The Ultimate Guide to Clause Libraries

A step-by-step guide

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What's the problem?

In this chapter, we investigate the traditional drafting process so we can identify its failings and see how clause libraries can help. If you are an experienced legal expert who has already experienced this process many times over, you are welcome to skip to chapter 2 (before the PTSD kicks in). 

Story time: Lucille drafts a license agreement 

Meet Lucille.

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Lucille is a junior associate in a prestigious law firm, with a little under 2 years of experience under her belt. She is no complete rookie, but she does not have a wealth of knowledge to draw upon when engaging in legal drafting. 

Lucille works for Rob, a partner at the law firm, who hands her a new assignment: “Create the first draft of a license agreement, taking into account that:

  • our client is the licensor (so the draft should be licensor-friendly), 
  • the subject matter is a trademark license, and 
  • the license should be non-sublicensable, remunerated and globally applicable”.

In a real-life scenario, the instructions would likely be much more exhaustive. For the sake of brevity, let's focus on these three.

Rob thinks back on his own experience drafting these kinds of documents, takes a quick dive in his email inbox, and provides Lucille with a precedent document to start from. From there on out, it’s up to her. 

We will be talking quite a bit about “legal nuance” in this guide. We hope the term is self-explanatory. If that is not the case: legal nuances are all those (subtle) elements in a clause or document where different options present themselves to the drafter and where the latter has to make a choice in light of the legal (or commercial) position they find themselves in. 

Examples include:

  • Employment law – employee type
    • Fulltime or part-time 
    • White-collar or blue-collar employee
    • Independent or employee status
  • Corporate law – SPA pricing methodology
    • Fixed price
    • Locked box
    • Completion accounts
  • Data protection law – party relationship 
    • Controller - controller
    • Controller - processor
    • Processor - subprocessor

Nuance 1: “Our client is the licensor”

Lucille immediately realises the precedent that Rob gave her is an outright disaster. It’s an old contract dating back 16 years ago, before a major legislative change shook up the legal landscape, so many of the provisions are outdated. Furthermore, the document was drafted for a previous client which did not act as the licensor but instead as the licensee.

There is often a curious disconnect between senior legal experts and junior legal experts when it comes to precedent documents. The former – thanks to their years of experience – are all too eager to believe that “they have something like that lying around.” The latter cannot find that material if it does not exist, and lack the experience to find it if it does. 

It’s evident that Lucille will need to find some replacement clauses to deal with the invalid clauses and the fact that she needs to make this document more licensor-friendly. 

She starts by going through her own email inbox to see if she has ever worked with a document like the one she is currently drafting, but she has limited experience and so limited information to draw on. She takes a quick look through the organisation’s document management system —  but since she cannot draw upon her own experience, she has trouble finding the right keywords to find the right document. She spends a lot of time analysing several of these documents to see if the required legal nuance is there. Many coffee cups later, she finally manages to cobble together a few clauses that are useful, but is forced to resort to a complete rewrite for the rest. 

Lucille takes a quick look at the amount of time she has already spent and the nerves creep in. “Surely it’s not supposed to take this much time?” As a young and ambitious lawyer, she is keen to prove herself to the partner in charge, so she decides to write off an hour she has spent on the work already.

Nuance 2: “The subject matter is a trademark license”

Intellectual property licensing tends to be similar enough in that a trademark license can have a lot of clauses in common with other kinds of intellectual property like copyright or designs. Nevertheless, some idiosyncrasies remain, which Lucille now has to deal with. 

Nervous about the time she has already wasted trying to find the right clauses, Lucille finds the courage to go knock on some doors. She explains her situation to a few senior colleagues and asks whether they can assist by sending over a few clauses or a precedent contract with the trademark-focus she is after.

She’s in luck: one of her colleagues, having experienced this process many times before, has begun to keep a rudimentary database of precedents and clauses. The colleague in question sends her over some material and Lucille thanks her lucky stars that she doesn’t have to underbill again. 

Nuance 3: “The license should be non-sublicensable and remunerated”

Lucille’s trademark licensing agreement is coming along nicely. She has already completed two of the three assignments given to her. She now simply has to tidy everything up to change the scope of the license as per Rob’s instructions. 

Fortunately for her, the document contains the following scope clause:

Screenshot of a contractual clause

She makes the necessary changes to the words “sublicensable” and “non-remunerated” and she’s set. 

Being the detail-oriented lawyer she is, Lucille subjects the document to a final “sanity check”. She has been through this process of sanity-checking before and made a list of elements to watch out for:

  • spellcheck and grammar check
  • consistent numbering 
  • consistent styling 
  • correct use of terminology (she doesn’t want to refer to the client for which the precedent was created!) 
  • cross-references all still functional (spoiler alert: they weren’t, and she was forced to find and dive back into the precedent document she got the offending clause from to find out what clause it was supposed to reference, losing another 30 minutes) 

With her sanity check out of the way, Lucille proudly presents the document to Rob… 

…who finds several fatal flaws within 5 minutes of reviewing. 

Lucille had altered the “Scope” clause, but neglected to make any additional changes throughout the document. 

There was still a clause setting out the rules by which sublicensing could occur, which should not have been allowed in the first place.

There was no clause on payment modalities, which is of course crucial if the license is remunerated.

There was still a clause discussing “the Territories” where the license applies, despite the license being globally applicable.

Lucille essentially forgot that the legal nuance she introduced in the scope clause did not carry over to other parts of the document. 

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