Category Archives: Legal practice

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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Licence grant wording: take care over the details

Ken demonstrates the ancient art of invisible cat's cradle

Ken demonstrates the ancient art of cat’s cradle, conceptually, and without the wool

IP Draughts’ favourite commentator on contract drafting issues, Ken Adams, has written an article, Granting Language in Patent License Agreements: An Analysis of Usages. The article has recently been published by Landslide, the magazine of the American Bar Association’s Section of Intellectual Property Law.

It is always interesting to read Ken’s views, particularly when his accompanying blog article issues a challenge to IP lawyers, expressed in Donnesque terms:

IP guys, you are not an island: it’s best to base your contract usages on general guidelines for clear and modern contract prose.

IP Draughts agrees with the sentiment, and with much of what Ken says in the article. That is not entirely surprising: he saw a draft of the article and commented on it. There are, though, a few more IP factors to take into account before reaching any conclusions on the drafting points that Ken identifies – factors that might only be known by an IP specialist.

Cutting to the chase, the article provides “before and after” versions of a typical licence grant clause, the latter being Ken’s approved version. Here is the “before” version:

Subject to the terms and conditions of this agreement, Acme hereby grants to the Licensee, and the Licensee hereby accepts, an exclusive royalty-bearing license under the Patent Rights, with the right to grant sublicenses, in the Field of Use, in the Territory, to make, have made, import, use, have used, offer for sale, sell, and have sold Licensed Products.

And here is the “after” version:

Acme hereby grants the Licensee an exclusive, royalty-bearing (in accordance with section 4.5) license (with the right to sublicense) under the Patent Rights in the Field of Use to make, have made, use, offer for sale, sell, and import Licensed Products in the Territory.

As John Donne nearly said: Every IP lawyer is a piece of the continent, A part of the main. If a clod be washed away by the sea, Europe is the less.

As John Donne nearly said: Every IP lawyer is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.

IP Draughts mostly agrees with the latter version, though he would probably make any right to sublicense subject to conditions, which would be set out in a separate clause or section. A cross-reference to that other clause would be appropriate. He would probably not bother to state here that the licence is royalty-bearing, as this means no more than that a contractual payment is due, which can be set out in a separate clause without a cross-reference in the grant clause.

Ken identifies a number of usages in conventional licence grant clauses that are either redundant or sub-optimal. IP Draughts’ brief summary of Ken’s comments, and his response to those comments, follow:

  1. Use the verb grants not licenses. Agreed.
  2. Refer to a licence not a right. Agreed.
  3. Use the expression hereby grants. Agreed.
  4. Don’t say ‘grants and agrees to grant’; the latter is redundant even in the case of future IP. Agreed in the case of licences. There may be some value in the case of assignment, in view of the differing national rules (and different rules for different types of IP within a jurisdiction) on the legal effect of an assignment of future IP. For a discussion of some US issues, see here.
  5. No need to ‘accept’ the licence. Agreed under English law. The advice from the Dutch contributor to our loose-leaf work on biotech transactions was that it was necessary to state that an assignee of IP, or a distributor of products, accepted the IP or appointment, and similar principles are likely to apply to licences. Bearing in mind that many IP licences are international, it may be safer to include some words of acceptance.
  6. Grant a licence, not a ‘covenant not to sue’ or an ‘immunity from suit’. Agreed. For a discussion of covenants not to sue and their usage, see here.
  7. Explain exclusive, sole, etc. Ken makes some subtle points about US drafting practice (eg phrases such as “exclusive, even as to the licensor”) but in the end, his “after” version simply says “exclusive”. IP Draughts’ view is that sophisticated parties are likely to be clear on the meaning of exclusive, but sole and semi-exclusive should be defined. And that if the EU territory is being divided, it would be prudent to be clear on whether sale outside the territory is permitted, and to ensure that whatever is agreed is aligned with EU competition law.
  8. Perpetual, irrevocable. As Ken notes, these terms are not synonyms. A licence could be perpetual, subject to right of early termination. Irrevocable is probably okay as a term in a short licence (if that is what is intended) but ideally the licence would make clear that no form of early termination by the licensor (whether or not properly characterised as revocation) is allowed.
  9. Assignable. IP Draughts shares Ken’s reservations about using the word “assignable” or similar in the long list of adjectives that precede the word “licence”. Instead, address this issue more precisely in separate clauses dealing with assignment and (less commonly) change of control. You may also want to address the question of whether the licensor is permitted to assign the IP that is being licensed, and the consequences for the licence of doing so. Typically, the default position under national patent laws is that a licence registered with the patent office is binding on a future owner, but what is less clear is whether the contract under which the licence was originally granted has any continuing effect. These matters should be addressed explicitly in the licence agreement.
  10. Sublicensing. IP Draughts agrees that the licence should address whether sublicensing is permitted. This is typically a matter for national patent law and the “default” position (ie if not addressed in the contract) varies between jurisdictions. However, if sublicensing is to be permitted, it is usually subject to conditions, eg as to duration, consistency of terms, etc, and those terms should be stated. IP Draughts’ preference is state these things in a separate clause an omit the word “sublicensable” in the grant clause.
  11. Worldwide. IP Draughts understands that, logically, it may be wrong to say a licence is worldwide if the IP is not registered in every country of the world, and of course one should be careful about giving warranties in unpatented territories. Nevertheless, licences are often expressed to be worldwide and usually this will not cause major problems of interpretation.
  12. Royalty-bearing or royalty-free; fully paid-up. IP Draughts can see a point in stating that no payments are to be due (if that is the case) and that a phrase such as “fully paid-up and royalty-free”, while rather jargon-ridden, may the simplest legal shorthand to express the point. He can see no point in stating that a licence is royalty-bearing in the long list of adjectives before the word “licence”. Just have a separate clause dealing with royalties.
  13. Limited licence. IP Draughts agrees that it is unnecessary to say that a licence is limited. The only concern that he identifies with this simple advice is that, particularly for US parties, the Universal Copyright Convention (to which most countries of the world are not parties, preferring the Berne Convention) has, or used to have, a concept of limited licences, which explains why copyright statements referred to limited licences as well as, or instead of, using the phrase “all rights reserved”. Although he is not a US lawyer, he understands that the provisions of this Convention may have been modified in recent years, making these references redundant. No doubt readers who are US lawyers can enlighten us!
  14. Licence to do what? IP Draughts agrees that the licence should state which otherwise-infringing acts the licensee is permitted to do, eg make, use and sell products. He was interested to see Ken’s explanation of why, in light of US law, licence agreements sometimes include a reference to “export”. IP Draughts has found this word problematic in past transactions and usually tries to avoid it.
  15. Subject to the terms of this Agreement. IP Draughts agrees that this expression is probably unnecessary in the grant clause, particularly if a separate termination clause makes clear that on any termination of the agreement, the licence automatically terminates. However, some lawyers clearly have a concern that the licence, once granted, may exist independently of the agreement under which it was granted, as a form of property right. For this reason, IP Draughts has tended to include this phrase, though he is now having second thoughts about its usefulness.

 

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Filed under Intellectual Property, Legal practice, Licensing

Writing legal letters with empathy

Lord Bramall, holding his Field Marshal's baton

Lord Bramall, holding his Field Marshal’s baton

Let us hope this never happens. You are accused of a serious sexual offence involving children, dating back several decades. The police investigate and 20 policemen search your house for 10 hours, lunching in the village pub where it is obvious what they are doing. You are a public figure, and someone tips off the tabloid press about the allegations against you. The police deny it is them, but there are plenty of past examples of policemen earning some extra money by selling stories to newspapers.

After a year or two of painful delay, the police write to you to inform you that their investigation is completed and no further action is being taken. In effect, you have been cleared, but the letter is written in heavy, official prose that seems designed more to exonerate the police from blame than to give you reassurance that your nightmare is over. The police refuse to apologise for the investigation, for the tone of the letter, or for failing to say in unequivocal terms that the shadow of suspicion is no longer falling on you. Their argument is that they cannot apologise for doing their duty, or provide reassurance that may later prove to be inappropriate.

In IP Draughts’ view, there is a right way and a wrong way to write a letter of this kind. It is possible to write a letter that is legally watertight and yet provides comfort to the recipient. His attempt at such a letter appears below.

First, though, some background on the current case. The Metropolitan Police, the main police force in London, has recently closed its investigation of allegations of sexual crimes that were made against Field Marshal Lord Bramall. Here is how the mid-market tabloid, the Daily Mail, covered the story.

Field Marshal is the UK name for a 5-star general. In most generations, the senior general in the British army gets no higher than the 4-star rank of General. Usually a Field Marshal’s baton is only awarded during war time, for exceptional service. Winston Churchill made a few of his generals Field Marshals towards the end of the Second World War, including Monty. General Bramall was in charge of the army at the time of the Falklands Conflict in 1982 and was promoted to Field Marshal a few months after the sucessful conclusion of that conflict.

Some more background. Lord Bramall is now 92 years old. His wife was dying at the time of the police raid, and in fact she died a few months later. Although mentally confused, she remembered that the police had visited, and later kept asking Lord Bramall whether she had done something wrong.

According to press reports, the allegation was made by one man who has made allegations against various public figures, and the police found no other evidence to support the allegation.

Let’s leave aside the question of whether the police should have intruded on the Bramall family home on the basis of a single allegation unsupported by further evidence other than (apparently) press reports that repeated the single allegation. There is a context to this question, including the Jimmy Savile case, that is beyond the scope of this article.

Instead, let’s just focus on the letter. Some of the text of the letter can be found at the Daily Mail link above. IP Draughts has seen a version of the complete letter in the last few days but can’t seem to find it from internet searching today.

Another argument made by the police is that this letter was addressed to Lord Bramall’s solicitors, and therefore the tone was different to a letter written directly to an individual. IP Draughts is not convinced by this argument, but even if it is correct, the Metropolitan Police should be sending a ‘sign off’ letter to the individual who has been investigated. Just as they are learning to show empathy to the victims of crime, they should learn to show empathy to the victims of allegations of crime.

The issue is brought into sharp relief because the victim of the allegation in this case is an exceptionally distinguished public servant, and because of his age. But the same courtesy should be shown to any victim of such a situation. Here is IP Draughts’ attempt at such a letter:

Dear Lord Bramall

I am writing to confirm that the Metropolitan Police has concluded its investigation of allegations that have been made against you, and that it is taking no further action.

The Metropolitan Police has a duty to investigate allegations of crime. We do this without fear or favour, but we seek at all times to be courteous to those with whom we deal. We recognise that any police investigation can be distressing both for the victims of crime and for those who are investigated, regardless of the outcome. Thank you for your cooperation as we performed our legal duties.

You will appreciate that we cannot make any commitment about future action, for example if new allegations are made or new information comes to light. However, based on the information that we currently have, this matter is at an end.

If you would like to discuss any aspect of this matter, please contact [ ].

Yours sincerely
Steve Rodhouse, Deputy Assistant Commissioner, Metropolitan Police

 

 

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