Maximising growth plans for an IT start up

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One of our IT clients, Converging Data, was recently acquired. Having worked with the business since 2016, it’s been exciting helping prepare for this landmark stage. 

We first got involved with the company when it was part of an accelerator (seed funding) programme led by Traction Central (under the name "Dotforge"). This programme was also supported by EMIS Group plc, Creative England Limited and Yorkshire and Humber Partners Academic Health Science Network Limited and provided some initial investment by way of loan notes to a handful of different companies, all of which were involved in the health technology sector. 

As the business has grown over subsequent years, we have assisted the company with some of its day to day agreements, and early in 2019, an arrangement which led to the company's Australian sister company being sold to Deloitte.  

Over the summer of 2019 we were delighted to learn about an offer co-founder Neil Murphy had received from Hippo Digital. This felt like a great fit for Converging Data, given that both it and Hippo Digital were Leeds-based businesses specialising in data-analytics working with organisations such as NHS Digital, William Hill, Barclays and Vodafone. Hippo Digital, who has more than 80 consultants, also supports the NHS and Department for Education and Department for Work and Pensions with incorporating digital services into their day to day operations.

The acquisition of Converging Data brings additional clients to the Hippo portfolio as well as expertise in analytics, internet of things (IoT) and cyber security.

Here’s what Neil kindly said about working with us: “We got to know Amy and the 3volution team from early in 2016, and they have been a great help throughout the growth of the business.  Clearly very smart people who really know their stuff, Amy has supported me through two transactions in the last 18 months, one involving UK and Australian companies that required some very niche expertise. 

“I always felt like I was in good hands, and generally enjoyed the meetings, when did anyone ever say that about a bunch of Lawyers!”

Converging Data is just one of a number of companies we have worked with since start up and which we have since assisted either with their subsequent sales or the receipt of considerable investment. 

It's really satisfying working with these clients from their early days through to completion of a successful exit. We are seeing more and more of our technology businesses going through this process which is testament to the quality of their work but also illustrates just how vibrant the digital sector is here in Leeds.

Ends

Let It Go

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And finally, as we edge ever closer to the frozen wilderness of life out of the EU, we look at the impact of Brexit on litigation.

 

England has built up a reputation for being the applicable law and jurisdiction of choice for international commercial contracts. Will Brexit change this?

 

In a recent survey carried out by Thomson Reuters 64% of respondents stated that they are already reviewing the dispute resolution clauses in their international contracts. This is, perhaps, to be expected – Brexit is as good a time as any to take stock of your contracts. On the face of things, however, this figure is worryingly high (for the Courts and those of us involved in the English litigation industry). This said, whilst 64% of respondents conceded that the clauses were under review, 54% of respondents stated that they are not considering taking a different approach to choice of law or jurisdiction clauses – so whilst reviews of such clauses are sensible, it seems that at least half of those surveyed have decided to leave their disputes in the hands of the English and Welsh courts.

   

What can those continuing to use the English and Welsh courts expect to change? One obvious issue that will need to be addressed is service of proceedings. Currently it is much simpler to serve a claim on an EU-based Defendant than one based in a non-EU country. The rules for EU countries are clear, and there are separate rules for non-EU countries. This is likely to change before too long. The rules around service of documents on EU-based Defendants may well start to resemble the rules around service of documents outside the EU. This will no doubt lead to more complex procedures and inevitably lengthier periods for service. At the moment, once a claim has been issued and sent to the receiving agent in an EU country, that agent must take no longer than one month to serve the claim. By contrast, we are currently involved in proceeding issued against an Indian-based Defendant and the current estimated time for service of that claim in India is one year.

  

Similarly, enforcement of judgments between EU member states is relatively simple as compared to enforcement in non-member states. Brexit will no doubt complicate this. Meanwhile arbitration, litigation’s more flexible alternative, is already readily enforceable in a number of countries. In Thomson Reuters’ above-detailed survey, 29% of respondents indicated that they are considering selecting arbitration instead of litigation. If enforcement of English judgments becomes a difficult and lengthy process for all countries outside England and Wales, then it is likely that this figure will rise.

  

For those not pursuing international disputes in the English courts Brexit could be beneficial.. Whilst a world-renowned legal system may be something to take pride in, there is no doubt that the Courts have been under intense time and resource pressure. The Civil Justice Statistics Quarterly in 2019 provided a mean time of 58.5 weeks from issue to trial for a fast or multi track trial. Alleviating this pressure even slightly could well result in better and often quicker access to justice as the Court's resources become less stretched. 

 

Happy Brexit Day Everyone!

Auf Wiedersehen, Pet

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Having looked at Trade Marks, we now turn our attention to  some of the potential implications of Brexit for the buyers and sellers of businesses.

Due diligence

 Due diligence is the process that a potential buyer conducts to assess the merits of an acquisition. As part of this exercise a potential buyer may want to carry out specific due diligence concerning the exposure of the target to Brexit risks both short and longer term. 

 There may be certain targets with more exposure such as those reliant on personnel or supplies of goods from the EU. Where risks are identified, the parties may need to mitigate such risks through the drafting of the terms in the share purchase agreement.    

 Potential for termination of material contracts 

 The buyer should review the terms of the contracts entered into by the target, to ensure that Brexit will not: 

-        Trigger a ‘material adverse change’ clause, allowing one or both parties to terminate a contract. 

-        Trigger a ‘force majeure’ clause, excusing a party from its contractual obligations on the occurrence of a disruptive event that is outside of a party’s control. 

-        Constitute a frustrating event, which is generally an event which could not have been foreseen by the parties at the time of entering the contract. 

If the buyer is aware of a material contract that could be terminated as a result of Brexit it may be worth discussing the issue with the seller and potentially speaking to the relevant third party to obtain some confirmation that they will not exercise their right to terminate the contract.  

Immigration 

If the target relies substantially on employees who are EU nationals, the buyer will need to examine the implications of changes to immigration on the workforce of such target. The buyer could consider drafting a pre-completion condition in the share purchase agreement that the seller must ensure that all its staff have the required immigration status to continue to work following Brexit. 

Warranty coverage 

Both parties should consider the potential impact of Brexit when drafting the warranties and completing the disclosure process to ensure that the drafting is flexible enough to encompass the effects of Brexit. For example, where a warranty refers to data protection compliance, the definition of data protection laws within the share purchase agreement should encompass any Brexit-related changes to data protection laws.

This isn’t a definitive list. There’s no one size fits all and nobody can say  with any confidence that they know what the implications of Brexit will be, so the key message for anyone buying or selling a business is that there is going to be an element of risk for some time. Few, if any, businesses, will be immune from the impact of Brexit.

The Long Goodbye

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The UK officially leaves the EU today (as if you could fail to have noticed this...).  So what happens now? While we don't claim to have a crystal ball, we thought we'd have a look at some consequences of Brexit on some of the work we cover. Unsurprisingly, there was too much to fit in a single blog, so this is the first of three and looks at the impact of Brexit on Trade Marks.

Following our exit tonight we will enter a transition period currently anticipated to end on the 31 December 2020 ("exit day").  During this transition period the UK will continue to be treated as a member state of the EU and any European trade mark and design registrations you own will continue to be valid within the UK.  However, after exit day you will only be able to obtain registered UK trade mark and design protection by filing a national application in the UK.  European registrations (whether for trade marks or designs) will no longer provide protection within the UK.  

But there’s no need to panic - the UK Intellectual Property Office ("IPO") has confirmed that it will automatically generate an equivalent right in the UK for every registered European right (trade mark and design) and no action is required by the owner or registered agent.  If the current withdrawal agreement is ratified by the European Parliament, this will happen at the end of the transition period (i.e., December 2020). 

As per the official IPO guidance each of these UK "equivalent" rights will:

  • be recorded on the UK trade mark register
  • have the same legal status as if you had applied for and registered it under UK law
  • keep the original EUTM filing date
  • keep the original priority or UK seniority dates
  • be a fully independent UK trade mark that can be challenged, assigned, licensed or renewed separately from the original EUTM

There will be no cost involved to you and the IPO hopes to keep administration to a minimum (hardly surprising given the amount of work likely to be involved in generating all these equivalent rights).  It is important to note that for these equivalent rights you will not receive a UK registration certificate, but you will be able to access  full details about the trade mark on the GOV.UK website.

WHEN MIGHT ACTION BE REQUIRED?

If your application is still pending on exit, the IPO is allowing new applications based on any pending European applications to be filed and retain any valid priority or seniority claims for a period of 9 months after exit.  These applications must relate to the same trade mark as the pending European application and seek protection for the same goods and services or if not identical, goods and services which are contained within the pending European application.  The application will not be considered an equivalent if it looks to expand the goods and services or amend the form of the trade mark in any way. There is no penalty for filing an equivalent application and the usual official IPO filing fees will apply.

Further information and reading on the effects of Brexit on the trade mark system in the UK can be found at https://www.gov.uk/guidance/changes-to-trade-mark-law-after-brexit and our IP team is always here to help if you need assistance or have additional questions. 

 

The Secret Life of Collective/Certification Marks

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Trade marks are everywhere. When we think of trade marks, we think of logos, signs and symbols which indicate a specific brand (i.e., the Nike swoosh or bitten-into Apple logo), which in turn, confirm the origin of a particular product or service. What many do not know, is that within this umbrella of trade marks, there exists two specific types of trade mark called “Collective trade marks” and “Certification trade marks”.

Collective trade marks 

A collective trade mark is used as an indication to the public that goods or services originate from a member of a particular association. It is a sign of membership. A collective trade mark application can only be filed by an incorporated company or partnership that is also an association. To qualify as an association there must be a form of membership, i.e. membership fees, issuing of membership cards, conditions of membership.  Organisations which would fall under the collective trade mark umbrella include Animal Aid, the Confederation of British Industry and Amnesty International.

It is important to note that when applying for a collective trade mark, the IPO requires regulations to be filed within 3 months of the application filing date. These regulations must be clear and accessible so that anyone intending to make use of the mark can easily access the information and understand the requirements that must be met before using the mark. The regulations must include information such as: who is authorised to use the mark; if use is allowed by all members or limited to sub-categories; the conditions of membership; the conditions on members for use of the mark and any sanctions that exist for misuse of the mark.

Certification trade marks 

A certification trade mark application can be filed by any incorporated company or partnership but, unlike a collective trade mark, the applicant does not have to be an association with members.  Importantly, the applicant itself cannot use the trade mark, but rather, it authorises use of the mark by others for the purpose of guaranteeing to the public that the goods or services possess certain characteristics.  Examples of certification marks include the "Champagne"mark used to indicate goods that originate from the Champagne region in France or the Fairtrade mark which appears on products as a guarantee that it has been produced according to Fairtrade political standards.

Again, when applying for a certification trade mark, the IPO does require regulations to be filed within 3 months of the application filing date. Similarly, the regulations must be clear and accessible and should include information such as: who can use the mark; the specific characteristic that is being certified; whether the mark can be used by anyone who is able to demonstrate the relevant characteristic being certified; the tests to prove the presence of the characteristic being certified; the fees that can be charged for use of the mark and the procedures in place for supervision of the mark.

These lesser known types of trade marks can add value and if used correctly will increase the reputation of goods/services issued under the marks. However, the level of preparation required prior to filing such a trade mark application should not be underestimated and includes a more burdensome process than filing a standard trade mark.  If you believe your association may require a collective mark, or your business may be entitled to use a certification mark, one of our IP lawyers will be happy to discuss this with you!

 

A Star Is Born

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Sara Ludlam, a partner in our IP and Commercial team, was invited to be interviewed live on Sky News on Wednesday 15 January 2020 by Colin Brazier because of her expertise in the laws of copyright, privacy and data protection. 

Colin focuses on live coverage of developing news as the day gets underway.  The news that required legal expertise was that of the claims by the Duchess of Sussex in the English High Court against the Mail on Sunday (‘Mail’) that when they published a letter she had written to her father, they had:

(i)              infringed her copyright

(ii)            breached her right to privacy (further to Article 8 of the EU Convention on Human Rights the paper must respect her private and family life, home and correspondence)

(iii)           breached the General Data Protection Regulations.

While this claim was issued in 2019 the latest developments in the news this week related to the potential appearance by the Duchess of Sussex’s father to give evidence.  Although Sara thought this would therefore be one of the issues in discussion in fact she ended up speaking about:

  • the fact that this case was not unique as Prince Charles brought a similar claim against the Mail in 1997 when they published extracts of his personal diaries and was successful
  • the chances of the case settling (high based on the fact that the Duchess has a good chance of winning following case law, including Prince Charles’ successful claim against the Mail in 1997 and the case on privacy by Naomi Campbell which was eventually found in her favour and the GDPR issue as below)
  • the fact that the inclusion of a claim for breach of GDPR meant if the Mail loses they will not just be paying costs and damages but also a fine of up to 20 million euros or 4% of their global turnover.  (Sara can get the GDPR into just about any conversation!) (The Duchess has said that any award for damages will be given to charity)
  • the fact that the person who writes a letter owns the copyright in it (and not the person who receives it)

The full interview is available above.