Archive for the ‘IP Negotiating’ Category

Why an IP Due Diligence Investigation?

Friday, August 27th, 2010

 

Are you concerned about a perceived or real threat of litigation or is your client a defendant in a pending lawsuit as an alleged infringer?  Are you interested in knowing more about the IP rights held by another for any other reason?  Who is the true, legal owner of the IP?  Have the IP ownership rights expired?  In a merger or acquisition, do all such rights actually transfer?  Are the IP rights encumbered by litigation?  A due diligence investigation will answer these questions and more, saving the company financial pain down the road. 

In the next few weeks we will be explaining the following:

 

Purpose:       IP Due Diligence Investigation to Determine the IP Rights Held by Another to Maximize IP Investment Value and Minimize Investment Risk and Liability

 

Purpose:       IP Due Diligence Investigation to Improve Management of a Company’s Assets, Including Identification of Possible Targets for Sale or License

 

Purpose:       IP Due Diligence Investigation to Assist in Your Management of an Allegation of IP Infringement 

Objectives:

 

  • Preempt distress and disaster by pro-actively evaluating the details of IP rights
  • Know exactly what IP assets your company is realizing from the transaction
  • Mitigate liability and negligence charges resulting from the failure to investigate
  • Maximize corporate strategic planning and profits

 

This series of articles are written by two of our industry expert attorneys, Laurie Hughes and Suzanne Kessler.

DUE DILIGENCE/THE TOOL FOR TRANSPARENCY

Monday, May 10th, 2010

By Mary Whetstine 

Do you know what you don’t know when investing in or purchasing a business or Intellectual Property (IP)?  Few of us have walked the path of life when we have not made some type of investment or purchase in which we “assumed” we knew what we were getting, only to be sorely disappointed? Perhaps assuming because the higher price of the product or entity we were getting exceptional quality, or of the evil assumption twin, of “getting a deal” because we were paying “below market value”? John Ruskin, the 19th century English poet and social thinker was attributed to saying: 

There is scarcely anything in the world that some man cannot make a little worse, and sell a little more cheaply. The person who buys on price alone is this man’s lawful prey.” 

The research needing to be done is the due diligence.  When we are making significant investments (in these times what investments are not significant?), the dire need of examining the multiple layers of the deal or the IP product is critical. There are pitfalls of Due Diligence that can become a door or a window.  Does it impede or facilitate the outcome? You and your team need to know what you intend to purchase and why.  The real question becomes, ‘Is what you see, what you get?’   And how about what you don’t see on the surface?  What are the gems and landmines that need to be uncovered?   Is the value and the cost for the venture merited? 

That is the essence of due diligence.  Value and risk, the balance determines if and how much to invest.  Whether an individual, venture capitalist or investment banker, the questions need to be answered before capital is invested. 

Make the ‘No’ or ‘Go’ decision before too much time or money is spent.  Most deals do not make it beyond this exploratory stage. 

To the reader:  Can you share an experience where solid, Due Diligence has guided you and your team to a great decision, that might otherwise been catastrophic? 

 Over the next few weeks, we will be discussing the components of the audit process.

The next article in this series will be: — Financial Due Diligence 

 By Mary Whetstine, Financial Analyst

The Comodity of Time

Friday, April 9th, 2010

 In mediation, we learn the value of identifying the emotions that strip our spritits and psyches of being present, in the now.  Unfortunately, all to often in litigation these are these emotions are the very tools and essense of  “solving” conflict.  This post will address a perspective from a publication that we greatly respect. 

The Futurist is a magazine that covers trends, forecasts and ideas about the future and is published by the World Future Society, a non-profit educational and scientific organization chartered in Washington, D.C.  Their website is www.wfs.org.

The Futurist May-June  featured an article titled, Trends Shaping Tomorrow’s World/Forecasts and Implications for Business, written by Marvin J. Cetron and Owen Davies.  During the next few weeks we will be periodically presenting segments of their article as they relate to businesses and business owners.  Here is our overview and perspective of their article regarding The Commodity of time. 

Time is becoming the world’s most precious commodity.

  • Computers, electronic communications, the Internet, and other technologies are making national and international economies much more competitive.
  • In the United States, workers spend about 10% more time on the job than they did a decade ago.  European executives and nonunionized workers face the same trend.
  • In these high-pressure environment, single workers and two income couples are increasingly desperate for any product that offers to simplify their lives or grand them a taste of luxury – and they can afford to buy it.
  • China’s rapid econo0mic development means its workers are experiencing faster-pace and time-pressured lives.  In a recent survey the Chinese new portal Sina.com, 56% of respondents said they felt short of time.  That 64% said they were never late and were intolerant of other people’s tardiness suggest a new cultural challenge to the traditional Chinese concept of a leisurely existence.
  • Technical workers and executives in India are beginning to report the same job-related stresses, particularly when they work on U.S. and European schedules.

 

Implications

 

            Stress-related problems affecting employee morale and wellness will continue to grow.  Companies must help employees balance their time at work with their family lives and need for leisure.  This may reduce short-term profits but will aid profitability in the long run.

            As time for shopping continues to evaporate, Internet and mail-order marketers will have a growing advantage over traditional stores.  Workers seek out convenience foods, household help, and minor luxuries to compensate for their lack of leisure time.

Time & Conflict

In the fast moving, ever changing world we live in, it is even more important than ever to be aware and conscious of how we, as well as others,  can often get caught up in that powerful, dangerous river of anxiety, fear, and anger.  How do we find peace within that very conflict and change?

There is a powerful  Eastern axiom that goes something like this:  “Meanings that we attribute to objects are subjective.  We make life real by the thoughts we project.”

In mediation, by creating space (time) between words and expressions, all parties are given the opportunity to listen and are guided towards actively understanding the other parties “truth”, as well as their “meanings”.  We can all practice this for ourselves on a daily basis, simply by practicing a basic technique.  When you feel anxiety, whether it by with another person, an event, etc:  accept the emotion that you are feeling and give pause (space & time).    You may find that in the brief time of the pause, that a subtle gentle light of empathy may appear within – and/or with a bit of luck, the other party will feel that they are actually being heard.

To our reader:

What techniques have you learned in your life experiences that bring you to a point of presense that allows your acceptance of another parties position? 

How does this post relate to your business experiences?

If  intellectual property is a part of the value of what you do, can you see how IP folks can often more readily adapt to mediation as a means of resolving conflict?

           

Mediation – Often, People Just Need to be Heard

Tuesday, March 30th, 2010

 “Sometimes we just get lucky”

I was asked to facilitate the mediation of an internal dispute between one of the largest divisions of a company among the top ten in the U.S. fortune five hundred list and their joint venture partner in several countries in Europe. To give you a sense of scope at the time, this J.V. was the third largest foreign investor in just the nation of Poland. Their operations were reaching a stage of expansion and disputes began to arise relating to decision making, procedure, philosophy and risk tolerance.

Under normal circumstances I would have interviewed several of the executives from both corporations and those directly operating the joint venture to get a clear scope of the roadblocks from their varying perspectives. This would also give me an insight into, and connection with, all the parties and form a basis of initial trust in me, and the process. The largest company decided that they could handle that “minor detail”, had already done so, and sent me a digest of the interviews that outlined the areas of dispute. Three days later we were to meet. From these transcripts I learned a great deal about the differences of opinion they were encountering technically, but nothing of the personalities, emotional or cultural issues that were behind these differences.

Please know that I would not have recommended this type of process to anyone who genuinely wished for realistic, lasting and qualitative resolution, but I had agreed to do this for a colleague who was in a bind. This was shaping up to be like going swimming with shoes on.

The evening before the meeting I was graciously invited to dinner with the junior executives who had set this session in motion. As we spoke over dinner, I tried to find out as much as I could about the personalities involved and their histories in business and as people. This also provided the chance to see the thinking of these junior executives as a reflection of their corporate culture.

That dinner was the key to how the process would unfold. It seems that the joint venture partner was originally a refugee from Europe and had come to the U.S. with only the shirt on his back. He had developed his business to the degree that he could return to the place that had reduced him to a nearly sub-human condition as a major player with one of the largest companies in the world. For the folks who had brought me into the there were no issues beyond the “bottom line” in their perception of what was involved in the J.V. arrangements. At the end of the dinner I told my hosts that I would be setting aside a special time for listening deeply to the chairman of the smaller company and I wanted their cooperation and non-interference with that process. They agreed but said they didn’t see what that had to do with the issues.

We had the very restricted time frame of 8:30 A.M. until 4:30 P.M. with the top decision makers from all the parties. After the introductions and welcoming statements we moved on to hearing from the gentleman who started the smaller company. I prompted him with questions that might allow him to express his feelings beyond the issues and kept him speaking for over 35 minutes. By 9:45 A.M. he had been thoroughly “heard”. Suddenly, it seemed there were no real issues to be resolved from the past and we moved on to how they all might work in the future. Animosity was dissolved and creative approaches were generated through the rest of the day.

After the meeting my hosts wondered how I “divined” how to handle the situation. I explained that what was a business arrangement to them was almost like a firstborn child to the other side. The issues were not material but emotional and by addressing them in that fashion it was really a simple problem. I guess I could have kept the mystery by saying that sometimes we just get lucky.

 

“Listen or thy tongue will keep thee deaf.”  ~Native American Indian Proverb

Written by Richard Dash

When to Consider Calling on an IP Mediator

Tuesday, March 9th, 2010

 

It seems that our businesses and organizations are experiencing the constant white water of change, conflict and uncertainty.  It is a time when the question is not if there will be conflict, but how businesses will respond to conflict.  A mediator can be useful resource to help businesses and organizations constructively confront conflict.  It is timely to work with a mediator to resolve organizational conflict when:

  • Important decisions or difficult problems are avoided because of potential conflict
  • Watered-down compromises leave everyone virtually everyone disenchanted
  • Split decisions stand only until an inevitable shift in the wind, taking the organization off course
  • Group deliberations focus is on speaking and complaining, rather than listening, collaboration and problem solving
  • Power plays and appeals result in an estranged work environment
  • Chronic and acute conflict within the organization limits its ability to serve customers and stakeholders or fluidly adapt to change.

 

What an Impartial Third Party Mediator Offers

 

While the primary focus of a mediator is conflict resolution, a professional mediator sees conflict as the catalyst for positive change within the organization and between stakeholders.  In addition to the collaborative resolution of a conflict, mediation also offers:

  • A structured process that promotes civility, mutual respect and open dialogue.
  • A shared understanding and appreciation of diverse perspectives.
  • Identification of practical workable solutions that address everyone’s needs
  • A shared focus on the realization of a desired future state.
  • An enhanced sense of commitment, accountability, partnership and esprit de corps.

 

How Business Mediation Reconciles Past Differences

Unresolved, conflicted and hurtful relationships in the work place have significant ongoing impacts upon a team and organization.  They are like a chronic illness, draining valuable energy from a work group or project.  The potential for negative ramifications outside of the organization are significant, as detrimental messages about the project, work group or organization spread as a part of the underlying turmoil.  The healing of existing wounds, restoration of relationships and moving forward on common ground are the key ingredients to reconciliation and positive change.  A business mediator plays a critical role in establishing a safe environment to come together reconcile the past and restore and establish new working relationships.  With a neutral third party professional facilitating activities and conversations that lead to understanding, parties take steps toward renewed working relationship in which they commit to working together to get the job done.

“Nothing endures but change.”

Heraclitus, from Diogenes Laertius, Lives of Eminent Philosophers
Greek philosopher (540 BC – 480 BC)

IP Interest Based Negotiations

Monday, March 8th, 2010

In a previous article we discussed Positional Bargaining Negotiating as a rather rigid position that a person takes on an issue – very linear, one-dimensional. It is most often very personal and thus filled with strong emotions. With Interest Based Negotiations the process is built around collaborative flexibility, with future relationship considerations. Through open dialogue, the negotiator will help the parties identify their specific, individual values, needs, desires, which most often are what has likely caused each party’s position. By understanding one’s needs as well as the other’s, mutual openness to bridges and paths are built between the persons of conflict.

Interest Based Negotiations

To illustrate Interest Based Negotiations, here is a recent case study. Dennis, after several years of building and growing a highly successful IT company made the decision to sell. The business had a strong documented cash flow history, strong growth opportunities in a solid industry, and was in a most favorable California life style location; thus, the seller was able to justify a higher multiple and asking price. In a rather short period of time Dan, a buyer from Ohio, decided to make an offer through Dennis’ broker to purchase; he was financially qualified, with good IT operational experience and skills to run the business, and Dan always wanted to live in this part of California. From the time the owner and the buyer met, there was an established trust and good chemistry. The owner accepted an offer that included an agreement for the seller to carry 10% of the financing. The buyer was able to acquire funding and a closing date was set. Then an unforeseeable event took place – a national lending crisis; the funding source changed their criteria for this acquisition and Dan no longer qualified. Dennis was upset that the buyer was no longer qualified to purchase the business. He was not about to lower the price of the business – this was his retirement. Now, after several months of tedious negotiations it was time to start looking for a new buyer. Dan was irked that Dennis would not even consider lowering his already “overpriced” business. Dan was equally frustrated with the funding source and was watching his dream of owning the business evaporate. The negotiator/mediator was able to ascertain that both men valued collaboration and wanted to see if the business relationship and deal could be saved.

Dennis’ Position: Get lending and pay me what I am asking or the deal is over

Dan’s Position: Lower the price so that I can qualify for a loan or I will find another business to purchase

 Dennis’ Interest: I want to retire; I wants to work with a buyer that I like and trust; I am willing to work collaboratively

 Dan’s Interest: I want to own this business/I want to live in California; I want to be able to afford the business; I am willing to work collaboratively

 Notice how the positions do not allow for negotiation or compromise, but when we examine the interests, both men have several interests in common. In this case they were able to agree that they wanted to work collaboratively and get a deal done. In a relatively short period of time,  Dennis was able to understand Dan’s sense of loss and frustration and Dan was able to understand Dennis’ retirement fears and needs. An agreement was reached where Dennis would carry a 25% note for Dan. Dan was then able to obtain funding from the same source with the new criteria and Dennis received his asking price. The transaction was completed and both the business and the relationship flourish.

 “So when you are listening to somebody, completely, attentively, then you are listening not only to the words, but also to the feeling of what is being conveyed, to the whole of it, not part of it.” Krishnamurti (Indian philosopher)

Alternative Dispute Resolution (ADR): Positional Bargaining Negotiation

Tuesday, February 23rd, 2010

In a previous article we discussed the concept of negotiation and defined it as a process in which the parties involved communicate with one another through a facilitator to resolve a dispute, consummate a transaction, or simply to reach agreement in order to create balance or clarity.  There are two primary styles that we are going to address, Positional Bargaining Negotiation and Interest Based Negotiation.   Today we will discuss Positional Bargaining Negotiation.

Positional Bargaining

To illustrate positional bargaining, consider an actual situation in which a partnership was ending.  In 1996 two young, bright and close friends Jason and Matt founded a software internet based company.  However, within months of the launch, it became apparent that their business and people skills, as well as their business philosophies were in most ways on opposite ends of the spectrum.  The business took off extremely well and they put their put their differences aside and took positions of simply accepting these differences.  Soon the business flourished and they enjoyed making the type of money that neither had ever even dreamt of.  Going into their fourth year, the day-to-day operations of the business became highly stressful for both Jason and Matt.  It was now reaching a point where it was having an effect on their personal production.  With professional guidance, both became cognizant of the dysfunctional nature of their partnership and how it was manifesting itself not only in their business, but also in their personal lives; it was at that point both agreed that it was time to end their partnership. Jason asked to be bought out so that he could start another technology company and Matt was in agreement.

Fortunately, aside from being savvy technology entrepreneurs, they also were also forward thinking when they started their partnership.  They had created a partnership agreement with their attorney, an agreement with an exit strategy.  As with many such agreements there was a buy-sell provision that arranges a buy-out; if one partner leaves the business, the other partner must buy him out.  This provision included a buy-out based upon a prenegotiated percentage of the business value.

The Bargaining

This was a 3 step negotiation.  First, was agreeing on a mutually acceptable non-compete agreement. Second, was agreeing on what firm would perform the objective Third Party Valuation.  The standard process for the valuation is for a qualified industry valuation expert to analyze the financials, market trends, industry trends and comparables of similar businesses in their segment of the technology industry.  A key component of the process was an IP assessment of their IT intellectual property for licensing, trademarks, copyright and a pending patent. The due diligence process was a main ingredient to forming a positive closure of Jason’s and Matt’s business relationship; a third party performed an objective valuation on their IP, which otherwise might have been an emotionally volatile situation. The final business valuation provided a specific range of value on what their business could likely be sold for in the current market place.   

In the first 2 steps, there were basic pragmatic decisions that were easily agreed upon.  The third step was the primary focus of this mediation.  In this type of negotiation, parties will often examine their strengths and weaknesses to establish maximum and minimum figures before going into negotiation.  During the course of the negotiation, both Jason and Matt went strategically back and forth on price, based upon their perceived value.  With outside, objective professional guidance, they both moved incrementally towards each other’s negotiated numbers to arrive at a mutually accepted figure. 

With the monies from the buyout, Jason was able to jumpstart his new endeavor and it has taken off nicely. One of the lessons that he learned from his business experience with Matt was the importance of creating a clear, consistent vision of who his company is and where he wants it to be.  With such awareness he was able to become a more effective and dynamic leader.

Matt continues to grow his business to new levels of successes.  He has been able to build an organization around a group of individuals who share a similar business philosophy and mind set.   He continues to make a very comfortable income and is having fun doing it.

Keys

The keys to effective and appropriate positional bargaining are:

  • An objectively defined sum or task that is being considered
  • Emotions and a continuing relationship are not important
  • No other underlying interests or outcomes other than money
  • Trust and flexibility are not likely or even possible

Summary

Positional bargaining is a very useful and effective tool in mediation when individuals have either prepared or anticipated for such mediation, or in situations where one party might be in a particularly strong position and simply wants to draw a close to the business relationship.  Most often, the preferred style is the interest base negotiation where parties are moved from rigid positions to a more flexible one, where both parties win. 

Reader, please share how you have utilized this method of negotiation to resolve business conflict and create your win-win solution.

“Everything should be made as simple as possible, but not one bit simpler.”

                                                                                                            Albert Einstein

 

Reader, what does the above quote mean to you in regards to negotiating conflict?

Next week: Interest Based Negotiations.