One thing I noted in all of these discussions (that I knew would prove to be of value in my future negotiations) was that these patent assertion entities had few, if any, qualms about vigorously and relentlessly pursuing patent infringement claims against any party.

In completing my BATNA analysis, I simultaneously considered direct negotiated sales to corporate buyers and moved immediately to the company that I thought would be the most opportune buyer of the patents—-XXX.  XXX had intimate knowledge of their industry and would be able quickly to assess the potential value of these patents there.  I also was confident that we soon would be discussing potential application of these patents in other industries and domains.

More importantly, though, was the fact that there were enormous potential synergies from XXX’s purchase of these patents because the effect of the purchase would be to eliminate XXX’s only major competitor.  Upon purchasing the patents, XXX almost immediately would be able to raise its prices and (substantially) improve its margins in all of their North American markets.

There was one major, near insurmountable problem with this strategy—-the history of competition between the two companies and the level of animosity between them.  Several years earlier, BEL’s CEO had passed up the opportunity to purchase XXX at what in hindsight would have been an incredibly low price.  His stated reason for rejecting the deal?  He preferred to destroy XXX rather than give them an honorable ending.

And subsequent events only increased the enmity that each party had for the other.  Only a few years prior, when fortunes of the companies had completely reversed, a fully negotiated and documented purchase of BEL by XXX blew up when the CEOs from each company came into the same room at the same time to sign the final documents.  Merely being in each others’ presence was enough to blow up the deal!

Although BEL’s CEO had left by the time I began work with them, remaining senior executives and management were more than willing to carry on the battle.  Emotions were so strong that I was instructed not to waste my time with XXX, and I had to develop and execute an internal negotiation strategy even to be able to initiate and carry on my discussions with XXX.

When I contacted XXX for a possible sale of the patents, the hostility from their side was even stronger than within BEL.  With patient persistence and by applying every tool and tactic in my collaborative negotiation toolbox, I eventually got them to discuss a possible transaction with BEL through me.

XXX’s intense feelings always overshadowed our discussions, however.  Just as I was beginning to feel that a deal could be made, XXX sensing the same, decided it was time to exact their pound of flesh—to address past perceived wrongs from BEL, to exact retribution, and to claim and memorialize their complete and total victory over BEL and XXX’s complete vindication in the marketplace.  They arbitrarily and without explanation or reason cut by more than half the purchase price we were discussing with a take-it-or-leave-it attitude.  XXX knew that BEL was on the ropes and, since I had approached them with this deal, they felt they had all the leverage and could dictate the terms of purchase.

Because I had developed and strengthened BEL’s BATNA prior to my negotiations with XXX, I was able to respond to their tactic with a very matter-of-fact description of my previously negotiated ability to sell BEL’s patent portfolio to numerous named patent assertion entities.  I also was able to paint a vivid picture of what it could mean to XXX’s future business model if our negotiations were to cease and I pursued options with these patent assertion entities.  Had I not previously developed a strong level of trust and understanding with XXX, XXX would not have been able even to hear or consider my comments on their merits.  Instead they would have heard only a threat and would have sought to exercise their formidable power in rejecting it.

Even though my comments were heard, they were not sufficient to take us completely to the finish line at what I thought was an acceptable price.  XXX postured in response that the kinds of patent infringement suits I was describing were just a cost of doing business in today’s world.

Then I got my lucky break.  Continuing my research on XXX (as I always do in a negotiation), I saw that XXX had just filed a Form S-1 with the Securities and Exchange Commission indicating its intent to become a public company.  The S-1 contained a treasure trove of information on XXX.  One of the risks to potential investors prominently mentioned in the S-1 was that XXX owned a thin patent portfolio and could itself be vulnerable to claims of patent infringement from competitors, third parties and the growing body of patent assertion entities.

I knew one of the surest ways a company then had to dissuade such infringement claims in the first instance or to resolve any suit actually brought was to itself own a broad patent portfolio.  With its own patent portfolio, XXX could cross-claim infringement of its patents by any such plaintiff and thereby set the stage for an early negotiated settlement of their competing claims.  Without a patent portfolio of its own, I knew that XXX would have increased difficulty with their underwriters, on their road show with institutional investors and in their public offering.  And BEL had the broadest and most relevant patent portfolio in the market.

By continually focusing and anchoring the discussions on the value to XXX of BEL’s patent portfolio, I was able to sell the entire patent portfolio in less than eight weeks from the start of our negotiations for an all-cash sale price that was more than twice our appraised value of the patents.  Equally important was that the sale was on an AS IS basis with little to no ability for XXX to make any claim for indemnification with respect to the patents and thereby claw back sale proceeds.  An AS IS sale was particularly important here because BEL had extremely limited knowledge of the provenance of its patents and it lacked any control over how aggressively XXX would exploit its patent claims.  Any representation from BEL as to the quality, nature or strength of the patents would have been the equivalent of issuing an insurance policy to XXX—–with no basis for understanding the underwriting risk being taken.

After-closing, BEL did have to deal with a third-party claim unrelated to the patents, but from which BEL had indemnified XXX.  I was personally gratified by the fact that XXX fully and immediately cooperated with BEL in defeating these claims.  XXX’s cooperation was without obligation, given freely and without reservation.

What had been one of the most confrontational, adversarial and distrustful of relationships between the parties that I had ever seen had become one of professional respect and mutual accommodation.  That was accomplished even though XXX ultimately paid BEL more than twice BEL’s highest hoped-for selling price.

Deal Point:  Focusing on your value to the purchaser is essential but not enough.  Even when you feel you have little or no leverage, if you want them to hear you and pay based upon the merits of your message, negotiate collaboratively.