The Power of Trade Marks for Your Small Business – A David Vs. Goliath Story

In 1999 an SME called Comic Enterprises Ltd (“CEL”) registered a series of trade marks which featured the words “The Glee Club”. They ran and operated entertainment venues under this name with some success, expanding their business and opening venues across the UK. The venues predominantly hosted stand-up comedy but they also featured live and recorded music shows.

In 2009 the Twentieth Century Fox Film Corporation launched their television show in the UK under the name “Glee”. The programme featured a so-called ‘Glee Club’ in an American High School. The show was successful in the UK and became very well known, particularly due to the music it featured, which included covers of popular songs. CEL noticed that the success of the show was causing significant confusion in that members of the public began to believe that their clubs were associated with the TV show, which had a negative effect on their target market. They began trade mark infringement and passing off proceedings against Fox in September 2011. They were successful in their claim for trade mark infringement and substantial remedies were awarded, a decision which was recently upheld in the Court of Appeal.

An important point for SMEs to note is that whilst CEL were successful in their claim for trade mark infringement, their claim for passing off failed on the basis that there was no actionable misrepresentation. Therefore if CEL had failed to register their trade mark the result would have been completely different.

This case highlights the increasing importance of intellectual property protection for SMEs. If your brand is vital to your future success then it is essential that you put in place adequate protection before infringement occurs and that you take action promptly when it does.

If you have any queries or would like to discuss any of the issues raised in more detail then please do contact Donna Bromyard, a Solicitor in our Business Services Team on 01992 558411 or email donna.bromyard@breezeandwyles.co.uk

 


Safeguarding design is a priority for smaller business

Cheaper registration fees are an opportunity for small businesses and designers to secure greater protection for their intellectual property in future, as well as being a route to protection in the UK post-Brexit.

registered design is one of the options available from the Intellectual Property Office, alongside trade marking, patenting and copyright.

It protects the visual appearance of a product including the shape, texture, materials, colour and pattern and gives the right to prevent others from using the design for up to 25 years through a renewal process every five years.  And since the Intellectual Property Act was introduced two years ago, it has been a criminal offence to copy a registered design intentionally.

The reduction in fees for registered designs sees the cost of a single online application cut by £10 to £50, with bigger savings for multiple applications. An application containing 2-10 designs will cost £70, and each extra block of up to 10 designs an additional £20.  The savings are huge for multiple design registrations: as an example, a batch of 40 designs registered online will cost £130 under the new system, compared to £1620 under the old fee rates.

Commercial Solicitor Donna Bromyard of Hertford town solicitors Breeze & Wyles said:  “This reduction opens the door to much more affordable protection for small businesses seeking to safeguard their business ideas and designs.  They can more easily afford to register different options, such as line drawings, coloured drawings and photographs, which could boost their chances in challenging any copycat competitor.”

She added: “The recent ruling by the Supreme Court, which saw the designer of children’s sit-on suitcase Trunki lose their infringement case against the cheap look-alike Kiddee case, has highlighted the need for a more comprehensive approach to registration of designs”.

The Trunki design was protected with six computer-aided design drawing representations of the exterior of the case from various angles and perspectives. The Supreme Court ruling pointed to the lack of ornamentation on the surface of the Trunki as depicted in the registration, and how this differed from the decoration present on the body of the Kiddee case.

“The Trunki design had been registered under the EU Registered Community Design process, but the outcome of the case translates directly to the UK design registration process,” explained Donna.  “And the lesson is to safeguard your designs with multiple depictions and types of image to give maximum protection.”

The UK process protects designs solely in the UK, so for businesses looking to protect designs in Europe the EU Trade Marks (EUTM) and Registered Community Designs (RCD) will continue to be valid in both the UK and the rest of the EU until Brexit is completed. Post Brexit, UK businesses will still be able to register a Community Design, which will cover all remaining EU Member States, but it will not be valid in the UK.

Also, the government has said it intends to ratify the The Hague System for the International Registration of Industrial Design in a national capacity, to enable continued access for UK designers post Brexit.  This allows registration of up to 100 designs in over 65 territories through one single international application.

Donna added:  “In the run-up to Brexit, it’s important that businesses consider their options for both new or existing design registrations, as to whether they need to protect their design in either the UK and Europe, or in both.”

PMS International Group Plc v Magmatic Limited [2016] UKSC 12 (“Trunki”)

ENDS

Web site content note: 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

References

http://www.legislation.gov.uk/ukpga/2014/18/contents

 https://www.gov.uk/register-a-design

https://www.gov.uk/government/news/good-news-for-designers

https://www.gov.uk/government/news/ip-and-brexit-the-facts

http://www.wipo.int/hague/en/

https://www.supremecourt.uk/cases/docs/uksc-2014-0147-judgment.pdf


Change in law opens door to off-limits creative work

Copyright holders of creative works are being urged to make their mark and claim their rights, following the launch of a new licensing scheme that will enable reproduction of so-called ‘orphan’ creative works and performances.
Orphan works are copyright works where the right holder is unknown or cannot be traced and in the past this meant the works could not be reproduced.  Now, anyone can apply to the Intellectual Property Office (IPO) for a licence to use an orphan work, if they can show they have made real efforts to identify or trace the holder of the copyright.  They will have to pay a fee, and royalties will be held by the IPO for eight years in case rights holders come forward.   
The scheme will enable creative works and performances, such as diaries, photographs, films or pieces of music, to be reproduced on websites, in books and on TV, whether for commercial or non-commercial purposes.   Without the licence, any reproduction would infringe copyright in the UK.   
Designed to give wider access to culturally valuable creative works, which may have previously remained out of public view because the rights holders cannot be identified, a licence will provide rights for up to seven years.   
Protection for copyright holders comes with the IPO holding all royalties it receives for orphan works in a ring-fenced account for eight years from the date of the licence.  The IPO can also refuse to grant a licence, for example where any proposed use could have a negative impact on the value of the work. 
The announcement of the new licensing scheme coincides with the introduction of the EU Orphan Works Directive, which enables museums, galleries and other cultural institutions across the EU to digitise certain orphan works and display them on their websites.  The objective is to increase access to Europe’s cultural heritage for works that are currently only available for viewing in a museum, archive or library. 
The UK licensing scheme and the Directive are complementary but separate.  Unlike the EU directive, the UK Orphan Works licensing scheme applies to all types of orphan works and provides for broader commercial as well as non-commercial use. It can be used by anyone and is not just restricted to cultural and heritage bodies.
Explained Breeze & Wyles Solicitors:  “There are commercial opportunities for users of these orphan works under the new licensing scheme, and some people, such as photographers, have sounded their concerns about a licence being granted after a cursory attempt to find the original owner.   But hopefully a combination of a fairly tough application process, and the fees that will be payable, will provide the required control.  
 “But if copyright owners want to be sure that their works aren’t subject to any future licensing under this new regime, they should make sure that their identity is well known, ideally by inclusion on the work itself.  That’s not always practical, but it’s another thing to bear in mind when authoring or holding such content.”  
ENDS
 
Web site content note: 
This is not legal advice; it is intended to provide information of general interest about current legal issues.

Cadbury’s imperial coat of purple under threat

Rivals given the go-ahead to cash in with replica purple branding, as prime Easter selling season arrives

A long-running court battle between confectionary giants Cadbury and Nestlé has seen the UK Supreme Court throw out an appeal by Cadbury against an earlier judgement that refused to secure their unique colour purple as a trademark.

And despite this being a clash between two international confectionary titans, intellectual property lawyers say the lesson is one that small business would be well advised to learn.

Long time emblem of royalty and emperors, and a symbol of power and nobility, the distinctive shade has been used by Cadbury for its milk chocolate for over 90 years, since it was introduced in 1914 as a tribute to Queen Victoria. But now their rivals Nestlé could cash in with a replica wrapper, just in time for an Easter bunny bonanza.

The UK Supreme Court refused to consider an appeal against a ruling by the Court of Appeal in October, putting an end to Cadbury’s hopes of stopping rivals adopting the distinctive purple wrapping. In the Court of Appeal ruling, judges agreed with Nestlé that the specific shade of purple, identified by its design and print industry reference number - Pantone 2658C – could not be trademarked.

Their judgement hinged on Cadbury’s description of the use of the colour, saying that they were not entitled to register the trade mark for the colour purple because its description as 'the predominant colour applied to the whole visible surface of the packaging of the goods' did not satisfy the requirement of a sign, nor the requirement of the graphical representation of a sign, within the meaning of Article 2 of the Trade Marks Directive 2008/95/EC.

“This is a tale of two international companies with mega brand budgets battling it out in the courts. It shows the lengths that some companies will go to in protecting their brand and the value that they place on that brand identity.” said commercial expert Brendan O’Brien of Breeze & Wyles Solicitors LLP. “But in these big cases there are always lessons for small companies.

“The first one is probably that prevention is better than cure. You are unlikely to be able to defend yourself in the regal style of a Cadbury chocolate bar, so think carefully about what you have that is unique, and how you may be able to protect it. If you’re in the early stages of development, then find out whether your ideas have the potential to be trademarked, before you’ve gone too far down the road.”

He added: “The other important lesson to be learned is that you should never mess with the big brands. Nestlé’s pockets are just as deep as Cadbury’s, so they were equally matched in this case, but if you try to mimic any well known brand identity on a similar product, don’t imagine they won’t spot you. They have teams on alert, watching out for this sort of thing.”

• Société des Produits Nestlé S.A. v Cadbury UK Ltd (Lewison LJ, Sir John Mummery & Sir Timothy Lloyd; [2013] EWCA 1174 Civ; 4 October 2013

ENDS

This information is not intended as legal advice


chains thumb

Innovating companies can gear up for clever tax benefits

Innovating companies can now maximise the advantageous tax regime that’s been brought in for patented products.

The Patent Box tax regime came into effect in April and it gives companies a reduced 10% corporation tax rate on the proportion of profits derived from the exploitation of patents.

It applies to patents granted by the UK Intellectual Property Office, the European Patent Office or certain other specified EEA countries.

First announced in 2010, the reduced corporation tax rate is designed to encourage businesses to develop and actively exploit patents, rather than sitting on intellectual property (IP) as often happens. The new regime will be phased in over the next four years, with tax savings gradually rising from 60% of potential benefits in year one to the full 100% from April 2017.

The Government has introduced the Patent Box to encourage innovative businesses to invest in the UK and say it should improve the competitiveness of the UK tax system for high-tech companies.

Companies can only benefit from the Patent Box if they are liable to Corporation Tax and make a profit from exploiting patented inventions; they must also own or hold an exclusive license for the patents and must have undertaken qualifying development on them.

But there are opportunities for companies beyond the original patent, as the tax relief is going to be available for profits on whole products, even where the patented item is only a small part of that whole. It is also going to extend to profits earned worldwide, even if the product is patented in just the UK.

As well as providing relief on IP income, the tax relief will also be allowed on license fees received on a patented product or process.

The other bonus for companies is that the Patent Box relief can be backdated to profits earned up to six years prior to the granting of the patent. This should help fund the cost of patenting where there is a short lifespan on a product.

Because it does not apply to non-exclusive licenses, exclusive licenses falling within the Patent Box will be far more valuable to potential licensees. The tax relief can also be claimed for related non-patent IP, such as trademarks and registered designs, so they do not need not be exclusively licensed.

Explained corporate law expert Brendan O’Brien: “There is scope for companies with activities that would not currently fall within the Patent Box to review their strategy and if necessary to modify their activities so that they qualify - although, as with all things, everyone needs to weigh up the admin burden of opting in to such a scheme.”

He added: “It’s a complex area, but any company involved in innovation and patenting should be reviewing what they are currently doing and looking how they might benefit from the new regime.”


Innovating companies can gear up for clever tax benefits

Innovation companies can now maximise the advantageous tax regime that’s been brought in for patented products.
The Patent Box tax regime came into effect in April and it gives companies a reduced 10% corporation tax rate on the proportion of profits derived from the exploitation of patents.
It applies to patents granted by the UK Intellectual Property Office, the European Patent Office or certain other specified EEA countries.
First announced in 2010, the reduced corporation tax rate is designed to encourage businesses to develop and actively exploit patents, rather than sitting on intellectual property (IP) as often happens. The new regime will be phased in over the next four years, with tax savings gradually rising from 60% of potential benefits in year one to the full 100% from April 2017.
The Government has introduced the Patent Box to encourage innovative businesses to invest in the UK and say it should improve the competitiveness of the UK tax system for high-tech companies.
Companies can only benefit from the Patent Box if they are liable to Corporation Tax and make a profit from exploiting patented inventions; they must also own or hold an exclusive license for the patents and must have undertaken qualifying development on them.
But there are opportunities for companies beyond the original patent, as the tax relief is going to be available for profits on whole products, even where the patented item is only a small part of that whole. It is also going to extend to profits earned worldwide, even if the product is patented in just the UK.
As well as providing relief on IP income, the tax relief will also be allowed on license fees received on a patented product or process.
The other bonus for companies is that the Patent Box relief can be backdated to profits earned up to six years prior to the granting of the patent. This should help fund the cost of patenting where there is a short lifespan on a product.
Because it does not apply to non-exclusive licenses, exclusive licenses falling within the Patent Box will be far more valuable to potential licensees. The tax relief can also be claimed for related non-patent IP, such as trademarks and registered designs, so they do not need not be exclusively licensed.
Explained corporate law expert Brendan O’Brien: “There is scope for companies with activities that would not currently fall within the Patent Box to review their strategy and if necessary to modify their activities so that they qualify - although, as with all things, everyone needs to weigh up the admin burden of opting in to such a scheme.”
He added: “It’s a complex area, but any company involved in innovation and patenting should be reviewing what they are currently doing and looking how they might benefit from the new regime.”
ENDS
This information is not intended as legal advice


Company Security rules from 6 April 2013

Introduction
The rules for registering security created by UK companies and limited liability partnerships ("LLPs") are set to be reformed next month in the biggest shakeup of the Companies House registration regime in years. The new regime will provide a single UKwide security registration regime that applies to all UK companies and LLPs. There will be an assumption that all types of security will be registrable at Companies House unless specifically excluded. This is a welcome simplification and will help to address the current confusion around whether the security is a type which must be registered. Electronic registration will also be possible for the first time in a modernisation of the current system.
The Department for Business, Innovation and Skills ("BIS") first published the draft Companies Act 2006 (Amendment of Part 25) Regulations 2012 on 9 August 2012 and these were updated again on 14 January 2013 following a lengthy consultation exercise. The new regulations are expected to come into force on 6 April 2013. A detailed overview of the key changes and their impact in practice is set out below.
Types of charges

All charges will be registrable other than some limited exceptions set out in the regulations (such as a rent deposit taken as security in connection with the lease of land). The term "charge" includes a mortgage and Scottish security (but not a pledge) and so covers virtually all types of security.

It is worth noting that the original draft regulations published in August 2012 expressly excluded pledges and liens from the definition of "charge", however the updated regulations only expressly exclude pledges. By their nature, liens depend upon possession and common law has not sought to characterise them as charges, therefore the absence of the express exclusion of a lien as a charge in the regulations should not mean that a lien is therefore registrable security. A lender may, however, wish to take a cautious approach in relation to contractual liens and so seek to register these in accordance with the regulations.

Time limit for registration
Registration of security continues to be time critical. The "period allowed for delivery" is 21 days beginning with the day after the date of creation of the charge and Companies House will reject filings received after the 21day period. An extension may be possible, as at present, following an application to the court in limited circumstances.

Statement of particulars

It will be possible to deliver a certified copy of the security instrument (instead of the original security instrument as is currently required) with a brief statement of particulars. The "section 859D statement of particulars" must include the following information:

• the name of the beneficiary of the charge or the security agent or trustee;

• whether the instrument is expressed to contain a floating charge and whether it covers all the property and undertaking of the company;

• whether the terms of the charge prohibit or restrict the company from creating further security that will rank equally or ahead of the charge (a negative pledge); and

• whether the instrument creates a fixed charge or mortgage over any land, ship, aircraft or intellectual property that is registered (or required to be registered) in the UK. If it does, short particulars need to be included on the form submitted for registration.

The requirement to include a short description of registrable land and intellectual property is new and care is needed as an inconsistency between the details included in the charge and on the form could result in registration being rejected. Intellectual property includes "(a) any patent, trade mark, registered design, copyright or design right; and (b) any licence under or in respect of any such right".


The certificate of registration of the charge will still be conclusive evidence that the complete documents required for registration purposes were submitted to the Registrar on time; therefore it would appear that once secured, the certificate could not be reopened.

Separate provisions set out the section 859D statement of particulars that will be required when a charge is not created or evidenced by an instrument.

Personal information relating to an individual (other than his name), bank account numbers of companies or individuals and signatures may all be excluded from the certified copy of the security instrument submitted to Companies House. However, as is currently the case with an MG01 form, commercially sensitive information cannot be excluded.

One final difference relates to the requirement to indicate whether the charge instrument includes a negative pledge (as described above). The inclusion of this information on registration forms currently is a matter of good practice. This will now be mandatory.

If after a charge has been created, it is amended to include a negative pledge or varies or regulates the order of priority, then the instrument and a section 859D statement of particulars may be delivered to the Registrar. This is voluntary and there are no time limits for doing so.

Evidence of registration

Each charge that is registered will be allocated a unique reference code ("URC") which will appear on the register and the certificate of registration of the charge (which is conclusive evidence that the documents required were delivered before the end of the relevant period allowed for delivery). The URC will enable those searching the register to track a charge more easily.

The Registrar will include the following documents in the register (to the extent that they were required for registration purposes):


• the certified copy of the instrument creating or evidencing the charge;

• the order extending the period allowed for delivery of the section 859D statement of particulars; and
• the certified copy of the instrument creating or evidencing a charge over any property or undertaking acquired by the company.

Consequences of failing to register


There are no longer criminal sanctions for a failure to register but an unregistered charge will be void against a liquidator, administrator or creditor of the company. If a charge becomes void against such persons, then the money secured by it will become immediately payable.


Foreign law security


The regulations provide that all charges will be registrable, save for those expressly excluded. The term "charge" is an English legal term that the regulations define to include mortgages and Scottish security. A foreign law security instrument may not be described as or include the word "charge" in it, although it may still be equivalent to the English law concept of a charge or mortgage; for example, security over a US registered patent or a foreign law pledge on shares. The cautious approach will be to submit for registration all security created by a UK registered company even if over assets located abroad or if the security is not expressly characterised as a charge.

It would therefore be prudent to register any foreign law security instrument, created by a UK company, which is sufficiently similar to the English concept of a charge or mortgage to prevent the consequences of failure to register from arising.


The practicalities


Other points to note from a practical perspective are as follows:

• The new registration requirements will apply to charges created on or after 6 April 2013; therefore a charge created on 5 April but submitted to Companies House on 7 April would need to be registered under the current regime (using form MG01).


• Registration of the satisfaction of secured debt or the release of a charge must be carried out in accordance with the new regime from 6 April 2013, regardless of whether the charge was created before 6 April or after; however differing information will be required according to when the original charge was created.

• Form 466, required for the registration of particulars of an instrument of alteration to a floating charge created by a company registered in Scotland, will remain in force (and subject to the 21day filing limit). For Scottish Floating Charges ("SFCs") created before 6 April 2013, the current filing requirements will apply. For those SFCs created on or after 6 April, a certified copy of the alteration will be required, the 21day filing limit will apply and the section 859D statement of particulars to be delivered will require less information as prescribed in Sch 2 of the regulations.


• Electronic filing will be available via WebFiling or Software Filing. When registering a charge electronically, it will be possible to submit certified copies of the security instrument electronically in PDF form (up to 10MB in size).

• To facilitate WebFiling, lenders (or anyone other than the company itself who is presenting the particulars for registration) will have to make a one off application for a lender authentication code or presenter authentication code to enable them to register charges. Software Filing allows the transfer and acknowledgement of electronic company data between presenters and Companies House and requires the purchase or development of suitable software to enable this. The online application forms for both WebFiling and Software Filing are available to download from the Companies House website. Companies may file charges against their own company using the company's authentication code.


• The fee for electronic filing is proposed to be £10 (although this is still to be confirmed); the fee for paper filing will remain at £13.
• There will be a new series of forms for companies and equivalent forms for LLPs which will require less information than the current "MG" forms. There will be separate forms for registration of charges created by an instrument and those created where there is no instrument. The form numbers will range from MR01 to MR10, with additional forms RM01 and RM02 available in respect of giving notice of the appointment of a receiver.
• Companies and LLPs are no longer required to keep an internal register of security. Copies of the full security instrument must be available for inspection instead.

Uk Intellectual Property Office introduces new Mediation Service

Ocassionally, disputes can arise in relation to Intellectual Property (IP) rights. Mediation is a type of alternative dispute resolution, a way of resolving disputes without going to court. It is cheaper and quicker than litigation and the outcome is usually beneficial to all parties.

A court will expect you and the other party in dispute to have attempted to resolve matters before starting legal proceedings. It will also expect you to have properly considered a form of alternative dispute resolution.

Mediation allows you and the opposing party to talk about the dispute with the help of an independent person, a mediator. The mediator’s role is not to make a decision on the dispute but to help you to find a solution that both parties can accept.

Most types of IP dispute are appropriate for mediation. In addition to it being cheaper and quicker, there are other advantages. Mediation can: involve discussion of a broader range of issues than those that are the subject of the litigation; result in a positive outcome for all parties involved eg through licensing or commercial agreements; and help parties to maintain or even create business relationships.

Introduction to the IPO Mediation Service

The IPO mediation service was set up to help businesses and individuals resolve IP disputes quickly and effectively. A flexible fee scale has been introduced and it may be possible to arrange mediation over the telephone for some cases. The accredited mediators can help you to resolve disputes involving unregistered rights, such as copyright and design rights, as well as patents, trade marks and registered designs.

The IPO mediation service can help you resolve:

disputes about infringement of an IP right

disputes about IP licensing

trade mark opposition and invalidation proceedings on relative grounds

disputes over patent entitlement eg whether a co-inventor was employee or consultant

copyright licensing disputes between collecting societies and users of copyright material regarding the terms and conditions of licences

Some disputes where mediation may not be an alternative to litigation include:

trade mark disputes concerning the distinctiveness of the mark

trademark opposition and invalidation proceedings on absolute grounds

disputes involving IPO decisions eg refusal of a patent application or request for extension of time

How mediation works

If you agree to mediation you and the other party will be required to sign a mediation agreement. The agreement is to confirm that both parties agree to:

use mediation to try and resolve your dispute

use one of our accredited mediators

the location and sharing of costs associated with the mediation

On the day of the mediation the appointed mediator will meet with you and the other party separately, and together, to discuss the issues. Mediation discussions are confidential and cannot later be used in court if the dispute is not resolved.

After you have reached an agreement, the mediator will encourage and if necessary help you to record at least the main points of the agreement in writing. This helps to reduce the risk of further disputes that may arise later about what was actually agreed.

Further details and a list of other mediation providers is available.

For further information on telephone mediation and details of mediation fees (76Kb) please contact:

Email: mediation@ipo.gov.uk

Tel: 0300 300 2000 - Outside the UK telephone +44 (0) 1633 814000

Mediation Service

Intellectual Property Office

Concept House

Cardiff Road

Newport

South Wales

NP10 8QQ

United Kingdom

Please note that you must accept liability for the transmission of any information you send us or ask to receive from us via e-mail.


IP Seminar: Have you left the door open for thieves?

“Whether a start up or a multi million pound business, your Intellectual Property is your most valuable asset.” – Brendan O’Brien, Director, Breeze & Wyles Solicitors LLP

Intellectual property, sometimes abbreviated IP, is a legal definition of ideas, inventions, artistic works and other commercially viable products created from one's own mental processes and essential to the operation of your business. Millions of pounds are lost annually across all industries through IP theft, proving that protection is a necessity not a luxury.

What's in it for me? Creating value from Intellectual Property

In conjunction with Red Sky Partnership Ltd

Date: Thursday, 5 July 2012Time: 9.30am - 11.00am

Venue: Breeze & Wyles Solicitors LLP, 2nd Floor Stag House, Old London Road, Hertford SG13 7LA

This free seminar will ensure that you’re fully informed on all aspects relating to intellectual property, so that you can safeguard and make the most of what is rightfully yours. It is therefore essential for all business owners.

Using a series of case studies, Sarah Staines of Breeze & Wyles Solicitors LLP will demonstrate the very real value of intellectual property in the operation of any business and give an insight into what can go wrong if protection is not sought.

Attendees will also learn how to reduce tax with Research and Development tax credits, and how this can benefit your business. This is a government incentive for companies developing new technology, and an incentive that government know works, so it keeps getting better with each year. Make sure you are not missing out.Following the talks by Breeze & Wyles and Matrix, there will be opportunity to network with other attendees.Spaces are limited to 25 attendees, therefore please respond by Thursday, 28 June 2012 to secure your place. To register, please email Rachel Harper at rachel.harper@breezeandwyles.co.uk or El Edmunds at el.edmunds@breezeandwyles.co.uk. Alternatively, please call 01992 558411.


SME Corner: Social Media Policy Issues Explained

By Brendan O’Brien, Head of Business Services

The fast shifting world of social media is creating new challenges for both employers and employees. Here, digital legal expert Breeze & Wyles Solicitors LLP provides an update on the latest issues to hit the courts and employment tribunals, both here and across the pond in the United States.

Keeping up with social media

Facebook has just announced its 901 millionth user; more than 500 million people are said to be tweeting; LinkedIn has over 100 million professionals connecting with each other; and every day more new applications arrive, vying for attention in the social media stratosphere.

Social media has made a big shift from the early days, when Facebook simply provided a route for people to interact with people they already knew. Now, more and more businesses are using the different platforms to raise their profile and to interact with customers.

But under the noise of this ever rising tide of social media, many of the boundaries are becoming blurred between business and private interactions and usage, causing problems in the workplace.

Whether employer or employee, it’s time to size up attitudes and approaches. Otherwise, employers stand to lose valuable intellectual property and employees need to take care of the merging between their private and working life.

Let’s take a look at some of the major issues that are facing social media users on both side of the work/home divide.

Can employers use Facebook to obtain information about employees?

Stories are emerging from America about employers asking job applicants to log onto Facebook during an interview, or asking existing employees to name their boss or line manager as a Facebook friend, so that the prospective employer can get an insight into the private life of the job applicant.

But this kind of action is dangerous because using the information available on a Facebook page may leave the employer open to an accusation of discrimination on the grounds of sexual orientation, religion, disability or age.

Employers taking this approach are arguing that they need to check whether employees are using Facebook to criticise their employer, or to assess the character of a prospective employee. It is also being used to monitor and investigate any accusations of employees using social media to bully or harass colleagues, as the employer has to investigate the matter if asked to do so.

In the USA, courts in California have taken the view that the right to privacy must be weighed against the reasons put forward by the employer for intruding into the private life of an employee, saying that the employer has to prove that the intrusion is necessary and proportionate. Legislation is being introduced in California, Maryland and other states to prevent employers from requiring employees to give them access to their social media pages.

Take aways: What happens in America is likely to be echoed over here, so it’s worth employers making a policy decision now about their approach to employees’ private social media accounts, to make sure that any request for access is “necessary and proportionate”. And for employees, don’t hand over access to your private social media accounts without getting a written explanation of why it’s being requested, and how it will be used.

Who owns social media information?

Social media such as Facebook, Twitter and LinkedIn are becoming important marketing tools for businesses, but as with any new development, this produces new challenges and questions.

Who owns the list of contacts in an employee’s account on professional social networking site LinkedIn? Who owns the log-in details of a social media account established by an employee for a company? Who owns the followers of a Twitter account set up for a company by an employee?

Once again, we have to look to America to guess what will happen next over here.

In one case, a former partner in a night club business left and set up his own competing night club. He took with him the log-in details for the original club’s MySpace page, which had over 10,000 friends. In a similar case, an employee who had set up a Twitter account to boost traffic to the employer’s website left the company, taking with him the Twitter account’s log-in details. He renamed the account, and kept the Twitter following.

In both of these cases, the US Courts have held that social media accounts, their log-in details and their ‘friends’ or ‘followers’ are capable of being trade secrets that are entitled to be protected.

In Ardis Health v Nankivell (SDNY 2011) an employee had been taken on to create and maintain her employer’s social media websites. When she was later dismissed, she took with her the log-in credentials for the websites, which were known only to her. When she refused to hand them over the company was locked out of its own social media accounts. As the employee’s contract stated that any work she created or developed in her employment belonged to the company, the court held that the log in details belonged to the company and ordered her to return them, but not before the company had already suffered from the halt to their online activity.

Take aways: Don’t leave one person in charge of online social media accounts and make sure you set online access and passwords at company level and change them regularly, especially when anyone responsible for social media leaves the company. And make sure employee contracts spell out who owns the accounts and the log-in credentials.

Can employers control what employees say on social media?

Whether it is a rude joke on their Facebook page or a grumble about someone at work, the extent to which it may be judged by the employer depends on a number of factors.

Firstly, the type of business and whether the business is referred to. An employee of a waste disposal company probably has more freedom to tweet than an employee of a large firm of London solicitors.

Secondly, the effect, or potential effect on the employer’s business.

Thirdly, the readership. If the tweet only reaches eight people, the potential damage to the employer business is less than if it reaches eight million people.

And finally, the seniority of the employee. Pictures of a drunken evening by employees of a well-known company will cause more harm to the employer if they are posted by the managing director than if they are posted by the office cleaner.

Outside work:

For many people, it doesn’t seem possible that what they write to friends on their Facebook wall, or tweet to their followers, outside work could get them into trouble with their employer, but there are grounds for employers taking disciplinary action over ‘inappropriate’ use of social media.

A recent example is the case of Swansea University student Liam Stacey, 21, from Pontypridd, who was sentenced to 56 days in jail after admitting inciting racial hatred over remarks made on Twitter about the Bolton Wanderers player Fabrice Muamba, who collapsed during a cup tie against Tottenham Hotspur. Not only did the remarks land him in jail, they have also cost him his place on Treorchy rugby team, and Swansea University has suspended him pending the conclusion of disciplinary proceedings.

But deciding whether behaviour is appropriate or not, can be tricky. John Flexman, a former employee of the British gas exploration company, BG Group, has just brought a constructive dismissal claim before a UK Employment Tribunal following a dispute with his employer over his use of LinkedIn. He was accused of “inappropriate use of social media” and found to be in breach of a company policy on conflicts of interest which prevents employees from ticking a ‘career opportunities’ box on the site. This is the first notable constructive dismissal claim involving a LinkedIn account and the outcome will be being watched carefully.

Criticising the company:

Employer should be able to take it for granted that employees will act in the best interests of the company and will not undermine it - just as an employee should be able to take it for granted that their employer will not try to undermine and diminish their abilities.

Public criticism of an employer on social media strikes at the root of this relationship, but even so, an employer needs to respond to criticism reasonably.

It’s unlikely to be a sacking matter if a teenage employee tweets that her job is boring as the complaint is about the job, not the employer. And as many teenagers would describe their jobs as boring, the complaint is unlikely to reflect badly on the employer. A better response by the employer might be to demonstrate to the employee how important her job is, how others rely on her doing it well and to show the level of responsibility it carries.

On the other hand, a recent incident where airline cabin staff wrote disparaging comments about passengers and the airline’s safety procedures was judged to be highly damaging to the employer and the guilty staff were dismissed.

Bullying and harassment :

Like the school classroom, the workplace is a place where friendships and enmities are formed. Nowadays, these personal dramas may be played out in public on social media sites, and an employer has a duty of care to protect employees from inappropriate or offensive conduct, bullying or harassment from other employees. It means that employers have to show they will not tolerate employees posting remarks of these kinds.

Confidentiality:

Careless use of social media could be a betrayal of confidential information. For example if an employee posts personal information like a date of birth that is also used for log-ins or passwords there could be a breach of security.

Or, in a business where client confidentiality is fundamental, like a solicitor’s firm or doctor’s surgery, a tweet by an employee that discloses the name of a client is likely to lead to instant dismissal.

This aspect also takes us back to the employment tribunal with Mr Flaxman, as his employer BG Group first raised the alarm in response to information he posted relating to the company’s human resources, which they say was confidential. They also disputed suggestions in Mr Flexman’s CV that he had brought about a reduction in staff attrition.

Take aways: Employers need to be very clear about what’s acceptable practice for employees when they are online. And if it’s you that’s going online, don’t write anything that you wouldn’t say out loud to a stranger. It’s too easy to forget that online chats and comments are not taking place over the phone or the kitchen table.

So what next?

For employers, the best strategy is an overall social media policy that’s regularly updated, rather than a piecemeal approach which may be hard to enforce. But it needs to be a set of rules that is sensible and reasonable, as oppressive rules are unlikely to be enforceable and will only serve to alienate staff.

What is important is to set out the policy clearly so that all employees know what the boundaries are and what is unacceptable. For example, unless it is clearly spelt out that employees must not, in any circumstances, post offensive remarks about another employee on social media sites, they may feel that they can post what they like outside office hours and that what they do in their own home is no concern of the boss.

Any policy also needs to be aligned with employment contracts, which should spell out that passwords and other login details are the property of the employer; and should also tackle attitudes to business network contacts made by virtue of the employee’s job with the employer.

It all needs to be backed up with practical attitudes to enforcement. So steps should be taken to ensure that the company has control over all the social media log-ins and passwords to ensure that a former employee will have no access after they have left – which is particularly important if there is any ill-feeling surrounding the employee’s departure.

ENDS

Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.