"B" Is For Boilerplate

Lawyers are fond of boilerplate language. It is quick to add, it covers a wide variety of exposures that might otherwise be overlooked and, since many of the phrases have been around for ages, the meaning is not likely to be debated. It is quick, it is easy, but it can also miss the mark.

Non-lawyers are now asking "What is boilerplate?" It is a lawyer-speak for language that is considered more or less standard in all contracts, such as a disclaimer of consequential damages: "Vendor hereby expressly disclaims any and all liability for consequential damages, whether or not foreseeable and whether or not Vendor was advised of the possibility of such damages." Boilerplate is generally found under the heading of "Miscellaneous."

Difficulties arise, however, when boilerplate is cut and pasted without regard for the transaction in question. For instance, this language comes from an agreement for custom programming service:

Each party to this Agreement shall keep in force during the term of this Agreement a policy or policies of insurance providing the following coverages in commercially reasonable amounts from reputable underwriters:...comprehensive automobile liability, covering all owned, hired, and nonowned vehicles of a party or its affiliates.

Setting aside the questions of what are "commercially reasonable amounts" and how to identify a "reputable underwriter," I am still wondering why auto insurance is relevant to this deal. If memory serves, customer and vendor met twice - when customer drove to vendor's offices. That would not create an exposure for vendor. After the work was awarded, all communications were via telephone, Web conference and email. I struck the language (and vendor agreed) because I saw no raise questions as to whether customer was carrying insurance that would contribute nothing to the deal.

Two of my favorite bits of boilerplate:

1. Mask Works

"Vendor claims all right, title and interest in and to, works of authorship, inventions, mask works, discoveries and other intellectual property created in the performance of this Agreement." But what is a mask work?

According to Wikipedia, a mask work is:

A mask work is a two or three-dimensional layout or topography of an integrated circuit (IC or "chip"), i.e. the arrangement on a chip of semiconductor devices such as transistors and passive electronic components such as resistors and interconnections. By extension, it also refers to the copyright-like intellectual property right conferring time-limited exclusivity to reproduction of a particular layout. The layout is called a mask work because, in photolithographic processes, the multiple etched layers within actual ICs are each created using a mask, called the photomask, to permit or block the light at specific locations, sometimes for hundreds of chips on a wafer simultaneously.

Clearly a mask work can be quite valuable, and such works are specifically protected by US law (17 USC Section 904). At the same time, mentioning mask works in a contract for custom database design merely invites question and confusion, without adding to the protections given to either party.

2. All Rights Anywhere In The Known Universe

"Licensor hereby retains all right, title and interest in and to the intellectual property anywhere in the known universe."

Yes, I have seen this language in genuine contracts. I generally reply that, to my knowledge, the Martians have not agreed to recognize American patents and copyrights. According to one of my very senior colleagues, this language started in a New York firm when satellite communications started to become common. The reasoning was that a radio wave continues forever and ever, and that the copyright owners need appropriate protection. Of course, broadcasts do NOT continue forever, but will eventually dissipate into nothing. More importantly, if the Martians ARE watching reruns of "Lucy" and "My Mother The Car," copyright claims would have to be pursued in Martian courts.

There are, as far as we know, no Martians or Martian courts, but the example is a useful illustration. Copyrights and patents granted in the US provide protection in the US, and not necessarily in other countries. If you plan to market your new Killer Application or Better Mouse Trap in the EU, China, and South America, make sure you have enforceable rights in each region or nation. A boilerplate statement that "Vendor reserves all intellectual property rights anywhere in the world," may simply not do the job if you will be doing business in a nation that requires special registrations or which does not recognize US grants of rights.

Boilerplate can be a drafter's friend, if he/she has a collection generally tailored to his/her field of practice. But both parties are best served if they read the boilerplate with the same care as the main business terms. After all, an error in the boilerplate may not be simply "harmless error" that will not disrupt the deal.