IP Transactions course

There will be a slight delay in transmission on this blog, while we prepare the papers for next week’s 5-day course, IP Transactions: Law and Practice. 37 people are booked on the course, which is excellent, and we have 28 volunteer speakers chomping at the bit and ready to run their sessions.

As well as our usual clientele of UK IP lawyers, patent and trade mark attorneys and licensing managers, we have a fair number of students from overseas – Belgium, Ghana, India, Ireland, Italy, Qatar and Russia.

During this intermission, readers may wish to study the potter’s wheel.

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Royalty-stacking clauses

This week’s golden oldie – royalty-stacking clauses.

IP Draughts

When negotiating royalty-stacking clauses, make sure you don't get fleeced! When negotiating royalty-stacking clauses, make sure you don’t get fleeced!

One of the pleasures of teaching is learning from your audience. This happened in abundance recently when IP Draughts, presently in Australia, delivered his advanced IP licensing course to a group of in-house lawyers and licensing managers. In fact, he delivered the course twice to the same organisation: last Friday to a team in their close-to-Sydney office, and yesterday to another team in their close-to-Melbourne office.

IP Draughts’ knowledge of Australian suburbs has increased greatly, but this posting will focus on legal issues rather than the architecture of Melbourne bungalows, or the surprise felt by a Brit who learns that St Kilda is close to Richmond.

Royalty-stacking refers to the situation where a licensee must pay royalties to multiple parties in order to commercialise a product. The royalties are said to be stacked, one on top of another. A licensee…

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Contract drafting tips: word order

Techniques for drafting contracts – we all use them, whether we consciously follow a formal guide such as the Manual of Style for Contract Drafting, or take an ad hoc approach based on our previous experience. Older readers in the UK, and perhaps a larger number of readers outside the UK, tend to apply rules of grammar and other writing techniques that they were taught at school. Sometimes those techniques are now considered out of date or discredited. Most of us have moved on from rigid obedience to rules (if we were even taught them) such as never start a sentence with a conjunction, or never split an infinitive.

IP Draughts finds that some techniques keep coming back to him when drafting contracts. A particularly valuable technique is to critically review the order of the words in the sentence. An example that IP Draughts uses when teaching is the following:

Being ignorant of the law, the attorney argued that his client should receive a light sentence.

The phrase “being ignorant of the law” is in a weak position in the sentence. If it is put immediately after “attorney” or “client”, the meaning becomes clear and unambiguous.

Consider the following example from a consultancy services agreement:

MegaCorp shall provide all access to documentation in its possession and to personnel under its control where required by Consultant within 7 days and if notified in writing to Megacorp.

Several techniques can be used to improve the clarity of this sentence, but for now let’s focus mainly on word order.

Within 7 days of the Consultant’s written request, MegaCorp shall provide access to (a) documentation in its possession and (b) personnel under its control.

Alternatively, the 7-day deadline point could be moved to after “access” or could be addressed in a second sentence. It is clearly in the wrong place in the original version, as it suggests that the obligation to provide access only applies where the Consultant needs access within 7 days. If the Consultant’s needs are less urgent, the obligation will not apply.

In a full review of the wording, many other points of drafting and substance might need to be addressed, including:

  • Who is the access to be given to – employees of the Consultant?
  • Confidentiality obligations
  • What does “access” mean in practice? Free rein to rummage in the company’s files, or something more controlled?
  • Are there any limits on access to documentation? Eg is access to pricing information on the Consultant’s competitors allowed?
  • Are there any limits on access to personnel, eg if they are busy or on holiday?
  • Cost implications

The careful drafter will be thinking about all of these points and more, even if some of them are quickly dismissed in the context of the deal.

Applying a scalpel to the sentence, and moving bits around, is often a good way of removing potential ambiguity, cutting out redundant wording, and improving clarity generally.

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Resistance is futile: all paths lead to co-ownership of IP

Golden oldie number something – comments on co-ownership of IP

IP Draughts

You have probably encountered this scenario.  A university, a small company and a large company are engaged in a research collaboration.  The parties have entered into a written collaboration agreement.  As one might expect, the agreement addresses the question of which of them will own any intellectual property arising from the collaboration, which is defined as Foreground IP.

During the negotiation of the agreement, various proposals were made on the ownership of Foreground IP.  The university suggested that a party would own any IP in improvements of the technology that it brought to the collaboration.  Unfortunately the parties couldn’t agree what would happen if the improvement related to more than one party’s technology.  The large company suggested that it would own all the Foreground IP and license the other two parties.  The small company’s investors wouldn’t accept this solution.  The small company suggested that the three parties should be joint…

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