There is a clause in some US contracts that makes IP Draughts feel puzzled, exasperated or resigned, depending on his mood. Well, more than one, but for today let’s focus. The clause typically says something like:
The Client shall own the Report.
Bland and inoffensive as this statement may seem to a casual reader, it doesn’t make much sense to this English IP lawyer. Usually it features in a contract that has other provisions that state that intellectual property in the results belongs to the Client, and that the information contained in the report should be treated as the confidential information of the Client. IP Draughts understands both of these last provisions. Similarly, a clause that stated that the property in the paper on which the report was printed belongs to the Client, would be logical if usually rather pointless.
Nor would IP Draughts have any conceptual problem with a statement that copyright in the report belongs to the Client. Or a statement that the Contractor will not use the results in work for any other person. All of these statements have legal meaning. What is unclear, though, is a statement that pure information (such as that contained in a report) belongs to anyone, in the absence of an identifiable legal right, such as patents, copyright, or rights in confidential information.
When IP Draughts has raised this point with US parties in negotiations, and tried to tighten up the wording of the clause, his point is sometimes accepted. On other occasions the objection is viewed as too legalistic. “The business managers want it, so it must stay” has been the cry. “Let’s not get into an academic debate”, seems to be the subtext. So far, no-one has made a reasoned legal case to IP Draughts for its retention. Surely it is important for contractual statements of ownership to be aligned with legal principles on property ownership? Otherwise, how can the contractual statement be enforced?
IP Draughts is sure he has made this rant before on this blog. So why make it again? Only because a recent case in the English Technology and Construction Court (part of the High Court) has looked in some detail at past case law and reaffirmed the point that IP Draughts has been making. The case is called Fairstar Heavy Transport NV v Adkins and another [2012] EWHC 2952 (TCC). It was decided on 1 November 2012 and the case report can be found here. The case focuses solely on the following question: “Does Fairstar have an enforceable proprietary claim to the content of [certain] e-mails held by Mr Adkins…” The answer, says Edwards-Stuart J, is:
Shame about the last 16 words, but you can’t have everything. So the position under English law is clear. Information, per se, is not property. A detailed analysis of the case can be found on the IPKat website here.
(By the way, that is a different proposition from whether the legal rights that are given to confidential information should be treated as a category of intellectual property, as this recent case discussed.)
Is there something in US laws that IP Draughts is missing, or is the clause referred to above another example of a “cockroach” provision that has infested US contracts, and other contracts that are based on US templates, and is now difficult to dislodge, like hold harmless clauses?
Mr Pettifog
Mark Anderson
Paul Maclennan
Stephen Brett
Victor Warner
IP Draughts 
Reblogged this on IP Draughts and commented:
“The Client will own the Report”: what does this statement mean? This golden oldie is worth a second read, if only for the excellent comments that others made below it.
I think Vance Koven is probably on the right track. “The client shall own the report” is likely included for no other reason than drafters being afraid to not repeat exactly what has been done before. However, the phrase may add legal significance in at least one (unlikely to be important) way: the provider would probably be estopped from asserting that they own the report.
Perhaps a legal right arises from the report that one party did not foresee or explicitly address. Perhaps the report contains pages of statistics that are not subject to copyright, but provide the enabling disclosure for a patent application? Perhaps the report contains material subject to one of the strange sui generis IP rights in U.S. law (a boat hull, a mask work, an Olympic logo)? Perhaps the contents of the report, while subject to an NDA, provide the affirmative defense in a defamation suit (truth).
In a lawsuit, the provider asserts, “hey, I assigned copyright to the client, but the statistics are mine.” Based on “client shall own…”. Now the client can shut down that argument.
I don’t agree with my own theory. I was just trying to imagine a scenario in which the phrase has legal significance.
The significance of the phrase more likely lies in the fact that contracts, while here considered to be legal documents, are also business products. A contract is something that a lawyer sells to a businessperson for money. Thus, just like a sports car with a stripe, the product must perform and appeal to the customer. In my experience, businesspeople would find that phrase appealing. Accordingly, those contracts may be good products to market to those customers.
Thanks for your comments, Zack, and welcome to this blog! I follow your reasoning, but I think I can cover all of your points with more pertinent language in the IP and confidentiality sections of the contract, rather than make a legally dubious statement about owning the Report.
Interesting idea that contract terms are like go-faster-stripes on a sports car – if the customer wants them, he can have them. Maybe that’s fine for the relationship between the buyer and his lawyer (as long as they are ethical go-faster-stripes), but why should the seller or his lawyer agree? I am trying to think of another car-related analogy. How about if the contract of sale said that the buyer was buying the car together with its spirit of adventure. Would we be happy, as the seller’s lawyers, to include that reference? It may be meaningless, so who cares? I expect to be shot down in flames with this analogy!
I think both the children agree. Exceptions to copyright that do not extent a commercial right into private or even community communication spaces would be very desirable.
I must also object to the idea that I am ignorant of the legal system in place and the current debates surrounding the intellectual property systems in academia or elsewhere just because I acknowledge that the political debate space, which is where the terms for interaction between entities co-existing in society are shaped, is not made for the discussion entered into by the original blogpost while at the same time being the root cause of the concern at all being raised.
My proposition is that the terms of contract that were addressed by the initial post is a consequence of the fact that politically there probably are strong interests at this time pushing for the complete transactionisation of all communication rights and information. Surely political sentiments are also reflected in business contracts, we dont believe that business is disconnected from society, I guess?
I strongly disagree that we have presently balanced correctly the interests of society visavi beneficiaries of the government-induced monopolies that are intellectual property rights. I don’t see how the concept of some interactions in society can be valuable without having that value codified in a financial transaction could be confused with anarcho-socialism (being aware that this wasn’t entirely suggested by Mark Anderson). And I do see a really strong political unwillingness to deal with IP problems (probably because they are always dismissed as “technicalities”, even when they’re not) and I have no idea how to get around that problem other than by pointing out to the technicalities people that maybe it’s not as technical as they want or perceive it to be.
Thanks, Amelia. I think you are right that neither consumers nor some business managers really understand the technicalities of IP law. However, I don’t think the complexity is likely to be removed in the near future.
My comment about anarcho-socialism was flippant and based (although you couldn’t be expected to know this) on this blog article: https://ipdraughts.wordpress.com/2011/04/07/news-flash-anarcho-socialists-disapprove-of-healthcare-patent-exclusivity/
I see that many (but not all!) politicians struggle to deal with IP problems, as they struggle to deal with many topics that are technically complex and not immediate vote winners or losers. To my mind there are two solutions to this problem: (a) increase the quality of politicians, or (b) remove decision-making on the detail of iP legislation from politicians and give it to an expert commission.
Other commitments have prevented my responding to this before now, but holy bureaucrats, Batman, the words that should strike terror in the hearts of all persons with an interest in any policy whatever, perhaps even more than the words you would normally think of, are “we’re from an expert commission and we’ll set everything to rights.” Panels of experts are the people who gave us accounting rules. Need I say more?
All policy questions are political to some extent. Usually it’s the extent to which people are willing to spend money to protect or extend an income stream. In the case of IP, or more particularly copyright, that has resulted in organized industry groups, with the witting or unwitting assistance of credulous authors, lobbying for longer and longer copyright terms on specious theories of caring for the descendents of the authors (did I mention credulity?). While some copyright laws have added protection for authors, as for example by permitting the claw-back of licenses after a set number of years, and while in some cases doctrines like fair use/fair dealing have ameliorated (but not nearly enough) the worst excesses of rights-holder grubbiness, the plain fact is that legislatures and courts have been captured by industry groups whose gains far exceed the miniscule losses to any single member of the public whose use of now-copyrighted material is impeded.
Lest I sound like some, I don’t know, anarcho-socialist, I’m a strong proponent of protecting the legitimate commercial interests of authors, which includes the right to obtain revenue from licensing rights to businesses who can exploit them by selling the licensed item. But the monopoly and property aspect of copyright and all other IP rights is (and I admit that this is a common-law viewpoint) something granted by the public for its benefit, which requires, first, that the public benefit (which it does not when rights are extended retroactively to works already created), and second, that the rights granted to the IP owner be the minimum necessary to promote the creation of new work. But the policy balance has to be struck by the people who are answerable to the public, namely legislators. Just as legislators have to familiarize themselves to some extent with energy policy, criminology, transportation, and all the other areas in which they deal, they need to be educated on the ramifications of IP policy at the macro and micro levels.
In the US there is at least a smidgin of content to the “I own this book” statement. Ownership of a copy of something under US copyright law allows the owner to deal in that copy without accounting to the copyright owner of its contents (other, of course, than by copying it). This is not necessarily the case under other copyright regimes, witness the churlish warnings one finds inside some British books.
As to the information embodied in the copy, it either is or is not covered by some principle of intellectual property law (assuming that trade secrets fall into that heading) based on the insanely fine-tuned nuances of the particular IP law at issue. Saying that one or the other party “owns” the report is for that reason more or less effective depending on what aspect of the report’s content is at issue: an invention disclosed in it? the manner of expression? the right to keep it secret (if it is)?
I too wish that contract language were more attuned to the legal issues; that it is not is usually reflects the legal ignorance of the drafter (as for example the ones who declare that an independent contractor’s output constitutes “work [made] for hire”–which it is not and almost never can be, at least under US copyright law. The best one can say of hand-waving terminology like “own” is that it establishes the parties’ intent, to the extent that matters, when a court later has to resolve a dispute. What would be required to have the hand-wavers take note would be a decision holding that the hand-waving statement actually altered the outcome under the underlying IP law to the drafter’s detriment. Har, har, har, that’ll fix ’em!
I think we have stumbled on an interesting angle, here.
Intellectual Property is subject to a lot of criticism, mainly from people who regard the detail of what IP actually does or does not cover as merely “insanely fine-tuned nuance” and therefore take the broad-brush approach that IP protects information and prevents it from being shared. Then, having ignored all the safeguards in IP law that prevent it from being used as a steamroller, they criticise it for being a steamroller.
Lawyers who then use feeble phrases like “The Client shall own the Report” merely encourage this. Clearly, they do not understand IP and are just waving their arms around hoping that it will have the necessary effect. I’m afraid that, to me, “The Client shall own the Report” means that the client will have ownership of the physical sheets of paper and the staple or other binding holding them together. Oh, and the toner particles that became fused to the paper in the process of printing it, too. I’d be grateful if you could put me in touch with them, as I have a house that I’d like to sell them. Except I won’t actually sell it, I’ll just say “It will be your house from now on”. It will be their house, too; every time I go home I will think “There is X’s house, so kind of him to let me live here for free”, and X will be welcome to drop in for a drink anytime, so long as I am there to let him in and not busy.
It all stems, I think, from the general feeling amongst non-IP lawyers that IP law is “hard”. I’ve heard this again and again. It isn’t, though. It’s so simple, even I can understand it.
I hope the daughter and son of Anders (or Andrew) can find some areas of agreement!
I agree that it is a political decision to establish a system whereby an author or artist owns an enforceable right (copyright) which can form the basis of royalties, unlike the former system where some found a rich patron and others were paid very little. Or a system whereby inventors are given a right to prevent use of their invention based on objective criteria, rather than being based on whether the monarch wanted to do you a favour (or sell you a sinecure). Generally, I think these property rights are a good thing. I don’t agree with the approach of the leading 19th century engineer, Isambard Kingdom Brunel, who built many of the excellent railway bridges in Oxfordshire that I have canoed under, and who was a leading figure in a campaign to abolish the patent system.
That is not to say there can be no improvements, such as extending the exceptions to copyright for consumers. And there should be limits to these property rights. One possible limit is not to give pure information the status of property. Whether this is an insanely fine-tuned nuance is for others to decide. I think everyone else is insane…
I have heard suggestions, (eg from one of the Manchester Manifesto signatories) that some of these property rights could be replaced by a more administrative system whereby a tribunal could award creators a royalty but remove their right to prevent infringement. I have yet to be convinced that this is workable and not an insanely reinvented wheel from an anarcho-socialist mould.
But I think you’re running into what is the political problem here. Politically, and therefore in the discourse around what practises or texts should be acceptable in common use in for instance business, we very much deal with information as something which needs to be covert, secret, kept owned and under ownership rules. You cannot expect that kind of insanely fine-tuned nuance that you are asking for in a broader discourse, I think.
This is partially why I am generally critical of intellectual property and information ownership. I believe that it leads to larger impracticalities in the discourse about communities, communication and information and culture that doesn’t serve the interaction we normally want between the entities that try to engage each other in society.
It would over all be helpful to have more commentary on this also from, say, practioning lawyers. At the end of the day, we need to allow ourselves to discern also the ideological (political) discourse here. Too often it is discarded as a mere technicality.