What are the steps in a licensing transaction and what challenges do you face in completing a deal?
The first hurdle always is making sure that the transaction makes business sense for both parties. I say that’s a major hurdle because it’s what everybody wants, but it’s often why a deal fails – when there’s some sort of a miscommunication or misset expectations when the parties get to meet. The first hurdle is usually not the idea. It’s usually not the preparation for the contract. It’s usually when you’re first sitting down and you have a discussion, because it’s not uncommon for the other side push back on price. Usually the evidence they give is somehow based in either evaluation or on like a technology study that they’ve done on their end or that they’ve paid for. So you have to go back and refute it. That’s a time when technology [research tools] become really important.
We’re always looking for ways to work smarter, not harder, and to figure out what tools we have to get the answers we need and the evidence we need to go back to the table and push that number lower, if we want to, or to get more terms and conditions added. That usually is something which occurs through the negotiation phase and as you conduct due diligence. Then the rest just follows, but a lot of times it really is the negotiations in trying to get the deal to match expectations on both sides that is usually where the biggest thing hurdle that we find in transaction occurs.
What’s the alternative for an IP transactions professional without access to sophisticated IP technology solution?
If you want to get the transaction done, you can always rely on your internal know-how for the business aspect, but if it comes to taking a look at the intellectual property, you’re either going to have to add more resources and get more people in or you’re going to start to need to look at tools. To do the due diligence that you need to on a transaction, you really need to have the people who were in and trained, or get more people or get the tools. There really is no other way to do it.
How would you go about it without these tools?
The entire time I’ve been here we’ve used ClearAccessIP! I don’t really have the best guidance on it because I don’t know what life would be like without it right now.
What advice do you have for other IP licensing & advisory groups around utilizing technology in their workflows?
I may have more support in my role at Houlihan than a team does if for instance, you only have five people in house to help support them, but, it’s all about working smarter, not harder. So sometimes adding extra bodies to do the work doesn’t necessarily help. The technology tools that you use are very important.
How does AI and Machine Learning play into the future of licensing?
I think in a lot of ways, it is really going to help facilitate transactions, and here’s why. The way transactions used to be done was usually based on who you knew. If you were in the marketplace and you had a need to take a license for a certain type of technology, you would open your Rolodex and start calling people to figure out who had what. And so i think your ability to find the right source to license was kind of limited on your personal network. And I think that that is in a lot of ways the way some people still traditionally do deals is they tend to go to the people they know and trust. There’s nothing wrong with that. Everybody loves repeat business and you want to work with people that you’ve done deals with in the past.
But I think one of the challenges of finding good material and good business partners is finding ways to get through all of the technology and intellectual property out there and figuring out what’s there to sift through to look for new business partners. Let me give you an example; If you have a client that wants to take a license, you obviously can’t take licensed intellectual property from your competitor. They’re not going to give it to you. That doesn’t make any sense. Right? So when you go and you pull up your Rolodex and say who am I going to look to see who has intellectual property for license? That’s going to take out a huge portion of your network because you tend to go to the same conferences with your competitors. One of the things I think one of the ways that the tools are really gonna help is, because they’re becoming more effective at funneling that information, you now have an extra resource that you can go out to. You’re not just going to the patent office website and pulling up the patent database to look for something. You have a more intelligent way to funnel the information to find something. And then with all the other general tools with the way the internet is and Linkedin, it’s easier to find the right people to talk to. So I think, if anything, it’s going to broaden the ability of people to do more transactions.
(condensed from interview with ClearAccessIP on March 13, 2018)
*Dr. Lacy Kolo is the Director of Tech and IP advisory at Houlihan Lokey and a trusted advisor who counsels clients on tech and IP-based transactions, mergers and acquisitions, IP based capital formation, and restructuring.
Lacy has spent her career working at the intersection of intellectual property, strategic transactions and technology, both as an operating executive and as a partner in one of the world’s largest law firms. Prior to joining Houlihan Lokey, Lacy was a partner at the international law firm of Squire Patton Boggs, where she routinely advised companies, private equity firms, and financial advisory firms on technology and patents in complex corporate transactions.
Lacy also has substantial experience on intellectual property, elements of restructuring, insolvency proceedings, mergers, acquisitions and divestitures for both buy-side and sell-side clients. At Squire Patton Boggs, Lacy was also responsible for building, and later monetizing, extensive patent portfolios through enforcement efforts such as licensing and litigation. Lacy also founded and successfully exited two companies.
**This interview has been lightly edited for content and clarity.