What we considered plagiarism in law school becomes good business in practice. Lawyers routinely repurpose internal precedent and wholesale copy documents available on EGDAR and other free and subscription sources. It has become so prevalent that transactional documents are becoming more standardized simply through the act of reuse. (See, Measuring the Consistency of Legal Documents)
Such reuse allows contract analysis to trace back lines of precedent and detect lines of similar documents having the same origin, just as we can trace relationship in the genetic code of living organisms. This post will explore two types of genetic markers in deal documents.
Last week, I studied a set of 106 Intellectual Property Security Agreements, collected from EDGAR. The set comprises 100 base clauses and between 5 and 7 distinguishable genetic lines of contract, depending on how granular you distinguish one thread from another. Most curiously, they share only two common clauses (Grant of Security Interest and Rights and Remedies) and the majority of the security agreements filed with EDGAR containing just these two clauses come from a single lender (Silicon Valley Bank).
(a) Structural Commonality
The first method of detecting shared characteristics is the structure of the documents, namely the presence or absence of particular clauses. The graphic shows the structure of 5 core IP Security Agreement models, each built from 10 or more example agreements. Clauses highlighted in green show the clauses common to all models; clauses in red are unique to each model.
Such reuse allows contract analysis to trace back lines of precedent and detect lines of similar documents having the same origin, just as we can trace relationship in the genetic code of living organisms. This post will explore two types of genetic markers in deal documents.
Last week, I studied a set of 106 Intellectual Property Security Agreements, collected from EDGAR. The set comprises 100 base clauses and between 5 and 7 distinguishable genetic lines of contract, depending on how granular you distinguish one thread from another. Most curiously, they share only two common clauses (Grant of Security Interest and Rights and Remedies) and the majority of the security agreements filed with EDGAR containing just these two clauses come from a single lender (Silicon Valley Bank).
(a) Structural Commonality
The first method of detecting shared characteristics is the structure of the documents, namely the presence or absence of particular clauses. The graphic shows the structure of 5 core IP Security Agreement models, each built from 10 or more example agreements. Clauses highlighted in green show the clauses common to all models; clauses in red are unique to each model.
While the short form, Model 01, may not predate the others, it has a foundational relationship to all the other models.
(b) Language Commonality
The second method is to look for similar blocks of text. At the end of this post, because it is a bit long, I added the text of a Power of Attorney clause from 6 different IP Security Agreements. They clearly were based on a common ancestor. And, interestingly, most have some relationship to Minneapolis.
These language markers can be even more granular. Each clause may itself be constructed from sub-elements. The approach first separates standard from deal specific language. And, within the standard language, we can see a remarkable degree of consistency. For example, within the Organization clause in the Representations and Warranties of a Credit Agreement, we can detect clause components, and statistically measure the consistency of the language.
Using the Markers
Identifying and tracing the genetic makers enables the categorization of documents into sub-types or models. Then by identifying the characteristics of each model, it is then possible to more clearly see how make the process more efficient. Rather than review 100's of similar documents, we can now analyze a small handful of representative models and determine whether these represent distinct business transactional or are more reflective or regional and personal preferences.
(b) Language Commonality
The second method is to look for similar blocks of text. At the end of this post, because it is a bit long, I added the text of a Power of Attorney clause from 6 different IP Security Agreements. They clearly were based on a common ancestor. And, interestingly, most have some relationship to Minneapolis.
These language markers can be even more granular. Each clause may itself be constructed from sub-elements. The approach first separates standard from deal specific language. And, within the standard language, we can see a remarkable degree of consistency. For example, within the Organization clause in the Representations and Warranties of a Credit Agreement, we can detect clause components, and statistically measure the consistency of the language.
| Document 1 SECTION 3.01. Organization; Powers. Each Credit Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization , has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business, and is in good standing, in every jurisdiction where such qualification is required. Document 2 Section 4.1 Corporate Existence and Power. The Borrower and its Subsidiaries are each corporations duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation , and are each duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by them makes such licensing or qualification necessary , except where the failure to be so licensed or qualified (i) will not permanently preclude the Borrower or any Subsidiary from maintaining any material action in any such jurisdiction even though such action arose in whole or in part during the period of such failure, and (ii) will not result in any other Material Adverse Change. The Borrower has all requisite power and authority, corporate or otherwise, to conduct its business, to own its properties and to execute, deliver, and perform all of its obligations under, the Loan Documents, the Pledged Securities, the Related First Mortgage Bonds and the Indentures. | Common Language The [parties]: (a) are each duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation ,(b) each have all requisite power and authority, corporate or otherwise, to conduct its business, to own its properties and to execute, deliver, and perform all of its obligations under this Agreement , and(c) are each duly licensed or qualified to transact business in all jurisdictions where such licensing or qualification necessary . |
Using the Markers
Identifying and tracing the genetic makers enables the categorization of documents into sub-types or models. Then by identifying the characteristics of each model, it is then possible to more clearly see how make the process more efficient. Rather than review 100's of similar documents, we can now analyze a small handful of representative models and determine whether these represent distinct business transactional or are more reflective or regional and personal preferences.
Example of common language markers in IP Security Agreements
Below is a Power of Attorney clause from 6 different security agreements. The caption shows the title of the agreement, the name of the lender and the date of the agreement. In the text of the clause, words in green text show consistent language; words in black text and underlined displays divergent language.
TRADEMARK SECURITY AGREEMENT
TCF National Bank (Golden Valley); October 1999
i) POWER OF ATTORNEY. TO FACILITATE THE SECURED PARTY'S TAKING ACTION UNDER SUBSECTION (g) AND EXERCISING ITS RIGHTS UNDER SECTION 6, EACH DEBTOR HEREBY IRREVOCABLY APPOINTS (WHICH APPOINTMENT IS COUPLED WITH AN INTEREST) THE SECURED PARTY, OR ITS DELEGATE, AS THE ATTORNEY-IN-FACT OF SUCH DEBTOR WITH THE RIGHT (BUT NOT THE DUTY) FROM TIME TO TIME TO CREATE, PREPARE, COMPLETE, EXECUTE, DELIVER, ENDORSE OR FILE, IN THE NAME AND ON BEHALF OF SUCH DEBTOR, ANY AND ALL INSTRUMENTS, DOCUMENTS, APPLICATIONS, FINANCING STATEMENTS, AND OTHER AGREEMENTS AND WRITINGS REQUIRED TO BE OBTAINED, EXECUTED, DELIVERED OR ENDORSED BY SUCH DEBTOR UNDER THIS SECTION 3, OR, NECESSARY FOR THE SECURED PARTY, AFTER AN EVENT OF DEFAULT, TO ENFORCE OR USE THE TRADEMARKS OR TO GRANT OR ISSUE ANY EXCLUSIVE OR NON-EXCLUSIVE LICENSE UNDER THE TRADEMARKS TO ANY THIRD PARTY, OR TO SELL, ASSIGN, TRANSFER, PLEDGE, ENCUMBER OR OTHERWISE TRANSFER TITLE IN OR DISPOSE OF THE TRADEMARKS TO ANY THIRD PARTY. THE DEBTORS HEREBY RATIFY ALL THAT SUCH ATTORNEY SHALL LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. THE POWER OF ATTORNEY GRANTED HEREIN SHALL TERMINATE UPON THE TERMINATION OF THE CREDIT AGREEMENT AS PROVIDED THEREIN AND THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS (AS DEFINED THEREIN).
PATENT AND TRADEMARK SECURITY AGREEMENT
Wells Fargo Bank NA; December 29, 2006
k) POWER OF ATTORNEY. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Credit Agreement as provided therein and the payment and performance of all Indebtedness.
PATENT AND TRADEMARK SECURITY AGREEMENT
Wells Fargo Bank NA; March 31, 2006
k) Power of Attorney. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Credit Agreement as provided therein and the payment and performance of all Obligations.
PATENT AND TRADEMARK SECURITY AGREEMENT
Pala Investments Holdings Limited (Channel Islands, Switzerland); December 12, 2007
k) POWER OF ATTORNEY. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Debenture as provided therein and the payment and performance of the Indebtedness.
TRADEMARK SECURITY AGREEMENT
Commerce Bank NA (New York); September 25, 2003
i) Power of Attorney. To facilitate the Secured Party's taking action under subsection (h) and exercising its rights under Section 7, the Debtor hereby irrevocably appoints the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Trademarks or to grant or issue any exclusive or non-exclusive license under the Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein is coupled with an interest and shall be irrevocable until the termination of the Loan Agreement as provided therein and the payment and performance of all Obligations (as defined therein).
PATENT AND TRADEMARK SECURITY AGREEMENT – PARENT
St. Paul Venture Capital VI, LLC; June 6, 2001
k) POWER OF ATTORNEY. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or necessary for the Secured Party, after the occurrence and during the continuance of an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon final and indefeasible payment and performance of all Obligations.
Below is a Power of Attorney clause from 6 different security agreements. The caption shows the title of the agreement, the name of the lender and the date of the agreement. In the text of the clause, words in green text show consistent language; words in black text and underlined displays divergent language.
TRADEMARK SECURITY AGREEMENT
TCF National Bank (Golden Valley); October 1999
i) POWER OF ATTORNEY. TO FACILITATE THE SECURED PARTY'S TAKING ACTION UNDER SUBSECTION (g) AND EXERCISING ITS RIGHTS UNDER SECTION 6, EACH DEBTOR HEREBY IRREVOCABLY APPOINTS (WHICH APPOINTMENT IS COUPLED WITH AN INTEREST) THE SECURED PARTY, OR ITS DELEGATE, AS THE ATTORNEY-IN-FACT OF SUCH DEBTOR WITH THE RIGHT (BUT NOT THE DUTY) FROM TIME TO TIME TO CREATE, PREPARE, COMPLETE, EXECUTE, DELIVER, ENDORSE OR FILE, IN THE NAME AND ON BEHALF OF SUCH DEBTOR, ANY AND ALL INSTRUMENTS, DOCUMENTS, APPLICATIONS, FINANCING STATEMENTS, AND OTHER AGREEMENTS AND WRITINGS REQUIRED TO BE OBTAINED, EXECUTED, DELIVERED OR ENDORSED BY SUCH DEBTOR UNDER THIS SECTION 3, OR, NECESSARY FOR THE SECURED PARTY, AFTER AN EVENT OF DEFAULT, TO ENFORCE OR USE THE TRADEMARKS OR TO GRANT OR ISSUE ANY EXCLUSIVE OR NON-EXCLUSIVE LICENSE UNDER THE TRADEMARKS TO ANY THIRD PARTY, OR TO SELL, ASSIGN, TRANSFER, PLEDGE, ENCUMBER OR OTHERWISE TRANSFER TITLE IN OR DISPOSE OF THE TRADEMARKS TO ANY THIRD PARTY. THE DEBTORS HEREBY RATIFY ALL THAT SUCH ATTORNEY SHALL LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. THE POWER OF ATTORNEY GRANTED HEREIN SHALL TERMINATE UPON THE TERMINATION OF THE CREDIT AGREEMENT AS PROVIDED THEREIN AND THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS (AS DEFINED THEREIN).
PATENT AND TRADEMARK SECURITY AGREEMENT
Wells Fargo Bank NA; December 29, 2006
k) POWER OF ATTORNEY. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Credit Agreement as provided therein and the payment and performance of all Indebtedness.
PATENT AND TRADEMARK SECURITY AGREEMENT
Wells Fargo Bank NA; March 31, 2006
k) Power of Attorney. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Credit Agreement as provided therein and the payment and performance of all Obligations.
PATENT AND TRADEMARK SECURITY AGREEMENT
Pala Investments Holdings Limited (Channel Islands, Switzerland); December 12, 2007
k) POWER OF ATTORNEY. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon the termination of the Debenture as provided therein and the payment and performance of the Indebtedness.
TRADEMARK SECURITY AGREEMENT
Commerce Bank NA (New York); September 25, 2003
i) Power of Attorney. To facilitate the Secured Party's taking action under subsection (h) and exercising its rights under Section 7, the Debtor hereby irrevocably appoints the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, financing statements, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or, necessary for the Secured Party, after an Event of Default, to enforce or use the Trademarks or to grant or issue any exclusive or non-exclusive license under the Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein is coupled with an interest and shall be irrevocable until the termination of the Loan Agreement as provided therein and the payment and performance of all Obligations (as defined therein).
PATENT AND TRADEMARK SECURITY AGREEMENT – PARENT
St. Paul Venture Capital VI, LLC; June 6, 2001
k) POWER OF ATTORNEY. To facilitate the Secured Party's taking action under subsection (i) and exercising its rights under Section 6, the Debtor hereby irrevocably appoints (which appointment is coupled with an interest) the Secured Party, or its delegate, as the attorney-in-fact of the Debtor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of the Debtor, any and all instruments, documents, applications, and other agreements and writings required to be obtained, executed, delivered or endorsed by the Debtor under this Section 3, or necessary for the Secured Party, after the occurrence and during the continuance of an Event of Default, to enforce or use the Patents or Trademarks or to grant or issue any exclusive or non-exclusive license under the Patents or Trademarks to any third party, or to sell, assign, transfer, pledge, encumber or otherwise transfer title in or dispose of the Patents or Trademarks to any third party. The Debtor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted herein shall terminate upon final and indefeasible payment and performance of all Obligations.
Related Note:
Some of you might ask is it possible to trace back the lines of precedent to the original author? Probably not: we lack sufficient historical data to go back that far. Lawyers have been repurposing forms for a very long time. The earliest I can trace the development of forms is 1392 when the Worshipful Company Scriveners first employed notaries.
OK that was a bit facetious; another way to address the question is to ask whether an attorney could claim copyright for their agreements. Or, put another way; is the wholesale copying of precedent from EDGAR or other sources a violation of fair use? In most cases the answer is probably not. In order to garner protection the drafter would have to show originality—difficult when it's easy to show that vast tracks are plagiarized or show that it is a protected compilation (a reordering of existing materials)—but such recompilation could also be found in numerous pre-existing precedent. See, Copyright and the Contract Drafter, Kenneth A. Adams, New York Law Journal Wednesday, August 23, 2006.
OK that was a bit facetious; another way to address the question is to ask whether an attorney could claim copyright for their agreements. Or, put another way; is the wholesale copying of precedent from EDGAR or other sources a violation of fair use? In most cases the answer is probably not. In order to garner protection the drafter would have to show originality—difficult when it's easy to show that vast tracks are plagiarized or show that it is a protected compilation (a reordering of existing materials)—but such recompilation could also be found in numerous pre-existing precedent. See, Copyright and the Contract Drafter, Kenneth A. Adams, New York Law Journal Wednesday, August 23, 2006.
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