Legal update April 2019

April has brought important changes in the areas of Corporate and Commercial, Intellectual Property, IT, Employment Law, and Brexit. We set out what you need to know, below.

Corporate and Commercial

There is an implied duty of good faith in relational contracts — Early this month, the High Court held that contracts between the Post Office and sub-postmasters were ‘relational contracts’ and as such there was an obligation of good faith in those contracts so that neither party could exercise express contractual rights which would be seen as commercially unacceptable by the ordinary reasonable and honest person. Particularly, the judge found in this case that some of the provisions of the Post Office’s standard terms were unusual and onerous, and so should not rightly be incorporated into the contract in this situation unless first brought to the attention of the sub-postmaster prior to the parties entering into the contract. Therefore, although correctly incorporated, the onerous terms failed the reasonableness test and there is a duty of good faith in these and similar circumstances.

Intellectual Property

The IP Enterprise Court dismissed a claim against a record distributor for secondary copyright infringement — It was found that by selling vinyl and CD copies of a sound recording of an album which the claimant claimed copyright ownership, the defendant record company was liable for primary infringement. However, the record distributor was found not to be infringing secondary copyright by making vinyl copies of the album. The distributor did not know nor should have known that the copies sold by the distributor were infringing and amongst other factors the Managing Director acted promptly and appropriately as someone who genuinely believed he was selling products which were not infringing, and so he was not held liable for secondary infringement.

IPO Guidance on bad faith trade mark applications — An appeal against a decision that an application to register a trade mark had been filed in bad faith and should be refused, has been rejected by the High Court. Guidance was provided in the judgement on how to deal with trade mark applications which are part of a series of abusive registrations:

• Where an application was made for a well-known trade mark and the applicant had no apparent connection, an explanation and justification should be provided.
• Other instances of similar applications by the applicant might be considered as similar fact evidence and cast doubt on the explanation and justification provided.
• Distinction must be made between unsubstantiated allegations and established facts directly relevant to the case.
• Current case law and the Trade Marks Act 1994 (TMA 1994) are a useful basis but did not have to be used in every case.
• The registrar could strike out proceedings brought for an ulterior and improper purpose as an abuse of process.
• Where there was a prima facie case of bad faith and the applicant had not filed evidence in answer, it might well be appropriate to exercise the power to strike out, but this power had to be exercised with caution.

There was also further protection, as section 32(3) of the Trade Marks Act 1994 required an application to state that the mark applied for was being used by the applicant in relation to the goods or services for which it was sought to be registered, or that the applicant had a bona fide intention to use it. A statement made in relation to a well-known third-party mark with which the applicant had no connection might give rise to trade mark infringement.

Expandable garden hose patents invalid for obviousness — It was held that the patents were invalid over one item of cited prior art. It was rejected that prior use close to a public road made this visible to the public was rejected as the judge held that a skilled person watching from the road would have to put together a series of the various tests carried out by the inventor, which it was rules was not what the skilled person would have done. Infringement depended on the meaning of ‘unattached... between the couplers’. Based on the common meaning of those words there was no infringement, but if the claims had been valid, it was held that in this case the hoses would have infringed.

Information technology, data and privacy

National Cyber Security Centre (NCSC) guidance on AI — If you are thinking of incorporating AI into your security systems, there are a few things you need to understand first. The NCSC has summarised in guidance published this month that you should clarify your own needs, understand the nature of the technology underlying any products you're considering, and finally, determine whether an 'intelligent' solution will give you a net gain in security. If you are seriously considering implementing AI in your business, the full guide can be found here.

Cyber Security Breaches Survey 2019 — The Cyber Security Breaches Survey 2019 was published on 3 April by the Department for Digital, Culture, Media and Sport. The survey analyses how UK businesses and charities respond to cyber security threats and how they are impacted by these threats, to help with future planning and policy reform. This year’s main findings were that:

• the introduction of the General Data Protection Regulation (GDPR) accelerated businesses’ addressing of cyber security breaches, but the attacks that do penetrate cause significant disruption and have more severe financial impacts than was previously the case, so fewer businesses are able to identify breaches or attack
• 32% of businesses and 22% of charities reported a cyber security breach or attack in the last 12 months and just over 80% and the most common type of attack was phishing attacks
• the average mean cost of cyber attacks was £4,180 in 2019 compared to £3,160 last year
• director engagement with cyber security is increasing, but even in large businesses only 41% have a board member with specific responsibility for this
• cyber risks in the supply chain are still not being successfully identified and more guidance or checklists could assist.

There is plenty for many businesses to consider and consolidate when it comes to cyber security.

Supreme Court appeal granted to Morrisons in data breach case — Following a data breach by Morrisons’ former auditor in 2014 disclosing bank details and salaries relating to 100,000 Morrisons staff members, Morrisons lost an appeal in October 2018 against a High Court ruling that it was vicariously liable for that data breach. The Supreme Court has this month granted Morrisons permission to appeal the Court of Appeal's judgment.

Employment Law

New National Living Wage and National Minimum Wage rates — Ensure that your business is complying with the new minimum wage rates this month, which have increased so that the New National Living Wage rate is £8.21 for those 25 and over, the new National Minimum Wage is £7.70 for those aged 21-24, £6.15 for 18-20 year olds, under 18’s will receive a minimum of £4.35 and apprentices will receive £3.90 per hour, as a minimum. These levels were all in agreement with the recommendations made by the Low Pay Commission.

No NDA for City worker awarded £270,000 in sexual harassment case — A female City worker has settled an employment tribunal claim, including a claim for sexual harassment, following a hearing, for a reported settlement payment of £270,000. In this particular case though, the female in question has not been required to a confidentiality agreement prohibiting her from discussing the alleged harassment. This comes at a time when the Department for Business, Energy and Industrial Strategy (BEIS) is consulting widely about the appropriate use of non-disclosure agreements (NDAs) by employers specifically where allegations of sexual harassment are being made by an employee or worker. This is also against the background of a BBC investigation into NDAs in universities which have contained ‘gagging clauses’ preventing them from speaking about the subject of any potential claims. These have been used extensively in universities in the last two years costing approximately £87million to settle around 4,000 complaints by staff, but how many of these related to sexual misconduct is unreported.

ACAS Brexit Guidance — ACAS has published advice to employers relating to Brexit and the things they may need to understand and implement, before the UK exits the EU. The guidance looks at how workplaces may be affected by Brexit and will be updated as we get closer to exit day and can be found at ACAS Brexit Guidance. The government has also prepared an online questionnaire to assist your business with knowing what and how to prepare for Brexit, which can be found here.

Brexit

Whilst we had expected that by this bulletin we would have already experienced Brexit, we are now looking at a further extension. On 9 April 2019, the House of Commons agreed to the Prime Minister seeking an extension of the Article 50 period to 30 June 2019 and on 11 April 2019, the European Council and the UK government agreed a second extension to the Article 50 period until 31 October 2019, at the latest. This may sooner, but a no-deal Brexit on 12 April 2019, which would have otherwise been the case, has now been avoided. Both the UK and the EU are continuing with their ‘no deal’ preparations in case the extension does not have the effect of allowing an agreement to be struck by the time the UK exits the EU.

*Please note that this update does not constitute formal legal advice and should not be relied upon as such. Always ask a solicitor if you are unsure of how the law relates to your business*