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A More Collaborative Approach to Drafting Contracts

A More Collaborative Approach to Drafting Contracts by Mirjam Ros and Deepika Jeyakodi Imagine discussing a collaboration or innovation project with a partner.

You would say, “First let’s do this. If it succeeds, then we could do that. If not, we could try a different thing. If everything works out by this time, then we can proceed to take that next step.” Sounds simple right?

Now that you’ve decided on most of these things, you want to formalize this in a contract.

Some days later, you have a 40-page document that contains a lot of what you agreed embodied in blocks of text. After some time negotiating the agreement with your partner, you eventually sign it, save it, and hope you never have to see all those pages again.

Recognize this?

The Problem with Contracts Today

The business world, especially in relation to collaboration and innovation, is responding to rapid changes. But there is constant evolution ranging from uncertain results to parties needing to be cycled out from the ecosystem to make the contract work. However, contracts – the way relations around these are formalized – are not dynamic enough to accommodate these demands.

Contracts are still:

  • dominated by standard, inflexible terms that slap conditions onto each other
  • created without involving the right party at the right time,
  • written with large chunks of legalese,
  • created without considering the specific needs of a particular project.

Not only do the above practices place restrictions on the parties engaged in the process, they can also hamper the relationship between them.

How We Usually Draft Contracts (The Human-Centered Approach)

There are two different ways to approach the contract drafting process: the human-centered approach and the linear approach.

The most obvious route is to take a human-centered approach. A contract can and should be an object of design that would enable its user to get optimal value from it. Now imagine that what you agreed with your partner is represented as a timeline, like this.

Image 1 – The Human Centered Approach

A timeline can be used to present events, actions, deadlines, and core topics within the collaboration setting.

Visualizing this flow can help to:

  • involve all stakeholders in discussions
  • take them along the chronology of the relationship to help them understand each stage of that relationship,
  • identify and record the key elements that will help them decide how and when they move from one stage to another, and
  • make or break the collaboration/innovation project.

For example, the below timeline shows how foreground (FI) and background (BI) intellectual property can be distributed between two contractual parties.

Image 2. Timeline of intellectual property ownership between two parties.

Image 2 – Intellectual Property Example

A More Collaborative Way to Draft Contracts (The Linear Approach)

Werner Fröhling[1]  proposed a linear process model for collaborations, based on which contracts, intellectual property distribution, and business models can be set and managed in a “Lego style construction.” [2]

Inspired by Fröhling, we built a linear timeline comprising of three phases for any collaboration/innovation activity:

Phase 1: Start of activity or period before collaboration and/or innovation, e.g., NDA or MOU.

Phase 2: Value creation or period during which the collaboration and innovation takes place, e.g., Collaboration or Innovation Agreement.

Phase 3: Value capture or period in which there is commercialization and exploitation of the collaboration and/or innovation, e.g., Sales or Services Agreement.

Image 3- The Linear Approach

For each phase above, to derive the right inputs for one or more contracts, you can then apply three sub-steps:

1. Think. Conduct an internal and external (your counterparties) analysis to determine what you have and what you need in terms of interests, contributions, business model, technology, and industry and/or organization. These would be the core elements of your contract.

2. Strategize. Choose what collaboration or innovation model, intellectual property approach, or business model best applies to the case.

3. Act. Deploy an effective strategy. Get a buy-in from the team, connect better with partners, and design contracts that are easier to understand.

Such a timeline can structure and visually represent the whole process of the collaboration/innovation in a more effective manner than just plain text in a contract. It is also a useful tool during negotiations and for co-creating a contract with your collaborators, especially where there are lots of parties involved.

Ultimately, this method empowers all users of the contract (not just lawyers and contract drafters) to better understand what their rights and obligations are, reduce risks, establish flexibility, and ensure that the contract becomes an enabling tool for better relationships.

For additional examples of use the linear approach when drafting contracts, refer to the IACCM Contract Design Pattern Library designed by Stefania Passera and Helena Haapio.

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[1] Dr. Werner Fröhling is an expert on intellectual property having worked with multiple international corporations and subject-matter organizations. He is currently the Managing Director and Chief IP Counsel of Flooring Technologies Ltd.

[2] ‘The Interconnection between Patents, Trademarks, Designs and Domain Names – Business Models & IP in Collaboration Scenarios’ (CONOPA Annual Conference, Copenhagen, 28–9 August 2008) [http://slideplayer.com/slide/4932537/] accessed 31 January 2020.

Mirjam Ros: Business Strategist with over 25 years of experience in the oil & gas, and aerospace industries and in R&D. Deepika Jeyakodi: A space lawyer, and a senior commercial contracts officer at an aerospace company in the Netherlands. Mirjam Ros and Deepika Jeyakodi are the authors of ‘The lnnovation Matrix‘, BIS Publishers, Amsterdam, 2019, and Chapter 15: Simple contracting for every step of collaboration/innovation in ‘Research Handbook on Contract Design’ edited by Marcelo Corrales Compagnucci, Helena Haapio, and Mark Fenwick, Edward Elgar Publishing, 2022.

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