Click here to post your answer to this month’s question. The best entry receives a $50 gift certificate at a local restaurant!
Brad and Pitt have been friends since 2003. In 2004, Brad designed a unique small animal system, which included genetically modified miniature lizards, turtles and snakes. As part of the concept, the unique system also contained a small “bug factory” that lets bugs safely procreate so as to provide a “natural” food source for the reptiles contained within the system. The system was called “Reptile Park.”
Brad obtained all of the appropriate copyrights, trademarks and patents on the unique animal system. Also, in 2004, Brad “licensed” Pitt to manufacture and distribute Reptile Park in the state of Idaho. Brad is the “licensor” and Pitt is the “licensee.”
Pitt did such a good job making and distributing Reptile Park in 2004 and 2005 that Brad invited Pitt to come to California to help run the home office. No specifics were discussed and no agreement was signed about Pitt’s participation with the home office. They both agreed to “check it out” and “see what happens.” In late 2005, Pitt sold his “licensed territory” in Idaho and moved to California to work in the home office.
Once Pitt was in California and working with the main office, he had a great idea to market Reptile Park on the Internet. But no one at the main office understood marketing on the Internet. In early 2009, it was clear that Pitt wasn’t getting along with anyone in the main office. As a result, Brad decided to part company with Pitt, who, on his own separate decision, continued marketing Reptile Park on the Internet. But Pitt had no license from Brad to manufacture, distribute or operate Reptile Park on the Internet.
By late 2009, Pitt had developed “Internet Reptile Park” into a business with annual gross sales of $100,000. He still had no license from Brad to do this. Brad did know a little about what Pitt was doing on the Internet because of the complaints to the main office. Pitt realized that Brad had a good thing, but had no security because he had no license to market Reptile Park. Pitt now wants an exclusive license to operate within the United States. His exclusive Internet license wouldn’t prevent other “non exclusive” licensees from marketing Reptile Park within their geographical territory. Pitt feels he’s owed the exclusive, because he thought of marketing Reptile Park on the Internet.
Pitt wants a written, five-year exclusive purchase and license agreement to market Reptile Park on the Internet. Brad wants to reserve his individual right to market on the Internet and his commercial right to sell or license others to market on the Internet.
Time to dig deeper
If Pitt can be the only one who markets Reptile Park on the Internet, he’s forecasted profits of more than $250,000 per year for at least the next three years. Meantime, Brad has been in negotiation with the Petco website and has been informed that having Reptile Park on the Petco website could be very profitable. In fact, Petco has offered to guarantee him $50,000 per year in sales.
Business development principles
Use the “GADECK” negotiation format:
Greetings. How you greet people often determines the “flavor” of the meeting and can immediately lead to success or failure.
Approach. Be sure to say something positive; at this point you’ll want to separate the people from the problem. If applicable, you may want to talk about how you can work together to solve the mutual problem.
Discovery. At this stage, you’ll want to ask questions about what the concerns, fears and desires of the other side are; you’ll focus on interests, not positions. Discovery questions are open-ended and cannot be answered by a single word like yes or no.
Edit. Summarize the areas of agreement and generate a variety of possibilities before deciding what to do next. Edit questions are close-ended and can only be answered by single words.
Close. Here you’ll want to find where you have agreement on the problem. If you have agreement, be sure to insist that the results be based on some objective and measurable criteria.
Knowledge. Whatever you have in agreement, be sure to put in writing. Even though you may not have full agreement yet, be sure to note your progress, in writing, in a formal written agreement.
Do You Have the Answers?
1. Whether or not Pitt is an employee of Brad, how much is he owed?
a. A fair and reasonable wage for that position.
b. Pitt is not an employee but only an independent contractor.
c. Actually Pitt is a partner and gets 50 percent of the profits.
2. How much money will Brad make in the first five years if he owns it 100 percent?
a. Less than $100,000 per year
b. About $250,000 per year
c. More than $300,000 per year
3. What do you think is the best outcome for this negotiation?
a. Brad keeps 100 percent and gives Pitt a decent salary.
b. Brad terminates the working relationship and makes him a slave.
c. Brad and Pitt become equal partners.
How Business Smart Are You?
What would you suggest to Brad and Pitt?
Click here to post your answer to this month’s question. The best entry receives a $50 gift certificate at a local restaurant!
