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As an American, I like it that English is the global language, at least for now. Travel and commerce are easier when there’s a common lingua franca; I cer­tain­ly like being a native speaker of the existing world tongue.

But English isn’t easy to master.  English would be more competitive in the mar­ket­place — versus, let’s say, Mandarin or German — if non-native speak­ers could more quickly pick up the basics and feel com­for­table that they were reasonably proficient.

Toward that end, English-language purists who immediately notice “bad” spelling and gram­mar (yes, I’m one of them) should lighten up and accept simpler, easier forms as they naturally arise.  Here are a few examples:

  • Less vs. fewer:  The “correct” form is (for example) fewer people, because the word people is a count­able noun; compare with, e.g., less time.  But all the time I see “incorrect” usage such as less people.  We ought to accept the latter form, because there’s no logical reason that the word less shouldn’t do double duty — it’d be one less thing (!) for non-native speakers to learn, not to mention a bit more intuitive to spell.
  • Who vs. whom:  Let’s just use who for everything, as many do anyway.
  • It’s vs. its.
  • The subjunctive — e.g., if I was a carpenter (“incorrect”) vs. if I were a carpenter.

This brings to mind the likely-apocryphal story of a new college campus whose architects supposedly didn’t design in any sidewalks: instead, they planted grass, waited six months, and then paved over where people actually walked.  Likewise, if we purists want English to continue being the global tongue, we shouldn’t grumble if it evolves to be more serviceable for others.

With one exception:  I still maintain that impact is not a verb (shaddup you kids, get off my lawn) ….

Related reading:

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May a landlord terminate a lease just because the landlord has decided to demolish the building?  That might well depend on the lease agreement.  In a Penn­syl­va­nia case, a trial court granted summary judgment in favor of the landlord, but an appellate court reversed and remanded for trial to resolve an ambiguity in the lease agreement’s termination provision. Those expensive legal proceedings might have been avoided at the contract-drafting stage by judicious use of rom­an­ettes — or better still, by breaking up the language to speed up legal review.

The agreement language

Here’s the relevant agreement language:

In the event that Lessor’s building is damaged by fire or other casualty and Lessor elects not to restore such building, or Lessor elects to demolish the building, Lessor may terminate the Lease upon not less than 60 days notice to Lessee upon paying Lessee ten (10) times the net operating income earned by Lessee from the Advertising Struct­ures or the Premises for the immediately preceding twelve (12) month period.

BL Partners Group, L.P. v. Interbroad, LLC, No. 465 EDA 2016, slip op. at 2 (Pa. App. June 15, 2017) (reversing and remanding summary judgment; non-precedential).  (Hat tip: Stacey Lantagne at ContractsProfBlog.)  Overturning the trial court’s ruling in favor of the landlord, the appeals court ruled that the bold-faced language was amb­ig­u­ous, because it could reasonably be interpreted in two different ways, and therefore a trial was necessary to resolve the ambiguity. See id., slip op. at 1.

Adding clarity with romanettes

Here’s a first possible meaning of the bold-faced language, with romanettes inserted to demark the possibilities:

In the event that (i) Lessor’s building is damaged by fire or other casualty and Lessor elects not to restore such building, or (ii) Lessor elects to demolish the building, then Lessor may terminate the Lease ….

(Adding the word “then” helps the reader to quickly locate the consequence clause, which I just discovered is called the apodosis.)

Here’s a second possible meaning, with the romanettes rearranged:

In the event that Lessor’s building is damaged by fire or other casualty and (i) Lessor elects not to restore such building, or (ii) Lessor elects to demolish the building, then Lessor may terminate the Lease ….

Just seven extra characters — or 13 extra characters if you count the “then.” They’re cheap insurance against expensive ambiguity disputes.

Even better:  Break up the sentence to ease the reviewer’s job

To make the termination provision even more readable, we could further break up the sentence, as follows (using the second meaning as an example):

(a) Lessor may terminate the Lease in accordance with subdivision (b) in either of the following cases:

(1) Lessor’s building is damaged by fire or other casualty and Lessor elects not to restore such building; or

(2) Lessor elects to demolish the building.

(b) To terminate the Lease under subdivision (a), Lessor must:

(1) give Lessee  not less than 60 days notice; and

(2) pay Lessee 10 times the net operating income earned by Lessee from the Advertising Struct­ures or the Premises for the immediately preceding 12-month period.

Sure, the broken-up sentence would take up more space on the page. But it also would likely be a bit easier and quicker to review — and because contract review is often the biggest bottleneck in getting contracts to signature, it makes sense to try to save time for the reviewer as opposed to saving paper.

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Contract drafters often use the term commercially reasonable efforts in lieu of stating more-precise standards of performance.  Two recent Delaware state court opinions suggest that contract drafters might want to specifically define that term, to reduce the risk that their clients will be caught unawares by a far-stronger commitment than they had intended.

In an opinion late last month, the Delaware supreme court defined com­mer­ci­al­ly reasonable efforts as “plac[ing] an affirmative oblig­a­tion on the parties to take all reasonable steps”  to achieve the stated objective.   Williams Cos. v. Energy Transfer Equity, L.P., No. 330 [2016], slip op. at 17-18 (Del. Mar. 23, 2017) (affirming chancery-court decision) (emphasis added).  A dissent by Chief Just­ice Strine opined that commercially reasonable efforts is “a com­par­a­tive­ly strong” commitment, one that is only “slightly more limited” than best efforts. Id., slip op. at 25 & n.45 (citation omitted).

Likewise, in the decision below, the chancery court had all but equated the term commercially reasonable efforts with reasonable best efforts: The lower court held that a party that had made such a commitment had “bound itself to do those things objectively rea­son­able to produce the desired [result].” Williams Cos. v. Energy Transfer Equity, L.P., No. 12168 (Del. Ch. June 24, 2016) (emphasis added).

Business people might well be taken aback by this strict, “all reasonable efforts” standard. My guess is that, if pressed, many business people would rank “efforts” commitments in roughly the following ascending order:

  • Reasonable efforts: One or more reasonable actions reasonably cal­cu­l­a­ted to achieve a stated objective, but with no one ex­pect­ing that all pos­sib­i­l­i­ties will be exhausted.  Colloquially, this could perhaps be phrased as, I’ll give it a rea­son­able shot.  (See the Common Draft definition & annotations.)
  • Commercially reasonable efforts: Those reasonable efforts that rea­son­able business people would expect to be made, but again not necessarily all such efforts. Or, again colloquially:  I’ll  do what professionals would do. (See the Common Draft definition & annotations.)
  • Best efforts: All reasonable efforts — as a Canadian court said, “leaving no stone unturned in seeking to achieve the stated objective.” Atmospheric Diving Systems Inc. v. International Hard Suits Inc., 89 B.C.L.R. (2d) 356 (1994). This is often defined in terms of diligence, or it could be stated in sports terms:  I’ll bring my “A” game. (See the Common Draft definition & annotations.)
  • Hell or high water:  Just get it done, no matter the cost, and whether or not a particular effort would be regarded as un­reas­on­able. See Hexion Spec. Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715, 756 (Del. Ch. 2008). (It’s unclear how this differs from an absolute commitment, as opposed to an “efforts” commitment.)

Let’s consider a hypothetical example. On major U.S. highways, the speed-limit signs often include both maximum and minimum speeds of (say) 70 mph and 45 mph. Those two speeds establish the upper- and lower bounds of reasonableness. Now, suppose that a trucking company were to agree that its driver would use a certain level of effort to drive a shipment of goods from Point A to Point B on such a highway, where drivers must drive between 45 mph and 70 mph. In good weather with light traffic, the following might apply:

35 mph 45 mph 60 mph 65 mph 70 mph
Reasonable efforts? No Yes Yes Yes Yes
Commercially rsnbl. efforts? No No Yes Yes Yes
Best efforts? No No No No Yes

 

Under the Delaware courts’ Williams Cos. holdings, though, it might be argued that the commercially reasonable efforts standard could be met only by driving, say, 68 mph or higher.

These holdings drive home the importance of a maxim that I stress to my stu­dents: W.I.D.D.: When In Doubt, Define.  Drafters who want a less-strict stand­ard than that defined in Williams Cos. can consider the Common Draft definitions linked above.

For additional commentary and citations, see Ken Adams’s post on the Wil­liams Cos. opinion. (Ken holds what I regard as unsound views about “efforts” standards generally.)

EDIT:  In a follow-up post, Ken admits: “There’s support in English caselaw for the distinction [between different “efforts” requirements], but that caselaw is a travesty. … There’s support in Canadian caselaw for the distinction, but it’s unintentionally hilarious.” (Links omitted.)  He also announces that, “You might find my views on efforts dismissed out of hand, without detailed criticism. It was always thus with traditionalists: ignore my methodical arguments and offer instead propositions that are too flimsy to be worth attacking. That’s why in effect I have the field to myself.”  In a com­ment, he says of his effort, “Game over, case closed.”

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The Mayo Foundation granted a license to a startup company under a patent application that Mayo had filed for certain nano tech­nol­o­gy. See OmegaGenesis Corp. v. Mayo Foundation for Medical Edu­ca­tion and Research, No. 15-3346 (8th Cir. Mar. 20, 2017) (affirming dismissal on the pleadings for failure to state a claim upon which relief can be granted).

In the license agreement, the startup company “warranted that it had ‘in­de­pen­dently evaluated the Patent Rights, Know-How, and Con­fi­den­tial Information . . . [and] is entering into this Agreement on the basis of its own evaluation and not in reliance o[n] any rep­re­sen­ta­tion by Mayo . . . .'”  (Emphasis ad­ded.) The license agree­ment also dis­claimed any im­plied war­ranties by Mayo about the pat­ent­a­bil­i­ty of the tech­nol­o­gy, among other things; the agreement stated that the licensed subject matter was being provided “as is,” “with all faults,” and “with all defects.” Id., slip op. at 9.

Things apparently didn’t go well for the startup company:  The patent ap­pli­c­a­tion died when (i) the patent examiner issued a non-final re­jec­tion of the pend­ing claims in the patent application, citing prior art, and (ii) the startup com­pa­ny (which was to take over prosecution of the patent application) failed to re­spond to the rejection within the six-month period prescribed by the patent statute.

The startup company then sued Mayo, alleging among other things that Mayo had engaged in fraud and misrepresentation. (The startup company had raised $500,000 in funding from investors; conceivably the lawsuit might have rep­re­sent­ed an attempt by the startup company to divert investor anger away from management and toward Mayo.)

The district court held, and the Eighth Circuit affirmed, that the start­up com­pa­ny’s fraud- and negligent-misrepresentation claims against Mayo were barred by the reliance disclaimer in the license agree­ment. This was because, under Minnesota law, act­ual and reasonable reliance on the alleged mis­re­pre­sen­ta­tions was both (i) a required element of both claims, and (ii) negated by the re­li­ance disclaimer quoted above.

Drafting lesson: This is yet another example of the successful use of reliance dis­claimers to immunize a contracting party from fraud claims.

(A reliance disclaimer will not always work, though; see the annotations to the Common Draft reliance disclaimer.)

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In a patent license agreement, a key contract term was drafted in the form of a multi-part sentence — and, perhaps as a result, the term crucially misstated a key aspect of what a court later found to have been the parties’ intended business deal. This eventually led to:

  • the wasting, by two global corporate empires, of millions of dollars and several years in pat­ent in­fringe­ment litigation that evidently should never have been brought in the first place; and
  • an award, against the plaintiff, of some $5.9 million of the de­fen­dant’s at­tor­ney fees.

See Bayer CropScience AG v. Dow AgroSciences LLC , No. 2015-185 (Fed. Cir. Mar. 17, 2017), affirming Civ. 12-256 (D. Del. Mar. 13, 2015) (Bumb, J.), adopting magistrate judge’s report (D. Del. Dec. 22, 2014) (Schneider, M.J.); see also summary judgment in favor of Dow on sublicensing issue (D. Del. Oct. 7, 2013) (Bumb, J.).

Background

The contract was an exclusive patent license agree­ment between Bayer CropScience, as licensor, and a company called MS Tech. The license agreement expressly gave MS Tech a right to grant sub­li­cen­ses; MS Tech later granted a sub­license to Dow Agro­Sciences.

But was MS Tech’s sublicensing right sufficient to shield Dow from Bayer’s patent rights?  Bayer’s answer was “no”; it took the position that the license agreement did not license MS Tech for com­mer­cial use of the patented tech­nol­ogy, because the license agreement’s exclusivity language made an exception for the commercial-use rights that had been granted to another company, Strine.

Bayer sued Dow for patent infringement, but in a summary-judgment proceeding, the district court concluded — largely from the testimony of Bayer’s own witnesses and the company’s doc­u­ments — that Bayer had indisputably intended for MS Tech indeed to have com­mer­cial-use rights. The district court spanked Bayer for persisting in its new no-commercial-use position; according to the court, even basic pre-suit due diligence, let alone discovery, should have re­vealed to Bayer that it had no case under the governing English law. The district court held that the case involved “extraordinary cir­cum­stan­ces” and, as authorized by the U.S. patent statute, awarded Dow some $5.9 million in attorney fees.   The Federal Circuit affirmed.

The contract-drafting error

Let’s look at what might have led Bayer’s counsel, in the lawsuit, to assert that the license agreement did not license MS Tech for commercial use of the pat­ent­ed technology (even though Bayer’s witnesses and documents said otherwise).  The Federal Circuit quoted the crucial contract language:

The SELLER [Bayer] hereby grants to the PURCHASER [MS Tech] . . . a worldwide, fully paid-up, exclusive license – {note the dash} with the right to grant sublicenses solely as set out in Article 3.1.3 and with the ex­cep­tion of the rights to in­crease, market, distribute for sale, sell and offer for sale, {note the comma} granted to STINE by separate agreement . . . .

Federal Circuit slip op. at 4 (boldfaced emphasis and italicized curly-bracketed text added, square-bracketed text by the court).

Taken in isolation, this license-granting language certainly seems to support, at a minimum, the position that MS Tech’s rights did not extend to sublicensing commercial use of the patented technology, the right to which had been been granted to Stine in a separate agreement. That would have resulted in Dow’s sublicense being invalid.

But:

As the district court explained, the parties agreed that English law governed the Bayer–MS Tech contract. The parties further agreed that under English law, the background facts and cir­cum­stan­ces surrounding the agreement—known in English law as the “factual matrix”—must be considered in construing the con­tract’s terms.

Id., slip op. at 10 (emphasis added).  After considering the back­ground facts and cir­cum­stan­ces — perhaps most notably including the testimony of Bayer’s own witnesses — the district court con­clu­ded that, when negotiating the license agreement, the parties had intended something completely opposite to the position that Bayer was taking in the litigation, namely that MS Tech was indeed to be grant­ed com­mer­ci­al­i­za­tion rights.  As a result, concluded the district court, Dow wasn’t a patent infringer, it was a sublicensee of MS Tech and thus an authorized user of the patented technology.

The district court concluded that Bayer did not adequately investigate the facts before filing its patent-infringement suit against Dow; ac­cord­ing to the court, Bayer’s own witnesses and documents would have revealed to Bayer that the license-agreement language did not accurately reflect the parties’ intent. The district court also found, in effect, that Bayer should have abandoned its infringement claim once discovery revealed the flaw in Bayer’s contract interpretation.  The court therefore awarded attorney fees to Dow; the Federal Circuit affirmed, holding that:

… [T]he district court permissibly relied on the testimony of Bayer’s witnesses to discredit Bayer’s interpretation.

The district court likewise did not abuse its discretion in concluding that Bayer failed to perform a diligent presuit investigation of its claims against Dow. Bayer’s own witnesses testified against its contract interpretation.

Id. 

Lesson:  How could this have been avoided?

We mustn’t reflexively blame the contract drafters for this train wreck. We have no idea what instructions the drafters received from their clients; it’s certainly not unheard-of for business people to be imprecise and even inaccurate in conveying their wishes.  As a result, what follows is necessarily Monday-morning quarterbacking.

To support (what became) Dow’s position, the drafters could have rephrased the crucial language by breaking it up into shorter sent­en­ces with more single-subject paragraphs, possibly along the following lines:

The SELLER [Bayer] hereby grants to the PURCHASER [MS Tech] … a worldwide, fully paid-up license to in­crease, market, dis­trib­ute for sale, sell and offer for sale, [the licensed subject matter].

The license includes, without limitation, the right to grant sub­li­censes, but only as set out in Article 3.1.3.

The license is exclusive except for the rights, granted to STINE by separate agreement, to in­crease, market, distribute for sale, sell and offer for sale, [the licensed subject matter]  . . . .

Or, to support what became Bayer’s position:

The SELLER [Bayer] hereby grants to the PURCHASER [MS Tech] … a worldwide, fully paid-up license to practice [the licensed sub­ject matter], for noncommercial purposes only. [The term “non­com­mer­cial purposes” should probably be defined.]

The license includes, without limitation, the right to grant sub­li­censes, but only as set out in Article 3.1.3.

The parties note that, by separate agreement, STINE has been granted certain rights to in­crease, market, distribute for sale, sell and offer for sale, [the patented subject matter]  . . . .

With these shorter, stand-alone para­graphs, the business people might have had a better shot at spotting any discrepancy between the drafters’ contract language and their own intentions for the deal.

See also:

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