Category Archives: Legal practice

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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Managing ambiguity in IP transactions

uncertaintyA job description recently caught IP Draughts’ eye. It requires candidates to “demonstrate the ability to operate effectively in highly ambiguous situations”. (The vacancy is for a legal manager in a university technology transfer office. If you are interested, you will need to hurry: the deadline for applications is the end of this month.)

Brief searching on the internet confirms that this quality is much valued in senior managers of organisations.

Ambiguity in this sense doesn’t seem to have quite the same meaning as a contract drafter might use it, to describe a contractual obligation that, through imperfect wording, may have more than one interpretation. Used in this way, ambiguity can be contrasted with uncertainty. The meaning of a contractual obligation may be uncertain, without there being any choice of meanings.

Instead, the term seems to be used in management theory to refer to dealing with uncertainty. Another way of referring to this quality is that a person is required to have the personal qualities to exercise good judgment in situations where he has incomplete information or conflicting pressures. This approach is sometimes contrasted with the one required for a techical role, such as a patent attorney, where the dominant requirement may be to apply technical skills in a consistent and rigorous manner.

IP Draughts can certainly see that senior managers need to be able to manage ambiguity, though if they are managing a team of technical specialists they may need to keep their feet in both camps, and be able to switch into technical mode when the situation requires.

It seems that one way of managing ambiguity is to build up a consensus among one’s colleagues.

alarm bellApplying these ideas to the task of drafting and negotiating IP contracts, several alarm bells go off in IP Draughts’ mind.

First, that (to put it provocatively) taking a touchy-feely approach to deciding what should be included in the contract is likely to result in sub-optimal terms. Instead, a careful analysis is required of the risks, the parties’ bargaining positions, the alternatives to doing the deal, terms that are deal-breakers, and so on. Once the analysis has been done – and it may be that you have incomplete information for making some of that analysis – a judgment call may be required. But the technical approach should be the starting point.

Second, that the drafting of the contract is a technical task, which requires the rigorous application of technical skills and not a “managing ambiguity” approach. “Drafting by committee” is the worst way of drafting, except perhaps in the final stage of negotiations, when there are only a few outstanding points, and when text can be displayed on a projector screen for all the negotiators to agree upon in “real time”.

Third, that the commercial decision-maker in negotiations may need to manage ambiguity when deciding how far to push a point. Sometimes negotiators refer to “constructive ambiguity” when agreeing a contract term that is not clear, but which they think gives them some “wriggle room” to argue for a particular meaning if a dispute arises. In IP Draughts’ view, some negotiators are far too sanguine about accepting terms of this kind, and the practice should be kept to an absolute minimum, if it is used at all.  He knows that some lawyers and commercial managers have a different view on this point.

In a university setting, there is so much ambiguity (in the management theory sense) that it is very easy to take bad decisions in relation to IP contracts based on a “muddle through” approach. Sources of ambiguity include:

  1. Are we trying to do a good IP deal, or to promote a researcher’s academic career, or to get technology out into public use, or to obtain short term revenues?
  2. Are there any terms that we cannot accept, or are unattractive contract terms just one element that goes into the mix when a senior manager takes a “managing ambiguity” approach to deciding whether to accept a deal? (Other elements may include keeping an important academic happy.)
  3. Do any of us have a good general overview of all the issues that go into an IP transaction, including legal risk issues, getting the technology into public use, advancing the research interests of the university, understanding how far one should push a commercial company in difficult negotiations, being willing to forego important funding if the terms are not right, and so on. Universities tend to be siloes of expertise, with the top management sometimes woefully under-experienced in the realities of commercial negotiations and commercial risk management. This may mean that the decision-maker (if one can be clearly discerned in a committee-based structure) lacks the necessary information and experience to manage ambiguity in an appropriate way.

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As was mentioned earlier, another way of labelling this subject is to refer to exercising good business judgment; this label focuses on the outcome rather than the process of arriving at the outcome, but they may amount to the same thing. In the context of negotiating contracts, lawyers are sometimes asked for their views on what terms should go into the contract; in other words, to make a judgment call.

wise monkeysThe traditional approach of external law firms is to drum into their junior associates the importance of avoiding giving a view on any commercial issue, and to keep good file notes to demonstrate how pure and undefiled they have been in relation to giving commercial advice. Commercial issues are for the client to decide! Of course clients don’t like this response, when they ask their lawyers for assistance on a difficult commercial issue.

IP Draughts chafed against this instruction when he was a junior associate, perhaps because he had been an in-house lawyer for 3 years before joining a traditional law firm. In-house lawyers are expected to be part of a commercial team, and not to stick to a purely technical role.

25 years on, IP Draughts can see some merit in the traditional approach. Nowadays he has enough experience to make commercial judgment calls; then he probably didn’t. Really, the client should only ask a partner or very senior associate to help with commercial questions.

Also, IP Draughts is less naive than he was as a junior associate. He has learnt that, while some clients want you to be part of their commercial team, appreciate  a “roll your sleeves up” approach, and won’t blame you if your commercial view turns out to be wrong (this is the type of client we try to cultivate), others take a more hard-nosed approach, and quite like the idea of being able to blame their lawyers for their own, poor decision-making. With the latter type of client, it makes good sense for the law firm to take a hands-off, ultra-careful approach.

 

 

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Execution of IP assignments as deeds

mistakesA recent posting on the Solo IP blog, subsequently reported by IPKat, raised several questions about the valid execution of IP assignments (and specifically trade mark assignments) as deeds.

IP Draughts would like to offer some thoughts on the points raised. As he understands the position under UK laws:

  1. Methods of transfer of ownership of IP. The main method of transfer of ownership of IP is by an assignment.  There are a couple of other methods, mainly automatic transfer to a dead person’s executors, and subequent transfer to a beneficiary in a will or on intestacy. See eg section 24(1) of the Trade Marks Act 1994, and section 30(2) and (3) of the Patents Act 1977.
  2. Formalities for assignment. Assignments of UK intellectual property must be in writing, and executed by the assignor. See eg section 24(3) of TMA 1994. Unlike the position under some former IP laws (eg, as IP Draughts understands it, the Patents Act 1949), there is no need under present UK IP laws for the assignment to be executed as a deed. Nor is there any need under IP laws (but see below) for consideration to be given for an IP assignment to be valid or for the assignment to be registered at the UK IPO.
  3. Underlying contract? Many IP assignments are made as part of a larger commercial transaction or relationship, eg if a consultant develops software for a principal, and assigns copyright in the software to the principal. Where an assignment forms part of a contract, the IP lawyer will typically be concerned to ensure that the contract is valid. One of the requirements for a binding contract under English law is that consideration should be given, or the contract should be executed as a deed. In the latter case, consideration is not required. If it is unclear what consideration is being given for an assignment that is part of a commercial transaction, a party’s lawyer will sometimes either (a) insert a nominal consideration in the written contract or assignment, or (b) execute the contract or assignment as a deed. Alternatively consideration may be found in the underlying relationship, eg if an assignment is made pursuant to an obligation in a binding consultancy agrement.
  4. Transfer of property by gift. However, it is not necessary for there to be a contract in order to pass title to personal property (including intellectual property). The transfer of property could be a gift. Dredging up his memories of undergraduate law, for a gift to be valid there must be an intention to give and an act of giving. The act of giving IP would seem to be demonstrated by signature and delivery of the assignment. In this situation, consideration would seem to be irrelevant. A cursory examination of the law in this area suggests that the donee must also accept the gift.  This seems like a good reason to have the assignee execute the assignment as well as the assignor, even though this is not required by UK IP laws, so as to provide evidence of acceptance. In any case, in international IP assignments, many countries require the assignee also to execute the assignment (eg this is a requirement for assigning an EPC patent application).
  5. Execution of an IP assignment as a deed. Parties sometimes choose to execute their IP assignment as a deed, eg because of concerns about consideration as mentioned above. As IP Draughts understands current law, a deed is a method of execution of a contract or other instrument. It is, perhaps, misleading to think of a deed as a different type of instrument; rather, it is a different means of executing the instrument, and involves different formalities, eg as to use of a seal (in a few cases), who must sign, requirement for formal delivery, etc. Clearly, if parties do intend to execute their assignment as a deed, they should comply with these formalities. It is no longer a surprise to IP Draughts how often reputable City law firms present deeds for execution that have incorrect signature blocks for universities, charities, government bodies and other “unusual” parties. In many cases, these bodies must use their official seal, even though the requirement to use a seal was abolished for Companies Acts companies and for individuals back in the 1980s. An illustration of this mistake can be seen in the very recent High Court case of Briggs v Gleeds, where the drafter of some pension deeds failed to use the correct signature blocks for execution by partners in a traditional partnership.
  6. Partial execution as a deed. Although he has no authority for this proposition, it seems to IP Draughts that one can have an instrument (eg assignment or contract) that is intended to be executed, and is validly executed, by one party as a deed and by the other party by simple signature (eg to acknowledge receipt). One would need to analyse the underlying transaction to know whether it is necessary for both parties to execute the instrument as a deed.
  7. perfectEffect of failure to comply with formalities for deeds. There are two, different problems that can arise: (1) the wrong signature blocks are used (as mentioned above), or (2) the right signature blocks are used, but the parties don’t complete them correctly, eg the space for a witness to sign is left blank, or the witness signs after the party signs, and without actually witnessing their signature. The latter class of problems tends to occur where a party doesn’t involve their lawyer in the signing process. As the discussion of earlier case law in the case of Briggs v Deeds, linked above, illustrates, such failures may or may not be fatal to the validity of the instrument. There is also a strand of case law in relation to “equitable assignments” of IP that don’t comply with the formalities, which may provide an escape route in some cases. IP Draughts would generally be very cautious about allowing a defective deed to be left unchallenged.

 

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Using the right words in contracts: knowing your 3Rs

learningThe 3 ‘R’s – for readers who have not come across this expression – are the basic subjects one first learns at school: reading, [w]riting and [a]rithmetic.

In this article, the 3Rs have a different meaning. We discuss 3 words used in contract law that start with an ‘r’.  They are technical, legal expressions, and many of us get by without using them at all, in contracts or elsewhere. Yet they feature in standard textbooks on contract law and in case law. The larger point is whether it is necessary to understand and use legal terms of art in contracts.

flynnThe 3 words are: revoke, repudiate and rescind. While they have other meanings in everyday life (eg if the authorities revoke – take away – your driving licence for drinking alcohol or speeding), these verbs have specific meanings in contract law. Like the Three Musketeers, they have a colleague who might be one of them, yet is slightly apart.  The noble Gascon of the contract world is (in noun form) restitution. Their colleagues in the corps of musketeers – rectification, release and replevin – will not be discussed in this article. Nor will their decrepit former colleague, rescous, which should not be confused with a type of wheat grain popular in North African cooking.

This article was prompted partly by a question that Ken Adams raised yesterday on Twitter:

adamsKen has followed up his question with a blog posting, titled simply Revoke. He suggests that there is no need to use the word revoke in relation to an IP licence, and that terminate is preferable.  IP Draughts agrees, but on technical questions of law he always keeps an open mind.  Property law has developed in strange ways over centuries (just think of the many types of legal and equitable interest that have been recognised) and there may be some point lurking in the shadows of old case law that he has not considered.

Whenever he hears any of the 3 R-words in a contract law context, IP Draughts has to concentrate to remember what they mean and to make sure he is not mixing them up.  Think of this article as remedial therapy for IP Draughts.  By forcing himself to articulate the different meanings, they may finally sink into his head. References below are to the leading tome, Chitty on Contracts, Volume 1, General Principles (30th edition, 2008).

Revoke

licence revokedOne of the traditional requirements for a binding contract is that one party makes an offer and the other accepts it.  A party can usually withdraw an offer before it is accepted.  The technical term for withdrawing an offer to enter into a contract is to revoke the offer (Chitty, 2-060).  Looking at the word revoke, it appears to have an etymology that suggests another word, “recall”.

This is different to terminating a contract that is already in existence.

Another sense of revoke is where a right or privilege that has been granted is subsequently withdrawn.  A driving licence may be withdrawn by the court for motoring offences such as speeding.  Some people use the term revoke for the termination of an IP licence, as the article linked above mentions.  As IP licences typically form part of contracts, this usage could be said to form part of contract law, but it is not conventional to refer to revoking a contract, and Chitty makes no mention of this usage.

Repudiate

In fact, there seem to be a pair of words with very similar meanings in contract law: repudiate and renounce.

IP Draughts is familiar with the expression “repudiatory breach” where a party acts in such a way as to make clear that he does not intend to perform his obligations under the contract, and the other party is entitled to “accept” this repudiation and terminate the contract.

Chitty seems to prefer the term renunciation for this type of breach (Chitty, 24-018) although the word repudiation appears in the discussion of several types of termination, eg in relation to contracts with minors (Chitty 8-031).

Rescind

voidThe correct use of the term rescind is to describe a situation where the contract is treated as never having come into existence, and not the situation where a contract is terminated part-way through its ‘life’.

For example, if a contract is terminated by acceptance of a repudiatory breach, this is sometimes inaccurately described as a rescission (Chitty 24-027).

Rescission from the start of the contract (ab initio) may occur if a party is induced to enter into the contract by (for example) misrepresentation or mistake (Chitty 6-103).  If rescission occurs after the contract has started, it will have retroactive effect to cancel the contract (Chitty 6-106).

Discussion

The 3 R-words have acquired different meanings in English contract law.  The differences in meaning are quite subtle.  A breaching party may repudiate the contract, but termination only occurs if the other party accepts the repudiation.  If a party is induced to enter into a contract by a misrepresentation, he may be entitled to rescind the contract. Contracts cannot generally be revoked, but an offer to enter into one can be revoked before the other party accepts.  There is also a suggestion that a licence can be revoked.

And this is just what the terms probably mean in one country’s development of the common law.  There is no certainty that these terms have identical meanings in other common law systems. It seems even less likely that there is an identical meaning in civil code systems, and if the words are translated into other languages, the subtleties of meaning may be completely lost.

rwordIP Draughts view is that it is better to avoid using terms such as rescind, revoke and repudiate in a contract, and instead to state specifically what rights and remedies and party has, eg the right to terminate for breach.  If termination is to be retroactive, this should be specifically stated. By using legal expressions of this kind, you may point a court to a particular understanding, based on case law, which may or may not work in the context of the contract under discussion.  Or you may find that the court is not familiar with the meaning you intended, particularly if the case is litigated outside your home jurisdiction. Or you may even use the wrong expression anyway – easy to do when they are so similar.

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Filed under Contract drafting, Legal practice