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.


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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