One-sided settlement agreements

UK readers can’t have helped noticing that non-disclosure agreements (NDAs) are again in the news. A Court of Appeal ruling has attracted attention. Despite a court order to the contrary, the identity of the person involved has apparently been disclosed in the House of Lords under Parliamentary privilege.

According to a report by the BBC this week, the UK Prime Minister, Theresa May, has commented on the issue:

Mrs May said non-disclosure agreements, or NDAs, should not silence whistle blowers. She added the government would take action to make sure employees knew their rights.

Some – as yet unspecified – legislation to regulate this issue is promised. During a time of legislative paralysis caused by Brexit, IP Draughts is sceptical about the government’s ability to deliver on such a promise.

But, giving the government the benefit of the doubt, what might any new law say? Perhaps that obligations of confidentiality in settlement agreements made by individuals are unenforceable? Or unenforceable where there is a significant imbalance of power between the parties? Would such a law promote or hinder the settlement of disputes?

UCL professor, Richard Moorhead, has provided thoughtful commentary on this issue, eg on his blog. Earlier this week, he was invited onto the Today radio programme and then onto BBC TV programmes to discuss the matter.

IP Draughts’ instinctive view is that, if confidentiality obligations in such circumstances were unenforceable, it would reduce the number of settlement agreements. But whether it would reduce the number significantly is unclear. Sometimes, confidentiality will be a key issue for one or both parties. On other occasions, the key issue may be resolving the dispute and avoiding the cost, time and additional problems associated with litigation, so that confidentiality is merely a “nice to have”.

Although he hasn’t advised on harrassment allegations or their resolution, IP Draughts occasionally advises on the settlement agreements that employers ask their employees to sign when dismissing them, typically in return for a payment that exceeds the contractual entitlement. In the UK, these agreements (formerly known as compromise agreements) can protect the employer against future claims by the (ex-)employee if they are drafted widely enough and comply with statutory requirements. One of those requirements is that the employee obtains legal advice and provides a certificate to this effect from the lawyer.

Although the circumstances of these settlement agreements are different from those that are in the news, there are some similarities: they are entered into between parties of unequal power, and in return for a payment the party with less power gives up a wide range of future rights. Typically they include confidentiality obligations. From an employer’s perspective, it is usually the preferred option to keep the deal secret.

Originally, these settlement agreements were drafted with a view to avoiding future, employment-related claims by the employee, such as for discrimination or unfair dismissal. They provide a limited ‘safe harbour’ or exception to the general rule that an employee cannot contract out of their statutory employment rights. The agreements were sometimes a little lengthy because they listed all the different types of theoretical claim that an employee could bring under UK employment legislation. But apart from these lists, the agreements were relatively straightforward.

More recently, IP Draughts has noticed a trend to throw much more into settlement agreements, to tie the employee up in legal knots. A draft settlement agreement that IP Draughts recently reviewed seemed to acknowledge this, when it said:

…if this Agreement is only effective for the purpose of precluding the Employee from presenting particular statutory complaint(s) to an Employment Tribunal, then the particular statutory complaints to which this Agreement pertains is/are the Employee’s complaints of unfair dismissal, wrongful dismissal or discrimination.

This was a small sub-set of the types of claim that, elsewhere in the agreement, were stated to be waived by the employee.

In addition, this particular agreement had some rather strong obligations on the employee, eg:

  • non-compete obligations on the employee
  • obligations not to make subject access requests under data protection legislation
  • obligations to cooperate with the employer in any future UK or overseas regulatory or legal proceedings to which the employer was party
  • full disclosure obligations (similar to an utmost good faith obligation) that were not reciprocated by the employer
  • obligations not to make disparaging statements about the employer

The wording of some of the obligations was extremely dense and difficult to follow. For example, a sub-clause on tax liabilities was part of a single, longer sentence. The tax part of the sentence ran to 348 words and included multiple qualifiers, ifs, buts and provisos.

These types of agreement tend to be drafted entirely to protect the employer, and detailed negotation of the terms is not usually expected. Something has gone wrong when they are are as complicated and one-sided as this one. Personally, IP Draughts wouldn’t sign such an agreement for the low thousands of ex gratia payment that are typically on offer, but perhaps he is talking with the luxury of being a well-paid professional. He finds it difficult to believe that the original intention of the legislation which brought in compromise (now settlement) agreements was to facilitate extreme agreements of this kind.

Some lawyers take the view that their role is to provide maximum benefit to their client and if that means maximum disbenefit to the other party, so be it. Some clients require their lawyers to act in this way. While this approach has its place, IP Draughts agrees with Richard Moorhead that when one is dealing with individuals, and when there is an imbalance of power, ethical considerations may require a tempering of the “win as much as you possibly can, and without caring about the other side” mentality.



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Inclusive and elite: contradiction in terms?

Rightly, there is a focus nowadays on ensuring that the workplace is inclusive and diverse. The Law Society of England and Wales treats this issue seriously and requires its committee members and chairs to undergo training. Law firms are required to publish their diversity statistics – Anderson Law’s most recently published figures are here.

An older feature of legal practice, and of other areas of professional life, is the reverence that it has for hierarchy and competitive merit. This leads to ranking and tiering. At the top of the legal tree are members of the UK Supreme Court, who are supposed to be better lawyers than in the Court of Appeal, and they in turn are better than their brethren in High Court. QCs are supposed to be more able than junior barristers and, in the traditional view, barristers are more gifted than solicitors. Experience is respected to some extent, but some lawyers are so brilliant – so high up the intellectual pecking order – that they bypass the need for judicial experience and are promoted directly to the Supreme Court, as in the case of Lord Sumption.

This elitist philosophy suggests that if you put 3 lawyers together, one is best, one is worst and one is in the middle. It is an approach with which IP Draughts is familiar. At the boarding school that his parents sent him to in the 1970s, everyone had a clearly-designated place in the hierarchy. Each term, lists were prepared putting people in order of seniority. Age and year of admission provided a starting point, but were then adjusted when a person was selected for responsibilities, eg as form captain or prefect.

Throughout the 5 years that he spent at this school, virtually every meal was taken sitting next to people who were slightly higher or slightly lower in the hierarchy. Choice of study/bedroom in the 6th form also followed this sequence. Some teachers even applied a similar system to seating in class, putting the people who scored the highest marks in exams in the back row, and following in lines down to the class dunce in the opposite, bottom corner.

This linear approach can make people very competitive – they want to be higher up the tree – and competitiveness is not, in principle, a bad thing. But the difficulty in IP Draughts’ mind is that this approach tends to look at two people and say that one is always better than the other. Perhaps this is true if you are picking prop forwards for the first XV rugby team. But in the professional world the skill-sets required are more sophisticated and complex. And the linear approach may be at odds with an inclusive and diverse approach. It is two-dimensional rather than three-dimensional.

A better approach when it comes to professional life is to identify people who meet a threshold level of competences, across several areas, and then select a variety of qualifying people, taking advantage of their different skill sets and perspectives. In IP Draughts’ view, this three-dimensional approach has more room for diversity and inclusion than a traditional hierarchy of talent and can result in a team with greater overall skills.

IP Draughts would like to see promising candidates who reach some defined, threshold standards, but are not the “finished article”, being promoted to the Supreme Court and given training and support to help them achieve very high standards. But he fears this is a step too far for an establishment that, no matter how much it agrees in principle with inclusivity and diversity, still has some deeply-embedded values that can push decision-making in a different direction.





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Unwired Planet win FRAND case appeal

The English Court of Appeal’s judgment in the case of Unwired Planet International Ltd & Anor v Huawei Technologies Co Ltd & Anor [2018] EWCA Civ 2344 has now been published. In brief, Kitchin, Floyd and Asplin LJJ wrote a joint judgment which in all material respects upheld the decision of Birss J at first instance. The first instance decision was discussed several times on this blog, including here. It seems that Huawei intends to try to appeal again to the UK Supreme Court.

A quick and oversimplified reminder: this case is partly about when the terms (and associated negotiation) of a licence agreement for standards-essential patents (SEPs) should be considered fair, reasonable and non-discriminatory (FRAND). Patent owners who declare (to standards-setting bodies) that their patents are SEPs are required by the rules of the standards-setting body to offer those patents for license on FRAND terms.

In very brief summary, the Court of Appeal decided:

  1. Birss was right to say that the licence had to be global, rather than limited to the UK as Huawei sought.
  2. It was not discriminatory for the terms of the licence to be different to those UP had previously provided to Samsung.
  3. UP had not abused a dominant position by starting legal proceedings against Huawei.

One of the topics that comes up in FRAND licensing is that parties tend to work out the financial terms by counting the number of standards-essential patents that the patent owner has, without looking too closely at whether each of them is valid. This is a crude but sometimes cost-effective approach for the parties to take. Reading through the Court of Appeal’s judgment, IP Draughts was struck by the number of arguments that they addressed and decided, and he wondered whether, in the interests of efficiency, litigation should be reduced to counting the number of arguments that each party makes.

In total the Court of Appeal addressed around 50 detailed sub-arguments that fell within the three numbered issues mentioned above. The Court of Appeal agreed with Birss J on virtually every point discussed in the CA judgment. The most notable area where they disagreed with him was that they held he was wrong to say that there is only ever one set of licence terms that is FRAND in any particular case, but this made no difference to the outcome of the case.

Commentators have today suggested that the Court of Appeal’s judgment will tend to make the UK a jurisdiction of choice for future FRAND licensing disputes. If that is correct, it should benefit both IP litigators and IP contract drafters based in the UK.





Filed under Intellectual Property, Licensing

IP in India and Sri Lanka

You may be wondering why there have been no postings on this blog for the last two and a half weeks. IP Draughts has been on a cruise with his mother and sister, to celebrate his mother’s 80th birthday. Most of the cruise was a trip down the west coast of India, stopping at various places including Mumbai, Goa (Vasco da Gama) and Kochi, before ending in Colombo, Sri Lanka.

IP Draughts didn’t work during the trip – in fact his firm had to provide a letter to the Indian government confirming that he wouldn’t do so. The closest he came to intellectual property issues was seeing this mysterious sign (above) on a spice plantation.

In his everyday life, IP Draughts rarely has much to do with India or Sri Lanka. His firm has occasionally advised on contracts that its clients have negotiated with Indian companies. But there have not been many of these, when compared with contracts involving European, North American or even Far Eastern parties. He regularly receives spam emails from Indian companies inviting him to use their no-doubt-cost-effective services for aspects of patent drafting and filing, or to attend or speak at IP conferences in India.

He has encountered engaging lawyers and law students from India and Sri Lanka, eg when teaching LLM students at UCL, and has reflected on the similarities in attitude that these individuals have seemed to have with English lawyers, compared with lawyers in some other jurisdictions. Perhaps this is partly a reflection of a shared cultural heritage that dates back to the time of British colonial rule. If so, after seven decades of independence, only the positive aspects of the relationship seem to remain.

IP Draughts hadn’t previously visited India or Sri Lanka, and didn’t know what to expect. Of course, the experience one gets on organised excursions from a cruise ship may not be fully reflective of the real world. But in general he encountered only positive and engaging people, and found the whole experience uplifting.

Some aspects he will not miss. Immigration procedures varied widely from port to port, and demonstrated the extremes of Indian bureacracy. IP Draughts’ mother, who has been on many overseas cruises, had never encountered the like. And the vast crowds of commuters that we saw surging towards the main railway station in Mumbai from every direction far exceeded IP Draughts’ experiences of Holborn tube station, in London, during his 7-year stint working at Bristows.

Far from a wireless world!

If a country is to be judged on how well it preserves its colonial-era buildings and public spaces, and removes litter from the streets, then Sri Lanka scores higher than India. We only spent a day in Colombo, but it seemed less chaotic than Mumbai. Our tour guides throughout our trip emphasised the harmony between religions that existed in their state or city. From the comfort of a tour coach, IP Draughts noticed an old wall in Colombo that appeared to have several dozen bullet holes in it. No mention was made of this feature by the tour guide.

IP Draughts is aware that the UK Intellectual Property Office has identified India as an important market, and has appointed an IP Attaché for India as part of its diplomatic activities. IP Draughts was involved in writing a brochure and video, published jointly by the UK professions, on why to use the UK for international IP services, and these materials have been used at trade missions in India.

Lotus Tower in the rain

In the case of Sri Lanka, it seems that China is fast becoming the lead benefactor of the economy, funding numerous projects including the almost-completed Lotus Tower. Our tour guide lamented this fact, and seemed to suggest that he would much prefer the UK to fulfil this role.

This posting doesn’t have as much IP content as usual. Normal service will be resumed next week.




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