Negotiating Transfer of Technology

Partially adapted from the "Training Manual on Technology Transfer", by United Nations Industrial Development Organization (UNIDO)

Introduction    Planning Stage    Negotiating Team    Preparing for Negotiations    Contract Drafts    Organizational Aspects    Role and Objectives    Conduct during Negotiations    Typical Negotiating Techniques and Tactics    Conclusion

Arriving at a satisfactory business relationship requires two things:

• the preparation of a balanced and comprehensive agreement between parties, and

• civil negotiations that aim to achieve mutually beneficial results for all of the parties involved.

Being well-informed, building an effective negotiating team and communicating well with members of the other team will affect the success of the negotiations. Various steps to be taken at a given stages of the negotiation process are recommended. Effective, cooperative negotiations make for mutually beneficial relations and the long-term satisfaction of the parties to the agreement.

Introduction

A technology transfer agreement that results in a satisfactory long-term relationship between two or more parties is one in which the parties recognize that the agreement must provide benefits for each. Once this principle is accepted by negotiators, the process moves more smoothly. It can be enhanced in two ways:

1. by preparing a proposed agreement between the parties to serve as the basis of negotiation that is balanced with respect to their mutual and conflicting interests as well as comprehensive, and

2. by conducting negotiations to arrive at a mutually acceptable final text that gives each party the appropriate rights and obligations.

The manner in which negotiations are conducted will also help ensure a successful end result. Negotiations should

1. obtain and master all the relevant information needed to correctly present their interests and options,

2. develop the internal communications that will mould each party into an effective team, and

3. utilize approaches and techniques that facilitate communication between the parties and develop mutual confidence and trust.

This guide will discuss the various steps that need to be taken at each stage of the negotiating process. It will elucidate the elements that maximize the chances of success, not necessarily in terms of what provisions are incorporated into the contract but by how successfully the project ultimately evolves, and by how the relationship between the parties becomes cooperative rather than adversarial. The cumulative effect of those elements constitutes what is generally referred to as the dynamics of the negotiation process.

Certain points stressed here should be kept in mind throughout the planning and execution stages of negotiations:

• When making international agreements, it is essential that the culture of the other party's country be studied carefully to assure that your own party's understanding of the other's arguments and interests are clear and that yours are clear to them. It is just as important to learn their customs to avoid embarrassments or insults.

• For any kind of agreement, national or international, learn all you can about the other party(s): its style, preferences, performance, financial condition, ethics, expectations from the deal etc. Separate assumptions from facts. This will help in formulating your own objectives and negotiating strategy.

Planning Stage

Objectives    Proposal Analysis    Preliminary Relationship Structure    Planning Stage Suggestions

If negotiations are to culminate in a successful agreement, certain prerequisites must be met before negotiations get under way.

Objectives

Well before an agreement is drafted, each party needs to determine its objectives for concluding a deal. This is an elementary but necessary rule of successful negotiation. Parties often do begin negotiations without being clear about the nature and scope of the contractual relationship they wish to establish. This may lead to ambiguity, misunderstanding and, even, distrust and bad faith between the parties as the negotiations proceed. Each party should enter a negotiation with well conceived and adequately supported goals so the process moves ahead in an orderly manner.

A technology transfer relationship often begins when one party submits an outline or preliminary proposal to another, offering rights to intellectual property or expressing interest in purchasing such rights. It may take a meeting or two to help define the market value of the technology or to decide how to structure the future relationship, especially if the technology is being transferred for the first time. Once these details have been worked out, one of the parties, usually the initiator of the proposed relationship, submits a written proposal to the other as the starting point for subsequent negotiations.

It is assumed that before writing such a proposal, the submitting party will have defined its goals and interests. The party receiving the proposal then needs to study it thoroughly.

Proposal analysis

The first step to be taken after receipt of a proposal is to appoint a technical group to analyse it, list all of the questions it raises and identify and request any additional information that is required from the party submitting the proposal. There should be no reluctance to do this; in fact, most parties who have submitted a proposal welcome questions and requests for information, for it indicates to them that the proposal is being taken seriously. It gives them a better idea of what is of particular interest to the other party, as well as any shortcomings of their proposal.

Information on the subject-matter of the proposal should also be sought from independent sources. Such information might relate, for example, to the nature and effectiveness of the technology being proposed, the market for the proposed product, the quality and production cost of the product, the potential sources of financing.

All the information received from the party submitting the proposal and from independent sources should then be reviewed thoroughly by the technical group. To the extent that the new information raises additional questions, these should again be posed to the proposing party or to the independent sources, until the technical group is satisfied that it has all the information it needs to formulate the preliminary structure of the relationship.

Preliminary structure for the relationship

Once the required information has been collected and analysed and it is determined that the proposal should be pursued, a preliminary structure (and, perhaps, alternative structures) for the relationship should be formulated and evaluated in terms of how it will meet needs and objectives. If a patent licence is being offered, the technical team should determine if pertinent know-how, trade marks, and/or copyrights should be included and should have some idea of the amount of training and on-going technical assistance required. In other situations, the agreement structure may require a technical services, engineering services or management services agreement. At times, a joint venture may be preferred or required relationship.

Planning stage suggestions

These are some suggestions for the planning stage:

• Determine alternatives to completing the agreement. Even one alternative improves your negotiating strategy. The authors of Getting to Yes, from Harvard Negotiating Project, call this BATNA, Best Alternative to a Negotiated Agreement.

• Consider the long-term benefits of the agreement. Don't be overly concerned with the short-term implications.

• Look for areas of agreement between the parties, not areas of conflict.

• Plan the major issues as independent units, not in sequence. This will avoid confusion if the issues are brought up out of your sequence.

• Set ranges for your objectives, not specific points.

The Negotiating Team

Composition    The team leader    Team members    Team discipline

Once a preliminary agreement structure has been agreed upon, a negotiating team should be selected.

Composition

Two teams need to be assembled, the planning team and the negotiating team. The team that does the planning for the negotiation should consist of, at a minimum, the chief negotiator, a technical expert, a financial expert and a legal expert. If it is a complex deal, engineering, manufacturing and marketing personnel might also need to be involved. At times an outside consultant will be beneficial. It is the planning team's responsibility to set all the parameters for the proposed agreement so that the negotiating team has the information it needs to properly present its side to the other party.

The actual negotiating team for technology transfer agreements should be kept as small as possible. A simple patent or patent and know-how licence may only require one person from each party, the licensing executive for each. As the complexity of the type of agreement being sought increases, the team is expanded. Many complex technology transfer agreements are handled by the licensing executive and an intellectual property attorney. This, of course, does not preclude discussions between negotiating sessions with technical, financial, manufacturing or marketing experts. In situations where, for example, a large production line, a turnkey plant or a joint venture is being considered, the negotiations may require the presence of technical, financial and other experts. As the negotiations proceed and once they are completed, the drafts of the agreement are nearly always prepared by an attorney skilled in technology transfer agreements.

All too often, a negotiating team is appointed just as formal negotiations are about to begin, so the team goes to the table without adequate opportunity to study the proposed transaction and back-up information in depth or to have an input into the positions that the chief negotiator will present during the negotiations. Obviously, last-minute appointment of the negotiating team is an unwise practice that should be avoided.

The team leader

The chief negotiator's role is a special one. He or she should command the respect of the other players and be articulate and patient. A company or a government makes a mistake whet it assigns this role as a matter of course to the senior official involved in the project. Instead, the person best able to deal with the particular negotiation should be named the chief negotiator. An understanding of the culture of the other party's country, the language in which the negotiations are to be held and the culture of the company itself are decided advantages for a chief negotiator.

The chief negotiator must have the character and strength to be able to control a meeting and win the respect of his own and the other party's representatives. He must have self-confidence, be able to lead and have the support of superiors. He must also be a person who thoroughly understands the subject, who is a broad-minded enough to listen to opinions different from his own and who appreciates arguments and is not offended when someone contradicts him. He must be vain, but, rather, sure of himself and not easily influenced by flattery. As well, he must have experience in the business being negotiated and, above all, must be able to make decisions when they are needed.

Team members

The technical expert should know the technology and must understand the technical advantages and disadvantages of what is being offered. He must have a knowledge of alternative technologies to those in the proposal and their cost. If at all possible, he should be drawn from the technical group in the planning team that analysed the original proposal.

The financial expert should be familiar with various types of financial arrangements, including potential sources and terms of both domestic and international financing. He should also be able to calculate the long-term impact of changes in interest rates, repayment periods and principal amounts of the financing being discussed, as well as the long-term financial returns and cash flows from the transaction as it is modified during the course of negotiation.

The legal expert should have experience in drafting contracts and should be knowledgeable about the terms and conditions of technology transfer agreements. If the subject matter is a project for developing country, a knowledge of technical, engineering or management service agreements may also be needed.

The legal expert's role needs to be delineated. Some companies feel such experts should take a back seat in the actual negotiating sessions as they are often sought to be too dogmatic in their approach. Others feel the opposite way, reasoning that agreements are legal documents and should be attended to by legal staff. However, whether the legal expert plays a primary or secondary role, his main duty is to structure the agreement and its specific provisions so that they reflect what the parties have agreed to orally. He must also watch for terms and conditions unfavourable to his side and must be able to detect subtle provisions that might escape the eye of the business licensing executive.

Should no suitably qualified experts be available locally, it would be worthwhile recruiting them from outside the company as consultants. The cost of a knowledgeable expert can be recognized many times over by his impact on the cost of a transaction to the acquiring party. If such an expert is retained, he should participate in both the preparation for the negotiations and the negotiations themselves.

Team discipline

A negotiating team should speak with one voice. Usually the lead negotiator is the main person. Other members should speak only when the principal spokesperson invites them to do so, which should be frequently as possible to maintain team alertness and spirit. The leader should try to engage all the members of the team while maintaining his authority over the team as a whole. Experienced negotiators make a point of looking for any disagreement between the members of an opposing negotiating team and exploiting it to their advantage. Obviously, open disagreements between team members must be avoided, as should disagreements conveyed by facial expressions and body language.

It becomes critical, therefore, that team members maintain a calm demeanour in the negotiating room. They should avoid revealing any difference of opinion with what the chief negotiator is saying. If the issue being discussed is of sufficient importance and the disagreement is substantial, the chief negotiator should be asked to call a recess so the issue can be discussed and an acceptable position agreed before returning to the negotiating room.

In fact, team meetings should be held before each day's negotiating session to go over the points to be discussed that day and to agree on their handling. Similar meetings at the end of each day's session to review the points agreed upon and their general impact on the overall progress of the negotiations will go a long way towards limiting the chance of disagreement during the actual negotiations. In these meetings, team members should advise and assist the lead negotiator by analyzing the arguments presented by the other side, finding their weak points, studying their implications and generally providing the chief negotiator with appropriate counter-arguments.

Preparing for Negotiations

Once the negotiating team has been appointed, it should start preparing for formal negotiations with the other party. This requires focusing on its own and the other party's key information, objectives and issues. Doing this before the start of formal negotiations compels the team to reflect in-depth on each issue and prevents it from later being caught by surprise or being forced to improvise positions.

• Develop key information. Key information on a range of issues needs to be gathered and assessed before negotiations. These issues include the technical aspects of the proposed transaction, such as the nature of the technological product or process being proposed and alternatives thereto, the type of equipment required, the raw materials and utilities needed, the material flow and production specifications and technical assistance requirements. They also include financial aspects such as estimated production and capital cost, potential profitability and return on investment. With respect to a technology licence, the team needs to determine proper royalties, territory, exclusivity, field of use and the many other important aspects of a technology transfer agreement.

• Defining key objectives. Adequate preparation requires the negotiating team to determine how its technical and economic objectives can be optimized without making the agreement unduly one-sided. Once the objectives have been identified and agreed to, the negotiating team should list the key issues to be negotiated and should try to avoid establishing fixed positions on these issues. A better approach would be to set acceptable ranges that would accommodate the side's interests. The ranges, however, do need to be firmly fixed to ensure that positions later agreed to prove satisfactory.

• Information about the other party. The importance of learning all you can about the other party cannot be overstated. Information on financial position may initially be obtained from the party itself. It can then be verified and supplemented with information from many other sources. If the other party is a publicly traded company, extensive financial information can be obtained from annual and quarterly filings with national regulatory agencies. If the other party is privately owned, information can also be obtained from large banks and credit agencies. Information on the experience and prior performance of the other party in similar technology transfer projects is more difficult to obtain. Again, the negotiating team should request such information from the other party and then check it out through other sources.

• Objectives of the other party. Acquiring background information about the other party may give the negotiating team a good idea of the other party's objectives, priorities and concerns. This information will enable it to formulate better negotiating strategies. Addressing the other party's concerns early in the negotiations with proposals designed to satisfy interests on both sides would greatly facilitate a mutually satisfactory agreement.

Contract Drafts

The point at which they enter the process

If a licensor already has one or more licensees for a given technology, the earlier licence agreement could be presented when the licensor is seeking another licensee. Usually, such a licensor has a proven technology, and existing contracts, and there will seldom be any major changes to the terms and conditions of another licence for the same technology.

If the subject of the negotiation is a technology for which there are no existing licensees, the process is different. In such cases, the first step is generally a meeting in which the offering party presents the technology to a prospective licensee. During the final part of the presentation, the offering party outlines general terms, such as the licence grant (patent licence only, patent and know-how, technical assistance or not etc.), field of use, territory and, perhaps, payments/royalties. Following this meeting, there may be others for further clarification of general terms. But if there is to be an eventual licence agreement between the parties, the offering party prepares a draft agreement that contains all the terms and conditions it expects for the licence and sends it to the potential licensee. This draft becomes the basis for the ensuing negotiations; it becomes, in effect, the object for study by the negotiating teams.

Following each negotiating session, the draft is updated and the new version becomes the basis for the next negotiation. This process continues until the parties agree and execute the agreement or finally disagree and go their separate ways.

Preparing the first draft

The party that prepares the first draft of a contract is commonly thought to have an advantage. That is probably true, as the first draft sets the agenda for the negotiations and places the onus on the opposing party for arguing for and justifying any substantive changes. However, the advantage is generally short-lived, because in the end both parties must be satisfied with the provisions of the agreement for a deal to be struck.

The negotiating team sets the parameters of the agreement in the planning sessions, sometimes even before any preliminary meetings. The parameters can then be refined as inputs from such meetings are received. When the required and desirable provisions have been selected and the draft has been reviewed and internally approved, it should be sent to the prospect in sufficient time for that party to review it before a first negotiation date is set.

Organizational Aspects of Negotiations

In arranging negotiating sessions, a number of organizational aspects need to be considered. While these at first seem of secondary importance they none the less have significant impact. Some of the more important organizational aspects of negotiations are discussed below.

Physical arrangements

The physical and psychological state of the negotiators during negotiating sessions frequently affects the dynamics of the negotiation process and can in turn be affected by the physical arrangements outside and inside the negotiating room.

Physical arrangements generally fall into two categories: arrangements outside the negotiating room and arrangements inside the negotiating room. The first category includes such elements as satisfactory hotel accommodations, familiar and high-quality food and logistical facilities such as secretarial and telecommunication services. The second involves the relative size of the negotiating trams, the size of the negotiating room and the seating pattern around the negotiating table.

If the outside physical arrangements are inadequate, or even unfamiliar, negotiators become uncomfortable and uneasy, which may lead to impatience and irritability. Such a state of mind makes the search for compromise solutions and eventual agreement more difficult.

Similarly, being substantially outnumbered by the opposing negotiators or being forced to negotiate in too small a room for long hours (particularly if there are chain-smokers among the team members) also makes negotiations uncomfortable and irritable and detracts from the dynamics of the negotiation process.

Some negotiators like to use physical arrangements as part of their tactics, believing that discomfort, impatience and irritation will induce negotiators to concede on issues where they might otherwise have staunchly resisted. That is not, however, a common practice. Look form it, and if the arrangements are troublesome, the host party will usually improve them once tactful comments or suggestions are made.

Meeting length and frequency

It is not unusual for daily negotiating sessions to last 10 hours at a time. Sometimes they go longer, but that is not advisable. Fatigue is bound to set in and affect judgment. As in the case of physical arrangements, the length and frequency of meetings can affect the state of mind of the negotiators and either speed up or delay arriving at agreement. As a general rule, 8-hour sessions are recommended, with several breaks for review to release the tension negotiation usually creates.

The first-stage negotiation of a given agreement should go through the entire agreement completely so that all of the issues can be surfaced, even if this takes several days. It is not useful to become bogged down by a few major issues and not resume until they are resolved. First, surface all issues. What is stipulated in one paragraph of an agreement can affect other provisions. Once all the issues are known, it is easier for each party to determine how much time they will need to study them and when a new meeting date can be set for their resolution.

Informal meetings

Informal meetings, such as lunch or dinner with members of the opposing negotiating teams, are highly recommended. In such settings members of the respective teams get to know one another better and have the chance to develop personal relationships that will facilitate communication and understanding between them. Business should not be discussed at such meetings: they should be kept informal. Team discipline must preclude "side discussions" of issues by team members other that the chief negotiator in informal meetings.

Conversely, if an issue(s) has reached an impasse, it can be helpful if the chief negotiators of each party get together by themselves for lunch or dinner to try to resolve the impasse without the tension-filled atmosphere of the formal negotiation, where face-saving may be important.

Language differences

Negotiations are often carried on in English. Although the proceedings are sometimes translated into the negotiating teams native languages by interpreters, ordinary members of the two negotiating teams need to be sufficiently fluent in English to communicate adequately for purposes of carrying on negotiations.

On the other hand, one must remain aware of the fact that, however fluently the negotiators or interpreters use the language of the discussions, their understanding of what is said may not be exactly what is intended to be conveyed. There are expressions in every language that are the product of a particular country's culture and business practices that have nuances and special meanings that can only be fully understood within these contexts.

It is important, therefore, to use the simplest possible phraseology in presenting proposals or making arguments. In fact, many experienced negotiators have developed the habit of restating points in different words to avoid ambiguity and to minimize their chances of being misunderstood.

Premature publicity

A project can founder because premature disclosure either raised expectations or created opposition before it has been structured sufficiently to appear economically feasible and desirable. Sometimes the disclosure appears in the form of a press release by one of the parties or a newspaper article based on an interview with an official or executive charged with responsibility for implementing the project.

In either case, the information contained in the release or article can be very limited, if not inaccurate, since the project is presumably still being structured. To the extent that the information is valid, it may publicly announce positions on key issues that have not yet been resolved, which could take them more difficult to change during subsequent negotiations.

The parties should, therefore, maintain confidentiality about the project and about the progress of negotiations until an agreement has been firmly structured and its key terms and conditions have been agreed upon.

Role and Objectives of Negotiations

While specific objectives may differ from project to project, the role of negotiations is to provide a forum and a process that will accomplish three results.

1. A mutually satisfactory structure. In the course of preparing for detailed negotiations, the negotiating team presumably formulated a preliminary structure for the proposed transaction. The role of negotiations is to convert this preliminary structure into a structure that satisfies the interests of the both parties.

2. An executed agreement. The negotiating team will have prepared a draft of the contract documents that contains terms and conditions that it believes are required or desirable to govern the implementation of the transaction. The role of negotiations is to reach agreement with the other party on both the text and scope of the terms and conditions that should be contained in the final contractual documents.

3. A long-term relationship. The role of negotiations is to provide a process by which agreement can be reached on terms and conditions that are the basis for a lasting, mutually beneficial relationship. Negotiations should create an agreement free of the seeds of future conflict. They should not leave a wake of anger, mistrust or bitterness as that would undermine the future relationship.

Conduct During Negotiations

Negotiators have different views on how negotiations should be conducted: whether as an adversarial process, with each side defending its interests until a mutually acceptable position is forged, or as a process in which the mutuality of interests is the paramount focus. Each view is discussed below.

Adversarial approach

The adversarial process has become part of the judicial system in common law countries principally because it was felt to be the most effective way to arrive at the truth in cases of alleged penal violation. But it is an inappropriate process in the undertaking of a business agreement, where cooperation and accommodation are sought. The adversarial approach leads to positional bargaining in which each side fiercely defends its position. Such a contest of will causes anger and resentment, which jeopardize the ongoing relationship. Bargaining over positions tends to force each party to extremes for the sake of winning small concessions. This drags the process out significantly, increasing the time and cost of arriving at an agreement and reduces the chances of one being reached at all.

Principled negotiation

Principled negotiation, or negotiation on the merits, is a widely accepted method of negotiation. This is the method advanced by the Harvard Negotiating Project, developed by Roger Fisher and William Urey and related in their best selling book 'Getting to Yes'. In essence, the method calls for negotiators to be problem-solvers with a goal of reaching a wise agreement efficiently and amicably. It has four basic points:

1. People: separate the people from the problem.

2. Interests: focus on interests, not positions.

3. Options: generate a variety of possibilities before deciding what to do.

4. Criteria: insist that the result be based on some objective standard.

The first point recognizes that positions become identified with egos. Agreement is delayed because it is difficult to get people to back down. The negotiators need to work side-by-side and to resolve issues together, attacking the problem rather than each other.

The second point is meant to avoid focusing on stated positions when the object of a negotiation is to satisfy the underlying interests of each party. Looking at the interests of the parties - that is, to their overall objectives - rather than at a series of positions makes it easier to reach compromises on the particulars.

The third point is aimed at avoiding decisions made under pressure or in a presence of an adversarial negotiator. Such conditions tend to narrow vision. The same can be said for coming up with the one right decision. Instead, negotiators from both sides should take time together to think up a wide range of of solutions that advance shared interests and/or reconcile differing interests and then, later, jointly choose one. The parties, in effect, should invent options for mutual gain.

The forth point has to do with situations in which the interests are directly opposed. In such situations, the parties should try to reach results based on standards independent of the will of each party. Some fair standard such as market value, custom, law or expert opinion will serve the purpose. Negotiators should reason and be open to reason, yield to principle but not to pressure, and insist on using objective criteria.

The Harvard Negotiation Project teaches that these four principles are relevant to all the stages of negotiation: analysis, planning and the actual negotiation. During analysis you are diagnosing the situation, gathering the studying information about it, considering possible problems with personal interactions, reviewing options already on the table and identifying the interests of the parties. During planning the same four points are considered again while ideas are generated and actions decided. How will the personality be handled? Which are your most important interests? During negotiations the four points come to the forefront. Differences in perception, feelings of anger etc., should be acknowledged and dealt with. Each side should recognize the interests of the other so both can generate options to achieve agreement.

In summary, principled negotiation, as contrasted to positional bargaining, focuses on the interests of the parties, mutually satisfactory options and fair standards to reach agreement. It enables the parties to reach agreement efficiently without all of the anger and resentment that occurs when they try to dig each other out of entrenched positions, improving the chances for a wise agreement, amicably achieved, that can lead to a rewarding long-term relationship.

Cultural differences

During negotiations it is important to be aware of cultural differences between the groups of negotiators and to recognize that cultural differences can affect the way one side hears and absorbs what is being said by the other. Cultural differences can either highlight and clarify or distort and confuse what is said. Special effort is needed to counter their impact. Care must be taken to be sure that arguments are phrased in a manner that will be fully comprehended. Speaking slowly and stopping to get feedback from the other party on their understanding of your statement will be very helpful.

Typical Negotiating Techniques and Tactics

It is often difficult to distinguish between negotiating techniques and negotiating tactics. One way is to think of negotiating techniques as positive methods designed to resolve issues fairly and negotiating tactics. One way is to think of negotiating techniques as positive methods designed to resolve issues fairly and negotiating tactics as clever negative maneuvres to create false impressions and obtain agreement through deceit.

Negotiating Techniques

• Defer difficult issues / create a momentum of agreement. Probably the most useful technique for advancing the process of reaching agreement is to defer those issues that appear most difficult to resolve and tackle those that can be settled quickly. Experience has shown that a series of agreements on lesser issues creates a momentum that induces negotiators to reach agreement on the difficult issues. The agenda for the negotiations should therefore be set so that less difficult issues are discussed first.

• Take up general propositions before specific ones, agree on the principle before the specific language. The rationale for this technique is in the same as for the preceding technique. It is frequently far easier to agree on a general proposition that on a specific one whose impact is more transparent. Similarly, agreement on a principle is often more easily obtainable than agreement on on the specific language that applies to a principle facet of the transaction, postponing the more difficult phase of the negotiation.

• Use committees to resolve difficult issues. Initial discussions on certain issues may reveal that they will be difficult to resolve and might require alternative means of resolution. Formal negotiating sessions may not be the best setting for exploring possible solutions. It may be more effective to set up a special committee in which members familiar with the problem explore the different solutions and report back to the negotiating team.

• Keep score of concessions / quid pro quo's / propose package deals. Keep a summary record of all concessions made. They prove your willingness to compromise and may help obtain concessions from the other party later in the negotiations. They may also be useful for obtaining a package deal at some point in the discussions. Another simple and frequently used technique is to offer a quid pro pro, one concession for another, or a package deal, one set of concessions for another set. Each technique is designed to break impasses by balancing the concessions on each side.

• Use the two-way street argument. Proposals are often advanced which may be difficult to oppose because they appear reasonable on their face, although they may have objectionable long-term implications. One technique to counter or accommodate such proposals is to agree to the proposal provided the proposing party agrees to accept the equivalent conditions. If the proposal does in fact have objectionable long-term implications, the proposing party will very likely withdraw it. Occasions for use of the two-way street technique come up often. Keep it in mind as its reciprocal logic makes it very compelling.

• Apply the "most favoured nations" solution. If there is more than one licensee for the same technology, the "favoured nations" argument is frequently raised. The new licensee wants this in the licence to assure the terms and conditions of its agreement will be comparable to that of other licensees. It is raised mostly in connection with royalties, but may come up elsewhere in the agreement. The best way to handle the argument is to offer to include the favoured nation provision but have it apply to all terms and conditions of the agreement. This is fair and precludes giving a concession to the new licensee on just monetary provisions, without including other provisions that may be unfavourable for the new licensee.

• Spread the concessions out. Negotiators occasionally face issues whose resolution requires a concession by the other party that is so large there is little chance of obtaining it. A technique that experienced negotiators often use in such cases is to break the issue down into its various components and then spread concessions on the relatively minor components throughout the various negotiating sessions. This is known colloquially as "slicing the salami" so that it becomes easier to swallow. In contrast to negotiating tactics or gambits, there is nothing underhanded about this technique. In many instances its use in announced by a phrase such as "let me try to break this issue down and see if we can agree". Such phrases may signal the need for countering the technique.

• Structure the negotiations. Quite often, usually in the first session, when the initial draft of the agreement is to be reviewed paragraph-by-paragraph, one party will want to negotiate and settle issues as they arise. This procedure is strongly discouraged. It is far better to have list all concerns and issues before negotiating any one of them. This would preclude conceding a point early in the session and then regretting it later, when a fresh issue is raised. While this precaution is most important for the initial session, it should be followed throughout the negotiations.

Negotiating Tactics

Some of the most common tactics are discussed bellow:

• Bad guy / good guy. If a team decides to use this technique, its members will create a "bad guy," who does not want to yield on any issue and who makes unacceptable demands, and a "good guy," who makes reasonable proposals and acts in a moderate way. In fact, the "reasonable" proposals of the "good guy" may also be unreasonable. The other party may accept them not because of their merit but because of their proponent's tone, which made it seem he was "good" and his proposals more acceptable. It is an old trick that plays on emotions and should be guarded against.

• Divide and conquer. This ploy selects one opposing negotiator whose views are more acceptable than those of the other opposing negotiators or, better, the opposing leader. The selected negotiator is then played up to and treated as a reasonable man. The aim of this ploy is, of course, to provoke a division in the opposing ranks that that isolates the team leader and eventually pressures him to make the desired concession.

• Trial balloon. red herring / straw man. All of these are variations of the same tactic, arguments presented not because they are believed, but simply to obtain information, to mislead, or to instill a false sense of confidence with respect to the other party. A trial balloon is essentially an argument or proposal that the presenting party does not intend seriously to pursue or does not really expect to be accepted by the other party. Its purpose is to obtain useful information about the other party by observing their reaction to it. A red herring is an argument or proposal that is really not relevant to the issue being argued. Its purpose is to divert attention. A "straw man" is an argument or proposal so weak on its face that it can be easily destroyed. Its purpose is to give the other party's negotiators a false sense of confidence making them less wary of what may be coming next.

• Threatening a walk-out. Threatening to terminate the negotiations is a tactic often used to gain an important concession. It can be successful if it appears the other party is under pressure to obtain the agreement being negotiated, but it can only be used once, or at most, twice, in any negotiation, however extended it may be. Like the boy who cries wolf too often, a repeated threat to walk out if a given point is not conceded loses its impact. The tactic needs to be used very judiciously and only when the issue is sufficiently crucial that the party making the threat will not hesitate, if the point is not conceded, to carry it out.

• Last-minute demands. Last-minute demands are generally made by the home team after negotiations have been completed and the visiting negotiators, under the impression that they now have completed their work, are about to return to their home office. The tactic is used in the belief that the pressure to accede to such a demand may be irresistible.

Standard terms, national practice / setting a precedent

A tactic commonly used by large multinational companies is to resist otherwise reasonable requests for charges by conceding their reasonableness but asserting they cannot be granted because the terms being offered are standard terms; or because they are in line with, and possibly even required by, national law or practice or because they would set a precedent that could force them to modify many of their existing agreements. Usually, these assertions do not have much validity. So-called standard terms are constantly revised by the companies themselves. Quite often there are no conditions imposed by national practice, and the argument usually  disappears if steps are initiated to check local regulations. Certain requests may indeed set a precedent, but this is almost always irrelevant since not two sets of negotiations and agreements are identical. The tactic may have merit, though, when a licensor already has existing licensees for the same technology

Conclusion

The goal of enlightened negotiation should be to achieve an agreement that is equitable. The process should recognize the interests of the parties and provide for optimizing the benefits as measured by objective standards. Enlightened negotiating leads to a long-term relationship in which both parties focus on maximizing their mutual return, not one in which each party tries to maximize its own return at the expense of that of the other party.

Adherents of positional bargaining - while they enjoy some obvious advantages in dominating a negotiation – tend to put excessive demands, restrictions, provisions and royalties into the agreement. Even though the terms and conditions may be accepted by the other party because it urgently needs the particular technology, experience has shown that agreements under such conditions can also lead to discouragement and underperformance. In the long run, fairness will result in the best return for each party.