Hot Topics in Business Law Panel 1: Negotiating Contract Issues for in-House Counsel

FACULTY David Munn, General Counsel, Pramata Corporation Sarah Sederstrom, Contracts Counsel, KBM Group Bill Thornton, Chair of Larkin Hoffman’s Corporate law department

In-House Practice is Different Perfect isn’t (usually) the goal Business people always want a short agreement Risk tolerance/perspective

Understand Your Business Understand the business and the industry Understand your client’s products and services Understand the business goals Know the people involved Understand the regulatory environment Keep everything in perspective

General Drafting Caveats Watch out for urban legends in contract law (example: “best efforts”) Watch out for forms from outside counsel Do you know what the word “shall” means?

Systems Can Help At least learn how to use Word (e.g., automatic numbering Online collaboration (e.g., GoToMeeting) Document assembly systems Contract management systems Automated contract review (proofreading) Electronic signatures (e.g., DocuSign, EchoSign)

Negotiations ● Understand your leverage ● Beware the non-negotiable form ● Keep the value of the contract and the effect of a breach in mind ● Beware unreasonable negotiating positions ● Know when to fold’em

Ethical Issues - Dealing with Non- Lawyers Minnesota Rules of Professional Conduct: Rule 4.2: Communication with Person Represented by Counsel “In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.”

Hot Topic – No Reliance Clauses Also known as “anti-reliance clauses” Example: “Acme acknowledges that because it is not relying on any statements made by Widgetco to Acme, other than in this agreement, regarding the subject matter of this agreement, Acme will have no basis for bringing any claim for fraud in connection with any such statements.” * Source: Ken Adams, Adams on Contract Drafting blog magic-words/

Challenging provisions

A: Typical Areas of Negotiation Indemnification Limitation of liability NDAs / Confidentiality Agreements IP ownership and assignment MFN pricing Data security requirements

Indemnification Often misunderstood Often poorly drafted

Indemnification Indemnification is an undertaking by one party (the indemnifying party) to compensate the other party (the indemnified party) for certain costs and expenses. From Practical Law, Inc.

Indemnification Indemnification is a way of shifting risks from one party to another. Typically combined with an obligation to defend against third-party claims.

Common types of claims subject to contractual indemnification: Breach of representation or warranty Breach of agreement Losses incurred by a party Third party claims for specific subject matter, such as (1) claims of infringement or misappropriation of IP, (2) use of goods by the indemnitee, (3) product defect or liability claims, (4) claims arising out of death or personal injury.

Hold Harmless Commonly seen as “indemnify, hold harmless, and defend” Ongoing debate about whether “hold harmless” means the same as “indemnify” or has a separate or broader meaning

Defend Obligation to defend is not inherent in the obligation to indemnify.

COMMON NEGOTIATION ISSUES Third-party claims or also breach of contract claims? Interplay with limitation of liability (indemnification obligations often “carved out” of limitations) Component part mfgr. liability Indemnification for a party’s own negligence Liability for data breach costs Insurance coverage

Limitation of Liability Limitation as to types of damages (e.g., no consequential damages). Know what you are waiving. Limitation as to amount of damages “Carve-outs” Interplay between limitation of liability and indemnification

Confidentiality and NDAs Make sure to cover use as well as disclosure Term of the NDA Period of disclosure Period of protection – trade secret issues “Residuals” Marking or written notice Return or destruction

Other Common Issues IP ownership and assignment Who owns what? Get assurance of assignment for what is yours Data security requirements Often pages long, get IS involved MFN pricing

Questions? Thank You!

USEFUL RESOURCES: Ken Adams: A Manual of Style for Contract Drafting, 3rd Edition Drafting/dp/ /ref=pd_cp_b_0/ and blog Drafting/dp/ /ref=pd_cp_b_0/ http:// Urban Legends in Contract Law (slides): IACCM (International Association for Contract and Commercial Management) iaccm.comiaccm.com Coming to Terms When Negotiating with a Non-Lawyer. November 2012 ACC Docket Article e=/legalresources/resource.cfm&qstring=show= &title=Coming%20to%20Terms%20When%20Negotiating% 20with%20a%20Nonlawyer e=/legalresources/resource.cfm&qstring=show= &title=Coming%20to%20Terms%20When%20Negotiating% 20with%20a%20Nonlawyer Minnesota Rules of Professional Conduct: Contract Review Technology For ACC Members: ACC Contracts Portal Urban Legends in Contract Law - ACC Law Department Management Committee Legal Quick Hit - Archived Presentation Negotiating with Non-lawyers: