Equality and diversity in intellectual property

work partyThe Law Society of England and Wales has an Intellectual Property Working Party (IPWP), of which IP Draughts is a member. After several years’ campaigning, the IPWP has recently been upgraded to become a committee of the Law Society. While this has some major advantages in terms of influence and access to Law Society resources, it also means that we are now subject to more Law Society rules.

Yesterday, IP Draughts received an email from the Law Society, telling him that he had to complete an online, interactive training programme in “equality and diversity”, taking about an hour, as a pre-condition of being allowed to serve on this new committee.

IP Draughts took the programme yesterday evening. It was slightly more entertaining than he had feared. Students were required to match nationalities with characteristics, to demonstrate lazy prejudice. He enjoyed pairing up Scotsmen with the characteristic “sunny personality”, and Italians with the characteristic “coldly logical”. This wasn’t playing the game, though. More seriously, he got a couple of questions wrong in the online exam at the end of the course. Note to self: peer bullying is harrassment and not victimisation for the purposes of equality legislation. Giving an employee an unfair assessment, with the result that their performance deteriorates, is a self-fulfilling prophecy. No marks are given for calling this a vicious circle.

The vocab of the equality community is tiresome; the underlying objective is worthwhile. As a quasi-public body, the Law Society feels it has to be at the cutting edge of best practice in this field. All solicitors’ firms in England and Wales now have to conduct an annual survey of staff, to determine how equal and diverse the firm is. The most distinctive aspect of IP Draughts’ firm seems to be the number of its lawyers, IP Draughts included, who were the first generation of their family to attend university. This is not a measure of diversity that is commonly discussed. It seems to be easier to make assumptions about a professional firm based on race or gender, or whether its members attended private schools.

working partyThe equality procedures that some organisations follow, with the best of intentions, can seem like mindless bureacracy. When the IPWP recruited new members a year or so ago, the names on the application forms were removed by Law Society officials, presumably so that the interview panel could not be adversely influenced by a foreign-sounding name. However, this had the ludicrous result that with one applicant, who was attending the interview by phone, we had to call a mobile phone number without knowing who to ask for. It took a while for us to establish that we had the right person (“Hello? Hello? Who are you? Who are you? etc). Even for applicants who attended the interview in person (in a basement room of the Law Society that had once been a prison cell – wonderful atmosphere!), it was ridiculous having all the data about them and their career other than their name. The sense of the ridiculous was compounded when we later discovered that the Law Society did not follow this procedure when recruiting its own staff.

Coming back to the online course, some of its teaching should be obvious to anyone who is experienced in contract drafting and negotiation. Saying that someone “is an invalid” carries a loaded meaning that is absent in the phrase “has a disability”. The loaded meaning is in two parts: first, it confers a status on the person (“is”) rather than just describing an attribute (“has”); and secondly, it uses a word – invalid – that has secondary and pejorative meanings. If readers will forgive an earthy analogy from the world of IP licensing, in negotiations it is usually more productive to say that a comment is bullshit than to call the person who made the comment a bullshitter.

shadDigressing slightly, in his childhood IP Draughts was puzzled and slightly shocked by a line from the classic Cole Porter song, “Let’s do it – let’s fall in love”. The line went “folks in Siam do it, think of Siamese twins”. Cole Porter’s acidic wit took few hostages.  Later in the same song, after exhausting nationalities, he turns to different types of fish. Only recently has IP Draughts come to understand the line “why ask if shad do it, waiter bring me shad roe”. Shad is not often on the menu in English restaurants. Nor are its eggs.

IP Draughts’ sense is that the people who practise IP law in the UK are not representative of the population as a whole, but this is not due to any direct discrimination against people who have what the legislation calls “protected characteristics” – race, gender, age, etc. Perhaps there was a clubby, public (ie private) school atmosphere a couple of generations ago, but that is no longer the case, at least in IP Draughts’ experience. Perhaps the influx of scientists into the profession has helped to make it more diverse. The distinctive character of the IP profession may be based, at least in part, on the expectation of very high educational qualifications among its practitioners, which tends to favour some groups over others. More could be done to encourage disadvantaged groups to aspire to become commercial lawyers while still at school. Some of the largest City firms are involved in initiatives in this area.

Fortunately, IP Draughts’ main prejudices (we all have them, what counts is how we deal with them) are not protected characteristics, at least for now. Hopefully, the time will never come when it is illegal to discriminate against someone who “doesn’t give a shit”, and in favour of someone who tries their best.

 

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First reminder: course programme 2014

Buy the book and be well prepared for the course...

Buy the book and be well prepared for the course…

Here are details of some one-day courses that IP Draughts will be running over the Summer and Autumn.

Drafting Legal Clauses in Commercial Contracts

Over many years, this has been one of the most popular courses that IP Draughts has run. In the morning we focus on warranties, indemnities and liability clauses.  In the afternoon, we turn to various boilerplate clauses including entire agreement clauses, termination provisions and choice of law and jurisdiction.

This one-day course will be run on 19 August 2014 at the UCL Faculty of Laws in London. Course programme here.

Contract Drafting: An Advanced-Level Workshop

And don't forget to buy this one as well...

And don’t forget to buy this one as well…

This course focuses on the techniques of contract drafting. It is suitable for practitioners who have studied contract law and have some experience of drafting, and who wish to develop their drafting skills away from the ‘heat’ of negotiations. Participants will have the opportunity to draft and discuss wording in a non-judgmental setting.

This one-day course will be run on 4 September 2014 at the UCL Faculty of Laws in London. Course programme here.

Intellectual Property Licensing: An Advanced-Level Drafting Workshop

This course combines a discussion of the substance of IP licence agreements with a detailed look at the drafting of the terms of those agreements, including grant clauses, payment terms, performance obligations and warranties. It is not specific to any market sector, and much of the discussion is relevant to most sectors, but in the examples that are used there is an emphasis towards technology licensing rather than arts-based licensing.

This one-day course will be run on 16 September 2014 at the UCL Faculty of Laws in London. Course programme here.

To book on any of the above courses, please send an email to mark@andlaw.eu.

Other courses

While on the subject of courses, don’t overlook Ken Adams’ course on Drafting Clearer Contracts, which will be run for the first time at UCL on 3 November 2014. Ken is a US attorney and contracting drafting guru, who has spent many years refining his thoughts on how to draft contracts clearly. These thoughts are set ou in his excellent book, A Manual of Style for Contract Drafting. IP Draughts agrees with most of what Ken says about contract drafting, and is delighted that he has brought his course to the UK. Details here.

Finally, if you would like an intensive, week-long course on IP transactions, which provides 29 CPD points, please consider attending our multi-award-winning course, Intellectual Property Transactions: Law and Practice, which will be run again at UCL in 2015.  This time, we are running the course a little later in the year, from 20-24 April 2015. The course has won a Provost’s Teaching Award from UCL in 2014 and a Highly Commended in the 2013 Law Society Excellence Awards. Last year’s course brochure here.

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A fresh look at indemnities

have a goFollowing last week’s post about indemnities, IP Draughts has had a go at drafting an indemnity clause from first principles, without ‘cutting and pasting’ any traditional indemnity language. His attempt can be found here.

Some points to note:

  1. The core parts of the indemnity are in clauses 1.1 and 1.2. These clauses simply use the term “indemnify” and avoid wording such as “hold harmless and defend”. Instead, the scope of the indemnity is explained in later clauses.
  2. The indemnities are designed to place responsibility on a licensee of intellectual property to indemnify the licensor, except where the liability arises from the licensor’s breach of contractual warranties (in which case the licensor indemnifies the licensee). For example, the indemnity under clause 1.1 would operate if the licensee sells a defective licensed product, his customer is injured and the customer brings a claim against the licensor.
  3. The defined term “Commercialising Entities” broadens the reach of the indemnity beyond that of many indemnities, and IP Draughts is in two minds about this aspect. It might be argued that, as the indemnity covers claims made against the licensee by third parties, it is unnecessary to spell out who those third parties might be, eg by referring to ebaythe indemnity covering use of a licensed product by people far down the supply chain, eg the child of someone who buys a licensed product on eBay from the licensee’s customer. However, an alternative view is that if the indemnity is intended to cover all liabilities that may arise from the use of the product, it is best to be explicit about this aspect. IP Draughts would be interested to hear readers’ views.
  4. The most ‘novel’ aspect of this indemnity clause is probably clause 1.4, which seeks to address questions of interpretation that have probably been the subject of reported cases, as can be seen from the case references in Contractual Indemnities by Wayne Courtney, an excellent book that was reviewed in last week’s blog posting.
  5. Clauses 1.5 and 1.6 address points that are sometimes covered in detailed indemnity clauses. IP Draughts is grateful to his friend and former colleague, Matthew Warren of Bristows, for sending him a very detailed indemnity clause after reading last week’s blog posting, which provided a convenient shortcut to drafting these terms. IP Draughts has filleted most of the ideas from Matthew’s clause but used simpler, and probably less watertight, language. Some points have been omitted, eg an obligation of confidentiality on the indemnifier with respect information learnt from the beneficiary. This point might be covered in a separate confidentiality clause of the agreement. Similarly, if it is intended to give officers and employees personal rights to enforce the indemnity, a separate ‘third party rights’ clause should make this point clear.

Clearly, there is a great deal of detail in the attached wording, even with the simplified wording that IP Draughts has used, and in several cases there are choices to be made by the drafter, eg whether to include an obligation to mitigate losses under clause 1.5(c). There are, no doubt, other points of interpretation and litigation practice that could be addressed.

What do you think of the clause?

 

 

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Indemnifying the damnified

contractual indemnitiesContractual Indemnities (by Wayne Courtney, Hart Publishing 2014) is an excellent book. It draws upon the PhD thesis of its author, who is a former practising lawyer and is now a Senior Lecturer and Associate Dean of the Law Faculty at the University of Sydney.

Regular readers of this blog will be familiar with the frustration that IP Draughts feels about the typical drafting of indemnities – a frustration that is shared by others whom IP Draughts respects, including contract drafting guru Ken Adams. See some of his commentaries on indemnities here.

Indemnities are often drafted with complex wording and long sentences, so that it is difficult to glean their precise meaning. The reasons for this complexity are various and include:

  1. Broad in scope. Indemnities are typically drafted so as to be broad in scope, and the lawyer sees their task as one of trying to be comprehensive and avoiding loopholes. In some market sectors, eg M&A, there are no prizes for simplifying indemnity wording, only potential claims against the lawyer’s professional indemnity policy if the lawyer’s original drafting fails to achieve the financial result desired by the client.
  2. Difficult issues. It is difficult, even for lawyers, to think through all the legal and practical implications of an indemnification obligation. In the heat of urgent negotiations, it is tempting to use wording that one has seen before, and that seems to cover all the bases.
  3. dryTheoretical. Indemnities are concerned with risk allocation, rather than operational issues such as price and performance obligations. The subject matter can seem very dry and theoretical and, frankly, boring. This combination of theoretical and legal subject-matter tends to make commercial clients run a mile, and leave the drafting and negotiation to their lawyers. As a result, there is less pressure to make the drafting straightforward and understandable.
  4. Case law. There is an extensive body of case law on the interpretation of indemnities. Unfortunately, the case law has not made the drafter’s job any easier; rather it has served to illustrate the many issues of interpretation that are thrown up by indemnity language and the different ways that judges can “jump” when presented with a set of facts about a commercial relationship.

In passing, IP Draughts considers that one of the problems with judges interpreting indemnities is that they often lack experience of drafting and negotiating them. In the UK and, one suspects, many other countries, judges are drawn from the ranks of courtroom advocates, who tend to be a different group from those who draft and negotiate commercial contracts. Increasingly, IP Draughts wonders whether the courts – even highly-respected commercial courts such as those in England and Wales – are the best place to decide matters of interpretation.

Be that as it may, Wayne Courtney has done a very good job of distilling centuries of English and Commonwealth case law on indemnities into a narrative that sets out the main principles of interpretation. His experiences as a practising lawyer and as an academic have undoubtedly contributed to making this a useful work.

aqua vitaeIP Draughts has only two significant criticisms of the text. First, that he would have liked even more distillation of the messy, impure fluid of authorities. He feels it should be possible to keep reducing the liquid down over time, into an aqua vitae of principles that are simple to apply when drafting indemnities. Perhaps this will be Wayne’s life’s work and, by the time of the third edition of this estimable book, the main text will be 150-200 pages, rather than the 302 pages it currently takes to cover the subject.

For example, there is a discussion (at section 7-7) of whether the indemnifier has an obligation to defend an action that is brought against the indemnified party, and is within the scope of the indemnity. It seems to IP Draughts that this question is intimately linked to the questions of whether the indemnity is preventive, and whether it covers claims as well as ultimately liability. These questions are discussed in other chapters. It seems to IP Draughts that these various points, which are each discussed in a useful and authoritative way but in isolation from one another, could be combined and distilled into a master-scheme of analysis.

IP Draughts’ second criticism is that Wayne doesn’t offer any indemnity language to address the main points that he has discussed in the text.

Highlighting a few of those points:

  1. damnifyIndemnities can be interpreted as “preventive” (requiring the indemnifier to ensure that the indemnified person does not suffer a loss) or “compensatory” (requiring the indemnifier to make good any loss that the indemnified person has suffered – referred to in the text as “damnification” – a wonderful word). Often, the courts will adopt a preventive interpretation. This does not seem to depend on using words such as “hold harmless” although, having read the book, IP Draughts suspects that the lawyers’ practice of using this phrase may have its roots in a desire to make the indemnity preventive in scope. There are better ways, in IP Draughts’ view, of making this point clear, than using a formulaic and unclear phrase such as “hold harmless”. (Incidentally, Wayne discusses and dismisses the idea that a preventive interpretation was to be found in the courts of equity, while a compensatory interpretation was to be found in the courts of law, prior to the merger of those courts under the Judicature Acts of 1875.)
  2. It is not always clear, from the wording of the indemnity, whether it applies to all or just some of the following: (a) third party claims against the indemnified party, (b) losses suffered by the indemnified party as a result of the indemnifier’s breach of contract, and (c) claims that might otherwise by brought by the indemnifer against the indemnified party, eg for breach of contract – this type of indemnity is effectively an exclusion clause.
  3. Whether the wrongdoing of the indemnified party cancels or qualifies the indemnity, eg if they are negligent.
  4. Whether claims that have not yet resulted in a liabilty are in some way covered by the indemnity.
  5. Whether costs are recoverable.
  6. Whether an indemnity that covers the same ground as a liability for breach of contract (eg where the contract includes an indemnity against breach of a warranty) can be broader in scope than the underlying breach of contract claim, or is subject to the same limitations and qualifications (eg as to causation, remoteness and mitigation). Wayne discusses the different viewpoints on this subject, eg that an indemnity provides an “agreed damages” mechanism that overrides the usual contract law rules (similar in effect to liquidated damages), but concludes that there are relatively few clear cases that support this analysis of the effect of indemnities, and that each clause must be construed individually. IP Draughts is reassured to hear this conclusion. He has encountered this “agreed damages” approach in the world of M&A and has long wondered where it came from.  More generally, IP Draughts has encountered commonly-held assumptions about the legal effect of contract terms in the world of M&A that are not always obvious to those whose contract experience has been in another market sector, and he wonders whether an element of “group think” has developed in that closed world.

IP Draughts may attempt some drafting of indemnities from first principles and with these points in mind, in a later blog posting. Most of these points are familiar, but some of them, eg the distinction between preventive and compensatory indemnities, have been brought into sharper relief by the book’s analysis.

 

 

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