Once a proposal binder has been assembled that includes the aforementioned elements, the target company should be contacted. The “Licensing Negotiation Process Flowchart” figure shows the negotiation process.
As one of the last steps in the negotiation process the value of the licensing deal is determined. As mentioned previously three generalized methods are used to do this, cost, cash-flow, and market. For the case of entities not negotiating deals that involve standards essential patents, or patents that cover a component of a complex system, these methods are pretty straightforward. However, for the negotiations that involve standards essential patents, or patents that cover a component of a complex system, the royalty or license revenue achievable is more complex. A strong case can be made for using artificial intelligence classifiers for this purpose as shown by Nigel Swycher and Steve Harris. Their process is included in the Chapter 25 discussion of Valuation of IP.