Warranties in a license agreement

popularPay attention, class! IP Draughts has been looking at the most popular search terms that have led readers to this blog. Over the last year, 121 people have found the blog by searching for “warranties in a license agreement”.

Of course, this blog has discussed IP warranties many times since it started in 2011. Here are a few instances:

Warranties of IP validity: a “no-brainer”?

Warrant only facts (not law or opinion)

https://ipdraughts.wordpress.com/2019/01/14/implied-terms-in-ip-licensing-items-11-20/

In IP Draughts’ experience, there is no standard set of warranties in a licence (or license) agreement. Partly, this is because there are many types of licences, eg life science or IT, early stage or late stage, B2B or B2C, licensing to an investor-driven vehicle or a company specialising in the area of business that is the subject of the licence, and so on. Each type tends to have different warranties.

In the absence of express warranties in a written licence agreement, the law of the contract may impose implied warranties. This will vary significantly between jurisdictions – to generalise, civil law jurisdictions tend to imply more obligations than common law ones. And the law in each jurisdiction may be a bit vague on what warranties should be implied – there isn’t always sufficient case law to know for certain what terms should be implied. This causes drafters to focus on stating explicitly what is not warranted. For example, IP Draughts’ template licence agreement includes the following text:

  • the IP Company does not make any representation nor give any warranty or undertaking:
    • as to the efficacy or usefulness of the Patents or Know-how; or
    • as to the scope of any of the Patents or that any of the Patents is or will be valid or subsisting or (in the case of an application) will proceed to grant; or
    • that the use of any of the Patents or Know-how, the manufacture, sale, or use of the Licensed Products or the exercise of any of the rights granted under this Agreement will not infringe any other Intellectual Property or other rights of any other person; or
    • that the Know-how or any other information communicated by the IP Company to the Licensee under or in connection with this Agreement will produce Licensed Products of satisfactory or merchantable quality or fit for the purpose for which the Licensee intended or that any product will not have any latent or other defects, whether or not discoverable; or
    • as imposing any obligation on the IP Company to bring or prosecute actions or proceedings against Third Parties for infringement or to defend any action or proceedings for revocation of any of the Patents; or
    • as imposing any liability on the IP Company in the event that any Third Party supplies Licensed Products to customers located in the Territory.

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Can you “own” a software licence?

This old article discusses fundamental questions of property ownership in relation to software, in light of a strange CJEU decision in the UsedSoft case.

IP Draughts

Property can be moveable…

Is it meaningful, in law, to refer to owning a software licence?  Is a licence “property”?  These questions have been highlighted by a recent decision of the Court of Justice of the European Union (CJEU) in the case of UsedSoft GmbH v Oracle International Corp.

This blog article focuses on one narrow point from the judgment, and is not intended to analyse the case generally.  The case is summarised on the IPKat blog here.  However, a brief summary is useful here by way of background.  UsedSoft offered for sale “used” licences to Oracle software that were current but no longer needed by the original licensee.  The software was downloaded from a website, and no physical copy of the software, eg on a disc, was provided.  The licence agreement which accompanied the software stated that the licence was “nontransferable”.

…or immoveable

Oracle brought proceedings in the…

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Ten tips for building a law firm

broom cupboardIn 1994, IP Draughts started his law firm. In 2011, he converted it to an LLP. The firm now has 5 partners and, in total, around 20 people. It is top-ranked in Chambers Directory, and several of the partners are recommended as specialists in transactional IP.

He offers the following suggestions for any lawyer who is thinking of starting their own firm. This article focuses on the business aspects. It is also important to comply with relevant regulations on the conduct of legal practice, but these vary between jurisdictions, and they are not today’s subject.

  1. Clients. It’s better to start with some prospect of work. Before IP Draughts started, a client contact offered him some part-time work for 6 months, which encouraged him to take the plunge. He had already built up some loyalty from clients of his previous firm, who continued to instruct him. Keep clients happy with your work, and they are likely to come back for repeat business. They may recommend you to others. If they move job, ideally you end up with two clients, i.e. both their former company and their new one. Many of his firm’s current clients are connected, directly or indirectly, to people he worked with in the 1990s.
  2. Markets and services. Offer your services in a thriving market. For the last 30 years, high-tech businesses and leading universities have been part of a growing market, and this is likely to continue. Within your chosen market, work out what you are good at, and focus on providing services in that area. IP Draughts found that he worked well with SME entrepreneurs and scientists, particularly on transactional IP.
  3. Unique selling point. Who are your competitors, and why would clients choose you over them? In IP Draughts’ case, he found that some clients liked his personal service, his focus on the big issues, and the clarity of his drafting, as well as his cost-effectiveness compared with people in large commercial firms. Not everyone needs or wants these things. Some clients want more of a standard service, and aren’t really interested in the personal aspects. You can’t please everyone. Don’t waste time trying.
  4. Marketing. Each person is different in how they approach marketing. IP Draughts has tried various methods, including the obvious kinds of networking. He has always come back to playing to his strengths, eg giving a talk at a conference to demonstrate knowledge and competence, rather than just attending it and hoping to meet and charm potential clients. He has written textbooks, both to improve and to demonstrate his technical expertise. He thought it was more important to build and maintain a lasting reputation for the quality of his work, than to spend time and money on subscriptions and paid-for marketing.
  5. Values and standards. Are you consistent in your values and standards? IP Draughts has always aimed for high technical standards, and a pragmatic, flexible approach, while standing up to clients and other parties where necessary. He remembers once being so exasperated with a client CEO’s aggressive attempts to try to get him to change his view, that (after years of standing up to him) he went along with something he didn’t agree with – a “yeah, whatever” moment. The CEO didn’t notice, but the Commercial Director who was in the meeting did, and rightly picked IP Draughts up on it afterwards. IP Draughts didn’t do that again.
  6. Pricing. Be competitive and don’t be greedy, but don’t undervalue your services. It helps if your competitors charge more than you; this will depend partly on your choice of services and markets. Gradually increase your fee rates over time. Small incremental changes are better than a large jump. With a new client, be sensitive on fees until they recognise the extra value of your services.
  7. Financing. Legal practice is a simple business model, and it shouldn’t be necessary to have bank loans. Don’t pay yourself what you haven’t earned. Cash flow can be a bit lumpy, particularly around the time you have to pay income tax, but you can usually plan ahead for this. IP Draughts has always invoiced monthly, to reduce the cash flow risk, and anyway clients seem to prefer this. As the firm grows, build up your financial reserves so that you have enough cash to cover the unexpected.
  8. People. Take on staff when you can afford to do so. Trainees are less of a financial risk than experienced lawyers, unless the latter have a following. When you take on staff, make sure they fit with your standards and values. Train and treat them well. Take a long-term approach.
  9. Systems. IP Draughts started with an accounts book that he purchased from the stationers, WH Smith. The front end recorded sales, and the back end purchases. He added these up manually each quarter for his VAT return. He recorded his time on paper cards for each client and matter. Nowadays his firm has sophisticated computer systems for client and work management, accounts, and even holiday booking. There are standard procedures for staff appraisals and anti-money-laundering compliance. As you grow, more systems are needed.
  10. Community. Think about how you can contribute to the communities in which you are spending your career, without being too “transactional” about it. When you are making such a contribution, respect its time commitments and don’t make it subservient to client work. IP Draughts has tried to spend a percentage of his time on non-fee-earning activities, such as sitting on the IP Committee of the Law Society for many years, and providing training at PraxisAuril and ASTP events. There may be indirect benefits from such work, eg networking with one’s peers.

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Leadership: the limits of setting the tone

leaderA leader sets the tone for an organisation, by what they say and do, and how they say and do it. A collective tone is important, but it doesn’t guarantee that everyone in the organisation will agree with it and follow it.

This week, the Law Society Gazette reported that a solicitor had been struck off, for instructing a trainee to alter the date of a mortgage deed, so as to meet a deadline for registering the deed with Companies House. The solicitor claimed that they had been taught to make Tippex corrections to deeds, when they were a trainee, but this claim was rejected by the Solicitors’ Disciplinary Tribunal (SDT). In IP Draughts’ view, giving such bad guidance to a trainee is worse than the act of misdating the deed.

(The Gazette has long been a source of titillating information about the misdeeds of solicitors, as established by SDT and SRA decisions. For non-lawyers reading the magazine, it has often been the sole area of interest. Now that the Gazette is no longer published in a paper version, the opportunity for non-lawyers to read it may be reduced.)

It’s not just trainees who are influenced by their seniors and peers. The Law Society has an important role in setting the tone for the profession, and in giving solicitors a common sense of identity and values. Solicitors should have integrity, and be trustworthy and reliable. They should be held to higher standards than the population as a whole. For example, it seems that a significant percentage of the population lies on their CVs (resumes), though the number is only 6% for lawyers.

There are risks in taking a strong stance on ethical issues. IP Draughts supports the Law Society’s efforts on increasing diversity in the legal profession, but he also worries sometimes about whether such efforts are “preaching to the converted”.  It is reported that around one third of the population are social conservatives, who react negatively to what is sometimes described as wokery. IP Draughts guesses that the legal profession has a similar percentage of social conservatives, which would amount to around 70,000 solicitors. Are the Law Society’s efforts on diversity focused on trying to persuade the large number of solicitors who may be instinctively suspicious of diversity initiatives?

This thought was prompted by an article in the Law Society Gazette this week, about the newest recruits to the UK Supreme Court, both of them white, male and aged over 70. Following their appointment, 11 out of the 12 members are male, and all are white. As the press has commented, there are now more members named David (three) than women on the court.

A majority of the comments below that article, and the associated “likes”, revealed a strong dislike of diversity criteria being applied to the court’s membership. As most of the comments are anonymous, it is impossible to know who the commenters are, but IP Draughts suspects many of them are white, male, socially conservative solicitors. The views on display are so far from the Law Society’s official pronouncements on diversity as to be extraordinary. They remind us of the danger of the Law Society speaking into an echo chamber of like-minded people, and not reflecting the views of a significant number of its members.

Setting a general tone is important, but so is engagement with the “silent minority” who resist the call for change. And for the small minority who flout the rules, we need strong disciplinary rules and procedures.

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