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Tmt conference 2013 presentation slide pack Presentation Transcript

  • 1. Eversheds TMT Conference 2013 Innovative thinking for TMT professionals Friday 5 July 2013
  • 2. Welcome & introduction Charlotte Walker- Osborn, Head of TMT and Technology, Eversheds LLP
  • 3. Eversheds TMT Conference 2013 Contracting update James Walsh, Head of Telecoms Charlotte Walker-Osborn, Head of TMT and Technology, Eversheds LLP
  • 4. Topics • Cooperation Agreements/OLAs • Best and reasonable endeavours • Changes in law and risk allocation • Choice of law and jurisdiction • A few updates on getting the drafting right / an update on a few key areas – Indemnities – OSS – Penalties
  • 5. Cooperation agreements, OLAs, etc • Multi-vendor environments are common place • Customers have struggled with dealing with cooperation issues between vendors • In practice, we are seeing increases in: – heavily negotiated cooperation clauses – non-binding operating level agreements or cooperation agreements between vendors • Issues and challenges include: – remedies for non-compliance with cooperation agreements – allocating the costs of cooperation – channels for claims between vendors
  • 6. Best & reasonable endeavours • Commonly used terms, not necessarily common meanings • A range of different decisions as to the extent of application. Issues include: – the efforts a party must undertake to satisfy its contractual obligation – whether a party is required to sacrifice its commercial interests to achieve a particular result • In 2012, the case of Jet2.com Ltd v Blackpool Airport Ltd [2012] EWCA Civ 417 highlighted issues with using these terms: – “whether and, if so, to what extent a person who has agreed to use his best endeavours can have regard to his own financial interests will depend very much on the nature and terms of the contract in question” – a dissenting judge considered the terms too unclear to be enforceable on facts • Now it is much more common to see definitions of what is meant by best and reasonable endeavours in contracts, with differing degrees of success.
  • 7. Best & reasonable endeavours (cont.) • An example of a rather cumbersome definition is as follows: “References to "reasonable endeavours" in this Agreement shall mean a duty (at the sole cost and expense of the party on whom such duty falls) to do what is reasonable (including incurring expenditure) in the circumstances on the basis of a standard of reasonableness which is that of a reasonable board of directors acting properly in the interests of their company taking into account: (a) commercial practicality; (b) the interests of their company; (c) the costs to their company; and (d) the likelihood of success, such that if such board of directors determined (taking all relevant circumstances into account) that the obligation imposed on the company was too great for the company to undertake, the obligated party will not be in breach of any obligation to use its reasonable endeavours by failing to take such action.” • Not necessarily an optimum solution, but worth defining.
  • 8. Changes in law and risk allocation • Laws affecting TMT sector and TMT customers in other sectors are changing. • Some TMT examples will be discussed in the conference, but in broad terms they include: – a new data protection regulation – changes in consumer rights directive – a potential new communications data bill • Changes in other sectors and countries include: – recent changes to financial services regulation – new laws in the energy sector to deal with TMT issues (eg the new licence procurement for a data communications company to support the Government’s smart metering project) • This is resulting in increased negotiating of change control provisions for contracts, including cost allocation and potentially termination rights
  • 9. Choice of law and jurisdiction • In international contracts, choice of law and jurisdiction has become a significant issue. • In particular: – there is controversy around the enforceability of unilateral jurisdiction clauses – parties are interested in choosing laws and jurisdictions that give more practical ways to obtain payment (eg imprisonment in UAE and other MENA jurisdictions) – more critical consideration of dispute resolution ‘steps’ and whether or not they will be used to a party’s detriment or advantage in dispute resolution – consideration of location of assets and ability to enforce judgements and arbitral decisions is still key • English law still remains a good neutral jurisdiction for choice of law in international contracts
  • 10. Contracts: a few updates on getting the drafting right / general update on key areas
  • 11. Indemnities Do they solve or create problems?
  • 12. K/S Preston Street v Santander [2012] “… the partnership shall indemnify the bank on demand against any cost, loss, expenses or liability (including loss of profit and opportunity costs) which the bank incurs as a result of the repayment of the loan ...”
  • 13. Vote now! Did the indemnity entitle Santander to recover its lost interest?
  • 14. The Court’s view • The indemnity only covered crystallised losses not future losses – referred to ‘incurs’ not ‘to be incurred’ – use of ‘on demand’ • Breach of contract rules on recovery of future losses not applicable to indemnity claims
  • 15. Rust –v- PB [2012] “The consideration for the sale and transfer by the Vendor is (i) £1,000 and (ii) the Purchaser assuming responsibility for the satisfaction fulfilment and discharge of all of the Liabilities and the Contracts of the Business outstanding at the Effective Date and the Purchaser hereby indemnifies and covenants to keep indemnified the Vendor against all proceedings, claims and demands in respect thereof.”
  • 16. Practical tips – indemnities (1) • Check an indemnity is the best remedy – could LDs be better if you are the customer? • Draft clearly and precisely. If you know that there are certain losses that should be included/excluded expressly deal with them • Is ‘all liabilities’ appropriate?
  • 17. Practical tips – indemnities (2) • Indemnities for future losses: – If you are the Customer: • ‘incur or to be incurred’ • avoid ‘on demand’ • If you are the Supplier: – remove ‘to be incurred’
  • 18. Open source • Suppliers often still do not separate out their obligations in relation to the different types of software they are supplying to customers • Implications = everything offered in relation to proprietary software/third party software is also offered in relation to open source software – Full IPR indemnities – Obligations to fix
  • 19. What is Open Source Software? • Source code, as well as object code, is made available under the licence • Software developers can plug it in to projects and further develop it • Often free of charge • Supported – and policed - by a large community • Easily available via the Internet • Now runs most of the Internet – e.g. LAMP stack A Recap
  • 20. OSS uptake increasing • 46.3% of respondents are using OSS • 22.3% using it consistently in all departments • 11% using it to gain competitive advantage • 20.3% conducting projects or prototypes • Others – 0.2% Recent Gartner survey
  • 21. The need to take care over what is being offered to customers • Bell Microproducts • Motorola • Acer • D-Link • Skype Some recent breaches of OSS licenses / enforcements
  • 22. The fix – where we see customer clients accepting compromise • Pass through of open source license terms – often licensed “as is” / with all faults • But, make clear if the software isn’t working due to the open source, the supplier will fix the problem so that the software is working back in [material] accordance with the specification • Intellectual Property Rights – Sometimes able to carve out of IPR indemnity – If not, it is key to have the ability to compel the customer to stop using the OSS/the software immediately and a right to replace with non-infringing code
  • 23. Penalties Is it still all about ‘reasonable pre-estimate’ of loss?
  • 24. Imam-Sadeque v BlueBay Asset Management (Services) Ltd [2012] • Burden of proof sits with party alleging penalty • Penalty does not need to be payment of money (could eg be transfer of property/forfeiture of sums due) • Only applies if sums payable on breach
  • 25. Imam-Sadeque (continued) • Penalty doctrine applies if predominant purpose is deterring breach rather than compensating innocent party – but not everything fits into this categorisation. What is critical is whether the clause is commercially justifiable • Easier to justify a single sum payment where it is very difficult to quantify losses • Court to look at the whole bargain (including other terms), sophistication and bargaining power of the parties
  • 26. Cavendish Square Holdings v El Makdessi [2012] “if a Seller becomes a Defaulting Shareholder he shall not be entitled to receive the Interim Payment and/or the Final Payment which would other than for his having become a Defaulting Shareholder had been paid to him…”
  • 27. Vote now! Did the reduction in consideration receivable by Mr Makdessi constitute a penalty?
  • 28. The Court’s view
  • 29. Key points “…no longer the need for the for the dichotomy between liquidated damages and genuine pre- estimate of loss, and so the relevant questions seem to be to be simply:- i) Was there a commercial justification? ii) Was the provision extravagant or oppressive? iii) Was the predominant purpose of the provision to deter breach? iv) If relevant, was the provision negotiated on a level playing field?”
  • 30. Practical Tips – avoiding penalties • Always file note LD/termination payment discussions to record commercial justification • Include drafting to explain commercial justification
  • 31. Eversheds TMT Conference 2013 To BYOD or not to BYOD? Jonathan Townend, Head of Technology Consulting, Victoria Mann, Associate, Simon Cloke, Senior Associate, Eversheds LLP
  • 32. Text slide title Verdana 32pt • Add text here Sub-heading Times New Roman 34pt Devices are everywhere
  • 33. CIO’s are out of excuses...
  • 34. ...you can’t stop the devices coming in
  • 35. So you need a strategy
  • 36. Strategic considerations • Infrastructure for BYOD – Simon Cloke • Data Protection issues – Victoria Mann • Conclusions & recommendations
  • 37. Infrastructure for BYOD Some of the key legal considerations include: • Connectivity – public v private networks • Spectrum – licensed v unlicensed spectrum • Equipment – RTTE compliance and responsibilities • Operation & Installation – Code Powers • Data Retention – storage of data There is no “one size fits all” approach to these issues.
  • 38. What network connectivity issues need to be considered? • How will the device be connected? – wired or wireless (2G, 3G, 4G, WiFi) • What sort of network will the device be operating over? – public 3rd party network (MNO, MVNO, WiFi) – hybrid – private corporate network • Who will be provided access to the network? – employees – consultants – visitors
  • 39. Spectrum – ensuring compliance with the Wireless Telegraphy Act • Wireless Telegraphy Act 2006 & Wireless Telegraphy (Exemption) Regulations 2003: – unlawful to establish/use a wireless telegraphy station or to install/use wireless telegraphy apparatus – exemption for radio local area network • compliance with interface requirements • must operate within specified bands • Where the above requirements are not met a licence will be required. • Civil and Criminal sanctions for breach of WTA.
  • 40. Radio Equipment and Telecoms Terminal Equipment Compliance • Radio Equipment and Telecommunications Terminal Equipment Regulations 2000: – apply predominantly to terminal equipment (e.g. handsets) but also cover radio equipment – impose restrictions on equipment being placed on the market or put into service • Manufacturers of the relevant equipment should be complying with these requirements! • Need to: – take all reasonable steps; and – carry out due diligence; to avoid committing an offence
  • 41. Operation & Installation of Equipment • Electronic Communications Code (aka Code Powers): – enables communications network providers to construct communications networks – applies to network providers designated by Ofcom • Code Powers include the right to: – construct infrastructure on public land – take rights over private land – cross land with a line and to maintain that line • S.21 places restrictions on land owners/lessees’ ability to remove equipment • The Government is currently reviewing the Code
  • 42. Storage and Retention of Data • The Data Retention (EC Directive) Regulations 2009: – only apply to public communications providers – require the retention of customer data for 12 months (includes traffic and location data) – cover data collected in the provision of the services • Different requirements apply depending on the type of network being provided • Processes will need to be in place to enable provision of information to law enforcement authorities • Note additional DPA 1998 requirements
  • 43. What are the potential data privacy/security issues? Use with caution: • balance BYOD programme with legal obligations re. personal data • portable devices = lack of control over data • N.B. DPA seventh principle • potential to lose/leak personal data as well as confidential business information • what happens if there is a data security breach? • data transfers and access? • storage – cloud?
  • 44. Other key privacy issues to consider... • monitoring of employee communications: – separation/ring-fencing of work-related and private information? – key to inform employees of monitoring – consider requirements/restrictions under interception laws e.g. in the UK RIPA and the LBPRs in addition to the DPA. – particular care needed in some EU countries e.g. Germany • don’t forget compliance with other DPA principles!
  • 45. Dealing with the DP risks • security issues – consider: – use of ‘strong’ passwords to secure devices in addition to 4 digit pin – file encryption – automatic device locking – remote wiping where device is lost/stolen – which data will be wiped and under what circumstances? – secure backup – virus protection
  • 46. • importance of BYOD policy/ToU: – clear obligations on employees – what happens if something goes wrong? – controlled access – set rules and boundaries – sanctions if breaches occur • Acknowledgements & Consents? How valid? • Effective communication and consistent enforcement of BYOD policy is key • Educate employees – BYOD training Dealing with the DP risks (2)
  • 47. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 48. Conclusions & recommendations 1. Data Audit • who can access what data on which devices? 2. ‘What If?’ Scenarios & Remote Device Management • don’t stop at lost & stolen 3. Acceptable Use Policy • Plus training, communications and monitoring IT & Legal collaboration
  • 49. Conclusions & recommendations 1. Carefully consider use of 3rd party suppliers • provision of network and services • installation of equipment 2. Contractual protections • compliance with law clause is not sufficient • public electronic service provider designation • provisions dealing with use of Code Powers • warranties and indemnities around RTTE 3. Technical separation of public/private networks Infrastructure
  • 50. Eversheds TMT Conference 2013 Case law update James Hyde, Principal Associate, Eversheds LLP
  • 51. Transport for G. Manchester v Thales [2012] EWHC 3717 (TCC) [2013] EWHC 149 (TCC)
  • 52. Transport for G. Manchester v Thales • Thales to supply a new Tram Operating System (£22m) • Monitoring and communication equipment in all trams, trackside equipment for signalling, points and control room • Hardware and software, from design to commissioning • Massive delays led to claims on both sides (£36m LDs or extension and £42.3 extra costs – depending on the side) • Allegations of variations, late instructions, lack of co- operation and delay – all very common • “Something has gone seriously wrong.” • Some claims put, under contract, to adjudication
  • 53. Transport for G. Manchester v Thales • TGM sought to use audit clauses to obtain early disclosure • Thales refused • TGM commenced Part 8 proceedings (quick, issues of law) • Commenced 9 Nov 12, Trial on 17 Dec 12 • Sought order for Specific Performance • Disclosure of 53 categories relating to costs and performance • Test (1): discretionary remedy, not where damages adequate, acts and results important, as is precision in what is ordered • Test (2): contractual interpretation not pre-action disclosure
  • 54. Transport for G. Manchester v Thales • The breadth of the audit clauses allowed disclosure requested • Common ground that privileged documents could be withheld • Thales claimed privilege over relevant documents prepared for it by a 3P in relation to the performance of the contract • Instructed from Dec 2010 to prepare adhoc and weekly reports • From Dec 2011 reports provided to Thales legal • Feb 13 trial and further evidence from Thales in-house counsel • Reports prepared after Dec 2011 not legally privileged • Litigation not dominant purpose, just one of several • No written instruction initially, nor new or separate retainer • Thales did not discharge their burden and disclosure ordered
  • 55. Statpro Group v Depfa Bank [2013] EWHC 969 (QB)
  • 56. Statpro v Depfa • C licensed software to D under two contracts starting 30 July 2007 “This agreement shall come into effect on the contract start date and remain in force for the initial period specified at Schedule 2. On the renewal date and each anniversary of the renewal date thereafter it will renew automatically for the term of the subsequent period specified in Schedule 2 and subsequent addendums to Schedule 2 signed by the client and Statpro unless either party gives at least 90 days notice in writing of its intention to terminate this agreement, expiring on any anniversary of the renewal date.” • Schedule 2 - initial period 2 years, subsequent period 3 years • D gave notices to terminate on 31 Mar 2010 and 25 Feb 2011
  • 57. Statpro v Depfa • Part 8 proceedings (1 March 2013) • C argued contracts renewed for 3 years on 30 July 2009 as not notice given prior to that date • D argued that 3 year period began on 30 July 2009, but then automatically renewed for a further 1 year on each anniversary, subject to a notice of termination given at least 90 days ahead of that anniversary • Held – notwithstanding the use of “anniversary”, the wording sufficiently clear to support C’s interpretation • Witness evidence on commercial context/practice in the IT industry irrelevant to the Court’s consideration
  • 58. SAS Institute v World Programming [2013] EWHC 69 (Ch)
  • 59. • SAS develops analytical software • WP developed alternative to execute programs written in SAS • WP emulated SAS functionality eg same inputs, same outputs • WP had no access to, or copied, the SAS source or object code • WP observed, studied and tested the SAS system to reproduce the functionality and used the SAS language and file formats • SAS claimed WP infringed copyright: – in the SAS manuals when creating WPS – in the SAS components when creating WPS – in a version of SAS when using it to assess functionality – in the SAS manuals when creating WPS manual and guides SAS v World Programming
  • 60. • A preliminary ruling, the Court found no infringement except in producing the WPS manual, but • Referred questions to the Court of Justice of the EU (CJEU) regarding interpretation of: – Council Directive 91/250/EEC of 14 May 1991 (“Software Directive”) – Directive 2009/24/EC of 23 April 2009 (codified version) – Directive 2001/29/EC of 22 May 2001 (“Information Society Directive”) • 29 Nov 2011 – Opinion of Advocate General Bot • 2 May 2012 – Judgment of CJEU SAS v World Programming
  • 61. • CJEU held: – Neither the functionality of a program nor the programming language and the format of data files used are protected – Licensee is entitled to observe, study or test functionality of a program to determine underlying ideas and principles – Can do so whilst loading, displaying, running, transmitting or storing the program (ie within what the licence permits) – Can do so without authorisation of the copyright owner – Any licence provisions to the contrary are null and void – If the first manual is protected literary work then reproduction of it in a program or manual is infringement • Accordingly, Court upheld its preliminary judgment SAS v World Programming
  • 62. EMI and others v BSkyB and others [2013] EWHC 379 (Ch)
  • 63. • Injunction sought by music industry against ISPs to block access to file-sharing websites called KAT, H33T and Fenopy • Based on s97A of Copyright, Designs and Patents Act 1988 • Followed 20C Fox v BT and Dramatico v Sky • Unopposed by ISPs and agreed terms of the blocking order • Court still required to determine whether jurisdiction to do so • Four factors: – That the defendants are internet service providers – That users and/or operatives of the websites infringe – That they use the defendants’ services to do so – That the defendants have actual knowledge of infringement • Then whether the order is appropriate and proportionate EMI and others v BSkyB and others
  • 64. • (1) defendants are service providers • (2) users infringe copyright by copying (s17) (eg downloading) and communicating to the public (s20) (eg uploading) • (2) operators infringe copyright by communicating to the public, by authorising infringement by UK users, and jointly liable for infringement by UK users • (3) Users and/or operators use the defendant services to infringe • (4) ISPs have actual knowledge via weekly reports • Orders were necessary to protect the IPR of the Claimants, the orders are narrow and targeted, contain safeguards, the cost of implementation is modest and they have been effective previously EMI and others v BSkyB and others
  • 65. PR Consultants Association v Newspaper Licensing Agency and others [2013] UKSC 18
  • 66. • Meltwater uses automated software programs to create an index of words appearing on newspaper websites • Customers provide search terms and M provides a report listing the results of a search of that index • For each hit, the report presents the opening words of the article, the keyword and several words on either side of it, together with a hyperlink (represented by the headline) • Report sent via email or can be accessed on M’s website • M licenced to provide the service • M’s customers licenced to receive the email service • Do customers require a licence to simply view the report on M’s website? PR Consultants v Newspaper Licensing
  • 67. • First instance: Yes. Court of Appeal: Yes. • Appealed to the Supreme Court • Temporary copies allowed where transient or incidental and an integral and essential part of a technological process and the sole purpose is to enable transmission in a network or a lawful use of the work; and which has no independent economic significance (28A CDPA 88, giving effect to the Article 5.1 of the Information Society Directive) • Considered these factors and cases Infopaq I, II and Premier League PR Consultants v Newspaper Licensing
  • 68. • The requirements of 28A and Article 5.1 arguably met and viewing the reports on M’s website unlikely to infringe • Purpose of the exemption is to allow end-users to view copyright material on the internet • Making of copies in the internet cache or on screen is temporary, transient • Indispensible to the correct and efficient operation of the technical processes involved in browsing • Lawful use includes internet browsing • It must not have independent commercial value – ie not additional to that which is derived from the mere act of viewing the material, which in this case it does not • However, before making an order made reference to CJEU. PR Consultants v Newspaper Licensing
  • 69. Notification to TalkTalk of a penalty under s130 Communications Act 2003 Issued: 24 June 2013
  • 70. • Ofcom’s investigation of the number of abandoned and silent calls in the industry started in 2006 • Following a number of complaints of abandoned and silent calls in 2010, Ofcom corresponded with TT about compliance • Following a continuation of complaints, in 2011 Ofcom began an investigation into TT and two of its call centre operators (TeleP and MM), which continued throughout 2011 and 2012 • 12 Oct 11: s128 notice issued to TT that Ofcom had reasonable grounds for believing that between 1 Feb 11 and 21 Mar 11 (the “Relevant Period”) TT had persistently misused an electronic communications network or service • TT, TeleP and MM make representations in 2011 and 2012 • 5 April 2012: Ofcom serves a provisional notification of a penalty under s130 of £750,000 TalkTalk
  • 71. • TT persistently misused an electronic communications network between 1 Feb 11 and 21 Mar 11 by: – exceeding an abandoned call rate of 3% of live calls over 24 hours by a substantial amount at a call centre operated by TeleP in South Africa across at least one campaign (some 9000 silent/abandoned calls) – failing to ensure a recorded message played by TeleP – persistently making abandoned calls at a call centre operated by MM in the UK in relation to Answer Machine Detection equipment (512 abandoned calls over 29 days) (also failed to provide estimates of false positives, failed to keep adequate records, failed to ensure live operator present on return call) TalkTalk
  • 72. • Penalty of £750,000 but note no obligation to compensate • Such persistent misuse was serious and warranted the penalty to create a deterrent and to ensure compliance • Regard was also had to: – serious contraventions and considerable harm caused – representations made by TT, TeleP and MM – steps taken to bring it to an end and not repeated (it did not act immediately but later ceased to use TeleP and MM) – steps taken to remedy the consequences of misuse (it did not state that it had taken any) – TT made some financial gain from its contraventions – TT has a history of contraventions – providing an effective incentive to TT to comply TalkTalk
  • 73. • Note maximum penalty is £2 million, which Ofcom considered would be appropriate for the most severe and damaging contravention of the persistent misuse provisions (but not this case) • The penalty of £750,000 would have been higher if TT there been an intention or recklessness as to contravention, including if management had known, or ought to have known, that a contravention was occurring or would occur • Would have been lower had TT co-operated to a greater extent than it did, if it had maintained adequate records and had taken swift action on being notified in the beginning TalkTalk
  • 74. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 75. Eversheds TMT Conference 2013 Environmental issues affecting the TMT sector Jane Southworth, Legal Director Eversheds LLP
  • 76. Agenda • WEEE Recast • ROHS Recast • Proposals to align producer responsibility legislation in the UK • REACH - Supplier of Articles • Nanomaterials - How should they be regulated? • Biocides • CRC Update
  • 77. Directive 2012/19/EU on waste electrical and electronic equipment • WEEE 1 —Existing directive (2002/96) —10 categories of EEE —Established principle of producer responsibility WEEE Recast
  • 78. Directive 2012/19/EU on waste electrical and electronic equipment • Implementation by 14 February 2014 • Key changes • Scope • New Collection Targets • Illegal Shipments • Extra Retailer Obligations • Key principals in relation to end of life costs have not changed. WEEE 2
  • 79. Directive 2012/19/EU on waste electrical and electronic equipment • Move to “open scope” from 15 August 2018 • 6 categories — Temperature exchange equipment — Screens and monitors — Lamps — Large equipment (any external dimension more than 50cm) — Small equipment (no external dimension more than 50cm); and — Small IT & telecommunications equipment (no external dimension more than 50cm) Scope
  • 80. Directive 2012/19/EU on waste electrical and electronic equipment • Collection target currently 4kg of WEEE per inhabitant • Until 31 December 2015 • 4kg or if greater amount = to the average of the weight of WEEE collected over the 3 preceding years • From 2016 45% POTM • From 2019 65% or 85% of WEEE generated • Higher recovery, reuse and recycling targets. Collection Targets
  • 81. Directive 2012/19/EU on waste electrical and electronic equipment • New requirements - Monitoring your shipment WEEE or EEE? - If you ship EEE abroad for reuse check your procedures. Illegal Shipments
  • 82. Directive 2012/19/EU on waste electrical and electronic equipment • New obligation for “small EEE” - EEE sales area 400m - Take back very small WEEE (no external dimension more than 25cm) - No obligation to buy anything - DTS Retailer Obligations
  • 83. Directive 2012/19/EU on waste electrical and electronic equipment • Consultation April – 21 June 2013 • Response expected by 16 August 2013 • Legislation expected before end of 2013 • Key debate in relation to compliance schemes and access to WEEE • Do nothing • National compliance scheme • Collection targets with a compliance fee; or • Matching collection sites to compliance schemes UK Implementation
  • 84. Directive 2011/65/EU on the restriction of the use of certain hazardous substances in EEE • Implementation required by 2.1.13 • Key Changes - New definition of EEE - Scope - CE marking ROHS Recast
  • 85. Directive 2011/65/EU on the restriction of the use of certain hazardous substances in EEE • “EEE” = equipment which is dependent on electric currents...in order to work properly • “Dependent” = equipment needing electric currents or electromagnetic fields to fulfil at least one intended function • Teddy bear • NB: Different than the definition for WEEE purposes. New Definition of EEE
  • 86. Directive 2011/65/EU on the restriction of the use of certain hazardous substances in EEE • Most of TMT sector products will already be in scope • From 22 July 2019 “other EEE not covered by any of the above categories” • Specific exemptions - eg large-scale fixed installations but of limited application given typical TMT products Scope
  • 87. Directive 2011/65/EU on the restriction of the use of certain hazardous substances in EEE • Previously – up to you how you demonstrate compliance • Now – CE marking • Technical files • Declaration of Conformity • Importers – ensure manufacturer carries out its duties • Distributors – act with “due care” CE Marking
  • 88. Directive 2011/65/EU on the restriction of the use of certain hazardous substances in EEE • Producers comply with various producer responsibility regimes • batteries directive • WEEE directive • Packaging Waste • Similar but different • Common themes Proposals to align producer responsibility in the UK
  • 89. Directive 2011/65/EU on the restriction of the use of certain hazardous substances in EEE • Consultation April to May 2013 • Changes being considered • Small producer exclusion for WEEE and batteries • Common registration process • Group registration • Retrospective data Proposals to align producer responsibility in the UK
  • 90. REACH • Supplier of articles • Do your products contain any SVHCs? • 0.1% weight by weight • Requirement to provide safety information (automatically to professionals on request to consumers) • Do your quality control procedures cover REACH? Don’t overlook it!
  • 91. Nanomaterials • Rapidly expanding and being used in TMT sector • Attention focused on new forms of nanomaterials e.g. nanosilver and carbon nanotubes • Growing market 200 billion € in 2009 expected to grow to 2 trillion € by 2015 Scope
  • 92. Nanomaterials • European Commission (“EC”) definition: “a natural, incidental or manufactured material containing particles, in an unbound state or as an aggregate or as an agglomerate and where, for 50% or more of the particles in the number size distribution, one or more external dimensions is in the size range 1nm-100nm. In specific cases and where warranted by concerns for the environment, health safety or competitiveness the number size distribution threshold of 50% may be replaced by a threshold between 1 and 50%....fullerenes, graphene flakes and single wall carbon nanotubes with one or more external dimensions below 1nm should be considered as nanomaterials....” • The EC will review by December 2014 Definition
  • 93. Nanomaterials • REACH sets the best possible framework, but specific requirements to be introduced • EC is to consider legislative options and propose draft legislation by December 2013 (if appropriate) • REACH applies to substances in nanoform • Risk assessment on a case-by-case basis • Further guidance on nanomaterials for registrations after 2013 • Registrants should actively update their dossiers where appropriate REACH
  • 94. Nanomaterials • CLP Regulation applies to nanomaterials • Specific provisions on nanomaterials introduced for • biocides • cosmetics • food additives, food labelling and materials in contact with foodstuffs • Review of occupational health and safety legislation currently being undertaken. Final assessment expected in 2014. Other EU legislation
  • 95. Biocides • BPR replaces the Biocidal Products Directive (“BPD”) from 1 September 2013 • General obligations established under the BPD remain • Key changes include • requirements for “treated articles” • Union List of Active Substances • introduction of Union Authorisation • the requirement to submit a dossier demonstrating access to information Biocidal Products Regulation 528/2012/EU (“BPR”)
  • 96. Biocides • BPR expressly covers “treated articles” • Treated article means any substance, mixture or article which has been treated with, or intentionally incorporates, one or more biocidal products but does not have a primary biocidal function. If its primary function is biocidal it is treated as a biocidal product. • Treated articles are likely to include laptops, mobile phones, etc. Treated Articles
  • 97. Biocides • Discussions over the exact distinction between “treated articles” and “biocidal products” continue • Member States and the European Commission disagree over the meaning of primary biocidal function • The European Commission considers that if a public health claim is made it is a biocidal product • Member States considers that this is only one of a number of factors to be taken into account Treated Article v. Biocidal Product
  • 98. Biocides When first made available on the EU market: • all active substances contained in the biocidal products used to treat the article must be approved • must be labelled with any relevant instructions for use • there are additional labelling requirements where a claim is made about the biocidal nature of the treated article or where there are conditions on the approval of the active substance Treated Articles - Key Requirements
  • 99. Biocides Requirements for suppliers/distributors: • Following a consumer request, suppliers have 45 days to provide information concerning the biocidal treatment of the product. Treated Articles - Key Requirements
  • 100. Biocides • will include all active substances, approved by the EU for use in biocidal products • the approval of an active substance covers nanomaterials only where explicitly mentioned • active substances approved under the BPD are deemed to be included • active substances which remain in the review programme continue to be subject to national legislation • Active substances not currently approved or included in the review programme must be approved prior to import/use in the EU Union List of approved active substances
  • 101. Biocides • Allows companies to place a particular biocidal product on the market across the whole of the EU • Will only be granted to biocidal products which have similar conditions of use across the EU • It does not apply to all active substances or all product types. Union Authorisation
  • 102. Biocides • A person placing an active substance or biocidal product on the market is required to submit a dossier to ECHA demonstrating that they have access to information used to support/approve the active substance through the review programme • From 1 September 2015, the active substance/ biocidal product cannot be placed on the market if supplier has not submitted a dossier • Prevents suppliers who did not contribute to the review of the active substance from benefitting from its authorisation • This obligation does not apply to all active substances Supply chain issues
  • 103. CRC Simplification • Currently in Phase 1 • Phase 2 starts 1 April 2014 – 31 March 2019 • Majority of changes apply from start of Phase 2 May 2013 CRC Energy Efficiency Scheme Order 2013
  • 104. CRC Simplification Some changes apply from 1 June 2013 • Reduction in no of fuels • 90% rule removed • Performance League Table abolished • 2 sales May 2013 CRC Energy Efficiency Scheme Order 2013
  • 105. Looking Ahead • More producer responsibility • More legislation governing chemical safety – will affect those selling products
  • 106. Jane Southworth Any Questions?
  • 107. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 108. Eversheds TMT Conference 2013 The M&A blueprint From inception to integration Steve Nash, Partner Eversheds LLP
  • 109. TMT M&A trends • Technology M&A activity fell (-17.5% in volume/ -16.2% in value); • Telecoms M&A activity fell (-3.8% in volume/ -13.5% in value); and • Media M&A activity rose (+6.5% in volume/ +20% in value) However, the global aggregate value of TMT deals increased compared to 2011 In 2012...
  • 110. TMT M&A trends • A repeat of 2012 (according to a recent PWC report) • Although, with so much of the 2012 performance due to large deals can this be repeated? 2013 Big Hitters so far... • Silver Lake and Michael Dell’s proposed $24bn acquisition of Dell. • Liberty Global’s $16bn acquisition of Virgin Media. So what can we expect in 2013?
  • 111. Research methodology
  • 112. Research methodology and sample UK 25% Europe (Exc. UK) 25% Asia- Pacific 24% Middle East, Africa 9% Other Americas 1% US 16% 0.0% 5.0% 10.0% Energy Equipment &… Road & Rail Auto Components Internet & Catalog Retail Health Care Technology IT Services Electric Utilities Trading Companies &… Textiles, Apparel & Luxury… Multiline Retail Biotechnology Communications Equipment Multi-Utilities Paper & Forest Products Household Products Software Hotels, Restaurants &… Containers & Packaging Professional Services Capital Markets Real Estate Management &… Aerospace & Defense Oil, Gas & Consumable Fuels Diversified Financial Services Electrical Equipment Pharmaceuticals Wireless… 54 core industry sectors 41 countries 128 qualitative interviews 306 quantitative survey responses 3,000+ cross-border M&A deals, past 5 years
  • 113. Executive summary
  • 114. Avoidable faults in due diligence account for most M&A failures 43% said that the most common cause of the failure to realise value in M&A transactions was down to errors in the due diligence and planning phase “The difficulty of carrying out credible due diligence is a real issue. What is true at a given date may no longer be true some time later. Nowadays, those involved are in a hurry to either complete transfers or to rapidly make a good bargain, even if it is sometimes to the detriment of legal and economic certainty.” French industrials company, Group GC
  • 115. Legal and management must be aligned Why did your cross-border TMT deal fail to create value? • External factors • Economic crises • Unhappy customers • Departure of target management team Commercial management • Internal factors • Misalignment between legal and management • Lack of coordination between local and international legal and management teams In-house legal resources
  • 116. Bring legal in early Legal brought into transaction early Legal brought into transaction TOO LATE Integration did NOT go as expected 14% Integration went as expected 86% Integration did NOT go as expected 38% Integration went as expected 63% Percentage of respondents
  • 117. Ten is the magic number Did the integration go as expected at the time of the deal closure 0% 5% 10% 15% 20% 25% 30% 1 2-5 5-10 10-20 20-30 30-50 50+ Percentageofrespondents Number of M&A deals you have worked on in the past 5 years "YES" "NO"
  • 118. The worst deals On your worst deal, what were the main problems you experienced?* Weak Due Diligence 14% Human Factors 11% Bad Business Decisions 19% *Percentages of mentions Every deal is the worst deal!” Multi- jurisdictional Issues 25% Communication/ Co-operation between Legal and Management 31%
  • 119. Integration x
  • 120. Integration priorities: What difference does experience make? Less likely to prioritise: • Managing external legal advisers • Managing contracts and relationships with third party vendors More likely to prioritise: • Managing business integrity and ethics issues • Corporate tax residency and tax planning GCs who had worked on 10+ transactions in the past 5 years were:
  • 121. Did integration go as expected when the deal was closed? 33% of Asia-Pacific M&A deals encountered unforeseen complications with planned integration at the time of the deal closure. YES 80% NO 20% Has the integration gone as expected at the time of the deal closure? 0% 50% 100% Asia-Pacific Middle East, Africa Europe US UK "YES" "NO" Percentages of respondents 20% of respondents said integration DID NOT go as they expected at the time of the deal closure.
  • 122. Integration challenges 27% of respondents said that the cultural aspect of integration was most challenging. 0% 5% 10% 15% 20% 25% 30% Authority demarcations Due diligence - not acting on it Resources People Tax HR & pensions issues Operational challenges Cultural issues Percentage of respondents “I regard integration as ‘acquisition by a thousand cuts’.” Group General Counsel, Materials Company, UK
  • 123. Overcoming integration challenges Communication Planning Sensitivity “Making sure that everyone understands what the approach is going to be is very important: is it a merger of equals or is it a takeover? In a takeover, what are you going to do with the management? Do you depend on the management of the target to continue running it? Are there some key personnel whom you need to retain?” “In general, you need to be astute in looking for solutions, be imaginative and rely upon good advice. It is not productive to try to strictly enforce group policies by imposing them or by being confrontational. We created a committee with a local majority in which the internal audit person was brought in from the corporate area.” “Identify the legal obligations and deal with the issues at an early stage (identify people not required, etc). Deal with the problem upfront – where people are concerned don’t complete the deal and then have to deal with it afterwards. Build any such issues, and the fact that they must be addressed, into the budget.”
  • 124. Separate deal and integration teams 65% of ‘ALL’ respondents had used separate in-house deal and integration teams on their last transaction The highest percentage of respondents who had separate in-house deal and integration teams were from the UK and the US. The most integrated teams tended to be in the Middle East. 0% 20% 40% 60% 80% 100% Middle East, Africa Asia-Pacific Europe US UK Percentage of respondents Did you have separate in-house deal and integration teams on this deal? "YES" "NO"YES 65% NO 35% Did you have separate in-house deal and integration teams on your last transaction?
  • 125. Who is on the integration team? Who was part of the integration team (or a key individual responsible for integration) on your most recent cross-border deal? 0% 20% 40% 60% 80% Europe (Exc. UK) Middle East, Africa UK Asia-Pacific US Members of the legal team who handled DD 0% 20% 40% 60% 80% Middle East, Africa Europe (Exc. UK) Asia-Pacific UK US Members of the M&A deal team 0% 5% 10% 15% 20% 25% 30% Asia-Pacific UK Europe (Exc. UK) Middle East, Africa US External advisers
  • 126. The role of external lawyers
  • 127. Over a quarter (26%) of respondents said they used no external legal counsel in the integration phase of their most recent M&A deal To a large degree 17% To a small degree 57% Not at all 26% 25% of deals in Europe used external legal counsel “to a large degree” compared with just 9% in the UK. 0% 50% 100% Asia-Pacific Australia NZ Eastern Europe Europe Middle East, Africa UK US "To a large degree" "To a small degree" Percentage of respondents To what extent were external lawyers involved in the integration phase of your most recent M&A deal? To what extent were external legal counsel involved in the integration phase of your most recent M&A deal? To what extent were external legal counsel involved in the integration phase of your most recent M&A deal?
  • 128. • Bringing an international perspective • Providing local law advice in unfamiliar jurisdictions • Employee restructuring, HR matters, labour law advice • Competition and anti-trust matters • Proactive advice or “gun-jumping” post-deal issues • Reorganisations Where did external lawyers add value during the integration? “Preparing a 30-day compliance report” “If you do not use external advisers, then you are taking a major risk” “Providing a guide on broad areas of strategy, including evaluating finance and tax issues”
  • 129. Our quantitative data revealed that the primary reason for not using external counsel was cost. More specifically, GCs felt that law firms didn’t offer relevant services, or were not an efficient option. 0% 5% 10% 15% 20% 25% Company board did not want to instruct external lawyers Law firms not proactive enough in offering support or advice External lawyers had already identified all relevant legal integration issues during the M&A process Internal integration team did not want to instruct external lawyers They did not add value in previous experiences Law firms don't offer relevant services Too Costly Percentage of responses Why weren’t external lawyers used?
  • 130. GCs felt they could benefit from the following aspects of post- transaction support from external counsel: Percentage of responses 0% 10% 20% 30% 40% Inter-transactional support (where client is involved in multiple consecutive deals) Continuity of external team Courtesy check-ins Commercial awareness Project management advice as oppposed to pure legal Jurisdictional bible/ongoning local advice Offerings based on DD findings and a closing checklist Effective closing checklist What additional support could external counsel provide to make post-transaction phase easier?
  • 131. Successes, failures and lessons learned
  • 132. Asia-Pacific Europe (Exc.UK) Middle East, Africa UK US Compliance issues 34% 19% 13% 18% 23% Litigation 20% 17% 31% 17% 28% Competition or anti-trust issues 8% 24% 19% 15% 20% Warranty claims 20% 17% 19% 15% 10% Completion accounts issues 12% 13% 6% 22% 13% Failure to meet earn-out arrangements 6% 10% 13% 12% 8% Percentage of respondents Where did you face significant issues on your most recent deal? Due to rounding up or down some columns will not quite add up to 100.
  • 133. What lessons have you learned from your deals? Lessons learned MULTI-JURISDICTIONAL Know your target culture. Or hire someone who does. FAILURE TO COMMUNICATE You may not be able to force anyone to adopt your advice. At bare minimum, however, you must make your thoughts known to the decision makers. WEAK DUE DILIGENCE Robust due diligence is at worst a short-term loss, long-term gain, so be thorough. MULTI- JURISDICITONAL ISSUES CULTURAL INSIGHT LACK OF COMMUNICATION /COOPERATION BETWEEN LEGAL AND MANAGEMENT EFFICIENT COMMUNICATION ROBUST DUE DILIGENCE WEAK DUE DILIGENCE
  • 134. TMT Benchmarking
  • 135. Online benchmarking tool A source of comparator data Online tool Provides comparator data on the approach to integration and deal issues Data compared by sector, jurisdiction and legal team size Benchmarking reports provided instantaneously by email
  • 136. Benchmarking examples… The following slides show 2 examples from benchmarking reports generated in relation to TELECOMS, SOFTWARE and HARDWARE All are based on UK mid tier companies acquiring assets in the US
  • 137. Telecoms
  • 138. Telecoms
  • 139. Software
  • 140. Software
  • 141. Hardware
  • 142. Hardware
  • 143. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 144. Eversheds TMT Conference 2013 Valuing intellectual property art of science Klevin King, Managing Director, Valuation Consulting Simon Crossley, Partner, Eversheds
  • 145. www..com Kelvin King, Managing Director 10 Greycoat Place, Victoria, London, SW1P 1SB Tel: +44 (0)20 7960 6060 Fax: +44 (0)20 7960 6100 E-mail: kelvin@valuationconsultingco.com www.valuationconsultingco.com VALUATION CONSULTING CO LTD
  • 146.  Many years experience within Government, investment banks and the accountancy profession  Members of the Society of Share and Business Valuers, authors, lecturers  RICS Registered Business Valuers  Law Society Registered Expert Witness accreditation/membership of the Expert Witness Institute  Experience in presenting testimony  Dedicated valuers – we value shares, businesses, intangibles and IPR WHO ARE VALUATION CONSULTING CO
  • 147.  Accounting Standards  Corporate Governance  Fairness Opinions  Pension Deficits INTANGIBLES – THE CURRENT BIG ISSUES
  • 148. THE LAWS OF PHYSICS AND VALUATION SUGGEST THAT THIS IS NOT POSSIBLE STARTING AT THE TOP AND TRYING TO BUILD DOWN
  • 149. Attributes relating to intellectual capital in a business context  Legal protection – barriers to competitors  Coverage, products, ‘the boundaries of the plot of land you call yours’ Regulation often defines required due diligence  FRS 141/142, IFRS 3 and IAS 38/39  Pension Regulator Governance and Fiduciary Capacities often define the due diligence  Pension Trustee DUE DILIGENCE AND THE VALUER
  • 150. Risk and liability affects all companies. Risk effects valuation analysis, corporate valuation must reflect risk and importantly risk assessment should reflect economic valuations  What are the intellectual property rights used in the business  What is their value and hence level of risk  Identify under-utilisation – how can IP be transferred or exploited for increased shareholder value  Licensing in and out  Create stronger barriers for example IP holding companies  Create better exploitation strategies (securitisation, pension deficits and tax) YOU NEED TO KNOW THE VALUE OF THE CROWN JEWELS
  • 151. Four Calculations or Steps – 'can Kelvin count' 1. Intrinsic value of Vendor 2. Intrinsic value of Purchaser PLUS 1. Intrinsic value of Vendor 2. Intrinsic value of Purchaser The capital values calculated are an essential step to calculate royalty rate or valuation – discuss from a Pension Trustees’ perspective THE LICENSEE/PURCHASER & LICENSOR/VENDOR
  • 152. DEFINITION & IDENTIFICATION
  • 153. Those assets whose essential characteristics are derived from the Legal System, in this case the UK Registered Rights  Patents – UK, EP(UK) (PA 1977, EPC 2000)  Trade Marks – UK, CTM (TMA 1994)  Registered Designs – UK, CDR (RDA 1949) Unregistered Rights  Confidential Information (equitable and contract)  Passing-off (common law)  Design Right (CDPA 1988)  Copyright (CDPA 1988 and Copyright Computer Software Amendment Act 1985)  Miscellaneous: Performance Rights, Image Rights, Moral Rights, Database Rights, Malicious Falsehood (common law), Plant Variety Rights INTELLECTUAL PROPERTY
  • 154. Rights  Contracts Relationships  Workforce  Customers Group Intangibles  Brands  Goodwill Characteristics of Economic Advantage  The spectrum of creative thought  Formulae, Recipes  Experience  Negative Knowledge  R&D and Information INTANGIBLE ASSETS – JUST A FEW EXAMPLES
  • 155. The US FASB has created a list of what it considers to be a firms intangibles: Market-related  Trademarks, trade names, service marks, trade dress, newspaper mastheads, internet domain names. Customer-related  Customer lists, customer contracts, customer relationships, customer agreements. Artistic related  Ballets, books, plays, articles, other literary works, musical words, opera, pictures, photographs, video and audiovisual material. ACCOUNTING STANDARDS
  • 156. Contract-based  Licensing agreements, advertising or service contracts, lease agreements, construction permits, operating and broadcast rights, employment contracts. Technology-based  Patented technology, computer software, unpatented technology, databases, trade secrets, secret formulae ACCOUNTING STANDARDS CONT…
  • 157.  Mergers & Acquisitions  Portfolio review and risk assessment  Arrange a loan – securitisation  Tax purposes  Licensing  Balance Sheet  Joint Ventures and Technology Transfer  Pension deficits  Selling your IP  Distress OCCASIONS FOR VALUING INTELLECTUAL PROPERTY
  • 158.  Tax Valuation and Open Market Value  Fair Value  Fair Market Value  Commercial Value  Investment Value  Owner Value CONCEPTS OF VALUATION?
  • 159. Market based  Comparable market transaction Caveats  Few sales  Lack of information  Separate values  Special purchasers  Different negotiating skills  Distorting effect of varying values  Assets not always comparable METHODS OF VALUATION
  • 160. Cost based  Historical or replacement cost Caveats  Economic Benefits Excluded  Duration of benefit and economic life  Obsolescence difficult to quantify  Maintenance  Time Value of Money METHODS OF VALUATION
  • 161. Income Approach  Capitalisation of historical profits DRAWBACKS Profitability  Problems of averaging  Problems of extrapolating from past performance  Decline and other key variable  Net tangible assets not separately assessed Multiple  No reference point for price earnings multiple  Often no regards to established marketplace  Often no reconciliation with market capitalisation METHODS OF VALUATION
  • 162. Modern valuation analysis is effectively DCF applied to the business enterprise under consideration  The Net Present Value (NPV) of a strategy or business is the sum of its expected free cash flows to a horizon (H) discounted by its cost of capital (r) PLUS  The terminal value which is the value of the business at a horizon (HV) HV = Cash Flow (r – growth) Also discounted back to present value NPV = Year 1 Cash Flow + Year 2 Cash Flow …. To say Yea 5 Cash Flow (1+r) (1+r)² (1+r)H INCOME APPROACH: DISCOUNTED CASHFLOW MODELS
  • 163. HOW MUCH? (CASHFLOWS)
  • 164.  Gross Profit Differential Methods – Premium Prices/Premium Profits  Excess Profits Method  Relief from Royalty Method TOOLS
  • 165. HOW LONG FOR? (TIME PERIODS)
  • 166.  Physical Life  Functional Life  Technological Life  Economic Life  Legal Life USEFUL LIFE
  • 167. AT WHAT RISK? (COST OF CAPITAL)
  • 168. IP valuation can play an important role in influencing decisions on what kind of IP strategy an enterprise follows e.g. defensive, offensive or competitive  Assess continuing and future activities  Infringement by you or others – successful enforcement  IP defence vs predatory attacks  Cross licensing VALUATION AND DEFENCE
  • 169. Many factors effect a valuer’s licensing and royalty rate advice  Deal structure (cash, profit etc)  Exclusivity  Relative risks  Investment rates of return  Commercial relationship between parties (fair value is not fair market value) LICENSING AND DUE-DILIGENCE
  • 170. Examples:  The legal strength of IP is only a beginning  Large/small/niche market and where  State of market and price volatility  Required investment  Close to market technology, or not  Development time and R&D expense  Economic and technology life  Market drivers and potential  Manufacturing depth  Comparable technologies MARKET AND TECHNOLOGY DUE-DILIGENCE
  • 171.  Effectively a DCF multiplier  Numerous DCF calculations accounting for various scenarios, say of revenue, market share, costs, internationality and other risks  With just 4 scenario changes of the stated assumptions above this means 256 models!  That is 4 values for each of income, different market share, costs, international penetration i.e. 4 x 4 x 4 x 4 = 256 MONTE CARLO
  • 172.  Probability trees = snakes and ladders, develops the Monte Carlo analysis  Develops terminations (snakes) if a route indentifies problems to suggest failure REAL OPTIONS
  • 173. Four Calculations or Steps – 'can Kelvin count' 1. Intrinsic value of Vendor 2. Intrinsic value of Purchaser PLUS 1. Intrinsic value of Vendor 2. Intrinsic value of Purchaser The capital values calculated are an essential step to calculate royalty rate or valuation - discuss THE LICENSEE/PURCHASER & LICENSOR/VENDOR
  • 174. Principle 1 Make intellectual capital a part of the business strategic thinking and planning. For example risk control, maximising value, being aware of emerging technologies, seek appropriate legal protection etc. Principle 2 Understanding the role of intellectual capital. Involves assessing the importance of intellectual capital now and in the future to the market position and future success of your business. Part of this is the challenge to identify the intellectual property of others and avoid infringing the associated legal rights. Principle 3 Be aware of competing intellectual capital. Principle 4 Know your own intellectual capital. Imply rigorous processes to identify and evaluate the existing intellectual capital in the business, creating a comprehensive record of results and developing a process for identifying future IPR being developed. Positive due-diligence. Success or not is dependent upon a management process to do just the aforementioned. Principle 5 Know the cost and value of your intellectual capital. THE MANAGEMENT OF INTELLECTUAL PROPERTY
  • 175. Principle 6 Identify required intellectual capital which is a process of forecasting future needs. Principle 7 Acquire any required intellectual capital. Principle 8 Think tax and balance sheet. Principle 9 Be ready to protect your rights. Principle 10 Measure improvements as an essential part of good intellectual capital management to develop measures of success of the management and evaluation of IPR. Principle 11 Spread the message because just as important as measuring improvements is communicating a strategy and process, not least via financial PR etc. THE MANAGEMENT OF INTELLECTUAL PROPERTY CONT.
  • 176. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 177. Data Protection General Overview • Special Legislation? • Definition of Personal Data and Sensitive Personal Data • National Data Protection Authority • Collection and Processing of Personal Data • Security Measures
  • 178. Data Protection • Jordan • Egypt • Morocco • United Arab Emirates(Dubai International Financial Centre) • Oman • Bahrain • Tunisia • Algeria • Qatar (Qatar Financial Centre) • Saudi Arabia Survey of Countries
  • 179. • Jordan • Egypt • UAE • Bahrain* • Oman* • Algeria • Qatar • KSA Data Protection Group (1): No Specific Legislation
  • 180. Data Protection Regulatory Framework General Legislation Sector-Focused Legislation Constitution Banking Law Penal Code Telecommunication Law Civil Code E-Commerce Law Cyber Crime Law Credit Bureau Law
  • 181. • Egypt: “data related to the data subject’s private life” court judgment. • UAE: “data pertaining to an individual’s private or family life”. • Bahrain and Oman use the term “Personal Data” without providing a definition. Data Protection Personal and Sensitive Information
  • 182. • consent • notify designated person of safeguard procedures, nature of collected data, identity of data processor and purpose of processing data • “take measures to prevent unauthorized use or disclosure of consumer information”. • “limit access to consumer information to trained and authorized staff” • “maintain confidentiality of and refrain from using or disclosing, other than for the proper purposes of providing telecommunication services” Data Protection Collection and processing of personal data
  • 183. • Morocco • Tunisia • Dubai International Financial Centre (“DIFC”) • Qatar Financial Centre (“QFC”) Data Protection Group (2): Specific Legislation Available
  • 184. • Personal Information: “any information of any nature … including sound or images related to an identified or identifiable individual”. • Sensitive Information: “any information pertaining to a concerned individual but reveals racial and ethnic origin, political, philosophical, religious, opinions, or trade union affiliation or that concern sex life or health, including genetic data”. • Data processor must take necessary safeguarding processes (encryption included) Data Protection Group (2): Morocco
  • 185. • Personal Data: “all information of whatever source or form which identifies or renders a person as identifiable, directly or indirectly. This does not cover publically available information”. • Sensitive Data: not defined. • Pre-processing safeguards: consent, inform data subject of type of information collected& processed, reasons of processing, beneficiary of processing, right to access and object, storage terms, description of security measures, transfer of data provisions. Data Protection Group (2): Tunisia
  • 186. • Personal Data: “Any Data referring to an Identifiable Person” (natural person). • Sensitive Personal Data: “Personal Data revealing or concerning (directly or indirectly)racial or ethnic origin, communal origin, political affiliations or opinions, religious or philosophical beliefs, criminal record, trade-union membership, health or sex life”. • processes requirements, measures, security and confidentiality … Data Protection Group (2): DIFC
  • 187. • Personal Data: any information relating to an identified natural person or an Identifiable Natural Person. • Sensitive Personal Data: "personal data revealing or related to racial or ethnic origin, political opinions, religious or philosophical beliefs, health or sex life”. • processes requirements, measures, security and confidentiality. • right to access, object, rectify and erase Personal Data. Data Protection Group 2: QFC
  • 188. • Jordan (public consultation phase) • Qatar (ready since mid 2011) Data Protection Group (3): Data Protection Draft Law
  • 189. TMT in the Middle East Online Media Regulation and Content Liability
  • 190. • Main Objective • Scope of Application • Criteria • Consequences of application • Practical Challenges • What’s next? Press and Publication Law Jordan
  • 191. • “the goal […] is to organize the work of websites, protect them, and keep from allowing those from outside the profession to inhabit the label of journalists…”. • Medium of publication should not matter. Jordanian Press and Publication Law Main Objective
  • 192. • “If the scope of activities of an Electronic Publication includes publication of news, investigations, articles and comments that relate to the internal or external affairs of Jordan then this Publication shall be required to be registered and licensed ...”. Jordanian Press and Publication Law Scope of Application
  • 193. • Broad scope • Censorship concerns • Not automatic • Social Media concerns Jordanian Press and Publication Law Criteria
  • 194. • Registration& licensing requirements • Limitations: – Funding – ownership • User Generated Content (“UGC”) related liability: – truthfulness – Relevancy – criminal liability Jordanian Press and Publication Law Consequences of Application (i.e. Press Publication!)
  • 195. • Jordanian reporters- exceptions apply. • Owner of Press Publication. – Jordanian individual; or – company owned by Jordanians or a Jordanian political party. • Editor in Chief – Member in the Journalism association for 4 years – Jordanian national – Residing in Jordan – Full timer – Language • UGC related issues. Jordanian Press and Publication Law Practical Challenges
  • 196. • Social Media (Facebook pages, twitter accounts…) • Unofficial assurance for social media and major TMT companies (Facebook, Twitter, Google, Yahoo!...) • Revisit the Press and Publication Law or the general guidelines of freedom of speech in Jordan? • Regional Effects? Jordanian Press and Publication Law What’s Next?
  • 197. TMT in the Middle East Censorship
  • 198. • Registration and licensing requirements. • liability of editor in chief, the publication and the author • Broad criminalizing legal provisions. – Politics – Pornography Censorship Media
  • 199. • offending the Royal Family – Royal Family? – Offending the Royal Family (strict liability) – False accusations • Religion, prophets, religious beliefs or spirituality • endangering foreign affairs • inciting public order Censorship Politics and sovereignty
  • 200. • No definition for pornography or salacious content. • The law prohibits: – selling or acquiring for sale or circulation or showing immoral prints, photos… or anything that may corrupt public morals […] • No definition for immoral content or public morals. • Penalty: imprisonment sentence up to (3) months or a fine of 50 Jordanian Dinars. Censorship Pornography and Salacious Content
  • 201. • Proposed definition of pornography: “Pornographic content is explicit sexual pictures and any other content that reveals of shows genital areas or sexual intercourse in a sexually provocative and arousing manner. This definition does not cover content related to scientific, academic or medical research purposes or legitimate artistic matters”. Censorship Telecommunication Law Draft
  • 202. • Sensor: – politically sensitive content. – Religiously offending content. – sexual/ salacious content. Censorship Current Tendency
  • 203. THANK YOU!
  • 204. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 205. Eversheds TMT Conference 2013 Pricing People Issues Richard Sheldon, Principal Associate Eversheds LLP
  • 206. • Anyone who spends at least 51% of their time working on a contract will transfer? – FALSE • You can’t make employees redundant after a transfer? – FALSE (provided there is an ETO reason or it is unconnected to the transfer) • You can’t change transferring employees’ terms and conditions? – FALSE (provided there is an ETO reason or it is unconnected to the transfer) TUPE Myths and Misconceptions
  • 207. Service provision changes X Ltd Recontracting Y Ltd Z Ltd Client Sub-contracting
  • 208. Understanding “TUPE Costs” Entitlement Example Employee Salary Variable £24,000 p.a. Benefits Variable Private medical, 25 days holiday Pension Up to 6% if occupational Match if GPPP 5% contributions Notice Statutory up to 12 weeks (More for senior execs) 5 weeks’ pay = £2,310 Redundancy Statutory up to £12,900 (Can be enhanced) £450 x 1 x 5 = £2,250 Early retirement pensions (Beckmann liabilities) Shortfall in annual pension £5,000 x 10 years = £50,000 Unfair dismissal £74,200 or 12 months’ salary £24,000 Failure to inform and consult 13 weeks’ pay 13 weeks’ pay = £6,000 Historic liabilities (e.g. discrimination claims) Uncapped - Injury to feelings up to £30,000 Typical awards £5,000 - 10,000
  • 209. Pushing back on the TUPE list • Offshoring of call centre to India. TUPE list seems to have too many names • not all employees arranged by client, some have specialist sector roles • some employees seem to spend time on other contracts • not all employees provide services directly e.g. supervisors and support staff. Scenario 1
  • 210. Pushing back on the TUPE list • Practical steps to challenge: • job descriptions • employment contracts • time breakdowns • rotas • shift/team names Scenario 1
  • 211. Pushing back on the TUPE list • What are the costs? • redundancy costs • notice pay • consultation costs • unfair dismissal • Does the commercial agreement cover these? • if not, who picks them up? • is there a “deal” with outgoing provider? Scenario 1
  • 212. Reducing the costs of post-transfer integration • PR and marketing services for internet search company brought in house: • staffing numbers • staffing costs • terms and conditions • skill sets • cultures Scenario 2
  • 213. Reducing the costs of post-transfer integration • Practical steps to take pre-transfer • Will outgoing provider co-operate? • Check commercial agreement • Is collective consultation required (20 +) • TUPE and redundancy consultation in parallel? Scenario 2
  • 214. Reducing the costs of post-transfer integration • Redundancies • notice immediately post-transfer if consultation is complete • compromise agreement • Changes to terms and conditions • can you create an ETO by restructuring • longer term e.g. make changes to all staff • compromise agreement Scenario 2
  • 215. Managing the risk of redundancy costs on exit • Existing exclusive contract for outsourced IT support services due to expire in 12 months • will client appoint sole or multiple providers? • staff currently deployed across the service Scenario 3
  • 216. Managing the risk of redundancy costs on exit • Practical steps to “manage” the risk • organise employees to likely split if multiple providers – create specific teams • what does agreement say • TUPE or not TUPE? • right to recover redundancy costs? • anti-manipulation clauses • if can’t re-organise, understand HR options Scenario 3
  • 217. Managing the risk of redundancy costs on exit • Walk away or make them redundant? • Potential costs • termination costs - early retirement pension? • unfair dismissal? • failure to inform and consult? Scenario 3
  • 218. Any questions?
  • 219. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 220. Eversheds TMT Conference 2013 Litigation post-Jackson Mark Rhys-Jones, Partner, Litigation and Dispute Management Eversheds LLP
  • 221. Background and introduction
  • 222. Litigation post-Jackson • In 2008, Lord Justice Jackson was appointed to lead a fundamental review of the rules and principles governing the costs of civil litigation and to make recommendations • In December 2009, Jackson LJ’s findings were set out in his final report • The purpose of Jackson LJ’s reforms is to ensure that the costs of litigation are proportionate Lord Justice Jackson’s mandate: costs
  • 223. Litigation post-Jackson • Broadly, the key areas of reform to civil litigation are: • Costs management • Case management • Disclosure • Part 36 offers • Funding • Save for some transitional provisions, the changes went ‘live’ on 1 April 2013 What’s changed?
  • 224. Costs Management
  • 225. Litigation post-Jackson • Changes aim to deal with cases justly and at proportionate cost • Applies to most multi-track cases • Parties must file and exchange costs budgets • A new test of ‘proportionality’ in the CPR • Increased costs burdens for litigants? The new costs management regime
  • 226. Litigation post-Jackson • Consider proportionality at all stages of a case • Consider quantum carefully from the outset • If the regime applies, each element of your costs budget must be proportionate • Even if the regime doesn’t apply, note the general push towards proportionality • Narrow the issues at an early stage • Behave reasonably! The new costs management regime: tips
  • 227. Case Management
  • 228. Litigation post-Jackson • Changes to the ‘overriding objective’ • Provisional allocation of cases • Parties file directions questionnaires • Online standard directions • Court’s express powers to monitor compliance with directions and sharper teeth in respect of applications for relief from sanctions • Docketing and ‘hot-tubbing’ to increase efficiency • Changes to track limits • Controls on witness evidence The new case management regime
  • 229. Disclosure
  • 230. Litigation post-Jackson • Applies to most multi-track claims • Changes aim to ensure that costs of disclosure are proportionate • Standard disclosure is no longer the default position – now ‘menu option’ for disclosure… The new disclosure regime
  • 231. Litigation post-Jackson The new disclosure regime • The menu of options are: 1. No disclosure; 2. Each party discloses documents on which it relies and requests specific disclosure from other party(s); 3. Disclosure on issue-by-issue basis; 4. Standard disclosure; 5. Any other order which courts thinks appropriate – e.g. ‘keys to the warehouse’
  • 232. Litigation post-Jackson • Parties must file and serve a disclosure report • Parties must also discuss/try to agree a proposal for disclosure • Court can give directions on how disclosure is to be undertaken/given at any time • Do you think that costs will reduce as a result of the changes? The new disclosure regime
  • 233. Litigation post-Jackson • Early planning, budgeting and a firm handle on quantum of claims really is essential • Think early about who you’ll need to involve in the disclosure process (IT, technical experts, lawyers, employees, the other side, the other side’s lawyers…anyone else?) • Link in with any e-disclosure requirements • Careful monitoring of costs is key The new disclosure regime: tips
  • 234. Part 36
  • 235. Litigation post-Jackson • Previously, a claimant received enhanced interest and indemnity costs if it did as well as/beat its own offer at trial • The changes to Part 36 mean that, in addition to the above, a claimant receives an extra payment (up to £75,000) • Changes only apply to claimants’ offers • Aim is to make claimants’ offers more effective in achieving settlement The changes to the ‘Part 36’regime
  • 236. Litigation post-Jackson • Defendants – think carefully about rejecting offers in the ‘right zone • Consider carefully whether to re-make offers already on the table to capture the enhanced benefits • Impact of changes most significant for claims with value in £300,000 - £500,000 range The changes to the Part 36 regime: tips
  • 237. Funding
  • 238. Litigation post-Jackson • Goodbye CFAs? • Still exist but success fee no longer recoverable from opponent • Same with ATE insurance premiums • Hello DBAs? • Form of contingency fee (no win, no fee) • Solicitors’ fees = % of damages recovered • Caps apply depending on nature of claim The changes to funding
  • 239. Litigation post-Jackson • Generally good news for defendants as no longer face increased costs liability • Reforms unlikely to have much effect on large commercial/complex/high risk claims The changes to funding: tips
  • 240. Re-cap
  • 241. Litigation post-Jackson • Changes are still very much in their infancy – expect satellite litigation • ‘Front loading’ will become the norm • Seek advice and plan early • Be vigilant in respect of court timetabling • Keep proportionality in mind at all times! Summing up
  • 242. Questions?
  • 243. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 244. Eversheds TMT Conference 2013 Cloud computing Charlotte Walker-Osborn, Head of TMT Sector Richard Little, Partner Penelope Jarvis, Associate Eversheds LLP
  • 245. Canvassing the cloud Study results
  • 246. Eversheds TMT Conference 2013 Copyright in the Digital World Neil Mohring, Partner, Eversheds LLP
  • 247. Copyright in the Digital World • Focus on creative industries • Need for change • Hargreaves Review • Hooper Review • Proposals for change Introduction
  • 248. Copyright in the Digital World • Opportunities for growth • Track record for innovation • Importance of IP • Need for change Creative Industries
  • 249. Copyright in the Digital World • Methodology • Recommendations • Copyright Licensing • Exceptions • Enforcement • SME Access Hargreaves Review
  • 250. Copyright in the Digital World • Reviewed IP licensing • Not fit for purpose • Complexity of process / organisations • Repertoire imbalance • Identification of owners • High volume, low value transactions Hooper Review
  • 251. Copyright in the Digital World • Enterprise and Regulatory Reform Act • Copyright Exceptions – First and Second batches • Status of other proposals Proposals for Reform
  • 252. Copyright in the Digital World • Orphan Works • Extended Collective Licensing Enterprise and Regulatory Reform Act
  • 253. Copyright in the Digital World • Private copying • Parody • Fair dealing • Fair minded honest person • Degree that infringing use competes • Whether published • Extent of use • Motive of infringer • Quotation Copyright Reform – Part 1
  • 254. Copyright in the Digital World • Data Analysis • Education • Research, libraries and archives Copyright Reform – Part 2
  • 255. Copyright in the Digital World • Small claims track at Patents County Court • Digital Copyright Exchange • SMEs • Mediation Service Other proposals
  • 256. • Complexity of copyright licensing • Multi-jurisdictional enforcement Copyright in the Digital World Are the current proposals sufficient?
  • 257. Copyright in the Digital World Questions?
  • 258. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.
  • 259. Eversheds TMT Conference 2013 Incentivising creativity TMT tax breaks explained Ben Jones, Principal Associate, Eversheds LLP
  • 260. Introduction • Tax policy used to encourage UK TMT businesses • Key TMT tax incentives • R&D tax relief • Creative sector tax reliefs • Patent Box • Other jurisdictions • Exploiting the intangible nature of IP
  • 261. Case study • Cutting edge production company, Tech Media • Produces high-end wildlife documentaries • Invests in developing new filming technologies • New technology patent protected • Exploits new technology through sale/license to third parties
  • 262. R&D tax relief • Tax benefit • SMEs • 225% enhanced tax relief • 11% (of enhanced tax relief) repayable tax credit • Large companies • 130% enhanced tax relief • 10% (of R&D expenditure) “above the line” tax credit
  • 263. R&D tax relief • Key features • Must be a project undertaken to achieve an advance in science & technology • Fact-based analysis • Qualifying R&D expenditure includes: • staff costs / contractors • software • sub-contracted R&D • Various restrictions • Differences between SME / large company regimes
  • 264. R&D tax relief • Example - Tech Media No R&D relief R&D enhanced relief R&D tax credit Production income £10m £10m £10m Costs: R&D expenditure (£2m) (£4.5m) (225% of £2m) (£4.5m) (225% of £2m) Other Costs (£5m) (£5m) (£7m) Profit £3m £0.5m (£1.1m) Tax (@ 20%) £0.6m £0.1m - Benefit £0.5m £0.121m credit from HMRC
  • 265. Creative sector tax reliefs • Tax benefit • 200% enhanced tax relief for qualifying expenditure • 25% (of enhanced tax relief) repayable tax credit • Key features • Aimed at production of: • High-end television programmes • Animation • Video games
  • 266. Creative sector tax reliefs • Key features • Core requirements • 25% of core expenditure incurred in UK • cultural “Britishness” test must be satisfied • intended for broadcast/supply to general public • Only available to company that is responsible/actively engaged in production activity • Detailed conditions and limitations
  • 267. Creative sector tax reliefs • Example - Tech Media No CS relief CS enhanced relief CS tax credit Production income £10m £10m £10m Costs: Production expenditure (£4.5m) (£9m) (200% of £4.5m) (£9m) (200% of £4.5m) Other Costs (£1m) (£1m) (£3m) Profit £3.5m £0m (£2m) Tax (@ 20%) £0.7m £0m - Benefit £0.7m £0.5m credit from HMRC
  • 268. Patent Box • Tax benefit • 10% tax rate on worldwide patent profits • Key features • Applicable to income from: • sales of patented items or items incorporating patented items • license fees/royalties from patented items • income from sale/disposal of patent • proceeds of infringement action • notional arm’s length royalty for internal usage
  • 269. Patent Box • Key features • Internally developed and actively managed • Complex calculation of patent profits • Identification of patent profits • remove “routine return” • remove “marketing asset return” • Maximising patent box benefits
  • 270. Patent Box 23% 10% 23% 23% Non-patented products Patented products Patent Box profits Marketing return Routine return Non- qualifying income
  • 271. Patent Box • Example - Tech Media No Patent Box relief CS enhanced relief Technology sales/license income £10m £10m Costs/expenditure (£6m) (£6m) Profit £4m £4m Patent Box profit (less specified deductions) - £3m Patent Box deduction - (£1.5m) Final taxable profit - 2.5m Tax (@ 20%) £0.8m £0.5m Benefit £0.3m
  • 272. Other jurisdictions • Other jurisdictions also incentivise TMT business • Lower headline tax rates also available • IP easily transferable • Anti-avoidance rules / reputation issues
  • 273. Simple IP holding structure Tech Media (High tax jurisdiction) IP Holdco (Low tax jurisdiction) Tech Media Opco Dividend Royalties License
  • 274. www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.