How to make the most of on-line and off-line marketing and still staying within the law

In this article, Dr Maria Anassutzi, intellectual property expert discusses the potential legal pitfalls of marketing (both online and offline) and gives some helpful tips on what to do in order to stay legal.

Marketing is one single word which has many different meanings. It means creating a valuable brand, creating goodwill and of course advertising. The way in which a business can conduct marketing it varies. It depends on budget, industry of the company. Generally speaking, it is recognised that nowadays marketing activities will include some kind of social media activity and online or web marketing.

Although social media and online advertising activities have several advantages, such as minimum or no cost, a great audience and reaching a potential even greater market, if something goes wrong the negative consequences could be as wide and far reaching, including (i) bad publicity, loss of reputation and brand damage; (ii) scrutiny and possible sanctions from regulatory bodies, such as the Advertising Standards Authority and the office of Fair Trading (iii) legal action by competitors or consumers (iv) costly recall of advertisingmaterial (and products)l and reprinting of advertising, wasted media space and ultimately (v) disappointed consumers and loss of consumer confidence in the organisation.

The main legislation relating to advertising is the Consumer Protection from Unfair Trading Regulations 2008 which are enforced by trading standards authorities and Office of Communications for television and radio advertising. The regulations prohibit unfair and misleading commercial practices generally, including advertising. So attention must be exercise when claims are made regarding (i) the existence, nature or
characteristics of the product (ii) the extent of the trader’s commitments, their motives, sales process and any statements or symbols used for sponsorship or approval of the product including ambush marketing, (iii) the price (including how it is set) (iv) the status and qualifications, (v) the consumer’s rights.

Generally speaking, advertising must be legal, decent, honest and truthful. It is particularly important to avoid causing offence on the grounds of race, religion, sex, sexual orientation and disability.

If you are advertising online, you may need to consider the Electronic Commerce (EC Directive) Regulations 2002 and the Consumer Protection (Distance Selling) Regulations 2000. These impose information requirements on those trading, including distributing content online and via SMS and provide cancellation rights for orders made at a distance. More information on direct marketing. Note also that, the remit of the Advertising Standards Authority from 1 March 2011 was extended with effect to cover organisations’ own website content and to marketing on social networking sites.

Online advertisers in Europe do not have a free rein in relation to the content or arrangement of their own websites. Certain details concerning the business or the relevant product or service must be provided on the site in an easily accessible manner. These information obligations range from identification data to consumer protection requirements. Identification obligations may apply to both websites and e-mails. In most countries, general company legislation will be applied by analogy to companiesoperating in an online environment, although some countries such as France have specifically imposed information requirements on online communications.

In addition if you advertise via social media areas you will need to consider the law relating to contract, passing off, trade mark and copyright infringement, defamation and malicious falsehood. You can read more about the legal and intellectual property pitfalls of social media here. Similarly use of social media by employees can also be dangerous as the UK Facebook case has proven.

You can find more guidance and information on social media here.

It is important, therefore to ensure that you take advice regarding intellectual property rights, that your advertising proposition is based on what your product actually offers and that your advertising is not misleading. In an online context it is important to remember that a website can usually be accessed from all over the world and the laws and regulations of non-domestic jurisdictions may also apply.

Here are some practical steps to consider:

• Advertising which misleads potential customers about the true nature of the product or offer.
• Denigrating competitors unfairly – for example, criticising a competitor without good reason.
• Unfair comparisons – make sure you compare like with like.
• Pricing errors.
• Infringing other traders’ intellectual property rights – for example, using a competitor’s trade mark.
• Offending decency.
• Producing advertising which is inappropriate for children to see.

Watch out for “greenwashing”. Many advertisers are keen to promote their eco-friendly credentials, especially in the light of the new duty for directors to consider the impact of their company’s operations on the
community and the environment when promoting that company.

This article is for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2011 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

The future of intellectual property in the UK

Although the UK’s intellectual property framework is designed to promote innovation and growth in the UK, the latest quick technological developments have rendered intellectual property regime somehow inadequate to provide full protection. It is the aim, therefore, that the necessary changes are made to ensure that intellectual property protects owners and users and represents interests adequately in the 21^st century.

So, the 21^st century should witness:

1) The establishment of a Digital Copyright Exchange to allow potential licensees quickly to identify and contact the relevant owners of intellectual property rights, together with a licensing system for orphan works to extend collective licensing for mass licensing of orphan works and a clearance procedure for use of individual works should also be established. It is predicted that an improved licence system may add up to £2.2 billion a year to the UK economy by 2020.

2) The introduction of new copyright exceptions to cover format-shifting, parody, non-commercial research and library archiving. For a limited private-copying exception, to bring copyright law into line with the real world, and with consumers’ reasonable expectations, since thousands of people copy legitimately-purchased content, such as a CD, to a computer or portable device such as an MP3 player, assuming it is legal. To widen the exception for non-commercial research, to cover “text- and data mining” to the extent permissible under EU law. To widen the exception for library archiving. To introduce an exception for parody. It would enable UK production companies to create programmes that could play to their creative strengths and create a range of content for broadcasters.

3) An improvement of collaboration between patent offices to reduce patent backlogs and a study on the
relationship between designs and innovation.

4) The establishment of a new small-claims procedure for low-value (with £5,000 or less at issue) intellectual property claims to take place in the Patent Claims Court to be renamed Intellectual
Property Claims Court.

5) An improved accessibility to intellectual property advice and registration for small and medium-sized businesses, particularly to cost-efficient providers of integrated legal and commercial advice on intellectual property.

6) Increased powers of the intellectual property office regarding intellectual property policy development.

In order to achieve the above, an appropriate enforcement structure of the intellectual property regime must operate. Such Intellectual Property enforcement regime is aimed at deterring online intellectual property infringement will continue in line with UK’s Intellectual Property Crime Strategy which will include steps to tackle online infringement of copyrights and trademarks and the
administration of the Digital Economy Act. In this regard, the government is removing the obligation on internet service providers (ISPs) to contribute towards the costs of Ofcom and the independent appeals body in setting up and administering the regime. No change is forecasted regarding the sharing of other costs between ISPs and copyright owners.

Furthermore, the UK will continue pursuing its international interests in intellectual property. The UK’s key priorities are China, India and Brazil, because of their size, rapid growth and influence. The UK also has a developing intellectual property relationship with Korea and Vietnam. How this can be done? For example, by establishing a network of intellectual property Attachés to promote UK business interests, policy interests and provide a focal point for supporting UK businesses with Intellectual Property related issues and work with UK Trade & Investment, supported by the Foreign and Commonwealth Office, and through a range of delivery channels to provide practical support to help UK businesses develop and exploit their intellectual property in key overseas markets. This will include:

• targeted support to SME users of intellectual property.
• development of specific packages for key markets, including China.
• raising the intellectual property concerns of UK business with third-country governments.
• establishing helpdesk and enforcement guides.

UK’s Intellectual Property crime strategy 2011

The strategy aims at reinforcing the attractiveness of the UK as a place to do business; making the UK unattractive to criminals engaged in intellectual property crime; and protecting consumers and society.

How this can be achieved.

• By using the Proceeds of Crime Act 2002 in order to recover the criminal gains from intellectual property crime.
• By adopting a well collaborated approach, including intelligence sharing and increasing the knowledge base, between enforcement bodies, government agencies and industry in order to
  maximise their operational activities.
• By showing resilience in the light of the current economic climate surrounding the dedication of resources.

New or enhanced action is planned on:

• Steps will be taken to improve dialogue between those who hold intellectual property related intelligence to improve co-ordination.
• Enforcement agencies will be encouraged to work together to understand existing barriers to collaboration and to overcome them.

The Intellectual Property Office would work with the EU Observatory on Counterfeiting and Piracy, to ensure that any UK based action informs and aligns with the EU approach.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2011 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

A quick round up of some key issues regarding liability, entire agreement and right of first refusal

In this article Dr Maria Anassutzi, Intellectual Property expert, analyses some key issues regarding liability, entire agreement and right of first refusal.

1) Entire agreement clauses

Are entire agreement clauses such as:                                                                                                                      “This agreement constitutes the entire agreement between the parties, and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, between them” an effective way to exclude claims for misrepresentation, breach of collateral warranty and/or implied terms?

The short answer is no. When the entire agreement clause consists of just a basic entire agreement statement, like the statement above without specific and clear provision to misrepresentation, the clause is ineffective to exclude misrepresentations. The exclusion of liability for misrepresentation has to be clearly stated. Traditional ways of doing this include clauses which state the parties’ agreement that no representations have been made; or that there has been no reliance on any representations and an express exclusion of liability for misrepresentation.

A basic entire agreement statement is also ineffective to exclude terms being implied to give the contract business efficacy. However it does exclude collateral warranties and other implied terms. Click here for further explanation on this case  and for some drafting tips, please click here

2) Right of first refusal

Right of first refusal clauses, whereby a party gives the other the possibility to quote and be awarded a further contract, a renewal or some additional right is common in commercial contracts.  A party may be
persuaded to grant such a right in the belief that since the right and the terms will need to be discussed and agreed they represent an agreement to agree and therefore unenforceable obligation.

Regarding the right of first refusal clause:

1. The Courts will try to give the clause some commercial effect.
2. The clause gives not only the opportunity to negotiate with the
   other party, as part of the tender process, but also it should be offered
   an opportunity to accept or refuse a contractual offer on the same terms
   offered from a third party.
3. When receiving third party terms these must be fully disclosed, so
   that the party with the right of first refusal could understand the terms
   it is to match. In the event the third party offer is
   matched then the other party is obliged to accept that party’s offer
   rather than that of the third party.
4. Words such as “under mutually acceptable terms and conditions”
   which often accompany a right of first refusal clause do not indicate an
   agreement to agree but mean that, once the right of first refusal has been
   exercised, further matters may need to be resolved, before a binding
   contract could be entered into.

Click here for further explanation on this case.

3) Limitation and exclusion of liability for deliberate breach

The above case helps to clarify also the question whether a limitation of liability applies to a deliberate
breach. Previous case law indicated that this was not the case. So a clause such as the one set out below:

“No claims by [X] of any kind, whether as to the products delivered or for non-delivery of the products, or otherwise, shall be greater in amount than the purchase price of the product in respect of which such damages are claimed; and failure to give written notice of claim within sixty (60) days from the date of
delivery, or in the case of non-delivery, from the date fixed for delivery, shall constitute a waiver by [X] of all claims with respect thereto. In no case shall either party be liable for loss of profits or incidental or consequential damages.”

Would also apply to breaches incurred deliberately. What you can do now. One option is of course not to do anything if you believe that your current terms reflect your business needs adequately. Alternatively you could:

- Amend your exclusion clause to state that the clause does not exclude or restrict liability for deliberate
breach. If this is a correct statement of the law, businesses should assume that an exclusion clause will apply to a deliberate breach of contract. Therefore, if a business wants to be sure that a counterparty’s liability will not be limited if that counterparty commits a deliberate breach of contract, it should amend the exclusion clause to state this expressly. Businesses are most likely to consider that they would benefit
from this carve-out when buying goods, services or rights (as most of the major obligations under the contract will belong to the other party).

- Amend your exclusion clause to state that it covers liability for deliberate breach. This approach would now only be appropriate if a business wanted to put the matter beyond all doubt. The courts are averse to over-wide exclusions which allow parties to abandon performance of a contract and leave the non-defaulting party with no meaningful remedy, and construe them strictly. However such an exclusion is very unlikely to succeed in a standard terms and conditions, or if the clause is not genuinely negotiated by the parties.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2011 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

In this article Dr Maria Anassutzi analyses the key legal and commercial issues in an outsourcing agreement.

Prior to undertaking an outsourcing exercise the customer should carry out a due diligence regarding the internal systems and services that will be outsourced. In particular, the customer should (i) consider the internal costs (so as to ensure that the new outsourced service is competitive), (ii) review all legal, tax and commercial issues including third party contracts (software licences, maintenance agreements, leases, and supply contracts) (iii) any assets (including employees) needed to provide the services, including the value of those assets, ownership rights and their condition.

Once the customer has identified its requirements, it can issue its requests for information/pricing, on which it will base its invitation to tender to the short listed supplier. The supplier’s response to the invitation to tender together with all the information provided will then be reviewed by the customer against, technical, commercial and legal requirements and each area awarded a number which will then help to select the supplier and award the contract.

Once the supplier is selected (or sometimes even before) the contract negotiation will start. The contract will address the following key issues:

Term: The length of the outsourcing agreement will need to be considered including the length of the period for which the customer may reasonably predict its needs for the future, the potential life expectancy of any assets used to provide the services, the pace of perceived technological change and the financial implications of the length of the outsourcing agreement.

People issues: The people issues surrounding an outsourcing arrangement are complex including (i) transfer of the employees; (ii) ongoing obligations in relation to employees and their provision of the services to the customer during the life of the contract; (iii) liabilities in relation to employees involved in the provision of the services at the end of the contract term.

Assets and third party contracts: Assets owned by the customer which are to be used by the supplier in the provision of the services may be sold, leased or loaned to the supplier. The outsourcing agreement will need to address what happens to the assets at the commencement of the arrangements, the treatment of assets (including new assets which are used by the supplier for the sole purpose of providing the services) during the life of the outsourcing agreement and what happens to the assets at the end of the contract term.

Intellectual property rights: During the life of the contract, consideration must be given as to how any new intellectual property rights are to be dealt with and who will own them. Much of this will depend on negotiation, the price paid for the services and the extent to which the services provide a bespoke solution for the customer. If the supplier assigns the intellectual property rights to the customer, the customer will need to grant the supplier a licence to use such rights in the performance of the services. However, the supplier will normally retain the ownership of any intellectual property in its proprietary products which have been developed independently of the project and which the supplier may utilise for the purposes of the project. The same position is likely to arise in relation to any third party software. In such circumstances, the relevant intellectual property right will usually be licensed to the customer.

Liability issues: Where services are critical to the operation of the business of the customer, the losses which the customer may suffer if the supplier fails to provide the service may be significant. It is important, however, not to impose contractual liabilities that are disproportionate to the value of the contract. As a result, consideration is often given to setting limits on the supplier’s liability that relate to payments due under the outsourcing agreement (possibly on a multiple basis) or the insurable level of loss on a project-specific basis. It is also important to identify any areas where the supplier’s liability should not be subject to a cap. For example, the supplier’s indemnity in relation to intellectual property rights or TUPE issues is often unlimited because it represents the customer’s protection for unquantifiable third party liabilities which the supplier is able to prevent or control.

Service levels: The service description should be drafted as a legally enforceable document using consistent terminology, with a detailed description of the services, the obligations of the supplier clearly identified and what the supplier is to provide and what the customer expects to receive and a set of service levels (sometimes referred to as key performance indicators).

Contract management, Termination and Exit issues:  The outsourcing agreement will need to include a mechanism for management of the relationship and a clear escalation procedure where problems arise. It is important that the parties agree in the outsourcing contract a process of escalating remedies if problems arise which supplement the agreed delay deduction and service credit regimes with the possibility to mediate if the internal escalation is unsuccessful. Finally the exit plan should address (i) the continuation of provision of the services for the duration of the notice period and any run-off period including potential co-operation with the new outsourcer or customer (in case of in-sourcing), (ii) the return or transfer back of assets and software (if required) and necessary assignments/licences of intellectual property and the provision of information and know-how to the customer or a new supplier and (iii) the treatment of employees and any obligations to inform or consult under TUPE and other relevant regulations.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2011 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

Cloud Computing: legal dos and don’ts

This article by Dr Maria Anassutzi, intellectual property and information technology law expert, discusses cloud computing, its benefits and risks and the legal issues that involves for businesses.

Cloud computing is the delivery of information technology services over the internet without the need for businesses to purchase or install software or run their own application and data servers. Applications are hosted in the data centers of the cloud computing provider, benefiting from massive economies of scale which in turn lower the costs of the service to the businesses.

Cloud computing services include: Software as a Service, Platform as a Service and Infrastructure as a Service, all of which involve delivering information technology components that had previously been regarded as infrastructure or hardware.

Benefits and risks

Cloud computing services offer to a number of benefits but also expose businesses to certain risks, although the risks are often ignored with the result that businesses may enter into a cloud computing contract without having considered all potential issues including legal and compliance. Some of the benefits of cloud computing include: low, fixed charges; improved support and maintenance through greater competition between service providers; anytime, anywhere access; ease of adoption; greater flexibility with business requirements that can expand or contract as required. Some of the risks include: standard solutions may not precisely match business needs, limited warranties, indemnities, lack of integration and management of legacy systems, lack of control over data and content with potential data protection issues, risk of lock-in, risk of hidden extras for additional users, storage and so on, risk that a business fails to control usage or increased storage and ends up paying more than what it had budgeted for.

What are the legal issues?

Cloud computing operators generally offer their services on standard terms. Standard terms tend to be for the benefit of the operator, including only limited warranties. In particular, cloud computing providers may reserve the right to delete customer data for breach of contract, such as non-payment. For businesses this may be disastrous vis-à-vis their customers.

In theUK, standard terms betweenUKcompanies (and, in particular, any exclusions or limits of liability) are subject to the Unfair Contract Terms Act and must be reasonable. However, this requirement is not necessary in the event of international contracts (as most of the cloud computing contracts are). In addition, it is far safer to negotiate key provisions in advance rather than rely on statutory protection after an issue arises and business will need to know what kind of service levels and service credits will be offered to it. In the event of use of cloud computing services for key operations such as outsourcing then, the parties must have a properly negotiated agreement, including service levels and support.

The legal issues to consider are various and include: concluding contracts inadvertently; data protection; intellectual property issues and defamation; software licensing, open source use; liability; law and jurisdiction. 

More in detail:

1)  The risk of concluding contracts inadvertently: for example, if an employee signs up to a cloud-computing application using a computer at work for a purpose related to their employment, then the company could be bound by the terms of that cloud computing service.

2)  The risk of data protection compliance: if employees input personal data held by their employer into the cloud, the company must comply with its data protection obligations.

3)  The risk of intellectual property infringement: liability may arise when employees post defamatory or copyright-infringing content into the public areas of many cloud-computing services. In all the above, appropriate policies, procedures and training must be given to employees to ensure compliance.

4)  Appropriate licences: when users have online use of software at a computer without a licence, they commit copyright infringement. The licences granted by cloud computing operators are usually very narrow and limited to use of the online application for the business own purposes. Customers have no rights to make copies of or modifications or enhancements to the software, and they cannot sub-license to third parties. So the business, before accepting the software licence, must ensure that it can comply with its obligations and if not it must make the necessary changes to allow for sub-contracting or outsourcing.

5)  Intellectual property issues: a cloud computing operator may not always own the intellectual property rights in the software that is the subject of the cloud-computing service. In this case, the operator will need to arrange for the right to sub-license the software to its customers, or for a direct licence to be entered into between the customers and the relevant third-party licensor.  

6)  Use of open source software: although the use of open source software helps keeping the costs down and many cloud computing operators build their services using such software, the open source software licences vary considerably and some require onward licensing of source code when open source is incorporated into other software or deployed in a hosted environment, which could have serious consequences for businesses. It is thought however, that pure cloud services are not considered to involve a conveyance according to the General Public Licence Version 3 and therefore code disclosure requirements should not be triggered. However, it is preferable for businesses to check this issue with their provider.

7)  Content licence: the standard terms offered by many cloud computing operators allow them to use any content stored on its servers. These licences are often expressed as being perpetual and irrevocable often giving the cloud computing providers the right to pass the content to third parties or use it for the purpose of promoting the cloud computing service. This may not be appropriate for information such as personal data, third-party intellectual property rights or confidential information contained in or attached to e-mails. Customers should therefore take care in identifying and amending any rights they are agreeing to provide to the cloud computing operator before they sign the relevant contract.

8)  Liability: the cloud computing provider will seek to exclude all liability for content stored or posted on its services and will normally include a right in its standard terms to remove any data from its servers. This is because internet service providers can be liable for failing to take down offensive, defamatory or intellectual property infringing content and cloud-computing applications often blur the line between public and private networks. In these circumstances, corporate customers should seek an indemnity for any loss suffered as a result of material being unnecessarily deleted or moved and should look to impose a requirement to be notified in advance if any content is to be removed.

9)  Intellectual property indemnity: it is common in all IT contracts to include an intellectual property indemnity for the customer’s benefit in the event that a third party makes a claim that the use of IT products by the customer (particularly software) infringes the third party’s intellectual property. However, it is important for the customer to ensure that such indemnity is not unreasonably limited or subject to unnecessary conditions. The inclusion of intellectual property indemnities in cloud-computing contracts remains important because customers have to rely on the cloud computing provider to ensure that software licensing issues have been resolved so as to entitle the customer to use the software as part of the service. One of the benefits of cloud-computing arrangements is that the burden of the upkeep of software licensing arrangements is generally lifted from the customer. However, if the arrangements are not properly made, the customer may still infringe the intellectual property of a third party even though it may have no knowledge of the infringement. Cloud-computing users need to be aware of the possibility of patent infringement through the use of cloud-computing arrangements. Patent protection is increasingly available for computer software in theUS and in the EU. Where cloud-computing arrangements are established on an international basis, the intellectual property indemnity needs to be wide enough to protect the cloud services’ customers in all jurisdictions in which the software will be used.

10)  Jurisdiction and governing law: Where the parties have not expressly chosen a legal system in their contracts: (a) contractual obligations will be governed in accordance with the law of the country in which the party who will perform obligations characteristic of the contract has its habitual residence or central administration this will generally be the law of the place in which the cloud computing provider locates its servers; (b) non-contractual obligations arising in civil and commercial matters between parties, the law applicable will be the law of the country in which the damage occurs or is likely to occur.

Also a business needs to take care during cross-border dealings to ensure that foreign law does not give rise to unexpected and binding non-contractual obligations (for example, duties of good faith in negotiations which do not exist under English law).

Under the Brussels Regulation a person domiciled in a contracting state may be sued in the courts of another contracting state where a contractual obligation is owed. A cloud computing provider based in the EU can be sued in all the jurisdictions in which it provides services to its customers. The Brussels Regulation also provides for mutual recognition and enforcement of judgments.

However, where the cloud computing provider is based outside the EU, jurisdiction will depend on the relevant rules of court relating to service of proceedings on the cloud computing outside the jurisdiction. Customers often take the view that the cloud-computing contract should be governed by their local law as this is the legal system of which they have greatest knowledge. However, this will be difficult to negotiate. Further, it may not necessarily be the most advantageous position. If the cloud computing does not have a sizeable presence in the customer’s jurisdiction then any court order that might be obtained will be difficult to enforce in the cloud computing provider’s jurisdiction. This applies particularly between EU customers and US cloud computing providers and where there is a need to obtain emergency remedies against a cloud computing provider for example, if the customer considers that its data has been misused by the cloud computing provider. In these circumstances, obtaining emergency remedies will generally be more straightforward if the governing law of the contract is the local law of the cloud computing provider. For a checklist of the cloud computing key issues see our article.

This article is for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

Dr Maria Anassutzi has founded Anassutzi & Co limited which offers high quality specialist intellectual property, information technology and commercial contracts advice tailored to each of our clients business.

Bribery Act 2010 (Act)

The Bribery Act 2010 will come into force on 1 July 2011 setting out procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing. The government has confirmed that a commercial organisation convicted of failing to prevent bribery under section 7 of the Bribery Act 2010 will not face mandatory exclusion from tenders for public contracts. However, public authorities will have discretion to exclude these organisations from tenders

On 30 March 2011 the Ministry of Justice published its guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing. If an organisation can prove that it has adequate procedures in place, then they can form the basis of a defence to the offence of failing to prevent bribery under section 7 of the Bribery Act 2010.

The Act sets out six principles that are intended to give all commercial organisations a starting point for planning, implementing, monitoring and reviewing their bribery free business regime.

The principles are:

Principle 1: Proportionate procedures: A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.

Principle 2: Top level commitment: The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.

Principle 3: Risk assessment: The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.

Principle 4: Due diligence: The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.

Principle 5: Communication: The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.

Principle 6: Monitoring and review: The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.

More about the principles in our Bribery Act part 1 article. Small organisations will face different challenges from those faced by larger organisations and organisations with purely domestic operations may face lower risks of bribery than those with international businesses. The respective bribery prevention procedures should be proportionate, but the outcome should always be robust and effective anti-bribery procedures.

The Bribery Act will come into force on 1 July 2011.

Some examples:

Section 1: offences of bribing another person

There have been concerns that this section would prevent certain types of hospitality, such as taking clients to major sporting events. However, the guidance clearly states that in order to bring a case, the prosecution would have to show that the hospitality was intended to bring about the improper performance and that this would be judged by what a reasonable person in the UK would think. It is therefore seen as unlikely that taking clients to, say, a Six Nations match at Twickenham would be an offence.

Section 6: Bribery of a foreign public official

The guidance notes that there may be an overlap between the section 1 offence and section 6 offence, in that bribing a foreign public official may involve conduct which amounts to improper performance of a relevant function. The lesser evidential requirement of section 6, that is, of proving the intention only to influence the official in his capacity as a foreign public official, is aimed at making section 6 more effective to prevent the influencing of decision making of public officials.

1- The provision by a UK mining company of reasonable travel and accommodation for foreign public officials visiting mining operations to review the company’s installations, safety and operating systems would fall outside the intended scope of the offence.

2- Flights and accommodation for foreign public officials to meet with senior executives of a UK commercial organisation in New York as a matter of genuine mutual convenience, and some reasonable hospitality for the individual and his or her partner, such as fine dining and attendance at a baseball match are unlikely to raise the necessary inferences. However, if, for example, the organisation’s senior executives could easily have seen the official with all the relevant documentation when they visited the relevant country the previous week then the necessary inference might be raised by holding a second meeting in New York.

3- Offering ordinary travel and lodgings to enable a foreign public official to visit to a hospital run by the commercial organisation providing private health care is unlikely to engage section 6 but if that same commercial organisation offered the foreign public official an unrelated five-star holiday this might well raise the necessary inference.

More examples in our Bribery Act part 2 article. The guidance therefore suggests that while an organisation is reviewing policies and procedures for the purposes of the defence under section 7, should also establish proper standards for hospitality and other similar expenditure.

More on the Bribery Act in our Bribery Act part 3 article.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

The risk of inappropriate use of social media: fair dismissal for inappropriate comments made on Facebook

The risks of inappropriate use of social media. An employment tribunal has held that an employee was fairly dismissed for gross misconduct after she made inappropriate comments on Facebook about two of her customers, who had verbally abused and threatened her.

The law

Unfair dismissal

Under English law, employees have the right not to be unfairly dismissed. It is for the employer to establish that the reason for dismissal is a potentially fair reason. An employer must also follow a fair procedure for a dismissal to be fair. To establish fairness in a conduct dismissal case, an employer must be able to establish that, at the time of dismissal:

• It believed the employee to be guilty of misconduct.
• It had reasonable grounds for believing that the employee was guilty of that misconduct.
• It had carried out as much investigation as was reasonable in the circumstances.

Whether an employer acted reasonably must be assessed objectively: Did the employer’s decision to dismiss fall within the range of reasonable responses that a reasonable employer in those circumstances and in that business might have adopted? A tribunal must not substitute its view for that of the employer.

Right to freedom of expression

The fundamental rights of the population of European member states are protected by the European Convention on Human Righs (the Convention). These rights include the right to freedom of expression (Article 10(1)).

The right to freedom of expression “may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary”.

The Human Rights Act 1998 (HRA 1998) gives effect to most (but not all) Convention rights and makes them enforceable in the UKcourts. So far as it is possible to do so, primary and subordinate legislation must be interpreted and given effect to in a way that is compatible with the Convention rights (section 3, HRA 1998). It is also unlawful for a public authority to act in a way that is incompatible with a Convention right (section 6(1), HRA 1998).

In the latest Facebook case, the tribunal considered whether a manager of a pub had been fairly dismissed after posting negative comments about customers on her Facebook page and whether her right to freedom of expression had been infringed.

Decision

The tribunal dismissed her claim.

The tribunal held that the employer conducted a reasonable investigation into allegations of gross misconduct namely the claimant entering into a conversation on Facebook. The conversation clearly concerned work and culminated in views being exchanged that could be read by a number of people, including the customers themselves. The sanction of dismissal fell within the range of reasonable responses available to a reasonable employer.

The tribunal found that although the employee had  a right to freedom of expression under Article 10 of the Convention, the action taken by the employer was justified in view of the risk of damage to its reputation.

The tribunal acknowledged that the customers’ behaviour was abusive and shocking. However, the Facebook entries took place over a lengthy period of time, after the situation had calmed down and she was working as normal. The employee knew that she could use a “hotline” to seek the advice of an experienced manager or, if she felt distressed, to ask permission to leave work early.

Conclusions

For employers, this case highlights the importance, and usefulness, of having a properly drafted policy regarding the use of social media. The lesson for employees is not to use Facebook or similar media as a way of venting frustration about work.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

What is a contract and why you should care

In this article Dr Maria Anassutzi, Intellectual Property Expert and Director of Anassutzi & Co Limited, explains the key reasons business owners, directors and commercial managers need to know what a contract is and why it is important for them to know and have the basic understanding of a contract and its impacts on business.

As a business owner, director, manager you enter almost daily into legally binding contracts.  The contracts may be in the form of placing orders or accepting them, purchasing and selling via your standard terms and conditions, or via your sales staff who may be a little bit over zealous trying to conclude the deal or by agreeing a letter of intent, outsourcing part of your operations or supply chain or commissioning a specific work, be it software, logo or marketing campaign.

This means contracts have not only legal implications but also commercial impact since they may unnecessarily increase your business exposure, affect your company’s liabilities and eventually your business turnover and profit. It would therefore be good if you and staff working for you knew how to avoid taking on extra responsibilities and liabilities and may cause you to be liable for misrepresentation, expose your company to unmanageable risks and ensuring that payment or receipt of goods or services goes smoothly. Of course even with the perfect agreement you cannot eliminate all risks. What you can do is ensuring that you know the risks you are taking and act accordingly be it by taking out the necessary insurance cover or pricing your product and services accordingly. Of course, you could ask your lawyer for assistance but very often you do not have the budget and you are expected to conclude contracts as part of your business, therefore engage a lawyer is not an option. However you can attend Anassutzi & Co Drafting Commercial Contracts seminar which gives at an affordable price all the necessary tips and hints for you to do your job plus lots of checklists and other materials.

A contract is a legally enforceable agreement giving rise to obligations for the parties to it. The formation of a contract is complete when the basic principles of offer, acceptance, consideration   and intention to create legal relations are satisfied (the four basic elements). An agreement is formed through offer by one party with acceptance of that offer by another party. This involves a matching of the two communications of offer and acceptance.

When a contract is formed through standard terms and conditions of business (sale or purchase) if both parties purport to impose their own standard terms, difficulties arise in determining which terms will prevail. The approach taken by the courts is that an acceptance which attempts to impose new terms is not an acceptance at all, but is a counter-offer which can be accepted by an unequivocal acceptance by the other party, or by performance. This is known as battle of the forms and means in practice that the last set of terms dispatched before acceptance or performance (the last shot fired in the battle of the forms) will prevail.

Some contracts may be written, or oral, or partly written and partly oral. Other contracts may need to be written or by deed to be legally enforceable. In the past, courts have found that contracts do not always have to be signed. Even though the parties to a contract had not executed the draft agreement that had been drawn up, and they had initially intended that it should not be binding unless and until the agreement was executed, the contract was binding on the parties as, on the evidence, they had been acting in accordance with the contract’s terms and they had, on the facts, effectively decided that the agreement did not have to be executed after all. However, this decision was overturned on appeal on the construction of the facts.

In another case, the Court of Appeal held that a counterparts clause prevented a contract from being formed, even though the parties had performed a substantial part of the contract. However, this decision was overturned in March 2010 by the Supreme Court, which held that although the parties never signed the formal written agreement, that agreement had come into effect notwithstanding that the agreement was expressed to be subject to contract. The parties had by their conduct waived the subject to contract provision. Lord Clarke commented that “the different decisions in the High Court and Court of Appeal and the arguments in the Supreme Court demonstrate the perils of beginning work without agreeing the precise basis upon which it is to be done”.

The moral of the story to is to “agree first and to start work later.” Businesses may not always find it possible to do so, but should be aware that behaviours, words and promises have all impact and cause implications that have commercial and financial consequences. Attending Anassutzi & Co Drafting Commercial Contracts seminar is the best and simplest way of doing so.

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

What restrictions can you impose on your employees regarding confidential information

In this article, Dr Maria Anassutzi, intellectual property expert, analyses and discusses the various issues employers must look for when trying to protect their intellectual property, know-how and confidential information from their employees and independent consultants.

During the employment period, the employer is reasonably well protected from misuse of its confidential information and know-how by implied terms and duties. If a job entails handling particularly sensitive information, the employer may wish to supplement these with an express confidentiality clause in the employment contract. However, the employer must ensure that the employee is aware that the information, when disclosed to him, is to be treated as confidential. If not, the benefit of the implied or any express obligations will be severely undermined. This awareness can be achieved in a number of ways: (i) oral clarifications; (ii) explicit terms in employment manuals; (iii) stamping documents “Confidential”; (iv) getting employees to sign express restrictions in respect of certain information.

There are three specific categories of confidential information:

- Trivial: information that, due to its trivial character or its easy accessibility from public sources, cannot be regarded as confidential.

- Confidential: information that the employee must treat as confidential because: (i) the employee is expressly told it is confidential; or (ii) from its character it obviously is confidential. This information, once learned, necessarily remains in the employee’s head and becomes part of the employee’s own skill and knowledge applied in the course of the employer’s business. Generally, an existing employee can be stopped from misusing or disclosing this information but will not impose any implied restrictions on the employee’s ability to use or disclose it, even to a subsequent competing employer, after the employment ends.

- Trade secrets: information that, by its nature, is highly confidential and is referred to as “trade secrets” or their equivalent: for example, chemical formulae, designs or special methods of construction. The courts will imply terms to protect this against misuse or disclosure post-employment.

Trade secrets include information used in a trade or business which is subject to limited dissemination (or at least where widespread publication is not encouraged) but which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret.

Therefore the implied duty can extend to cover highly confidential information that is not just of a technical or scientific nature. Information concerning personal relationships can also be trade secrets for the purposes of imposing implied restrictions post-employment.

Employers very often use restrictive covenants in the employment contracts to extend the implied protection offered to them. Restrictive covenants can be: (i) covenants that relate specifically to certain information (non-disclosure/non-use clauses) and (ii) covenants that prohibit certain acts, irrespective of whether specific information is being used (for example, not to compete within a certain area or not to solicit former customers or employees). It is not clear from the cases to what extent the first category can provide the former employer with any more protection than is already offered by the implied protection. “Confidential” (non-trade secret) information in certain instances was found to be protected by reasonable express post-employment covenants whereas in others it was not.

It is better not to identify the subject matter that is being protected in the employment contract, since the employer may be able to find alternative arguments for justifying the restrictive covenant if challenged. The subject matter may include objective knowledge constituting the employer’s trade secrets. However, it cannot include the skill, experience, know-how and general knowledge acquired by an employee as part of the job during employment (even though that will equip the employee as a competitor, or potential employee of a competitor).

Employers very often use restrictive covenants in the employment contracts to extend the implied protection offered to them. Restrictive covenants can be: (i) covenants that relate specifically to certain information (non-disclosure/non-use clauses) and (ii) covenants that prohibit certain acts, irrespective of whether specific information is being used (for example, not to compete within a certain area or not to solicit former customers or employees). It is not clear from the cases to what extent the first category can provide the former employer with any more protection than is already offered by the implied protection. “Confidential” (non-trade secret) information in certain instances was found to be protected by reasonable express post-employment covenants whereas in others it was not.

 It is better not to identify the subject matter that is being protected in the employment contract, since the employer may be able to find alternative arguments for justifying the restrictive covenant if challenged. The subject matter may include objective knowledge constituting the employer’s trade secrets. However, it cannot include the skill, experience, know-how and general knowledge acquired by an employee as part of the job during employment (even though that will equip the employee as a competitor, or potential employee of a competitor).

Another way employers can protect their know-how and confidential information is to include a provision in the employment contract for a specified period of “garden leave”. During this time the employee remains employed but does not attend work. As a result, the employee is effectively denied access to the company’s information and contractually bound not to work for anyone else. The implied protections do not survive during this period so a garden leave clause should include express terms to continue the implied obligations of confidentiality, at least until the period ends.

These clauses are particularly beneficial to protect information that is commercially sensitive whilst current but not a trade secret (that is, which may not be protectable post-employment, even with an express provision). However, a long period of garden leave may have an adverse impact on the enforceability of otherwise reasonable restrictive covenants, in particular if the latter also last for a long period. Therefore, it is not uncommon to provide for a corresponding reduction in the restraint period for each day of garden leave served.

Employers seeking court protection need to take action promptly to restrain any misuse of IP rights or confidential information. Delay is a bar to injunctive relief, particularly where the employer has allowed the employee to set up or join a competing venture before deciding to take action. For example, a delay of two months may be considered unreasonable.

It is also essential that the employer is not in material breach of the employment contract. Where this is the case, the former employee can rescind the contract and all its clauses, including the restrictive covenants. This is the case even where the covenant is stated to apply after the termination of the contract “howsoever arising”. For example, attempts by the employer to make a non-contractual payment in lieu of notice could trigger a wrongful dismissal claim and leave the contract unenforceable. Therefore, where the enforcement of post-termination covenants is important, it is important to include a payment in lieu of notice provision.

However all cases are considered on a case by case basis, Where an independent contractor was involved it was held that a provision protecting confidential information continued to apply after the termination of a contract for services despite a repudiatory breach of the agreement. Significantly, the court held that it would have come to the same conclusion if the case had involved an employee, arguing that there could be no justification for making a wrongly dismissed employee “a present” of his employer’s trade secrets or other confidences. 

All articles are for general purposes and guidance only and do not constitute legal or professional advice.

Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

For more information email maria@anassutzi.com

“DRAFTING COMMERCIAL CONTRACTS” A hands-on seminar to help the non-specialist deal with contracts effectively

The course is about helping those without formal legal training, who have to deal with legal documents, specifically commercial contracts, understand better what they are looking at. The aim is to allow you to get to grips with what your legal documents more quickly and effectively.

Managers are increasingly involved in the task of negotiating and signing contracts. A lack of basic skill has tangible consequences, including excessive costs, delays and unacceptable risks. Our seminar promises to be very popular, as it specifically focuses on the needs of business people dealing with contracts. It is a fast, effective and clear way to obtain the skills and confidence to understand commercial contracts.

KEY BENEFITS

1. Learn how to get to grips with complex legal issues, arising from these clauses.

2. Discover how to negotiate clauses, which limit liability for contractual claims.

3. Understand the importance of warranties and other obligations.

4. Find out how to avoid serious problems, if it all goes wrong.

5. Gain practical experience of drafting techniques.

6. Understand practical “boilerplate” clauses and their use.

7. Understand the essential issues to be analysed prior to negotiations.

WHAT WILL YOU GET OUT OF IT

• Improved contracting skills and know how.

• Save legal costs, by working more efficiently with your lawyers, cutting the time your lawyers need to spend.
• Minimise negotiation deadlocks.
• Ensure the contract meets your needs.
• Effectively manage business risks.
• Draft clear and unambiguous contracts, which will help achieve your commercial objectives.
• Get transactions moved along faster, to get more business done.

WHY YOU SHOULD ATTEND THIS  SEMINAR

Do you wish to take your drafting skills to the next level? Attend our new practical seminar on drafting commercial contracts, to increase your knowledge and practice drafting skills, with an experienced practitioner.

This half a day programme has been designed to give you practical guidance on the drafting and use of the “legal” clauses in commercial contracts. The rights and liabilities created as a result of warranties and indemnities can create complex legal problems for contracting parties and third parties.

ABOUT YOR SPEAKER

Dr. Maria Anassutzi, an intellectual property specialist lawyer with vast experience in general corporate commercial law, specialising in information technology, e-commerce and outsourcing, is founder and director of niche intellectual property practice Anassutzi & Co limited. Her clients include both suppliers and users of technology, Universities, inventors and telecom companies and businesses. Maria is a prolific writer on intellectual property, e-commerce and IT and given Maria’s intellectual property expertise, she is regularly invited to present to seminars and holds workshops on intellectual property and information technology related issues.  She has advised clients on IP management and conducted in-house training on confidentiality, intellectual property and other related issues to senior management and board members.

HOW MUCH IT COST

1^st Delegate: £150.00 (Introductory price; standard price £300.00)

2^nd Delegate: £100.00

Book easily by calling Maria on 07788 726446 or by emailing at maria@anassutzi.com