Monthly Archives: October 2011

How plain should your English be, in an IP assignment?

Best practice in contract drafting is a complex business.  On the one hand, the drafter has to make sure that any legal terminology in the contract is used correctly and will be interpreted correctly by  the judge or arbitrator, if there is a dispute.  For example, if a contract includes terms such as indemnify, direct loss or force majeure, the drafter needs to understand what these terms mean and how and when to use them.

The legal meaning of such terms may differ, depending on which country’s or state’s laws apply to the contract.  Take the example of force majeure.  The concept of force majeure exists in many civil law countries, but not in England and Wales.  Yet the meaning may differ between civil law countries.  For instance, under French law, the term has a precise meaning: “any event that is external (extérieur), unexpected (imprévisible), and irresistible (irrésistible)”.  Of course, parties may come up with their own, contractual definition.  But they need to be careful.  In one English case it was held that a contractual provision which stated “the usual force majeure events shall apply” was void for uncertainty (see the discussion of this case at page 271 of our book, A-Z Guide to Boilerplate and Commercial Clauses, second edition).

Thus, the contract drafter has to be technically accurate and take account of judicial interpretation.  At the same time, though, he is under pressure to use straightforward language that non-lawyers can understand.  This pressure is illustrated by a number of developments in English law.

First, there is the abolition of Latin phrases in the English courts, and the renaming of things to make them more easily understood, as part of the Woolf reforms.  Thus, plaintiffs are now claimants, writs are now claim forms, and interlocutory injunctions are now interim injunctions.

Then there is the Plain English Campaign, and a general trend for clients to expect to understand the contracts that their lawyers draft for them, rather than (as might have been accepted in earlier generations) treating legal documents as a mystery that can only be understood by the initiates of a secret cabal.  In the case of consumer contracts, the need for plain English has been enshrined in statute.  Based on an EU Directive, the UK’s Unfair Terms in Consumer Contracts Regulations 1999 specifically require that contracts be written in plain, intelligible language.

Standard English Bull Terrier: "at whom are you looking?"

Consumer protection laws generally do not apply to business-to-business contracts, and in such contracts the drafter is permitted to use more sophisticated language.  The US author on contract drafting, Ken Adams, favours what he calls “standard English” for such contracts.

Applying these principles to IP assignments, IP Draughts’ view is that it should be possible to use straightforward language for most parts of an assignment, but there are some places where legal language must be used.  Specifically, the word “assign” should be used, as in “X hereby assigns the Patent to Y”. From a common law perspective, it is probably also appropriate to state that it is an assignment of “all right, title and interest” in the property being assigned, so as to avoid any uncertainty that it is a complete assignment.

Other legal issues are typically addressed in an IP assignment, but there is usually no need to use magic legal words to address them.  For example, an assignment will typically state that it includes the right for the assignee to sue in respect of infringements that occurred prior to the date of the assignment.  This can be stated without recourse to complex legal expressions.

Unfortunately, some lawyers use language in IP assignments that is far from standard English.  The following clause is lifted from a US assignment:

Assignor hereby grants, bargains, sells, conveys, assigns, sets over and delivers unto Assignee all of Assignor’s rights, interests, obligations, and liabilities in and to the Trademarks to have and to hold the Trademarks unto the Assignee, its successors and assigns forever.

IP Draughts has heard arguments for why it is necessary to have a long list of verbs in the first line of this quoted text, including arguments that cite a nineteenth century case heard in the US Supreme Court, Waterman v Mackenzie (1891).  In that case, the court held that:

The patentee or his assigns may, by instrument in writing, assign, grant and convey, either…

1.  the whole patent…, or

2.  an undivided part or share…, or

3.  the exclusive right …[in] a specified part of US

A transfer of either of these three kinds of interests is an assignment, properly speaking…  Any assignment or transfer short of one of these, is a mere license…

This quotation is sometimes cited as authority for why it is necessary to say “assign, grant and convey” in an IP assignment, rather than just “assign”.

While IP Draughts is not qualified to advise on US law, he finds it difficult to believe that any sane judge would require a trio of words to be used, or that this quoted text even says that such a trio must be used.  But the innate caution of some lawyers means we will probably see this type of language remaining in some IP assignments for many years to come.

There are other oddities in the quoted text, including use of the phrase “to have and to hold”, which, IP Draughts seems to recall, is part of the traditional language used in some Anglican wedding ceremonies.  The reference to successors and assigns also seems misplaced, given that it is an absolute transfer of title.  Discussion of these further oddities will have to wait for another day.

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Filed under Contract drafting

Do we need an EU contract law?

IP Draughts attended a meeting today, hosted by the Law Society of England and Wales, to discuss the European Commission’s proposal to introduce a European sales law.  It is, in effect a stand-alone, contractual code that could govern both consumer contracts and business-to-business contracts, within the European Union.  It would apply to contracts for the sale of goods (including items supplied electronically) with or without services.

Topics that would be covered by the code include:

  • how contracts are formed
  • implied terms in a contract of sale (analogous to the English Sale of Goods Act 1979)
  • unfair terms that are not enforceable
  • consumer protection provisions, including information to be supplied to consumers, where they may sue, etc

The idea of a European contract law has been quietly rumbling away in the European Commission since in the 1970s.  Now it looks as though it may happen.  Commissioner Reding has made it her priority and has support from the European Parliament.

The draft law states that it will only apply if the parties want it to.  There is a fear, though, that it may be revised during the legislative process to allow consumers to require it to apply to their transactions within the EU.

Many of the terms of the new law are unobjectionable as statements of general principle.  The problem lies more in the legal mechanisms for applying those principles.  A recital to the legislation states that traders will be able to rely on this stand-alone law without reference to national laws.  This seems to be nonsense.  It will be necessary to fill in the gaps of the legislation somehow (eg as to how and when title will pass, and whether the parties have legal capacity) by reference to other legal principles.  This is likely to result in differences in interpretation in different EU countries, which goes against the idea of a comprehensive code.

The case for introducing such a law appears to be more political than economic.  In particular:

  • It is not clear that consumers will be in any better position if their transactions are governed by the new law.  In some countries, existing laws may already provide greater consumer protection.
  • Transactional costs are likely to be increased, as parties seek advice on the new law and have template agreements drafted to reflect its provisions.  There will be greater uncertainty than at present, as there is not an established set of legal principles to govern issues not addressed in the law, or not addressed in detail.

The European Commission proposes to introduce this law under Article 114 of the Treaty on the Functioning of the European Union.  The significance of this route is that countries that are hostile to the law (eg the UK – see the comments of the Justice Secretary, Ken Clarke, here) do not have a veto on legislation passed under Article 114.  There is, apparently, European case law to indicate that a law of this kind should be introduced under Article 352, where individual member states would have a veto.

What should the UK do about this proposed law?  Please complete the survey below.

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Filed under Legal policy

Taking data protection too far: the mysterious case of W115

W115

Congratulations to Dr Henne Holstege and her team at the VU (Vrije Universiteit Amsterdam) Medical Center for sequencing the genetic code of the world’s oldest woman, Hendrikje van Andel-Schipper, who died in 2005 at the age of 115.

According to this weekend’s newspapers, Dr Holstege announced this achievement at the International Congress of Human Genetics in Montreal, Canada last week, but declined to name the individual, referring to her only as W115.

This may be an extreme example of attempted compliance with the EU Data Protection Directive (or national laws based thereon) by using anonymised codes in place of patient names.  Data protection legislation prohibits the disclosure of personal data about an individual (although, from memory, IP Draughts is not sure the rules apply to dead people).  A common technique in clinical trials of a new medicine, in order to avoid identifying individuals, is to allocate code names to each patient who is the subject of the trial.

M115

If that is the reason why the code name W115 was used in this case, it is a good illustratration that using such codes doesn’t necessarily achieve compliance with data protection rules.  In this case, it is easy for a journalist to identify the “patient”, if other information about her (the world’s oldest woman; genome studied in a Dutch hospital) is known.

We have been involved in advising on clinical trials for small and distinct patient sets, where similar concerns arise, and where additional precautions may need to be taken to avoid disclosing data that could identify the patient.

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Filed under Confidentiality, News

Hold harmless revisited

If you have experience of negotiating international commercial contracts, you have probably come across provisions in which a party agrees to “indemnify and hold harmless” another party. This is a topic that has been looked at by many commentators in different jurisdictions, eg Ken Adams here, and it is a subject that IP Draughts covers in his training courses on contract drafting.

IP Draughts’ excuse for mentioning it again is that he is reading a non-legal book that, much to his surprise, refers to the use of the phrase “indemnify and save harmless” in 1912.  Save harmless seems to be synonymous with hold harmless for present purposes.

The book is about the sinking of the Titanic and the aftermath of that tragedy for some of the families involved.  The book focuses on one of the bandsmen who continued to play their music as the ship sank.  None of the bandsmen was saved, and they were found floating in a group, in some cases with their instruments still strapped to their backs.

The personal effects of this young bandsman (a rusty watch and few other, minor items) were delivered to his father in Scotland, and a member of the family who received them was required to sign a receipt in which she agreed to “indemnify and save harmless” the shipping line.  This reminds IP Draughts that use of this phrase is not a modern aberration by US lawyers, and has a long history in Anglo-American contract drafting.

If you ask a group of lawyers what is the difference between an indemnity and a hold harmless, you may well get conflicting answers.  The main alternative (and conflicting) meanings that IP Draughts has heard or seen expressed are:

  • indemnify covers third party liabilities, while hold harmless covers inter-party liabilities
  • indemnify covers eventual, proven liability, while hold harmless imposes an obligation to deal with third party claims, even if spurious
  • indemnification requires the indemnifier to protect the other party from a third party claim, while hold harmless then prevents the indemnifier, having incurred the liability to the third party, from seeking to recover the amount of that liability from the other party
  • the two terms have the same meaning, and merely reflect different usage in different parts of the USA; to be on the safe side, it is prudent to use both terms
  • the two terms have the same meaning, but one is Anglo-Saxon and the other is Norman French, and using the pair of phrases reflects legal practice in the centuries after the Norman Conquest of England in 1066
  • the two terms probably have the same meaning, and the reasons for using both terms are unknown, but it is a brave lawyer who goes against established custom and practice by dropping one of them

The fact that there isn’t a uniform understanding of how the words differ in meaning, that some people think they mean the same, and that case law in different countries may point to different meanings (although IP Draughts’ view is that the case law he has seen referred to in the US, Canada and the UK does not lead to any definitive conclusions on meaning) make this a very tricky area on which to advise.

IP Draughts would never (famous last words) draft an indemnity with “hold harmless” language, but he would usually try to make sure that the indemnity included provisions to address the following points:

  • is it limited to third party liabilities or does it also cover inter-party liabilities
  • does it cover claims, or just eventual, proven liability
  • who has conduct of any claims that arise (usually the party giving the indemnity)

In IP Draughts’ experience, this approach is consistent with the practice of leading commercial law firms in the City of London.

If, however, he was presented with a draft agreement drafted by the other side that included “indemnify and hold harmless” language, he would usually try to work with the existing wording, rather than redraft it from scratch.

Revisiting this subject has prompted IP Draughts to consult the excellent BAILLI website, to see if there are any recent cases on the subject.  A search of the BAILLI database threw up a recent Scottish case, Farstad Supply AS v Enviroco Limited, that recently reached the UK Supreme Court.  Their Lordships refer in that case to the “lucid and compelling judgment” of Lord Hodge at first instance, in the Outer Scottish Court of Session (overturned on appeal to the Inner Court), which can be found here (see paragraphs 24-25).  Their Lordships grapple with indemnify and hold harmless but do not come to any definitive conclusions as to any difference of meaning between these terms.  Indeed, Lord Clarke comments in the Supreme Court:

It is of interest to note that one of the sources quoted, dated 1651, gives the definition of ‘indemnify’ as “Save harmless and keep indemnified.”

IP Draughts’ view is that this case, while interesting, does not change his views as expressed above.

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Filed under Contract drafting, General Commercial