Two important attributes of a win-win deal are fairness and flexibility as they relate to both the market and the license agreement. It is critical, of course, to have a written agreement that clearly spells out the terms of the deal. “But once that contract has been signed, the licensor and licensee must focus on meeting the needs of their relationship rather than the terms of the agreement,” says Michael Ross, senior VP/GM Britannica. “It’s the relationship that will sustain the partnership, not the contract.

“If as things move along the original terms of the agreement no longer make sense, if the signed contract puts either party at a disadvantage or threatens their business model, then both parties must be willing to modify the agreement,” Ross adds. “I have seen many partnerships fail because of an agreement that started out fine for both parties but, due to changes in the market, became unsustainable for one of the parties.

“You have to decide what you want more: a strong, long-term relationship or strict, principled adherence to a contract,” Ross continues. “This is fundamental to a win-win partnership. Many people say they want a relationship, but they behave as if they want a transaction.”

A few years ago, I noticed that, quarter after quarter, I was not making any money from a licensed product, even though sales were strong. So I looked carefully at the royalty statement. Then I saw the problem—a 3 percent royalty. Ouch! It should have been 6 percent. I called the vice president of marketing and asked why I was receiving half of what I deserved. “Because that’s what you agreed to in the contract,” he replied. (This man was not at the company when I made the deal.) I checked, and he was correct. I had made a serious error. I must have been asleep when I cut the deal.

I asked him what he could do to cure my dilemma, and he said, “It’s easy. We’ll just change it to 6 percent.” He even went back a couple quarters and made up the loss to me. This executive knew how to maintain a relationship. To this day, we still work together, and I’ll never forget his gesture.

I have been blessed to have had the opportunity to do business with many wonderful people who have not sought to take unfair advantage. I have also been exposed to executives to whom the only win-win is when they win twice. They are uncomfortable when they don’t have the advantage. These guys handle nickels like manhole covers. They are Loophole Louies who cannot be trusted no matter what they agree to on paper. They are the portent and epitome of moral and spiritual disorder. “Some rob you with a six gun, and some with a fountain pen,” wrote Woody Guthrie. Be alert. Lerts survive.

Contracts are a two-way street. I have had companies request that I change an agreement long after it has been in force or that I take an unreasonably low advance or royalty. If I feel it is a fair request, I’ll do my best to make it work. There is nothing greater for both sides or more enviable than a deal in which the inventor and the manufacturer feel victorious and share in the rewards.

I would much rather negotiate with an executive who is well rewarded, someone who has something to gain by my success. These are the kind of people who negotiate the fairest deals. The problems arise when companies do not give their people a strong incentive package.