Category Archives: Commercial negotiation

Better negotiation outcomes – better process

…properly!

Ever since his firm’s negotiation training in February, IP Draughts has been reflecting on what Rob Marshall, our course leader, taught us. A topic that particularly resonated with IP Draughts was how different negotiators have a different mix of priorities, in the following categories, and how these priorities sometimes change when you are under stress. The categories are:

  1. People
  2. Process
  3. Outcomes

IP Draughts has been re-assessing clients and others through the lens of these categories – are you a “people” person, or mainly focused on outcomes, or obsessed with process? Or do you have these qualities in balance?

This has helped him to understand better some situations where he found a negotiation frustrating, and where one or more of these qualities was neglected. The same thought process has been helpful in explaining internal conflict within an organisation, between someone who is people and outcomes focussed, and someone who is more interested in process.

While he can think of examples, over the last few decades, where the issue was a lack of focus on people or outcomes, with his commercial clients the biggest problems have arisen from a lack of focus on process. There seems to be a particular type of business development manager who engages at a personal level with his opposite number, and is focused on getting the deal done, but seems to have no interest in process. The lack of focus on process can sometimes jeopardise the deal, or result in an organisation taking on inappropriate risk.

This can operate at different stages of the deal, including:

  1. Bad term sheet. Where the parties negotiated a term sheet but didn’t involve their lawyers, causing downstream problems in the negotiation of the final agreement. Or perhaps others in the organisation vetoed the deal altogether once they heard about it, as being not consistent with company policy or risk appetite.
  2. No term sheet. Where the parties didn’t have any discussion of key terms (and certainly no term sheet) before starting the negotiation of a detailed agreement. Signficant commercial differences emerge during the page-turning exercise, which can be an extremely inefficient way to negotiate the key principles of a deal. Sometimes, it becomes apparent only during the detailed negotiations that the draft agreement being used is an inappropriate starting point, e.g. because the deal is really a licence agreement rather than a research collaboration, or a joint venture rather than a distribution agreement.
  3. Too much spontaneity. Where one party thinks it is fine to “jump on a plane” to see the other party, or to call them on the phone unannounced, without prior scheduling and preparation, much to the frustration of the legal team that has to review the draft carefully. Or a draft is sent through hours or minutes before a planned negotiation call, leaving insufficient time to review it properly.
  4. Careless mark-ups. Where one party sends through a draft that is only partly marked-up, or marked up oddly, or in an uneditable format, or some other malarkey, that gets in the way of smooth, trusting negotiations. Often this can be avoided by better control over process, including the editing process.
  5. Assuming the deal is done. Where one party thought the deal was done and had gone for signature, only to find that it was being reviewed at another level, eg by a legal department or a higher level of management, and that substantial changes would be required. Prior discussion of the exact process and timetable would have avoided this last-minute surprise.
  6. Different expectations on signing. Where the parties made assumptions about the signature process, failing to schedule time for a Board meeting to be held to approve the transactions. Or they failed to agree on the exact signature process and one party thought Docusign would be used, whereas the other party wanted to see wet-ink signatures. Or the agreement is signed but not dated, or a party has just signed without taking the trouble to fill in the lines that state their name and role, and the signature is illegible.

Often, these and other problems can be avoided by careful discussion and implementation of an agreed process, including allowing a reasonable period of time for each stage in the process. But that approach is sometimes not favoured by the impatient commercial manager who is leading the deal. Or they may fear that a focus on process will be perceived as indicating a lack of trust. The lawyers assisting in the negotiations (on both sides) may be more focussed on the benefits of a good process, but they aren’t in control.

Good negotiations are a team effort, where all members of the team are full participants.

 

 

 

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Trust, Verify and Warranties?

They seem like a lawyers’ nightmare version of the Three Graces. Not Charm, Beauty and Creativity, but Trust, Verify and Warranties.

When you are entering into a contract with someone, to what extent do you rely on trusting that person or organisation? Do you do any due diligence or ask the person to supply information? Do you rely on contractual promises that give you a remedy in the courts if the promises are not met?

In one-off transactions such as buying a house or business, due diligence (searches and enquiries) and warranties may be more important than trust. In relational contracts, such as R&D collaboration agreements, trust may be a greater priority.

A similar, but different, set of questions seems to operate when hiring a law firm. You may want competence, a good working relationship and to trust the lawyers (to act in your interests, charge a fair price, etc) but which of these qualities is most important to you? For bet-the-company transactions, the relationship may be less important than reliability and reputation. Or so it seems, if the culture of some large, commercial law firms is a reliable guide.

In the past, clients have complimented IP Draughts on his ‘personal’ approach; by implication, other lawyers and firms that those clients have used have had a different approach. But perhaps his approach is more suited to the type of work that he does – mostly relational contracts for long-term clients.

In passing, IP Draughts can’t resist mentioning one of his bugbears: the procurement process when applied to legal services. In IP Draughts’ experience, the process typically fails to tackle the important issues of competence and relationships, and its approach to trust is essentially one of replacing it with tough contract terms.

These thoughts are prompted by two recent events. Today, he came across a TED talk that someone he knows (and trusts) recommended. The talk is by a Harvard professor, Frances Frei, and is on the subject: How to Build (and Rebuild) Trust. She recounts her experience of working with Uber, and  considers their corporate culture. She breaks the subject of trust down into three components: logic, empathy and authenticity. The presence or absence of all of these elements affects whether you are trusted.

This is not dissimilar to another formula that IP Draughts has heard in the past, that you trust someone (e.g. a chair of a meeting) if they demonstrate both competence and warmth.

Yet another formulation comes from a 5-day course on mediation skills that IP Draughts attended a week ago. The course was run by the Centre for Effective Dispute Resolution (CEDR), the leading provider of mediation services in the UK. During the final two days of the course, IP Draughts and his fellow students were assessed against six ‘competencies’, during role-play exercises. It was all very intensive!

More on the course itself in future blog postings. For now, IP Draughts wants to focus on the six areas of competence, which came under three themes: rapport, process and content.

The competencies involve a mixture of hard (analytical, process-driven) and soft (human interaction) skills. Building rapport and trust requires empathy and authenticity. The process element seems more like the ‘logic’ discussed in the TED talk. The content element is really a mixture – as a mediator you should be helping the parties to find their own solution rather than finding or advocating one yourself, and this involves both soft and hard skills. During the role play, IP Draughts subconsciously fell into the trap of steering the parties towards his solution. He will watch out for this, in future.

Ultimately, mediation is probably more soft than hard skills, whereas the practice of law is probably more hard than soft skills. More than one person on the course used the term ‘touchy-feely’, usually when he was – how can we put this non-judgmentally – developing his skills on the relational aspect of a mediator’s role.

Legal training emphasises the hard skills, and of course these are important. But the really good lawyer will have a mixture of hard and soft skills. The latter are mostly learnt by experience, and occasionally in training, such as on negotiation skills courses. IP Draughts is coming to the conclusion that there should be more training for lawyers in soft skills, which could be through attending a mediation skills course.

 

 

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Choice of contract law in light of Brexit

IP Draughts has just returned from a pleasant few days spent in Paris, where he chaired the third annual meeting of BioLawEurope FmbA, a not-for-profit association of specialist life science lawyers across Europe, who mostly work in small firms. In the last 3 years, we have referred dozens of projects between members of the association. IP Draughts’ firm is currently working on a regulatory matter that was referred to us by the German member of the network, and a commercial matter referred by the Danish member.

During our annual conference we have presentations on various topics. One that has stuck in IP Draughts’ mind this year was on choice of law and jurisdiction. When negotiating parties are based in different jurisdictions, they often need to find a compromise jurisdiction on which both of them can agree. Apparently, English law and jurisdiction has been a popular compromise choice, but is currently less popular for some of the BLE members, due to uncertainty over Brexit. Specifically, will there be mutual recognition of judgments between the UK and EU countries after Brexit?

IP Draughts thinks it is likely that the UK and EU will negotiate mutual recognition as part of the Brexit negotiations. Although the UK government is playing its cards very close to its chest, there is some ‘mood music’ to suggest that it recognises the importance of maintaining the reputation of England and Wales as a jurisdiction of choice. This seems to be a relatively uncontroversial topic where common sense would suggest that arrangements similar to those currently applicable (under Rome and Brussels regulations) will be agreed.

However, just because something makes sense and is uncontroversial is no guarantee that it will be negotiated, given the extraordinary times in which we live, so IP Draughts understands the short-term concerns that were expressed at our Paris meeting.

Part of our discussion was about the features of litigation in different jurisdictions. This discussion left IP Draughts feeling that, recognition issues apart, England and Wales had much to recommend it, including:

  1. A summary judgment procedure to get rid of spurious cases (unlike, it seems, France).
  2. Disclosure (also know as discovery) procedures to obtain access to the internal documents of the other party (unlike most civil law jurisdictions).
  3. Oral advocacy and cross-examination of witnesses, which tests the strength of the case in court, rather than relying mostly on written submissions (unlike in most civil law jurisdictions).
  4. A judiciary made up of experienced advocates, rather than career judges.
  5. A system of ‘without prejudice’ communications that are not disclosed to the court, and which facilitate freer communications in negotiations (unlike, it seems, Austria).
  6. The winning party usually gets a court order that most of its legal costs must be paid by the losing party. Apparently, in Austria, Germany and some other countries there is a tariff system which pays only a small proportion of the costs actually incurred. At the same time, for smaller cases in the Intellectual Property Enterprise Court, in London, there is a cap on legal costs of £50,000.

Other issues that we discussed included whether a non-English court would be willing to conduct the case in the English language, if the parties agree to do so. Apparently this is possible in Denmark but not in many civil law jurisdictions, where every document relied on must be  translated into the local language and certified to be an accurate translation, which can add considerably to a party’s costs.

Increasingly, IP Draughts is wondering whether Ireland might be an answer to some of these issues, bearing in mind that its legal system shares many features with that of England and Wales, particularly if the mutual recognition point is not dealt with in a timely manner.

But IP Draughts is crossing his fingers in the hope and expectation that all will turn out well in the next couple of years.

 

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Adams v Anderson on Contract Drafting

gazetteIn case you missed it, here is a link to an article in last week’s Law Society Gazette, the journal of the Law Society of England and Wales.

The article is titled Adams v Anderson on Contract Drafting. It takes the form of a discussion between IP Draughts and Ken Adams, the author of the leading work A Manual of Style on Contract Drafting (American Bar Association, 3rd edition, 2013). Ken also runs a popular blog.

terry and juneThe article covers such diverse issues as the horrors of US-drafted contracts, the madness of English judges, the personal qualities of the famous UK sitcom couple, Terry and June, and our hopes for the future of contract drafting.

Although the article may suggest otherwise, Mr Adams and IP Draughts actually agree on most aspects of contract drafting. IP Draughts was very pleased to be able to facilitate him runnng his one-day seminar, Drafting Clearer Contracts, through the Faculty of Laws of University College London. The seminar has run for the last two years, has been very well received, and shows every sign of being a long-term, annual fixture.

Ken Adams, Master of Style

Ken Adams, Master of Style

Correspondence on the content of the article may be addressed to Mr Adams.

 

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Filed under Commercial negotiation, Contract drafting