The One Negotiating Strategy You Need to Know

Legal trouble seems to follow me wherever I go. My resume reads like a who’s who of landmark intellectual property litigation. We’re talking illustrious patent cases involving Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Texas Instruments (NYSE:TXN), and Samsung, among others. Not exactly the stuff hit TV legal dramas are made of, but not your typical corporate life, either.

No, I’m not a lawyer, despite my mother’s insistence that it was my calling. But as the company’s chief marketing and revenue exec, I was intimately involved in negotiating and legal strategy. After all, nothing impacts a company’s business more than being ripped off. It makes paying customers wonder why they should bother.

The thing is, my companies somehow always ended up on the winning side even though they were far smaller than their opponents. No, it wasn’t just dumb luck or karma. And it was never easy. But in every case, it was the negotiating and legal strategy that made the difference.

Was it worth the not-insignificant cost and downside risk? Was it worth the stress and anxiety? Was it worth all the frayed nerves, the nail biting, the hand wringing, and the nausea? Hard to say. But when it’s your or your company’s physical or intellectual property being threatened – when it’s something you or your employees worked hard to achieve or acquire – you really have no choice but to defend it.

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Make no mistake: In the legal world, failing to actively defend your intellectual property rights is tantamount to letting it go. In the corporate world, it’s an executive’s fiduciary duty to act in the best interests of the company and its stakeholders. And when it’s your personal property in a nation of laws, you’ve got to stand up for your rights.

Asking if it is worth it is asking the wrong question. The right question is “What is the winning strategy?”

Long ago, the general counsel of a late-stage startup company articulated the strategy that I’ve seen used time and again across an entire spectrum of corporate and personal disputes. It has saved my behind more times than I can remember. Not only is it indispensible for every executive and business leader. Everyone should know this.

Always seek to raise your opponent’s risk. The words seem so innocuous but their implications are far-reaching. It is a simple phrase, but remarkable insights usually are. And therein lies the rub. How you use it has as much impact on the outcome as the strategy itself. The devil is in the details.

So let me explain how this works. First, the phrase means that you must find a way to make your opponent’s risk of losing or not settling higher than they are willing to bear. The risk is usually but not always monetary. Of course, you have to figure out what that is. Sometimes it’s obvious; other times it requires research to uncover; and occasionally it inadvertently pops out during negotiations, so pay attention.

The strategy itself is not a one-time thing. It’s something you employ from your initial negotiating position through litigation, if necessary, until a deal is finally reached. And it assumes you have a legitimate legal case or conflict position. If not, don’t waste your time and money.

Here’s an example – a really hairy, real-world example – so you can see just how effective the strategy can be.

Let’s say your company’s patents are being infringed by a much larger corporation that makes components (chips, displays, or touchpads, for example) for smartphones and tablets.

You’ve approached them with reasonable licensing terms, negotiated for months in good faith, and you’re still miles apart. In other words, they’ve done an effective job of wrapping you up in negotiating purgatory. This is nothing new. It’s a common tactic big companies use to wear down small companies with limited resources.

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Once you realize they have no intention of settling, you decide to sue. The problem is they have a far bigger war chest so they can outlast you in protracted litigation. And that can also have a chilling affect on your business and your ability to raise capital, a fact that your opponent is well aware of.

In other words, your risk is high while theirs is low. And that is a recipe for disaster. Your opponent will use every trick in the book to drag the legal battle out for years and years. They will never settle. And there’s a very good chance your company won’t survive to see the light at the end of the tunnel.

The way to change the balance of that equation is to ask, “What matters most to a corporation?” The answer is “Its customers.” Its revenues and profits. So you sue the company … and its biggest customer. Since their smartphones that include the infringing components are assembled offshore, you file the complaint with the International Trade Commission (ITC).

The ITC is called a rocket docket because it’s faster than the fastest courts, around 15 months on average. And if it finds patent infringement, it can issue an injunction that blocks infringing products at the border. In other words, if you win, your opponent runs the risk of its biggest customer losing access to the biggest market on Earth.

Since the smartphone maker has all the leverage in the relationship with its component manufacturers, it will no doubt pressure your opponent to settle, require indemnification for damages, and raise the possibility of loss of future business.

That is how you raise your opponent’s risk. The same strategy works across a broad range of negotiations and legal disputes, from employment and business contracts to real and intellectual property issues.

Just remember one thing. Never make threats you don’t intend to carry out. Drawing red lines in the sand only weakens your position if you’re not going to follow through when your opponent crosses it. If your mettle is untested, I guarantee he will cross it.