All posts by Leslie Marell

Handshake and teamwork

Getting to “Yes” with your Lawyer: It’s not an oxymoron!

Many business people are frustrated by how long it takes their lawyer to review / finalize a contract.

The typical complaint:  It took my lawyer (choose one: weeks/ months / years) to finally get the (choose one or several: indemnity, warranty, limitation of liability, IP) clause resolved.Sound familiar?  If so, I want to give you some suggestions on how to greatly reduce this review process.But, before I do, I need to let you in on a little secret:
Your lawyer is just as frustrated about this process as you are!

What do I mean?  Let me share with you a typical email from a client:

Leslie,
            Please review the attached contract and provide us with the major legal issues. The company is
            coming in next week and we want to be ready to finalize the contract.            John Client
When you read this email, do you know what the deal is about…or what John and the other company agreed to….or John’s issues….or what areas are more important than others?

Did you answer “NO” to these questions?

I’ll let you in on another secret:  I DON’T KNOW THE ANSWERS TO THESE QUESTIONS EITHER!

These answers are important because I can’t analyze a contract in any meaningful way without understanding:

  • The deal
  • Your issues/ concerns about the deal
  • The other sides’ issues/ concerns

Like me, your attorney probably has an inbox full of these emails. If I review the contract without my client’s input, I know I’ll waste a lot of time. I also know that getting the details from my client is going to be like pulling teeth. What could have been a straightforward matter has now turned into a more time consuming, frustrating project…..for both of us!

(By the way:  I’ve talked to dozens of in-house lawyers and they all tell me they share the same experiences and frustrations!)

Believe it or not……we attorneys are looking for direction from you, our client!

To explain what I mean, here’s a story “Jim”, one of my seminar attendees, told me:

“I received a supplier’s objections to our contract. I’d been with the company for a short
time and asked a colleague to refer me to the attorney who needed to review the
changes.

            “He said: Don’t expect to hear from him any time soon. We call him the “black hole”. Things go 
            in but they never come out.”

            I wrote a memo to the attorney explaining the deal, what we’d agreed to, and what problems I 
            had (and didn’t have) with the changes. I asked to set up an appointment.

            I sent the email in the morning.  That afternoon, I received a reply from the attorney who 
            gave me language suggestions and some ideas on how to respond.

            No one could believe that I’d received such a quick response. Someone even suggested I must 
            have bribed him.” 

While Jim’s department may have been surprised, I wasn’t. Jim’s lawyer is inundated with requests from other clients who mostly never explain the deal.

Jim’s lawyer is thinking: “Finally, a client who gives me the necessary background, has read the contract, tried to make sure the contract language lines up with the deal, and helps focus my attention.”

Jim helped make the lawyer’s job easier and saved the lawyer time!

TIPS TO EXPEDITE THE LEGAL REVIEW

  1. Discuss the major issues with your supplier/ customer before negotiating the contract.
  2. Make sure the contract includes the deal points you’ve agreed upon.
  3. If you don’t agree with/ understand a clause, ask for an explanation.
    - Don’t be reluctant to ask questions: What problems do you have with our clause? Can you give me
    some specific examples?
    - Your questions will lead to information about your supplier’s/ customer’s concerns. 
  4. Discuss the business aspects of all clauses.. even the “legal” clauses.
    - The limitation of liability clause boils down to “who pays the money”.
    - Example:  In the sale of equipment, discuss limitation of liability in exchange for providing no or low
    fee monthly preventative maintenance. Talk in real world terms with real world approaches to
    address your issues.
  5. Before you send the contract to your lawyer, make sure it reflects your agreements.
  6. Don’t just “hand off” the contract to your lawyer. Stay involved.
    - Provide your lawyer with a “term sheet” explaining the deal.
    - Set up an appointment to discuss these issues with your lawyer.

I guarantee you’ll reduce the time involved in the legal review if you follow these tips!

MORE TIPS:

In order to be effective, you must understand the meaning of your clauses and your customer’s clauses.

That’s where I come in!

I’ve presented seminars throughout the country to thousands of sales, marketing and purchasing professionals on how to read, understand and negotiate contract terms. I use your company’s terms and conditions as well as your customers’ and we discuss the meanings of both sides’ clauses, how to negotiate them, and approaches to resolution.

I would be delighted to discuss the possibility of presenting a workshop for your company.

Businessman_Relaxed_Crop

Part One: Do you own the intellectual property to work created by your supplier?

When you retain a supplier to design software, customize its standard product to meet your needs, create engineering specifications, or develop documentation, do you have the right to use it over and over?  Can you re-use it in another application? Does your supplier have the right to re-sell it to another customer?
These questions have, at their heart, the basic principles of copyright, ownership and intellectual property.OWNERSHIP OF COPYRIGHTS Under copyright law, the author who creates an “original work of authorship” owns the copyright to that work.  Among other things, an original work of authorship includes designs, specifications, software, documentation, photographs, website development, artwork, or multimedia work.The author who owns the copyright automatically owns the exclusive rights to it and the rights to prevent others from copying, distributing, or preparing works based on the copyrighted materials.

As counter-intuitive as it may seem, even though your company pays your supplier to develop a work, or customize or modify the supplier’s product to your requirements, your company will not own the copyright to the work created unless it obtains a written assignment of copyright ownership signed by the author/ owner of the work. An assignment is simply a transfer of copyright ownership.

EXCEPTION:  WORKS FOR HIRE DOCTRINE
(Read this carefully:  It’s often misunderstood)

The “Works for Hire” doctrine is an exception to the above general rule.

Employee:
If a work was created by an employee as part of his or her job, the law considers the creation a work for hire, and the employer will own the copyright.

Independent Contractor (defined as any supplier you retain who is not an employee – whether sole proprietor or large company):
If the creator is an independent contractor, the works will be considered works for hire only if:
(1) the parties have signed a written agreement stating that the work will be a work for hire; and
(2) the work is commissioned as a contribution to a collective work, a supplementary work, an instructional text, answer material for a test, an atlas, motion picture, or an audiovisual work.

Note that the above list for independent contractors is very narrow and specific. Outsourcing the development of software, designs, photographs, catalogs and the like are not contained in this list and would not be considered “works for hire”.  

Merely including the “work-made-for-hire” language with your supplier is not enough to ensure that your company obtains ownership to the copyright in most cases.

BOTTOM LINEYou should obtain a written assignment before your supplier starts work. This language should specifically require that the supplier will assign (transfer) all intellectual property rights in the work to the company. Without a clear, written contract, your company may end up with only a limited license (right) to use the work.

A clause that simply says that your company owns the rights but does not specifically assign the rights does not legally transfer the ownership rights.

A simple NDA does not transfer the IP rights. You need an agreement with a specific assignment clause that transfers these rights.

EXAMPLE LANGUAGE

The following is an example of a very simple assignment clause to include in a contract with your independent contractor:

Independent Contractor hereby assigns and agrees to assign to Company, and shall require its subcontractors in writing to assign to Company, all right, title and interest in and to the (name of the work) and all intellectual property rights therein.

NEXT ISSUE 

These concepts are not terribly complicated. So, why all the back and forth negotiations between your company and the supplier?

Next month I’ll discuss the underlying problems by addressing the customer’s perspective of ownership vs. the supplier’s perspective and provide you with possible approaches to resolution.