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
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
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?
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.
33. Text slide title Verdana 32pt
• Add text here
Sub-heading Times New Roman 34pt
Devices are
everywhere
38. 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.
39. 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
40. 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.
41. 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
42. 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
43. 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
44. 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?
45. 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!
46. 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
47. • 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)
49. 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
50. 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
52. Transport for G. Manchester v Thales
[2012] EWHC 3717 (TCC)
[2013] EWHC 149 (TCC)
53. 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
54. 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
55. 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
57. 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
58. 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
60. • 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
61. • 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
62. • 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
64. • 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
65. • (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
67. • 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
68. • 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
69. • 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
71. • 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
72. • 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
73. • 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
74. • 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
76. Eversheds TMT Conference 2013
Environmental issues affecting
the TMT sector
Jane Southworth, Legal Director
Eversheds LLP
77. 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
78. 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
79. 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
80. 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
81. 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
82. 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
83. 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
84. 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
85. 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
86. 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
87. 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
88. 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
89. 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
90. 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
91. 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!
92. 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
93. 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
94. 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
95. 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
96. 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”)
97. 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
98. 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
99. 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
100. 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
101. 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
102. 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
103. 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
104. 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
105. 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
106. Looking Ahead
• More producer responsibility
• More legislation governing chemical safety – will
affect those selling products
109. Eversheds TMT Conference 2013
The M&A blueprint
From inception to integration
Steve Nash, Partner
Eversheds LLP
110. 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...
111. 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?
113. 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
115. 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
116. 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
117. 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
118. 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"
119. 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%
121. 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:
122. 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.
123. 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
124. 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.”
125. 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?
126. 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
128. 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?
129. • 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”
130. 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?
131. 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?
133. 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.
134. 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
136. 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
137. 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
148. 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
149. Accounting Standards
Corporate Governance
Fairness Opinions
Pension Deficits
INTANGIBLES – THE CURRENT BIG
ISSUES
150. THE LAWS OF PHYSICS
AND VALUATION
SUGGEST THAT THIS IS
NOT POSSIBLE
STARTING AT THE TOP AND TRYING TO
BUILD DOWN
151. 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
152. 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
153. 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
155. 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
156. 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
157. 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
158. 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…
159. 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
160. Tax Valuation and Open Market Value
Fair Value
Fair Market Value
Commercial Value
Investment Value
Owner Value
CONCEPTS OF VALUATION?
161. 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
162. 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
163. 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
164. 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
170. 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
171. 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
172. 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
173. 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
174. Probability trees = snakes and ladders, develops the Monte Carlo analysis
Develops terminations (snakes) if a route indentifies problems to suggest
failure
REAL OPTIONS
175. 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
176. 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
177. 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.
179. 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
180. 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
181. • Jordan
• Egypt
• UAE
• Bahrain*
• Oman*
• Algeria
• Qatar
• KSA
Data Protection
Group (1): No Specific Legislation
182. 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
183. • 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
184. • 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
185. • Morocco
• Tunisia
• Dubai International Financial Centre (“DIFC”)
• Qatar Financial Centre (“QFC”)
Data Protection
Group (2): Specific Legislation Available
186. • 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
187. • 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
188. • 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
189. • 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
190. • Jordan (public consultation phase)
• Qatar (ready since mid 2011)
Data Protection
Group (3): Data Protection Draft Law
191. TMT in the Middle East
Online Media Regulation and Content Liability
192. • Main Objective
• Scope of Application
• Criteria
• Consequences of application
• Practical Challenges
• What’s next?
Press and Publication Law
Jordan
193. • “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
194. • “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
195. • Broad scope
• Censorship concerns
• Not automatic
• Social Media concerns
Jordanian Press and Publication Law
Criteria
196. • 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!)
197. • 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
198. • 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?
200. • Registration and licensing requirements.
• liability of editor in chief, the publication and the author
• Broad criminalizing legal provisions.
– Politics
– Pornography
Censorship
Media
201. • 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
202. • 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
203. • 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
207. Eversheds TMT Conference 2013
Pricing People Issues
Richard Sheldon, Principal Associate
Eversheds LLP
208. • 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
210. 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
211. 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
212. Pushing back on the TUPE list
• Practical steps to challenge:
• job descriptions
• employment contracts
• time breakdowns
• rotas
• shift/team names
Scenario 1
213. 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
214. 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
215. 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
216. 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
217. 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
218. 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
219. 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
224. 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
225. 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?
227. 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
228. 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
230. 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
232. 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
233. 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’
234. 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
235. 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
237. 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
238. 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
240. 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
241. 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
243. 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
248. Eversheds TMT Conference 2013
Copyright in the Digital World
Neil Mohring, Partner,
Eversheds LLP
249. Copyright in the Digital World
• Focus on creative industries
• Need for change
• Hargreaves Review
• Hooper Review
• Proposals for change
Introduction
250. Copyright in the Digital World
• Opportunities for growth
• Track record for innovation
• Importance of IP
• Need for change
Creative Industries
251. Copyright in the Digital World
• Methodology
• Recommendations
• Copyright Licensing
• Exceptions
• Enforcement
• SME Access
Hargreaves Review
252. 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
253. Copyright in the Digital World
• Enterprise and Regulatory Reform Act
• Copyright Exceptions – First and Second batches
• Status of other proposals
Proposals for Reform
254. Copyright in the Digital World
• Orphan Works
• Extended Collective Licensing
Enterprise and Regulatory Reform Act
255. 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
256. Copyright in the Digital World
• Data Analysis
• Education
• Research, libraries and archives
Copyright Reform – Part 2
257. Copyright in the Digital World
• Small claims track at Patents County Court
• Digital Copyright Exchange
• SMEs
• Mediation Service
Other proposals
258. • Complexity of copyright licensing
• Multi-jurisdictional enforcement
Copyright in the Digital World
Are the current proposals sufficient?
261. Eversheds TMT Conference 2013
Incentivising creativity
TMT tax breaks explained
Ben Jones, Principal Associate,
Eversheds LLP
262. 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
263. 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
265. 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
266. 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
267. 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
268. 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
269. 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
270. 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
271. 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
274. Other jurisdictions
• Other jurisdictions also incentivise TMT business
• Lower headline tax rates also available
• IP easily transferable
• Anti-avoidance rules / reputation issues
275. Simple IP holding structure
Tech Media
(High tax jurisdiction)
IP Holdco
(Low tax jurisdiction)
Tech Media
Opco
Dividend
Royalties
License
