International IP transactions and the effect of local laws

Litigating IP rights is such tiring work!

Litigating IP rights is such tiring work!

You have entered into an IP agreement that applies worldwide. It might be a licence agreement in which the licensed territory is all countries of the world. Or it might be an assignment of all of your IP, in all countries of the world.

The parties have agreed the law and jurisdiction of the contract. For present purposes, let us say that English law is to govern it, and that the English courts have exclusive jurisdiction. But the issues mentioned below are likely to apply irrespective of which law and jurisdiction are chosen.

The contract addresses IP-related issues in each country of the world. Take the example of an exclusive licence agreement that includes a term stating that the licensee can sub-license its rights. To what extent will this term override provisions of national IP law that state whether a licensee is permittee to sub-license?

As far as IP Draughts is aware (but he hasn’t done any worldwide research), on this point national IP laws may provide a fall-back position if the contract is non-specific on the issue, but they tend not to be prescriptive in the sense of overriding what the parties have agreed. For example, section 30(4)(a) of the UK Patents Act 1977 provides:

to the extent that the licence so provides, a sub-licence may be granted under any such licence and any such licence or sub-licence may be assigned or mortgaged

This suggests that, in the absence of a provision in the head licence agreement that permits sub-licensing, sub-licensing is not allowed.

Some years ago, when we wrote our loose-leaf work on agreements in the pharmaceutical sector, our German-law contributor included the following comment as a footnote in the licence agreement template:

Under German law, the right to grant sub-licences in case of an exclusive licence follows by law. Thus the parties need to explicitly exclude such right if desired.

IP Draughts suspects that, in most cases, national IP laws on the interpretation of an IP agreement will not override terms that the parties have expressly agreed in their contract.

If we broaden the subject from IP laws affecting the interpretation of IP agreements, to IP laws more generally, can we still assume that the terms of the contract override national IP laws? Probably not. For example, an IP agreement made under English law might state that the licensee can sue infringers. National IP laws may not allow the licensee to bring an action in its own name. Should the agreement be interpreted as requiring the IP owner to sue an infringer on behalf of the licensee in those countries where a licensee lacks locus standi to sue in its own name? IP Draughts cannot offer any universal answer to this question. It may depend on how the court interprets the contract. And even if the English court (in the above example) says that the answer to this question is yes, how enforceable will this decision be in the jurisdiction where the action is to be brought?

lex luthor

lex luthor

This type of question has long troubled IP Draughts, and he regrets that he didn’t take a course in conflict of laws at university. When, occasionally, he scratches the surface of this subject, he sees the liberal use of Latin expressions such as lex situs and lex fori, realises how dry and complicated the subject is, and leaves detailed study for another day. Even apparently helpful documents that seem to be directly on point, such as this one, cause him mild panic.

It was with mixed feelings, therefore, that IP Draughts read last week’s judgment by Arnold J in the case of Gloucester Place Music Ltd v Le Bon & Ors [2016] EWHC 3091 (Ch) (02 December 2016).

Readers may have seen reports in the national press about this case, and the dissatisfaction of the defendants with the outcome. Boiling it down to its essentials:

  1. The defendants are the members of the 1980s pop group, Duran Duran, and their service companies.
  2. In the 1980s they made an outright assignment of the worldwide IP in their songs to the claimant, a UK company, in return for payments including royalties. The agreements were all made under English law and were subject to the jurisdiction of the English courts.
  3. The assignment was very broad in scope (and used excruciating language, but that is a discussion for another day).
  4. US copyright law (section 203 of the US Copyright Act 1976) allows authors who have assigned their copyright to reclaim it after, typically, 35 years, by serving notice on the assignee. Section 203(5) provides: “Termination of the [assignment] may be effected notwithstanding any agreement to the contrary…”
  5. The defendants have served notices under section 203 on the claimant.
  6. The claimant sought and won a declaration in the English High Court that by serving such notices the defendants are in breach of their contracts with the claimant under which the IP was originally assigned.

The judge managed to use another Latin expression from the conflict-of-laws dictionary, namely lex loci protectionis. Applying English law principles of interpretation he concluded, “not without hesitation”, that he should give effect to the assignment as written, and should not make it subject to the rights given to authors by US copyright law to claim, in effect, a reversionary interest in the copyright.

This brief report omits mention of a number of other issues that the judge considered, including the fact that neither party provided expert evidence from a US lawyer.

IP Draughts hopes that this dispute will be appealed to the UK Supreme Court, so that we can get some guidance from Lord Neuberger and his colleagues on the interplay of national IP laws and IP contracts made under another law. Dare he say it aloud, but he would find this a far more interesting subject on which to get the Supreme Court’s ruling than whether the Prime Minister is required to introduce a Parliamentary Bill (which will almost certainly be approved by the House of Commons) before giving notice under Article 50 to leave the European Union.



Filed under Intellectual Property, Legal practice, Legal Updates

Getting the tone right in legal work-product

polishPart of IP Draughts’ job is to review draft documents that have been prepared by junior colleagues, before the document is sent out to a client or another party. The document may contain legal advice, explanation or commentary, argue a case, or ask for further information.

More often than not, IP Draughts has little to say about the substance of any advice or other information that is contained in the draft. Prepared by IP Draughts’ excellent and diligent colleagues, the substance tends to be accurate.

The main task, in many cases, is making sure that the content of the document is expressed in the best way possible. ‘Best’ may vary between types of document, but often includes providing information in a helpful way, or arguing a case persuasively. In most cases it is important to use clear language and to structure the document in a way that helps the reader to find their way through the details. For example, if the document is lengthy, it may be better to put it in a Word document, with plenty of headings and a summary at the beginning, rather than just paste it into a lengthy email.

mindreadingIt is also useful to try to put oneself into the mind of the intended reader. How do they process information? Are they looking for reassurance, or a simple overview, or chapter and verse? Are they likely to be ‘difficult’ and should the tone be checked for anything that might give them an excuse to react in an unproductive way? Are they expecting a recommendation, rather than just a setting out of options? Is the purpose of the document to try to steer the reader in a particular direction, and is it likely to have this effect? Predicting some of these points may require several years’ experience and a degree of empathy. Adjusting the document to take account of these points will similarly require experience and well-developed drafting skills.

too-hardSometimes, the task is to make the document more user-friendly and less lawyerly. At other times, the drafter may have gone too far in this direction. In a well-intentioned effort to be helpful, he may have stated his views with too much certainty, based on too little knowledge of the client’s commercial objectives. The result may be a document that appears useful but isn’t. It may be necessary to rein back on the recommendations and make them more robust, or to make clear the limits of the author’s expertise.

All of this requires thought and care. IP Draughts tries to follow an approach that he learnt as a junior lawyer, that there should be no personal pride in a document, and it should be critically scrutinised by the author or others before it is sent out. Sometimes, this results in more than one draft.

Sometimes, IP Draughts finds it helpful to think hard about the following points:

  1. Purpose. What is the document trying to achieve? In the case of a letter of advice, what has the client asked for and how will they use the advice?
  2. Reader. Who is the reader, and how will they understand and react to the document?
  3. Clarity and presentation. Is there a logical structure and flow to the document? Is it signposted with headings, an overview and other aids to reading? Is the language clear?
  4. Content. Is the document providing the right information and the right amount of information? Or is it too detailed or not detailed enough? Are there any inconsistencies in content between different parts? Is it answering questions that weren’t asked or which are not needed by the reader?
  5. Boundaries. Are there any limits on the scope of the document, eg that it is not intended to be comprehensive (because the work involved would require disproportionate expense), or depends on information provided, or is focused on one aspect of the problem, or that the reader is responsible for taking commercial decisions in light of the content of the document? Do these limits need to be stated explicitly?
  6. Professionalism. Is the document a professional piece of work, that would withstand scrutiny by a hostile regulator? While this criterion should usually flow naturally from dealing with the earlier points, and one should avoid being too defensive, there may be occasions where something in the document sticks out as not looking quite right, and where some tweaking of content or tone may be required.

working-outTypically, a well-drafted document will not show these workings, even if the drafter has made use of them in the background. They are part of the toolkit of the lawyer, perhaps less obvious than other elements such as understanding of the law, or even the ability to draft clear contract terms, but no less important when it comes to providing an excellent service.

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The lawyer’s role as scribe

sketchIn olden times, long before document-scanning software was invented, a scribe was someone who was employed to make manuscript copies of documents, including legal and religious texts.

In a modern legal setting, IP Draughts uses the term to refer to the contract drafter’s job of converting conversations between commercial negotiators into clear, legally-accurate contract language.

The importance of this role varies between market sectors and types of agreement. Some financial transactions rely on industry-standard agreements, as do some agreements dealing with commodities, such as the shipment of grain. The drafter’s job may be simply to record a few ‘variable factors’ such as specification, price and delivery times.

Moving a little down the scale towards freehand drafting, lawyers who advise on business sale agreements typically start with a favoured template. But they make detailed changes to particular clauses, eg converting an absolute warranty into a knowledge-based one, or carving out exceptions and qualifications to the template terms.

In the field of R&D agreements, commercial parties often agree tailored deal terms that cannot readily be found in any single template. For example, R&D collaborations frequently include ‘what if’ clauses that deal with a range of possible outcomes to a collaborative research project. An obvious example of this is the Lambert research agreements, which now have 7 or 8 variants. The variations deal mostly with one issue – intellectual property. If further standard agreements were prepared to deal with variations in other clauses – payment terms, say, or dispute resolution – the number of templates needed would quickly multiply.

In this world, the commercial parties tend to focus on negotiating the headline issue. Once this has been agreed, there may be numerous points of detail and logic surrounding that issue that the drafter needs to address, if the agreement is not to be full of holes. Sometimes, it may even be necessary to tell one’s commercial colleagues that their solution may work for the scenario that they discussed, but is unworkable in other possible situations, and therefore should be rethought.

Identifying these issues, prioritising them, anticipating what the client is likely to want, and then drafting suitable wording, all take skill and effort. Often this work is done under time pressure.

One of the skills required for this work is the ability to draft clear, accurate contract wording. This skill is not learnt overnight, and some lawyers are concerned that insufficient training in freehand drafting is given in large law firms, where the priority may be to ‘get the deal done’ and where many deals are of the commoditised type referred to at the start of this article.

monkey-pastePractising this skill can sometimes seem a lonely occupation, particularly when one is surrounded by lawyers who have not been sufficiently trained in it, commercial parties who just want to get the deal done, finance directors who are focussed more on the numbers than the words, and procurement managers who see their task as avoiding changes to their companies’ templates. It requires some strength of mind to insist that the drafting is important.

Our recent panel discussion at UCL on Dysfunction in Contract Drafting reminded us that there is a community of professionals who think drafting is important, even if people disagree about some of the details. If you would like to see the recording of that discussion, it is available on YouTube here. Over 400 people have already viewed it, in addition to the 150 or so people who attended the live event. Persuade your colleagues to view it too, and let’s get the viewing numbers up to well over …1,000?



Filed under Contract drafting

A song about Brexit

porterWith apologies to Mr Cole Porter, IP Draughts and others have re-written one of his best-known songs. This follows an exchange on Twitter yesterday with @law_and_policy and @iamthebaritone. The version below is further revised. Imagine a butler answering the phone to one of Miss Otis’ friends, in a swanky New York apartment in the 1930s.

Miss Otis regrets Article 50 will be delayed, madam.
Miss Otis regrets Article 50 will be delayed.
She is sorry it’s not yet done,
Though last Summer down at Leaver’s Lane
They won, madam.
Miss Otis regrets Article 50 will be delayed.
When she woke up and found
That her EU dream was gone, madam,
She ran to the man
Who had called the referendum.
And from under her velvet gown
She drew a gun and shot her PM down (politically), madam.
Miss Otis regrets Article 50 will be delayed.
When the Daily Mail turned on her
And dragged her from Number 10, madam,
They stitched her up, shouting that England ruled the world.
And the moment before she (politically) died
She lifted up her lovely head and cried, madam.
Miss Otis regrets Article 50 will be delayed.

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