Streamlining deal flow

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?

1. 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.
2. 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.
3. 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.
4. 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:

1. 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.
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.
3. Identify the unique features. Why can’t the template agreement (identified via question 2) be used verbatim? What is unique about the deal?
4. 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…

 

 

 

 

10 points to be a good lawyer

This article almost invites contradiction from contrarian lawyers. After all, part of our role is to play devil’s advocate, and see the other point of view.

And what works in one commercial sector may not work in others. Most of IP Draughts’ practice has involved working on relational contracts, where a cooperative approach is often considered appropriate, and where legal risk allocation is not usually a primary focus. Other areas of practice (IP Draughts prefers not to offend by giving examples) may place a higher value on an uncompromising, winner-take-all approach.

Having got his defences in first, IP Draughts can now say what he thinks. His thoughts reflect over 40 years’ experience of the law, at university and in practice. In no particular order, the attributes of a good commercial lawyer include the following:

1. Keep learning. Your legal education doesn’t stop with a law degree or professional qualification. This is just the start of what should be a life-long interest in becoming better at the technical aspects of your job. In his early years of practice, IP Draughts spent time reading around the subjects he was working on, in books such as Chitty on Contracts. Later, he did research for, and wrote (in many cases, with colleagues), a series of published books and articles – for details, see the pages behind the blog page on this website. He has kept challenging himself, by taking exams and assessments to qualify as a Certified Licensing Professional in his fifties and, in his sixtieth year, as a CEDR-accredited mediator. His colleagues have taken part-time postgraduate degrees and courses, including the UCL IP Transactions course and the Oxford IP diploma course.
2. Keep practising. Legal practice favours those with experience as well as technical skills. It can take several years before you have sufficient experience to see situations from different angles and give rounded advice. For experienced lawyers, past battle scars are useful, but there is no substitute for having current exposure to drafting, negotiating and advice. It keeps you fresh.
3. Keep listening. Good lawyers listen hard, to their clients, to the other side in negotiations, and to external advisers such as barristers. It doesn’t require deep psychological skills to do so. People often reveal their wishes or perspectives in their words and body language but, equally often, others fail to listen closely enough, and miscommunication occurs. Once you understand what is wanted, you can try to frame a solution that meets everyone’s needs.
4. Keep it nice. Be professional and, if you can, be pleasant. Some people are not pleasant. Don’t let them dictate the mood of the meeting. Use your insights to understand situations and not get dragged into unproductive dramas.
5. Keep it ethical. Be clear-headed about your values, and don’t get dragged into dodgy territory. Be prepared to say no, and to be unpopular for doing so. Sometimes, requests for unethical courses of action are based on the other person not thinking through the issues with sufficient care. Your analytical skills may help to identify what is, or is not, ethical.
6. Stay grounded. Compared with the overall population, commercial lawyers are very well paid. But when you are in that bubble, it is too easy to be competitive about whether you are earning as much as the next lawyer, or working in an equally prestigious firm. Viewed objectively, these differences are tiny. What is more important is whether you are making best use of your skills, working in an environment that suits you, and earning a reasonably competitive salary for the work you are doing. All the rest is fluff.
7. Be resilient. Law is a very competitive profession. You may well get knock-backs, which cause you to doubt your worth or your career choice. Again, viewed objectively, you are probably at a very similar standard to others who seem to be progressing faster than you. When you get the knock-back, as most of us do, use your objective, analytical skills to find the best way forward. Sometimes, this may be mean moving job. That isn’t the end of the world. Find what suits you, and make a success of it.
8. Provide good value. If you are in private practice, don’t try to squeeze the last ounce of fees out of clients. Take a long term view and build up client loyalty. At the same time, don’t undervalue your services.
9. Think long term. Keep building up a portfolio of experiences and relationships that will enable you to be successful and “add value” in the longer term. Secondments, moving around between departments, taking on special projects, etc, can all help to build up a rounded set of experiences and skills. IP Draughts is about to complete a 4-year term as a non-executive director of a company in the biotech sector. This unpaid role has been an extremely valuable learning experience, though how he will make use of the learning is not yet clear.
10. Give back. Take opportunities to help others, as others have helped you. There are many different ways of doing this. It may be mentoring, or voluntary work, writing textbooks, sitting on a professional committee, or providing pro bono legal services. Experiences of this kind will help you to see things from another perspective, add to your skills, and help to make you a better lawyer.

Listening, proposing, understanding: sometimes it doesn’t work

This is IP Draughts’ attempt to articulate some thoughts about what works, and what doesn’t, in business dealings. They are prompted by a particular concern that he has at present, but they apply more generally to commercial negotiations, and to other business relationships where you are trying to make progress and get things done.

He is taking a long-term view. Some people just bulldoze their way through, by force of personality, or bargaining position, or because of learnt behaviour – they have done things this way before, and they have got away with it. Others acquiesce with the bulldozer, either through fear of confrontation, or a sense of conformity (no-one else is objecting), or because they haven’t come up with an alternative approach.

But for sustainable, long-term relationships, a different approach is required. We need to listen hard to what the other person is saying – this should be at the heart of communication. If we disagree with what is being said, or think it doesn’t give a complete answer or promote our own (legitimate) interests, we need to develop our own ideas and proposals, and articulate them clearly and assertively.

Where this results in a clash of opinions, we need to be respectful of the other person’s point of view, and consider their counter-arguments. We may need to adjust our views in light of any new information.

This process is iterative, and should lead to mutual trust and understanding, with everyone working together to find better solutions. On several recent commercial negotiations, he has noticed an increased mutual respect and cooperation in a second conference call, compared with the first.

But if a desirable outcome doesn’t happen, there may need to be a parting of the ways. Over the years, IP Draughts has seen commercial colleagues persist in negotiations despite clear warning signals that the relationship is bad. Pressing on to get the deal done may seem right in the short term (and if the company has unsophisticated incentives for business development professionals, it may be right financially for the individual) but if the relationship issues are not addressed, the long-term health of the relationship is not likely to be good.

When IP Draughts takes on a project, he tries to do it to the best of his ability. He is currently trying to decide whether to continue with a project that has run for several years, and where he marks himself 9 out of 10 for effort, but only 6 out of 10 for results. Several colleagues have encouraged him to continue, but he is not sure that further progress can be made.

Sometimes, it is best to cut your losses and walk away.

 

 

 

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.