So You Want to Negotiate A High-Tech Deal

 

I have been practicing law for approximately 25 years and concentrating my practice in the area of negotiating and drafting contracts for the purchase or sale of High Technology for the last 13 years. I recently came across Mark Grossman’s guest blog posting in IP In Brief entitled, “A How-To Guide for Negotiating Tech Deals”. This is a must read. If you are considering making any high-tech purchase, I highly recommend that you take the time to read this article in order to gain an insight and perspective that is little discussed but impacts your deal greatly. As a practitioner in this area, I found myself one early Saturday morning sitting in my office reading Grossman’s article and shouting “Yes, Yes, Yes”. I was fist-pumping and if anyone was near to me they would have gotten a high-five. His approach is straight-forward and no nonsense.

Andrew Berger’s introduction sets the stage and reveals to the reader for the first time the concepts of “unwritten industry norms” and “choreographing your concessions around areas where you’re not likely to win the battle anyway”. Grossman starts his analysis by pointing out the obvious (i.e. the first drafts of the agreements are poorly written). I think this was my first “Yes” that I heard myself say out loud while reading in my office all alone. I can’t tell you how many times I’ve received new templates or first drafts of proposed new agreements which were simply a mishmash of cuts and pastes from older useless documents. My second “Yes” and my first fist-pump was Grossman’s admission that the sales teams are in charge of the deal. I freely admit, and in the spirit of full disclosure I happily accept that the sales team is the entity that brings the deal to me. Without them I would be out of work. However, Grossman points out, without actually stating it, that the sales team views the attorney as an obstacle that must be overcome. Perhaps it was the way he explained the process of requesting a revision to some contract language to more accurately describe the issue and then commented,

“All the while, I can feel the sales team seething at me because of my absurd requirement that the contract accurately state the deal”.

That comment garnered fist pump number two and a loud chuckle. I would have enjoyed it if Grossman had discussed the mirror image on the buy side. I have represented both Buyers and Sellers. By the time the deal comes to me from the buy side (i.e. the Project Team), there is what is commonly called a “love affair” with the functionality of the proposed software package. In essence the Project Team “has been sold” and they know that they cannot live without having this software in their repertoire.   As an attorney, I get that same glare from the Buyers when revisions for clarity are requested.

Grossman has a very salient section on the “Norms in the Industry”. To put it simply, why waste your time arguing points that will not be changed. These “Norms” need to be understood simply due to their peculiarity. He has an excellent section explaining Warranties in the industry and how they differ from what would be expected. Limitations on Liability is another section worth reading because it goes against what a Buyer expects and readily requires from its vendors. I must confess it was good for me to read these sections simply because I have been so inculcated with these industry “Norms” that I needed a refresher on why outsiders would consider these absurd.

He concludes his article by stressing the practical side of mutuality. A software vendor can and usually does readily accept revisions to sections to make the obligations mutual. One must remember that the parties are usually starting from paper that was first drafted by the vendor and so the natural urge to make the language one-sided must be addressed and overcome where possible.