Inappropriate use of indemnities

This golden oldie discusses one of IP Draughts’ hobby horses: inappropriate indemnities. He found himself teaching on this point earlier in the week, at one of his UCL courses on IP licensing.

IP Draughts

Too many contracts include indemnities.  IP Draughts has noticed a increasing trend to include indemnities in commercial contracts, in recent years.

First, we need to distinguish between two types of indemnity.  Take the example of a contract between A and B, under which A is engaged to manufacture a pharmaceutical drug for B, to B’s specification, which B will use in human clinical trials.

A third party indemnity allocates responsibility between A and B for dealing with third party claims or liability.  In the present example, a patient might be injured by the drug.  The manufacturing contract may provide that, if a patient brings a claim in respect of that injury:

(a) if the injury arose because the drug was inherently toxic or harmful, B will indemnify A against the patient’s claim; or

(b) if the injury arose because A introduced some contaminent into the drug during the manufacturing process…

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If you’re so commercial, start a law firm

Apparently, commercial law firms want their junior lawyers to demonstrate ‘commercial awareness’. IP Draughts has seen several articles and social media discussions on this subject recently. But commercial awareness can mean many different things, as was discussed in a Guardian article.

It could mean understanding the overall objectives and priorities of a firm’s commercial clients. IP Draughts has always found slightly fatuous the advice given to law students to read the Financial Times to gain these insights. But perhaps his commerciality runs on different lines.

It could mean understanding the people who work for the firm’s clients, what motivates them, and what they want from their lawyers.  This could vary enormously between types of client and job roles within a client organisation, as well as individual personalities. The entrepreneur who starts a high-tech business may have very different expectations and priorities from a professor, IT salesman, finance director or middle manager in a multi-national insurance company.

In IP Draughts’ view, it takes years to develop an understanding of different types of clients and what they want (and, as important, what advice they should get). Some clients are very demanding, and this may be down more to culture and personality than to business logic. It is unfair to expect very junior lawyers to have these insights. They need guidance from senior colleagues. Some firms are better than others at providing this guidance.

At another level, commercial awareness is recognising that legal advice is not an end in itself but is a service that helps a commercial client to assess risk and take business decisions. Bearing this in mind when giving legal advice may help the lawyer to make the advice more useful. But a balance needs to be struck: if you are the business of providing high-end, reliable, ethical legal advice, it may be sometimes necessary to deliver a message that the client doesn’t want to hear.

Yet another version of commercial awareness is understanding the priorities of the law firm. Some junior lawyers are naive about the purpose of a law firm. It is to make profits for the partners. Its business model for doing this may be to provide an excellent service to clients, to be ethical and look after the client’s interests, to recruit excellent people, and give them an excellent working environment. Or not. Understanding how your law firm operates is important for any ambitious lawyer.

IP Draughts is sceptical about commercial awareness. He understands that the training one receives in law school is mostly theoretical, and that junior lawyers need to adjust their approach when starting in practice, to focus more on the client. But he also doubts whether many commercial lawyers have more than a superficial understanding of business, particularly in large law firms.

If you think you are really commercially aware, why haven’t you started your own law firm? It’s not that difficult. The business model can be as simple as you want it to be. The administrative costs are low, even in the current era of SRA over-regulation. You just have to get a steady stream of clients to instruct you.

And that is the heart of being a successful commercial lawyer. Persuading clients to instruct you and keep instructing you. Having the skills, personality and experience to provide a good service. In IP Draughts’ view, this package of attributes is learnt over time, and is based on solid foundations: technical legal skills and an engaging personality. Being asked to demonstrate commercial awareness when applying for a training contract is a ritualistic dance that has no meaning. The emperor has no clothes.

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Block out your diary – IP and contract courses

Here are details of some public courses that IP Draughts is due to run at UCL in the next few months.

The big one is the next, annual outing of our IP Transactions course, which will run from 8-12 April 2019. This will be the 7th year that the course has run.

There are also a few one-day courses coming up, including courses on:

  • IP licensing – 1 October
  • Contracts with universities – 23 October
  • Clinical trial agreements – 30 October
  • Introduction to contracts – 13 November
  • Drafting legal clauses in commercial contracts – 20 November

Details of these courses can be found on the events page of the UCL Laws website here and here.

We are happy to quote for running an in-house version of our courses. We have some coming up in the next few months. Please contact


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Big data, big policy decisions

First of all, thanks to the many readers who have commented on the last posting on this blog, which ruminated on its future. Your comments were very helpful (and also very kind). IP Draughts has not yet taken any major decision, and for the time being will continue as before.

Today’s theme is “big data” and the policy decisions that accompany it (not them, please!).

IP Draughts has come across this subject in several contexts recently. There is health data, such as that held by the UK National Health Service (NHS) about its patients. Several of our clients have been involved in licensing-in or licensing-out such data, whether as a hospital, university or start-up technology company. These activities can raise some significant data protection issues, but fortunately several members of our team have become very familiar with this area of law, including Francis Davey and Stephen Brett.

On the public stage, there have been well-publicised initiatives to mine such data. Lord Drayson recently raised £60 million from investors on the AIM market, for his company, Sensyne Health, which has entered into agreements with several NHS Trusts. He is reported as saying:

The NHS has a “responsibility to society” to make money out of patient data rather than allowing the profits to be captured by US technology companies…

[there is] an “ethical imperative” to use anonymised data to improve care.

The national focus on big data is not confined to the health field. So-called geospatial data is also under the spotlight. In last Autumn’s Budget, the UK’s Chancellor of the Exchequer announced the formation of a Geospatial Commission, which would “maximise the value of all UK government data linked to location, and to create jobs and growth in a modern economy.” More recently, the government has declared:

From emergency services, transport planning, and 5G networks, to housing, smarter cities and drones – the UK’s geospatial infrastructure has the potential to revolutionise the UK’s economy.

The government is currently recruiting for members of this commission and for the civil servants that will support them. The commission will set a strategy for commercialisation of the nation’s geospatial data, working with the main agencies that currently hold the data, including the Ordnance Survey and the Land Registry.

National initiatives spawn national policies and codes of practice. Where personal data is involved, and where the custodian of the data is a public body such as the NHS, documents of this kind are perhaps inevitable. The latest one to cross IP Draughts’ desk is called “Initial code of conduct for data-driven health and care technology“. It sets out “10 key principles for safe and effective digital innovations, and 5 commitments from the government to ensure that the health and care system is ready and able to adopt new and innovative technology at scale.” The document’s introduction explains the government’s underlying thinking:

Today we have some truly remarkable data-driven innovations, apps, clinical decision support tools supported by intelligent algorithms, and the widespread adoption of electronic health records. In parallel, we are seeing advancements in technology and, in particular, artificial intelligence (AI) techniques. AI is being used on this data to develop novel insights, tools to help improve operational efficiency and machine learning driven algorithms, and clinical decision support tools to provide better and safer care.

This presents a great opportunity, but these techniques are reliant on the use of data that the NHS and central government have strong duties to steward responsibly. Data-driven technologies must be harnessed in a safe, evidenced and transparent way. We must engage with patients and the public on how to do this in a way that maintains trust.

AI, AI, Oh!

The 10 principles are not particularly surprising or radical for anyone familiar with GDPR and government policy generally; what is noteworthy is that the principles have been brought together and published for the circumstances of big health data. They are explained in more detail in the document itself, but the headings are:

  1. Define the user
  2. Define the value proposition
  3. Be fair, transparent and accountable about what data you are using
  4. Use data that is proportionate to the identified user need (data minimisation principle of GDPR)
  5. Make use of open standards
  6. Be transparent to the limitations of the data used and algorithms deployed
  7. Make security integral to the design
  8. Define the commercial strategy
  9. Show evidence of effectiveness for the intended use
  10. Show what type of algorithm you are building, the evidence base for choosing that algorithm, how you plan to monitor its performance on an ongoing basis and how you are validating performance of the algorithm

The possibilities of big data, artificial intelligence (AI) and algorithms seem to have captured the attention of the UK government. These developments should mean more work for IP and IT lawyers and for technology transfer managers –  and help to offset the likely negative effects for this part of the UK economy that will result from Brexit.

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