Business Legal News from Blackadders Solicitors

With the purveyors of doom queuing up to tell us how bad everything is, you’d be forgiven for thinking that nobody is doing anything positive (though I see that Google has patented technology for a driverless car, perhaps paving the way for future generations of Christmas partygoers to find an alternative way home). Times are undoubtedly tough for everyone, but it is important to recognise that many businesses continue to innovate and invest in their assets. We have been encouraged by the number of young businesses looking to protect and exploit their brands despite challenging economic conditions. In particular, we have seen a marked increase in the number of clients applying to register trade marks as they seek to gain a competitive edge. A registered trade mark affords its owner the exclusive right to use that mark and can serve as a key tool in the creation of a recognisable and marketable brand. It demonstrates that you mean business to customers and competitors alike. Any sign capable of distinguishing the goods or services of one business from those of another can potentially be registered as a trade mark – this includes business names, product names, logos and slogans. Trade marks are assets that can be licensed, franchised or sold. As such, they can play a major role in the commercial strategy of a business. If you are wondering whether your business could be doing more to protect and exploit its brand, why not take professional advice and find out more? I’m sure that Google did in the late nineties…

OSCR regulates charities in Scotland and one of its functions is to determine whether charities continue to meet the charity test.  As charitable status brings tax benefits, an important part of the charity test is that charities can demonstrate that their activities have public benefit.  

OSCR in Scotland and the Charities Commission in England and Wales have for some time been looking into whether private schools deserve charitable status.  OSCR has already issued directions to private schools such as St. Leonards in St.Andrews and Merchistons in Edinburgh that they need to widen their public benefit.  More directions have been issued south of the border.

In England and Wales, the Independent Schools Council, representing 1,260 schools, has taken the Charities Commissioner to court challenging the way that it applies the public benefit test.  A tribunal decision of 14 October 2011 has confirmed that there is too much emphasis on bursaries for poorer children and there is a need to examine the wider charitable work that schools are involved in.   

New guidance is expected shortly as to whether this approach will be followed in Scotland or whether the focus will remain on public access to school places.

I was interested to read that the Court of Appeal in England has held that newspaper headlines may be protected by copyright and that accessing material via a hyperlink could amount to copyright infringement. I have recently advised a number of clients on the subject of internet hyperlinks. Providing and accessing links from one website to another is an integral part of modern internet life, but it can be problematic. Apart from anything else, some website terms and conditions expressly forbid the creation of links from other sites without permission, and so linking may be prohibited as a matter of contract. In the recent case (Newspaper Licensing Agency v Meltwater), the court found that a newspaper headline could amount to a literary work capable of enjoying copyright protection. Although this case concerned the use of headlines as links in the context of a commercial service, it serves to highlight the type of legal issues that can arise in the digital age. From both a commercial and a legal perspective, deep linking (where the home page of the linked site is bypassed) can be particularly unattractive for website owners, as key revenue-generating advertising and disclaimers will typically appear on the home page. Moreover, a deep link is perhaps more likely to lead a user to think that the content of the linked site is part of the linking site, which could cause damage to the reputation and brand of the linked site and its owner. In summary, care must be taken when dealing with material created by others and the potential implications of linking to and from third party websites should always be considered.

On 1 June the Intellectual Property Office (IPO) launched its Peer to Patent (P2P) scheme, which will run on a trial basis until the end of the year.  The scheme will allow the public to participate in the patent application process through the IPO’s website.  It is hoped that members of the scientific and technical communities will participate in this process by providing IPO examiners with a body of specialist information and opinion to draw upon when considering an application’s originality.

The goal is to improve the overall strength of the patent system by ensuring that patents are only granted to truly novel and inventive works.  During the trial period, the P2P scheme will operate only in relation to IT patents.  Those wishing to contribute can do so by registering on the IPO’s website from 1 June. 

The P2P scheme is one of three proposals put forward by the Government in its Blueprint for Technology paper, which is aimed at making the UK a more fertile ground for innovation and technology.  The other two elements are the updating of the UK’s intellectual property laws (which produced the recently published Hargreaves Review) and the proposed “Entrepreneur Visa”, which aims to make it easier for overseas innovators to set up in the UK.

The corporate & commercial team at Blackadders is well placed to offer businesses a range of services in registering, licensing and protecting their intellectual property.

The European Commission has undertaken a consultation into how contract law could be harmonised within the EU.  This is aimed at removing the barriers of cost and legal uncertainty which presently impede cross-border trade within the EU.  This is of particular concern to small and medium sized businesses who either cannot afford advice on the legal implications of cross-border contracts and expose themselves to risk as a result, or incur unwanted costs getting appropriate advice.  In July 2010, the Commission identified seven options for harmonisation. These ranged from creating legislative ‘tool boxes’ for Member State governments to draw upon when drafting their own laws through to establishing a single mandatory system of European contract law.

The Commission’s preference is for an ‘optional instrument’, a comprehensive, stand-alone body of rules which parties could nominate to govern their contract in place of the laws of any one Member State.  On the surface, such an idea could be attractive: the same rules could apply wherever you do business – which would go some way towards the law catching up with internal market in which we operate.  However there would be massive upheaval required to implement this. For instance, some basic principles of contract law vary between Member States, so questions on pre-contractual issues or on the very existence of a contract could well stray into difficult gray areas without extensive legislation.

The Commission is not expected to formally table their proposal until autumn, so actual legislation is not likely to surface for some years.  Many questions on both the technical and practical aspects of the proposal remain to be answered, yet events are in motion and the way in which business is conducted within the EU might well change substantially, and for the better, in the years to come.

The Information Commissioner published a statutory Code of Practice on Data Sharing on 11 May 2011.  When launching the Code, the Commissioner noted that “organisations that don’t understand what can and cannot be done legally are as likely to disadvantage their clients through excessive caution as they are by carelessness”.  Accordingly, the Code is aimed at improving understanding and increasing efficiency within the field of data processing.  The law has not changed: this is simply a model for good practice.

The Code provides guidance on two particular types of data sharing: ‘routine’ sharing, where the same organisations frequently swap or pool information for a certain purpose, and ‘one off’ instances, which could include sharing of information in an emergency.  The kind of practical tips offered by the Code hint at the broad approach that the Commissioner expects data handlers to adopt.  For instance, they advise organisations that share data with each other to ensure that information is held in a standardised way and that their respective processing systems are wholly compatible.  This is to ensure that data is not corrupted or inadvertently altered; a useful reminder that the Data Protection regime is not just about guarding against unauthorised leaks of information, but also about maintaining the accuracy and usefulness of data within today’s ‘information society’.

The Code also provides case studies which illustrate what organisations can and cannot do when presented with particular problems.  Even those already familiar with the letter of the Act may find these useful in finding better ways to comply.  The Code of Practice and the accompanying summary checklists can be found at the ICO’s website: www.ico.gov.uk.

The corporate and commercial team at Blackadders is on hand to assist those looking to re-evaluate their data protection procedures in light of the Code.

Stewart Dunbar
Trainee Solicitor

The Additional Paternity Leave Regulations 2010 came into force on 6 April 2010 and offered fathers the opportunity to become more involved in their child’s upbringing. Essentially, these regulations allow mothers to transfer part of their maternity leave to their partner or the child’s father. The UK Government is now proposing further reform on this topic in the form of a new system of flexible parental leave from 2015. The Government has launched a consultation on its proposals. Ministers say that the aim is to help both parents and employers by allowing them greater choice and flexibility than is afforded by the current regulations which are said to be too rigid and reflect outdated notions of parenting. The proposals provide for parents sharing any leave allowance remaining after the early weeks of paternity and paternity leave have expired. This shared leave could be taken in different chunks and, unlike the current system, parents could both take leave simultaneously. However, if agreement as to the timing of leave is not possible, employers would be able to require leave to be taken in one continuous period. Employers would also be able to ask staff to return from leave temporality to meet any peaks in their business requirements. The aim is to provide greater flexibility to allow for paternity arrangements which suit mothers, fathers and employers. The proposal also details the Government’s intention to extend the right to request flexible working to all employees. The current system offers this right to parents of children under 17, of disabled children under 18, and to certain carers. On another related issue, the consultation also sets out proposals to amend the UK Working Time Regulations 1998 (WTR) to comply with recent decisions of the European Court of Justice. These European decisions have held that where an employee is on sick leave, they are entitled to be reimbursed for any holiday entitlement which they have missed during the period of absence. This could mean carrying the leave forward to the next leave year which is currently prohibited by the WTR. The proposals recommend amending the WTR to the affect that where an employee has been on sick leave, the 4 weeks basic leave entitlement could be carried forward to the next leave year. However, the additional 1.6 weeks and any further contractual leave could not be carried forward. The consultation document is at http://c561635.r35.cf2.rackcdn.com/11-699-consultation-modern-workplaces.pdf.

Jack Boyle
Trainee Solicitor

Cookies, the tiny files that are saved onto your hard drive when you visit websites, are used to store information about the way you interact with a website. The idea is that, by using this information, the website can give you a more efficient and personalised experience. Using cookies, advertisers can also collate information about the sort of websites that a user accesses in order to deliver adverts specific to a user’s ‘tastes’. This is a key part of a now lucrative industry: the UK’s online ad industry saw a turnover of £1.75bn in the first half of 2009. However the law relating to cookies changed today (26 May) and a number of issues will need to be addressed.

Previously: the “informed opt-out” system

Until now, it was enough that website operators made it possible for users to decline their cookie at some point. Usually the operator did this by maintaining a privacy policy which explained how cookies were used and how users could opt-out.

From 26 May 2011: the “prior, informed opt-in” system

Operators will need to obtain explicit consent from users before using cookies. There is debate over how this will be achieved in practice. Some suggest that internet browser providers could build-in settings that could allow users to specify what type of cookies they will accept in advance. Privacy groups argue that this does not represent ‘explicit consent’. The Information Commissioner suggests that browsers cannot presently be customised sufficiently well to enable a website operator to assume that a user has consented to downloading cookies via their browser settings.

Challenges and criticism

It has been said that the new rules overlook the technological complexity of the issue, that cookies play a crucial role in holding together the different layers of (often third party) content that make up modern commercial websites. A strict system of explicit consent for every cookie could unpick this construct, resulting in a poorer consumer experience as users are continually confronted with pop-ups seeking their consent. Some also speculate that tighter laws may lead to international publishers removing content from UK-targeted sites, or that key talent from within UK online advertising may relocate to less stringent locations like the US.

Guidance and enforcement

The Information Commissioner has noted that time will be needed for organisations to react to the new laws, so hard-line enforcement is likely to be some time away. In the meantime, the Commissioner has made it clear that organisations must be able to show that they are taking steps in response to the new rules. To help them do this, the Commissioner has published guidance which encourages focus on key areas such as:

• the type and purpose of cookies that are used;
• the level of intrusiveness involved; and
• the best way for gaining users’ consent.

The enforcement agencies will have key roles to play in finding a balance between privacy concerns, consumer convenience and commercial efficiency. The months ahead will shed light on what these laws will come to mean in practice.

Stewart Dunbar
Trainee Solicitor

Spinouts UK, a body that lists all spin-outs from UK universities, has suggested that Scottish universities produced more spin-out enterprises than any other region in the UK in the past decade. Spin-outs are created by universities seeking to harness the commercial potential of the intellectual property produced through their research and development functions.  These enterprises aim to make such ‘products’ marketable: applying business principles to secure funding, register patents and license the use of innovations.

Recent squeezes on funding for education may see even more spin-outs appearing as universities attempt to maximise returns on their intellectual property.  The climate is favourable for such set-ups: there are gaps in the market following the turbulence experienced by traditional companies.  There is also an ever expanding pool of talented personnel available as high calibre graduates struggle to find work in the mainstream job market and experienced employees in industry suffer from lay-offs. 

With success stories such as Dundee’s Cypex, Tayside Flow Technologies and Ceimig, as well as PhotoSynergy of St. Andrews, it is clear that spin-outs have the potential to play an important role in boosting Scotland’s economic recovery.

The corporate and commercial team at Blackadders is experienced in dealing with spin-outs and is well equipped to advise in this specialist area.

Stewart Dunbar

Trainee Solicitor

Internet Keywords and Inter-flora versus Marks and Spencer plc

The Advocate General recently delivered an Opinion on a question put to the European Court of Justice involving alleged search engine keyword ‘coat-tailing’ by Marks & Spencer.  In that case, M&S sponsored the keyword ‘interflora’ on the Google AdWords system, so that users who searched for ‘interflora’ would see a link to M&S’ own flower delivery service in the sponsored links section.  Naturally, the owners of Interflora were not best pleased with this and sought to have M&S’ advert taken down as it infringed on their trademark.

The Advocate General recognised that a distinctive trademark (like ‘Interflora’ or ‘Kodak’) could be hijacked by competitors trying to gain an unfair advantage.  This is distinct from coat-tailing that is coincidental: a fruit & veg wholesaler who sponsors the word ‘apple’ it is unlikely to be unfairly taking advantage of the popular iPod manufacturer. However there was little doubt here that M&S was seeking to take advantage of Interflora’s popularity in sponsoring the keyword ‘interflora’: the Opinion recognised that there was a danger that consumers presented with a link to M&S Flowers after searching for ‘interflora’ could believe that M&S Flowers was a part of Interflora’s business network.

However the Advocate General stopped short of encouraging prohibiting all such ads. There are potential grey areas: even in the present case, some Google users may search for ‘interflora’ simply as a way to find a flower delivery service, rather than as a way of finding Interflora’s own website.  Further, in cases concerning trademarks less distinctive than ‘Interflora’, advertisers may simply argue that they are merely trying to present themselves as commercial alternatives and that customers generally have the ability to tell the difference between competing products.  The tension between the protection for trademark rights and the need for undistorted competition will clearly be an issue in such ‘grey area’ cases, which will need to be resolved on a case by case basis.

Interflora will find the Opinion very encouraging, and other holders of distinctive trademarks will take heart from the Court’s readiness to protect their rights in cases where competitors seek to exploit those trademarks in a bid to siphon away confused customers. The ECJ’s ruling on the case may clarify how similar matters will be treated by the courts.

The new Advertising Standards Agency rules

On 1 March this year, the ASA introduced new guidelines regulating the use of digital advertising. Since then, online advertising is now monitored in the same way as TV, radio and printed ads.

Online advertisers must now ensure that any “communication for a good, service, opportunity or gift that primarily sets out to sell something” must be “legal, honest, decent and truthful”. So, claims about the prowess of your business must be true, special offers must be valid and product descriptions must be accurate. This applies equally whether advertising on your own website, on a paid-for location (such as Google AdWords) or non paid-for locations which are under your control (like Facebook or Twitter).

Businesses should now review their digital marketing material as a matter of priority.  The ASA can force the removal of offending adverts, name and shame offenders and, interestingly, put up ‘counter-adverts’ highlighting an offender’s non-compliance.  In an age where record numbers of consumers go online for an ever increasing range of goods and services, businesses can ill-afford to have their online presence damaged by inviting such sanctions upon themselves.

Stewart Dunbar

Trainee Solicitor