Monthly Archives: October 2021

U.S. Decision in Omni Medsci Illustrates Continued Need for Proper Drafting When Attempting to Assign I.P.

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A recent cases handed down by the United States Court of Appeals provides a good example that, even today, in an age where courts have largely abandoned formalism, yes, some legal documents still need to reflect precise words to express certain things and make certain things happen.

The case at issue, Omni Medsci, Inc. v. Apple Inc., stems from a lawsuit by a company called Omni Medsci, Inc. (“Omni”) against the Apple corporation, for patent infringement. Omni thus sought to avail itself of certain remedies that American patent law affords patent holders, when a third party uses their invention, once it’s been patented, without first obtaining a license to do so.

Unfortunately for Omni in this case, Apple was diligent about making its homework, and obtained a copy of the 1992 employment agreement of a university researcher. The rub? This agreement, which purported to transfer the invention (patent) rights of this inventor to the University of Michigan (the “University”), did so by using language which was, shall we say, less than ideal. Indeed, the clause of the employment agreement at issue supposed to transfer the intellectual property (“I.P.”) rights over the work of this employee (to the University), tried to do so by a somewhat ellipical sentence, to the effect that I.P. which resulted from research by this employee “shall be the property of the University,”. That’s right, no active verb, no present tense, just a statement of (apparent) fact that his work would (eventually) belong to the University. Oh ho.

The court of appeals agreed with Apple that this fell somewhat short of actually expressing an intent to assign I.P. rights right then and there, including because of the future tense and the fact that nowhere were the verbs “assigning” or “transferring” used in the key sentence. Rather than using usual phrasings like “assigns”, “agrees to assign” ou “does hereby grant title to…”, the University elected to use relatively convoluted and obscure language to express what could have been expressed plainly by using simple words that would adequately one’s intent to actually transfer I.P. on the spot. For the court, such language does NOT express an intent to transfer I.P., merely some sort of promise to eventually assign the signor’s rights, nothing more.

This being the case, the University did not possess the I.P. over the invention (patent) at issue when it purported to assign it to Omni. Classic case of: you can’t transfer something you don’t have. As a result, Omni is not the owner of the patent at issue and, thus, cannot legally sue Apple for infringement thereof. Checkmate.

Even though it may be a U.S. decision, this case nevertheless provides us with an excellent example of the fact that, yes, even in 2021, certain words DO matter, and should be used when attempting to effect certain things. Even though courts may, by and large, no longer get hang-up on formalities in legal documents, there remain certain essential things that will be required once you get in front of a judge. Eh, what do you know? Proper legal drafting is still important, who knew?

Drafting Minutes: More Art Than Science?

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I attended a worthwhile webinar on Friday about what may seems like a boring subject but that’s actually (legally) an important topic: the drafting of minutes for meetings like board of directors meetings. The speaker was Sylvia Groves, founder of Governance Studio, a firm that specializes in helping organizations like corporations handle and prepare good meeting minutes.

The truth is that most most lawyers and paralegals who often handle these tasks just learn about doing this as they go. As a result, the style and quality of minutes we see in minute-books vary considerably.

To start, I agree with the speaker that anyone who draft minutes should start by remembering why we’re doing it and what function meeting minutes have, legally, namely to provide with a prima facie evidence that such and such decisions were taken on this particular day by this particular group.

We should also remember that a ancillary goal is to provide evidence that certain decisions haver been formally taken, but also how these decisions were arrived at. We often forget that the goal of these minutes is partly to shield deciders (like directors) from eventual claims that they either did not exercise due care or that they failed in their fiduciary duty to protect those they were supposed to protect. Well prepared minutes should (ideally) protect those involves in an official capacity from such eventual claims.

To do this, Sylvia Groves, recommends minutes that are neither too long, nor too short, including avoiding minutes that limit the description of any point to the conclusion/decision to which the group arrived at. Rather, adequate minutes should provide a summary of the discussions about any given point and that allow us to know what the group considered, how, and based on what information and documents. What you want, is to make sure a trace is kept about the fact that the group was diligent about considering any issue it considered, along with the rational it applied in reaching the conclusion that culminated in any given decision.

Other pieces of advice for anyone preparing minutes include the following:

  • Remember that the main goal is to provide a record that a given decision was taken by the group, in accordance with requisite formalities – the minutes should of course reflect who attended and any vote submitted to the group, including the outcome of that vote, who may have abstained, etc.;
  • The goal is not to reflect every word that was uttered during that meeting -Avoid minutes akin to a mere transcription of what specific individuals said and how – the minutes should reflect that a group discussion was held, not generally who said what specifically;
  • Minutes should also generally avoid naming individuals, except when a specific person is reporting on something further to an assignment for the group (it’s a “team sport”, to use Sylvia Grove’s expression);
  • You should, of course, avoid minutes that fail to reflect what actually transpired during a meeting, including by claiming certain points were discussed or decided upon but that were not actually part of the meeting (yes, even if it was an oversight);
  • As with other legal documents, precision and terminology do matter – don’t use terms of art, acronyms, business lingo and buzzwords without first defining them;
  • Be consistent in your drafting (form-wise) and do use the correct names and titles of individuals (for example, don’t talk of the Comptroller if her title is actually Vice-President, Finance, etc.);
  • Ideally, do get rid of drafts and meeting notes once the minutes have been prepared, approved and signed -in case of eventual litigation, leftover documents like these could become a problem if they reflect something not reflected in the minutes .

Though 95% of board and shareholder formal decisions for small and medium-sized businesses (SMBs) are presented in written “resolutions”, several of the above-mentioned advice does apply. Definitely worthwhile points to keep in mind when drafting resolutions and minutes.

BTW: Governance Studio (which I have not relationship with) has several books on governance, including a short (free) one entitled 10 Secrets Directors Must Know About Minutes). Thank you Sylvia!

The Ever-Increasing Menace of Ransomware in 2021

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I attended the MAPLE-SEC conference this week which I thought was quite good to provide a good overview of the state of cybersecurity and cybercrime, in Canada, in 2021.

On thing we learned during the conference was that a majority of businesses faced with a ransomware incident during the last year, ended-up paying the criminals, to get their data back and/or to avoid its disclosure to third parties. Not too surprisingly, this type of crime is pretty consistently on the rise, as the typical victim ends-up capitulating and rewarding criminals, by paying some sort of ransom.

We also learned recently that a 2021 report by cybersecurity firm Sophos revealed that about a third of businesses were the victim of some sort of ransomware attack during the last year. That makes for ALOT of businesses and data!

With stats like these, it’s not surprising that insurers offering cyber-insurance products are now feeling the pinch. Cyber-insurers are now apparently losing considerable money because of this type of policy. Because of this, an expert in insurance law who spoke at the MAPLE-SEC conference warned everyone that cyber-risk insurance coverage is about to get substantially more expensive for businesses everywhere. His advice as to this was to get the best cyber-insurance you can afford, right now.

Recent stats clearly show ransomware is unfortunately here to stay, as we’re now seemingly paying the price for collectively minimizing the importance of cyber-security for so long.