Business lawyers specialising in technology and intellectual property law, management and commercialisation

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Legal nonsense

legal-nonsenseWhen used on its own, do not expect business law to get you to a sensible or good result. It can happen but it is not a given.

When only purely legal thinking is in operation often business law is a road to nonsense, failure or suboptimal results.

Why business law is in this state is a long story. Two recent cases provide short illustrations for discussion of both complexity and incongruity in law.

Complexity is unavoidable, indeed necessary in business law, eg in intellectual property law.

Unfortunately some business laws go beyond complexity. It is as if they regulate business by hindering it. Regularly charged with this are areas of Australian taxation law and corporations law.

To deal with the phenomenon of complexity and thickets in law, it is useful to examine their existence, features and operation. Two examples are discussed in this post.

Complexity in law – selecting an intellectual property licence agreement

The first example relates to complexity. I’m currently dealing with a case for a client seeking to license its considerable intellectual property built over many years.

franchising-lawAfter hours of needs assessments in two meetings, the client and I concluded that the licensing need is best handled by drafting a relatively simple intellectual property licence agreement. When finalised it will be about 12 pages in length. It will borrow heavily from a template I prepared a decade ago.

The sad fact is that before being referred to me, my client had paid tens of thousands dollars to a lawyer who professed expertise as a franchising law specialist. That lawyer commenced drafting a franchise agreement as the solution for the client's need.

It is true that a franchise agreement is a type of contractual licence granting rights to intellectual property. But it is much more than that. It is highly regulated and generally much more complex and longer than a pure intellectual property licence agreement.

Importantly, in the client's case a franchise agreement should not have been drafted as the priority. Preliminary business foundations were not first in place, eg an operations manual or any successfully tested external company owned site. To put it politely, that was the first major sign that complexity had won against the lawyer and the client.

As indicated, a franchise agreement is more than just an intellectual property licence agreement or a simple means for licensing intellectual property.

  • Franchising law in Australia is quite simple, it is principally the Franchising Code of Conduct.
  • What makes franchising complex is the depth and wide range of business issues for its creation, operation and management and the cluster of related business laws. The business issues can include financial analysis (eg of pricing decisions), sourcing and examining demographic information (for site location), developing mechanisms for engagement of franchisees, preparing an operations manual, sourcing raw materials and other inputs and so on.
  • So franchise law is quite simple but such business issues faced in a franchise business (which bring into play many related business laws) add complexity and the application of many additional laws.

When my client gave up on the franchising lawyer, there was already 85 pages prepared. This comprised a draft franchise agreement of 46 pages plus a draft disclosure statement of 39 pages. Despite all those words the lawyer never fully or properly identified or defined the client’s intellectual property which the draft agreement purports to license! That was another major sign that complexity had won against the lawyer and the client.

We’ve trashed all 85 pages because franchising and its complexity is not required. The complexity almost drowned the client's opportunity. It is being revived with simplicity, a pure intellectual property licence agreement.

Existence and operation of a thicket of laws

We turn now to a U.S. case and a great evil, thickets of law. Explaining this concept involves a few paragraphs.

In late 2011 a U.S. citizen was killed by a U.S. drone in Yemen following a "targeted killing" decision. The New York Times commenced legal action against the U.S. Department of Justice to get access to the "targeted killing" decision documents created within the Executive Branch of Government or its agencies.

A U.S. thicket of laws achieved this result in the case decision released last week:

U.S. war, spying, anti-terrorism and national security laws permit the Executive Branch of the Federal Government to approve “targeted killing” of U.S. citizens without a check by the judicial branch of government, ie by courts.

In her decision in favour of the U.S. Department of Justice, Judge Colleen McMahon described U.S. spying, anti-terrorism and national security laws as a “thicket of laws”. The New York Times report quotes the Judge's introduction and it is accurate on my reading of the 71 page judgement.

ip-licence-law The "targeted killing" documents remain secret. The Times is appealing.

Judge McMahon was presented with many instances of exceptions against the U.S. Freedom of Information Act. She refers to exemptions to freedom of information in agency-specific statutes (eg the CIA Act of 1949) and in the law of privilege that can be, and was claimed in the case, against disclosure of evidence at various levels of the Executive Branch of Government and its agencies. The exceptions cover letters, memoranda and other documents relating to the killing decision.

Judge MacMahon was clearly not happy to have to rule the way she did.

A thicket of laws is by definition difficult to decipher, explain, understand or discuss. Judge MacMahon finds the laws difficult to reconcile with traditional U.S. legal principals, including due process law in the U.S. Constitution. Critically, she finds no consistent and reasoned statement of legal principles in support of the ends sought by the thicket of laws.

How does a law reach such a state of incongruity? There are at least three ways.

  1. It lacks a stated rationale or principles or clearly stated or reasoned ones.
  2. It uses an extraordinary number of words.
  3. At uses unusual or creative lawyering definitions.

You can read in Judge McMahon's decision that all three were in existence in the case. Here’s my description of the creative lawyering definition she cites presented to her by counsel for the definition of "targeted killing":

Targeted killing” as used in the Executive Branch of Government in the U.S. describes a lawful act (ie one sanctioned by law, ie the thicket of laws Judge McMahan examines) in contrast to assassination which is accepted as being unlawful.

Partial solution: multidisciplinary training, tools and resources

Regrettably the existence of complexity and thickets have snowballed in recent decades. The legislative, executive or judicial branches of government are all involved, but the first two more so.

It often seems that the reason for creating a thicket of law is to achieve ends without having to explain or construct the reasoning or clear reasoning to justify the means. Trampled in the process are valuable traditional legal principles and civil society.

As for complexity in law, as one solution I have long found multidisciplinary thinking and approaches very useful in legal practice. They are often a better tool for getting to the heart of many business needs and solving them, therefore not relying on legal thinking on its own. Those who follow this Lightbulb blog are familiar with its discussion of learning from management consultancy.

For example, today in reviewing a lease that seems inappropriate for a client's business need, I have asked the client to first provide its budget and business plan and I have referred the client to a new accountant.

Multidisciplinary thinking requires additional training, tools and resources to help lawyers think holistically about business situations and avoid impractical legal solutions. Without them complexity and thickets of laws can waste opportunity, time and money.


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