In recent months, IP Draughts has been involved in several projects that have revealed both the great value of using template agreements, and the difficulty of sticking with templates when unique situations emerge.
This subject should be on the radar of senior management at universities and in industry, and additionally should be the subject of sector-wide discussion and action plans. It should not be left to the legal and contracts departments of individual organisations. Why?
- If every contract is dealt with as a unique deal, this leads to the growth of in-house legal and contracts departments. Contracts become more expensive and time-consuming to negotiate.
- Many contracts are routine, and don’t raise “bet the company” issues. But this is not a reason for senior management to ignore them. Instead, management should be thinking about ways to streamline the contracting process.
- If people are left to their own devices, they tend to stick with the familiar way of doing things, which in this case tends to be individual negotiations. Leadership is needed for change.
- Even if one party is innovative and wants to streamline, the other contracting party or parties may be stuck with traditional ideas of how to negotiate. So, unless the innovative party is in a position of great market power or influence, only a sector-wide action plan will change things.
IP Draughts should declare an interest. He and his firm have written template agreements for clients and for publications. Usually, our templates move quietly into circulation over several years. There is a certain satisfaction in recognising wording that IP Draughts first prepared about 30 years ago (e.g. the referral-to-expert wording that is present in some licence agreements), but it is not to be compared with seeing the templates mentioned in the national press – see this article in last Thursday’s Irish Times, about our Covid-19 licence agreement.
IP Draughts is well aware of the difficulties of sticking with template agreements, even if the parties want to use them. This week he learnt that a biotech client, which wants to use a standard data processing agrement for clinical trial sites across Europe, can’t use the template in Germany or Bulgaria because in those countries local laws indicate that a (different) joint controllership agreement should be used. So, if you can’t achieve a standard agreement, even if it is mandated by EU law, what hope is there for agreements that are a matter of private choice rather than public policy?
In IP Draughts’ view, the answer to this type of question is that the parties need a streamlined procedure for negotiating contracts, as well as appropriate templates. Both the procedure and the templates need to be agreed across the sector, rather than just being an individual initiative of one organisation.
This has been tried before, without spectacular success. When the Lambert Agreements for UK university/industry research collaborations were first agreed, part of the output of the Lambert committee was a decision-tree to help parties decide which Lambert Agreement was suitable. The idea was that this would replace individual negotiation of terms. In practice, the decision-tree seems to be used very rarely, and parties often seek to negotiate individual terms of Lambert Agreements. Old habits die hard.
The idea of standardised negotiations is good, but it needs buy-in from senior management if it is to stand a chance of being adopted. A new way of thinking is required. IP Draughts suggests the following sequence of decisions and actions, once a basic set of template agreements has been developed:
- Triage the deal. Is this a bet-the-company deal, or so far from any available template that individual negotiations are necessary? If not, move to question 2.
- Identify a template. Find the most suitable standard agreement that could be used or adapted for this deal. If one simply doesn’t exist for the type of deal under discussion, there should be a separate work-stream for a sector-wide committee to approve new templates as they are required.
- Identify the unique features. Why can’t the template agreement (identified via question 2) be used verbatim? What is unique about the deal?
- Problem-solve to come up with a new agreement. As part of the new process, each party should appoint a deal facilitator, whose role is to work with the other party’s deal facilitator to find the simplest way to adapt a chosen template to be suitable for the deal under discussion. Where the new agreement is to be used more than once (e.g. if it is to be used for many individual contracts to be awarded under a funding stream), it may be appropriate for the head of the contract department or some other senior person to agree the standard template for that funding stream with their opposite number(s) in the other organisation(s).
None of this is easy, which is why it needs buy-in and reinforcement from senior management, as well as cross-sector adoption. It requires some significant changes of approach, including:
- If an agreement fits within the criteria for standardised agreements, mentioned above, each party should be clear that their task is not to do the best deal they can, nor to remove perceived drafting or other defects in the template agreement, in individual negotiations. The task is to make the templates work, accepting their imperfections in the pursuit of a strategic objective of having streamlined deal flow.
- Where a template needs to be adapted, the task should be to make the minimum number of changes possible, to make the agreement suitable for the deal.
- The individuals responsible for getting the deals through should think of themselves as process facilitators, rather than contract negotiators.
As mentioned above, developing the template agreements, and getting sector-wide approval of them, is a separate task. IP Draughts’ experience, as a member of the Lambert Outer Committee and with other projects, is that an expert drafter is required as part of this process – someone who is both talented and prepared to stand up for clear, coherent drafting in what may be a multi-party negotiations where compromises are often required, and where some other participants may not have a great interest in the drafting aspects. Of course, this would require a budget. But given the millions or billions that the UK spends on research, spending tens of thousands on developing template agreements doesn’t seem excessive, and will save money on negotiations in the longer term.
Ken Adams would be an excellent candidate for that drafting role. Or IP Draughts can think of some other people closer to home…