OPTEON

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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 [phone] philip_at_opteon.
com.au
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Negotiation A Counter-Intuitive Process

• Something of a provocative title
• Title comes from remarks made by participants at
  some of my negotiation workshops
• thats 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

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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 ?

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Fisher Urys 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

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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

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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, 510 parties in a negotiation, each
  competing to put their own position

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Focus on interests instead of positions

• Whats 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

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Focus on interests instead of positions
Position is the pathway
Position
Pathway 1
Pathway 2
Pathway 3
Interest
Pathway 4
Pathway n
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Focus on interests instead of positions
Solution

• A position identifies only one pathway forward
• An interest usually identifies several pathways
  forward
• Pathway in common is the solution

Acceptable to one party
Pathway 1
Pathway 2
Pathway 3
Pathway 4
Pathway n
Acceptable to other party
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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

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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 thats important
to you
Let me see if I understand. You want that
because (you state in your words)
I dont understand how that will work, can you
explain it to me
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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)
Were open to doing this in any number of ways
that achieves (your interest not your
position)
Whats 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)
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Focus on interests instead of positions
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Focus on interests instead of positions
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Focus on interests instead of positions
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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

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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 doesnt 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 ?
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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 ?

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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)

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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

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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 partys 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

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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

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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

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Diving into a negotiation

• 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

• 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

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

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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

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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
  partys needs and interests
• We can now formulate proposals
• that are more likely to blend in with the other
  partys 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

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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

Can you help me understand why that is important
to you?
What do you want to achieve out of our
relationship ?
What do you hope to achieve out of todays
meeting
What would be your thinking on this?
How would you feel about us looking at it from
this perspective
How would it work if we were to consider?
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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 partys needs and
  interests and therefore more likely to be
  accepted by them

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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?
• Licensees perspective
• that we were a desperate licensor
• Commitment on financial terms at such an early
  stage likely to be when licensors 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
• Licensors perspective
• Value of the IP dependent on exactly what the
  clinical pathway would be

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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
• Scope of further RD work to be undertaken
• Work Plan of for that RD (toxicology, animal
  studies etc)
• Timeframes for the above
• 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)
• Your proposed marketing strategy and market roll
  out
• Will you be partnering outside Europe ?
• Your assessment of the market.

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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

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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 ?

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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 TCs 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
  couldnt 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

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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

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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 dont want to appear weak

How can they possibly disagree with this ?
They must not have understood Ill have to
repeat it
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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
• Influence the proposals we make to the other
  party
• Increase the likelihood that our proposals will
  be acceptable to the other party

Can you help me understand why that doesnt work
for you?
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Avoid rejecting their proposals

• When a proposal is made to us that doesnt 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
• Theres more to a negotiation than a carpet
  bazaar haggle

That wont work. I suggest that
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Avoid rejecting their proposals

• Intuitive step in a negotiation
• To reject a proposal and doesnt work for us, and
  make a counter proposal
• Counter-intuitive step in a negotiation
• To share information on why it doesnt 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
• Influence the proposals we make to the other
  party
• Increase the likelihood that our proposals will
  be acceptable to the other party

Let me share with you my thinking on that
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Intuition Counter-intuition

• Weve covered 4 things with this intuition /
  counter-intuition theme
• Focusing on needs instead of position
• Deferring a meeting to a time of our choosing
• Establish rapport
• Ask questions and gather information
• Educate instead of negotiate
• Not defending our rejected proposals (with the
  risk of entrenching ourselves)
• Not rejecting the other partys 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

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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