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Negotiating the Impossible by Deepak Malhotra

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2LEVERAGING THE POWER OF FRAMING

Stalemate over Royalty Rates

WE WERE NEGOTIATING A large commercial agreement.1 The company I was advising was an early-stage venture that had developed a potentially game-changing product in a multibillion-dollar industry. The folks on the other side of the table were hoping to license our product and help bring it to market. As a result, we had to negotiate a wide range of issues: licensing fee, royalty rate, exclusivity provisions, milestones, development commitments, and so on. We got stuck on royalty rate—that is, the percentage of sale price they would pay us for each product they sold.

There had been some early discussions in which the two sides had very informally agreed that a 5% royalty rate was reasonable. ...

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