By Electra Japonas, CEO at TLB + Co-founder of oneNDA & Claustack.
One argument that’s been heard throughout oneNDA is that the ‘standardisation’ element of the initiative, which has been highlighted over and above the ‘open source’ element of the project, is in fact hindering its value because contracts are just too hard to completely standardise and lawyers will always want freedom of authorship. We’ve heard various voices out there saying that actually, the main value of oneNDA is that it’s open source – unlike most of the legal content out there.
Our view is, and always has been, that even if there are 15 standards, that’s better than 20 million different templates. Also, standardisation has been extremely successful in other areas of the law (ISDA, Construction, SCCs etc) – oneNDA is the application of the same principles to a commercial law ‘horizontal’ rather than an industry specific ‘vertical’. We think the reason this hasn’t happened before (or has happened but with less success) is that there is no one association or body driving standards or better ways of working for the general commercial legal landscape – which is why a community approach was so suitable. Standards are in fact a staple in other industries like the software or hardware manufacturing world. Law, on the other hand, is severely lacking.
oneNDA prohibits changes other than those that are expressly allowed in the variables section (we’re calling this ‘hard standardisation’). Some people have said that if they’d been able to add just one little thing, they’d be in a position to adopt it immediately. We have always questioned whether this is in fact true or whether we’d actually be deterring the people who agree that standardisation is the way forward and have adopted oneNDA on the basis that it’s non-negotiable. We’ve concluded that the non-negotiable nature of oneNDA and the time and cost-savings this results in, are benefits that far outweigh giving lawyers freedom of authorship.
The original objective of oneNDA was to reduce negotiations and therefore time and cost expended on these documents that add little to no value by getting everyone to agree on one NDA. Our paramount objective therefore was standardisation with open source being a side-element that we thought was required in order to increase adoption.
Hard standardisation vs soft standardisation
The value of ‘hard standardisation’ (having a non-negotiable document) is that if we’re all on the same standard and we know we can’t change it, we save ourselves a load of time and money by not negotiating (often) silly points that no one really cares about. The outcome of everyone being able to add their own language (‘soft standardisation’) is that everyone will end up with their own ‘flavour’ of oneNDA resulting in a world where we all have to go back to reviewing, redlining and negotiating. Not ideal and certainly not in the spirit of the initiative.
The barrier hard standardisation creates is that often companies will have a genuine need to make a change because it is substantial and can have a significant impact. We’ve never argued that this wasn’t a valid use-case so what we’ve said is that if you change oneNDA, you can no longer call it ‘oneNDA’ and that having a standard that works for 80-90% of the instances in which one needs an NDA is a huge improvement to the current way we work where we use different templates for 100% of the transactions we enter into.
This now opens up a second thread of deep philosophical musings within the realms of the standardisation movement, which is how we measure success and also how we differentiate a ‘standard’ from a ‘good template’.
The paramount objective of the initiative has always been to save time and cost negotiating by agreeing to the same template. There are a few success criteria, each of which comes with its own challenges:
- Cost and time saving: success is ultimately measured by how much cost and time oneNDA has saved for companies. But this is a really hard metric to measure without direct input from its adopters. One way to get this is to spend (significant) resource on gathering this information directly from the adopters, although in many instances, adopters don’t have the data to compare the ‘before and after’ considering legal ops is a relatively nascent function and CLMs are only just about going mainstream.
- Adoption: adoption is another way of measuring success, but again, that relies on people telling us whether they’ve adopted it. And even if someone says they have adopted it, it’s not really a measure of how much time and money they’re saving as it could be that counterparties aren’t accepting it, or companies have said they’ve adopted it without actually rolling it out. However, this is the only way to determine whether a form is in fact a ‘standard’ so measuring adoption is key.
- Use: another way is to measure how much the document is being used as well as how the document is being used, whether there are pushbacks on certain clauses that we could then use to iterate on the document and make it better. However, this option requires tech and obliging everyone to use our tech to facilitate oneNDA would itself reduce use. We wanted this document to be tech agnostic so anyone could use it and the CLMs of the world could also host it without concern in order to increase adoption. We thought about releasing oneNDA as an API that CLMs call when a user wishes to send it out but from our research, we’ve found that many CLMs are not geared up for this.
- Downloads: finally, the loosest way of measuring success is number of downloads. However, this doesn’t actually demonstrate that oneNDA has an impact – only that it’s had interest.
Our conclusion is that none of the above metrics are perfect. In fact, these are all very challenging and difficult problems to solve. However, our view is that in order for anyone to be able to call something a ‘standard’ there needs to be an element of consensus that it is in fact a standard – so measuring adoption is key.
The meaning of ‘standards’
The question of what constitutes a standard over a ‘good template’ is important. Merriam-Webster defines a ‘standard’ as ‘something established by authority, custom, or general consent as a model or example’. If a form is unilaterally issued and labelled a ‘standard’ without it having gone through a process of iteration, wide acceptance or public consultation and subsequently, been adopted by organisations as their own, it cannot be considered a standard. It can be a really great template, but it’s not a standard.
So what’s a ‘standard’ then?
After great deliberation, here’s what we consider a standard to be:
1. Agreements that have been created through a blend of input from a committee of legal professionals and input from the wider community before the document is issued and subsequently widely adopted by the community.
2. Template agreements that have been created by a committee of legal professionals through a process of iteration, but not had input from the wider community. The creation process should be transparent and public. This type of template will only be considered a standard once it’s been widely adopted by the community.
3. Template agreements that have been ‘crowd-sourced’ by the broader community without input from a committee and have subsequently been widely adopted by the community.
What is NOT a standard?
1. Templates created by individuals or single organisations without wider input and which are not widely accepted, adopted, known or used.
2. Templates downloaded from Practical Law (PLC) or other similar subscription
The standardisation movement isn’t just about creating a number of great templates that people can use for free. Sure, the open-source element is beneficial but it is not the main value to the community nor what the philosophy of oneNDA is based on. The real benefit is the community consensus itself – that’s the bit that’s most powerful and industry-shifting. Having a significant market share agreeing that a certain template is a ‘standard’ is what will drive the real improvements to the way we currently contract and what will ultimately reduce the cost, time and effort for businesses worldwide.
Thanks Electra for this great educational think piece! Standardisation and the positive debate around the issues connected to it is only going to grow, especially as more and more lawyers engage with the benefits of this approach. Looking forward to seeing how things develop across 2023 and into 2024.