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Save the date: UCL debate on dysfunction in drafting

David Dimbleby will not be chairing this debate

David Dimbleby will not be chairing this debate

If you care about contract drafting, you will be interested in a unique debate that University College London will be holding this Autumn, in London. It is free of charge, and you will have an opportunity to submit questions to a panel of experts, as well as hear their different views on this controversial subject.

Dysfunction in Contract Drafting: Are the Courts, Law Firms, and Company Law Departments Stuck in a Rut? will be held on Tuesday 8 November 2016, 18:00 – 19:30 at the UCL Events Pavillion, Main Quad, Gower Street, London WC1.

The four panel members bring impressive credentials to the discussion, including senior-level experience of contracts in the courts, in private practice and in-house. They comprise:

  1. Ken Adams

    Ken Adams

    Ken Adams, US-based contract drafting guru, and author of A Manual of Style of Contract Drafting (American Bar Association, 3rd edition).

  2. Sir Julian Flaux

    Sir Julian Flaux

    The Honourable Mr Justice Flaux, an English High Court judge who until recently was Judge in Charge of the Commercial Court, in London.

  3. Kate Gibbons and friend

    Kate Gibbons and Olly

    Kate Gibbons, a senior banking lawyer at Clifford Chance, and the firm’s Global Knowledge Partner.

  4. Kristin McFetridge

    Kristin McFetridge

    Kristin McFetridge, Chief Counsel at British Telecommunications plc, and currently in charge of a programme to redraft BT’s standard contracts.

IP Draughts will be the compere moderator of the panel discussion. Learning, laughter and linguistics guaranteed! Book your tickets at the link above.

 

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Another patent purchase programme: IP3

stop me and buy oneThanks to Mike Mireles of the IP Finance blog, IP Draughts has learnt of a new patent purchase programme, known as IP3, that builds on the Google exercise of last year. Mike has expressed interest in IP Draughts’ views on the standard assignment agreement for the new programme. Could it be as bad as the Google agreement that IP Draughts previously commented on, in an article on this blog, Do No Evil …Drafting?

Preparing for this article, IP Draughts revisited the terms of the Google agreement of last year. He discovered that some of the drafting mistakes that he had identified had been corrected, but many others remained.

stop meComparing the new agreement for IP3 with the older Google agreement, it is clear that some of the text of the older agreement has been copied and pasted into the new one. Other parts of the new agreement are very different. IP Draughts has the impression that the drafter has taken their own, favoured template, and bolted in provisions from the earlier agreement, perhaps in response to specific instructions from their client.

He assumes it has been drafted by the Californian law firm, Fenwick & West LLP, as the address of the assignee is stated in the agreement to be this firm’s address in San Francisco, “Attention: Jake Handy”. Handy is a partner in the firm and chairs their technology transactions practice.

If IP Draughts’ name were put in the first paragraph of a document of this kind, he would be very keen to ensure that the drafting was up to scratch.

PATENTS 3 GUINEAS

PATENTS 3 GUINEAS

In IP Draughts’ view, the IP3 agreement is an improvement on the Google agreement, as he would expect from the work product of a reputable IP law firm. The template on which it is based is more mainstream, less home-made in style. There are fewer obvious drafting errors than in the Google agreement. But it suffers from problems that are seen in many law firm templates, including turgid, old-fashioned language, terms that are irrelevant to the present transaction (which should have been deleted) and wording that has been bolted on to the template in a very clumsy way. It also has its fair share of typos.

Here are a few of the problems with the text:

  1. Multiple verb pile-up. Rather than just “assign” the patents, the drafter considers it necessary, in the operative assignment clause (Section 1.1), to “assign, convey, sell, grant and transfer”. This is one up on the Google agreement, which only required the assignor to “sell, assign, transfer and convey”. But in the recital to the IP3 agreement, the assignor has only agreed to “transfer and assign” the patents. The IP3 assignor is also required to execute a formal confirmatory assignment, the terms of which are set out in Exhibit B to the agreement. Here, the assignor is to “sell, assign, transfer and convey”. Perhaps we should forgive the drafter for using redundant language that appears in their office template, though the chair of the technology transactions practice might feel it is time to modernise the wording of his firm’s IP agreements. But should we also forgive the lack of consistency in the wording throughout the document, which is the responsibility of the individual drafter?
  2. Sloppy and inconsistent drafting of warranties. Article 3 sets out some warranties. They start off in conventional style, but the drafting deteriorates towards the end. For instance, the first sentence of Section 3.3 starts “Assignor represents and warrants to Assignee”, which is clear as to who is making the promise, and to whom the promise is given. The second sentence starts “Assignor has provided Assignee with” – is this a warranty by the Assignor, or an acknowledgement by the Assignee? The first sentence of 3.4 starts “No funding …was utilized” – it is not clear whether either party is making any promise about this statement, though it is more likely than not to be meant as a warranty by the assignor. Depending on the intended meaning, all of these statements should start in the same way. The drafter has not cleaned up inconsistencies in the text. The Google agreement was better in this point, as all of the warranties in Article 6 were qualified by lead-in wording at the start of the Article, which read “Seller hereby represents and warrants to Google…”
  3. Typographical errors. The drafter seems not to have focussed very hard on the wording of section 3.4, as it also appears to have two typos: the word “form” in line 1 should be “from”, and the second instance of the word “and” in line 3 should be “any”. In section 1.3 the term “Assignee” should be used rather than “IP3”.
  4. Irrelevant text. According to section 1.1(d), the assignment includes an assignment of “all goodwill associated therewith”. “Therewith”, in this context, must mean the patents and inventions described earlier in the section. Perhaps there is some quirk of US patent law that has escaped IP Draughts’ attention, but he would have expected an assignment of associated goodwill to appear in a trade mark assignment, and not in a patent assignment. Can any US reader enlighten IP Draughts as to what, in legal terms, it means to assign goodwill in a patent? Or is this section a drafting mistake?
  5. Unclear drafting. Section 3.2 refers to the patents being free of encumbrances including “identifications to standard committees”. IP Draughts finds this wording very unclear but assumes it is the same point that appears in the Google agreement as a warranty that “there is no obligation imposed by a standards-setting organization on Seller or Google to license any of the Patents on particular terms or conditions.” If so, IP Draughts prefers the clarity of the Google wording. More significant, perhaps, is the lack of clarity in section 3.3, which states that the assignor has provide the assignee with “all information …concerning …validity, patentability and/or enforceability of the Patents”. Is this a warranty of validity by the back door? Should it be read as all information in the assignor’s possession or all information in the universe?

There are also drafting points that raise commercial issues, eg Article 2 says that assignee “will pay” the price, but doesn’t say when it will do so, though the sentence ends with an acknowledgement of receipt.

Many of terms in the IP3 agreement are designed to protect the interests of the assignee, and in principle one can see why these terms have been included. What is less understandable is why some of them are different from the warranties and obligations in the Google agreement, when the context of both agreements is similar.

Some of these differences seem random, as if they are simply a reflection of the template that the drafter picked up on each occasion. For example, the Google agreement has much more detail on what the seller must do with the prosecution files, including keeping them confidential (section 5.1), considers it important to address the position of Affiliates, and has extensive clauses limiting liability. The IP3 agreement doesn’t focus on these issues but instead has more of a focus on encumbrances, withholding tax and payment of renewal fees after the Effective Date. It is tempting to speculate that some of these terms reflect issues that arose on an earlier transaction, rather than topics that are important for the present transaction.

Overall, IP Draughts prefers the IP3 agreement, but neither document is well drafted. In some areas, as mentioned above, the Google agreement is better. For example, both agreements refer to the possibility that the assignor may have licensed the patents, but only the Google agreement specifically asks the assignor to deliver the licence agreements (see Exhibit A); section 3.5.2 of the IP3 agreement should have included this item in its list.

processIP Draughts is left with the impression that both of these agreements have been drafted by patent attorneys who are focussed on the technical process of transfer of title to patents, and who lack some of the skills required to draft contracts clearly and accurately. Perhaps their clients do not demand such clarity, and instead assume that patents (including patent transactions) are a difficult technical subject that they can’t and don’t need to understand. If so, that is a shame. We are told that a revolution is coming in the way in which law is practised. Lawyers who are inward-looking and focus only on their core skills may find they are less marketable to employers and clients in future.

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10 year campaign by Law Society to change IP law: we’re nearly there

queen speechThis week, Her Majesty the Queen nearly used the words “intellectual property” in public. From her throne in the House of Lords, she outlined the Government’s legislative programme for the current Parliamentary term. The speech focussed on matters of general interest. Perhaps it was unrealistic to expect the Government (which writes her speeches on these occasions) to ask Her Majesty to refer specifically to the Intellectual Property (Unjustified Threats) Bill. Instead, it was swept up in the phrase “Other measures will be laid before you.”

Nevertheless, the Government’s supporting papers, issued at the same time as the speech, make clear that this Bill is one of 21 that they will introduce in the coming months.

The announcement gets us very close to a successful conclusion of a campaign that the Law Society’s Intellectual Property Law Committee initiated in about 2006. The exact date on which we started work is lost in the mists of time, but I have managed to find a committee paper on this subject dated February 2006. As that paper noted:

Today we have an illogical and inconsistent assortment of threats actions relating to various IP rights; they run counter to the over-arching encouragement [e.g. in the Civil Procedure Rules] to communicate and settle rather than precipitately issue legal proceeding and they leave clients and solicitors in jeopardy of  being sued for making actionable threats, simply by reason of the sending of what would otherwise be an uncontroversial letter before action.

Robin Fry

Robin Fry

I am now the Chairman of the IPLC, but credit for this campaign lies mainly with others. Among the many committee members who have worked on the project, two names stand out: Robin Fry, a former member of the committee, who led the discussions and drafted our position papers in the early years, and Isabel Davies, who chaired the committee from 2006 until 2015.

Isabel Davies

Isabel Davies

The IP threats provisions are complex and technical, but in essence they provide a legal remedy to someone who is threatened with IP litigation. The recipient  of the threat can sue the threatener for making “unjustified threats”. How you view these provisions may depend on what question is asked. If you are asked, should we have laws that stop aggressive IP owners from using spurious IP claims to bully smaller businesses and consumers into buying their products (or avoiding competing products), the answer may be yes.

If, on the other hand, you are asked whether struggling creative artists, whose IP is being misused by major companies without acknowledgement or compensation, should be inhibited from asserting their IP rights by satellite litigation that focuses on their precise choice of words in correspondence, then the answer may be no.

At this point, and unusually for this blog, I feel the need to issue a dislaimer. To discuss this subject, we need to get technical, but this journalistic overview should not be used as legal advice. Don’t use any of the information in this article when asserting or defending IP claims!

ceaseEnglish IP owners (or their lawyers) who know about these laws have typically drafted “cease and desist” letters (to use an American term) in the most bland of terms, to avoid being accused of making threats. Unless the recipient of the letter is also in-the-know, and can interpret the code, they are left none the wiser by the letter. Some lawyers have taken the view that even a bland letter is too risky, and that the only safe course of action is to issue proceedings before communicating with the infringer; once proceedings are started, the threats provisions no longer apply. These strategies run completely against the spirit of the English civil procedure rules, where clear and open communication is required.

Yet another strategy is to focus, in the letter, on types of IP that are not covered by the threats provisions. For example, a product might infringe both copyright and design rights. A “clever” lawyer might try to draft a letter threatening (only) to sue for copyright infringement which is not covered by the threats provisions, and avoid mentioning design rights, which are covered by threats provisions.

In other words, the threats provisions are the cause of some absurd behaviour by IP owners and their specialist lawyers.

By contrast, the IP owner who cannot afford specialist UK IP lawyers, and who communicates in clear terms with an alleged infringer, is at great risk of being sued for making threats. Note that the previous sentence refers to “specialist UK IP lawyers”: one of the leading cases on this subject in recent years concerned correspondence from a Spanish law firm that might not have been expected to know the quirks of English law in this area. English law is out of line with most other jurisdictions on this subject.

As specialist IP practitioners, our committee saw that this area of English law wasn’t working properly, and needed to be changed. However, we faced several obstacles. First, the subject was very technical, and unlikely to get much political interest. Secondly, several IP judges were against change, at least in the early days. The IP judges have influence with legislators.

From a judge’s perspective, IP threats provisions might be thought useful as a curb on egregious behaviour by aggressive IP owners. But the judge only sees the cases that come before him or her, and not the large number of claims that are settled before they reach court, or which are not made at all, due to the dampening effect of the threats legislation. As practitioners “at the coalface” we could see what the judges apparently could not see.

law commissionSo, we didn’t get much traction for our ideas in the early years. But we persisted, and kept arguing the case for change, for example in our responses to Government-sponsored reviews of the IP system, including the Gowers and Hargreaves reviews. Eventually the Law Commission decided to take up this issue, with our active encouragement. They issued a consultation document, and later a report recommending changes, which our committee largely supported. The Government mostly accepted the Law Commission’s recommendations. The threats provisions are not to be abolished, but they are to be greatly improved, and made more consistent between IP types.

The Law Commission and the Parliamentary Draftsmen’s Office prepared a draft Bill to effect these changes, on which our committee provided detailed comments. Last year, one of our regular committee meetings focussed on this subject; our invited guests included three representatives of the Law Commission, two from the Parliamentary Draftsmen’s Office, and two from the Intellectual Property Office. My main contribution to that discussion, as a transactional IP lawyer rather than a litigator, was to challenge the use of the term “best endeavours” in the draft Bill; the wording was changed in a later draft.

The Bill is now set to be introduced in the House of Lords by a special procedure that is used for uncontroversial measures.

Sometimes, the law is changed through vigorous political activity. Our campaign illustrates a different approach: it is possible to achieve important, but very technical, changes to the law through patient committee work.

 

 

 

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The IPKat retires: IP Draughts reflects

jeremy phillipsProfessor Jeremy Phillips has retired. He is best known today for the IPKat blog on intellectual property (IP) issues, which he established in 2003. IPKat has approximately 12,000 subscribers and has been viewed over 16 million times. 16 million! – an astonishing level of popularity for a blog on a specialist topic. From conversations over several years, IP Draughts knows that many (most? all?) specialist IP lawyers in the UK are regular readers of IPKat.

IP Draughts has known Jeremy for nearly 35 years. Their first encounter was in about 1980 or 1981, when IP Draughts was an undergraduate law student, and Jeremy a law lecturer, at the University of Durham. IP Draughts signed up to Jeremy’s course on commercial law. Early in the course, perhaps on the first day, Jeremy explained to the class that he had wanted to run a course on IP law, but this had been considered too radical by the faculty. (At the time, very few degree courses on IP law existed in the UK.) Instead, he was allowed to run a course on commercial law. After an amuse bouche on the Sale of Goods Act and similar core texts on commercial law, the lectures quickly moved on to the main course: fascinating discussions about cases involving trade marks and other types of IP. IP is, after all, a branch of commercial law.

IP Draughts has two memories of Jeremy in those days. First, his great enthusiasm for IP law, combined with a gentle, encouraging manner, which helped to make the subject interesting and enjoyable to his students. These qualities have remained constant throughout the last 35 years. Secondly (and I hope he will forgive a personal note), IP Draughts has a strong memory of how young he looked. Jeremy has continued to look younger than his real age throughout his adult life, but the contrast is not as great now as it then was.

NewKatSome people are close friends, while others are friendly, completely-trusted acquaintances. IP Draughts would place his relationship with Jeremy in the latter category. They have had professional contact over several decades. No doubt hundreds of Jeremy’s former students could claim a similar connection. At various times throughout IP Draughts’ career, Jeremy has been there as a fixed point in a changing world. Some highlights for IP Draughts include when Jeremy:

  • first commissioned an article from IP Draughts (for Patent World in 1990). This was the first serious article that IP Draughts wrote. It was on the subject of applying real property laws to IP transactions. This experience helped to jump-start an interest that resulted in IP Draughts writing several legal textbooks and articles in the last 25 years.
  • in recent years, commissioned several articles and book reviews from IP Draughts for the Journal of Intellectual Property Law and Practice.
  • two years ago, invited IP Draughts to speak at an evening talk on the difference between a licence and covenant not to sue. An associated blog article received a large number of comments, and led to an invitation to write an amicus curiae brief in a US Supreme Court case.

Capping all of these intermittent memories has been Jeremy’s support for IP Draughts’ blog, which he has done by frequently linking to it on IPKat. In an interview with a magazine a few years ago, Jeremy was asked to name his favourite blog. Excluding those he was actively involved with, he identified the IP Draughts blog. His reasons? How could IP Draughts forget this pithy, forensic, and balanced summary:

It is pedantic, smug, practical and generally right.

Jeremy has touched many people’s lives and he continues to do so. He has made a major contribution to the world of IP law. IP Draughts hopes that Jeremy enjoys his retirement, and that he will continue to provide wise counsel to the IP world as and when time permits.

 

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