OMG – new company names %*@!

Quiz question: which of the following names requires permission from the authorities before it can be registered as a company name in the UK, and which is automatically permitted?

(a) OMG F**K :–) Limited

(b) Sheffield University Patent Licensing Institute

Answer: (a) is now permitted, (b) requires permission.

Two UK statutory instruments (SIs) came into force on 31 January 2015, each of which has a very boring traditional name, with no use of symbols or accents, and only sensible punctuation:

• The Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014; and
• The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015.

The first of these SIs (the 2014 Regulations) updates the list of names that require permission before they can be registered with the UK Companies Registry (Companies House). The second SI (the 2015 Regulations) covers various points of detail relating to business names, but for present purposes we are concerned with the relaxation of the rules governing the letters and symbols that can be used in company names.

Sheffield University Patent Licensing Institute

The Government has attempted to “cut red tape” by reducing the number of names that require permission. However, many names still remain on the list. Before giving permission for a company to include those names, Companies House (on behalf of the Secretary of State) must take into account the views of various stakeholders – Government departments and others. The second company name mentioned above is an extreme example, as every part of its name requires permission. Before permitting this name, Companies House would have to consult with:

• The Company of Cutlers in Hallamshire (for “Sheffield” – because Sheffield Steel is well known)
• The Department for Business, Innovation and Skills (for “University”)
• The Patent Office (for “Patent”)

In addition, Companies House would need to give permission for “Licensing” and “Institute” but these names do not require any specific consultation with others.

This company may be permitted to omit the word “Limited” from its name if it is a company limited by guarantee and meets some other criteria described in Regulation 3 of the 2015 Regulations.

In summary, it may be very hard work getting permission to have this name registered.

OMG F**K :–) Limited

By contrast, the first name mentioned above does not require any specific permissions. Under the 2015 Regulations, one is now able to register company names that include numbers, punctuation, symbols and accented (ie foreign) letters, though in some cases these cannot be used as the first 3 letters of the company’s name.

Companies House continues to have the power to reject a company name if it is offensive. However, as it has previously permitted the registration of FCUK Limited, it would be odd if it rejected a name that includes F**K.

The 2015 Regulations include provisions about rejecting names that are similar to existing names and use symbols such as “*”. These might be relevant if the proposed company name is “F**K Limited” (ie very similar to FCUK Limited), but the presence of other letters in the first example above brings us outside this territory. There are other companies whose name starts with OMG, but none that is followed by F**K.

While the name may be acceptable as a company name, this blog posting will probably fail to get through your office internet filters. Sorry about that!  &*%!

 

 

Copyright reform and the bottom line

IP Draughts has a comfortable office chair. It is a reproduction of a design by the famous, mid-twentieth-century designers, Charles and Ray Eames. The design is known as the lobby chair, because it was originally designed for the lobby of the Rockefeller Center in New York, in about 1960.

The chair was a bit of a luxury item, as it cost IP Draughts several hundred pounds. It was certainly more than his previous chair, which was also of good quality, but was bought in a clearance sale when Rio Tinto shut one of its offices in London. That one cost £10. The average price paid by IP Draughts for his office chairs is not too unreasonable.

There must be thousands of reproduction Eames lobby chairs in circulation across the World. They vary in quality and price, but many of them look very similar. You can spend nearly £5,000 on one at the Conran Shop in London, if that is your choice. Or you can get them much cheaper. This one costs AUS$499, while this one seems to cost only US$70-150 if you buy 20 of them, and pay the costs of importing them from China.

With such a disparity of prices, IP Draughts idly wonders whether it is possible to have a reproduction of a reproduction, or a rip-off of a rip-off, to put it less charitably. No doubt, readers who are copyright litigators will be able to answer that one.

IP Draughts is not an expert in US copyright and design laws, but assumes that the Eames design is no longer protected. He is on safer ground discussing the position under UK copyright law. UK copyright law in this area is about to change very significantly, and will make the sale of modern reproduction furniture more difficult (or more expensive).

Let us take the fictional example of a chair designed and first marketed in England in 1960, by the fictional English designers, Karl and Jay Eaves, who both died in 1976. The chair would probably have benefitted from UK copyright, as a type of artistic work known as a “work of artistic craftsmanship”. Usually the period of copyright protection for artistic works is the life of the author plus 70 years. However, section 52 of the Copyright, Designs and Patents Act 1988 limits the period of copyright protection for articles that are manufactured by an industrial process, to 25 years. A statutory instrument states that this provision applies if more than 50 articles are manufactured.

In the above example, assuming that the current law applies, copyright expires in 1985 rather than 2046. (As this is only a blog article, we will skip over the fact that the chair would have first been protected under the Copyright Act 1956 and the effect of the transitional provisions in the 1988 Act for works that existed before the 1988 Act came into effect. This subject is far too boring and complicated for IP Draughts’ brain.)

In principle, this shorter period of protection seems right to IP Draughts. There may be arguments for a long period of copyright protection for creative works such as books and paintings, to give a revenue stream to struggling individual creators and their descendants. But industrially-manufactured items seem to IP Draughts to be in a different category, and the duration of design right (much shorter than copyright) reflects this difference.

The precise meaning of a “work of artistic craftsmanship” has not been fully established. There has been very little case law on the subject. It probably covers a chair that was designed specially for a building in New York, by leading designers, but this is not certain. This category of works was originally introduced into UK copyright law in response to the UK’s Arts and Crafts Movement, led by William Morris, in the late nineteenth and early twentieth centuries. William Morris wallpaper designs are still selling today.

Part of the problem in deciding what is the right period of protection for works of artistic craftsmanship is that they straddle the line between purely creative works and industrial works. They have both art and craft.

Never mind the historical position, the UK Government is now proposing to repeal section 52, to align UK copyright law more closely with that in the rest of the EU. This will result in a much longer period of copyright protection for iconic furniture designs and other works of artistic craftsmanship. The Government’s detailed proposals, published last week, can be summarised as follows:

1.  Section 52 will be repealed in the near future. The repeal will take effect from 6 April 2020. In other words, there will be a period of about 5 years in which makers and sellers of reproduction articles can adjust to the new legal regime, in which copyright will last for the life of the designer plus 70 years.
2. Following the effective date of the repeal, traders will be allowed to sell off existing stocks, and trade in copies that already exist, but will not be allowed to make or import new unlicensed copies.
3. The Government will issue non-statutory guidance about the types of product that are within the category of works of artistic craftsmanship.

The effect of this change on traders in reproduction furniture and other artistic products is likely to be dramatic. A large number of items will be brought back into copyright. It may be necessary to stop selling items or take licences. It will be interesting to see what happens to the trade in reproduction ‘designer’ chairs. Will the bottom drop out of the market?

Restricting use of professional titles protects clients

Our society seems to be on a trajectory that is downgrading the traditional professions, including lawyers and doctors, to a point where they are unrecognisable to an earlier generation. In Sydney recently, an Australian lawyer told IP Draughts that part of the definition of a profession was that it regulated itself. Perhaps this was once an essential factor, but increasing moves towards independent regulation of professions in the UK make this definition highly suspect. Perhaps, though, the definition is correct, and the sorry reality is that there is no longer, or will soon not be, any legal professions in the UK. Instead there will be a range of “service providers” some of whom will be bound by externally-enforced rules of conduct, and some of whom will have no rules at all, other than general laws that come in from Europe, eg in the Services Directive.

Several factors conspire to make professions seem like a relic of the past. Mrs Thatcher started it, by liberalising the market for property conveyancing services, back in the 1980s, and introducing the paralegal-style qualification of “licensed conveyancer”. Subsequently, both advertising of legal services and referral fees were allowed, which led to ambulance-chasing personal injury practitioners, many of them not actually lawyers, but acting as referral agents for solicitors. Many solicitors would agree that referral fees are not a good idea, but it is largely out of our hands, and controlled by economists and competition authorities that tend to favour a free-for-all in legal services, and dismiss lawyers’ arguments to the contrary as the advocacy of vested interests.

At the same time, an increasingly consumerist approach in government policy-making has created pressures towards independent regulation of the professions. They even created a consumer panel of the Legal Services Board, whose chairman periodically rants about lawyers and seems to want to abandon all self-regulation.

Meanwhile, the Government has effectively abandoned the role of Lord Chancellor, who for generations has provided some political protection for lawyers (and more importantly,for the rule of law) from the short-term-populism of politicians, for whom lawyer-bashing always seems like a good vote winner. Or if not abandoned, at least downgraded the role to impotent irrelevance, by appointing non-lawyer, third-rate politicians to be Lord Chancellor. Contrast the present incumbent (who is he again?) with a former Lord Chancellor, Lord Hailsham. Hailsham may have been a bit of an upper-class twit and showman, ringing his bell at the Tory Party Conference in the early 1960s, but for a generation he was an effective Lord Chancellor, and as a former leading candidate for the party leadership, not a political third-rater.

These thoughts are prompted partly by an item that has been rumbling in the news for some months, concerning the practice of some UK banks and pay-day-lenders to send nasty letters to their debtors that appeared to be from external solicitors but were actually from in-house departments. For a time this seems to have been “standard practice” among some lenders. It seems that the stationery on which these letters were written sometimes used a fictitious name of a law firm. In at least one of these cases currently in the news, the Solicitors Regulation Authority is scratching its metaphorical head to know what to do about this disreputable practice, as the participants were not solicitors and therefore probably not within the SRA’s jurisdiction.

If we had stronger laws that prohibited a person from misrepresenting themself as a lawyer, this type of practice might never have developed. The UK rules have always been weak, though, focussing on titles and a very short list of restricted activities. The US rules have been stronger and more general, focussing on unlicensed practice as a lawyer, but may not be a good model to follow. The US rules may soon be relaxed in view of the pressure to open up the legal market there to new entrants. It is probably unrealistic to expect the current UK laws to be strengthened; the trend is in the opposite direction.

In IP Draughts’ view, consumers and corporate clients benefit from knowing whether they are dealing with a regulated professional, who is insured and subject to rules of conduct. Perhaps it is optimistic, in this de-regulated age, to hope that the professional will also have an ethos, learnt from, and reinforced by, his or her peers, that insists on levels of service and putting the client’s interests first. The best professionals will continue to stick with these values, even if the market is pushing them in a more selfish direction. Some consumers will always go for the cheapest service, and have no interest in the professional status of the service provider; for others, there is still a brand value attached to solicitors and barristers.

IP Draughts is not advocating a return to a world where solicitors live a cosy, protected life, buttressed by inflated fees on wills and conveyancing. Instead, he suggests a small change in direction to one where the Law Society takes back full control of the SRA, all future Lord Chancellors are experienced lawyer-politicians, and there is no further emasculation of the professions.

Royalty-stacking clauses

When negotiating royalty-stacking clauses, make sure you don’t get fleeced!

One of the pleasures of teaching is learning from your audience. This happened in abundance recently when IP Draughts, presently in Australia, delivered his advanced IP licensing course to a group of in-house lawyers and licensing managers. In fact, he delivered the course twice to the same organisation: last Friday to a team in their close-to-Sydney office, and yesterday to another team in their close-to-Melbourne office.

IP Draughts’ knowledge of Australian suburbs has increased greatly, but this posting will focus on legal issues rather than the architecture of Melbourne bungalows, or the surprise felt by a Brit who learns that St Kilda is close to Richmond.

Royalty-stacking refers to the situation where a licensee must pay royalties to multiple parties in order to commercialise a product. The royalties are said to be stacked, one on top of another. A licensee may seek to negotiate a clause in his first licence agreement, stating that if he has to pay a royalty to another IP owner, the royalties payable under the first licence agreement will be reduced. These clauses are known as royalty-stacking clauses.

Two key issues arise when such clauses are negotiated:

1. In what circumstances will the clause operate. In particular, is its operation limited to the situation where the licensee must obtain the third party licence in order to practise the intellectual property licensed under the first agreement? Alternatively, may the clause apply even where the third party licence relates to “add-on” technology that is not strictly required in order to practise the licensed IP under the first agreement but which is useful for the final marketed product? Usually, a licensor will wish to limit the clause to the first of these alternatives. An example of the latter alternative might be where the first licence is in respect of a pharmaceutical drug, and the licensee combines the drug with a drug-delivery technology, licensed under the second agreement.
2. What is the formula for making deductions from the first royalty? Is all or only a part of the third party royalty deducted (eg 50%)? Is it deducted from net sales or directly from the first royalty? Is it subject to a cap or floor, eg that the first royalty should not be reduced by more than 50%?

Licence agreements vary significantly in how they address these issues, and not all licence agreements have royalty-stacking clauses. In IP Draughts’ experience, some parties negotiate tailored clauses while others rely on what they perceive to be a “standard” clause, culled from some earlier agreement or templeate.

Whatever the clause says, if enough money is at stake its correct interpretation may be litigated: see the leading UK case of Cambridge Antibody Technology v Abbott, decided in about 2003 (look it up on Google) which concerned a royalty-stacking clause in a licence agreement in respect of the market-leading product known as HUMIRA.

In IP Draughts’ Australian talks, several interesting points came up in discussion that he had not fully considered before. From a licensor’s perspective:

1. Should the licensee be required to satisfy the first licensor that he needed to take the second licence and that the terms of the second licence were appropriate? Should the first licensor be involved in the negotiation of the second license between the second licensor and the licensee, to ensure that the first licensor is not financially disadvantaged? (IP Draughts perceives a danger that if this is insisted upon, it may make the licensee inclined to put more of the onus on the first licensor to “sort out” third party IP problems.)
2. Should the first licensor have a right to audit the terms of the second licence to ensure that the correct deductions have been made? How will this be affected by the confidentiality terms of the second licence? Will the second licensee be willing to have the terms of its agreement disclosed to the first licensor?
3. Do these royalty stacking clauses make the assumption that deductions have to be made from the “first” licence agreement (in which the clause appears)? Are there situations in which it should be the other way around, ie any deductions should be made from the other licence agreement?

To IP Draughts’ mind, these are all good questions, which are not always addressed in negotiations. Readers, what is your experience? Should these clauses get more tailored negotiation than they typically receive at present? How, in your view, should they be structured? Should they be included at all?