opteon philip mendeslevel 3, 33 queen st brisbane qld, australia ph + 61 7 3211 9033 fax + 61 7 3211...

OPTEONPhilip Mendes Level 3, 33 Queen St

Brisbane QLD, Australia

Ph + 61 7 3211 9033

Fax + 61 7 3211 9025

[email protected]

Topic 18Negotiations Skills and Case Studies

WIPO-KIPO-KIPA IP Panorama Business School Investment Summit9 October 2008

Geneva

Negotiation: A Counter-Intuitive Process

Something of a provocative title Title comes from remarks made by participants at some of my

negotiation workshops “that’s the opposite of what I do” “I know I should do that, but I find myself doing exactly the

opposite” “Its counter-intuitive”

What are people saying ? They recognise the prudence of a particular strategy But they find it difficult to implement it Their natural inclination is to do the opposite of what they recognise

is the prudent strategy

Intuitive – Counter-Intuitive

Automatic gear Shift into manual

Focus on Positions Focus on interests

Dive into the negotiation Defer the negotiation to a time of our own choosing, gather information first

When our proposals are rejected, justify and defend them

Ask why our proposal doesn’t work, and gather information

When a proposal is made to us that is unacceptable, rejection

Instead of rejecting, ask why their proposal is important, and gather information

What are some of the intuitive things we do in a negotiation the counter-intuitive thing we might consider as an alternative ?

Fisher & Ury’s “Getting to Yes”

Main theme: Focus on interests instead of

positions Position is a proposal

Likely to be rejected Interest is the why of the proposal

– what is sought to be achieved There may be multiple ways

of achieving that interest This perspective in a negotiation

is counter-intuitive

Focus on interests instead of positions

Bargaining over positions Negotiators lock themselves in

The more we clarify and defend our position, the more committed we become, and the more we lock ourselves in

The more we convince the other party of the impossibility of changing our position, the harder it becomes to do so

As more attention is paid to positions, the less attention is given to the underlying needs of the parties

We start with a higher position to increase our chances of a favourable outcome, which stresses the negotiation

Makes the negotiation inefficient Stresses relationships which also makes the negotiation more difficult


Bargaining over positions Becomes a contest of will Positions results in negotiators yielding, leaving one with a “win” and

the other with a “loss” Negotiations become a series of “wins” and “losses” One side or both sides have a “giving in” feeling The negotiation becomes a series of “giving in” points May result in anger and resentment Bargaining over positions is bad enough where there are 2 parties in a

negotiation Significantly worse when there are multiple parties 3, 4, 5…10 parties

in a negotiation, each competing to put their own position


What’s the alternative ? The parties may perceive that their relationship is a conflict of positions

Natural therefore for the parties in their negotiation to state and restate positions

Positions lead to conflict and impasse We want to avoid conflict and impasse

Interests are the motivator Positions is how they are expressed

Challenge is to look beyond the position, recognise the interest, and explore how it can be addressed


Position is the pathwayPosition

Interest

Pathway 1

Pathway 2

Pathway 3

Pathway 4

Pathway n


Pathway 1

Pathway 2

Pathway 3

Pathway 4

Pathway n

Acceptable to one party

Acceptable to other party

A position identifies only one pathway forward

An interest usually identifies several pathways forward

Pathway in common is the solution

Solution


Be hard on interests, and soft on positions Be committed to our interests being met But be soft on our position on how to meet that interest

Our interest is the motivator Not necessarily the pathway to achieve it, may be unwise to be committed to a specific pathway

Be hard in negotiating our interest But be flexible on how that interest can be achieved Chances are that during the negotiation,

We may identify more pathways The other party may identify more pathways

any of which may be acceptable, or even better


How do we identify interests ? Use the language of ascertaining their interests

“Can you help me understand why that’s important to you”

“Can you explain how that achieves what you need”

“I don’t understand how that will work, can you explain it to me”

“Let me see if I understand. You want that because (you state in your words)”


How do we identify interests ? Use the language of communicating our interests

“We’re open to doing this in any number of ways that achieves… …(your interest – not your position)”

“What we need to achieve is… (your interest – not your position)”

“What’s important to us is…(your interest – not your position)”

“Can you think of any ways, without downside for you, in which we can … (your interest – not your position)”

Licensor / Seller of Product Licensee / Distributor

Proposal Licensee / Distributor must achieve minimum worldwide sales targets of 300K per year - or termination

No.




No.

Interests and Needs

Needs to ensure achieve a minimum financial return

Needs to be able to appoint alternative licensee / distributor if not achieved

Needs sales targets to be realistic and achievable so as not risk loss of rights.




No.

Interests and Needs

Needs to ensure achieve a minimum financial return

Needs to be able to appoint alternative licensee / distributor if not achieved

Needs sales targets to be realistic and achievable so as not risk loss of rights.

Ways to Achieve them

Same as position – minimum sales targets of 300K / year Sales targets holiday Year 1, followed by 300K / year each year Sales target holiday first 6 months, followed by ramped up

minimum sales each year Enter into a sub-distributorship agreement in a critical segment

of the market



Intuitive step in a negotiation: To make proposal of what we want

Counter-intuitive step in a negotiation: To explain what we need to achieve from the relationship – the why of the

proposal

Starts a dialogue about the interests of the parties what they respectively need to achieve

That dialogue likely to identify or suggest proposals that can be made that are responsive to the respective needs of the parties are therefore more likely to be accepted

Diving into a negotiation

Intuitive approach to a negotiation is to make proposals

Our proposals To us are self evidently fair and reasonable We make the proposal, and sit back and expect the “I agree”

response

We are then taken aback when the “I agree” response doesn’t come

We expect proposals to be made in a negotiation Making proposals is what a negotiation is all about

“How can they possibly disagree with this ?”


First step start haggling

royalty terms, milestone payments, upfront payments or a price of products

But may that be premature ? Do both parties share a common understanding / expectation

Can expectations be influenced By establishing rapport? By talking about the pathway forward ? By talking comparable deals ? Similarities in other deals Other deals that may influence the financial terms ?


By diving into a negotiation prematurely we may be denying ourselves the opportunity to Prepare thoroughly Establish rapport Inform the other party about things that may influence their expectations in

our favor Gather information about the other party that may

Influence the proposals we make to the other party Influence our expectations

So that they are higher than otherwise So that they may be more realistic

Consider deferring the negotiation until after information gathering (what we can learn from the other party) Information sharing (what we can inform the other party)


Instead of diving in – establish rapport What is rapport? A feeling of being “in sync” or “on the same wave length”

Rapport, or the absence of rapport is a main determinant of whether people develop a trusting relationship Trust one another to share or not share information Trust one another to be frank and open or less frank and open in a

discussion Trust one another in what the other says, or whether they feel that it may

be bluff

People who have done deals together before, who have established rapport established some trust and confidence in each otherdo a better and faster deal than otherwise


Establish rapport Rapport facilitates communication When people know each other they can more quickly

Communicate information Identify options for solutions Converge on a solution or an outcome

Establishing rapport involves getting to know the other party’s individuals Not from a dishonest perspective, nor to take advantage of the other party From the perspective that getting to know the other individuals in a

negotiation will be beneficial to both sides in a negotiation There is mutual benefit in getting to know each other


Establish rapport Liking

People like those who like them If we are liked by someone, they will

listen to us register what we say want to explore ways to help us achieve our needs and interests be receptive to accommodating our needs and interests

Antipathy – the opposite of liking Results in the opposite behaviour Other person will not

listen to us register what we say want to explore ways to help us achieve our needs and interests be receptive to accommodating our needs and interests


Establish rapport: Northwestern & Duke Universities experiment 146 students involved in negotiation experiment Negotiation for the purchase of a car

Students were paired Half the students had an initial “getting to know you” phone call Remaining half the students did not have that phone call All other communications, in both groups, were by email

In the phone call, students developed a rapport with each other Talked about themselves, their universities, their interests and hobbies,

sport etc They got to know one another

In their emails they kept up that same dialogue – remarking about a recent football or basketball match – as well as doing their deal

Ie, they continued their rapport


Results: In rapport group: Majority felt that they could

trust the other person Majority felt satisfied with their

deal Majority felt that they had done

a good deal Majority would do another deal

with that person A small number felt “ripped off”

Results: In non-rapport group: Majority felt that they could not

trust the other person Majority felt dissatisfied with their

deal Majority felt that they had done a

bad deal Majority would not do another

deal with that person A large number felt “ripped off”

The group which did not have that rapport opportunity were 4 times more likely to have their negotiation fail


Use the first meetings of a negotiation to ask lots of questions

Use the first few meetings as information gathering opportunities

Find out more about the other party their interests and needs the extent to which they know or appreciate our interests and needs

The more questions we ask the more information we gather about the other party the more we understand their position and their objectives equips us to make proposals of our choosing that are more likely to be

accepted



With each question we ask we will be better informed

How does that help us? We now have a better means of navigating how to achieve our own needs

and interests, having regard to our better understanding of the other party’s needs and interests

We can now formulate proposals that are more likely to blend in with the other party’s objectives that are therefore more likely to be accepted

The more we know about how to help the other party, the better equipped we are to make proposals that achieve our own needs and interests as well as theirs


Use the first meetings of a negotiation to ask lots of questions Open ended questions are questions that require more than a Yes or No They are questions that oblige the respondent to volunteer information

“Can you help me understand why that is important to you?’“What do you hope

to achieve out of today’s meeting”

“What do you want to achieve out of our relationship ?”

“How would you feel about us looking at it from this perspective…”

“How would it work if we were to consider…?”

“What would be your thinking on this…?’



Open ended questions are not proposals, nor positions are hypothetical “what ifs” facilitate exploring interests and needs

Help to set a climate or mood of cooperation and collaboration in the negotiation

Help to elicit responses that make us better informed To evaluate the other party To appreciate its interests To formulae proposals that work for us, and which are responsive to the

other party’s needs and interests and therefore more likely to be accepted by them


Case study Proposed license of a novel more efficient delivery system for a drug already

on the market, and off patent Second phone call with the interested licensee First point made by the interested licensee “What are the royalties and other terms you expect?”

Licensee’s perspective: that we were a desperate licensor Commitment on financial terms at such an early stage likely to be when

licensor’s resistance was lowest, and when it was most likely that licensor would proposed modest package of financial terms, which the licensor could then negotiate down

Licensor’s perspective Value of the IP dependent on exactly what the clinical pathway would be


The management team requires that I assemble a briefing document before it can sign off on financial terms that I can afterwards suggest for consideration.

Can you help me with that briefing document by helping me understand:1.Scope of further R&D work to be undertaken 2.Work Plan of for that R&D (toxicology, animal studies etc)3.Timeframes for the above4.Anticipated clinical pathway (are phase I, II, and III trials all required, or might regulators be relaxed and allow phase I or II to be short trials, or even jump straight to phase III)5.Your proposed marketing strategy and market roll out 6.Will you be partnering outside Europe ?7.Your assessment of the market.


Educate instead of negotiate Sometimes the negotiation is not a negotiation at all Instead its an education The other party may not be aware of

The landscape within which we operate Forces that impact upon our expectations

The other party may be inexperienced unfamiliar with normal models for the deal that we are about to do

Need to educate more than negotiate Results in understanding, rather than a negotiation Not doing that means that we and them are each working from different

reference points That impedes the negotiation


Educate instead of negotiate

Who needs to be educated ? Not just the individuals at the negotiating table Consider other stakeholders who need to be educated as well Who are the decision makers who need to be educated

What do we educate them about ? The technology? The landscape of the technology ? The landscape of the deal ? The environment for doing the specific type of deal being negotiated Benchmarked transactions ?


Educate instead of negotiate Ozgene – makes transgenic mice for drug target validation Customers are large pharmaceutical companies, research institutes in US, Europe

and Japan Customer provides gene sequence for human gene of interest We knockout the gene (that is, delete it from the mouse genome) (as well as

knockin in specific locations, or randomly) Standard T&Cs contained clause that customer indemnifies Ozgene against any

claims arising from the generation of the mouse strain and the delivery of transgenic services to customer infringing third party IP rights

Some customers request deletion, or that the clause be reversed, that Ozgene provide that indemnity to the customer

We needed to educate our customers Board adopted a policy that explained why Ozgene couldn’t provide indemnity,

and why we needed the indemnity from the customer In a nutshell – only customer could know whether the requested gene of interest

(there are 40,000+ human genes) infringed third party IP rights Board Policy would be provided to customer Customer would invariably not press the request


Intuitive step in a negotiation: To dive into the negotiation

Counter-intuitive step in a negotiation: To defer the negotiation to a time of our choosing

Why would we want to do that ? What do we do in the meantime ?

Establish rapport Inform the other party about things that may influence their expectations in

our favor Increase the likelihood that their proposals will be acceptable to us Gather information about the other party that may

Influence the proposals we make to the other party Increase the likelihood that our proposals will be acceptable to the

other party Educate the other party about our interests and needs

Defending our rejected proposals

We believe our proposals are fair We are taken aback when our fair and reasonable proposal is rejected

Our automatic gear reaction

We Justify Present supporting data and arguments We entrench our position

The more we entrench our position The more difficult it is for us to step back from it – we don’t want to

appear weak

“How can they possibly disagree with this ?”

“They must not have understood – I’ll have to repeat it”

Defending our rejected proposals

Intuitive step in a negotiation: To defend and justify our rejected proposals

Counter-intuitive step in a negotiation: To ask for criticism of our proposals

What do we achieve? We get the other party to tell us what their needs and interests are We provide information about us to the other party that we choose to give Increase the likelihood that their proposals will be acceptable to us Gather information about the other party that may


other party

“Can you help me understand why that doesn’t work for you?”

Avoid rejecting their proposals

When a proposal is made to us that doesn’t work for us, we reject it, and make a counter proposal.

That starts a haggle Proposal Rejection and counter proposal Rejection and counter proposal Rejection and counter proposal Rejection and counter proposal

There’s more to a negotiation than a carpet bazaar haggle

“That won’t work. I suggest that…”

Avoid rejecting their proposals

Intuitive step in a negotiation: To reject a proposal and doesn’t work for us, and make a counter proposal

Counter-intuitive step in a negotiation: To share information on why it doesn’t work

What do we achieve? We provide information about us to the other party that we choose to give Increase the likelihood that their proposals will be acceptable to us We start a dialogue In so doing we gather information about the other party that may


other party

“Let me share with you my thinking on that”

Intuition – Counter-intuition

We’ve covered 4 things with this intuition / counter-intuition theme1. Focusing on needs instead of position2. Deferring a meeting to a time of our choosing

Establish rapport Ask questions and gather information Educate instead of negotiate

3. Not defending our rejected proposals (with the risk of entrenching ourselves)

4. Not rejecting the other party’s proposals to us (with the risk of a carpet bazaar haggle)

The objective of doing that is: Information

Information that we gather about the other party Information about us that we choose to share with the other party

Information sharing and gathering

Information is said to be the currency of a negotiation

Without information That we might gather about the other party That we might choose to share with the other

party about ourselves

we risk our proposals being aimless, possibly landing anywhere

With information That we might gather about the other party That we might choose to share with the other

party about ourselves

we have an increased likelihood our proposals will hit the bulls eye

opteon philip mendeslevel 3, 33 queen st brisbane qld, australia ph + 61 7 3211 9033 fax + 61 7 3211...

Documents

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