Archive for January, 2010

'We can deliver!' – Can these words expose you to unlimited liability?

Friday, January 29th, 2010

If they’re made dishonestly they might…

In particular, if you’re a provider of outsourcing services and make a statement that you:

  • can deliver a project within certain prescribed timescales and    
  • are making this statement having carried out a proper analysis of the work involved

Then, if your customer believes you, you may well find that your contractual limits on liability will not protect you, as one supplier found to their cost in the long awaited decision between BSkyB and EDS this month.

 It was held by the Judge that the statements made by the supplier were not only incorrect but were also dishonest, since the person making them knew them to be wrong.  

This allowed the customer to claim for Fraudulent Misrepresentation (under the Misrepresentation Act 1967).  Since liability for Fraudulent Misrepresentation cannot be limited, when the project went over-budget and missed the deadline, the supplier’s £30 Million cap on liability was ineffective. 

Liability has yet to be decided (and the case may be appealed) but the misleading statements made by the supplier may well mean that it now faces liability of £200 Million or more. 

The lesson for suppliers – if you’re bidding on a project be careful what claims you make about your ability to deliver and never claim to have assessed the risk unless you truly have.  Given the recent history of IT projects delivered late and over budget in the public sector  I suspect there will be a number of customers scanning emails in the light of this case to see what optimistic IT providers might have promised.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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Was the recession a force majeure event?

Wednesday, January 27th, 2010

The UK has just this week reportedly emerged from recession but the pain is still being felt by suppliers and customers throughout the UK.

It has been the cause of many breached contracts, failed deliveries and missed payments over the last few months, a fact that’s unlikely to change as a result of the economic growth figures.

But what if you can no longer perform your part of a bargain because the funding you thought you had in place is no longer available? Should you be able to escape your obligations?

What about if you were aware of a clause in your contract allowing you to escape liability for “force majeure events”?

Sadly for the purchaser of an executive jet aircraft whose case was heard this month, such a clause, by itself, may not help.

It seems only right that force majeure should not include economic downturns, particularly where it is possible for the parties to deal with a lack of funding another way – by using a “hardship” clause or to make the deal dependent upon the purchaser first obtaining funding.

For those suppliers facing unwilling purchasers (or would-be purchasers waiting for deliveries) this case is likely to be welcomed. The recession (and its consequences) wasn’t a force majeure event, nor should it be treated as one, but rather a challenge that buyers and sellers must face together on their own terms.

Richard Nicholas

Posted by Richard Nicholas
0121 237 3992
rnicholas@brownejacobson.com

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Breached competition law? Sue your employees!

Tuesday, January 19th, 2010

The High Court has cleared the way for companies in the Safeway Group to seek damages from eleven ex-employees and directors in relation to an OFT penalty (yet to be imposed) for competition law breaches.  The penalty could be as high as £16.4 million. 

Safeway is alleging that the ex-employees were in breach of their employment contracts and fiduciary duties, that they were negligent and that they conspired to procure the companies’ participation in anti-competitive practices. 

The ex-employees argued that the claim should be struck out on public policy grounds and, in particular, the rule that a person who commits an illegal act or unlawful act cannot seek an indemnity for any consequent liability (ex turpi causa non oritur action).  They argued also that the claim is fundamentally inconsistent with the UK competition law regime. 

The High Court rejected the application to strike out the claim on the basis that Safeway has a “real prospect” of defeating the defences at trial. 

The concept of companies suing employees is not new but it is new in the field of competition law.  We must now wait to see if Safeway is successful at trial once all of the evidence has been considered.  If it is then it will signal further personal risk for employees who engage in anti-competitive practices.  The result will surely be that employees demand more and more guidance on what they can and cannot do.  Compliance officers and in-house legal departments can expect their phones to be busy!

Matthew Woodford

Posted by Matthew Woodford
0121 237 3965
mwoodford@brownejacobson.com

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Independent schools abandon the modular system – is the state-private gap widening?

Friday, January 15th, 2010

A recent survey suggests that independent schools are returning to traditional A-levels as opposed to the modular, AS system. Students will only sit exams at the end of the 2 year course with no exams in the interim. This move reflects the trend at GCSE level where, last year, more independent schools adopted the International GCSE (iGCSE) curriculum, which they deem more rigorous.

But are independent schools customising their curriculum to ensure a higher return for exam-savvy students? Currently, the government does not fund the iGCSEs in state schools as they do not match the national curriculum. This failure to recognise the qualification skews league tables and will undoubtedly lead to university entry confusion.

With the potential for the two-tiered system to become even more pronounced, should independent schools be reined in, or should the government become more flexible?

Mark Blois

Posted by Mark Blois
0115 976 6087
mblois@brownejacobson.com

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New ITC claim makes life rotten for Apple

Friday, January 15th, 2010

Apple is already embroiled in an International Trade Commission (ITC) dispute with its competitor and mobile phone giant Nokia over alleged infringement of both parties’ patents . Now Apple, along with RIM (of Blackberry fame) are the subject of a new complaint before the ITC brought by Kodak.

Kodak has already successfully enforced its “picture previewing” patent against Samsung and Sun Microsystems in the recent past. In this new complaint to the ITC, Kodak is seeking to enforce the same patent against Apple and RIM, presumably with a view to securing favourable licensing revenue from the handset manufacturers.

This new action reinforces the view that the big players in the technology market regard the ITC as a forum with considerable bite. The ITC’s ability to force a ban on the supply of infringing products together with the ability to award damages within a process which can be far quicker than the equivalent process through the US courts marks it out as a forum of choice.

However, in a world in which open source and standardised technology is prevalent, one might question whether a readily available ban on supply really encourages innovation, or whether it rather leaves technology providers at the mercy of patentees. An environment in which patentees are encouraged to declare their patents as essential to a particular standard and then make them available to be used under licence on fair, reasonable and non-discriminatory terms also exists, but whilst patentees have the threat of an ITC action at their disposal, they will of course continue to use that to maximum effect.

Mark Daniels

Posted by Mark Daniels
0121 237 3993
mdaniels@brownejacobson.com

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Cutting the cost of IP litigation

Thursday, January 14th, 2010

After several months preparation a report was published today which makes recommendations aimed at reducing costs of IP cases and speeding up the process of dispute resolution.

A constant criticism of litigation is that the costs involved in pursuing or defending a claim are disproportionate. The risk of having to pay the other side’s costs in the event of losing an action or even the unrecoverable costs of winning a claim are a barrier to using the courts for dispute resolution particularly for small and medium sized enterprises. It has been estimated that the average cost of taking a case to trial is in the region of £700k (although our experience is that we would not expect the average case to cost that much).

The new proposals contained in a report written by a serving Judge of the Court of Appeal and bearing his name (Jackson) include:

  • reforming the Patent County Court and introducing a cap on recoverable costs (£50,000 in patent cases, £25000 for all other IP cases);
  • introducing a fast track and small claims track for cases with low monetary value and clearer forms of pleadings

The proposals are welcome as if implemented they will enable us to give greater certainty regarding the exposure to costs of litigation. If such greater certainty is achieved will it mean greater confidence in the court system? What do you think?

Peter Ellis

Posted by Peter Ellis
0115 976 6267
pellis@brownejacobson.com

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Mandy the one man law-maker

Thursday, January 14th, 2010

The Digital Economy Bill continues to be a political hot potato as the government backtracks on key provisions following a wave of criticism.

On this occasion, the issue making the headlines is the proposed “Clause 17”, a provision which would enable the Secretary of State, Lord Mandelson, to make amendments to the Copyright Designs and Patents Act without first consulting Parliament.

In December, top level executives from Google, Yahoo!, eBay and Facebook expressed strong concerns about this in an open letter to Lord Mandelson, the closing line of which reads “we urge you to remove Clause 17 from the bill.” The crux of their complaint is that the controversial provision could pave the way for arbitrary measures and a high degree of uncertainty if new laws can be fast-tracked through the system on a whim.

The government has made a number of concessions in order to allay some of these fears including proposals to water down the powers conferred upon the Secretary of State. In particular, a 60 day consultation period has been proposed, as has an evidential test whereby it must be shown that harm would result if the amendments were not made. In addition, the power cannot be used to create or modify a criminal offence. In spite of mounting opposition to the clause, the government remains in support ofit, stressing that the new powers are required in order to “future-proof” copyright law as new technologies develop.

Whilst most will appreciate that the law must evolve in line with technology, Clause 17 allows the Secretary of State effectively to rewrite primary legislation with a minimum level of Parliamentary scrutiny making this clause, perhaps, a step too far.

Mark Daniels

Posted by Ryan Harrison
0121 237 3950
rharrison@brownejacobson.com

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Alcohol advertising to be subjected to Government regulation?

Tuesday, January 12th, 2010

On 11th December, we reported that the BMA were seeking a total ban on alcohol advertising. But, we noted that to date, the Government had stood firm and supported the self regulation of alcohol advertising by the Advertising Standards Authority (ASA).

Well, now the Parliamentary cross-party Health Committee has called for the introduction of minimum pricing per unit of alcohol, together with tighter regulation on the marketing of alcoholic drinks.

Of particular concern are :

  1. the marketing of alcohol via sponsorship of events at which at least 10% of those in attendance would be under 18, and
  2. marketing of alcohol via online campaigns, including viral and social network marketing.

The conclusion is that these avenues are poorly regulated by the existing scheme of supervision. Proposals include a suggestion that an independent body be set up to regulate alcohol advertising. This would be a significant departure from the existing scheme of self-regulation.

Any new regulator would no doubt be looking immediately to claim a high profile “scalp.” If these proposals do go forwards, it will become more important than ever for drinks companies to ensure that they have an audit trail, to show that their product marketing is responsible and in accordance with guidelines.

Still – if by April we have a Conservative government (who would be looking to cut public spending, and boost the economy), in our opinion any “nanny state” plans such as these may, in the medium term, be substantially amended, if not shelved altogether.

Fiona Carter

Posted by Fiona Carter
0115 976 6224
fcarter@brownejacobson.com

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Ofsted slammed by MPs

Friday, January 8th, 2010

Ofsted now oversees early years settings, colleges, children’s services and social care, as well as schools. In a new report the Commons schools select committee has attacked the breadth of Ofsted’s responsibilities and their overreliance on exam results when assessing schools.

Criticism has also been targeted at the “relentless pace of reform” that Ofsted is overseeing; saying that schools feel “coerced and constrained”. The select committee has urged Ministers to give schools and LAs a period of stability. The committee is supported by the Association of School and College Leaders General Secretary, Dr John Dunford, who commented that the obsession with accountability has led to a sense there is a crisis in the schools system.

With a general election campaign about to begin, is there really any likelihood of a period of stability?

Mark Blois

Posted by Mark Blois
0115 976 6087
mblois@brownejacobson.com

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An Apple [lawsuit] a day keeps Nokia busy

Tuesday, January 5th, 2010

Back in October last year we reported on litigation commenced by Nokia in Delaware against Apple alleging infringement of 10 Nokia patents, considered by Nokia to be “essential” to the relevant wireless telecommunications technical standards. In early December Apple filed its response, denying infringement, together with a counterclaim, alleging that Nokia itself infringed 13 of Apple’s own patents.

 Enough of the lawsuits, I hear you cry! Not a bit of it.

On 29 December, Nokia cranked the dispute up another notch, by filing a complaint with the US International Trade Commission alleging that Apple infringes 7 Nokia patents. This is a significant step, particularly as it appears to take Nokia’s claim far wider than a dispute relating solely to the iPhone. Here’s what Paul Melin, general manager of Nokia’s patent licensing at Nokia, had to say about this latest step: “while our litigation in Delaware is about Apple’s attempt to free-ride on the back of Nokia investment in wireless standards, the ITC case filed today is about Apple’s practice of building its business on Nokia’s proprietary innovation”.

Perhaps so, but though the patents before the ITC relate to technology which differs from those patents being litigated in Delaware, one can’t help wondering whether the battles aren’t in fact inextricably linked – after all, the original claim by Nokia was brought following a breakdown of licence negotiations, the timing of Nokia’s ITC complaint strongly suggests that it is the next step within the current dispute, and we all know that lawsuits can be settled and an adjustment to licence fees negotiated accordingly. We await Apple’s next move – we can be confident that the dispute will widen before the two sides bury the hatchet. Of course, the English High Court has jurisdiction to hear claims built on the “essentiality” of patents to standards……..

Mark Daniels

Posted by Mark Daniels
0121 237 3993
mdaniels@brownejacobson.com

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