Rethink the Nature of Leverage
All too often dealmakers conflate negotiation power with a strong BATNA and the concomitant ability to hurt the other party. Essentially, the message they send is: We don’t need a deal with you, and you need a deal with us, so we get to dictate the terms. Such a mindset leads to pressure tactics. It also makes negotiators who lack attractive walkaway alternatives conclude that they have no power, which in turn causes miscalculations and unwarranted concessions. Moreover, their sense of powerlessness can breed fear and resentment—negative emotions that hamper creative thinking about potential avenues to an optimal outcome.
The solution is think beyond walkaway alternatives and consider multiple sources of not only coercive leverage but also positive leverage. By positive leverage, we mean things negotiators can uniquely offer to make the other side desire a deal rather than fear the absence of one.
Many technology firms have IP teams that seek to persuade consumer electronics companies such as Apple, Sony, and LG to pay for licenses. The negotiation of IP rights in this market is dauntingly complex. Patent infringement is pervasive—though often unintentional. Legitimate efforts to collect royalties are vastly complicated by the well-known phenomenon of patent trolls. As a result, most IP licensing teams struggle to “move up in the queue” for simple consideration by underresourced in-licensing teams, who feel besieged by all the parties claiming the right to royalties—and offering little in return except an agreement not to sue.
The IP licensing team at one well-known tech firm had a strong claims portfolio and compelling market data about the rights that other companies were infringing. The team tried to be creative and flexible, offering to blend payments for past infringement, ongoing royalties, and cross-licenses. However, its BATNA—filing lawsuits against infringers that ignored it—wasn’t strong, because the ability to enforce patent rights and collect damages had been hampered in recent years in many jurisdictions around the world. The firm didn’t have a particularly good track record in court, either. To various consumer electronics companies, it made sense to rebuff the team’s demands. And so they did.
All too often dealmakers conflate negotiation power with a strong BATNA and the concomitant ability to hurt the other party. Essentially, the message they send is: We don’t need a deal with you, and you need a deal with us, so we get to dictate the terms. Such a mindset leads to pressure tactics. It also makes negotiators who lack attractive walkaway alternatives conclude that they have no power, which in turn causes miscalculations and unwarranted concessions. Moreover, their sense of powerlessness can breed fear and resentment—negative emotions that hamper creative thinking about potential avenues to an optimal outcome.
The solution is think beyond walkaway alternatives and consider multiple sources of not only coercive leverage but also positive leverage. By positive leverage, we mean things negotiators can uniquely offer to make the other side desire a deal rather than fear the absence of one.
Many technology firms have IP teams that seek to persuade consumer electronics companies such as Apple, Sony, and LG to pay for licenses. The negotiation of IP rights in this market is dauntingly complex. Patent infringement is pervasive—though often unintentional. Legitimate efforts to collect royalties are vastly complicated by the well-known phenomenon of patent trolls. As a result, most IP licensing teams struggle to “move up in the queue” for simple consideration by underresourced in-licensing teams, who feel besieged by all the parties claiming the right to royalties—and offering little in return except an agreement not to sue.
The IP licensing team at one well-known tech firm had a strong claims portfolio and compelling market data about the rights that other companies were infringing. The team tried to be creative and flexible, offering to blend payments for past infringement, ongoing royalties, and cross-licenses. However, its BATNA—filing lawsuits against infringers that ignored it—wasn’t strong, because the ability to enforce patent rights and collect damages had been hampered in recent years in many jurisdictions around the world. The firm didn’t have a particularly good track record in court, either. To various consumer electronics companies, it made sense to rebuff the team’s demands. And so they did.