Q & A Table of Contents
They Keep Changing The Rules
From: Young-eun, Seoul, Korea
Question: I am working with a Korean biotech venture company. Since last year, I have contacted one unit in a British hospital to introduce its technology. I heard that the unit of the hospital we are talking is short of research fund, so I thought that we could easily negotiate with them.
In January I sent a proposal, offering an up front payment of $20,000 and 2% of running royalty and they accepted our offer.
However, they wanted us to pay up front, instead of providing a running royalty because they are short of cash. We accepted it and reproposed $30,000 last month.
But they changed; they counter-offered $80,000 and said that they have 15-year experience on the technology and can't be able to have any royalty. They even said that the fee is not negotiable.
I am afraid to say that we told them we really need to get their technology and we didn't say that we have alternatives. What do we have to do? I am preparing for material to show market situation and expected sales and profit of our company. But does it work?? Or do we have to find alternatives right now? (Actually, we contacted several companies and the organization with which we have been negotiating is one company which shows interest in working with us).
Response: Unless you have a written contract, I suggest you should communicate with the British organization and say that you are not comfortable with the way the negotiations have been going. Indicate that you are concerned that because of possible differences relating to both national and corporate cultures, it appears that you have reached a point where the agreement is lacking clarity in terms of communication, understanding, and consequently, the elements necessary for agreement.
You need to take a close look at your company's interests and the priority of those interests. Most likely, your top priority is to make money -- but you may also want to get a product to market, to establish your credibility, to create or expand jobs within your company, etc. Paying attention to those interests and making certain you do not write or say anything that conflicts with your interests is your most important job in negotiation.
Thus, in this case, if you conclude that your need to do business with the British organization is the more important interest, then you can draw conclusions about how much you can concede in the negotiation process.
Once you are clear on your priorities, then you can communicate with the organization in the UK about your concerns regarding the negotiation. You might suggest there is a list of issues that need to be clarified or resolved if you are to do business together. You should ask them what factors are going to drive their decision. If it is already clear to you that they need to be convinced that your company has sufficient assets, which your question seems to indicate, you need to consider creative options in structuring the deal in terms of a) up front cash, b) a form of bonding or insurance that guarantees they will be paid, or some other approach. If you have calculated the likely amount of income their product can generate for you, it could make sense to develop a price you are willing to pay them which represents a discounted proportion of the total net revenues you anticipate the product will generate.
This is a complex series of issues. You need to get your own thinking in order; comprehend your own priorities; try to get a better understanding of their priorities; and 're-invent' or re-start the negotiation process based on a mutual face-saving formula.
Good luck with this deal,
Steve
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