Success: I can understand why you might think exclusive patent licensing deals aren’t attractive deals. You have to scratch more than the surface to understand how they work. There are a lot of reasons companies take exclusive agreements. Exclusive agreements are like a patent sale, BUT they provide on-going revenue - and the patent can kick back to nonexclusive.
Here are three very typical examples:
1. Microsoft takes an exclusive for $50M and becomes the exclusive licensing agent for NeoMedia.
2. Microsoft takes an exclusive for $50M for office-based solutions only. Keep in mind that is $50M plus a royalty per sale of the dominant office suite in the world. No other player matters in the vertical.
3. Microsoft takes an exclusive for $50M for two years for pre-installing on future mobile devices. NeoMedia can continue to sell for many other applications and it reverts to nonexclusive after two years. They currently give pre-loads for free.
Sound terrible?
Or you can take another $2M eBay deal which MIGHT renew in 2015. You can see how nonexclusives would be excellent for saying good-bye to YA. Right now, it would take at least 40 eBay-sized deals, or 4 eBay’s a month, to pay-off YA by the July 2013 maturity date. So, if management would have a choice, they better fall on the side of saving investors, and consider an exclusive.
Can you imagine what would happen to PPS if we signed an exclusive deal with Microsoft for $50M + royalties and used the initial proceeds to pay off YA?
With exclusive you get a solid payment up-front payment which tends to assure future royalties. On the flip side, Microsoft can license for a non-exclusive royalty payment and never pay a penny on the contract unless they adopt indirect campaign management someday.
So, if you were Laura, and actually have a chance to save your reputation, which would you chose?
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