In this three-part series, I share several real-world examples of royalty negotiations gone awry. This week, I look at a deal that on the surface appeared to be a “give away.”
Example #2: Sometimes a Bird in the Hand Really Is Worth Two in the Bush
Our client was approached by a company for a single-use, internal-use-only technology license. We estimated the value of the technology to the prospect at $100K in cost savings. But the prospect had offered only about $10K for the license.
On the surface, this seemed like a poor offer that fell well short of the true value of the technology.
The innovation was a method for improved manufacturing, and any infringement would be virtually impossible to detect. The licensor believed that if they rejected the offer, the prospect would use the technology anyway, and the licensor would have great difficulty enforcing their patent.
Based on this logic and our royalty negotiation discussions, the client decided to take what they could get, and accepted the offer as is.
When evaluating a deal, always question what the outcome would be if you don’t go through with the deal. Sometimes withdrawing from the deal may be more expensive than taking a low offer.