GUIDELINES FOR LICENSEES & LICENSING PROFESSIONALS

Overview:

We've designed this site to support the way you "do business'.

New products generally emerge from one of three sources: a) expensive, slow internal R&D, b) corporate acquisitions, and c) licensing-in technology.

Your goal at 2XFR then, is to find an appropriate technology or invention in the most expedient and efficient manner, then license, develop and commercialize it for a profit - all the while keeping your exposure to financial and legal risk to a minimum.

Let's quickly hit the reality curve:

By the nature of the organizational structure of the companies that would become licensees, there are built-in impediments to integrating licensing-in as a routine business operation.

2XFR endeavors to help you work around the impediments and foster deal flow. We bring qualified technologies and educated technology owners to your fingertips within the framework of an unbiased, Frictionless Marketplace.

Any business relationship you may develop with an inventor or technology owner is to be negotiated between you and them, using any traditional licensing-in procedure you may have established. We stay out of your business.

Here is a short list of guidelines which, for many of you, is simply a recap. However, they may help you maximize your technology acquisition efforts through 2XFR.

1. Prepare your objectives
2. Finding Prospective Technologies / Inventions
3. Limiting Liability Exposure
4. Licensing Negotiations and the Agreement
5. Tools To Facilitate Your Licensing-in Efforts

1. Prepare Your Objectives

Our database structure is the most intuitive and refined in the industry. Nevertheless, clarity of purpose and an objectives short-sheet can help prevent tangent distractions once you find yourself amidst thousands of technologies at 2XFR.

To maximize the effectiveness of your search, clearly identify all of your objectives in advance, for exmple:

• market share increase
• stronger competitive position
• increased manufacturing capacity
• reduced production costs
• enter new markets
• reduced development costs
• shorter time to market
• broaden product line
• "invest" in an already proven product
• leverage your small internal engineering group
• defer a bulk of R&D costs until after product sales
• pure portfolio strengthening

2. Finding Prospective Technologies / Inventions

2XFR's architecture is designed for the "buyer" - you. It's designed as a tool to support your business objectives - not as a confusing technology research database. To quickly match a technology with your objectives, you need to be aware of our structure:

Click on "search" or "browse" at the top to locate a technology based on a variety of proprietary database parameters:

Keywords: 2XFR's Keyword search works in much the same way as traditional "search engines".

Technology Category: self explanatory. One difference compared to other technology exchanges however, is that "technologies" are somewhat segregated from "inventions". This distinction allows you focus on core technologies associated with pure research (considerable time and expense to commercialize), or product-based inventions in various stages of development that could be brought to market quickly, producing a short-term ROI.

Targeted End User Segment: Sales and marketing organizations that want a smorgasbord of technologies that could dove tail into current marketing channels can filter their search by the end user market segment the technology is targeted for.

Manufacturing & Fabrication Process: another proprietary classification that allows manufacturing companies to find inventions and technologies that could be manufactured on their existing capital equipment, and within their current production expertise - regardless of the technology category or targeted market segments.

Degree of Engineering & Development Risk: the further along the invention development proceeds, the lower the engineering risk. Earlier state inventions carry a higher risk of not working as intended, being too expensive, and so forth. Find technologies that fit within your engineering capabilities.

Technology Monitor Alert: if you don't have the time to visit 2XFR every day, fill out a technology acquisition profile once, and for 365 days, you'll receive notice by e-mail every time a new listing matches your alert parameters.

3. Limiting Liability Exposure

"Liability" takes many forms when it comes to tech transfer. Your legal counsel should be consulted to review and advise on your risk exposure, but here are a few tips to help licensees recognize and mitigate common risks normally associated with technology licensing:

[E-1] Errant claims of technology theft by technology owners: You elect to not enter into an agreement with after reviewing their technology / invention, whether or not their technology is similar to what your engineering group may be working on internally:

[T-1] Use non-confidential agreements at the onset, and graduate to confidential disclosure agreements once you are confident that the technology satisfies your business interests. See our form templates if you don't have standardized disclosure forms.

[E-2] Paying too much for the license:

[T-2] The "Business Objectives" that drive your technology acquisition activities should be compiled by marketing, engineering, production, and other professionals on your team. It's easier to set "acquisition cost boundaries" if you follow preset budget guidelines.

Also, you can use the Patent Value Predictor as an arm's length guide to determine the value based on general economic indicators.

[E-3] Third Party Infringement Claims - After the License Agreement is executed, you encounter claims of patent infringement.

[T-3] Laying the defense of the license's underlying technology on the inventor / technology owner is fundamentally sound. However, oftentimes, the licensor lacks the financial resources to adequately defend such claims on your behalf. Requiring an intellectual property infringement insurance policy can reduce friction on this point - even if you, the licensor, builds in a mechanism to pay for the policy as part of the fees / royalty stream.

4. Licensing Negotiations and the Agreement

Here are a few review points that can help reduce friction during the negotiation phase:

Consider negotiating a separate inventor consulting agreement.

Questions on every inventor's mind whenever discussing a license include: a) whether the licensee will commercialize their invention / technology, and b) whether the licensee is just fishing for know how without an earnest desire to license the technology.

Once a license is executed, the scientific knowledge or know how of the inventor often needs to integrated into the development or commercialization process.

By considering a consulting agreement early in discussions, you demonstrate your desire to allow the inventor to experience the business decisions related to commercialization, and your commitment to compensate the inventor for sharing know how.

This also assures a nominal level of income to the inventor prior to receiving royalties.

Technology Valuation

Technology valuation is the most encountered sticking point to negotiating a licensing agreement. It's also the point that raises the negotiator's visibility within an organization - the consequences or paying too much, or the accolades associated with "getting a deal" put the decision makers in a high career risk position.

Determining a fair amount to pay for license has a number of approaches, three of which are:

• Quantitative: Revenue / Income Potential
• Qualitative: Comparable Deal Analysis, and
• Cost Method: Budget-driven

Negotiation of a fair value will likely incorporate one of more of these methods.

Quantitative: Revenue / Income
Fairness: Good
Accuracy: Fair
We've made available a proprietary, On Demand analysis tool that calculates the value of a given patent based on a number of economic factors including the relative percentage of the Gross Domestic Product (GDP), the remaining life of the patent, industry segment, and other factors. This is an impartial mechanism to determine a quantitative point of reference. Keep in mind that future-looking valuation, regardless of the method used, is not absolute, so determining an "actual" value quantitatively is extremely difficult.

Qualitative: Comparable Deals
Fairness: Very Good
Accuracy: Good reference
By reviewing licensing agreements executed by other companies within your industry or technology segment, you can begin to paint a picture of the "going market value" of similar technologies. Although other deals are a good reference point, they do not accurately reflect the nuances that differ in every deal.

Cost Method: Budget Driven
Fairness: Very Poor
Accuracy: Very Good
This method is very "accurate" from the licensee's point of view since it reflects precisely the amount of money a licensee has budgeted to acquire a technology. However, this method disregards the needs or objectives of the inventor / technology owner. In essence, it lays out the framework for a "take it, or leave it" negotiation.

If can conduct a rather quick, objective technology review by using our Invention Assessment Software program.

5. Tools To Facilitate Your Licensing-in Efforts

We offer products and online services that reduce "friction".

Intellectual Property Infringement Insurance: Policy that puts $1/4 - $1/2 million (or more) litigation war chest at your disposal to fund litigation to abate or defend infringement claims. (This may be applicable to your current portfolio assets as well). Secure Online Form.

Royalty-based Business Loans: allow you to use the royalty stream of your IP assets to secure business loans over $3 million, rather than encumbering your capital assets. Secure Online Form.

Automated Patent Valuation Systems: an On-Demand analysis tool that will instantly give you a patent valuation for a specified patent calculated using the Gross Domestic Product (GDP) for the industry segment (based on patent classification), remaining life or status of the patent, and other proprietary factors. This provides one very fast metric of IP valuation.

Software: recognized licensing agreement software and reference book that will help licensees quickly learn the ins-and-outs of licensing, and address key agreement points.

Forms Templates: a large collection of On Demand, editable IP legal forms templates (Microsoft® Word® format), all highly targeted based on your intended application, that can save time and money in the initial stages of your licensing activity.

IPSearchEngine™: PatentCafe's premier online patent & non-patent prior art search utility for use during the due diligence phase.