payment as a security or sign of intention

3.1.7. Recognition of access to strong IP

3.1.8. Recognition on the part of the licensee

3.1.9. A payment towards a portion of the expenditures

3.1.10. Milestone fees to reward the licensor

3.2. Royalties, the ‘25% rule’ approach is used frequently for the negotiation of a royalty.

3.3. Setting the Royalty Rate

3.3.1. For stand-alone products or processes

3.3.2. For compound products or processes

3.3.3. For compound products or processes

3.3.4. Set the royalty as a precise cash amount per unit/volume/ weight sold

3.3.5. If the royalty is not based on a unit which itself tracks inflation

3.3.6. Set the royalty as a percentage of the profit

3.3.7. If the licensee is making an investment

3.3.8. A sliding scale with a high initial royalty falling to a lower rate on increased sales

3.4. Minimum Royalty

3.4.1. The product or technology is completely new and both the licensor and licensee had unrealistic market expectations

3.4.2. The licensee is too small or specialised and cannot service the targeted markets

3.4.3. Competing products or technologies appear on the market in the interim

3.4.4. The product or technology shows problems

3.4.5. The licensee does not use his best efforts to promote the product or technology

3.5. Resetting Minimum Royalties. In the event that the minimum royalty is not achieved, partners usually build some scope into the licence agreement for renegotiation of the minimum royalty on reasonable terms, but cancellation of the licence is an option.


4.1. To begins with discussion that usually extends over a period of time, taking the form of conference calls and e-mail exchange of documents. The parties may need to meet in person at some point in between.

4.2. The negotiations should focus on the Heads of Agreement presented for the initial discussion.

4.3. The contract must fulfil three essential elements. There must be:

4.3.1. Terms of exchange specified for the bargain.

4.3.2. Something of value exchanged.

4.3.3. Mutual exchange.