Legal update March 2019

Below are the updates you should be aware of in the areas of Corporate and Commercial, Intellectual Property, IT, Employment Law, and Brexit, for March.

Corporate and Commercial

The Chancellor’s Spring Statement — On 13 March 2019, in his Spring Statement, the Chancellor announced audit committees will be required to review payment practices, and report on them in annual accounts. Further details will be published shortly along with the results of government consultation on whether measures including the Companies (Miscellaneous Reporting) Regulations 2018 would have an impact on payment behaviour and whether more needed to be done to ensure that payment behaviour was considered at board level).

A new capital allowances relief can now be introduced by statutory instrument under the Finance Act 2019. This relief would be for expenditure incurred on the construction of new commercial buildings and structures and on new conversions and renovations.

A number of other reports are due to be published in the coming months and we will keep you updated on their contents.

Strict liability under the Consumer Protection Act even where a specific defect cannot be identified by a claimant — The High Court has this month reinforced the law that a fault under the Consumer Protection Act 1987 (CPA) results in strict liability for a producer of a product (as it failed to meet the standard of safety that the public generally is entitled to expect at the time when it is introduced to the market) when it held that a faulty electric heater leading to a household fire was defective for the purposes of the CPA. The heater was used by the owner in an entirely normal manner but it ignited spontaneously in circumstances where it should not have done. The heater therefore fell below the standard of safety that consumers, such as the claimants, were reasonably entitled to expect and was defective within the meaning of the CPA. On the balance of probabilities, the heater was the source of the fire, and it followed, as there was no misuse, that it was defective. It did not matter that the claimants were unable to identify the specific mechanism or cause of the fire.

A non-compete restriction in an NDA was deemed an unreasonable restraint of trade —The Court of Appeal has found that a non-compete provision in a non-disclosure agreement (NDA) was unenforceable as an unreasonable restraint of trade. The NDA, between two legal services firms, covered the disclosure of information about a proposed group action in respect of the vehicle emissions scandal. The Court looked at whether the non-compete was both reasonably necessary for the protection of the discloser's legitimate interests and in line with the disclosee’s benefits under the NDA. The NDA was aimed only at protecting the confidential information which was being disclosed for the purpose of obtaining legal advice. It was hard to see why a restriction that went beyond using that confidential information for its own purposes or for other clients could be reasonable in that context, although a broader limitation might be acceptable in a collaboration agreement. This case is a reminder that, to be enforceable, non-compete provisions must be appropriate to the parties' obligations in the document being signed, taking into consideration the facts at the time of signature.

First appeal against ICO information notice under DPA 2018 dismissed — The First Tier Tribunal (Information Rights) dismissed the first appeal to reach final determination under the new DPA 2018 regime by Doorstep Dispensaree Ltd (D). They had received an information notice from the Information Commissioner (IC) as following suspected non-compliance relating to personal data processing under the GDPR D refused to provide information which the IC requested. D appealed on the basis that the information notice was invalid if compliance with its terms involved a risk of self-incrimination, but it was decided that the information notice was not invalid on this basis. The IC may serve an information notice where she requires a controller or processor to provide her with information which she reasonably requires to carry out her functions. An information notice does not require information to be provided which would expose them to criminal proceedings. The appeal was dismissed as the information notice was lawful and there was no legal basis for finding that the IC should have exercised discretion differently.

How are liquidated damages awarded in termination or abandonment cases? — The Court of Appeal has held that a liquidated damages clause did not apply where work was never completed by the contractor, as the remedy was for general damages for delay. The approach will depend entirely on the individual case and the wording used in the liquidated damages clause, as it is not a given that liquidated damages must be used to compensate employers for part of their loss and so non-completion as well as delay should be specifically dealt with in the contract.

Contact details to be provided to consumers by online traders — The Consumer Rights Directive requires traders to provide certain information to consumers before the contract is made. This includes ‘the trader’s telephone number, fax number and e-mail address, where available, to enable the consumer to contact the trader quickly and communicate with him efficiently’. The Attorney General has given an opinion this month that traders must offer consumers a choice of means of communication and online traders may choose communication other than telephone, fax or email, such as online chat services or call-back. The requirement to provide a telephone number ‘where available’ does not mean that every trader with a telephone must provide its number. The focus should be on consumer choice, rapid contact, efficient communication and visibility so that high standards of consumer protection are maintained.

Intellectual Property

EU Intellectual Property Office March case update — In Wirecard Technologies GmbH v EUIPO it was decided on appeal that EUIPO correctly decided that the EU trade mark ‘SUPR’ in relation to various goods and services including software and software design was likely to cause confusion with the earlier Benelux word trade mark ‘ZUPR’ also registered in relation to software and software design.

Similarly it was decided by the EUIPO in the case of Pan v EUIPO that on appeal Entertainment One UK Ltd, and Astley Baker Davies Ltd should be successful in their appeal against an earlier ruling that their application for a declaration of invalidity failed. A similar image to that of Peppa Pig was printed on clothing, footwear and headgear with the word Tobbia. It was decided that there was sufficient risk of confusion for the public as between the two brands and so the latter EU figurative trademark relating to Tobbia was declared invalid.

On the other side of the coin, in IQ Group Holdings Bhd v EUIPO, EUIPO incorrectly concluded that lighting products covered by a contested international registration were similar to Christmas tree decorations incorporating lights, covered by the opponent's registrations, and its decision to allow the opposition was therefore to be annulled and the EUIPO was to pay costs.

In relation to descriptiveness and deception, in Perry Ellis International Group Holdings Limited v EUIPO, EUIPO correctly held that the word mark ‘PRO PLAYER’ should not be registered in relation to clothing, because this included sports clothing and might be deceptive. Similarly in Novartis AG v EUIPO, an application to register the word mark ‘SMARTSURFACE’ in respect of contact lenses was correctly rejected on the ground of descriptiveness, as this would be taken to indicate a responsive, adaptive and sophisticated surface of the lenses.

A figurative mark containing decorative motifs on products were not within shape exclusion — A sign consisting of just a shape, which gives significant value to goods could not generally be registered but that did not apply to a sign consisting of two-dimensional decorative motifs attached to products, such as fabric or paper. It is unclear how Article 7(1)(e)(iii) will apply to marks registered after March 2016, as the Amending Regulation amends the wording to prohibit registration of a sign which is solely a shape ‘or another characteristic’ giving substantial value to the goods, meaning the clause could be construed more widely.

IT

The Financial Conduct Authority report on cyber security insights — The FCA has brought together over 175 firms across different parts of the financial services sector to share their cyber experiences with the aim of improving cyber security practices among members of the various Cyber Co-ordination Groups (CCGs). Over the last year, governance, identification, protection, detection, situational awareness, response and recovery and testing have been the main focus of information sharing in respect of cyber security. Examples shared by one or more entities in the CCGs have been reported on where the FCA believes the shared information may be of interest, particularly to small and medium-sized firms.

This report is not a set of guidelines laid down by the FCA in order to comply with its regulatory requirements, but many of the insights do support guidance from the national Cyber Security Centre. Moving forward, the FCA is looking to create two new CCGs to increase the representation of trading venues, benchmark administrators, brokers and principal trading firms. The FCA will also look at other means of communicating insights and innovative practices shared within the CCGs with the wider financial community.

Employment Law

Unpaid overtime by UK workers in 2018 — UK workers did over £32billion worth of unpaid overtime in 2018 according to the TUC. At least five million workers did around two billion hours of unpaid overtime, equivalent to each worker working January and February for free.

According to the research, men do more unpaid overtime hours than women on average and the national average was 18% of workers working unpaid overtime, whereas almost a quarter of workers in London did unpaid overtime in 2018.

TUC general secretary Frances O'Grady said ‘Overworking staff hurts productivity, leaves workers stressed and exhausted and eats into time that should be spent with family and friends’. We will keep you updated as to whether any action is taken in respect of this either by the market or by regulation.

Vodafone to offer paid leave to domestic abuse victims —Vodafone will offer up to 10 days of paid leave to all workers who have been victims of domestic abuse, to help victims find time to seek help, attend appointments, support their children and where required arrange moving house. Support and specialist counselling will also be offered by the company.

The Vodafone Foundation has also published a new handbook, containing research, statistics and advice supporting those impacted by domestic abuse. The research surveyed 4,715 Vodafone workers across nine countries, and found that 37% had experienced domestic abuse, and perhaps unsurprisingly 67% of those affected said it had impacted their career progression.

Apprenticeship employer leaderboard — Education Secretary Damian Hinds has announced a new quality mark for apprenticeships developed with ‘Investors In People’ and he plans to introduce an independently judged leader board of the top apprenticeship employers. This leader board will rank the top 100 large apprenticeship employers and top 50 SMEs and it is hoped this will motivate employers to keep apprenticeship standards high and help applicants with their search.

Seasonal workers pilot — In September 2018 the government announced a seasonal workers pilot, whereby fruit and vegetable farmers can employ up to 2,500 non-EU migrant workers for seasonal work for up to six months. This pilot is now open will run until the end of December 2020 with two scheme operators being responsible for identifying suitable workers and matching them to UK farmers. The pilot should test whether the immigration system is fit for purpose in alleviating seasonal labour shortages and well as effectively controlling immigration.

Director of Labour Market Enforcement report on employers avoiding prosecution for abuse of employees — The Director of Labour Market Enforcement, Sir David Metcalf, has stated that only 7 prosecutions were brought between 2017 and 2018 and only 14 prosecutions for minimum wage offences have been brought in the 20 years since the National Minimum Wage Act 1998 was enacted meaning that employers who commit serious labour abuses are often escaping prosecution. This especially when compared to the more 500 convictions each year for health and safety offences.

This report coincides with figures released by the National Crime Agency (NCA) revealing that 6,993 potential victims of slavery and trafficking were reported to the National Referral Mechanism in 2018. This is an increase on the 5,142 referred in 2017 and the 3,804 in 2016. Even more staggering, the number of children referred in 2018 increased by 48% from the year earlier. Whether this is due to better reporting or the situation becoming worse is unclear, but either way, these figures are likely to only be a small proportion of the real figures, as many cases will go unreported.

Pimlico plumber loses holiday pay claim — Although the Supreme Court confirmed that Gary Smith was a worker of Pimlico Plumbers last year, an employment tribunal has now ruled that Mr Smith was out of time to make a holiday pay claim worth around £74,000. It is likely that Mr Smith will appeal the decision.

Is Brexit uncertainty affecting the employment market? — Two new surveys suggest that UK companies are increasingly planning to cut jobs and freeze new hires whilst the timing and terms of Brexit remain uncertain. A HIS Markit survey found hiring plans of UK businesses had reached its lowest point in the past six years in February 2019. ManpowerGroup’s recent survey of 2,000 businesses indicates that the number of companies preparing to make job cuts is increasing, particularly in the finance and business sectors.

Brexit

Perhaps unsurprisingly, given that the UK’s exit date was originally set for 29 March, this month has been busy with Brexit news. On 11 March 2019 Theresa May rushed to Strasbourg to secure new assurances on the temporary nature of the Northern Ireland backstop, she then failed for a second time to push her Brexit deal through parliament. There was then a rejection of a no-deal Brexit at any time, and an agreement to extend the Article 50 period on 14 March 2019. On 21 March 2019 Theresa May was granted an extension to Article 50 until 22 May, provided that she can get her deal through parliament – then the UK would leave Europe on 22 May 2019 with a deal. MPs are expected to be given one more chance to approve this, even though this has failed already twice.

If MPs do not approve Theresa May’s deal there will only be a short delay until 12 April before Brexit and alternative options would need to be explored by parliament during that time and action would need to be taken fast at that point to avoid a ‘no deal’ Brexit. If the UK wanted to remain in the EU for a longer period it would need to participate in the EU elections in May.

The government set out details of the UK tariff earlier this month, stating that international competition co-operation agreements would not be in place by 29 March 2019. EUIPO has created a Brexit webpage to help holders of EU trademarks and CRDs prepare for no deal and the FCA published statements on various obligations relating to financial services, in the event of a no-deal Brexit.

*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*