Category Archives: Legal practice

Brexit and IP transactions

eliteIP Draughts learnt this week that he was part of a metropolitan elite. Which is nice. #lookingforthepositive

Yesterday the UK electorate decided, unexpectedly, to leave the European Union. At this stage, no-one knows what will happen next, or what “leaving” actually means. The possibilities, however far-fetched some of them may be, include:

  • Change of mind. Nothing changes in the EU (except, perhaps, some face-saving remarks by EU leaders or trivial changes in law), following which the UK electorate has a change of heart and decides not to leave after all. Some point to the Irish experience with the Lisbon treaty as a precedent for this outcome.
  • Squeezing some more concessions. Negotiate real “improvements” in the way in which the EU does things, following which the UK electorate has a second vote in which they decide to remain in the EU, either in a referendum or by voting in a general election for a pro-remain political party. These improvements might be concessions for the UK alone, or general changes in the structure of the EU.
  • demographicsAssociate membership. Create a new, “associate member” category of membership of the EU, which the UK would then transfer to, and which would give associate members some exemptions from EU rules, eg on free movement of labour.
  • Leave and join EFTA. Leave the EU and join the European Free Trade Association, and therefore benefit from some but not all of the legal regime that applies in the EU, but without any special concessions for the UK. In other words, have the same relationship with the EU that Norway has as an EFTA member.
  • Leave and expand EU rights for non-EU members. Leave the EU and change the rules of the EU, so that countries that are outside the EU (ie the UK at that point) can benefit from certain aspects of the EU that are currently only available to members (eg participation in the Community Trade Mark regime). The new arrangements might be designed for, say EFTA members (if the UK decided to join that club) or might be made more broadly available to, say, European countries that are outside the EU.
  • Leave and negotiate one-off trade deals. Negotiate individual, arms-length trade treaties between the UK (as a non-EU-member) and the EU.

social-classesIt is fair to say that the Brexiteers have not focussed on IP during the pre-referendum debates. When Brexit is negotiated, IP legislation is likely to be some way down the list of priorities, after immigration, trade tariffs, and other political topics.

In the area of business regulation, much was made during the referendum campaign of so-called “Brussels red tape” but few examples were given. In one televised debate, IP Draughts heard Boris comment scornfully that the remain campaign didn’t want to change any existing EU laws, “not even the Clinical Trials Directive”, as though this was self-evidently a terrible piece of legislation. For some reason, this law seems to trigger a response in Boris, like a mood-altering drug.  The benefits to the UK economy of pan-European regulation of life-science product development seem to have passed him by.

elite2Perhaps Boris is not aware that the UK has a thriving life-science sector, the best in Europe, and that being part of the EU is a significant benefit for that sector. David Cameron seems to be aware of this, as he negotiated for the UK to have the chemistry and life-science part of the central court for the Unitary Patent.

It is impossible to know what the implications of Brexit will be for international IP transactions until the blueprint for Brexiting has been established. Nevertheless, there are some obvious risks that can be addressed when drafting IP-related agreements. They include:

  1. EU research funding. In research agreements that benefit from EU funding (eg under the Horizon 2020 programme) what will happen if the UK party ceases to receive EU funding on Brexit? Is it still obliged to do the work but not get paid for it? Or can it terminate its participation in the project? As a separate issue, what do the terms of funding say about the grant of IP rights to companies that are outside the EU? Is any preference given to EU parties?
  2. EU territory. Does the agreement grant rights to a territory defined as the European Union or the European Economic Area? What are the implications if the UK is no longer part of the EU or EEA?
  3. UK territory. Does the agreement refer to the United Kingdom? What implications are there for the agreement if Scotland decides to withdraw from the United Kingdom (but possibly try to remain in the EU)?
  4. Definition of IP. How is intellectual property defined in the agreement? Is the definition flexible enough to cater for changes to the IP system, or new types of IP, that may emerge following Brexit?
  5. Export of personal data outside EU. Sometimes, agreements have clauses that refer to the export of personal data outside the EU. Have the implications been considered of what this will mean in practical terms if the UK is no longer part of the EU?
  6. Compliance with regulations generally. Some agreements, eg clinical trial agreements, impose an obligation on a party to comply with applicable regulations. Are these obligations worded in a way that is resilient to the possibility of UK regulations being significantly different from those in the EU?
  7. Law and jurisdiction. Does the agreement have a clear law and jurisdiction clause? If not, bear in mind that if the UK is not part of the EU, the Rome and Brussels regulations will probably no longer apply to tell a UK contracting party which law and jurisdiction will govern the agreement.

This is unlikely to be a comprehensive list of contractual issues that could be affected by Brexit. If you can think of others, please suggest them in the comments below this posting.

 

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Diversity in IP law

hug a lawyerAsk the public whether they like and trust lawyers in general, and the answer may be distressingly negative. Ask them about a lawyer they have used, and the answer tends to be more favourable.

The same contrast is found in other areas. The current debate in the UK about ‘Brexit’ has a strong focus on immigration. Ask (some) people about immigration in general, and the answer may be very negative. Ask them about the Romanian tradesmen who did an excellent job tiling their bathroom recently, and the answer may be much more positive.

Since he became the chairman of a Law Society committee, IP Draughts has become more conscious of the Society’s approach to diversity. It is difficult to object to the general principle that the legal professions should encourage diversity in their membership and leadership. This theme resonates with the principles of fairness and meritocracy that our profession is likely to support.

And to the extent we are concerned with trends at the macro-level, such as the recruitment practices of major firms that employ thousands of people, we can encourage more diversity and learn from the statistics whether this encouragement is bearing fruit. In IP Draughts’ view, the efforts of the Law Society and of CIPA in this area should be commended.

At the personal level, though, the merits of a strong focus on diversity are not always so obvious. English firms of solicitors are required to report their diversity data to their regulator, and publish the results. For instance, Anderson Law LLP’s most recent data can be found on our website here. It so happens that we have people from a variety of backgrounds. But some might say that in a firm as small as ours, the data is not useful. It is affected too much by who were the candidates for employment in a particular year, and who met our requirements. In even smaller firms (and much of the English solicitors’ profession is made up of small firms) this is true with knobs on.

whiskasSimilar thoughts were prompted by our recent recruitment exercise for new members of the IP Law Committee of the Law Society. Following open advertising of the vacancies, we received 6 applications. IP Draughts has no official data on the candidates’ backgrounds, but the vast majority were male, and the vast majority would probably classify themselves as White British. How far should a diversity agenda influence the Law Society’s choice? How far can it, when the candidates mostly come from particular categories? Should the questions asked of interviewees be designed to bring out their attitudes to diversity, as a substitute for actual diversity, or is this a ridiculous way of selecting people for a committee of technical experts?

Sometimes, it seems that the diversity agenda has so much momentum in organisations that to question its relevance to a situation is to put oneself beyond the pale (and no, that is not a reference to skin colour).

Gender and race are, in some respects, easier to determine than other, well-known diversity categories. Educational background is a particularly knotty one. Some would say that the virtual extinction of selective grammar schools in the UK a generation or two ago, done in the name of equality, has resulted in the legal profession becoming less diverse in recent years.

One aspect of diversity that we are required to report on is whether our lawyers were the first generation in their families to go to university. But what of the lawyers who tick this box but (as in the case of IP Draughts) their parents saw fit to save hard-earned money to send them to a fee-paying school to improve their chances in life? Are they good or bad from a diversity perspective?

numbersIf we focus resources on the extreme cases – the bright kid with hopeless parents who needs a huge amount of help – we may end up achieving less in the name of diversity than if we make incremental improvements that benefit those who are a few rungs higher up the ladder of opportunity and whose families support them. Or is that taking too quantitative an approach, despite the diversity industry’s apparent interest in statistics?

Yes, the legal professions, and the IP professions, need to keep improving on diversity. But we also need to be brave enough to object when a heavy, bureacratic approach is taken that focuses on process and being seen to do the right thing, rather than gently encouraging best practice.

 

 

 

 

 

 

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Why professional values matter

poppyEvery few years, political pressure is applied to the professions, to make them more like ordinary people, or to provide services in a similar way to high-street retailers, or to accept external regulation and complaints-handling, or to admit non-graduates to their ranks, or to allow external ownership by people who are not part of the profession, or to remove any remaining monopoly rights they may have in favour of more competition from unlicensed competitors.

Some of these pressures contradict one another. Increasing the burden of regulation on a profession, while at the same time allowing unregulated, non-professionals to provide the same services, is intellectually incoherent. We are pulled in one direction by a belief in open markets, and in another direction by a belief in consumer protection.

There is also a contradiction between professions. The English education minister has recently referred to the importance of teachers regulating themselves; at the same time, the government is proposing independent regulation for solicitors. The nursing profession is moving to an all-graduate entry; at the same time, pressure is being applied to solicitors to admit non-graduates.

Some of the pressures may be contradictory, but the overall theme is clear. Over time, professionals are losing control over many aspects of their professional life, including entry to the profession, training, qualification, rules of conduct, the structure of firms, the terms of their relationships with clients, complaints handling, and expulsion of defaulting members.

In the case of solicitors, the process of emasculation has been a gradual one. First, the profession delegates control over these matters to a ring-fenced subsidiary, with a minority of external lay Board members. The subsidiary employs professional regulators who look at the profession from the outside, and apply their own professional values to regulation, rather than those of the profession that they are regulating. Gradually, they change the rules governing the profession, to make them more like laws than statements of ethical principle.

let goA few years later, the number of lay Board members is increased so that they form a majority, and a lay Chair is appointed. The regulatory body becomes more remote from its parent. Some of the regulations for solicitors seem designed to reduce the SRA’s workload rather than being proper matters for regulation, eg requiring solicitors to run a viable business. Finally, the Chair leads a move to make the regulatory body completely independent from its former parent.

This is what is happening with the solicitors’ profession in England and Wales. In IP Draughts’ view it is the wrong direction for solicitors to take. If we are forced by the government to accept external regulation, so be it. But the model of external regulation should not be based on the self-regulatory model. Self-regulation covers many aspects, including the values that the profession seeks to embody.

familyWhen the Solicitors Regulation Authority was formed, all aspects of the solicitors’ profession, other than representation, were hived off into the SRA, including training, ethical conduct and insurance obligations. This made sense when the SRA was still part of the Law Society family, but in hindsight it was a dangerous route to take. If the SRA is to become completely independent, as the current Chair has recently suggested, then its role should be strictly limited to those aspects that need to be independent, eg misconduct and complaints handling.

This will allow a level, competitive playing field between solicitors and other legal service providers who are bound by the same regulations. At the same time, solicitor should be allowed to impose higher standards on their members, and to offer an upmarket service to clients based on those higher, common standards.

To take a few examples, solicitors have stricter rules than some other service providers in areas such as handling conflicts of interest, acting in the best interests of the client, compulsory insurance (and the terms of that insurance, which seem to annoy some underwriters), and so on.  These and other areas should be under the control of the profession, as part of its USP, rather than a matter for general regulation.

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In praise of simple contracts

ramblersThis posting may seem to ramble. In IP Draughts’ head there is a theme, but (if you will indulge a pretentious analogy) like Einstein’s unified field theory, it may be difficult to find.

First, consider the desire of large organisations to reduce contracts with suppliers and customers to a standard process that requires the minimum of expensive human intervention. As part of this process, standard contracts are developed.

Each standard contract needs a one-size-fits-all set of contract terms. The terms should be suitable for a wide range of factual situations and be readily agreed with, or imposed upon, a supplier.

To focus the discussion, let’s take one type of contract that is often standardised: an agreement with a supplier of services. IP Draughts has seen this type of agreement used for diverse types of services including:

  • research services
  • specialist courier services
  • the development and supply of software

Standard services agreements have even been proposed to IP Draughts for the provision of legal services, as part of an aggressive, procurement-focussed strategy.

middle of the roadTo make the terms suitable for a variety of factual situations, and to minimise the need for negotiation, the terms should be clear, straightforward, middle-of-the-road, and reasonably protective, while recognising the other party’s legitimate interests. Terms that are based on these features are easier for a supplier to accept and easier for a purchaser to impose, using low-cost administrative staff. Deviate from any of these features and there will be an increase in transaction costs.

Competing with the desire for a simple, inexpensive process is another objective – to minimise legal risk. Some organisations take an aggressive approach to this subject, which is manifested in very ‘protective’ contract terms. These typically include one-sided warranties, liability clauses and indemnities. Often, those clauses are difficult to understand. Sometimes they are not understood by the representatives of the large organisation that is imposing them on a supplier. This becomes apparent during negotiations. Vast amounts of time are spent across the world negotiating these complex provisions,  except in those cases where the terms are just imposed.

Where inappropriate terms are agreed, they are often just ignored. For example, telling a contractor that it must impose identical terms on a subcontractor looks good on paper, but how often does it happen? If your services are couriering patient samples used in clinical trials, and your subcontractor is a major airline, how often will you even try to impose your customer’s standard terms on the airline?

Does the presence of these terms really protect the organisation against legal risk, or are they just a bad habit that is getting worse over time, providing a theoretical rather than practical mitigation of risk?

rpnWhen the standard contract was drafted, it was part of a standard process that was designed in a large organisation. Lawyers were probably involved, but there may have been strong input from process-designers (often accountants), procurement professionals and commercial executives. Some of those professionals may be more comfortable working with numbers than with words. Their skills may lie in managing uncertainty, or people, or commercial situations, rather than closely analysing complex language. It may not be a priority to think deeply about the words used in the standard contract and whether they are optimal for the range of situations in which the contract may be used.

In some cases, the standard terms may have been commissioned from a prestigious outside law firm who can be blamed for any imperfections. This attitude is not likely to result in a simple, straightforward set of terms.

wigWhen disputes get to court, the culture changes. At least in the English legal system, court proceedings are led by people who are good at language, and who may not have much experience of business. In the oral tradition of English barristers, what matters is words and arguments, applied to closely-analysed facts. Barristers and judges are unlikely to have much instinctive sympathy with the modus operandi of large organisations. Throughout their careers they have been self-employed individuals.

These factors may result in the court analysing contract terms in a way that may not have happened at any stage before the contract became the subject of litigation.

All of the above factors lead IP Draughts to the conclusion that standard contract terms should tend towards the simple rather than the complex, and to the reasonable rather than the very protective. This approach assists all constituencies to understand and apply the terms in a meaningful and consistent way, including procurement executives, process designers, contract managers, in-house lawyers and, ultimately, court room advocates and judges.

 

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