Category Archives: Legal Updates

G-whizz. Wake me up after May 25!

At this year’s UCL course on IP Transactions, many of the speakers commented to IP Draughts about how busy they were, advising clients on the EU General Data Protection Regulation (GDPR), which is due to come into force later this month. Except for one lucky speaker who said that her firm had a separate department dealing with such matters.

For many IP lawyers, it seems to go with the territory to advise on data protection issues. Perhaps it is because they are really IT and IP lawyers, and GDPR is part of the regulatory regime that protects the “I” part of IT. Or perhaps because they are EU laws, and who better than an IP lawyer to advise on EU laws, when most of the IP laws in the UK are at least tinged with EU influence, even if they are not directly derived from EU legislation.

IP Draughts is not immune from this trend, and has recently been the partner-in-charge of several GDPR projects, advising clients on compliance with the new regime, or revising contracts to take account of the new law. Fortunately we have some GDPR gurus within the firm, so that IP Draughts can be “young Mr Grace”, wheeled out as a figurehead, but sometimes a bit redundant when the detailed discussion starts.

He has picked up enough on the subject to recognise the issues that seem to come up time and again. This is fortunate, as he has agreed to be the moderator of a panel discussion on data protection at an American Bar Association conference in Copenhagen in June.

IP Draughts would appreciate your help, dear reader, in putting together a list of incisive questions (or themes) to ask the panellists, who are a mixture of US and European lawyers and data protection managers. Here are some crude, general questions to get us going. Under the new regime:

  1. Is the definition of personal data broader than at present?
  2. Should organisations rely on consent, or another lawful basis for processing? Is consent less likely to be used under the new regime than it is at present?
  3. Are existing consents going to be sufficient to comply with the new law, or will we need to get fresh consents?
  4. Can you rely on more than one lawful basis of processing? Eg if you start off with consents, but the consents are not compliant, can you switch to another basis of lawful processing as a back-up?
  5. Is it realistic to suggest that employees can give consent freely to their employer? Won’t they feel pressurised to give consent and won’t this make the consent invalid under GDPR?
  6. Do we need to rewrite our privacy statements? Can we rely on small print on website terms and conditions, and if not how “in your face” do we need to be?
  7. If you make the right noises, and try to institute new processes to comply with GDPR, will that get you off the hook if the regulator knocks on your door, even if your processes are not, in fact, compliant? Is the sensible course to treat GDPR a bit like many companies treat health and safety issues – going through the motions, without conviction – until you see some case law that shows you exactly what you need to do?

Alas, poor [Y]! I knew him, [H]…

There are many more general questions, though they can only sensitise you to the issues, rather than show you how to comply.

Are these questions on the right lines for a panel discussion? Or should IP Draughts take a different approach? Assume that 60% of the people attending the conference are US lawyers and 40% European, and that some, perhaps many, of them will not have much clue about the subject.

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Article on drafting FRAND licences now published

Back in December, IP Draughts had an article published in the online version of the Journal of Intellectual Property Law and Practice (OUP). The article’s title is How to draft a licence agreement that is fair, reasonable and non-discriminatory: a ten-point plan.

IP Draughts learnt at the weekend that this 10,000-word article has now reached the paper version of the journal. For non-subscribers to the journal, it can be purchased here.

The abstract reads as follows:

The English High Court case of Unwired Planet International Ltd v Huawei Technologies Co Ltd & Anor is of great interest to IP lawyers who advise on standards-essential patents (SEPs), on associated questions of competition law, and on licensing patents on fair, reasonable and non-discriminatory (FRAND) terms. The case is also of interest internationally, partly because there have been relatively few cases anywhere in the world, to date, that provided judicial guidance on legal issues relating to SEPs and FRAND and because this is the first time that an English court has determined a FRAND royalty rate.

This article focuses narrowly on the FRAND aspects of the Unwired Planet case, and on what the case teaches us about how to draft a patent licence agreement that is FRAND. But the discussion is broadened to reflect not only on the licensing of SEPs but also of other types of licence where there is an obligation to negotiate fair and reasonable licence terms, with particular reference to the terms of grant of the European Commission for Horizon 2020 research projects.

This focus results in the author omitting discussion of some points that would be of interest to the lawyer who is running litigation against a user of an SEP (perhaps in parallel with negotiating a FRAND licence with that infringer), or who may be advising on compliance with competition laws in the context of such litigation and negotiations.

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Trawling for case law

Those of us who work in the legal profession, or interact with it regularly, are mostly familiar with the ‘legal update’ documents that many law firms produce. Nowadays these documents tend to be available online or emailed to a circulation list. Or they are found through a commercial aggregator such as Lexology, whose daily offerings pop into IP Draughts’ inbox early each morning.

Often, IP Draughts finds that these articles are of limited interest. So much English case law is now available online, eg through the excellent and free BAILII, that cases of very little importance are trumpeted as major news. Law firms need to get better at filtering their case reports. And they also need to get better at explaining the context of the case, and why the reader should care about it. Just because a lot of money is at stake, and parties have thrown every legal argument they can think of at the judge, doesn’t make it a landmark case.

The real “added value” that a law firm could bring to these reports is an editorial one of explaining the longer term significance of the case, eg in the development of legal principles. It seems as though many of these case reports are produced by a lowly researcher or support lawyer, when really they should be issued in the name of a leading practitioner within the firm, whose commentary can be trusted. But of course, this costs more in time and judgment than simply churning out a case summary.

IP Draughts tries to keep abreast of the BAILII reports, but doesn’t have the time or interest to read every case that is reported. A quick scan today revealed nothing that seemed to raise important issues for IP contracts. But without reading every case you just don’t know. The titles of the cases aren’t necessarily conclusive, but he applies his own, rough-and-ready filtering system. For example, he tends to avoid those that name an individual and the Home Office as parties – these cases are more likely to be about immigration than commercial law. Cases in the Commercial Court should, in principle, be of interest, but often they concern procedural issues such as whether the English court has jurisdiction, or whether an arbitrator’s decision should be enforced.

Today on BAILII, he spotted a case called Bubbles & Wine Limited v Lusha, but it wasn’t a dispute between someone who likes a drink and his supplier. Nor was the case of Reynard v Fox an Anglo-French dispute between small-to-medium sized, omnivorous mammals. And he was disappointed to see that in the case of Fish & Fish Ltd v Sea Shepherd UK, neither party had instructed Bird & Bird as their solicitors. Ah, the joys of legal research.

 

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Interpreting a liability clause

Since Finola o’Farrell became a High Court judge last year and joined the Technology and Construction Court, IP Draughts has taken to looking out for her judgments on BAILII.

Last week Dame Finola published two judgments that concerned contractual interpretation. This posting is about one of them, The Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [2017] EWHC 2197 (TCC) (31 August 2017).

The case is about the supply of a health record scanning system (comprising hardware and software) by ATOS to a hospital trust. The contract price was approximately £5M. The trust became dissatisfied with the system and eventually (after several years) terminated the contract. It claimed approximately £8M for breach of contract, including wasted expenditure.

The judgment concerns two preliminary issues that were ordered to be tried before the main hearing. In summary those issues were:

  1. Is the claim for wasted expenditure excluded by a contract term that stated that neither party would be liable for lost revenues?
  2. Is a limitation of liability clause so badly drafted that it cannot be interpreted, and therefore is ineffective?

On the first point, Dame Finola reviewed case law on when wasted expenditure can be claimed and concluded that the losses were “reliance losses” and not lost revenues. This is a technical point about recoverable damages and difficult to summarise in headline terms – read the judgment!

On the second point, IP Draughts puts aside his usual moan about courts being too ready to damn contractual language as badly drafted. Here, the trust’s barrister had a point. The wording in question was as follows:

Clause 8.2.1:
8.2.1 … the liability of either party for Defaults shall be limited as stated below:

(b) the aggregate liability of either party under the Contract for all Defaults, other than those governed by sub-clause 8.1.2 (a) above, shall not exceed the amount stated in schedule G to be the limit of such liability.
Schedule G, paragraph 9.2:

The aggregate liability of the Contractor in accordance with sub-clause 8.1.2 paragraph (b) shall not exceed:

9.2.1 for any claim arising in the first 12 months of the term of the Contract, the Total Contract Price as set out in section 1.1; or

9.2.2 for claims arising after the first 12 months of the Contract, the total Contract Charges paid in the 12 months prior to the date of that claim.

How do you interpret paragraph 9.2 in the situation where there are multiple claims, e.g. one in the first 12 months, one at the end of the second 12 months, and one at the end of the third 12 months of the contract? Is the cap:

  1. Total Contract Price + year 2 Contract Charges + year 3 Contract Charges? or
  2. Total Contract Price + year 2 Contract Charges? or
  3. Total Contract Price + year 3 Contract Charges? or
  4. Total Contract Price? or
  5. Something else?

And does the answer depend on when the trust submits its claim, or when the act of Default occurred?

Answers on a postcard, please.

There are at least 3 problems with the above-quoted wording for paragraph 9.2:

  1. 9.2.2 starts with the word “claims” but ends with the phrase “that claim”, which doesn’t take account of multiple claims.
  2. The paragraph refers to “claim arising” (which sounds like insurance industry jargon) but what it should probably refer to is “Defaults”, which is the term used in clause 8.2.1 above.
  3. The relationship between 9.2.1 and 9.2.2 is not clear, particularly in the case where claims (or defaults) arise under both sub-clauses.

It seems as though the drafter only thought of the situation where there was one claim. He or she didn’t think around the wording, and test it against different scenarios.

Dame Finola (IP Draughts can’t tire of using this form of address, for someone he encountered in a first-year law tutorial 38 years ago) ran quickly through the case law on interpreting contracts. Her summary of the leading cases on this subject such as Arnold v Brittan is admirably concise, taking in aggregate not much more than half a page; IP Draughts wishes other judges could be so concise!

Her conclusion is equally concise and clear:

89. In my judgment, paragraph 9.2 imposes one aggregate cap on the liability of ATOS for all Defaults (excluding claims for personal injury or property damage). The level of the cap is determined by the timing of the first Default. If a Default occurs in the first twelve months of the Contract, the level of the cap is the Total Contract Price. If no Default occurs during the first twelve months of the Contract, the level of the cap is the total Contract Charges paid in a twelve month period prior to the first Default.

This could be viewed as being generous to the poor drafter (in more than one sense) who came up with paragraph 9.2, but in IP Draughts’ view this decision is consistent with the recent approach of the courts to be more willing to give effect to limitation of liability clauses rather than strike them down for imperfect drafting, as happened too often in the past.

But we should not read too much into this sensible interpretation: other judges (including the Court of Appeal in this case, if this decision is appealed) may take a less benign view of such drafting imperfections.

A better solution than hoping that the judge sees it your way is to get the drafting right in the first place. IP Draughts is groping towards a rule of thumb for contract drafting and negotiation. A possible formulation is: you should spend at least as much time thinking about and drafting a clause as you will spend negotiating it. This won’t work for all clauses and all negotiations, but it may be a start.

 

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