Habit, not logic, in IP transactions

familiarityWe are all creatures of habit. In commercial transactions, we like to use templates and clauses that we have seen before. It is comforting to use familiar concepts and wording in our contracts. We choose not to think so carefully about them.

We dignify our preference for the familiar with wise-sounding arguments. This clause is “market”. That clause has been tested in the courts, so using different wording is risky. Usually, these arguments are spurious nonsense.

So many examples come to mind. Here are the first 10 that IP Draughts thought of, assuming the agreement is made under English law:

  1. Parties. Adding Affiliates to the description of the parties (see popular blog article here).
  2. Interpretation. Including a long list of interpretation clauses in your contract, probably because they are in an office template. Making this drafting nonsense worse by putting the clauses “front and centre” in clause 1.2, rather than hiding them at the back of the contract.
  3. IP. In a technical services agreement, stating that the customer “owns the Results”, in addition to clauses that state that IP in the Results belongs to the customer, and the Results are to be considered the customer’s confidential information. IP Draughts has no idea what this statement means.
  4. Confidentiality. Refusing to accept unlimited duration to confidentiality obligations “because we need to know when we can close our file”.
  5. Statutory warranties. Including the phrase “with full title guarantee” in an IP assignment, probably because it is in your firm’s template assignment, without stopping to consider whether the statutory warranties that are implied by this phrase are appropriate in context.
  6. Representations. Starting a list of warranties with the phrase “represents and warrants” so as to give your client the opportunity to sue in tort instead of breach of contract.
  7. Indemnities. Requiring indemnities against breach of contract.
  8. Exceptions to limited liability. Carving out from the limitation of liability clause a long list of breaches, eg of confidentiality obligations, just because you have seen this in other agreements.
  9. Insurance. Requiring a party to have insurance against all risks arising from the contract. This is almost certainly impossible to achieve, as every policy has a financial cap, exceptions, and circumstances where the policy won’t pay out (eg non-disclosure).
  10. Block capital letters. Putting some clauses in block caps, because you’ve seen it before (probably in a US contract).

Some of the above examples might be justified in context. If you have thought carefully about the clause before including it, fine. IP Draughts’ objection is to clauses that are “there because they are there”.


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4 responses to “Habit, not logic, in IP transactions

  1. This doesn’t sound like an academic research contract (sponsored research), it sounds more like a commercial research contract or consultancy.

  2. t2000

    “Results” and “ownership of IP in the Results” is a pet bugbear of mine.

    In one common collaboration/service provider scenario, 2 parties agree to conduct an experiment. The details of the experiment are agreed and included in the contract. The contract waffles on about the results. Any invention, however, may not reside in the results, unless some unexpected result occurs. The invention will likely have already been conceived. The inventors being those who designed the experiment, the “Results” of which either support their invention or debunk their idea. The invention has occurred before this contract has even been signed, so the invention IP is not in the Results.

    The Results in this scenario may be data, in which copyright or confidentiality may reside. The data may be re-generated outside of this contract, but not the invention.

    • Thanks, t. Thought provoking. I wonder how often this arises and how often it is thought about. If the funder is to own IP in the results, should they also own the previous IP that the results verify? And should the terms be different for that specific invention (eg ownership or exclusive licence) and for other pre-existing IP (non-exclusive licence)? Perhaps the answer is that in most cases (not advised by a patent attorney who has thought hard about the specifics), negotiating parties don’t get into this level of granularity.

      • t2000

        If the funder needs full ownership of all IP, the discussions under the CDA should be restricted such that there is no idea generation and sharing. Fanciful scenario.

        Discussions may already have been taking place under a CDA (no IP is assigned) to design the experiments, where all IP is ideally owned by the funder. In that case, there should be an assignment in the main contract of all IP related to the funders “product” including inventions made/conceived during the negotiations, inventions described in the contract (experimental plan) and those arising during the work.

        Instructing a service provider to conduct experiments should be less of a problem, because the funder will presumably have determined what experiments to conduct, so the inventions from the experiment design will already belong to them.

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