In-house News Bulletin - November

Time for another monthly in-house legal update brought to you by Radius Law and LexisNexis.

We scour the news and select the most relevant news for in-house lawyers and bring this together in a monthly bulletin. What’s more, we highlight the practical implications of the news to your business and what actions you need to consider taking as a result of the changing legislation, regulation or case. You can also download this bulletin here.

Employment: the big story of the month undoubtedly is the holiday pay saga. The news broke on the 4th November that the Employment Appeals Tribunal (EAT) had answered the question of what constitutes normal remuneration for holiday pay purposes.

The key issue being whether holiday pay should include overtime that an employee normally earns or whether the employee is only entitled to basic pay during holiday periods. The EAT held that employers must pay normal remuneration for holidays and that includes the regular overtime regardless of whether it is guaranteed or not, but this only applies to the first 4 weeks of holiday.

With regard to claims for holidays already taken, aside from very recent holidays we believe that’s unlikely although the door is not completely shut. Doubtless there will be a test case.

Naturally with any such significant shift in law the first task will be to consider the financial impact. Once that’s done we recommend that employers review their current contracts and policies and consider any knock-on effects. Perhaps the most obvious knock-on effect will be the impact on pensions.

Finally and just to flag, we may not have heard the end of this story as the door has been left open for an appeal. Read more details: Sun sets on holiday pay dispute.

Intellectual Property

Website blocking orders: the Richemont Group has obtained a website blocking order against five internet Service Providers. Richemont who is the owner of luxury brands including Cartier and Montblanc obtained the order to obligate several internet service providers to block access to websites selling counterfeit goods. It’s an important case as until now there has been confusion about whether this right exists for trademark holders as the relevant legislation only makes specific reference to copyright.

Given the inherent difficulties of pursuing evasive counterfeiters, this case has opened up a new and arguably more effective weapon to tackle trademark infringements. Read further analysis: Are injunctions a suitable alternative to statutory remedies?

Marks and Spencer’s win again on Google AdWords debate: if you are an avid follower of intellectual property news you’ll probably be bored with reading about the Marks and Spencer and Interflora AdWords spat.  It has been running since 2008 and has been to the Court of Appeal on three occasions and each time Marks & Spencer has been successful.

To recap the case concerns Marks & Spencer’s purchase of the Google Adword Interflora.  When a user types in Interflora, Marks & Spencer’s advert appears in the Google sponsored links. Interflora is a trademark owned by Interflora, the network of businesses that deliver flowers.

Marks & Spencer’s use of the trademark is invisible in that the word Interflora has never appeared in any of the adverts.

As Marks & Spencer is not part of Interflora’s network Interflora has challenged this use of its trademark claiming that Marks & Spencer is free riding on its brand.

This most recent Court of Appeal appearance in November is probably the most important as a retrial has been ordered. So where does the law stand today on AdWords?  Although not conclusive there have been a string of cases that suggest the use of another party’s trade mark as a keyword is permitted provided the advert does not mislead the user into believing that the goods and services are those of the trade mark owner. Read the case analysis

Data protection

Wearable technology: A recent collaboration between Intel and fashion designers to create a smart bracelet seems to have sparked discussions about the legal issues of wearable technology. Wearable technology includes things like smart watches, fitness trackers and satellite navigation units. Such devices collect substantial data about the user and often automatically upload the information to the cloud.  One of the biggest threats to this technology is privacy issues and companies embarking on such initiatives must get all the relevant issues such as who is controlling the data and what has been made clear to the user sorted at the outset. Technology of this nature does not create new legal issues but it does show how they create added complexity. Read further analysis

A criminal conviction for a director that illegally accessed a customer database: a company director has been fined £500 and given a criminal conviction for illegally accessing one of Everything Everywhere’s customer databases.  Matthew Devlin a director of a telephone services company impersonated the company’s security team in order to gain access to the customer database.  He then used the data to target customers with services offered by his business.

If you are concerned about data protection compliance in your organisation, see our risk management guide: In-house lawyers: Risk management: data protection.

Organisations must stop SQL injections: the ICO has warned that organisations must take actions to stop SQL injections. Like us you may have no idea what that is, but we can explain the impact.

The warning issued by the ICO in November follows a hotel booking website operated by Worldview Ltd that had its website hacked and full payment card details of almost 4,000 customers stolen.

The website was encrypted but the decryption key was stored with the data making it vulnerable from attack.

Aside from reputational and compensation claims from customers, the ICO is now issuing significant fines. In this case the ICO stated it would have fined Worldview Ltd £75,000 but was required to consider the impact the penalty would have on the company’s financial situation.  Instead the company was fined £7,500.

If, like most businesses, your website is hosted by a third party it’s imperative that the hosting company is under a contractual obligation to meet the latest security standards. That said, our advice first and foremost is to undertake robust due diligence on your business partners.  In cases where your website hosting company will store data ensuring it is ISO27002 certified is a good first step.  There is also a standard specifically for payment card data called Payment Card Industry Data Security Standard.

Further information on data security for SMEs has been developed by the Governments Information Assurance and Cyber Security Programme in the form of an e-training course. See: http://www.nationalarchives.gov.uk/sme/

ICO working with Which? task force on nuisance calls: in our bulletin last month you may recall that we reported the case by OfCom against Ageas Retail for making abandoned calls. I am sure we have all experienced such calls.  The phone rings but when you pick up the phone there is no one there.  This is usually the result of automated calling systems designed to keep all of the call handlers busy, but sometimes they are too busy to speak with you.

The ICO has now announced that it is part of a task force with consumer group Which? to look at new ways to tackle the problem of nuisance calls and spam texts.

The task force is currently considering how to improve the ways companies obtain and record consent, and how to reduce the unfair and unlawful trade in personal data for marketing purposes. Instead of suggesting changes to the law, the task forces’ recommendations will focus on practical steps which businesses should be taking to improve their marketing practices. As part of this work, last month the task force held a session in parliament with MPs, business and consumer representatives. A report will be published by the government on the 8 December with these recommendations. We’ll be keeping our eye on the developments and will keep you updated.

Read the recent ICO Press Release: ICO continues nuisance calls clampdown as over £500,000 issued in fines

Advertising

Price wars: Sainsbury and Tesco’s price wars recently had the bar raised with a judicial review application. Sainsbury challenged Tesco’s claim that ‘you won’t lose out on big brands, own-label or fresh food’ stating it was misleading as important attributes such as ethics and provenance had not been taken into account. The ASA however held that the same needs or purpose test under the CAP code had been met as food was interchangeable and intended for the same purpose. Sainsbury’s took the matter to an independent review but was rejected, albeit sympathetically.  The Independent Reviewer stated: ‘Sainsbury’s can be right, that non-price elements of products are material to many customers, but that does not mean that the [ASA] is wrong to conclude that they were not material or essential or indeed important to this particular comparison’

Undeterred Sainbury’s made a judicial review application to the High Court but this was also rejected. Read further analysis on the implications the decision could have for advertisers and their legal advisers

Commercial

Data Resource Ltd v Data Services Ltd: the recent case Data Resource Ltd v Data Services Ltd highlights the need for detailed clauses when reserving a right to inspect the other party’s compliance with a contract.

In this case the Claimant had licensed the use of a database to the Defendant. The Claimant reserved a right in the contract to enter the Defendant’s premises to check that it was complying with the terms of the licences. The Court held however that the licence was defective as it did not detail its rights once it had gained access to the premises.  It had not, for example, said whether it had unlimited inspection rights and whether it could look through every file.  Whilst the courts are often willing to fill the gaps this case demonstrates they are not willing to re-write the contracts to find the logical position.

Read further analysis which considers what powers a party should seek in a contract for monitoring the other party’s compliance

Polypearl Ltd v E.On Energy Solutions: turning to another case, Polypearl Ltd v E.On Energy Solutions, that emphasises the need for clear drafting, we’ll start with a quiz.  Imagine you are a supplier and you want to exclude liability for loss of profits and the contract includes the following clause: ‘Neither party will be liable to the other for any indirect or consequential loss, (both of which include, without limitation…. loss of profit, loss of business…) howsoever caused …’

Does that cover it?

My guess is that you will all spot the problem given some time to study it, but perhaps also share my view that it would be easy with a quick read, believe this clause does what you require. This certainly seems to have been E.On’s conclusion when the contract was negotiated.

Given that the explanatory wording in the brackets followed the words ‘indirect or consequential loss’ the court held that it did not exclude direct losses of profits. A bitter blow for E.On as the loss of profit claims fell squarely in the direct losses camp. Read further analysis

Dispute Resolution

Claiming in-house lawyers costs: a recent Employment Appeals Tribunal Case (Ladak v DRC Locums Ltd) confirmed that an in-house lawyer’s costs can be recovered for litigation in a tribunal.  In this case Ladak had argued the employment tribunal rules did not permit such recovery but this received a sharp rebuff by His Honour Judge Richardson who stated ‘to my mind it is plain that the words [in the rules] fees, charges, disbursements and expenses are not to be read restrictively’.

Turning to the question of what costs can the in-house lawyer claim, the civil courts have usually taken a pragmatic approach and looked at the cost of employing the lawyer. Inevitably however, in the event that a company wants to recover such costs it will have to show detailed records of the time that the lawyer spent on the matter and only legal work, not administrative will be claimable.

Competition

The CMA has confirmed it will open an in-depth investigation in markets for SME retail banking and supply of personal accounts. The CMA has highlighted a number of concerns, including:

  • low levels of customers switching banks;
  • complexity of making comparisons between banks offerings;
  • the ability or lack of ability for smaller and new providers to develop their businesses;
  • very little movement in the market shares of the four largest banks.

The investigation is expected to last for 18 months. The CMA has wide discretion to the remedies that it can implement.

Under section 131 of the Enterprise Act 2002, the CMA may make a market investigation reference to its Chair for the constitution of a Market Reference Group where it has reasonable grounds for suspecting that any feature, or combination of features, of a market in the UK for goods or services, prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the UK or a part of the UK. Read further analysis: SME banking sector—is it time for change?

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