Category Archives: Contract drafting

New standard agreements for universities are published

Sir Richard Lambert

Sir Richard Lambert

Have you had sleepless nights? Have you found it difficult to concentrate on Brexit or the US presidential elections, through wondering when the new Lambert agreements, promised many months ago, will finally be issued?

Worry no more: over a dozen new agreements and term sheets are waiting for you on the UK IPO website.

How are they different from the old Lambert agreements, IP Draughts hears you ask. In fact, he is one of those asking. Well, it’s difficult to say, without a line-by-line comparison. Has anyone done such a comparison? The Lambert committee, for example? And could they share the mark-ups? That would be very helpful for the university community.

Comparing the new and the old agreements won’t provide a complete picture, as some of the new documents are completely new, and don’t have an equivalent in the old set. In particular, there are now 7 bilateral agreements, numbered 1-6 (yes, that is confusing – there is a 4A as well as a 4). The old set comprised 5 bilateral agreements. There continue to be 4 multi-party agreements, numbered A-D.

A European consortium: Queen Victoria and Albert, the Prince Consort

An early European consortium: Queen Victoria and Albert, the Prince Consort

IP Draughts prefers to call the documents bilateral, or two-way, agreements, and multi-party agreements, though the documents themselves are named “collaboration agreements” and “consortium agreements” respectively. In IP Draughts’ mind, these official names are not descriptive. Some bilateral research agreements don’t involve a true collaboration, and are merely one party paying another to do research. And most multi-party research agreements are collaboration agreements, as that term is normally used. The name consortium agreement seems to have become popular through its use as a term of art in EU funded research projects, and in this context is synonymous with collaboration agreement.

Sometimes, universities will instinctively select Lambert 2 as a starting point. Its terms are similar to those used by US universities in most cases, ie the university owns the resulting IP, and grants the sponsor a non-exclusive use licence plus an option to negotiate an exclusive licence to commercialise.

From a quick scan through the new Lambert 2, and without the benefit of a line-by-line comparison with the old one, IP Draughts spotted the following:

  1. Many or most of the terms are familiar from the old document.
  2. There seem to be more optional terms, marked in square brackets.
  3. One of the clauses mentions the need for the university to demonstrate public impact in its research, and to disclose certain information for this purpose. “Impact” as an important policy objective for UK universities post-dates the date of publication of the old Lambert agreements.
  4. There are some tediously lengthy schedules that set out policies on issues such as anti-bribery, non-use of child labour, etc. Many large companies now seem to require references to such policies in their standard agreements.

As with the old agreements, the main “variable” between them is their different IP terms. Below is a summary of the IP terms in each case.

Bilateral agreements
No Terms IPR owner
1 Collaborator has non-exclusive rights to use in specified field/territory; no sub-licences (Institution)
2 Collaborator may negotiate further licence to some or all Institution IP (Institution)
3 Collaborator may negotiate for an assignment of some Institution IP (Institution)
4 Institution has right to use for non-commercial purposes (Collaborator)
4A Each party has right to exploit certain results created during project and takes assignment of those results. Institution has right to use for academic and research purposes, Collaborator for research purposes (Both)
5 Contract research: no publication by Institution without Collaborator’s permission (Collaborator)
6 Institution has right to use for academic and research purposes (Collaborator)

Multi-party agreements
No Terms
A Each member of the consortium owns the IP in the results that it creates. They grant each other party a non-exclusive licence to use those results for the purposes of the project and any other purpose.
B The other parties assign their IP in the results to the lead exploitation party (or the lead exploitation party is granted an exclusive licence).
C Each party takes an assignment of IP in the results that are germane to its core business and exploits those results.
D Each member of the consortium owns the IP in the results that it creates. They grant each other party a non-exclusive licence to use those results for the purposes of the project only. If any member of the consortium wishes to exploit another’s IP they must negotiate a license or assignment with the owner of that IP.

A new feature in the 2016 Lambert agreements is that two templates for term sheets are provided, one for Lamberts 1-6, and one for Lamberts A-D. In IP Draughts’ view, these are not particularly useful documents. They are very detailed and lengthy. If one is going for that amount of detail, it will often be better to move straight to negotiation of the actual agreement. IP Draughts has previously commented on his preference for term sheets, MOUs, heads of agreement and similar documents to be brief, perhaps no more than 2-3 pages. For instance see this article: Keep the Term Sheet Simple. Pretty please…?

IP Draughts is aware that some UK universities use modified versions of the (old) Lambert agreements. It will be interesting to see if those documents are updated to reflect the new Lambert terms. If not, we may end up with a proliferation of versions, and the original Lambert message – that parties should use the Lambert agreements rather than their own, favoured documents – may be further diluted.


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Filed under Contract drafting, Intellectual Property, Legal practice, universities

Legal drafting issues in medical research

biobankIP Draughts has been reviewing a large number of publicly-accessible documents used in medical research, particularly in the context of what are variously known as tissue libraries or biobanks. In other words, collections of materials taken from patients and intended for use in research. The materials might include body tissue, cancerous cells, or blood. The research might lead to the development  of diagnostic products or therapies for human diseases and conditions.

The documents currently on IP Draughts’ desk include patient consent forms, information leaflets, material transfer agreements, and policy guidance notes. Reading these documents, it is striking how much variation there is in the language used to convey similar ideas, and how difficult it seems to be to communicate clearly and accurately.

IP Draughts doesn’t underestimate how complex the task is. The drafter needs (but often seems to lack) a wide range of skills, including:

  • Regulation. How to comply with and explain complex laws and regulations, such as the Human Tissue Act and Data Protection Act. Often there are several layers of regulation, each with their own vocabulary, including those applying to human tissue, associated data, data protection and medical ethics.
  • Contract drafting. How to draft documents in a legally accurate way. For example, in identifying the parties to an MTA. Organisations such as  “the Loamshire BioRepository” (to anonymise the name in an MTA in front of IP Draughts) doesn’t exist as a legal entity, and is simply a convenient name for a collaboration between Loamshire University and Loamshire Hospital NHS Trust. Referring to the Biorepository as the provider of the materials is unclear. At the end of the document, it is unclear whether the person asking for the materials is an individual researcher or an institution. Failing to identify the parties to a contract is a very basic mistake. In the same document, the drafter clearly doesn’t understand the conventions on using defined terms; he defines the “Material”, then uses the expression ‘Material’ with pointless and weird single inverted commas.
  • Science. How to communicate with researchers, whose focus is likely to be mainly on their scientific projects, and less on the details of compliance with legislation.
  • Donors. How to explain, at a level suitable for the general population, the nuances of the permissions being sought – eg the range of research in which the human materials will be used, the right of the person to withdraw consent, why individual-related information on the outcome of the research will not be provided (it should be done by the patient’s doctor, not by a research team; and anyway, if the research has been anonymised, the researchers won’t know the identity of the patient, etc)
  • Communicating at a time of grief. In the case of material to be taken from a corpse, how to communicate with grieving relatives who are being asked for permission to use the body of a recently-deceased person for medical research, or to confirm their consent to instructions given by the deceased before his or her death

bodyReading through a selection of documents, IP Draughts is left feeling that the drafting of documents within a complex regulatory regime should be a multi-disciplinary team effort, in which the best communicators among doctors, nurses, researchers, regulatory experts and lawyers should be engaged. Instead, the drafting seems often to be left to someone to ‘muddle through’ as best they can.

One of the areas where these issues come up is in relation to IP and property issues arising from the use of materials in research. These issues arise at several levels:

  1. As a matter of public policy and law, it may not be possible for there to be property in body parts, though there seem to be some exceptions to this principle. Similarly under the EU Biotechnology Directive, some aspects of the human body are not patentable. Therefore, referring to a biobank as owning materials, or owning the IP in materials, may or may not be legally meaningful.
  2. Linked to the above points is whether the patient can claim any financial or other interest in, or control over, the exploitation of products derived from research that made use of their materials. If consent forms mention this issue at all, they vary widely in how they cover it.
  3. Should the biobank, in its relationship with the researcher who takes material from the biobank, claim to own those materials? Some do and some don’t. A policy document issue by the UK National Cancer Intelligence Network in June 2009, quoting a recommendation of the Confederation of Cancer Biobanks, suggests that biobanks should waive their IP rights in the materials that they supply to researchers.

noIP is just one of dozens of legal, practical and policy issues that are typically addressed in the documents. It is difficult to know how best to deal with these issues as a researcher or the employer of a researcher. Should one take the terms on offer or try to negotiate them, if only to remove glaring inconsistencies and inappropriate terms? It seems that some biobanks refuse to negotiate the terms of their MTAs, no matter how badly drafted they may be.

Rather than spend a time and money negotiating terms in individual cases, shouldn’t the sector be developing some standard contracts, as has been done for university research contracts (the Lambert agreements) and for clinical trial agreements in NHS hospitals? Although neither of these examples of standard contracts is perfect, at least they provide a way of reducing negotiation time.


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What’s the point of good contract drafting?

imperfectThis post is triggered by several recent conversations and thoughts:

  • the patent attorney who told IP Draughts’ colleague recently about the poor quality of patent examiners in the USA and certain other countries, who apparently sometimes misunderstand basic English, let alone complex scientific concepts. This raised in IP Draughts’ mind the question of why patent attorneys spend years honing their patent drafting skills to a very high technical level, when the system seems to be crude and imperfect; and whether a similar question should be raised about the drafting of contracts.
  • the Court of Appeal judge who told IP Draughts that courts would always try to “do justice in the case” in contract disputes, the implication being that interpretation of the wording used in the contract might take second place to wider policy considerations, and that if IP Draughts wanted an approach based purely on the contractual obligations he should go to arbitration.
  • the fact that contracting parties will sometimes argue an interpretation of contract wording that is clearly wrong, no matter how clear the drafting, if it is in their commercial interests to do so.

There is a legitimate question about whether we are too nice (in the senses of fastidious or foolish) about the drafting of contracts. Rather than waste time focussing on clear and accurate use of language to state contractual obligations, shouldn’t we recognise that the world is imperfect, treat contracts as a process rather than an opportunity for exercising our writing skills, get the wording roughly right, and save our energies (and the client’s money) for arguing the toss when a dispute arises?

yukIP Draughts’ answer to this question is an emphatic no. But mere assertion is not enough. Why should we spend time in getting the wording as right as we can? Several thoughts come to mind:

  1. The example of the construction industry, where parties tend not to take legal advice at the stage of entering into their contracts, and instead spend more money on litigating their contracts. There is a view among (at least some) lawyers that more money spent in getting the contracts right in the first place would save money in litigation and overall.
  2. The fact that sometimes court cases are decided based on the wording of the contract – several examples come to mind  – where clear and accurate wording may reduce the likelihood of the court coming up with an inappropriate interpretation. In recent years, the UK Supreme Court has heard several cases in which it has updated its approach to interpretation – particularly where the wording is unclear. Those cases would probably not have reached the Supreme Court if the wording had been clear.
  3. That producing clear, accurately drafted contracts demonstrates professionalism, which itself can help to smooth contract negotiations.
  4. That clients don’t always know whether their lawyer has the necessary legal knowledge and experience to handle their matter, but they can more often spot poor use of language. The self-interest of lawyers should encourage them to draft well.
  5. That consumer pressure, particularly in the UK but probably in other advanced countries, has made it difficult for lawyers to hide behind obscure, fusty language. IP Draughts had a very interesting conversation with some Chinese law students during a recent training course, in which they queried IP Draughts’ focus on clear, simple language and said that clients in China would expect their lawyer to use complex legal language, and possibly even think less of their lawyer if they used simple language. This didn’t resonate with IP Draughts’ current experience of UK clients, but he could imagine a similar approach a few generations earlier in the UK.
  6. That even if clients sometimes argue extreme interpretations of wording if it suits their commercial purpose, by making the wording clear and accurate, those arguments become more difficult to make.

wandIn summary, clear contract drafting is not a magic wand that guarantees that disputes are avoided and that contracts are interpreted correctly. The benefits are more nuanced. But there should not be any doubt that taking care to draft clearly and accurately is a good use of time and money.




Filed under Contract drafting, Legal practice

Remedies for breach of warranty

Beware of Daphne, bearing grease...

Beware of Daphne, bearing grease…

At one level, the case of Idemitsu Kosan Co Ltd v Sumitomo Corporation [2016] EWHC 1909 (Comm) (27 July 2016), reported on BAILII last week, is of limited interest. It is only a hearing of an application for summary judgment, before a deputy judge.

Nevertheless, it is a decision of the Commercial Court, and is a useful reminder of several points:

  1. That parties will argue obscure legal points if enough money is at stake, or if their “normal” legal remedies are time-barred (in this case there was a time limit of 18 months from completion for any warranty claim to be brought).
  2. That High Court judges can and will come up with different answers to those obscure points, and if there is not a good Court of Appeal authority on them, the chances of an unpredictable outcome are increased.
  3. That the issue of whether a party can bring a claim in tort for misrepresentation as well as, or instead of, one for breach of contract, is alive and kicking and can take many forms. It does not depend solely on whether the parties used the phrase “represents and warrants” in their contract.

The parties in this case were two Japanese companies who entered into a share sale agreement. A subsequent dispute with a third party resulted in the buyer suffering loss. The buyer was unable to bring a claim for breach of warranty because the agreed time period for bringing such a claim had expired. It argued that it also had a right to claim for misrepresentation, which was not time-barred. In other words, the buyer argued the same set of facts that caused it a loss gave rise to parallel claims for (a) breach of contract and (b) misrepresentation under the law of tort.

This was not a case where the argument was based on lead-in wording in the relevant clauses that the seller “represents and warrants” a series of statements. The clause in this case started with the following words:

Each of the Sellers warrants to the Buyer in respect of itself and its Relevant Shares in the terms of the Warranties in paragraphs 1 and 2 of Schedule 4

The buyer nevertheless argued that the matters warranted were also representations that were actionable under tort laws, including the Misrepresentation Act 1967.

This was despite the presence of another clause in the agreement which read:

The Buyer acknowledges and agrees with the Sellers that:

(a) it has not relied on, or been induced to enter into, this Agreement by any representations, warranties or undertakings of any kind other than the Warranties (as modified by the Disclosure Letter); and

(b) the Sellers shall not be liable to the Buyer (whether in equity, contract, tort or under the Misrepresentation Act 1967 or otherwise) for any warranty or undertaking which is not set out in this Agreement and the Buyer shall not be entitled to terminate or rescind this Agreement as a result of a breach of this Agreement, including the Warranties (for which the Buyer’s only remedy shall be in damages for breach of contract).

The buyer argued that the Warranties (as set out in Schedule 4 to the agreement) should be treated as representations as well as contractual promises and therefore the above clause did not prevent it from bringing a claim for misrepresentation.

The judge was referred to conflicting authorities on this point, namely:

  1. The decision of Arnold J. in Invertec Ltd v (1) De Mol Holding BV, (2) Henricus Albertus de Mol [2009] EWHC 2471 (Ch) which supported the proposition that a claim for misrepresentation could be brought.
  2. The contrary decision of Mann J. in Sycamore Bidco Ltd v (1) Sean Breslin, (2) Andrew Dawson [2012] EWHC 3443 (Ch).
Arnold J and Mann J have a disagreement

Arnold J and Mann J disagree

In the words of the deputy judge in the present case, “Mann J. gave fully reasoned consideration to the question, and to the decision of Arnold J. in the earlier case. He refused to follow Arnold J., not on the basis that there was any room to distinguish between the contractual wording in the two cases but because he disagreed with Arnold J.’s view as a matter of principle.” The deputy judge agreed with Mann J’s view on this point.

It seems that it was not entirely clear to the deputy judge whether the buyer’s argument was based on the idea of a prior representation made prior to signing the share sale agreement, that induced the buyer to enter into the share sale agreement, or of a representation that was made as part of the share sale agreement. Either way, the claim failed.

One of the deputy judge’s many stated reasons for coming to this view was that there was no express statement that the warranties were also to be treated as representations:

In some cases that problem is solved by an express provision making certain contractual statements representations. In such a case the parties have agreed as to their nature and how they should be treated. However, that is not the present case.

IP Draughts is disappointed by this last comment, which is a little glib and was not considered in detail. It suggests that the judge might have accepted the buyer’s argument if a formula such as “represents and warrants” had been used. That is far from a foregone conclusion, in IP Draughts’ view, though he is aware than many practitioners in the M&A field have a similar view to the judge on this point.

IP Draughts hopes that this topic will get an airing at the UCL panel discussion to be held in London on 8 November, Dysfunction in Contract Drafting, at which Ken Adams, Mr Justice Flaux, Kate Gibbons of Clifford Chance, and Kristin McFetridge of British Telecom’s legal department will be speaking. So far, 169 people have booked their (free) tickets for this event. Don’t miss out on what will be an interesting and lively occasion!169


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