Topic 18
Negotiations Skills and Case Studies
WIPO-KIPO-KIPA IP Panorama Business School Investment Summit
9 October 2008
Geneva
OPTEON
Philip Mendes
Level 3, 33 Queen St
Brisbane QLD, Australia
Ph + 61 7 3211 9033
Fax + 61 7 3211 9025
philip@opteon.com.au
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
 What are
 some of the intuitive things we do in a negotiation
 the counter-intuitive thing we might consider as an alternative ?
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
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
Focus on interests instead of positions
 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
Focus on interests instead of positions
 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
Focus on interests instead of positions
Position
Position is the pathway
Pathway 1
Pathway 2
Interest
Pathway 3
Pathway 4
Pathway n
Focus on interests instead of positions
 A position
identifies
only one
pathway
forward
 An interest
usually
identifies
several
pathways
forward
 Pathway in
common is
the
solution
Solution
Acceptable to one party
Pathway 1
Pathway 2
Pathway 3
Pathway 4
Acceptable to other party
Pathway n
Focus on interests instead of positions
 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
Focus on interests instead of positions
 How do we identify interests ?
 Use the language of ascertaining their interests
“Can you explain how
that achieves what you
need”
“Can you help me
understand why that’s
important to you”
“Let me see if I
understand. You
want that
because (you
state in your
words)”
“I don’t understand
how that will work,
can you explain it to
me”
Focus on interests instead of positions
 How do we identify interests ?
 Use the language of communicating our interests
“What we need to
achieve is… (your
interest – not your
position)”
“What’s
important to
us is…(your
interest – not
your
position)”
“We’re open to
doing this in any
number of ways
that achieves…
…(your interest
– not your
position)”
“Can you think of any
ways, without downside
for you, in which we can
… (your interest – not
your position)”
Focus on interests instead of positions
Proposal
Licensor / Seller of Product
Licensee / Distributor
Licensee / Distributor must
achieve minimum worldwide
sales targets of 300K per year or termination
No.
Focus on interests instead of positions
Licensor / Seller of Product
Licensee / Distributor
Proposal
Licensee / Distributor must
achieve minimum worldwide
sales targets of 300K per year or termination
No.
Interests and
Needs
Needs to ensure achieve a
minimum financial return
Needs sales targets to be realistic
and achievable so as not risk loss
of rights.
Needs to be able to appoint
alternative licensee / distributor
if not achieved
Focus on interests instead of positions
Licensor / Seller of Product
Licensee / Distributor
Proposal
Licensee / Distributor must
achieve minimum worldwide
sales targets of 300K per year or termination
No.
Interests and
Needs
Needs to ensure achieve a
minimum financial return
Needs sales targets to be realistic
and achievable so as not risk loss
of rights.
Needs to be able to appoint
alternative licensee / distributor
if not achieved
 Same as position – minimum sales targets of 300K / year
Ways to
Achieve them  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
Focus on interests instead of positions
 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 ?”
Diving into a negotiation
 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 ?
Diving into a negotiation
 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)
Diving into a negotiation
 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 other
do a better and faster deal than otherwise
Diving into a negotiation
 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
Diving into a negotiation
 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
Diving into a negotiation

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
Diving into a negotiation
 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
Diving into a negotiation
 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
Diving into a negotiation
 Use the first meetings of a negotiation to ask lots of questions
 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
Diving into a negotiation
 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
“What do you want
to achieve out of
our relationship ?”
“How would you
feel about us
looking at it from
this perspective…”
“What do you hope
to achieve out of
today’s meeting”
“How would it work
if we were to
consider…?”
“Can you help me
understand why
that is important to
you?’
“What would be
your thinking on
this…?’
Diving into a negotiation
 Use the first meetings of a negotiation to ask lots of questions
 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
Diving into a negotiation
 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
Diving into a negotiation
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 above
4.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.
Diving into a negotiation




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
Diving into a 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 ?
Diving into a negotiation
 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
Diving into a negotiation
 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
“How can they
possibly disagree
with this ?”
“They must not have
 We
understood – I’ll have to
 Justify
 Present supporting data and arguments repeat it”
 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
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
“Can you help me
understand why
that doesn’t work
for you?”
 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
 Influence the proposals we make to the other party
 Increase the likelihood that our proposals will be acceptable to the
other party
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 won’t work. I
suggest that…”
 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
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
“Let me share with
you my thinking on
that”
 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
 Influence the proposals we make to the other party
 Increase the likelihood that our proposals will be acceptable to the
other party
Intuition – Counter-intuition

We’ve covered 4 things with this intuition / counter-intuition theme
1. Focusing on needs instead of position
2. 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