Category Archives: Latest News

A Venture Capital and Private Equity career of A Lawyer

Accounting and Audit, Articles, Banking and Finance, Latest News

As I worked my way through law school, I had worked for 5 different law firms so by my third year had concluded I wanted to go into business rather than practice law.  I chose consulting both because the major consulting firms were willing to hire lawyers and consulting seemed like a great way to get “fire hose” overview of the business world.

While on a flight from London to Amsterdam to look at a potential acquisition for a Bain & Co. client, I saw an article on the Apple IPO and the role of Arthur Rock as an investor and Board member. His partner at the time was Harvard Law School graduate Thomas Davis, who also founded Mayfield Fund.  I had found my inspiration.  I thought venture capital represented a field where the deal skills of a lawyer and the market intelligence of a consultant might be a good fit.  I began to interview in earnest and landed a job at Centennial Ventures in Colorado.

Over the next 32 years I became a voracious student of all things technology and healthcare.  I chose those two fields because in the first case it is the agent of change and in the second case because of the size of the markets and how it affects all of us personally.  Over time I began to focus on later stage deals.  This was due to the fact that I am not an engineer or a doctor or a PhD, but a business trained lawyer.  The fit was therefore best in companies where a particular formula could be applied, along with my cumulative experience.

Eventually in 2010 I focused exclusively on deals with the following characteristics: (1) profitable (2) small companies ($5.0-$10 million in revenue typically) below the radar screen of the private equity firms (3) software/SaaS/cloud or healthcare services where I had been investing all this time, (4) majority ownership, the so-called control transactions (5) a heavy value element where EBITDA multiples would be no higher than 7.5 in technology and no higher than 6.0 in healthcare services (6) a minimum of $1.5 million in EBITDA.

A key characterization of these companies is that they are typically run by Baby Boomer-aged management who are looking to retire.  Usually there had been no outside money or just friends and family.  The entrepreneur wanted to get liquidity, diversify his holdings, and retire or semi-retire.  This meant that we as a sponsor group had to have the new management already selected and groomed by the original entrepreneur or bring our own new top management.

Management transition is a key issue in these deals. Roughly 10,000 Baby Boomers will turn 65 today, and about 10,000 more will cross that threshold every day for the next 19 years.  Most haven’t founded businesses, but this generation is the richest ever, forecast to have assets of about $54 trillion by 2030.

Our management is often younger, but more importantly either trained by a top MBA school or having extensive management experience or both.  The classic 21st century analytical management with familiarity with dashboards, key operating metrics or ratios, and internal operating software has a different perspective than the seat of the pants entrepreneur.  This is positive in terms of risk reduction and visibility to key levers of growth.  What are often missing are the industry contacts and the natural selling skills of the original CEO.

Think of these small buyouts, what we call micro-buyouts, as the bargain basement of technology deals, healthcare deals and many other industries. These are not the type of technology deals appealing to venture capitalist.  In fact, if these companies have ever received VC then we know they are “ruined” either because they became very successful or are of the size and valuation that we cannot afford, or they have burned through a lot of equity and don’t have much to show for it.  Either way, it makes the companies ill suited for a value-oriented majority control investor.

Still we have proven we can produce venture style investment returns without taking venture risk.  No, we are not going to hit a 100 to 1 return.  But we have produced 5X-realized returns since 2010 across 8 exits from 26 investments.   These returns come from 4 basic sources: (1) leverage (2) efficiencies (3) revenue growth (4) multiple expansion.  The large buyouts depend primarily on the first two.  They have the stability of operations to take on relatively high leverage and they can produce efficiencies by application of analytics, metrics, and internal software.

In our small buyouts the opposite is true.  The gains come primarily from growth.  We do leverage our companies, but the leverage is typically not more than 3X EBITDA or 50:50 equity/debt and often smaller.  We do not look for efficiencies in the classic sense of making EBITDA margin growth the primary goal.  We instead try to preserve as much as possible the typically high margins enjoyed by the original entrepreneur.

We instead often add expenses initially to drive growth.  The higher growth brings with the hope of eventually higher EBITDA margins from economies of scale.  Most important, by creating higher critical mass, we bring the company into the scale necessary to attract a much broader buying audience.  A $10 million company with $2.0 million of EBITDA might attract a 6X EBITDA multiple while a $20 million company with $4.0 million of EBITDA might attract an 8X EBITDA margin. This EBITA multiple expansion is critical to our returns.

Some who are lawyers might wonder whether they can be successful in technology businesses competing with engineers, or in general competing with MBA’s.  But the investment field is full of lawyers who first observe the business world, and then enter it successfully.  Deal skills are highly attractive to investment firms.  Analytical skills necessary to decide upon the attractive markets and the attractive business models are held by many lawyers.  The opportunities are there and the most important ingredient is a curious mind and an attraction to the field.

 

UK Apprenticeship levy

Articles, Employment and HR, Latest News

In force from 6 April 2017, the apprenticeship levy will apply to all employers (including private and public sector employers, as well as charities and educational groups) with an annual pay bill of more than £3 million. The levy, charged at 0.5% of the annual pay bill, aims to increase the quality and quantity of apprenticeships, and fund three million apprenticeship schemes by 2020.

A levy allowance of £15,000 will be offset against an employer’s levy payment, meaning payments will only need to be made in respect of 0.5%, which exceeds £15,000. Only one allowance will apply and so employers with multiple payrolls cannot claim multiple allowances. The levy payment will be collected monthly by HMRC, alongside the usual PAYE payments.

Once paid, the levy will be accessed via the new Digital Apprentice Service account, which employers, after registering their details online, will be able to access and draw down vouchers for each of their apprentices. Vouchers can be used from May 2017 but only with registered training organisations. Vouchers can be used on new or existing staff, provided they and their training needs meet set criteria (CPD training does not fall within the apprenticeship standards). Vouchers can also only be used towards training, as opposed to apprentice salaries, travel costs or costs associated with setting up an apprenticeship.

The government will also apply a 10% top up to the apprenticeship funds available in an employer’s account and funds will remain in that account for 24 months, unless spent on apprenticeship training. If unspent, the funds will simply expire after 24 months, although a ‘first come, first served’ approach will be taken and the oldest funds will automatically be used first, in an attempt to minimise the amount of expired funds.

The government has introduced anti-avoidance measures, however if these measures cannot counteract the advantage gained by the business, it will be denied the £15,000 levy allowance for the tax year.

Catharine Geddes, Employment Partner and Head of HR at Bournemouth-based Lester Aldridge, commented: “Employers who pay into the levy scheme should be given access to the Digital Apprentice Service in February 2017 and they can then better plan how the new apprenticeship scheme will work for them. Employers who don’t need to pay the levy should also consider where apprenticeships can best fit within their businesses as the government has confirmed it will contribute at least 90% towards the cost of apprenticeship training, with other grants and funding arrangements being available for small employers ”.

For advice and assistance with apprenticeships and the levy, or any aspect of employment law and HR, please contact Catharine or a member of her team on 01202 786 161.

January sees surge in divorce enquiries

Articles, Family and Matrimonial, Latest News

It’s a sad fact that in the UK, more people get divorced in January than any other month.

Filing for divorce in January is so popular that it is dubbed “Divorce Month” while the first working day back after the Christmas break is often known as “Divorce Day”. On top of this 42 per cent of all first marriages now end with a decree absolute.

The month is once again living up to its reputation as law firm Blanchards Bailey reports a surge in enquiries across Dorset.

The sharp rise of people contacting the legal firm reflects a national trend as people take stock and decide to make a fresh start in the New Year.

Lisa Holden, Principal and Head of Family Law, said: “New Year is naturally a time for reflection with many people struggling through a difficult festive period, often for the sake of children.

“We’ve found that appointments were being made in advance by people in early December as they were already planning to start the divorce after the holiday season, simply getting through Christmas before starting the process. We’ve seen that financial pressures are a main cause for conflict at this time of year.”

Blanchards Bailey assists people in every area of divorce, from child disputes to financial and business matters, as well as offering family mediation, collaborative law and advice on probate, wills, tax and estate planning.

Lisa added: “Our team is particularly experienced in assisting people who have a lot of assets to protect and our clients continue to trust our delivery of the best outcome for each situation.

“We understand that going through a divorce can be one of the most traumatic experiences for those concerned but we do our utmost to guide and support people through this difficult period. Our experience ensures you know exactly where you stand, what the best options are, the process and the costs involved.”

For more information visit www.blanchardsbailey.co.uk

The GDPR: How to Make the Simple Complex

Articles, Latest News, Technology Media & Telecoms

I fear my European legal cousins share a character trait with my US colleagues – the ability to make the simple complex. I have practiced law longer than I am going to admit, with the past four years in-house as the Chief Privacy Officer and VP of Legal Affairs at a tech company that creates privacy products. I rely upon counsel from many outside firms for concise business-oriented advice and also speak on a daily basis with in-house counsel for many of our clients. Those who I go back to time and again are those who keep it simple and make their advice relevant to my business – no easy feat considering the complexity of many laws.

The General Data Protection Regulation (GDPR) is meaty and dense, certainly a legislative tome. Coming in at 186 pages, it makes an excellent bookend. Personally I view it as a brilliant piece of legislation, irrespective of whether it was by design or default. First, the four year EU-wide legislative process was staggering. When it began I couldn’t conceive of it being completed, but it was. Secondly, guidance on regulatory expectations is embedded within the law, stripping away a lot of ambiguity that is often coupled with legislation. And third, given the twin realities of an explosion in borderless digital commerce and the lack of a national privacy law in the United States, the GDPR’s extra-territorial application will make it the de facto national privacy law of the US, which is good news.

Don’t get me wrong, compliance necessitates paying attention to the details. But before any of us, however, can pay attention to the small things of the GDPR, we need to understand the big picture to best explain it to CEOs, CFOs and Board of Directors. The GDPR is a seismic event for many organizations, even greater than Y2K leading up to 2000. It goes way beyond data protection – it’s title is a misnomer – and should be named the General Data Governance Regulation.

The GDPR is really pretty simple. The law is all about giving power back to the people. That plays well to my revolutionary youth still buried inside this middle-aged mind. And the way this will be done is by requiring companies to do the two things: be both accountable and transparent for their data practices.

Accountability requires companies to be introspective and take a good hard look in the corporate mirror to get a comprehensive understanding of what data they collect, how they collect it, whether it’s personal or nonpersonal, and how they use it. It’s a pretty reasonable ask, despite the public discussion on about how unreasonable this obligation is. Unsurprisingly, Big Law and Big Consulting have quickly seized upon this, rightly seeing it as a massive business opportunity, ramping up their assessment teams, to begin their complex GDPR gap analysis. This new GDPR services industry will spawn billions, in fact IDC estimates it will create a $3.5 billion market opportunity for security and storage vendors by 2019.

This is important. A baseline is needed to measure where you are against where you need to be by 25 May 2018, the go live date. But it’s not the whole story. Remember, process review is only the first step, but the goal is to get that full picture understanding so you can know what your weak spots are and put in the right privacy controls to protect those vulnerabilities. Once you get all that, then you can accurately document it both to the regulatory authorities, and clearly and honestly communicate your data practices to your customers and employees.

The second top-level obligation, after the introspection, is to be outward facing and transparent about how you use data. This transparency obligation is manifested in a few ways, but at the end of the day it boils down to this: communicate clearly to your audience. There’s a dilemma, however, namely how to communicate effectively while still satisfying the law’s disclosure requirements. This is something many organizations have been wrestling with for quite a while. The GDPR codifies the obligation to be transparent in a concise easy to understand why, which will force counsel to shift their advice from a no-risk approach, to a contextual based risk approach.

The new individual rights under the GDPR should not come as a surprise to anyone. The concepts have been around for years in one form or another, usually as high-level principles. Now though, these well-established privacy concepts are rights: to access and correct your data, to get your data in a readable format, right to erasure, the ‘right to be forgotten’, whereby a person can ask for offending information about her to be removed from a website, and to object to profiling, also known as ‘tracking’ in the US.

While the right to erasure has proved vexing and controversial, the important thing to remember is that a data controller really needs to have a process in place that allows: (i) for a person to request certain data be removed or taken down, (ii) triggering the data controller to review the request and go through a determination process using the GDPR’s guidelines in deciding whether to honor the request, and (iii) respond to the request. For example, if an individual wants evidence that he is a registered sex offender taken off a website, it may be in the public’s best interest that such data should not be removed.

Clearly many new processes will be created, and companies will assuredly rely upon counsel to help understand how to deploy them. From my experience, where counsel adds the most value is in keeping it simple. I already know that the GDPR is a big deal and penalties for non-compliance can be crippling. However, the regulation is also an opportunity. It’s a once in a career moment when legal and privacy can plant a flag in the ground and demonstrate that if done right, and the essence of the GDPR is captured by good data hygiene practice, then compliance with the law will be the least of the things to accomplish. That’s the advice I need.

 

 

Approaching five years PQE? – It’s time for a career spot-check

Articles, Employment and HR, Latest News

Lawyers approaching the five year post qualification mark tend to use this milestone as a time to take stock of their career. It is seen as a good time to assess whether you are truly happy in your current role and direction, and whether it is likely to deliver on your ambitions over the next five years.

We are not necessarily talking about lawyers who are unhappy in their current role, it’s about assessing where you want to be professionally in the coming years. In fact, a good proportion of the lawyers say that their current role/firm can satisfy their mid-term goals.

So what about you? Have you given your career a mini spot-check as you edge towards that five year PQE mark?

The starting point is to work out what is important to you now and what you anticipate being important to you in the long term (of course that latter can change with time). It tends to be that remuneration aside, the biggest considerations for lawyers at this stage centre on one of the following:

(1) Progression

(2) Work/life balance and flexibility

(3) Private practice Vs In-house

Let’s examine each of these areas so that you can give your own career a mini spot-check.

(1) Progression prospects – Climbing the ladder

The first question to ask yourself is “Do I want to be a Partner in a law firm” Yes or No?

“No”

If you’re starting to feel that the answer to this question might be “no” then don’t worry – you are not alone. There is an increasing number of lawyers who are less attracted by the idea of partnership and the responsibility that comes with it.

That is not to say that you are not ambitious, but maybe that your motivators and ambitions have changed. If you’re more motivated by quality of work than responsibility and management, is your current firm allowing you to focus on the fee-earning and client side of your role? The motivators in sections (2) and (3) below might strike a chord with you.

“Yes”

Others do remain completely focused on reaching the partnerships milestone. If you fall into this category there are two further questions you need to ask at this stage in your career:

  • Am I realistically going to reach partner at my firm in the next five years?
  • And the even bolder question – Do I want to be a partner at this firm?

If you are unclear on either of these questions, then it is time to take stock. Remember, if you leave a lateral move until a later point in your career, firms will expect more from you. You’ll be a more senior, more expensive hire so will have to expect elevated scrutiny around the strength of your network and client following.

A lateral move later on in your career will also require you to re-establish yourself internally and this can take time. That is why the four/five year PQE mark can been seen as the perfect time to take the plunge, as it gives you ample time to establish yourself on both fronts.

Recruitment decisions at the four/five year PQE mark are more centered on expertise and ability and less on external network – of course showing an appetite for business development is a plus. Equally, at this time in your career, firms will still see you as fairly malleable – if you are looking to make the step up into a larger firm it is not too late. It may become trickier to do so the longer your career progresses.

As for the second bullet point, if you are already having doubts about your current firm then it is definitely time to take stock! Perhaps you’ve seen some of the frustrations and red tape the partners at your firm face. In this case a move to a smaller firm may work. Some may see this as a risk but being part of a smaller team can expedite your path to partnership. You’re also likely to get a lot more autonomy, allowing you to develop your own brand and client base.

(2) Work/life balance and flexibility

Your priorities may have changed. What might have seemed like a great lifestyle and career path as a junior solicitor might not seem so attractive any more. Working at the very best firm and acting for the very best clients often comes with a compromise – your own free time.

The search for a better work/life balance is without a doubt one of the biggest reasons lawyers register with recruitment specialists. This has been even more evident in recent years. As the market picked up post-recession, a lot of teams suddenly needed to recruit en masse to meet client demand, but soon realised there was a lack of quality talent. As a result, talented junior lawyers have been under immense pressure, often working very long hours and weekends. Sure, some might say that this is part and parcel of being a lawyer but many have realised that it doesn’t have to be the norm.

The legal recruitment sector has helped a large number of lawyers make a move before the five year PQE mark – moving to firms with a genuine focus on flexibility and policies such as part-time hours, remote working and job sharing. It’s not an urban myth – these firms really do exist! What has been refreshing for a lot of these lawyers is that they have not had to compromise on the quality of work and have actually enjoyed a lot more client exposure.

A lot of teams still remain bereft of quality mid-level lawyers due to the recession and natural attrition. Recruitment experts are seeing a lot of the more regional/national players snap up talent from the larger firms by allowing more flexible working.

(3) Private practice Vs In-house

Lawyers often see ‘in-house’ as the perfect escape from the headaches and hazards of private practice. After all, doesn’t life as an in-house solicitor allow you a more manageable work/life balance and the chance to move to move away from a KPI/chargeable-hours culture?

It really depends on the in-house organisation and role. Global recruiters such as Michael Page, have certainly seen a lot of private practice lawyers move in-house and never look back. They feel like a valued part of the wider commercial team and a lot closer to the commercial rationale of the legal advice given.

Equally, recruiters have spoken to in-house lawyers who have longer (and at times more stressful) working days now than they did in private practice. You really need to think carefully about what is motivating your desire to move in-house and whether you have found the right role for you.

It is certainly an option to be thinking about as you approach five years PQE. The more senior in-house roles tend to prefer someone with previous in-house experience, whereas lower level roles can often be more flexible thus allowing a lawyer to make that first jump from practice to in-house.

Whatever you decide to do at this stage you have a wide array of options in front of you and are in a position to make choices about the mid and long-term trajectory of your career.

The complications surrounding defendant anonymity

Articles, Criminal, Family and Matrimonial, Latest News

Whilst the anonymity of complainants in serious sexual offences has long been protected in English law, defendant anonymity has proved a far more contentious issue.  It was initially granted along with victim anonymity in the 1970s, but later abolished in 1988.  It was argued that, unlike the case for victims, there was no reason to make a special exception for defendants and in fact, by doing so, it could imply that rape complainants were less reliable. It has also been argued by both women’s groups and the police that such a law would prevent investigating officers’ calls for other complainants to come forward in serial cases, such as in the case of the taxi driver, John Worboys, the ‘black cab rapist’.

The issue has been raised a number of times over the last few years following a string of high-profile cases, affecting politicians and celebrities alike.  The media spotlight on these cases and the public sympathy towards individuals like Sir Cliff Richards has helped move the debate forward.  A YouGov poll in 2015 found that there was widespread opinion favouring the need to protect both complainant and defendant.  Speaking after the police dropped his case, Sir Cliff described a unique violation of his privacy by a sensationalist media.

In addition to the disproportionate attention these stories attract, the coverage is often of such a lurid and intrusive nature that it arguably leaves a stigma which goes beyond other crime.  In 2015 both Nigel Evans the conservative MP and the radio one DJ, Paul Gambaccini, gave evidence to the Home Affairs Select Committee about their personal suffering whilst subjected to protracted and highly publicised investigations by the police.   In his concluding remarks Committee Chairman, Keith Vaz, spoke of the destruction and irreparable damage to the reputation of defendants.

It now appears that we are moving towards ever tighter restrictions on press coverage in respect of sexual offence allegations.  The above committee report called for anonymity for sexual offence suspects, unless they were charged or police needed to name them. More recently in late 2016 the DPP, Alison Saunders, came out in favour of anonymity for defendants.  She was quoted in The Times as saying, “you don’t shout about it before you come to any conclusion”.

Building trust between police and complainants

Investigations into allegations of sexual abuse pose unique challenges for the police, especially in striking the right balance between their responsibilities to the complainant and to the accused.    The ongoing football abuse scandal serves to highlight some of these challenges.

The unfolding revelations that followed Andy Woodward’s decision to waive anonymity and speak out about his ordeal at Crewe Alexander, raised the spectre of widespread and systematic abuse reminiscent of that uncovered during the Saville investigation.  Similarly, the personal accounts we have heard from ex-footballers like Mr Woodward and Paul Stewart, the former England and Spurs star, served as a timely reminder of the psychological damage inflicted upon the victims of these crimes, and the unique challenges they face in coming forward.

It is essential that survivors have the confidence and reassurance to speak out, and the police undoubtedly have a role to play in this.  Days after Woodward’s revelations to The Guardian, Cheshire constabulary put out highly publicised appeals urging victims to contact them, and assuring them their reports will be taken ‘extremely seriously’.

Despite the seemingly compelling evidence that surfaced in relation to at least one sexual predator, police had to, and must continue to, remain vigilant against the risk of bias creeping into their conduct.   However, following the string of failed investigations in the wake of Saville, there is a growing concern that the impartiality and objectivity of the police has been found wanting.

It is widely accepted that Saville’s offending went undetected as long as it did because of a society-wide reluctance to speak openly about child abuse.  Police forces have taken it upon themselves to remedy this problem.   Operation Hydrant was set up in the wake of the Saville revelations to share good practice.  It emphasised the need to build trust and rapport with the complainant.  To this end, it was felt that anyone who came forward should be recognised and referred to as a victim. In explaining the new approach, the head of Operation Hydrant, Chief constable Simon Bailey, claimed that “if we don’t acknowledge a victim as such, it reinforces a system based on distrust and disbelief”.

 A Policy of ‘believing victims’

The end of 2016 saw the publication of Sir Richard Henriques’ report into the mishandling of Operation Midland, the 18 month investigation by Scotland Yard into allegations of historic abuse levelled against prominent members of the establishment including former head of military, Lord Bamell, and former conservative MP, Harvey Proctor.  Sir Richard’s report identified 43 separate failings by the police during the investigation.  The central criticism being that they were too ready to believe the complainant without sufficient scrutiny of the evidence. It attributed these failings directly to Operation Hydrant.  Sir Richard took aim at the police practice of labelling complainants as “victims”, (just as Cheshire constabulary did in the wake of Woodward’s revelations, saying that it was a cardinal principle of the justice system that a complaint maybe false. He stated that “the policy of ‘believing victims’ strikes at the very core of the criminal justice process” and warned that “it has and will generate miscarriages of justice on a considerable scale”.

It is now widely felt that in so many of the high profile investigations into abuse since Saville, such as Operation Midland and those levelled against Sir Cliff, Paul Gambaccini and Nigel Evans, the investigation was pursued in spite of the lack of credible evidence.

The real damage to these individuals is to do with the unique stigma attached to the suspects of sexual abuse and how in the above cases their reputations were trodden on by unscrupulous officers who were quick to name the accused in the hope that it would encourage others to come forward and bolster inherently weak cases.  In his evidence to the home affairs select committee, Mr Gambaccini described the way police hung his name up in public during a year-long investigation as being a ‘fly paper tactic’.   Sharing his grievance, conservative MP Nigel Evans said, “I don’t believe that people ought to be plastered all over every national newspaper just to fish other people out”.

It is the strength of these personal accounts that has driven a recent revival of debate around the issue.   As already mentioned, prominent figures like Keith Vaz, Sir Henriques and the DPP, Alison Saunders have now called for a change in the law to reintroduce defendant anonymity.

The Power of Reporting

However, there may be an occasion when naming a suspect is a necessary and proper adjunct to an investigation. The manner in which the recent football revelations unfolded speaks eloquently of the power of reporting.  Andy Woodward’s brave decision to waive anonymity brought media coverage and attention to his ordeal and acted as a rallying cry to others to come forward.  It is arguably the case that naming his attacker added further weight to the story and helped propel it onto the front-page news, thereby maximising its impact.  Cheshire police confirmed that a further 11 footballers came forward in the days following the stories publication, and the NSPCC reportedly received 50 calls to their helpline in the first two hours of its operation.  This domino effect of complaints is reminiscent of what happened in the Saville investigation, along with other serial abuse cases, and many see the police’s discretion to name the suspect as being a vital trigger in this process.

Furthermore, it should be appreciated that many of the footballers who have come forward have suppressed painful memories of their ordeals throughout their entire adult lives. Mr Stewart, for example, talked about the heartbreak he felt in sharing his story with close family members before its publication in the Mirror.  They need every reassurance that their claims will be taken seriously.  Some feel a blanket law protecting defendant anonymity in sexual abuse cases alone will set it apart from other types of criminal case and in doing so send the wrong message that complainants, like Mr Stewart, are less likely to be believed than complainants in other types of criminal cases.   Following the Home Affairs Select Committee’s report in 2015, rape victim’s campaigner, Jill Saward talking on the Today program described how the committees proposal were insulting and claimed that it implied victims are lying.  Peter Watt of the NSPCC also spoke out against the committees proposals arguing that the naming of suspects gave other victims the strength to speak out.

The matter has now gone to parliament following the tabled amendment of the Policing and Crime Bill and already the issue is proving to be as polarising within the house as it has been in the wider public.    During recent debate in the House of Lords, Lord Judge spoke out openly against a blanket protection of defendant’s anonymity invoking the overriding principle of open justice.  He said, “That is not how we work in this country. We do not want people locked up for any time at all without being able to say so.”   Lord Lamont on the other hand suggested that a lack of defendant anonymity, in the case of this crime, undermined the British understanding of ‘innocent until proven guilty’.

Responsibility of the Police and their relationship with the press

The debate within parliament must go further than a consideration of the rights of defendants against those of victims and pay heed to a wider issue; that of the public’s confidence in the police handling of abuse investigations and in particular their relationship with the media.

It is interesting that the highly controversial report produced by the Home Affairs Committee back in 2015 did little more than call for reform of the law in terms already set out in current police guidance.   In November 2012, Leveson LJ said in his Report on The Culture Practices and Ethics of the Press that ‘It should be made abundantly clear that save in exceptional and clearly identified circumstances (for example, where there may be an immediate risk to the public), the names or identifying details of those who are arrested or suspected of a crime should not be released to the press nor the public.’

In 2013, the College of Policing published ‘Guidance on Relationships with the Media’ which dealt with the issue of the police revealing the names of individuals suspected of committing serious crimes. It followed the principle set out by Leveson. The Guidance advocates that ‘police forces must balance an individual’s right to respect for a private and family life, the rights of publishers to freedom of expression and the rights of defendants to a fair trial. Decisions must be made on a case-by-case basis but, save in clearly identified circumstances, or where legal restrictions apply, the names or identifying details of those who are arrested or suspected of a crime should not be released by police forces to the press or the public.

The loss of impartiality and objectivity of the police, and the danger that unscrupulous officers are ignoring the above guidance and publishing the names of suspects in desperate attempts to attract others to come forward and bolster inherently weak cases is highly problematic.  The objections to defendant anonymity boil down to the argument that the police must retain operational independence.   However this argument in turn raises the question of whether the police can be trusted to pursue their investigations impartially and objectively. The opinion of some, such as Sir Henriques in his report on the failed Operation Midland is that currently they can’t.  His report concludes with the warning that “nobody is safe from false accusations and damaging exposure under present arrangements”.

The investigation into allegations of historic abuse raises particular challenges. The recent failures discussed, highlight the fundamental requirement upon police that their conduct remain objective and impartial, and that any derogation from this principle would constitute an abuse of their powers. The naming of suspects is such a power that has been too readily abused.  Perhaps we have now reached the stage where a change in the law to provide added protection to suspects is necessary where the police guidance has been so flagrantly disregarded in a long line of investigations.  However, as the recent football revelations highlight, there will be cases where the naming of a suspect maybe a necessary and proportionate step and just as the select committee first proposed back in 2015, rather than a blanket protection, any such change to the law must allow for the possibility of judicial intervention to waive defendant anonymity in such rare cases.

R-E-L-A-X: We Can Still Patent Software, But Don’t Expect A Clear Test Anytime Soon

Articles, Intellectual Property, Latest News, Technology Media & Telecoms

More than two thirds of all patents challenged under 35 U.S.C. §101 have been invalidated since Alice Corp v. CLS Bank was decided in 2014.[1] Is this recent trend signaling the beginning of the end of the software patent? Should software even be patentable? Will a clear test help? While both the majority and dissenting opinion in Intellectual Ventures I LLC v. Symantec Corp. agree that software is patentable, in a bizarre twist, the concurring opinion has declared that software patents are finished. Clearly some judges on the Federal Circuit have run out of patience with the multitude of software patents that were drafted prior to the Mayo/Alice cases being decided. Nonetheless, don’t expect a clear test for patent eligibility under §101 anytime soon. This article reviews the majority and dissenting opinions in Intellectual Ventures, contrasts the concurring opinion, and explains why we believe a clear test for patenting software is not needed and in fact, would set back the patent system for years.

Intellectual Ventures I LLC v. Symantec Corp.

Intellectual Ventures sued Symantec for infringement of three patents. Ultimately, all three were found to be directed toward different abstract ideas:

1) Receiving mail and discarding it based on the characteristics of the mail

2) Screening messages

3) Virus scanning

The Federal Circuit went through both steps in the Alice framework and ruled that all three patents were invalid under §101 (affirming the District Court on two and overruling the Court on the remaining patent).

The Federal Circuit made two things clear. First, the inventive concept required to transform an abstract idea into a patent eligible concept must be in the claims. This concept was spelled out by the majority directly addressing the dissenting opinion. The dissent had argued that one claim in one patent was patentable because that claim improved the functioning of the computer and addressed problems specific to the internet. However, the majority stated that, while it was true the patent disclosed an improvement in the functioning of a computer, the improvements at issue were absent from the claims. Therefore, the Federal Circuit held the claim invalid.

Second, the majority makes clear that software is still patent eligible. The majority restated precedent noting that to be patent eligible, software must improve the functioning of the computer or solve problems specific to the technological environment. The majority even gave an example of how the virus screening claim at issue might have been patent eligible.[2] The fact that the majority stated what they are looking for when determining software patent eligibility and provided a concrete example of how such a claim might have been patentable, makes clear that software is still patent eligible.

Judge Mayer’s Concurring Opinion

Initially, Intellectual Ventures I LLC v. Symantec Corp. seemed like another run-of-the-mill software patent case. Company A sues Company B for infringement of software patents.  Company B argues that the asserted patents are invalid under §101. The Federal Circuit agrees and the software patents are ruled invalid. Case over, right? Not so fast. Judge Mayer, in a concurring opinion, has decided he’s had enough of software patents in general. His frustration likely built up after more than two years of purging the system of software patents that never should have been issued. Since Alice in 2014, software patents have been invalidated at the Federal Circuit level under §101 at an alarming rate of roughly 95 percent.[3]

Judge Mayer’s central point, on its face, is difficult to dispute. If an idea (software) is not patentable and only embodiments of the idea are patentable, and the generic computer the software is running on is not patentable, then all ideas running on the generic computer should not be patentable. However, guidance from the Courts, like the majority opinion, has said software must improve the functioning of the computer or solve problems specific to the technological environment in order to be patent eligible. It’s undisputable that patents directed at conventional ideas cannot be patented by simply tying those claims to a generic computer. What we believe Judge Mayer is missing is that not all software patents are generic ideas on generic computers. In reality, a lot of software patents are behind the improvements of the electronic devices we use today. Software has a place in patent law; unfortunately, it has taken patent law several years to catch up and find that place.

Judge Mayer’s reasoning has two main points:

1) Software patents “run afoul” of the First Amendment

2) Software patents on a generic computer are not eligible for patent protection

Judge Mayer’s first point regards preemption, a main concern in the post-Alice world. However, instead of worrying about how a patent claim might preempt a field of invention, Judge Mayer expresses concern about preempting the First Amendment by “exacting heavy taxes on widely-used conduits for online expression.”[4] This concern, while somewhat valid, is actually resolved by the Alice framework, which specifically addresses the potential for preemption. If, for example, an idea preempts “widely-used conduits for online expression,” it would be ineligible for patent protection under §101. Thus, Judge Mayer’s slippery slope argument involving preemption is not a valid reason to make software ineligible for patent protection.

Judge Mayer’s second point, the more sweeping concept of preventing patents from being issued on software, is broken into four sub-points:

1) The scope of software patents outweighs their technical disclosure

2) Software patents provide incentives at the wrong time

3) There are too many software patents

4) Software patents lack the definiteness required by patent law

The first sub-point also regards preemption. As noted above, preemption is accounted for under the current Alice framework. However, one sticking point for Judge Mayer is that most software patents do not include the software code behind the invention. The reason for the lack of code in the patent, however, is that the code itself is not patentable. What is patentable is what the code does. Software code itself can be protected using copyright law and has no place in patent law.

The second sub-point, that software patents provide incentives at the wrong time, exists for virtually any invention, not just software. While Judge Mayer correctly points out that a lot of software patents are filed at the “idea stage,” before the invention is finished, the same is true for most inventions. This problem has only gotten worse because of the new First to File rule under the America Invents Act. It’s true that “those who scamper to the PTO early…reap hefty financial dividends.”[5] But, this reward is not a result of software patents; it is a result of the new filing provision of the America Invents Act. Right or wrong, first-to-file is here to stay and all inventors are incentivized to file patent applications as early as possible.

The third sub-point, that there are too many software patents, should have no bearing on whether software is patent-eligible. Clearly, most of the things we use today are operational because of software. In fact, it is very likely that you are reading this article using an electronic device that is operational because of software. It’s no surprise that the most popular area of innovation has a lot of patents. Software’s patent eligibility doesn’t hinge on the popularity of the technology it relates to.

The fourth sub-point, that software patents lack the definiteness required by patent law, is also related to preemption. Judge Mayer states that software is “akin to…literature or a piece of music, undeniably important, but too unbound” to be patent eligible.[6] But Judge Mayer misses the point – software patents don’t patent software, they patent what software does. If software simply does something that can be accomplished without it, the Alice framework will render that ineligible for patenting, thereby preventing the preemption Judge Mayer is concerned about.

A thorough review of Judge Mayer’s analysis, combined with the fact that it was a concurring opinion, shows that the software patent is not dead. The current Alice framework directly addresses most of Judge Mayer’s concerns. Looking at the underlying reasons for Judge Mayer’s arguments suggests he is simply frustrated with the large number of bad software patents he sees on a regular basis.

There Is No Cookie-Cutter Solution

We should not spend much time waiting for a clearer standard on patenting software from the Supreme Court. Many recent cases seeking such guidance have been denied certiorari.[7] This is likely because the patent system has already learned first-hand the consequences of bright line rules. In its 2008 search to find a predictable test, the Federal Circuit declared the Machine or Transformation test as the standard for patent eligibility under §101.[8] While the Machine or Transformation test seemed to be in line with Supreme Court precedent, it had tremendous unintended consequences. The Machine or Transformation test led to numerous patents awarded merely because a conventional abstract idea was performed on conventional computer hardware. Today, many similar patents are regularly invalidated because implementing an abstract idea on a generic computer is not patent eligible. While many suggest that the sheer number of patents being invalidated is a sign of bad things to come, or worse, that software and its effects are not patent eligible, the fact that these patents are being invalidated is actually a good sign. The heightened number of invalidated patents is an indication that a lot of ineligible patents were issued under a system that hand-cuffed both patent examiners and the courts. The patent system is purging itself of patents that slipped through the system under the Machine or Transformation test.

The Supreme Court has long “warn[ed] …. against” interpreting Section 101 “in ways that make patent eligibility depend simply on the draftsman’s art.”[9] Trying to give a definition to the term “abstract idea” or a clear test on patent eligibility under §101 would do just that. Given the Alice framework, it’s clear that software patents will continue to be granted based on how well a patent prosecutor can define the invention so that it is not simply an “abstract idea.” A clear test with bright line rules and definitions would handcuff patent examiners and the courts for years, and once again set back the patent system.

For the purposes of §101, the want of predictability is outweighed by the need of flexibility. Patent law exists to promote the progress of science and useful arts. Scientific progress is unpredictable. An overly rigid legal system will only “impede innovation more than it would tend to promote it.”[10] Moreover, “Section 101’s vital role…is to insure that patent protection promotes, rather than impedes, scientific progress and technological innovation.”[11] The current application of the patent eligibility standard is working; no clear test is needed.

Summary

In trying to address new technology, the Federal Circuit used an inflexible rule to interpret Section 101. Since then, the Supreme Court has made determinations under Section 101 more flexible, which has led to large-scale purging of many patents that should never have been issued. The Supreme Court would not have gone through Bilski, Mayo and Alice, if software were ineligible for patent protection. Instead, the Supreme Court appears to be trying to mold a flexible set of rules that can keep pace with innovation. Another inflexible rule would simply set the patent system back again. The software patent is alive and well. It is merely being held to the same standard as all other areas of technology.

 

[1] Two Years After Alice: A Survey of The Impact of a ‘Minor Case’ (Part 1), Bilski Blog, June 16, 2016, available at: http://www.bilskiblog.com/blog/2016/06/two-years-after-alice-a-survey-of-the-impact-of-a-minor-case.html.
[2] Intellectual Ventures I LLC, v. Symantec Corp, 2015-1769, at 24-25 (Fed. Cir. 2016).
[3] Two Years After Alice: A Survey Of The Impact Of A ‘Minor Case’ (Part 1), Bilski Blog, June 16, 2016, available at: http://www.bilskiblog.com/blog/2016/06/two-years-after-alice-a-survey-of-the-impact-of-a-minor-case.html.
[4] Intellectual Ventures I LLC, v. Symantec Corp, 2015-1770 at 3 (Fed. Cir. 2016) (Mayer, C. J., concurring).
[5] Id. at 10.
[6] Id. at 12.
[7] Ultramercial, LLC et al. v. Wild Tangent, Inc. 772 F. 3d 709 (Fed. Cir. 2014) (cert. denied).
[8] In re Bilski, No. 2007-1130 (Fed. Cir. Oct. 30, 2008).
[9] Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).
[10] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).
[11] I/P Engine, Inc. v. AOL Inc., 2013-1307, at*9 (Mayer, C. J., concurring) (“A robust application of section 101 ensures that the nation’s patent laws remain tethered to their constitutional moorings.”)

Vulnerable Road Users Are Victims In Government’s War On Compensation Culture, Warn Experts

Articles, Latest News

Experts warn that the Government’s latest crackdown on fraudulent motor claims must make exceptions for vulnerable road users, such as motorcyclists, bicyclists and pedestrians, or risk denying fair access to justice.

In its response to the Ministry of Justice’s consultation on reforming the ‘whiplash’ claims process, Fletcher’s Solicitors, which deals with around 30% of all motorcycle accidents in England and Wales, warns that the planned blanket approach for all road users ignores the reality for vulnerable groups. This includes the 18,000-plus motorcyclists who represent 10% of all casualties on the UK’s roads each year, despite only making up 1% of all road users.

The proposals, which aim to impose stricter limits on damages for minor soft tissue injuries, referred to as ‘whiplash’ injuries, will also require all claims under £5,000 to go through the small claims court and therefore not be able to recover sufficient legal costs even if they are successful.

The proposals are aimed at increasing the cost and effort required for all qualifying claimants injured in road accidents, while reducing the amount of compensation claimants with soft tissue injuries can receive. The Government believes this will put off many minor and fraudulent claimants and so reduce overall premiums for ‘honest’ motorists. They expect motorists to receive a £40 saving on their car insurance, although there is no intention from the Government to police this.

However, experts argue that the knock-on impact for vulnerable road users will be unfair and fail to support the Government’s wider objectives.

Ed Fletcher, CEO of Fletchers Solicitors, says: “There is a genuine danger that the rights of vulnerable road users will be harmed if exceptions are not made to the Government’s plans.

“While the Government has concerns about a perceived compensation culture amongst car users, problems with fraud simply do not apply to claims from vulnerable road users. Compared to the ABI’s estimate of 70,0000 dishonest motor claims detected in 2015 alone, we estimate less than 0.0002% of motorcycle claims involve findings of dishonesty,

“Insurers recognise this and, as a result, motorcycle insurance is already good value, about a third of the equivalent insurance for car drivers. The Government’s focus is clearly on reducing car insurance, not motorbike insurance.

“The proposals also fail to take into account the complex nature of accidents involving vulnerable road users who aren’t protected by a car when an impact takes place. Not only are their injuries more complex and varied as a result, but also, in our experience, the question of who is to blame is twice as likely to be disputed in motorcycle cases compared to the average motor claim.

“This makes it harder for such matters to be dealt with fairly through the small claims court.  Such road users are therefore more likely to require more in-depth legal advice and also very detailed (and more expensive) medial reports to support their case.

“Applying a blanket approach across all road users therefore puts these groups at a substantial disadvantage for no benefit other than to put unreasonable obstacles in the path of legitimate claimants.”

Ed Fletcher believes the correct solution will be to draw a clear distinction between claims from different types of road user.

Ed continues: “We believe that any reforms bought in by the Government in order to crackdown on whiplash claims should be limited to claims as defined by the proposed definition in the consultation, with special emphasis on the distinction between ‘occupants of a vehicle’ and vulnerable road users. This will ensure that bikers and other vulnerable road users, who are not part of the perceived problem, continue to be protected by society.”

For more information, please visit: www.fletcherssolicitors.co.uk

Organisations need to act now in order to meet the requirements of the new Electronic Identification and Signature (eIDAS) legislation

Articles, Latest News, Technology Media & Telecoms

Electronic signatures present a huge potential for businesses to improve their operations, create better customer experiences, improve security, and increase potential revenue. E-signature technology now offers cross-border recognition of electronically-signed documents, and instant verification of signer identities and document authenticity – which are essential for businesses operating in increasingly digital and mobile environments.

However, transitioning to e-signatures brings a number of challenges —both regulatory and operational— that businesses need to be aware of. With e-signature adoption increasing, and it becoming mandatory for businesses to recognise electronic identities (eIDs) from mid-2018, it is crucial organisations prepare themselves now.

The changing e-signature landscape

Adoption of e-signatures is still uneven across different industries. A lack of technology standards has been an issue, as has the fact that e-signatures historically have not had the same legal standing as handwritten signatures.

Major changes are underway: this year the EU’s new regulation on electronic identification (eIDAS) became legally binding. The regulation provides a common legal framework for understanding and categorizing e-signature processes; makes it easier for citizens and businesses within EU member states to understand and use e-signatures; and gives e-transactions and other e-signed documents the same legal status as paper documents.

What’s more, this summer also saw Adobe help launch the Cloud Signature Consortium, a group of leading industry and academic organisations brought together to build a new open standard for cloud-based digital signatures across mobile and web. The aim of the initiative is to make electronic signing consistent, secure and scalable, so that anyone can sign digital documents from any digital channel or device.

Under eIDAS, only certain business entities, called Trust Service Providers (TSPs), will be able to issue digital IDs that can be used to create legally verifiable “qualified electronic signatures”. eIDAS establishes a common foundation for mutual recognition of electronic signatures across EU member states, making qualified electronic signatures compatible across all 28 participating EU countries and within the 236 trust providers recognized by the EU.

By providing legal and regulatory standardisation around e-signatures, the eIDAS regulation lays down a predictable legal structure for individuals, companies (in particular SMEs), and public entities to safely access services and conduct transactions online and across borders in just “one click”. With this framework, businesses across Europe can finally and confidently embrace digital transformation with electronic signatures.

Classification of e-signatures

Any business that utilises e-signatures will have to be eIDAS-compliant, and so it is crucial that owners become familiar with the new legislation, and review and identify which business processes need to be updated for compliance.

eIDAS considers three categories of e-signatures, and defines a class of providers—called Trust Service Providers (TSPs)—who offer electronic IDs, time stamping, and other services that support electronic signatures. It goes into significant detail about security requirements, burden of proof, rules for mutual recognition, and supervision of TSPs. eIDAS offers a standardised mechanism for a business or corporate entity to understand the legal standing of the signatory, based on the following signature categories:

  1. Electronic Signatures

An electronic signature under eIDAS is data in electronic form attached to or logically associated with other data, and which is used by the signatory to sign a document. eIDAS provides that an electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely based on the fact that it is in electronic form. In other words, courts cannot discard them as evidence only because they are electronic, with a legal principle called non-discrimination.

  1. Advanced Electronic Signatures

Advanced signatures are a specific type, or a subset of, the larger category of electronic signatures. They are: uniquely linked to the signatory; capable of identifying the signatory; created using data that the signatory can use under his sole control; and are linked to the signed document in a way that any subsequent change is detectable. This requirement can be met with a specific type of digital ID, called a “certificate”, which is typically issued by a Trust Service Provider.

  1. Qualified Electronic Signatures

Qualified signatures are a very specific form of an advanced signature, and they are the only signatures defined in eIDAS that have the equivalent legal effect as a handwritten signature. They’re also the only type that will be automatically recognized by other member states. For businesses to work with Qualified Electronic Signatures, the signer needs to work with a certificate-based digital ID issued by a Trust Service Provider that has been specifically accredited in a member state. In addition, qualified signatures require the use of a qualified signature creation device. For example, the certificate is stored on a smart card, and the signer uses a smart card reader when signing the document.

When it comes to e-signatures, qualified electronic signatures really are the gold standard. These tend to apply to document processes that have high monetary value or where the risk associated with identity fraud is too high to bear. Processes related to government benefits or clinical research are good examples. This category also applies to any business process where applicable law requires, exceptionally, a specific form with a handwritten signature. Example of these types of exceptions are employment termination proceedings in Germany or the transfer of real estate in some countries.

The majority of the use cases, however, don’t require written forms, with businesses typically having the flexibility to utilize Advanced Signatures. These require that each signer have a certificate-based digital ID, which may be practical for employees or favoured business partners, but is more difficult to implement when working with new customers, partners, or the public at large.

The eIDAS legislation also introduces the idea of “electronic seals”: With eIDAS, only an individual person can use an electronic signature. A legal entity, such as a business, cannot. The business can, however “seal” a document to ensure certainty of a document’s origin and integrity.

Preparing for the future of e-signatures

It will be mandatory for businesses to recognise electronic identities (eIDs) from mid-2018. A business that is unprepared for the eIDAS regulation may find that it risks restricting potential customers and partners, as it will not be able to facilitate long distance digital signing or legally verify a documentation due to the absence of the right technical infrastructure. And beyond the potential loss of new trade, a business may face legal repercussions for failing to comply with eIDAS adequately.

Any business using e-signatures will, naturally, also have to be compliant with the Data Protection act, which governs data security and compliance for a new breed of businesses services which are increasingly based on the Cloud. Regardless of its size, any business handling personal data is responsible for its protections.

Besides regulatory concerns, business owners will also have to evaluate which technologies can best advance this transition by engaging with the specialist vendor community, which can provide expert counsel on compliant solutions. Doing so will enable them to test their in-house expertise and verify that their current and planned technologies will continue to operate within regulatory boundaries.

With the arrival of eIDAS, businesses have been given the flexibility to deploy electronic signature solutions that meet their specific requirements. The use of e-signatures is only set to grow, as businesses continue to operate in an increasingly connected environment. By ensuring compliance as early as possible, businesses can better guarantee that they won’t be superseded by more agile, technologically savvy competitors, while having the capability to conduct cross-border business securely and safely.

Ex-Spouses could face travel bans for failing to pay divorce settlements

Articles, Family and Matrimonial, Latest News

Paul Lancaster, partner of the Family Law team at Blacks Solicitors, looks into the latest proposals from the Law Commission:

“The Law Commission has published new proposals which aim to make the enforcement of family financial orders ‘more effective, accessible and fair’ and implement tough sanctions for those who refuse to pay their former spouse’s divorce settlement.

The Commission states that many divorcees are ignoring the orders, with as many as 4,200 enforcement cases each year amounting to an estimate of £15m to £20m of debts each year which go unrecovered, leaving the recipient spouses at a serious detriment and hardship.

The current position allows those that are owed money to take their ex-spouses to Court where a jail sentence may be ordered however, because a criminal standard of proof is required, in reality this type of sanction is rarely enforced.

The report recommends a wide-ranging reform, including the power for the Courts to obtain information about debtors, broadening the range of assets available for enforcement purposes and introducing further punitive measures such as disqualifying debtors from driving and prohibiting them from travelling out of the UK.

The Commission has, however, confirmed that they will not put ex-spouses in a self-defeating position whereby they can no longer earn a living as a result of a driving ban. The commission is therefore also recommending that the Courts have the power to confiscate passports which would be returned once the debt is settled. It is believed these measures will go some way to tackling the growing culture of non-payment.

The proposal will now be considered by government and the Justice Secretary over the course of the upcoming year to decide if the proposals will be legislated.”