Better, Faster, Cheaper Negotiations? Take the Survey and Let Us Know

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One topic that many legal practitioners have talked about lately (and for years actually) is legal friction. Legal friction can describe many kinds of obstacles from regulatory to course of dealing, but most often it describes the impediments (delay and fees) encountered when negotiating transactions whether for software, services, or any form of property. More specifically legal friction happens when the commercial terms are generally agreed but prolonged negotiations continue while each party attempts to work out the legal terms. No doubt this is a pain point for both the business owners and counsel.

The legal terms effectively allocate risk between the two parties based on some perception of likely contingencies and risk profiles.  Sometimes they’re really important and form key parts of the deal, but most often not.  Unfortunately the problem is exacerbated by the fact that everyone drafts their own terms in a manner they think is best and often most favorable to their own interest. Since each term is handcrafted to perfection, the other party has to examine each term to determine if it comports with their own requirements. This adds unnecessary time and expense and delays starting on the actual commercial arrangement which is the whole point.

In the FOSS space, the open source licenses themselves reduce legal friction to the extent the rights and obligations of the parties are known, immutable, and seemingly well understood. Thus, there’s no negotiation over the terms. Creative Commons has also done this really well so the focus is on the exchange of the creative and the actual agreement doesn’t get in the way.  Recently there were some standard venture capital terms published by TheFunded as reported by Venture  Beat that serve the same purpose.  In each of these cases, the standardized agreements represented a clustered set of terms with values of simplicity and market norm, that work for some set of transactions.

Given the above, it seems like the same concepts could be extended for other kinds of software and technology transactions with just a little modification.

  • Suppose there were a set of reference terms (atomic v. whole licenses) that were available for transactions that were widely adopted. In this setting, parties could incorporate the standard terms to reduce negotiation friction and uncertainty.
  • Ideally the terms would represent a range of values, including the compromise positions that are fair to both parties.  Such terms could even be used in online terms of service agreements.
  • In the maritime world when shipping goods was the thing and property was “real” the INCO terms were heavily used to allocate risk, i.e. FOB.  So in this context, imagine a set of terms that worked for IP and service based transactions that could be incorporated into agreements to varying degrees.

Obviously there are a few small details like developing the reference terms and getting adoption, but it seems like there is a fair amount of pain in this area so I suspect there are folks who would want to work on the solution.  If this has already been done or tried, please advise, but if not, would welcome feedback via the survey below or post a comment if it works better for you. The goal is to determine if any of these assumptions are correct and to test the viability of potential solutions.

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2 Responses to Better, Faster, Cheaper Negotiations? Take the Survey and Let Us Know

  1. I am an engineer, but have had to deal with contract, patent and license issues on several occasions during my career. To me legal language is a lot like programming – for there can be both system and structure in it – or not 🙂

    Creating a usable standard set of agreements and terms for common transactions – yes, that appears to be a good thing. If such a thing is introduced it probably won’t have the same sweeping economic effect currency or the standard metric units had. But a positive effect it should have nevertheless.

    I can imagine that freelancers and small tech firms could greatly benefit from that. Five years ago I was working for a small startup company and we often didn’t have the money to hire a lawyer, so had to learn to resolve many matters ourselves.

    The main technical issue that would make or break such a standardisation effort? I think this is the degree of variation and “quantumness” of risk allocation between the parties in the types of contracts you want to cover. Despite the wide sliding-scale of possible arrangements, my feeling is that there isn’t that much contract variablity in practice. Take software warranties for example: the case here is that typically there is none.

  2. Frenchie says:

    ncA6Un That’s really thinking out of the box. Thanks!