Rhetoric and habit in negotiations

We are creatures of habit. We like the familiar. In commercial negotiations, we hear the same argument a few times, and we think it has merit. We use the argument ourselves, and it is persuasive, because the person we use it on has heard it before. Whether the argument has any genuine merit is an entirely separate question. Here are a few:

  • I’m not paying your taxes (IP Draughts hears this from US parties, in relation to a clause that says that payments are exclusive of VAT; usually the person doesn’t understand the European VAT system).
  • “Represents and warrants” gives remedies in tort as well as contract.
  • We should not pay royalties on patent applications that are more than 5 years old.
  • Confidentiality obligations should not be perpetual, as we need to know when we can close our file. 5, or at most 10, years is conventional.
  • Your cap on liability should not apply to breach of confidence, IP obligations or data protection issues.
  • We need to own the data that comes out of the project; our business client expects to see such a clause. IP rights are a separate issue, dealt with in a separate clause.
  • The definition of each party should include its affiliates.

If IP Draughts had more time, he could think of more examples. Some of these arguments (or perhaps assertions would be a better word) have emerged as conventional wisdom during the time that he has been practising. Some are the subject of more detailed discussion in old articles on this blog.

In all cases, the arguments can be questioned on the grounds of logic, legal principle, or whether they favour one’s client’s interests. But questioning them can be a backwards step in negotiations, because one is challenging the norm. Particularly if the point seems secondary or unimportant to the deal, or if one’s commercial client really doesn’t care about the issue, it is tempting to go along with what everyone else seems to do.

An example: fairly early in IP Draughts’ career, he negotiated a confidentiality agreement and, after some discussion, persuaded the other party to increase the duration of confidentiality to 20 years (or was it 15?). Later, IP Draughts’ client relayed some feedback from the other party, that IP Draughts had been difficult over a minor agreement, and that this didn’t bode well for the more important negotiation of the “full” agreement. Even if there was logic in a longer period of confidentiality (for a biotech client’s technology), it was not considered appropriate to go above a 10-year confidentiality term.

Negotiating agreements involves a series of judgment calls about whether to accept an argument, a form of words, a compromise: when doing so, IP Draughts recommends that you keep a clear head on whether the argument is valid or just familiar. Of course, this requires you to be really on top of the technical aspects of your profession.

2 Comments

Filed under Commercial negotiation, Contract drafting, Legal practice

2 responses to “Rhetoric and habit in negotiations

  1. Thanks, Vance. I agree that there maybe good reasons for requests of this kind or for resisting them. My beef is with an unthinking approach.

  2. vrkoven

    I could dilate at length about some of those issues, probably most of them. Most do not, in my view, reflect a misunderstanding of the legal principle (rep and warranty and defining the parties do, of course), but actual differences in the position of the parties. They have to be resolved by negotiation, for very pertinent example the length of a confidentiality commitment (I’d say it depends on the type of information) and the cap on liability (this most often occurs if there’s an absolute exclusion of “incidental and consequential” damages–pace Ken Adams, the view that the entire subject is incoherent is a very hard sell most of the time–or where damages are capped with reference to the contract value). As to taxes, most American commercial lawyers understand that VAT is an ad valorem tax, and the convention *in principle* is that the buyer pays ad valorem taxes, but we’re not accustomed to paying the high rates that European countries charge, so the real issue is sticker shock. Walking the buyer through the reimbursement process for exports, together with a commitment to cooperate, is the necessary emollient.

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