Somewhere in the heart of Vermont, USA, there is a small radio station. Every day, with uncanny accuracy, the station tells its listeners the percentage chance of rain in the local area. For years, meteorologists, who possess some of the most advanced computer technology on the planet, puzzled as to how this small radio station could predict weather with a degree of accuracy they could only dream of.
One day, a bemused weatherman staked out the radio station, desperate to find out its secret. Imagine his surprise when he saw a disc jockey step outside, walk over to a field of 100 cows, count how many were lying down, and then broadcast that number as the percentage chance of rain that day. 'Keep it simple, stupid'. In the IT world, probably the best advice you could ever give anyone.
For months, I have been struggling with how best to manage the flow of information between internal and external lawyers, to ensure consistency across multiple jurisdictions and manage costs to a sensible level.
BEA has five in-house lawyers working throughout Europe, the Middle East
and Africa, which means day-to-day transactions in about 20 jurisdictions. Because of language difficulties and local legal nuances, we have had to establish strong relationships with local law firms in all of the countries in which we work.
So how best to work with them? Licence contracts required by US software companies – central to our business – have a peculiarity that is often alien to non-US lawyers. US Gaap (Generally Accepted Accounting Policies) lay down strict revenue reporting requirements that greatly restrict the flexibility of a company to
offer extended warranties, acceptance, enhanced limitation of liability – in fact, just about everything a customer's lawyer might want to change.
This presents a training problem, particularly as every company has its own spin on how these rules should be interpreted and applied, and also involves a cultural shift for any lawyer dealing with contracts on behalf of a US software company.
BEA is a leading e-business infrastructure software company, so we harnessed the expertise of the company and developed a solution that relies heavily on
web technology.
We have deconstructed our software licence agreement and we hyperlink every clause. This means whenever anyone clicks on a particular clause, they are taken to another document. The document contains a list of approved languages that can be substituted in the course of a negotiation. Against this are monetary limits and approval levels, allowing any user to know what flexibility they have in the negotiation process. It also includes a full justification of why we adopt a particular stance in relation to that clause. If a customer proposes an amendment to the limitation of liability clause, anyone negotiating the contract can see exactly what flexibility they have to respond to the customer.
We have been testing this internally for the last few months to see whether this building-brick approach to contract negotiation will actually work. The results have been better than expected as it has reduced significantly the time it takes to obtain internal approvals, and has enforced consistency of language across the region. This also reduces the chances of customers 'forum shopping' to get the best legal terms.
A lot of time and effort went into compiling our alternative language library, collating data from deals going back over many years. The next challenge is to roll this out to our external counsel. We are hosting a pan-European lawyers' forum in November to introduce this programme to our law firms.
The initiative short-circuits the need to give detailed training to external advisers as the hyperlinked software licence agreement contains all the information needed under any negotiation scenario. This is a plus for us. We are also reducing the perceived value of our external lawyers in contract negotiation, as much creative thought has been removed from the negotiation process, to be replaced by multiple-choice drafting. None of this will reduce the role of our external counsel in other matters, such as property and employment, but in the customer-facing world, we are looking for more predictability, speed and cost-effectiveness. Not always words associated with the legal profession, and a profound shift for some.
Nigel Cannings is the European general counsel for BEA Systems Inc.