The Medici family were in many ways like contemporary Venture Capitalists. The Medici's investments advanced business practices in Renaissance Italy, as exemplified by the invention of double entry bookkeeping. Cosimo il Vecchio (1389-1464) was the original political and business leader (Link to Picture Source).

Intellectual Property: Sell/Buy/Deal

Pricing IP

As a practical matter, prices in IP transactions are set more by haggling and tradition rather than rigorous economic analysis. Two factors encourage this haggling. First, there is no observable market for high-end technology licenses or patents, and there is a fundamental lack of objective price models. Thus, dealmakers rely on emotionally driven opinions and behavior. The valuation process becomes one of determining value to the parties to the transaction- a negotiation. Negotiation is the usual means by which the parties’ emotions, forecasts for future use and internal values are resolved. But all this begs the question: How do you find the appropriate negotiation range for closure?

We assist deal makers to determine value of their IP and negotiate price in IP transactions. We focus on

• Patents

• Patent Licenses

• Licenses of Semiconductor Designs

SBVC Innovates IP Risk Management

One of our innovations is to enable mismatched risk tolerances of buyer and seller to be identified and matched by offering multiple, equivalent deals. Focusing on risk matching advances the business practices associated with negotiating IP deals. For example, some buyers prefer paying royalties to upfront fees, and sellers frequently prefer upfront fees to royalties. Using our approach of finding multiple kinds of deals with the same net present value, each side has multiple choices at the same time, with all choices having the same risk. We design deals to tradeoff upfront fees, option exercise prices (another of our innovations in licensing), per design fees and royalties. Thus, by selecting from various different but equivalent offers, each side can smooth their differences and close a mutually acceptable deal. Examples and more detail are presented in our briefing on Design Licensing.

Design Licensing presentation.

Our approach called "Multiple Equivalent Simultaneous Offers (MESO)" has been researched by V. H. Medvec and A.D. Galinsky, professors at the Kellogg School of Business at Northwestern University. As reported in Negotiation newsletter (Vol.8, number 4, APRIL 2005), published by the Program on Negotiation at Harvard Law School, negotiators using this MESO technique get better outcomes than those using sequential, single offers, without sacrificing relationships or losing credibility.