Monthly Archives: September 2011

Owning and assigning data and know-how: what does it mean?

Potsdam conference: ownership of data was not a major issue

First scenario: late at night in the final stages of a corporate transaction.  You are asked to produce IP-related documents for completion (closing).  The documents are to include a know-how assignment.  You look on your office computer system but can’t find a suitable template.  What do you do?  It may be tempting to use a patent assignment, deleting the word patent wherever it appears and replacing it with the word know-how.  But is this good enough?

Second scenario: negotiation of a contract to perform R&D services.  The customer requests that a clause be inserted in the contract stating that the customer owns the data produced in the course of performing those services.

In both cases, the required assignment/clause appears to be based on the premise that know-how or data is property that can be owned and transferred.  Under English law, our understanding is that know-how and data are simply information, and there is no property in information as such, in the absence of specific categories of intellectual property such as patents or copyright.  The position may be different under other countries’ laws (eg under US trade secrets legislation?), and we would welcome readers’ comments on this aspect.

Thus, in scenario 1 above, we have occasionally drafted documents that are called know-how assignments for the sake of convenience, but where the content is rather different to a conventional IP assignment.  The content may include:

  • an obligation to communicate the know-how to the “assignee”
  • a warranty that the know-how was generated by the “assignor” alone and without use of third party information or IP
  • a warranty that the know-how is confidential, has not been publicly disclosed and in the future will not be disclosed or used by the assignor
  • a transfer of the right to sue third parties who breach the confidence of the information, including an undertaking by the assignor to cooperate in any action brought by the assignee against third parties for breach of confidence, with the assignor lending its name to the action if required

In scenario 2 above, a statement that the data is “owned” by the customer is often seen in US-drafted contracts, but causes IP Draughts concerns from an English law perspective, as it is not clear what it means.  Any paper on which the data is printed out may be owned, as this is physical property.  If the print-out of data is a copyright work, the copyright can be owned.  If the data is recorded in a database, there may be database right in that database. Any inventions that are disclosed in the data (although this may be unlikely if it is raw data) can be owned, under patent legislation.  But the data itself is pure information, and not property.

What is the customer trying to protect by stating that the data is its property?  Perhaps it wants to be clear that:

  • The data will not be used or disclosed by the party that generates it (in effect, confidentiality obligations)
  • Any inventions generated using the data will belong to the customer
  • Anything else?

We dislike wording in contracts that we don’t understand, and for this reason resist statements that data is owned.  Please let us know your thoughts.

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Filed under Contract drafting, Intellectual Property

Shall or will in contracts?

You shall go to the ball, Cinderella!

This posting is prompted by seeing this recent article, on a non-legal, grammar blog, about the distinction between shall and will, including the use of these words in contractual obligations.

To focus the discussion, here are some examples of contractual obligations:

  1. The Consultant shall provide the Services to the Client.
  2. The Consultant will provide the Services to the Client.
  3. The Consultant [undertakes / agrees] to provide the Services to the Client.
  4. The Consultant covenants to provide the Services to the Client.

Conventional practice among most English commercial solicitors is to use version 1 above.  Shall is almost always used (in preference to will) to express contractual obligations in the template agreements of City [of London] law firms.

Sometimes, variants on version 3 appear, but they take up more words than version 1 and add nothing to the legal effect under English law, so should probably be avoided as unnecessary verbiage.

In real property transactions in England and Wales, covenant has a special meaning, in that a negative covenant given by a purchaser of land may be binding on subsequent owners of the land.   This is an exception to the usual principle that contractual obligations bind only the parties to the contract.  In ordinary commercial contracts, contractual obligations, however described, are only binding on the parties to the contract.

Technically, it seems that the term covenant is an undertaking given in a contract under seal (nowadays, a contract made as a deed).  Conveyances of land must be made as deeds, so one can see why obligations in relation to the land, as described above, have been called covenants.

Covenants are sometimes encountered in ordinary commercial contracts.  Most typically, non-compete obligations, eg in employment contracts, are described as covenants.  Our understanding is that the use of the term covenant in this situation adds nothing to the legal effect, but does make the obligation sound more imposing.

Coming back to shall and will, the article referred to above mentions briefly a distinction that appeared in English language school books until a few generations ago:

(a) for the future tense, it is or was considered correct to say, I shall, you will, he/she/it will, and

(b) for the emphatic mood the words are reversed and it goes I will, you shall, he/she/it shall.

Contracts are usually written in the third person singular, as in our four examples above, hence the correct word to use is shall.  As far as we know, the use of shall in English contracts is based entirely on the application of this rule of grammar.

As the article mentioned above indicates, this is a rule devised by eighteenth century grammarians, and may be considered unnecessarily rigid in the 21st century, when linguistics academics often find prescriptivist rules abhorrent (search for prescriptivist poppycock on that site).  In any event, we find it difficult to believe that any sane English judge would interpret a contract wrongly based on the drafter’s choice of shall or will.

IP Draughts has discussed the use of shall and will in contracts with hundreds of lawyers who have attended his contract drafting courses over the last decade or so.  In the course of these discussions, he has learnt that some lawyers, particularly in the USA, are taught to use the word will when drafting contracts.

This teaching is far from universal in the USA.  The leading US author on contract drafting, Ken Adams, in his book a Manual of Style for Contract Drafting, recommends the use of the word shall for contractual obligations, but only for contractual obligations.  Thus, if a contract refers to something happening in the future but is not a contractual obligation, will may be the appropriate word to use.

This approach may be contrasted with that of the respected US legal author, Bryan Garner, who in his book Legal Writing in Plain English prefers to use the word will.  The title of section 35 of that book may give a clue to Garner’s views: “Delete every shall“.

The approach in US contracts may be affected by the fact that the word shall seems to be regarded as old-fashioned and rarely encountered in everyday speech in the USA.  This may lead one to avoid the word altogether, as Bryan Garner recommends, or to use it only in a specific, technical sense for contractual obligations, as Ken Adams recommends.  For what it is worth, this English lawyer prefers the latter approach.

I must buy some more perfume

Another alternative is to eschew both shall and will and use a neutral word such as must.  IP Draughts has seen must in a small number of contracts, but it hasn’t really caught on.  For some, the word may seem too abrupt and demanding, although this is not a view that IP Draughts shares.

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Professional rankings by legal publications: how much value do they have?

This posting is prompted by some intriguing comments from Neil Wilkof on IPKat about the marketing benefits of professional listings.

In common with most specialist IP practices, Anderson Law LLP is mentioned in a number of legal directories, including Chambers Directory and IAM Licensing 250.  Small firms such as ours are at a disadvantage compared with the larger IP practices when making submissions to the directories.  Some of the listings are based on taking up references with clients, and the number of clients that we act for in any year is necessarily limited.  We know that there must be limits to our clients’ benevolence in taking calls from researchers from the publications that produce the lists.  For this reason we have focussed our attentions on Chambers Directory and (following its move to a reference-based list this year) IAM Licensing 250, and have not made submissions to other publications including Legal 500 (much to the disappointment of the Legal 500 advertising representative who called us a few weeks ago, and who tried to encourage us to make a submission to his publication; the clear implication being that, if we were successful, he could then sell us advertising space).  Assuming we don’t ask a client to be a referee for more than one practice field in one publication, and that we need up to 5 references for each listing, this means we need up to 15 referees for Chambers Directory (if we apply in the IP, IT and life sciences fields) and another 5 for IAM Licensing 250.

Other listings are not based on client references, or at least not from referees notified by us.  We were pleasantly suprised to receive two awards this year from publications that are outside our usual focus, including awards for UK life sciences law firm of the year, and UK life sciences lawyer of the year.

All of these awards are from commercial publications.  They do not have the objective authority of an award from a professional body, such as being appointed as Queen’s Counsel, or as a member of a specialist panel (neither of which is available to us as IP solicitors in the UK, as only barristers are appointed as QCs, and there is no specialist panel for IP solicitors).  However, prospective clients are not only interested in thresholds of competence, which is what professional awards can provide.  Clients also want to know who is regarded as the best choice in a field of competent professionals – who is at the top of their game in a particular year.  This information may be more ephemeral, and less reliable, than professional awards, but it is still of interest to some people when making a choice of legal adviser.

Commercial publications are there to make a profit.  This obvious fact does not lead to any conclusions about how objective the publication will be.  Some publications, such as Chambers, clearly want to be regarded as objective and reliable, and it helps their profit-making activities to be, and to be seen to be, objective and reliable.  Some other publications may not have the same business priorities.  This is no different to other areas, eg restaurant guides.  A discerning eye can quickly tell which restaurant guides try to take an objective approach, and which provide little more than “puffs” for those paying for entries. But presumably guides in the latter category still persuade punters to visit restaurants, otherwise they would go out of business.  Or are we applying too much logic to the world of PR?

An argument against even the best legal guides is that they are too focussed on the window of 12 months prior to each year’s submissions being made.  Sometimes, law firms feature briefly through acting one or two cases, then disappear again without trace.  We can think of a number of overseas law firms that come into this category in relation to the IP listings.  Is it right that such firms are recommended as IP specialists by a legal directory, based on one previous year’s work, while firms and lawyers who are genuine specialists, and have been for many years, but by chance did not have any major IP cases in the previous year, drop down the rankings?  In our view, this is a weakness of an assessment system that relies entirely on firms’ submissions and a 12 month snap-shot of performance.

Looking at it from the view of the publication, it is cost-effective to employ inexperienced researchers who look simply at the submissions, and contact the referees named in those submissions, before making relative assessments based on the information in front of them.  Introducing other factors, eg a weighting based partly on a 5 year presence in the practice area, or peer recognition, or pro-actively searching out other professionals who have not chosen to make submissions, complicates matters and probably adds to the cost of assessment, even though it may improve the quality of the final product.  For this reason we are not surprised that it was the advertising representative of Legal 500 who contacted us recently, rather than an editor dealing with the IP rankings.

A counter-argument to this is that, over several years, the imperfections in the assessment system average out, and one gets a more reliable picture by looking at several years’ rankings together.  Many law firms’ websites, including ours, provide quotes from several years’ rankings in the legal directories.

Neil Wilkof’s article refers to a lesser-known ranking of female lawyers in a particular region of the USA.  We can confirm that Anderson Law LLP is by far the best two-partner, specialist IP law firm for, oh, …miles around.

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Filed under Intellectual Property, Legal practice

Top 9 law books for commercial IP practitioners

Law books for practitioners are sometimes very different to books designed for law students or academic researchers.  Law books don’t always travel well, as laws vary between jurisdictions.  For some, books are yesterdays’ technology, and the best way of obtaining legal information is by subscribing to an online service.

With these defences out of the way, here is IP Draughts’ list of the top 9 law books that he finds useful as a practitioner working in the areas of commercial and IP law.  Following the approach of judges of the Eurovision Song Contest, he rules out voting for any of his own books.

    1. Chitty on Contracts.  First published in the nineteenth century, and evolving through thirty editions, this multi-volume work is a kind of bible for contract lawyers.  For some inexplicable reason it is not found in a bedside drawer in every hotel room in the world.
    2. Interpretation of Contracts.  An important aspect of contract law is how the courts go about interpreting contracts.  This book is arguably better than Chitty on contract interpretation, which is high praise indeed.  As a barrister, the author Kim Lewison QC specialised in landlord and tenant disputes.  As a judge of the Patents Court and, very recently, the Court of Appeal, he has become a specialist in IP law.  In both areas, questions of contract interpretation are often at the heart of commercial disputes.
    3. Manual of Style for Contract Drafting.  The author, Ken Adams, left legal practice some years ago to concentrate on writing and teaching.  He has thought about and fine-tuned the principles set out in this book over many years.  IP Draughts agrees with most of those principles.  Occasionally, he detects a US focus in Ken Adams’ prescriptions, but in most cases the recommendations can be followed in the UK.   This book deserves to be included in the top 10 list.
    4. Drafting Patent License Agreements.  This book provides an excellent discussion of the legal and commercial issues that affect patent licence agreements, and wise advice on how such agreements should be structured and drafted.  Unlike Adams, the authors make no claims for the book being suitable for use outside the USA.  It is necessary to apply a UK legal filter, to ask “does this work in the UK”, but in most cases the answer to this question will be yes.
    5. Hewitt on Joint VenturesAbout to be published in its fifth edition, this book is a paradigm for how books on commercial transactions should be written.  The subject-matter in this case is commercial joint ventures, but the general approach of the book could be followed to advantage in many other areas of legal practice.  Clearly-written, focussed discussion of legal principles and practice points, in a well-organised, logical package.
    6. CIPA Guide to the Patents ActsThe Chartered Institute of Patent Attorneys’ Guide to the Patents Acts is an excellent compendium of information about UK patent laws.  Its value lies in the detailed notes and commentary that it provides on each section of the patents legislation.  There are other excellent texbooks on UK patent law (eg the Terrell or Roughton tomes), but none of the others provides the detailed, practical information that the CIPA Guide does.
    7. Bellamy & Child: European Community Law of Competition.  Another lawyers’ bible, this time on the subject of EU competition law.  Good for a detailed overview of competition law; for answers to detailed questions about EU competition law and IP, read Bellamy and Child first before turning to more IP-focussed materials (eg one of Professor Val Korah’s monographs).
    8. The White Book.  Previously, this publication had the more formal name of the Supreme Court Practice, but it was always referred to popularly as the White Book; now the latter appears to be its official name.  It sets out the English rules of civil court procedure together with detailed notes and commentary.  Essential reading for anyone contemplating, or engaged in, litigation in England and Wales.  See Volume 2 for a discussion of proceedings in the Patents County Court and other IP proceedings.
    9. ICSA’s Company Secretarial Practice.  The Institute of Chartered Secretaries and Administrators publishes this very useful guide to company secretarial practice, which includes commentary and specimen forms on a wide range of topics.

An early edition of Chitty on Contracts

This would have been a “top 10″ list, except that we ran out of books that qualified.  There are other, valuable books on IP and commercial law subjects, but none that we can think of that seems to merit inclusion in this list.  Perhaps you know differently…?

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Filed under General Commercial