Tmt conference 2013 presentation slide pack

Eversheds TMT Conference 2013

Innovative thinking for TMT

professionals

Friday 5 July 2013

Welcome & introduction

Charlotte Walker- Osborn, Head of TMT and Technology, Eversheds LLP


Contracting update

James Walsh, Head of Telecoms

Charlotte Walker-Osborn, Head of TMT and Technology, Eversheds LLP

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

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

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.

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.

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

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

Contracts: a few updates on getting the drafting right / general update on key areas

Indemnities

Do they solve or create problems?

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 ...”

Vote now!

Did the indemnity entitle Santander to recover its lost interest?

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

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.”

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?

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’

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

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

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

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

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

Penalties

Is it still all about ‘reasonable

pre-estimate’ of loss?

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

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

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…”

Vote now!

Did the reduction in consideration receivable by Mr Makdessi constitute a penalty?

The Court’s view

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?”

Practical Tips – avoiding penalties

• Always file note LD/termination payment discussions to record commercial justification

• Include drafting to explain commercial justification


To BYOD or not to BYOD?

Jonathan Townend, Head of Technology Consulting,

Victoria Mann, Associate,

Simon Cloke, Senior Associate,

Eversheds LLP

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Devices are everywhere

CIO’s are out of excuses...

...you can’t stop the devices coming in

So you need a strategy

Strategic considerations

• Infrastructure for BYOD – Simon Cloke

• Data Protection issues – Victoria Mann

• Conclusions & recommendations

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.

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

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.

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

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

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

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?

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!

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

• 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)

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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

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


Case law update

James Hyde, Principal Associate,

Eversheds LLP

Transport for G. Manchester v Thales

[2012] EWHC 3717 (TCC)

[2013] EWHC 149 (TCC)


• 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


• 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


• 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

Statpro Group v Depfa Bank

[2013] EWHC 969 (QB)

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

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

SAS Institute v World Programming

[2013] EWHC 69 (Ch)

• 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

• 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


• 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


EMI and others v BSkyB and others

[2013] EWHC 379 (Ch)

• 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


• (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


PR Consultants Association v Newspaper Licensing Agency and others

[2013] UKSC 18

• 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

• 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


• 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.


Notification to TalkTalk of a penalty under s130 Communications Act 2003 Issued: 24 June 2013

• 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

• 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

• 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

• 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

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Environmental issues affecting

the TMT sector

Jane Southworth, Legal Director

Eversheds LLP

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

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


• 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


• 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


• 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


• New requirements

- Monitoring your shipment WEEE or EEE?

- If you ship EEE abroad for reuse check your procedures.

Illegal Shipments


• 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


• 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

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


• “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


• 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


• 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


• 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


• 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

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!

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

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

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

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

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”)

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

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

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

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

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

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

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

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

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

Looking Ahead

• More producer responsibility

• More legislation governing chemical safety – will affect those selling products

Jane Southworth

Any Questions?

www.eversheds.com



The M&A blueprint

From inception to integration

Steve Nash, Partner

Eversheds LLP

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...

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?

Research methodology

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

Executive summary

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

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

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

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+

Percen

tag

e o

f resp

on

den

ts

Number of M&A deals you have worked on in the past 5 years

"YES"

"NO"

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%

Integration x

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:

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.

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


“I regard integration as ‘acquisition by a thousand cuts’.” Group General Counsel, Materials Company, UK

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.”

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


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?

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

The role of external lawyers

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"


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?

• 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”

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?

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?

Successes, failures and

lessons learned

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%


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.

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

TMT Benchmarking

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

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

Telecoms

Software

Hardware

www.eversheds.com Eversheds LLP 2013© Eversheds is a limited liability partnership.


Valuing intellectual property

art of science

Klevin King, Managing Director, Valuation Consulting

Simon Crossley, Partner, Eversheds

www..com

Kelvin King, Managing Director

10 Greycoat Place, Victoria, London, SW1P 1SB

Tel: +44 (0)20 7960 6060 Fax: +44 (0)20 7960 6100

E-mail: [email protected]

www.valuationconsultingco.com

VALUATION CONSULTING CO LTD

mailto:[email protected]

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

Accounting Standards

Corporate Governance

Fairness Opinions

Pension Deficits

INTANGIBLES – THE CURRENT BIG

ISSUES

THE LAWS OF PHYSICS

AND VALUATION

SUGGEST THAT THIS IS

NOT POSSIBLE

STARTING AT THE TOP AND TRYING TO

BUILD DOWN

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

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

Four Calculations or Steps – 'can Kelvin count'

1. Intrinsic value of Vendor

2. Intrinsic value of Purchaser

PLUS



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

DEFINITION

&

IDENTIFICATION

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

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

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

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…

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

Tax Valuation and Open Market Value

Fair Value

Fair Market Value

Commercial Value

Investment Value

Owner Value

CONCEPTS OF VALUATION?

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

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


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


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

HOW MUCH?

(CASHFLOWS)

Gross Profit Differential Methods – Premium Prices/Premium Profits

Excess Profits Method

Relief from Royalty Method

TOOLS

HOW LONG FOR?

(TIME PERIODS)

Physical Life

Functional Life

Technological Life

Economic Life

Legal Life

USEFUL LIFE

AT WHAT RISK?

(COST OF CAPITAL)

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

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

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

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

Probability trees = snakes and ladders, develops the Monte Carlo analysis

Develops terminations (snakes) if a route indentifies problems to suggest

failure

REAL OPTIONS

Four Calculations or Steps – 'can Kelvin count'



PLUS



The capital values calculated are an essential step to calculate royalty rate or

valuation - discuss

THE LICENSEE/PURCHASER &

LICENSOR/VENDOR

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

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.

www.eversheds.com


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

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

• Jordan

• Egypt

• UAE

• Bahrain*

• Oman*

• Algeria

• Qatar

• KSA

Data Protection

Group (1): No Specific Legislation

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

• 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

• 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

• Morocco

• Tunisia

• Dubai International Financial Centre (“DIFC”)

• Qatar Financial Centre (“QFC”)

Data Protection

Group (2): Specific Legislation Available

• 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

• 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

• 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

• 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

• Jordan (public consultation phase)

• Qatar (ready since mid 2011)

Data Protection

Group (3): Data Protection Draft Law

TMT in the Middle East

Online Media Regulation and Content Liability

• Main Objective

• Scope of Application

• Criteria

• Consequences of application

• Practical Challenges

• What’s next?

Press and Publication Law

Jordan

• “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

• “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 ...”.


Scope of Application

• Broad scope

• Censorship concerns

• Not automatic

• Social Media concerns


Criteria

• Registration& licensing requirements

• Limitations:

– Funding

– ownership

• User Generated Content (“UGC”) related liability:

– truthfulness

– Relevancy

– criminal liability


Consequences of Application (i.e. Press

Publication!)

• 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.


Practical Challenges

• 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?


What’s Next?

TMT in the Middle East

Censorship

• Registration and licensing requirements.

• liability of editor in chief, the publication and the author

• Broad criminalizing legal provisions.

– Politics

– Pornography

Censorship

Media

• 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

• 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

• 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

• Sensor:

– politically sensitive content.

– Religiously offending content.

– sexual/ salacious content.

Censorship

Current Tendency

THANK YOU!

www.eversheds.com



Pricing People Issues

Richard Sheldon, Principal Associate

Eversheds LLP

• 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

Service provision changes

X Ltd

Recontracting

Y Ltd

Z Ltd

Client

Sub-contracting

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

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


• Practical steps to challenge:

• job descriptions

• employment contracts

• time breakdowns

• rotas

• shift/team names

Scenario 1


• 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

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


• 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


• 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

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


• 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


• Walk away or make them redundant?

• Potential costs

• termination costs - early retirement pension?

• unfair dismissal?

• failure to inform and consult?

Scenario 3

Any questions?

www.eversheds.com



Litigation post-Jackson

Mark Rhys-Jones, Partner, Litigation and Dispute Management

Eversheds LLP

Background and introduction


• 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


• 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?

Costs Management


• 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


• 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

Case Management


• 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

Disclosure


• 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



• 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’


• 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?



• 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

Part 36


• 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


• 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

Funding


• 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


• 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

Re-cap


• 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

Questions?

www.eversheds.com



Cloud computing

Charlotte Walker-Osborn, Head of TMT Sector

Richard Little, Partner

Penelope Jarvis, Associate

Eversheds LLP

Canvassing the cloud

Study results

http://www.intranet.eversheds/Groups/Sectors/tmt/Documents/Canvassing the Cloud - study results.pdf


Copyright in the Digital World

Neil Mohring, Partner,

Eversheds LLP


• Focus on creative industries

• Need for change

• Hargreaves Review

• Hooper Review

• Proposals for change

Introduction


• Opportunities for growth

• Track record for innovation

• Importance of IP

• Need for change

Creative Industries


• Methodology

• Recommendations

• Copyright Licensing

• Exceptions

• Enforcement

• SME Access

Hargreaves Review


• Reviewed IP licensing

• Not fit for purpose

• Complexity of process / organisations

• Repertoire imbalance

• Identification of owners

• High volume, low value transactions

Hooper Review


• Enterprise and Regulatory Reform Act

• Copyright Exceptions – First and Second batches

• Status of other proposals

Proposals for Reform


• Orphan Works

• Extended Collective Licensing

Enterprise and Regulatory Reform Act


• 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


• Data Analysis

• Education

• Research, libraries and archives

Copyright Reform – Part 2


• Small claims track at Patents County Court

• Digital Copyright Exchange

• SMEs

• Mediation Service

Other proposals

• Complexity of copyright licensing

• Multi-jurisdictional enforcement


Are the current proposals sufficient?


Questions?

www.eversheds.com



Incentivising creativity TMT tax breaks explained

Ben Jones, Principal Associate,

Eversheds LLP

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

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

R&D tax relief

• Tax benefit

• SMEs

• 225% enhanced tax relief

• 11% (of enhanced tax relief) repayable tax credit

• Large companies

• 130% enhanced tax relief

• 10% (of R&D expenditure) “above the line” tax credit

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

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

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


• 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



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

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

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

Patent Box

23%

10%

23%

23%

Non-patented products

Patented products

Patent Box profits

Marketing return

Routine return

Non-qualifying

income

Patent Box


No Patent Box relief CS enhanced relief

Technology sales/license income £10m £10m

Costs/expenditure (£6m) (£6m)

Profit £4m £4m

Patent Box profit (less specified deductions) - £3m

Patent Box deduction - (£1.5m)

Final taxable profit - 2.5m

Tax (@ 20%) £0.8m £0.5m

Benefit £0.3m

Other jurisdictions

• Other jurisdictions also incentivise TMT business

• Lower headline tax rates also available

• IP easily transferable

• Anti-avoidance rules / reputation issues

Simple IP holding structure

Tech Media (High tax jurisdiction)

IP Holdco (Low tax jurisdiction)

Tech Media

Opco

Dividend

Royalties

License

www.eversheds.com


Tmt conference 2013 presentation slide pack

Technology

Transcript of Tmt conference 2013 presentation slide pack