NDA with OFQUAL: what’s all the fuss?

Surprising as it may seem, parts of the UK national press have been buzzing with excitement over the terms of a non-disclosure agreement (NDA).

The story so far

There haven’t been any (many?) school exams this year, due to the Covid-19 pandemic. Instead, school pupils were to be awarded grades in their GCSE and A level exams using an algorithm developed by OFQUAL,  the regulatory body for school examinations in England.

The Royal Statistical Society (RSS) had proposed to OFQUAL the inclusion of two independent experts to help develop the algorithm. OFQUAL asked these experts to sign an NDA. RSS objected to the terms of the NDA on the grounds that it would prevent RSS from commenting on the choice of computer model, on how the constraint of grade inflation was set, whether it was appropriate to the statistical task at hand, and who set it.

In fact, following an outcry over the results produced by the algorithm, pupils have been able to claim any higher results predicted by their teachers.

The terms of the NDA

General comments

So, what is so terrible about the NDA that was proposed? IP Draughts has reviewed many hundreds of NDAs over the last 36 years, and one of his books is on the subject of Drafting Confidentiality Agreements, published by the Law Society of England and Wales, and now in its third edition. He thought it might be interesting to review OFQUAL’s NDA.

First, some general comments, before focussing on the special case of an independent academic review of technology being used for public purposes.

IP Draughts’ overall impression is that the NDA was originally based on a simple template with conventional terms, but like many templates it has acquired some accretions over time, and it doesn’t look like it has received a high-quality legal review for some time. He would be embarrassed to put his name to such a scruffy document.

Points that jumped out (in the order in which they appear in the draft) include:

1. Bad formatting, e.g. the definition of the Parties appears in a paragraph about OFQUAL.
2. The definition of Confidential Information is broad. It covers all information provided by OFQUAL unless the information fits within one of the standard exceptions. More often in NDAs there would be a requirement that information must be marked as confidential or if disclosed orally identified as confidential at the time of disclosure.
3. Bad/sloppy choice of language, e.g. “undertakes to do as follows” is followed by a list of items, such as “that copyright …remains the copyright of [OFQUAL]”

In a routine business-to-business (B2B) NDA, these points could be fixed by marking up the draft with conventional changes found in many NDAs, and with drafting corrections.

Other aspects of the NDA seem unremarkable in B2B NDAs, e.g.

• conventional exceptions to confidentiality
• restrictions on use or disclosure of the Confidential Information
• requirement to return information on request and certify destruction
• 5-year term for confidentiality obligations

Conventional as the above terms are, there are still a few drafting suggestions that might be made, e.g. that the receiving party can keep one copy of the confidential information in its legal files.

Special circumstances of this disclosure

OFQUAL’s NDA was proposed for signature by two independent experts suggested by the Royal Statistical Society. It appears from the RSS’s letters (see first link above and documents linked there) that they wanted to be free to publicly criticise the detailed features of the algorithm, and its creators, including OFQUAL. They were concerned that the NDA would prevent them from doing so.

IP Draughts agrees that the NDA probably would prevent them from doing so, but he has some sympathy with the OFQUAL position. It is a public body that was developing a policy, including a methodology for implementing the policy, on an issue affecting many thousands of families in England. As later events showed, the policy was very politically-sensitive.

In those circumstances, looking at it from OFQUAL’s perspective, it seems counter-intuitive to admit people to the policy-making body and then allow them to criticise the policy.

It appears that RSS is a campaigning body that presumably wants both better use of statistics in public bodies and greater transparency about their use. That is an understandable and laudable aim, but if I were running OFQUAL I would be reluctant to create a rod for my own back by giving RSS representatives both privileged access to a policy and freedom to criticise it.

Overall, IP Draughts thinks the issue is not really about the terms of a mediocre NDA, but about whether people involved in developing public policies should be constrained as to what they can say in public about those policies, and when. This is, or should be, itself a matter of public policy rather than something to be governed by private agreements.

 

 

Guidance on aggressive CDAs

The Law Society of England and Wales (LSEW) has issued guidance to individuals about signing confidentiality agreements (CDAs or NDAs). This follows the scandals – if this is not too strong a word – of people being asked to sign extreme CDAs as part of settlement agreements, in both the UK and USA. A UK Parliamentary committee produced a report on this subject earlier this year.

What makes a CDA extreme is a matter of opinion, but candidates for this include:

• not being permitted to retain a copy of the CDA
• terms prohibiting disclosure of information, or the CDA itself, to one’s family, doctor, lawyer, in litigation or investigations (civil or criminal), or to regulatory bodies
• financial penalties (e.g. recovery of money paid in settlement, or indemnities) for certain breaches of the CDA
• not being permitted to make factual references to one’s activities during the term of employment
• not being permitted to use information about one’s experience (e.g. of discrimination or harrassment) to support others bringing similar claims

The LSEW’s guidance to members of the public, Non-disclosure agreements: What you need to know as a worker, is disappointingly brief. In IP Draughts’ view, it pussy-foots around some of the concerns that have been highlighted in the Parliamentary inquiry. He would summarise the guidance as follows [followed by his comments in square brackets]:

• agreements are hard, take legal advice [a bit self-serving by the body representing solicitors, but okay]
• your employer may pay for this advice [IP Draughts has only seen this with settlement agreements at the end of employment, where getting a certificate from the employee’s legal adviser that they have given advice and that they have insurance is a pre-condition for the employer avoiding the effect of certain employment laws; moreover the amounts offered – typically in the range £250-500 – don’t really cover the costs of giving full advice on what are nowadays becoming excessively detailed and complex agreements]
• if you are unhappy about a CDA that you have previously signed, take legal advice [see above]
• it’s important that you understand what you have signed up to [no shit, Sherlock]
• check whether the terms allow you to disclose to family members or your doctor, how long the confidentiality obligations last, and whether you can talk about your role in future job interviews [this seems a rather partial list of things to check]
• you can’t be stopped from talking to the police and regulators [arguably the most useful information in the guidance so far]
• the CDA may not be binding on you, e.g. if you didn’t have the opportunity to think about what you were being asked to sign or you couldn’t get legal advice [a rather downbeat way of making the point that some of these extreme CDAs are there to intimidate you and they may not be legally binding]
• you should ask for a copy of the CDA [this could be expressed more strongly as, if you are not allowed to keep a copy, you should run a mile from signing the CDA]
• CDAs can’t be used to stop whistleblowing, but this subject is hard and you may need legal advice on it [see above]

IP Draughts is left uncertain as to the purpose of this document. It seems to be a one-off rather than forming part of a set of guidance notes for consumers on different issues that affect them. He feels the key messages should be not to sign extreme CDAs, and that they are not “normal”; if you have signed them they may not be binding. But perhaps such a blunt message was too much for a body whose members act for employers as well as employees. Perhaps the LSEW felt it had to say something, in view of the criticism that has been directed to lawyers in cases such as those involving Harvey Weinstein and others. Like some other LSEW documents in areas of political sensitivity, it is a bit of a damp squib.

Predatory behaviour by lawyers – IP aspects

The Solicitors’ Regulation Authority (SRA) is the regulatory body for solicitors (the profession of most lawyers) in England and Wales. It has recently updated its guidance to solicitors on Balancing Duties in Litigation, in light of the recent controversies over extreme non-disclosure agreements (NDAs).

While the guidance is directed primarily to litigators rather than transactional lawyers, and across all sectors rather than being focussed on IP, it is striking that several examples from the guidance are of direct relevance to those of us who advise on IP matters including transactions. Three areas in particular are worth noting:

1. Predatory IP litigation
2. Drafting aggressive and unenforceable terms in NDAs
3. Taking advantage of unrepresented individuals

As the executive summary to the guidance document makes clear:

…although solicitors must advance their clients’ cases, they are not ’hired guns’ whose only duty is to that client. They also owe duties to the courts, third parties and to the public interest.

This is a welcome change of emphasis from the SRA, which in the past has seemed to downplay these duties in favour of an overriding obsession with the interests of “consumers”.

This blog article doesn’t seek to summarise the overall content of the guidance, but instead highlights some points that jumped out as particularly relevant to IP practitioners.

Predatory litigation

One of the examples of predatory litigation cited by the SRA is the action brought by ACS:Law against downloaders of porn. Letters were sent out to multiple parties, in each case alleging copyright infringement and demanding several hundred pounds to settle the case. Though the law firm is not named in the guidance, it is clear who the SRA has in mind as the guidance refers to “blackmail” and includes a footnote linking to the transcript of a House of Lords debate where this firm’s activities were discussed by name.

The guidance includes the following paragraphs:

Predatory litigation generally involves solicitors bringing large numbers of claims with limited investigation of their individual merits or of the underlying legal background. The idea is usually that the cost in time and money of proceedings, or the threat of public embarrassment, will lead to opponents settling cases that might have no real merit.

For example, a law firm might send letters of claim to large numbers of individuals alleging, on limited evidence, that they have breached the intellectual property of their client. The requested settlement is usually significantly lower than the potential cost of fighting the claim, which encourages people to settle the claim before it goes to court and without first seeking their own legal advice.

IP Draughts was challenged about the SRA’s effectiveness in this area, when he gave oral evidence to a House of Lords bill committee in relation to what became the Intellectual Property (Unjustified Threats) Act 2017. His off-the-cuff, unprepared response was that there will always be outliers who break the rules, and it was better to deal with them in a regulated environment than an unregulated environment. He acknowledged that the SRA was like an oil tanker, taking a long time to change direction, but it did eventually take action against ACL:Law and its principal, striking them off the roll of solicitors.

Now the SRA has gone further and provided specific guidance to solicitors about this type of behaviour. Most IP lawyers that IP Draughts’ knows wouldn’t dream of behaving like ACS:Law but there are outliers in any profession, and the guidance is welcome.

Unenforceable terms in NDAs

The Harvey Weinstein case involving a UK member of staff was the subject of much press comment, and lawyers from the English law firms involved were hauled before a Parliamentary committee to explain their actions. Some of the details of that case were, to IP Draughts’ mind, extraordinary, including that a party was not allowed to retain a copy of an NDA that they had signed.

The SRA guidance on this subject includes the following statements:

The role of solicitors in drafting NDAs in relation to allegations of harassment has received public and political attention.⁴ This attention will continue. There are legitimate uses for these agreements, but solicitors must make sure that they do not draw up clauses that go beyond what is necessary to settle the claim. They must not threaten consequences that cannot legally be enforced. In particular, solicitors must not seek to prevent anyone from reporting offences or co-operating with a criminal investigation and other legal processes, including influencing the evidence they give. They must also not prevent someone who has signed an NDA from keeping a copy of the agreement.

There have also been allegations of employers threatening to give a hostile reference or otherwise to penalise a victim if they do not agree to sign an NDA.⁵ Other victims have reported being given the impression by the solicitor that they would be imprisoned if they did not comply with the NDA.⁶ People that have experienced some form of harassment might be vulnerable, in part because of the harassment itself. Solicitors need to consider this when communicating with them and when drafting an NDA.

The document cross-refers to a more specific guidance document on NDAs from the SRA.

Unrepresented individuals

When dealing with a party that is not legally represented, a solicitor should not “take advantage”. The only situation where IP Draughts comes across this on a fairly regular basis is where a university client is negotiating an IP transaction with an individual such as an academic who is forming a spin-out company to exploit IP. Sometimes, the academic does not take their own legal advice on the terms they are being asked to agree to, and IP Draughts recommends recording in writing, eg in an email to that person, that (a) the law firm is acting for the university alone (if that is the case), (b) neither the law firm nor the university is providing legal advice to that person in a personal capacity, and (c) they should consider obtaining their own legal advice.

The SRA’s advice in this area includes the following comments:

In advancing a client’s interests, solicitors must be careful not to take unfair advantage of the opponent or other third parties such as witnesses. Special care is needed where the opponent is unrepresented or vulnerable. Solicitors will need to consider this duty in all cases, but particularly when faced with a party showing a simple lack of legal knowledge or obvious procedural misunderstandings.

There can be a fine line between proper defence of the client’s interest and taking unfair advantage of others, usually highlighted by any form of deceit or misinformation.

Indicative behaviour 11.7 in the Code of Conduct highlights that taking unfair advantage of an unrepresented party’s lack of legal knowledge shows a failure to comply with duties to others. Special care should be taken when corresponding with lay or vulnerable opponents not to take advantage or use language that might intimidate them.⁸ Regulatory breaches can arise from any oppressive or domineering tactics, regardless of whether misleading information is included. These tactics include:

• overbearing threats of claims or poor outcomes
• legalistic letters to minors or others who might be vulnerable
• threats of litigation where no legal claim arises
• claims of highly exaggerated adverse consequences.

From memory, this is not the only guidance that the SRA gives on dealing with unrepresented parties, but the above is focussed on the specifics of litigation.

Conclusions

Some clients hire a large legal team

The bottom line is that an English solicitor is not supposed to go out “all guns blazing” in pursuit of their client’s interests, if this would result in a breach of the solicitor’s other professional duties. Care is needed, particularly with vulnerable or unrepresented individuals. Although the SRA’s guidance is primarily concerned with litigation, it may also affect those of us who draft IP agreements and are regulated by the SRA. IP Draughts expects that the other regulators of UK IP professionals, including the Bar Council and IPReg, would follow a similar line to the SRA.

Some clients will be disappointed with this approach, and see it as “pulling your punches”. They may prefer the US approach where attorneys are expected to represent their clients in a “zealous” manner.

One-sided settlement agreements

UK readers can’t have helped noticing that non-disclosure agreements (NDAs) are again in the news. A Court of Appeal ruling has attracted attention. Despite a court order to the contrary, the identity of the person involved has apparently been disclosed in the House of Lords under Parliamentary privilege.

According to a report by the BBC this week, the UK Prime Minister, Theresa May, has commented on the issue:

Mrs May said non-disclosure agreements, or NDAs, should not silence whistle blowers. She added the government would take action to make sure employees knew their rights.

Some – as yet unspecified – legislation to regulate this issue is promised. During a time of legislative paralysis caused by Brexit, IP Draughts is sceptical about the government’s ability to deliver on such a promise.

But, giving the government the benefit of the doubt, what might any new law say? Perhaps that obligations of confidentiality in settlement agreements made by individuals are unenforceable? Or unenforceable where there is a significant imbalance of power between the parties? Would such a law promote or hinder the settlement of disputes?

UCL professor, Richard Moorhead, has provided thoughtful commentary on this issue, eg on his blog. Earlier this week, he was invited onto the Today radio programme and then onto BBC TV programmes to discuss the matter.

IP Draughts’ instinctive view is that, if confidentiality obligations in such circumstances were unenforceable, it would reduce the number of settlement agreements. But whether it would reduce the number significantly is unclear. Sometimes, confidentiality will be a key issue for one or both parties. On other occasions, the key issue may be resolving the dispute and avoiding the cost, time and additional problems associated with litigation, so that confidentiality is merely a “nice to have”.

Although he hasn’t advised on harrassment allegations or their resolution, IP Draughts occasionally advises on the settlement agreements that employers ask their employees to sign when dismissing them, typically in return for a payment that exceeds the contractual entitlement. In the UK, these agreements (formerly known as compromise agreements) can protect the employer against future claims by the (ex-)employee if they are drafted widely enough and comply with statutory requirements. One of those requirements is that the employee obtains legal advice and provides a certificate to this effect from the lawyer.

Although the circumstances of these settlement agreements are different from those that are in the news, there are some similarities: they are entered into between parties of unequal power, and in return for a payment the party with less power gives up a wide range of future rights. Typically they include confidentiality obligations. From an employer’s perspective, it is usually the preferred option to keep the deal secret.

Originally, these settlement agreements were drafted with a view to avoiding future, employment-related claims by the employee, such as for discrimination or unfair dismissal. They provide a limited ‘safe harbour’ or exception to the general rule that an employee cannot contract out of their statutory employment rights. The agreements were sometimes a little lengthy because they listed all the different types of theoretical claim that an employee could bring under UK employment legislation. But apart from these lists, the agreements were relatively straightforward.

More recently, IP Draughts has noticed a trend to throw much more into settlement agreements, to tie the employee up in legal knots. A draft settlement agreement that IP Draughts recently reviewed seemed to acknowledge this, when it said:

…if this Agreement is only effective for the purpose of precluding the Employee from presenting particular statutory complaint(s) to an Employment Tribunal, then the particular statutory complaints to which this Agreement pertains is/are the Employee’s complaints of unfair dismissal, wrongful dismissal or discrimination.

This was a small sub-set of the types of claim that, elsewhere in the agreement, were stated to be waived by the employee.

In addition, this particular agreement had some rather strong obligations on the employee, eg:

• non-compete obligations on the employee
• obligations not to make subject access requests under data protection legislation
• obligations to cooperate with the employer in any future UK or overseas regulatory or legal proceedings to which the employer was party
• full disclosure obligations (similar to an utmost good faith obligation) that were not reciprocated by the employer
• obligations not to make disparaging statements about the employer

The wording of some of the obligations was extremely dense and difficult to follow. For example, a sub-clause on tax liabilities was part of a single, longer sentence. The tax part of the sentence ran to 348 words and included multiple qualifiers, ifs, buts and provisos.

These types of agreement tend to be drafted entirely to protect the employer, and detailed negotation of the terms is not usually expected. Something has gone wrong when they are are as complicated and one-sided as this one. Personally, IP Draughts wouldn’t sign such an agreement for the low thousands of ex gratia payment that are typically on offer, but perhaps he is talking with the luxury of being a well-paid professional. He finds it difficult to believe that the original intention of the legislation which brought in compromise (now settlement) agreements was to facilitate extreme agreements of this kind.

Some lawyers take the view that their role is to provide maximum benefit to their client and if that means maximum disbenefit to the other party, so be it. Some clients require their lawyers to act in this way. While this approach has its place, IP Draughts agrees with Richard Moorhead that when one is dealing with individuals, and when there is an imbalance of power, ethical considerations may require a tempering of the “win as much as you possibly can, and without caring about the other side” mentality.