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Commercial - Insight

Insight is a quarterly newsletter which aims to keep clients and contacts up-to-date with the latest legal developments in commercial law.

Latest Issue

In our latest edition of Insight Eleanor Markey looks at the recent pricing spat between Tesco and Unilever and other cases of interest with a reminder of the fines if firms don't comply with the EU regulations. We also look at oral variations to contracts and if some set-top boxes are infringing copyright. Finally, we bring you the latest team news outlining our recent appointments plus Hayley Morgan looks back at her recent visit to the AEL's IP Group's meeting in Madrid.

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Five top legal tips for start-up businesses

Thursday 26th May 2016

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Insight - Commercial Law Update - Issue 8

When you start out on your journey from start-up to established business, there can seem to be a million things on your to-do list – a list on which legal issues often feature a long way down.

While your focus should always be on building your business and developing your product, there are a few simple things which any start-up can do to save some serious headaches down the line.

Agreement between co-founders

Start-ups thrive on the spirit of cooperation which exists in the exciting early days. However history is littered with friends who fell-out as their business began to succeed (or fail). A fairly simple agreement at the outset setting out things such as the roles, ownership percentages and capital contributions of each of the co-founders can go a long way to ensuring disagreements get settled quickly, or in the worst-case scenario ensure a relatively simple and low-cost divorce!

Non-disclosure agreement

Non-disclosure agreements are critical if your start-up is based around a novel idea or invention. A simple non-disclosure agreement will prevent a partner, developer or investor from using your confidential information for its own purposes.

Often potential investors will resist any attempt to sign them up to a non-disclosure agreement. In such cases, it is important to tread carefully on how much information you disclose. If you are overly secretive you risk putting off a potential investor, however any fan of the TV series Silicon Valley can tell you the risks of giving away too many of your trade secrets.

Intellectual Property ownership

It is crucial to understand that, without an agreement to the contrary, most intellectual property rights vest in the creator of the work. This means, for example, that if you engage a developer to write code for you, then in the absence of a written agreement they will be the owner. You should always check the terms and conditions of any outside consultants you engage, and consider signing them up to your own terms.

Plenty of start-ups get a few months down the line and, on the eve of launch, receive a letter of claim from an existing business with the same, or a similar, name that they are proposing to use. Rather than proceeding for months under a taken name, consider carrying out a brief trade mark and domain name search on your proposed business name to uncover any potential issues before they arise.

Incorporation

It will normally be a routine decision to incorporate a new company through which to run your business. As a separate legal entity the company, and not the owners themselves, will be party to the contracts and ultimately liable for any failure to meet its obligations or liabilities. Incorporation can provide tax advantages and may give third parties contracting with the business some level of comfort as to the transparency and legitimacy of the business.

Terms and conditions

Having a well-drafted set of standard terms will reduce your business’s liability, offer mechanisms for recovery when customers default and provide certainty in your favour when issues arise. An up-front investment in a favourable set of standard terms brings uniformity and certainty to every contractual relationship of your business. It can be difficult to impose your terms after the event, and therefore putting together a solid set of terms and conditions as soon as possible should always be a priority for any business.

Need advice or wish to talk to us?

At Brabners we advise businesses from start-up stage right through to large PLC’s and private corporations. If you run a start-up and would like an informal steer on any steps your business can take to minimise its exposure please do not hesitate to contact us.


Jacob O’Brien

Solicitor
Tel: 0161 836 8803
Email: jacob.obrien@brabners.com


Business Rocks 2016: The tech innovation event held on 21-22 April

Thursday 26th May 2016

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Insight - Commercial Law Update - Issue 8

On 21 and 22 April, Manchester Central opened its doors to Business Rocks 2016. The brainchild of founder Jonny Cadden, Business Rocks takes inspiration from SXSW and Dublin’s Web Summit and is aiming to become Europe’s largest gathering of techies.

This year Nik White, Richard Hough, Sam Mabon and Jacob O’Brien attended to explore and chat with the huge number of tech businesses exhibiting at the event, from small start-ups right up to giant corporations. The biggest draw was of course the appearance of Steve ‘Woz’ Wozniak, who gave the keynote address to a packed house with standing-room only.

You can view a short video clip of the event along with a picture gallery by visiting the Business Rocks website.

Next year’s event will be held on 3-4 May and we look forward to seeing you there for an even bigger event than 2016!

In the meantime, if you need any advice with your legal matters please don’t hesitate to get in touch with us.


Jacob O’Brien

Solicitor
Tel: 0161 836 8803
Email: jacob.obrien@brabners.com


Brexit - pursued by a Bear: How Intellectual Property rights would likely be affected

Friday 6th May 2016

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Commercial Law Update

The EU Referendum Act 2015 received royal assent on 17 December 2015 and sets out the framework for the holding of a referendum in the UK and Gibraltar on whether the UK should remain a member of the European Union (EU). With a referendum date now set for 23 June 2016, many are wondering what the consequences of a ‘no’ decision (or Brexit) will be.

In reality, many areas of UK law and policy would likely be affected by a Brexit, particularly in relation to those areas which are based upon, and influenced by, EU provisions. The UK intellectual property law framework is particularly likely to be affected in the event of a Brexit, especially in light of its cross-border interests with the EU.

In this article, we will consider how intellectual property rights within the UK would likely be affected in the case of Brexit. There is an uncertainty as to how specific laws will be affected, however. No specific intellectual property points were raised in David Cameron’s renegotiation summit in Brussels in February. Equally, the most significant European treaties and regulations contain no provisions which address a member state’s exit of the EU, so it is difficult to accurately determine the impact a Brexit will have upon the implementation and validity of EU law in the United Kingdom.                              

However, having considered the current EU intellectual property law framework and the manner in which it is implemented in the UK, we can attempt to predict how a Brexit would affect the operation of intellectual property law within the UK.

The European Union Trade Mark (EUTM) and Registered Community Design (RCD) Systems

As already highlighted by many critics, a Brexit is most likely to affect the EUTM and RCD systems, both of which operate in a similar manner.

The recently amended European Union Trade Mark Regulation (207/2009) (the Regulation) governs the operation of the EUTM system. Any individual can apply to register a trade mark as a EUTM under the Regulation, and if successfully registered, such a right provides the EUTM owner unitary protection within all 28 member states of the EU (including the UK).

The Regulation clearly details how the EUTM system will operate in the event that the EU expands. However, it is silent as to how it will operate in the event that a member state leaves the EU. The wording of Article 1(2) of the EUTMR, which says that the use and existence of EUTMs shall not operate other than “in respect of the whole European Union”. This suggests that in the event of a Brexit, EUTM owners shall have no continuing EUTM rights within any countries outside of the EU. If this wording were taken literally, and no transitional provisions were put in place to allow EUTM owners the opportunity to ensure protection of their marks within the UK, EUTM owners would most likely have no registered trade mark rights within the UK.

However, it is probable that some transitional provisions would come into force which would allow the jurisdiction of EUTMs to extend to the UK, or for EUTM owners to convert their marks to UK marks following a Brexit. Such provisions could be implemented by the EU or the UK, but it seem doubtful that any legislation effectively extending the jurisdiction of EUTMs to the UK would be passed by the UK government, as doing so would effectively reduce the UK’s sovereignty in respect of trade mark law.

The adoption of subsequent EU legislation equally seems unlikely. This is particularly the case given that its trade mark legislation has been drafted and implemented in respect of the “European Community” or “European Union”. New legislation allowing a non-EU country to be included within a system, and benefit from rights, intended for those within the EU could potentially be seen as a slippery slope which defeats the purpose of having a clearly define EU. 

RCDs operate in a much similar manner to EUTMs and, like EUTMs, are registered with the EU IPO. Therefore, it is highly likely that RCD rights would be affected in a similar fashion to EUTMs.

So what could this mean for UK-based EUTM and RCD owners?

Taken literally, the wording of the Regulation suggests that if the UK were to leave the EU, the protection a EUTM and RCD affords owners would effectively be reduced so as to no longer include protection within the United Kingdom. As such, owners would need to ensure that their marks and designs are also registered as UK trade marks or UK registered designs with the UK Intellectual Property Office, if they wished for them to be protected within the UK, and would have to cover the cost of such applications. This would only be the case if no transitional provisions were implemented, however.

Are transitional provisions likely to be implemented?

Possibly.

Despite the concerns the UK and EU legislator may have implementing transitional provisions, as highlighted above, it seems unlikely that the EU and UK would allow EUTM owners to simply lose all of their trade mark rights within the UK. But how could transitional provisions operate?

The UK or EU legislator could implement provisions which allow EUTM owners to maintain their EUTM registrations and convert such marks to UK registrations for an additional fee. This method was historically used when Ireland became independent to the UK in the early 20th century, which provided UK registered trade mark owners with protection in Ireland whilst marinating their existing UK rights.

Pending EUTM application owners may also be offered a choice of whether to proceed with such applications in relation to the EU or simply convert their application to a UK-based application.

If such methods were exercised, it is also likely that each EUTM benefitting from seniority, would also benefit from such seniority within the United Kingdom.

Therefore, we suggest that EUTM owners, and particularly those with large portfolios of EUTMs, should begin to consider whether protection of their marks within the UK or EU, or both, is necessary and plan accordingly.

Would UK trade mark law be affected?

The majority of UK trade mark law is based upon EU legislation. For example, the Trade Marks Act 1994 is based almost exclusively on the wording of the EU Trade Marks Directive. However, legal critics believe that it is unlikely to be repealed in the event of a Brexit, particularly given that it has governed the operation of trade mark law within the UK for over 20 years.

UK trade mark law would be likely to diverge, however, and develop in a different manner to that of the European Union. Even to this extent though, any changes to the UK trade mark framework are unlikely to be substantial, particularly if the UK remains in the European Economic Area (EEA). This is because the UK will seek to maintain close ties with other EEA members, and the UK significantly changing its current national trade mark laws would likely be unpalatable to those members, the vast majority of whom remain within the EU and therefore have a harmonised trade mark law framework.

UK judges would have the benefit of exercising a greater level of freedom in their trade mark decisions, however. This is because they would no longer be required to interpret UK legislation in accordance with EU legislative provisions and case law. Whether judges would actually depart from EU decisions is a different matter, though, particularly if the UK remains in the EEA, as explained above.

On the other side of the coin, it must be remembered that some UK judges have previously disagreed with a number of EU trade mark decisions. These decisions were subsequently implemented into UK law. As such, it is possible that judicial freedom could result in such decisions being reviewed.

What about Patents and Copyright?

A Brexit would have much less of an impact on the operation of patents registered by the European Patent Office (EPO) and copyright.

In relation to patents, this is because, unlike EUIPO, the EPO was introduced by the European Patent Convention which a treaty entered into by European (as opposed to EU) countries. As such, a Brexit would not affect the UK being a party to the European Patent Convention.

Equally, a patent granted by the EPO is effectively converted into a package of national patents, and as such, will continue to be effective in each country which was a member state at the time of the grant, regardless of whether or not that country subsequently leaves the EU.

Brexit would also be unlikely to significantly impact upon the operation of UK copyright law as although some aspects of it are based upon EU Directives, the majority of it has developed independently of the EU and in that sense is territorial.

Unitary Patents and the Unitary Patent Court

Additionally, a separate type of patent known as the European Unitary Patent (EUP) (implemented under the Unitary Patent Court (UPC) agreement) which is proposed to come into force in 2017, could potentially be affected by a Brexit.

Unlike the EPO system, EUPs will only have effect within the EU and must be ratified before they have effect. A Brexit would require the existing draft of the UPC agreement to be re-written so as to extend its jurisdiction to either all non-EU countries, which seems unlikely, or just to the UK.

The UK would also be required to ratify the UPC agreement as the three member states with the highest number of European patents (France, Germany and the UK) are required to ratify it before it takes legal effect.

However, it is unlikely that the UPC agreement will be ratified before the referendum on the 23 June. Therefore, it is possible that the UK would choose not to ratify the UPC agreement in the event of a ‘no’ vote, as doing so would result in the UK entering into the UPC agreement in the knowledge that it would only participate for a limited amount of time, until its full exit from the EU. It is unlikely that the UK government would allow its sovereignty to be diminished by the UPC agreement for such a short period of time, so it is likely that the UK would choose not to ratify the UPC agreement in the event of a ‘no’ vote.  

If the UK did not ratify the UPC agreement, Italy or the Netherlands would be able to ratify it instead, but would only be able to do so once the UK fully exits the EU, which could take as long as two years. Seemingly though, this would require the wording of the current UPC agreement to be amended if it was to be entered into prior to the UK leaving the EU.

Other parts of the UPC agreement would also likely need to be amended in the event of a ‘no’ vote. Currently, the Central Division of the Unified Patent Court is set to be located in Paris, Munich and London. Obviously, having part of the Central Division located in the UK when it is not a member of the EU (and potentially not even the UPC agreement), is likely to be considered unappealing, although there is nothing in the current wording of the UPC to prevent this.

Conclusion

Although the above outlines how various types of intellectual property rights are most likely to be affected in the event of a ‘no’ vote, there is uncertainty as to what will actually happen.

We recommend that those who currently benefit from intellectual property right protection within the EU and UK take steps to plan for how such rights will continue to take effect in the UK in the event of a ‘no’ vote.

Need advice or wish to talk to us?

If you would like to discuss any matters about this please do not hesitate to contact us as soon as possible.


Colin Bell

Partner, Commercial team
Tel: 0151 600 3281
Email: colin.bell@brabners.com


 

You can find out more about how we can help you by visiting our IP & IT page


Have technological advances diluted ‘variation’ clauses?

Friday 26th February 2016

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Insight - Commercial Law Update - Issue 7

It is fairly common practice for contracts to contain a clause stating that any variation must be in writing and signed by both parties. These variation clauses are designed to ensure that both parties have clearly agreed to any changes in the terms of a contract. Traditionally this has been through a written document that is then signed by both parties to the contract.

However, two recent decisions of C&S Associates UK v Enterprise Insurance Company and Hughes v Pendragon Sabre Limited T/A Porsche Centre Bolton have had to look at whether the terms of a contract can be effectively varied through an exchange of emails.

C&S Associates UK v Enterprise Insurance Company

This case was between Enterprise, an insurance company, and C&S, an insurance claims handler. The parties had a binding agreement that C&S would handle third party moto insurance claims for Enterprise.

Enterprise required C&S to provide certain information to its external auditors, but C&S refused to do so. Enterprise considered this to be a repudiatory breach of contract, and combined with C&S’s alleged poor performance, Enterprise decided to terminate the agreement.

One issue which arose following termination was whether or not the parties had validly varied the terms of the agreement through email exchange between two companies, resulting in an increase of C&S’s fees. The agreement contained a standard variation clause which stated that variations could only be made to the contract if made in writing and signed by both parties.

The Court held that the parties had effectively varied their written contract through an exchange of emails. The decision was grounded on the rationale that generally variation clauses are included in agreements to ensure that their terms are not varied by unintentional oral agreements or informal documents. The Court concluded that such a clause should not prevent variations which, although not in paper-form or containing manuscript signature, otherwise satisfied the usual requirements of contract formation. As such, emails sent on behalf of the Directors of each company satisfied the requirement for variation as they were in writing, contained the necessary signatures in the form of an email footer, and there was evidence of clear intention by both parties that they would be bound by the email content.

Hughes v Pendragon Sabre Limited T/A Porsche Centre Bolton

This case was between Mr. Hughes, the owner of a classic car workshop, and Pendragon Sabre Limited (Pendragon), a Porsche sales executive.

In 2011, Porsche announced that it was going to produce a highly sought after limited edition car. Mr. Hughes contacted Pendragon via email, stating that he would like to place an order for the new model, subject to cost and availability. Pendragon confirmed receipt of his “intent to purchase” on the same day and stated that it would update him with any further information it received about the new model.

A few days later, Pendragon contacted Mr. Hughes and informed him that he needed to pay a £10,000 deposit for the vehicle and that he needed to visit its showroom that day in order to have priority on its order list. He did so, also signing a Vehicle Order Form which stated that “the Seller shall not be obliged to fulfil orders in the sequence in which they are placed”. It also contained a standard variation clause.

Pendragon then emailed Mr. Hughes stating that he would be given the first model that Pendragon received from Porsche. Pendragon was subsequently allocated a vehicle but sold it to another customer. Pendragon the argued that no contract existed between itself and Mr. Hughes and that all the parties had entered into was “an agreement to agree”. It also argued that if a contract did exist, there was no breach due to Pendragon having no obligation to fulfil orders in sequence.

Mr. Hughes brought a claim for breach of contract, however the County Court agreed with Pendragon that no valid contract had been entered into. The Court of Appeal subsequently overturned this decision. It stated that the email sent by Pendragon which stated that Mr. Hughes would receive the first vehicle did create a “collateral contract” which varied the terms of the Vehicle Order Form. This was because the statement in that email was intended to have contractual effect as it clearly reflected the terms of what both parties had agreed to in principal.    

Lessons to be Learnt

In order to ensure clarity of contractual terms, contracting parties should bare the above decisions in mind when discussing the terms of a contract via email.

In light of the above decisions, parties should consider expressly stating that the contract cannot be varied by email. This, combined with an express statement at the outset of any email discussions confirming that such discussions are subject to formal contract and not legally binding, should ensure that the terms of an agreement are clear and that neither party is bound by a term that it did not wish to be bound by

Parties should also consider expressly including a caveat to any standard variation clause to the effect that only specifically named individuals are able to vary an agreement.

Parties should also be aware that the outcome of the above decisions, despite being in the context of email exchange, could potentially extend to any form of electronic communication. As such, it is not inconceivable that a text message exchange could vary contractual terms.

If you would like more information about the issues in the article please contact either:


Jacob O'Brien

Solicitor, Commercial
Tel: 0161 836 8803
Email: jacob.o’brien@brabners.com

 

 


EU-US Privacy Shield agreed

Friday 26th February 2016

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Insight - Commercial Law Update - Issue 7

The European Commission and US government have struck a new deal relating to the protection of data in transatlantic data transfers. This new scheme will be called the “EU-US Data Privacy Shield” (the Privacy Shield).

Safe Harbor:

The Privacy Shield will effectively succeed the Safe Harbor Agreement which was recently declared invalid by the Court of Justice of the European Union (CJEU). In simple terms, the Safe Harbor Agreement allowed personal data to be transferred from the EU to the US, provided that the US entity which received it had an “adequate” level of data protection. US entities were able to self-certify that they complied with data protection laws and that they had an “adequate” level of data protection. Self-certification allowed US entities to be covered by the Safe Harbor Agreement and therefore allowed EU companies to legally send personal data to the US for processing.

Since the Safe Harbor Agreement was declared invalid, negotiations have been taking place between the European Commission and US government with the aim of redefining the level of protection afforded to personal data which is transferred across the Atlantic, resulting in the agreement of the new framework known as the Privacy Shield.  

Privacy Shield:

The Privacy Shield proposes to implement much more stringent obligations on US data controllers and processors in relation to EU-citizen’s data, as well as increasing the monitoring undertaken by US government bodies.

The Commission has not released full details of the Privacy Shield as yet. However, a press release by the Commission (available here) states that the Privacy Shield will include the following elements:

  1. US companies which receive personal data transferred from Europe will be required to agree to and abide by specific “robust” obligations on how personal data is processed and protected. Compliance will be monitored by the US Department of Commerce and the US Federal Trade Commission.

  2. Organisations which control or process European human resource data must agree to comply with European data protection authority decisions;

  3. Access to personal data by public authorities for the purposes of national security and law enforcement will be subject to numerous safeguards and clearly defined limitations;

  4. A yearly joint review of the effectiveness of data protection measures will be undertaken by the European Commission and US Department of Commerce.

  5. Companies which handle personal data will be more accountable to individuals, particularly in relation to complaints received. If individual complaints are not resolved, companies will be required to participate in arbitration proceedings under the Privacy Shield as a final course of action.

Before being finalised, the EU Commission must draft a new “adequacy decision” which defines the adequate level of protection of personal data which must be achieved by organisations handling EU data outside of the EU. The adequacy decision will be adopted following the “comitology procedure” which requires a proposal from the Commission and opinions from the Article 29 Working Party and the Article 31 Committee.

Reaction:

The new Privacy Shield has been welcomed by tech firms in both the US and EU following huge industry pressure for a new deal to be struck. However, some critics have suggested that negotiations surrounding the Privacy Shield have been rushed.

The wording of the Commission’s press release (detailed above) has been described as vague and broad. This, combined with particular concern relating to the adequacy of the rights data subjects have to seek redress against those who hold their personal data, indicates that the Privacy Shield may be vulnerable to legal challenge in the same way as the Safe Harbor Agreement was.

We will await further details of the Privacy Shield in the coming months.

For more information about these developments please contact either:


Jacob O’Brian

Solicitor - Commercial
Tel: 0161 836 8803
Email: jacob.o’brien@brabners.com



 


Consumer law is changing – A look at the Consumer Rights Act 2015

Thursday 25th June 2015

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Commercial Law Update

The Consumer Rights Act 2015 (CRA) which received Royal Assent on 26 March 2015 is expected to come into force on 1 October 2015 (with some provisions coming into force earlier).1

The CRA will change consumer law in several areas, including in relation to the supply of goods, services and digital content for contracts made from 1 October 2015 between a “consumer” and a “trader” and consolidates key consumer rights relating to each of these areas.2

Key Changes 

Goods

a) The CRA applies to all contracts where goods are supplied to consumers (including sales contracts, contracts for the hire of goods and hire-purchase arrangements).

b) Statutory rights - under the CRA, a consumer has a number of statutory rights which will be implied into a contract with a trader (if not dealt with expressly within the contract). Such statutory rights include that goods must:

  • be of satisfactory quality;
  • be fit for a particular purpose;
  • match the description, sample or model (when a consumer relies on a description, sample or display model, the goods supplied must confirm to it); and
  • be installed correctly (where installation has been agreed as part of the contract for the supply of goods).

c) Pre-contractual information - the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 require businesses to provide a consumer with certain information before the contract becomes binding (such as information about payment and delivery). Under the CRA, any such information supplied by a trader pre-contract, will become an implied term of the contract with a consumer.

d) Remedies - consumers will have a number of different remedies against a trader for breaches of the CRA where goods are supplied including:

  • the right to reject goods which have been supplied within 30 days;3
  • the right to have faulty goods repaired or replaced (even after the 30 day right to reject period has expired);
  • andthe right to a price reduction or the final right to reject goods after one unsuccessful attempt to repair or replace the goods has been made by a trader.

Services

a) Under the CRA, consumers will have a number of statutory rights where services are supplied by a trader, including that:

  • the service is carried out with reasonable skill and care;
  • information conveyed orally or in writing to the consumer is binding where the consumer relies on such information (this will include quotations and any promises about timescales for delivery);
  • the service must be performed for a “reasonable price”; and
  • the service must be carried out within a “reasonable time” (what is “reasonable” will depend on the type of service being provided)

b) Remedies4 - if the service provided does not conform to the contract, a consumer will have the following statutory remedies available:

  • the right to require repeat performance;
  • or the right to a price reduction.

Unfair Contract Terms

a) The CRA also deals with the use of “unfair terms” by businesses in contracts with consumers. The test for “unfair terms” is essentially the same as that under the Unfair Contract Terms Act 1977 (i.e. a term is “unfair” if “contrary to the requirements of good faith, it causes significant imbalance in the parties’ rights and obligations to the detriment of the consumer”).

b) In contrast to previous consumer legislation, the CRA includes a more extensive list of terms that may be regarded as “unfair” (such as terms allowing the trader discretion over the price after a consumer is bound to the contract).

c) However, a term in a consumer contract may not be assessed for “fairness” to the extent it sets out the main subject matter of the contract or sets out the price. Instead, the term must be: (i) “transparent” (i.e. expressed in plain and intelligible language); and (ii) “prominent” (i.e. brought to the consumer’s attention).

d) The CRA also applies to any “notices” (not just contracts) issued by traders to consumers (“notices” mean any announcement, (whether or not in writing) and any other communication issued by a trader to a consumer).

Digital Content

a) The CRA introduces specific rights and remedies for consumers in relation to the supply of digital content.

b) The CRA applies when: (i) digital content is supplied to a consumer for a price; or (ii) when digital content is supplied free with goods and/or services which the consumer has paid for.

c) Generally the supply of digital content is treated in the same way as the supply of goods in that it must be of satisfactory quality, fit for purposes and in conformity with the description provided by the trader.

d) Under the CRA, consumers are entitled to claim compensation if the digital content supplied by the trader damages the consumer’s electronic device on which the digital content is used or causes damage to other digital content and the damage is of a kind that would not have occurred if the trader had exercised reasonable skill and care. In such circumstances, the trader must either repair the device which has been damaged due to the digital content supplied by the trader or provide a replacement device.

Summary  

The CRA clarifies what rights and remedies consumers have in terms of their dealings with businesses who supply goods, services and/or digital content. In light of this, businesses should take the opportunity before 1 October 2015 to review their existing consumer terms and conditions and also the content of any communications / notices they issue to consumers to ensure they will be compliant with the CRA.

 

1 In general, consumer law has developed piecemeal over time and is contained in several pieces of legislation, including the Unfair Contract Terms Act 1977, Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982. The existing legislation which deals with the supply of goods and/or services by businesses will be amended to cover business to business and consumer to consumer contracts only.

2 The CRA also deals with a number of other areas outside the scope of this article, such as the duty of letting agents to publicise their fees, secondary ticketing sales and options for consumers and small / medium businesses to challenge anti-competitive behaviour through the Competition Appeal Tribunal.

3 The time limit for a consumer to exercise this right to reject is the end of the 30 days beginning with the first day after the following have occurred: ownership or possession has transferred to the consumer; the goods have been delivered; and, if applicable, the goods have been installed.

4 Such remedies do not prevent the consumer seeking other remedies for breach of contract by a trader such as claiming damages or seeking specific performance.


Apps – Key Legal Developments

Monday 9th February 2015

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Insight - Commercial Law Update - Issue 6

With over 1 million apps available on Apple’s iOS App Store alone, it is clear that businesses are using technology to reach out to customers.

As the use and influence of apps increases, so too does the importance for businesses of observing the developments in the law in this area.

2014 saw the emergence of two distinct developments in the law surrounding the development of apps:

1. Apps and users’ privacy

A global survey of over 1,200 mobile apps by 26 privacy regulators conducted last year has revealed widespread data privacy failings in the collection and usage of users’ personal information. The survey made the following key discoveries:

  • 85% of the apps surveyed failed to clearly explain to users how they were collecting, using and disclosing personal information;
     
  • almost 30% of apps unlawfully requested excessive personal information from users; and
     
  • 43% of the apps surveyed failed to tailor privacy communications to small screens for tablet and mobile devices, either by providing information in a too small print or by hiding the information in lengthy privacy policies that required scrolling or clicking through multiple pages.

Why is this important to your business?

The UK’s privacy watchdog, the Information Commissioner’s Office (‘ICO’), recently conducted research which showed that 49% of app users had previously decided not to download an app due to privacy concerns.

Whether your business already has an app or is considering developing an app, it is important to be aware that the ICO has several options available to it for breaches of data protection/privacy legislation such as the power to issue enforcement notices and fines of up to £500,000 in the most serious of cases.

What can your business do to comply with the law?

The ICO’s latest guidance emphasises the need for transparency from businesses regarding their use of users’ personal information.

Examples of best practice include:

  • providing a basic explanation to users of how any personal information they provide to you will be used by your business;
     
  • using ‘just-in-time notifications’/‘pop-ups’ to let users know when they are required to submit personal information; and
     
  • providing clear links for users as to where they can obtain more detailed information about how their personal information will be used by your business.

The ICO also recommends that businesses check periodically whether they actually need all of the information from users of their apps which they collect and store (e.g. by conducting regular audits). You should delete any app users’ information that your business collects for marketing, commercial, accounting or other legal reasons but doesn’t require or use.

Given the risks of non-compliance, businesses should ensure that they seek appropriate contractual protections in their arrangements with app developers. In particular, such arrangements should deal with compliance with applicable laws such as privacy / data protection laws and responsibility for non-compliance.

In addition to your business complying with its legal requirements in this area, collecting, storing and using the personal information you obtain from users of your app correctly will help establish a relationship of trust which could give your business a competitive advantage, with users feeling reassured that their personal information will be used properly and kept securely.

2. In-app purchases and advertising

2014 also saw the beginning of a concerted effort by the Office of Fair Trading and the Advertising Standards Authority (‘ASA’) to clamp down on misleading add-on costs once an app has been downloaded.

Businesses should be aware that advertising an app as being ‘free’ (e.g. in the promotional overviews of apps displayed in the Apple iOS Store / Google Play Store) may be misleading if the proper functioning and users’ enjoyment of the app is dependent upon in-app purchases. For example, the ASA has found app advertisements to be misleading where in-app purchases have had a more significant impact on the functionality of the app than the user would have initially expected from the information given in the original advertisement.

Advertisements should therefore be clear about what users can expect from the ‘free’ aspects of the app and informed if in-app purchases may have a significant impact on the functioning and performance of the app.

Summary

Nowadays apps play a key role in the marketing and commercial strategies of many businesses as they create new ways for businesses to interact with their customers. At the same time it is vital for businesses to understand and abide by their legal obligations in respect of how their app operates.

 


Don’t lose on penalties – Top tips for liquidated damages clauses

Monday 9th February 2015

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Insight - Commercial Law Update - Issue 6

An important part of managing risk is minimising exposure to potential liability under arrangements with third parties. One way of achieving this is through the use of liquidated damages clauses although, as with any provision seeking to exclude or limit liability, there is a risk that such clauses could be held to be unenforceable if challenged. Careful drafting is, therefore, essential in order to enhance the robustness of such clauses.

Liquidated damages clauses seek to fix the amount payable by the defaulting party in the event of breach. In the absence of such a clause and in the event that the parties cannot reach an amicable solution, the court is often required to intervene in order to assess the level of damages to be paid by the defaulting party (subject to other relevant terms of the agreement). Liquidated damages clauses avoid this (costly and time consuming) process, by allowing the parties to assess the appropriate level of damages for themselves at the time of entering into the contract, giving certainty and making recovery easier.

So, are liquidated damages clauses that simple? And does this give parties absolute freedom to determine the level at which they are set? No – if a liquidated damages clause is too severe or is intended as a deterrent or punishment then it will be regarded as a “penalty clause”, which is unenforceable. Here are our top tips in this area:

  1. Courts generally award damages for breach of contract to compensate loss, not to punish the party in breach. Liquidated damages clauses must follow this principle and should therefore be a genuine pre-estimate of the loss likely to be incurred as a result of the breach.

  2. Make sure that you would be able to evidence why and how the value given in a liquidated damages clause is indeed a genuine pre-estimate of loss. Keep a record of any calculations, assumptions made and any negotiations between parties.

  3. One size may not fit all, as different breaches may warrant different levels of damages, which should be reflected.

  4. In long-running contracts, make sure that the liquidated damages clauses are kept under review, particularly if the contract is amended. For example, if a contract price is varied, this may affect the level of any relevant liquidated damages clauses.

  5. Consider alternative approaches and drafting options such as service credits or bonus payments for early or good performance.

As far as contracts between businesses are concerned, recent case law suggests that courts may be becoming more open to considering the “commercial justification” behind liquidated damages clauses in order to determine whether or not they are unenforceable penalties. This may hint at a move towards a more lenient approach by the courts; however, any party which seeks to rely on commercial justification alone runs the risk of the court not agreeing with their interpretation of what is and is not commercially justified. With this in mind, the above approach should be adhered to, to try as far as possible to ensure the robustness and enforceability of liquidated damages clauses.

 


Brabners is a proud sponsor of the Merseyside Innovation Awards…once again!

Monday 9th February 2015

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Insight - Commercial Law Update - Issue 6

The Merseyside Innovation Awards is now open to applicants following this year’s launch on 19 January 2015.

Now in its 19th year, the Merseyside Innovation Awards (MIAs) recognise and reward the use of innovation as a means of boosting growth and profitability on Merseyside.

Brabners has been sponsoring the MIAs for over a decade during which we have been helping to support the transformation of great ideas into great businesses.

Since its establishment the Awards have seen applications from companies and individuals with a vast variety of businesses including IT, automotive, pharmaceutical, green technology, design, industrial and construction, and the sponsors are always keen to see something new.

We are to happy receive applications from all parts of Merseyside which includes the areas of Liverpool, Wirral, St Helens, Knowsley, Sefton & Halton.  As the economic development of Merseyside is the drive behind the Awards, part of the scoring criteria is based on an innovation’s expected ‘impact on Merseyside’.

The Awards have monthly winners, which are decided by the sponsors based on set scoring criteria.  These monthly winners have the benefit of free local PR and the chance to be selected for the Grand Final.

The Grand Final, held in July, sees three shortlisted finalists present their innovations to a distinguished panel of judges from across the commercial spectrum who then decide on a winner.

The winner of the Awards receives £10,000 in cash, financial support that can have a huge impact on a small business.  The runners up each receive specialist business support worth up to £2,000.

The 2014 winner, Briggs Automotive Company (BAC) Ltd, manufactures the world’s first road-legal single-seat production supercar.  Last year’s other finalists were Pulmorphix Limited, who developed what they believe is the world’s first ‘lung bio-simulator’ and Ultromex Limited, who develop novel and safe economic processes to improve recycling of metals.

Any Merseyside-based individual or company with less than 50 employees with an innovative product or service is eligible to apply.

More information as well as the application criteria can be found on the Awards website at http://www.merseysideinnovationawards.co.uk/default.aspx.

If you have an innovative business that you would like to be considered for 2015’s Award, please contact Hayley Hall.


Hayley Hall

Intellectual Property Executive
Commercial team
Tel: 0151 600 3466
Email: hayley.hall@brabners.com


Don't Gamble on Third Party Promotions

Friday 10th October 2014

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Insight - Commercial Law Update - Issue 5

At present, gambling companies can be based overseas and provide remote gambling facilities for UK consumers without requiring a UK licence.

On 1 November 2014 (implementation has been delayed one month in light of a judicial review), new legislation is expected to come into force which seeks to change this and tighten the level of control by the Gambling Commission by requiring all remote operators to hold a UK licence if their gambling facilities are used in Great Britain. For a more detailed summary of the new provisions, please click here.

As well as it being an offence for any gambling operator to provide remote gambling facilities to UK consumers without a licence, it will also be a criminal offence to advertise/promote such companies/services – although at first glance it may appear that this area only affects those in the gambling industry, this does not necessarily hold true as the changes have a significantly wider application. “Advertising” covers a range of activities and encompasses sponsorship arrangements, brand-sharing and promotional agreements. Businesses therefore need to carefully consider whether any of their commercial activities fall within the broad definition of “advertising” and whether they may therefore be affected – the potential sanctions for committing an offence include imprisonment and/or fines.

For example, if a rights holder (such as a sports organisation or venue) has a sponsorship deal with a gambling operator who is not appropriately licensed, such rights holder could be exposed to significant risk and liability. Similarly, advertising of gambling operators by third parties (for example advertising on physical sites such as hard copy publications or billboards, or in digital media) could be affected, whether such arrangements are managed internally or through a third party (e.g. an advertising agency). For example, if a business engages an agency to sell/manage the advertising content on its website, any advertising/promotion of an unlicensed gambling operator in or on such media could lead to liability for the business and/or the agency.

As such, businesses should be aware of the potentially wide application of the legislation (with particular reference to any third party advertising or promotional associations it has in place) in order to consider the potential risks and take appropriate action, both on a practical level and in its associated  contractual arrangements.


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