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Archived updates for Monday, February 27, 2006

Asian Licensing Negotiating Tips

At the Winter Meeting of the Licensing Executives Society (LES) in Pasadena, California, a panel of international experts offered their perspectives on licensing deals in Asia. The discussion was led by Larry W. Evans, past president of LES USA and Canada and LES International, and the panelists included Eun-Sub Jung, managing partner of the AJU International Law Group; Akiko Futamura, Ph.D., executive vice president, Science & Technology/Business Development for SC Biosciences USA, Inc.; and Dave Palella, president of BioScience Ventures.

The panelists agreed that personal relationships are extremely important in negotiating business deals, and in many cases, the relationship established during the initial meeting can be relied on to solve problems that may come up later in the negotiations. Evans cited an example where once the Chinese leader with whom he had conducted the original negotiation entered the room after two days of difficult negotiations, the disagreement was resolved within an hour.
Jung offered several points of advice on dealing with Korean business executives, including:
  • Larger Korean companies have negotiators fluent in foreign languages.
  • Koreans with advanced writing skills are not always fluent oral communicators.
  • Korean negotiators often work to reach an equilibrium point between the positions of two parties
  • Most Korean companies are highly centralized and most agreements have to be approved by the president. The president will be influenced by the thoughts and opinions of the other employees.
  • Take advantage of lunch or dinner opportunities – Koreans enjoy "hanging out"
  • Some Korean companies are staring to insist on including all important terms in the written agreement – this is a change from past practices, where some terms were not documented
  • Do not threaten litigation as a negotiating tactic

Futamura spoke on negotiating business deals in Japan. “I see that difficult negotiations are sometimes just caused by misunderstandings in what the two parties are trying to achieve,” she explained. The experience of many Japanese working for one company their entire lives can sometimes prevent the government or universities from benefiting from people with more diverse business experience. She also echoed the opinion of others that licensing deals are heavily based on relationships, and encouraged executives to focus first on building solid business relationships. “Japanese make decisions based on consensus and they are not willing to take risks,” Futamura added. “They want to make sure everyone is comfortable in any agreement.”

Palella told several stories of failed business deals in Asia that he says cost tens of millions of dollars for the companies involved and recounted some of the lessons learned from these failures.

  • Be careful of erroneous translations of key words. When difficult words come up, watch their faces and make sure they understand. There is no such thing as overcommunicating with Japanese
  • Japanese companies respect CEOs but do not want to have them as project managers, believing that CEOs have too many things to do to manage a project effectively.
  • Japanese change research and development strategies all the time – include a provision to get an up-front fee in the agreement and include a significant termination fee.

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