Picture the Scene

Our defendant clients had been involved in long-running proceedings involving complex copyright issues.  There were 10 parties involved in the proceedings some with cross claims against each other.

The legal issues were numerous and complex and the contentions that would have to be determined in court included: Who was the true copyright owner? Had there been joint authorship? Had there been copying? If so, what was the precise extent of the copying? Was similar ‘look and feel’ enough to establish copying? To what extent did the judgment in Navitaire Inc –v- Easyjet (No3) 1725 (Ch) (2005) ECC30 impact on the issues? The question of the personal liability of directors for any infringements by their companies would also have to be adjudicated as well as some very opaque issues of fact.

The parties had been in battle for 5 years and the proceedings on going for approximately 18 months. The proceedings had reached a critical point and it was expected that in 12 to 18 months time there would be a 10 to 15 day trial.

The High Court granted a stay of proceedings to permit the parties to try to resolve their differences by mediation.

The Outcome

At the outset, the Mediator (himself a highly-respected copyright barrister) commented that it was impossible to predict the outcome if the case went to trial as there were at least 64 possible permutations.

It was a long and difficult mediation lasting 15 hours and at which, it can be reliably said, the parties aired their views, and it in the end it produced a resolution that all of the parties could live with.

Had the matter gone to trial, there would probably have been a judgment in favour of some and against others, but it is unlikely that there would have been any clear outright winners.

A little bit of “thinking out of the box” at the mediation meant that the solutions adopted by the parties resulted in a settlement agreement that gave something to everyone. Most importantly from our clients’ point of view, there was no longer a threat of an injunction that might have constrained their business and overall the parties came out of the mediation with honours shared.

The estimated costs to the parties to take the proceedings from the point they were at to trial, £250,000 to £300,000. The cost of the mediation was somewhat less than one-tenth of this figure.

It was a “no brainer” as they say.

The Dispute Resolution Team:

John Abbott:   jca@silvermansherliker.co.uk    
Richard Pearlman: rhp@silvermansherliker.co.uk
James Robertson:  jvar@silvermansherliker.co.uk
Stefan Arestis:  sa@silvermansherliker.co.uk
Asil Albayaty  aa@silvermansherliker.co.uk

This is a non-exhaustive 50 point checklist designed to help you avoid some very common legal pitfalls and maximise the legal security of your business.

1. Make sure that legal ownership assets used in the business are actually owned by the business.
2. Get written copyright assignments from designers, authors, software and web developers and appropriate warranties of originality.
3. Check the terms and conditions of third party suppliers of services to ensure you legally own any deliverables they create.
4. Do not rely on a terminable licence for key business assets; take an assignment or a perpetual royalty-free licence.
5. Always negotiate when taking or granting a licence (term, option to renew, notice period, warranties, conditions etc).
6. Make sure new shareholders assign the assets that they are bringing to the party to the business as a condition of the issue of their shares.
7. Check every name, trademark, slogan and design you use to ensure it does not infringe any third-party rights.
8. Do not use a name, slogan or logo without filing a registered trademark application.
9. Check the patentability of your inventions before disclosure or marketing.
10. Patent your novel inventions if patentable.
11. Register your designs as UK or EU Registered Designs.
12. Insist on non-disclosure agreements as prelude to deal negotiations.
13. When buying, consider milestone payments and a retention.
14. When buying, obtain contractual warranties and indemnities from sellers.
15. When buying, carry out as much due diligence as is possible.
16. When selling, get deferred payments guaranteed or secured.
17. Agree terms of ’soft’ loan capital up-front to avoid sudden repayment demands by investors.
18. Consider weighted voting rights for business founders who go below 50%.
19. Ensure shareholders, employees and consultants agree non-compete obligations.
20. Ensure post-termination non-competes are reasonable and enforceable.
21. Protect customer-base and goodwill by including non-solicitation obligations in employee contracts.
22. Protect investment in staff by including non-poaching obligations in employee contracts.
23. Impose strict confidentiality obligations on people involved in the business.
24. Ensure confidentiality obligations continue after termination of involvement.
25. Draw up an appropriate Shareholders Agreement for multiple shareholders.
26. Consider list of ‘reserved issues’ requiring unanimous shareholder consent to implement.
27. Do business under your own clearly-drafted standard terms and conditions of business.
28. Bring your terms and conditions to the attention of customers before they commit to buy.
29. Make share ownership by partners and staff subject to performance criteria.
30. Provide that employee shares vest over a reasonable period of time.
31. Make employee shares subject to sell-back obligation if they leave for any reason.
32. Provide a procedure for the fair valuation of shares of leaving employee.
33. Encourage employee loyalty by providing for nil value on share buy-back in first 2-3 years.
34. Consider discounted (or nil) value for shareholder employees dismissed for breach or wrongdoing.
35. Control the ability to sell the business by imposing ‘drag-along’ terms on minority shareholders.
36. Consider share purchase assurance to buy back shares of deceased shareholder from the estate.
37. Consider a contractual dispute resolution procedure to avoid dead-lock or formal proceedings.
38. Build business value by obtaining written contracts with customers and clients.
39. Consider minimum term commitments from customers and clients and long notice period.
40. Register under the Data Protection Act if applicable.
41. Negotiate favourable written agreements with all suppliers.
42. In supplier contracts, seek exclusivity, initial minimum term, renewal rights and long notice period.
43. When granting exclusivity ensure minimum performance criteria as a condition of such exclusivity.
44. Consider legal expenses insurance and After the Event Insurance when engaging in legal proceedings.
45. Ensure your business operates within its industry standards and applicable statutory framework.
46. Agree an appropriate Grievance and Disciplinary Procedure and stick to it.
47. Do not terminate any contract of employment without taking legal advice.
48. Never rely on a calculation or valuation carried out by accountants that are being instructed or paid by someone else.
49. Always seek a personal guarantee of payment or performance from principals of an SME business.
50. When dealing with a group of companies, seek guarantee of payment or performance by holding company.

              …..and never give anyone a signed, blank cheque.

 Email to discuss any of this: cjs@silvermansherliker.co.uk

As of Monday, injured feelings will cost UK employers a lot more!

Employees who are unfairly dismissed, particularly in discrimination cases, often get an ‘injury to feelings’ award.

The case establishing the principle was the well-known 2005 case of Vento -v- Chief Constable of West Yorkshire Police.

There has been considerable debate since 2005 as to whether an ‘injury to feeling’ award should be index-linked to allow for inflation. Employment Lawyers have assumed they should be and their views have been confirmed in the Employment Appeal Tribunal case of Da’Bell -v- NSPCC which has just been decided in past 2 days.

The compensation bands for ‘injury to feelings’ award are now :

• lower band:     £ 6,000
• middle band:  £ 18,000
• upper band:    £ 30,000

So employers should be very careful not to upset anyone.

Conversely, if you do get fired…..make sure you are really upset about it!

This developmentshas significant ramifications, not just for those currently fighting tribunal claims but also for those who are advising on compromise agreements where an element of compensation is being ascribed to injury to feelings.

Clearly there is now a lot more to fight for!

As this judgment has been handed down, it has immediate effect despite the transcript not yet being available.