Just finished my Journal of the Licensing Executive Society, which includes the results of their most recent member survey on licensing issues.  There were some interesting statistics that suggest some best practices to adopt in negotiating deals.  For example, when asked "thinking about licensing agreements entered into in the last twelve months, with the benefit of hindsight, which, if any of the following contract characteristics would you now restructure?"  The top three answers were as follows:

·        Field of use restrictions (43%)

·        Technical Milestones (40%)

·        Business Milestones (44%)

At the low end of the spectrum were clauses on most favored nation provisions and terms of use.  As a follow-up a question, the survey inquired "what are three most common reasons why you would restructure some of last years deals if you could?"  The top answers to that question were as follows:

·        The other side is not putting their promised effort into the product/technology. (53%)

·        Revised business strategy. (40%)

·        New Information has emerged about the market opportunity. (39%)

I think it is interesting to note that 28% responded that they would restructure some of last year's deals if they could, because they now realize that they made mistakes in negotiating.  Isn't that amazing?  Over one fourth of the respondents would restructure some of last year's deals, and mostly because the other side is not putting their promised effort into the product/technology. Even more amazing is the fact that among respondents that identified themselves in the university/government space, a whopping 71.8% complain that the reason for wanting to restructure would be the failure of the other side to put forth the promised effort.  

So what does all this mean?  The survey results would tend to suggest that when structuring and drafting license and development agreements, more focus should be placed on the technical and business milestones, and, to the extent possible, contractual provisions should be structured to provide some assurance that each party will, in fact, put forth the promised level of effort into the subject technology. Carefully crafted, detailed, technical and business milestones will clarify the party's expectations, duties, obligations, and assumptions on the front end of the deal, and considerably decrease the likelihood of any surprises in terms of the level of effort or achievement as the transaction proceeds.