How can an individual entrepreneur or inventor negotiate against much larger companies?
Overall, by staying one step ahead. Actually, by being more than one step ahead — try for five or six steps ahead at least!
You must take advantage of your size. When you’re small and agile (as well as extremely motivated) you can stay a few steps ahead of the larger companies you’re negotiating with. How? By focusing on the bigger picture.
You obtain leverage over these larger companies when you see and understand the bigger picture, because no single individual within their walls possesses all of this knowledge — whereas you can.
You must envision how all of the pieces of your deal and future relationship are going to come together, which requires planning ahead.
Make the following part of your arsenal when negotiating licensing agreements with companies of any size.
1. Market demand. The number-one, single most important thing you can have to help you negotiate. When negotiating, proof of market demand is one of the greatest leveraging tools.
In my experience, when there’s business on the table, companies are willing to sign anything. They will agree to strong non-disclosure agreements and licensing agreements that are in favor of the inventor. They will even agree to let you continue owning all intellectual property, including future improvements.
2. Familiarity with the landscape of intellectual property. You must understand all of the prior art. This is the only way of establishing a point a difference in your intellectual property that has advantages over the competition. Filing provisional patent applications that include variations and workarounds is critical.
This type of insight can also be used as a selling tool.
When it comes to intellectual property, the devil is in the details. Perceived ownership is everything, especially when you don’t own anything yet.
3. Filing intellectual property that stops workarounds and variations. This shows that you’re building a wall of protection against your competitors, which takes away risk — another great asset when negotiating.
4. Filing first. Be the first to file. Understand how important intellectual property is to whomever you are negotiating with. Study the patents they have filed and the patent portfolios they have acquired. Think ahead as you try to identify where the holes are.
5. Hiring the best patent attorney. This is an absolute must when dealing with large companies. You’re playing a chess game, and your patent attorney needs to be able to compete. Not all patent attorneys have the same knowledge! Hire a firm with litigation experience.
6. Leveraging prior art. Be able to leverage the prior art as a selling tool. There’s always going to be prior art. You need to be well-aware of it. In fact, the prior art will be brought up many times during negotiations. Knowing your point of difference versus other patents allows you to keep selling the benefit of your innovation.
7. Innovating for the future. Expand your intellectual property portfolio with line-extensions. You need to keep current on where the technology is going. Always keep looking ahead.
8. Familiarity with the market landscape. Understand your point of difference compared to similar products on the market. Your ability to tell a story about the problem you’re solving — in a way everyone can identify with — is powerful when negotiating. This allows you to “sell” without selling at all.
9. Manufacturing knowledge. This gives value to any intellectual property that you’re filing, because execution is everything.
Everything comes down to delivery. This is an extremely important aspect of intellectual property that most people avoid or overlook. Having this type of knowledge is critical to actually delivering your innovation to the market, and that gives you leverage during negotiations.
10. Manufacturing costs. Having multiple solutions at various price points helps you cover all your bases.
11. Understanding their goals. Exclusivity? Being first to market? You must know what’s important to them.
12. Time. Your timing can be extremely important. Are any new regulations presenting themselves in the future? Are there any potential problems in the marketplace? You need to know about it.
13. Following up. Be a polite pest. Everything is going to take longer when negotiating with large companies. You need to be extremely patient, but persistent.
14. Relationships. Build relationships with everyone on their team. This will make their job easier and give them more confidence in you.
15. Establishing your credibility. By demonstrating your knowledge on all of the above topics, you earn credibility. This is extremely important! The other side needs to be confident in your ability to solve potential problems. Trust me — there are always problems. Name-dropping past projects that you’ve worked on that were successful never hurts, as they are testimonials to your expertise.
All of these tactics adds up to you, the inventor, being perceived as an asset. With this type of strategy, you will become extremely valuable to the companies you’re negotiating with. Instead of being seen as a competitor, you make it easy for them to have you join their team.
If you stay in the inventing game long enough, sooner or later, you just might have the opportunity to sit at the table with some of the most powerful companies in the world — companies that have the ability to spread your invention everywhere.
For most inventors, it’s a dream come true. I remember my first experiences negotiating with Fortune 500 companies like they were yesterday.
There was the time I flew out to Cincinnati, Ohio to make a presentation to Procter and Gamble’s technical group. Finally, my big day had arrived! I wasn’t prepared, and it didn’t go well. I didn’t know how my invention would be manufactured, which made my intellectual property strategy weak.
Not that long after, I was invited to give a presentation to Coca-Cola on the top floor of the company’s headquarters in Atlanta. I couldn’t believe it. There I was, in this circular room, speaking in front of a dozen vice-presidents from around the world. Unfortunately, that didn’t go well either. I didn’t understand their business well enough. Once again, I was reminded of my failure to adequately prepare.
Sometimes you have to learn the hard way. I certainly did. These learning experiences were painful but priceless. I kept at it, eventually licensing my rotating label technology onto popular products selling around the world, including Jim Beam and Nescafe coffee in Japan.
Achieving success as an inventor is less about your product and more about your persistence.
This article was originally published on Forbes.com.
