Restrictive Covenants in Employment Contracts

The law provides protection to employers against competitive activities of employees and ex-employees by the use of confidentiality clauses and restrictive covenants in employment contracts.

Confidentiality During Employment

During employment, an employee is under a number of implied obligations to their employer, including an implied duty of confidentiality and implied duties of trust and confidence and good faith. The former means that the employee is under an obligation not to disclose to unauthorised third parties their employer’s confidential information and trade secrets obtained during the course of employment.

However, in cases where employees have access to confidential information, it is always advisable to insert an express confidentiality/non-disclosure clause into the employee’s contract of employment which makes it clear that they must not reveal such information during employment. Such a clause can usefully define the information that the employer classes as confidential. Employers are able to discipline employees for disclosing confidential information during employment and the case will be strengthened where there is an express clause that has been breached. 

Confidentiality After Employment

When an employee leaves employment, they are generally free to use the skills, training and knowledge gained during their employment. However, employers are entitled to protect their information which can properly be classed as a trade secret or information which, while not properly described as a trade secret, is in all the circumstances of such a highly confidential nature as to require the same protection as a trade secret. Unfortunately, there is no generally accepted definition of what information amounts to a trade secret. Essentially, it is likely to constitute information which, if disclosed to a competitor, would be liable to cause significant damage to the employer’s business. Each case will turn on its own facts but it may include: secret manufacturing processes, chemical formulae, designs or special methods of construction, customer lists and confidential price lists. In determining whether information is a trade secret, the court will have regard to the nature of the employment, the nature of the information, whether the employer impressed on the employee the confidentiality of the information and whether the relevant information can easily be isolated from other information which the ex-employee was free to use or disclose.

Employers who wish to protect themselves should ensure that employees are subject to an express post-termination confidentiality/non-disclosure clause preventing disclosure of trade secrets and highly confidential information when employment ends. It is always better to have an express clause than to rely on an implied duty.

Enforcing Confidentiality Clauses

It is normally easier to enforce a restrictive covenant than to enforce an express or implied obligation of confidentiality post-termination of employment. Restrictive covenants give certainty whereas the line between information which is confidential and information which is not is hard to draw. However, if there are no express post-termination restrictive covenants, they cannot be implied and the employer will then have to rely on express/implied obligations of confidentiality.

The courts may enforce confidentiality clauses by the use of injunctions and search orders/orders for delivery up.

Springboard injunction: an injunction may be obtained as a means of protecting the employer against the competitive activities of ex-employees who have wrongfully used confidential information, for example, a customer list obtained during employment. It is used to prevent the ex-employee from taking an unfair advantage of the springboard they have gained by the misuse of the confidential information. Essentially, the ex-employee is not allowed to use information in confidence as a springboard for activities detrimental to the owner of that information. If an injunction is granted, it should not normally extend beyond the period for which the unfair advantage may reasonably be expected to continue.

Search order/delivery-up order: a search order is used in cases where the employer believes that confidential documents or documents containing trade secrets have been taken and the employee will destroy those documents if they become aware of legal proceedings. A delivery-up order orders delivery up of documents or other property belonging to the employer.

Account of profits: the employer could alternatively try to seek an account of profits for breach of confidence i.e. all profits the employee has made due to the breach. There is no requirement to mitigate.

Damages for breach of contract: an employer is entitled to sue an employee who has acted in breach of contract for any direct and actual losses incurred as a result of the breach of confidentiality complained of.

Restrictive Covenants

One of the most effective means of protecting a business from competition is to ensure that employees are bound by enforceable post-termination restrictive covenants. Restrictive covenants in the context of employment contracts are covenants placing restrictions on an employee’s activities once employment has ended. They need to be express: they cannot be implied. Such clauses will only be upheld against the employee to the extent that they are reasonably required for the protection of the employer’s legitimate business interests. A restrictive covenant will not be enforced if its sole purpose is to prevent the employee from competing with their ex-employer or from using the skills, experience and knowledge acquired during their employment. For the covenant to be enforceable, it is essential that three conditions are fulfilled:

  1. It protects a legitimate business interest – an employer has a legitimate interest in (a) its trade secrets and confidential information, (b) its trade/customer connections or goodwill, and (c) protecting the stability of its workforce. There is no requirement to identify the legitimate interest in the covenant itself but where the covenant does identify the legitimate interest, the employer is stuck with having to rely on that interest and cannot rely on a different one.
  2. It is drafted no wider in scope than is reasonably necessary for the protection of that business interest.
  3. It is not otherwise contrary to the public interest.

Employers should make sure that the restrictive covenant actually forms part of the employee’s contract of employment and that the employee is made aware of it before they accept the job. If an employer tries to impose a restrictive covenant unilaterally at a later date (i.e. without the employee’s express consent), this is likely to constitute a fundamental breach of contract enabling the employee to resign and claim constructive dismissal. An employee can generally claim constructive dismissal if they have been employed for two years or more where their employment commenced on or after 6 April 2012, or one year or more where their employment commenced on or before 5 April 2012.

However, it may be possible for an employer to insist on an employee accepting a restrictive covenant when it comes under a competitive threat and then to fairly dismiss the employee on SOSR (some other substantial reason) grounds if they refuse. It will depend on whether the employer acted reasonably or unreasonably in treating that reason as sufficient to dismiss the employee.

Types of Restrictive Covenant

There are four main types of restrictive covenant:

  1. Working for a competitor, or carrying on a competing business on the employee’s own behalf (non-compete covenants).
  2. The soliciting of the employer’s clients or customers (non-solicitation covenants).
  3. Dealing with the employer’s clients or customers (non-dealing covenants).
  4. The soliciting of the employer’s other employees (non-enticement covenants).

 Modes of Restriction

Restrictive covenants may place restrictions on:

  1. Area: covenants of this kind restrict an employee from competing in a geographical area where the employer has legitimate business interests.
  2. Scope: restrictive covenants of this nature must be carefully defined with regard to the business interests of the employer which they seek to protect. So, for example, an employer will not be allowed to enforce a restrictive covenant attempting to prevent a business activity which is wider than the activities the employer’s business would normally be involved in.
  3. Time: restrictive covenants must be reasonable in relation to the length of time for which they restrict competition. A clause not limited in time is likely to be unenforceable.

Non-compete covenants: covenants which restrain employees from working for a rival company, or working for the former employer’s clients or customers, or setting up a rival business in competition, after they have left the employer’s employment are known as non- compete covenants. These are the most difficult to enforce as they are the most restrictive/draconian. The only way such covenants may be acceptable is in a case where the covenant limits the ability of the ex-employee to carry out certain prohibited activities in a specified geographical area for a limited duration of time (usually six months). Sometimes, it may be better to refer to specific named competitors rather than a geographical area. In cases where the employer’s legitimate business interest can be adequately protected by another lesser form of covenant (such as a non-solicitation covenant), the court will not uphold a non-compete covenant. As far as prohibited business activities are concerned, employers should define these as closely as possible. For example, if an employee goes to work for a competitor but in an entirely different role which presents no risk to the employer’s legitimate business interests, they should not be restrained. It is common to limit the area of business to the specific business activities in which the employee was personally involved when working for the employer. The key factors here are therefore: duration, geographic area and prohibited business activity.

Non-solicitation covenants: this type of covenant prevents an employee from soliciting, canvassing or accepting any work from the former employer’s existing customers or clients for a period of time (usually six months). Such a covenant will be enforceable if it is necessary to prevent the employee from using their personal influence over their former employer’s customers or clients, and the knowledge of their requirements, which they acquired during the course of their employment, to entice them away from their former employer. The covenant should preferably only include those customers or clients with whom the employee actually had personal dealings (or specific knowledge of) in a defined time period prior to the termination of their employment (usually 12 months). The key factors here are therefore: duration, definition of the client/customer/supplier and prohibited business activity.

Non-dealing covenants: covenants of this nature prohibit employees from having any dealings with their former employer’s customers or clients for a period of time (usually six months). It prevents ex-employees from responding to customers and clients who approach them unsolicited, as well as restraining ex-employees from dealing with the customers and clients who they approach. Again, the covenant should only include those customers or clients with whom the employee actually had personal dealings (or specific knowledge of) in a defined time period prior to the termination of their employment (usually 12 months). The key factors here are again: duration, definition of the client/customer/supplier and prohibited business activity. A non-dealing covenant is more onerous than a non-solicitation covenant (as it prohibits dealings even if the client approached the ex-employee) and hence is harder to justify – but easier to enforce because they are easier to prove on the facts.

Non-enticement covenants: this type of covenant prevents the ex-employee from enticing away their former employer’s other employees for a period of time (usually six months). However, it should not cover all employees. Such a covenant should specifically refer to the seniority or knowledge and experience of particular employees and ensure that employees who join after termination of the employee’s employment are not covered. The key factors here are therefore: duration, definition of the staff and prohibited business activity.

Breach of Contract and Restrictive Covenants

If an employer dismisses an employee wrongfully (in breach of contract), or otherwise commits a repudiatory breach of contract, normally he will be prevented from enforcing any restrictive covenants in the ex-employee’s contract of employment. To partly deal with this, employers should consider inserting a clause entitling them to terminate the contract by making a payment in lieu of notice where the contract also contains restrictive covenants. However, be aware that a PILON (pay in lieu of notice) clause in the contract will generally make this payment taxable as earnings. If an employee is dismissed for gross misconduct but the misconduct was not gross, this will not only be an unfair dismissal but also a wrongful dismissal, again enabling the employee to get out of the restrictive covenants. Employers therefore need to be particularly careful when dismissing employees for their competitive activities during employment. An employee can generally make a claim for unfair dismissal if they have been employed for two years or more where their employment commenced on or after 6 April 2012, or one year or more where their employment commenced on or before 5 April 2012. The same principle would apply where the employee resigns alleging constructive dismissal on the basis of fundamental breach of contract/breach of the employer’s duty of trust and confidence: some employees may purport to do this to avoid having to be bound by their post-termination restrictive covenants.

Enforcement and Remedies

Injunction: an interlocutory or interim prohibitory injunction may be used as a temporary order restraining the employee from acting in contravention of their contract of employment, pending the full trial of the action. In this case, the employer would have to provide evidence to support the allegation that the employee is or is about to act in breach of their post-termination covenants. It is only in exceptional circumstances that an ex parte injunction (i.e. without notice to the other side) will be granted. Normally, an injunction is sought on notice to the other side. There is generally no need for the employer to prove damage/loss (except in exceptional cases). The court will decide whether, as a matter of discretion, an injunction should be granted. For example, they will look at the amount of time left to run on the covenant, any delay in enforcement (and the reasons for it), the likely utility of an injunction and whether the employer could be adequately compensated by readily calculated damages or an account of profits.

Damages: the employer is entitled to sue an employee who has acted in breach of contract for any direct losses incurred as a result of the breach complained of. The financial loss to the employer’s business must be quantifiable. Since it is often difficult to prove that a victim of unlawful competition has suffered financial loss, damages calculated on the traditional compensatory basis may be nominal.

Account of profits: the employer could alternatively try to seek an account of profits for breach of confidentiality or fiduciary duty i.e. all profits the employee has made due to the breach. There is no requirement to mitigate.

Claims against the new employer: an employer whose ex-employee has disclosed or is threatening to disclose confidential information to a competitor, or who has entered or is threatening to enter the employment of that competitor in breach of a restrictive covenant, may be able to bring a claim against the competitor himself, even though the competitor was not a party to the original contract.

Please note that proceedings in relation to the enforcement or breach of restrictive covenants must be brought in the County or High Court and not in the Employment Tribunal. This is because most disputes in relation to the enforcement or breach of such covenants fall outside the jurisdiction of the Employment Tribunal.

Restrictive covenants and Garden Leave

An employer may restrict or deny an employee who has resigned and is working out their notice period access to confidential information and/or customers, suppliers and clients by placing the employee on ‘garden leave’. A garden leave clause has the effect of requiring an employee to serve their period of notice at home. During the period of garden leave, the employee would be entitled to their full salary and benefits, while at the same time they must not work for anyone else and they continue to owe obligations of good faith and confidentiality. The aim of the employer in imposing garden leave is to maintain the employee’s fidelity whilst at the same time ensuring the employee does not maintain his contacts with the employer’s customers, suppliers, clients and confidential information. For garden leave to be enforced, there must be an express clause included in the employee’s contract of employment. Otherwise, putting an employee on garden leave could be in repudiatory breach of the right to work – and may invalidate any restrictive covenants.

The Legal Advice has just moved to… Twitter!

The best things in life come free. But does this apply to the legal services?? Being a rather conservative industry when is the word affordable ever heard? Well, at The Legal Stop we wanted to shake up the industry’s status quo once again, changing the way people think about legal services.

 

The power of social media

At The Legal Stop, we want to make the law and the provision of legal services accessible and affordable. We have already introduced our revolutionary Legal App, designed to provide professional, quality legal services for start-ups, SMEs and individuals, at reasonable prices, on the go, and without sign-ups or long-term contracts.

How to make your Friday REALLY attractive?

We pride ourselves in providing top quality legal services that don’t cost the earth. However, we didn’t stop there. We are so committed to the start-ups and small businesses that we decided to offer professional legal advice for FREE. Yes, absolutely FREE of charge!

Find your personal legal adviser on Twitter!

We believe in the power of social media and modern Internet technologies, and that’s why we decided to take our legal services to Twitter and offer them for free! Every Friday, you will be given an amazing opportunity – simply ask any question – share your legal issue or concern, and we’ll get back to you with an answer!

Legal Friday – how to join?

What you need to do to take part? Simply tweet your question using hasthag #LegalFriday and get your answer right on Twitter! Asking your legal questions is now easy as pie, and it’s absolutely free. You can ask about any legal issue or concern you’ve got – the only thing you have to remember is the 140 characters tweet limit.

The beauty of simple solutions.

Have you ever struggled with very simple issue and needed straightforward, quality and affordable legal help? Most solicitors could charge £100s for mere consultation, and you have to go through all the paperwork and hassle of legal procedures. Now you can get the legal advice during your lunch break, tweeting it in, right between favouriting a great dinner recipe and retweeting your friend’s party invitation.

YouI can’t believe it! What’s the catch?

Well, you probably live in the old world, with old habits. At The Legal Stop we believe in thinking different and changing the way people think about legal advice. As long as you tweet your question on Friday, using #LegalFriday, you’ll get an answer straight to your Twitter feed.

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What if Steve Jobs was a lawyer?

This week, we have celebrated the 30th Birthday of Macintosh. The revolutionary invention changed the way we thought about computers. At The Legal Stop, we like being innovative. The launch of our Pay-As-You-Go Fixed Fee Legal Services Scheme allows anyone to access quality legal services on the go, for very low fee. We’re sure this will change the way you think about legal industry.

The first Mac design seems a little bit oldy now, but it was unbelievably innovative in 1980s.

The first Mac design seems a little bit oldy now, but it was unbelievably innovative in 1980s.

The 20-year-old Steve was working in a garage with his friend Steve Wozniak – they both created something that was a milestone in computer revolution.

It might sound odd today, but they weren’t the first ones to introduce a personal computing machine at all. In fact, there were a couple of these already on the market, and people thought computers should be used for big scientific calculations, rather than searching for a chocolate cake recipe and sharing funny cats pictures.

The questions is – how did a garage-based boy manage to entirely shake up the whole concept of computers?

The answer is pretty simple: design, quality and innovation. Instead of trying to make another big, complicated computing machine, he decided to stand out of the crowd and invent a computer that will come with user-friendly, robust and easy-to-use interface.

30 years later, can you imagine entering a couple of complicated commands in the terminal prompt?

 A couple of sample commands in a text-based system needed to handle Wikipedia. Just a teaser of pre-Jobs computer world.

A couple of sample commands in a text-based system needed to handle Wikipedia. Just a teaser of pre-Jobs computer world.

Now, let me ask you what you think about the legal services industry today. Isn’t it something like the command prompt? You want a simple legal document. Just imagine all these procedures, going through lawyer’s assistants, booking appointments, struggling with a list of forms and declarations to sign.

All in all, you end up with a bunch of long-term agreements, “it depends” as an answer for all your questions, and an invoice that you don’t even want to look at.

What if you could buy a document or order a legal service just as simply as you buy a song on iTunes? Sounds like a dream? At The Legal Stop, we just made it happen.

We aren’t just another legal company. We think different – and we are different. We have invented a Pay-As-You-Go Fixed Fee legal services app that will suit all your legal needs. Do you need an employment contract? Or maybe you want a loan agreement? Legal advice or court representation? We’ve got an app that will cover it all in seconds, and yes, it’s just a few clicks away.

GO to our APP

Our app comes with friendly, easy-to-use and fully secure interface, so that you can have all your legal requirements at your fingertips.

source: freedigitalphotos.net

Another great deal! I just tapped in the app and sorted the contract out. Thank you, The Legal Stop!

Today’s business is a 24/7 thing, especially with start-ups building up their client base. Just picture this – it’s 2am in the morning and you need a legally binding document to close the deal with your client. And, as always, (start-up entrepreneurs will tell you…) need it NOW.

Well, you can try your best waking up your solicitor with a phone call or rush through the Internet websites offering different templates – but are you sure this will give you a legally binding document that will secure your interests?

The Legal Stop is here to help – simply unlock your smartphone, go to our app and tap into a list of documents. 60 seconds and you’re done. Sign off the document and relax watching your business grow.

You don’t have to worry about the costs, either. Our offer is straightforward – no long-term contracts, low fees and quality documents whenever and wherever you need.

We’re so inspired about the start-ups and SMEs that begin with a small idea and grow with us to become successful multi-million companies. Steve Jobs has passed away, but he left us with his wisdom. If he was a lawyer, he would surely invent something like our legal app. We feel that we have to continue his legacy.

Let’s go invent tomorrow instead of worrying about what happened yesterday.

4

FREE Commercial Property Law Webinar with Q&A

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The Legal Stop is proud to host this FREE Commercial Property Law Webinar with Q&A

 

The Webinar will provide attendees with the most up-to-date information about Commercial Property Law, covering the following topics:

 

• CHOOSING THE RIGHT PROPERTY
• LEGAL IMPLICATIONS OF TAKING A LEASE
• KEY TERMS (COVENANTS) OF A LEASE
• WHAT TO LOOK OUT FOR ON INSPECTION OF A PREMISES
• WHAT HAPPENS WHEN A LEASE TERM COMES TO AN END
• Q&A SESSION

 

Our Commercial Property Law Webinar is broadcast live which allows you to interact with our expert speaker, asking the questions that concern you most.

 

The Webinar will take place on Wednesday 19th February 2014 @ 1 pm UK time (which is 5am PST). This Webinar is totally FREE and you can register here

 

This Webinar is hosted by The Legal Stop together with Property Law Solicitor Jasmin Crilly 

 

Jasmin 2Jasmin founded Kinnaird Sherington Solicitors a specialised property litigation practice in 2013. She gained her relevant experience working in property development and large London Firms where her typical clients were large retail companies. She regularly acts for small to medium sized property developers, landlords, tenants, and property management companies.

 

 

 

 

 

 

SALE OF GOODS AND SERVICES THROUGH A WEBSITE

This article provides a brief outline of the legal background when selling goods and services through a website.

When selling through a website it is important to have terms and conditions in place. The relevant terms must be set out in writing as an online contract will be as enforceable as any other type of contract.

If you sell goods to consumers through a website, it is important to be aware of the following regulations:

The Sale of Goods Act 1979   This Act states that goods that are sold must be as described and of satisfactory quality.

If consumers discover that products do not meet these requirements they can reject them and ask for their money back providing they do so quickly. Alternatively, they can request a repair or replacement or claim compensation.

The Sale of Goods Act has been amended by the Sale and Supply of Goods to Consumers Regulations 2002.

The Consumer Protection (Distance Selling) Regulations 2000 Distance Selling Regulations give protection to consumers who shop by phone, mail order, via the Internet or digital TV. The protection includes:

  • The right to receive clear information about goods and services (including information about the arrangements for delivery of the product and information about the seller) before deciding to buy;
  • Confirmation of this information in writing;
  • A cooling off period of seven working days in which the consumer can withdraw from the contract;
  • Protection from credit card fraud.

The Unfair Terms in Consumer Contracts Regulations 1999 prevents sellers from enforcing terms in a contract which are contrary to the requirement of good faith and which causes a significant imbalance in the rights and obligations of the parties to the detriment of the consumer. Sellers must also ensure that they use clear and plain language when drafting because transparency is an important part of fairness.

These regulations provide significant protection to consumers and so must be adhered to very carefully by sellers. If a term is unfair, it will not be binding on the consumer. If an unfair term excludes or limits liability for unsatisfactory goods or poor workmanship, the consumer can sue for compensation regardless of it. If an unfair term is unenforceable, the rest of the contract may still be valid (unless it is unworkable without the unfair term).

Assessment of fairness takes into account the nature of the goods or services, all the circumstances relating to the conclusion of the contract and the effect of other terms in the contract or another dependent contract. This means that a term considered fair in one agreement is not necessarily fair in another.

Consumers should have the opportunity to read all the terms and conditions before agreeing to the contract. Therefore, you should ensure that the terms and conditions are clearly accessible on the website.

The Data Protection Act 1998 The purpose of the Act is to protect the rights of the individual about whom data is obtained, stored, processed or supplied rather than those of the people or organisations who control and use personal data. The Act applies to both computerised and paper records depending on the type of filing system.

If you wish to pass on individuals’ details to other organisations or wish to contact them about promotions in the future, you must obtain their consent to this. Provisions of this kind may be acceptable where there is a free choice to agree to them or not, for instance, via an option separate from the rest of the contract. But note that fairness is much more likely if consumers have positively to “opt in”. A chance to “opt out” in small print may be missed or misunderstood. In any case the chances of fairness will be increased if the significance of the choice is indicated and drawn to the consumer’s attention.

The Act requires that appropriate security measures will be taken against unauthorised access to, or alteration, disclosure or destruction of personal data and against accidental loss or destruction of personal data. It is important to ensure that your terms and conditions contain an appropriately worded privacy policy.

The Electronic Commerce Regulations 2002 states that when selling online, information must be given in a clear and ambiguous manner about the technical steps to complete a contract, prices must be clearly stated, details must be given about the supplier (in particular, the name and address and registered office address if this is different, e-mail address, the company’s registration number, any Trade or Professional Association memberships and the company’s VAT number) the fact that any orders must be acknowledged without undue delay and there must be available to the user of the site the ability to identify and correct any errors prior to the placing of their order.

Excluding liability

It is not advisable to exclude liability when dealing with consumers. You are never able to exclude liability for faulty goods or death and personal injury. If a consumer makes a mistake when entering details online, s/he should be given a reasonable opportunity to correct the error before they place their order. If you fail to do so, consumers will be entitled to rescind the contract.

LAW ON TRADEMARKS

What is a trade mark?

A trade mark is a mark, brand or sign used by traders to differentiate their goods from those of other traders. Trademarks can be registered or unregistered.

Under the Trade Marks Act 1994, any sign which can be represented graphically and which is capable of distinguishing the goods or services of one business from those of another is in principle registrable as a trademark (subject to the absolute and relative grounds for refusal (see below)). Examples of trademarks are: labels, logos, names (including domain names), packaging, smells, sounds, business style and business presentation. Therefore, a trade mark can extend beyond the name of a product or its logo to the colour and shape of the goods. For example, Marmite jar, Coca Cola bottle and colour combinations for drug capsules.

The name of a person with a possible endorsement right can also be a trademark. However, the name and the image of an individual has to be distinctly linked with the origin of the goods or services in question. For example, Tiger Woods with golf equipment. Therefore, the application to register the image of Diana as a trade mark in connection with various goods such as tea towels failed, likewise so did the application to register Elvis Presley as a trade mark on beauty products.

In relation to geographical names, it has recently been held that, in general, they cannot be registered as trademarks. However, where a geographical name has come through use to identify the product as being made by a particular undertaking, then the geographical name gains a new significance and can be registered e.g. Waterford crystal.

Internet domain names (for example: www.thelegalstop.co.uk ) can be registered as a trademark provided they are distinctive. Further, it is possible for infringement to occur where the domain address used utilises an already established trademark.

Exploitation of trade marks

There are various ways in which a trademark can be exploited:

  • A business may sell its trade mark, for example if it wishes to withdraw from a specific product market.

  • A business may wish to spread the financial return through licensing. Competition law may apply to trademark licensing to control the extent to which a licence holder can be protected from competition from the licensor or its other licence holders.

UK Registration of trademarks

Application for registration is made to The Intellectual Property Office (IPO). The application must be accompanied by payment of a fee. Renewal is necessary every 10 years, when a further fee will be required. Alternatively, an application may be made at the European Trade Marks Office.

An application is filed for goods or services in one or more of the relevant classes of the International Classification. Each class represents a certain type of goods or services. There are 45 different classes for goods and services. Often, it would be advantageous to file in a number of different classes in order to cover the variety of goods or services in which the business proposes to deal. The classes tend to be rather broad and it will normally be necessary to limit the application to specified goods within that class.

Steps to be taken for registration

  1. File application. You should receive a receipt within 1 week.
  2. Examination and search by the Trade Mark Registry. You should receive a report within 4 weeks, and this may contain the Intellectual Property Office’s objections. If this is the case, you may wish to respond.
  3. Advertisement of the application in the Trade Mark Journal.
  4. Opposition to the trademark would need to be made within 2 months, with the possibility of a 1 month extension.Registration if no opposition is made or if opposition proceedings are decided in favour of the applicant.
  5. Date of registration is back-dated for priority purposes to the date of first filing.If the examiner rejects the application to register the trademark, there is a right of appeal to the High Court.

Grounds for refusal of registration

There are 2 types of grounds on which an application to register a trademark can be refused. These are absolute grounds and relative grounds.

Absolute grounds

Absolute grounds apply where the sign is, for example, purely descriptive, not distinctive and should otherwise remain available in the public domain. The trademark would be refused registration on the following grounds:

  1. The trade mark lacks distinctive character. That is, if the mark applied for merely describes the goods and services applied for. For example ‘Froot Loops’ was refused on the basis that the name described the product.
  2. The trade mark consists exclusively of signs or indications which are used to describe a particular feature of the goods. The following categories would therefore be considered descriptive:
  • Kind. For example, personal (for computers).
  • Quality. For example, best.
  • Intended purpose.
  • Value. For example, worth their weight in gold.
  • Geographical origin.
  • Time of production or of rendering of services. For example, 24 hour service, eight till late.
  • Other characteristics of the relevant goods or services.
  • Phonetics: misspellings of words that would otherwise be refused will require evidence that the trademark is distinctive.

3. The trademark consists of signs or indications which are customary in the current language or the established practices of the trade.

A trade mark should not be refused registration in relation to any of the above grounds, if, before the date of application to register, it has in fact acquired a distinctive character as a result of the use made of it by the applicant.

4. The trademark consists exclusively of the shape if the shape: results from the nature of the goods themselves; or is necessary to obtain a technical result; or gives substantial value to the goods.

Goods or packaging created in a specific shape may be registered.

5. The trademark is contrary to public policy or accepted principles and morality.

6. The trademark is likely to mislead or deceive the public (for instance, as to the nature, quality or geographical origin of the goods or service). For example, an application to register ‘Swiss Miss’, the name of a chocolate, failed on the ground that it was not made in Switzerland and was not in anyway connected with Switzerland.

7. The trade mark is prohibited under UK or EC law.

8. The trade mark is a specially protected emblem e.g. the Olympic symbol.

9. The application is made in bad faith.

Relative grounds

Relative grounds for refusal are concerned with protecting the prior conflicting rights and interests of other trademark owners and the interest of the public in not having similar marks used in relation to the same or similar goods or services. The earlier mark will be protected whether they are registered or not and different rules apply to each situation.

Where the earlier trade mark is registered

An application will be refused where there already exists an identical or similar trademark that relates to identical or similar goods and services AND where members of the public are likely to be confused. An application may also be refused on the grounds that, although the goods or services are not similar, the trademark has an established reputation and an applicant for a similar or identical trademark would be taking unfair advantage of, or causing detriment to, that reputation.

Where the earlier trade mark is not registered

Even where the earlier trademark is not registered, registration may be refused if it benefits from the reputation of that existing trademark.

Infringement of a trademark

Infringement occurs when the trademark is ‘used’ by a person or business other than the owner without their agreement or where the use is based on the above absolute and relative grounds. Therefore, an applicant who tries to register such a trade mark will not only be refused registration but through its use may be sued for infringement. ‘Use’ of a trade mark includes: putting it on goods or packaging; offering, marketing or stocking goods or services under the mark; importing or exporting under the mark; putting it on business papers or advertising material.

Infringement can also be non-visual such as ‘smell’ or ‘sound’ trademarks.

Suppliers of the infringing material, such as printers, may be joined in proceedings. For such an action to succeed, the supplier must have known or have reason to believe that use of the mark was not authorised by the owner.

International Implications

There are 3 ways of registering trademarks. All applications can be made through the UK Intellectual Property Office (IPO).

  1. Application in the UK for a UK trade mark registration will protect the trademark in the UK ONLY. Conversely, trademarks registered outside the UK will not be protected by that registration in the UK, in the absence of any international agreements to the contrary.Application for a Community trade mark (CTM). This is a unitary right applying in the EU.
  2. Application for a CMT may be made either at the IPO or directly to the Office for the Harmonisation of the Internal Market based in Spain. There is an additional handling charge for CTM applications dealt with by the IPO. Registration will extend to all EU countries and is cheaper than applying for national rights in every country. It is important to note that CTM regulations do not replace national trademark laws, but offer an alternative system of registration. Registration is renewable every 10 years. The main disadvantage of a CTM is that if it is successfully opposed in one of the EU countries, the application will fail in all. The only way around this will then be to convert it to individual trademark applications in each country, which means additional fees to be paid, on top of the CTM registration fees already paid.
  3. Application for an international trademark registration, under the Madrid Agreement. It introduces a single international application, which permits the registration of a mark in more than one country, as if the application was made to each individual country.

An application can be made by an owner of a trade mark (application or registration) in one of the member countries of the Madrid Protocol, who is also one of the following:

  • a national of a member country of the Protocol;
  • a resident of a member country of the Protocol; or
  • a person or organisation with business premises (legally, ‘a real and effective industrial or commercial establishment’) in one of the member countries of the Protocol.

Because the UK is a member of only the Madrid Protocol (and not the Madrid Agreement), you can protect your mark only in countries which are also members of the Protocol.

The application is made to the IPO, who then present the application to the International Bureau of the World Intellectual Property Office (WIPO) in Geneva, which in turn notifies each designated Contracting Party. Each notified country has between 12 to 18 months to oppose registration, after which registration will automatically take effect, and the mark will be protected as if the mark had been registered as a national trade mark (Madrid Protocol, Art.4(1)(a)). The initial duration is for 10 years, renewable for 10 years thereafter.

What should I do if I believe that a domain name which I have registered as a trademark has been infringed?

Nominet UK is the Registry for .uk Internet domain names, and provides a dispute resolution service for .uk domain names.

The majority of disputes relating to domain names are brought under Uniform Dispute Resolution Policy (UDRP). The UDRP is used widely to deal with what is known as cybersquatting (deliberate, bad faith, abusive registration of domain names in violation of others’ rights – particularly trademarks). The complaints are usually brought by the holder of a registered trademark which is identical or very similar to the domain name in question. Generally the complainant must prove the following to succeed in a complaint:

  • that the domain name is identical or confusingly similar to a trademark in which the complainant has rights;t
  • he respondent holder has no rights or legitimate interests in respect of the domain name; and
  • the domain name has been registered and is being used in bad faith.

Under the policy, complaints are examined by independent panels and if the panel concludes that the complaint satisfies the requirements specified in the policy, it directs that the domain name should be cancelled or transferred to the complainant. If not, the complaint is rejected.

Remedies

There are various remedies available to the owner of a trademark where a trademark right has been infringed. Sometimes, commercial advantage can be gained by the owner on selling or licensing the trademark to the infringer. Where such agreement between the parties is not possible, the following remedies are typically available:

  • Injunction (a restraining order to immediately stop the infringing act).
  • Damages (a monetary claim for financial compensation).
  • Account of profits (this allows the injured party to claim the profits made by the party who is in breach).
  • Delivery up and destruction (the right to both seize goods and have handed over the infringing material or goods).
  • A declaration that the trade mark is valid and has been infringed.
  • Criminal penalties (enforcement being carried out by the Office of Fair Trading with the maximum penalties being 10 years imprisonment and/or a fine).

The usual way to begin would be for solicitors to draft a letter on behalf of the client demanding an undertaking that infringement cease immediately, threatening legal action, usually by way of injunction, and claiming damages or account of profits. However, such a letter should be carefully drafted as the law does provide that where the threat of litigation is groundless, the aggrieved person may be able to bring a civil action for damages on the basis of the groundless threat. A threat would be groundless where the acts concerned would not in fact be an infringement of a valid right.

 

The Difference between Templates and Bespoke Document Drafting

In today’s internet driven world many people find their legal document needs online. There are a range of options, including the fixed price fees we offer, that allow you to protect yourself and your business quickly.

One area that has risen in popularity over recent times is the templates for legal documents. These can be downloaded in seconds and paid for in an instant, leaving you with a legally binding piece of literature that should protect you as soon as it’s signed and witnessed.

Legal document templates are obviously cheaper and faster than bespoke document drafting as one template is constructed to fit all. They can be ideal for general insurances, small legal areas, such as tenancy agreements and partnerships yet as the requirement grows, they may not cover all.

The Benefits of Templates

  1. Tried and Tested Used by Many
  2. Easy to download
  3. Accessible within minutes
  4. Instant protection
  5. Customisable as long as the jargon stays in place
  6. The cheapest way to protect you and your business

It’s important to note though that templates are very general and if you are held under scrutiny, a law enforcer may find holes that you should have included to ensure the document was bespoke to your business.

Drafted Documents

Many people believe that bespoke drafted legal documents are very expensive. That they cost thousands of pounds and are only affordable by bigger businesses. In fact with our fixed priced fees drafted documents can save you a lot of expense in the future. Recently the news reported that the well-known celebrity Tommy Lee lost over £10 million pounds in a legal battle as the wording wasn’t quite right in the document.

Online Business

We recommend drafted documents for terms and conditions and privacy policies. By their nature these are lengthy as they must cover you for all eventualities. It’s sad but true that a disgruntled user will exploit the T and C’s, they will look for loopholes and they will have no hesitation in starting a lawsuit if they think you’ve missed something. Templates will cover the general use of your site yet they won’t be specific to your stock, services, delivery criteria and so on.

Also online people worry about their privacy being exploited. This is why a good privacy policy needs to be in place. A template will cover the generalisations such as the use of cookies but you may need it adapting to your own case. For example, you may send out newsletters via Mailchimp but the privacy policy via the template states you will not disclose email addresses to third parties. Although you’ve only given the addresses to your own Mailchimp account, a disgruntled customer could sue you for sharing information when they were led to believe you wouldn’t.

Quite simply they may take a little longer and they may be more expensive but you can’t get better protection than a drafted document.

Could Bespoke Document Drafting Pay for Itself?

Legal document templates are on the rise with people downloading these in an instant online. For as little as a few pounds you can have the protection you or your business needs within seconds. With these advantages is there still a place for bespoke document drafting? Shouldn’t everyone simply use templates and just hope for the best?

Unfortunately, although templates cover generalisations, they may be useful if you’ve less than five employees or they could be helpful for a short hold tenancy agreement, if you want to be bulletproof they’re unlikely to give you the full protection you crave.

You can of course adapt a template to suit your own needs but this is unadvisable without the help of a solicitor as if you make a mistake you risk making the whole document null and void. Hiring a solicitor to adapt a template is quite insulting. It’s embarrassing for you and in the end you will have paid the same amount as if you’d drafted a document from the start.

The Loopy Loopholes

In business drafted documents are essential. It’s a sad but true fact that the USA suing culture has hit Britain. Ten years ago we wouldn’t have dreamed of suing a box over a simple fall but today we all know that “where there’s blame there’s a claim”. This means businesses and individuals must be stringent with legally binding documents as the lawyers that promise the “no win no fee” service have an incredible knack for sniffing out loopholes you won’t even have noticed yourself.

Case Example: Let’s say you sell ice cream. You have a health and safety policy template that covers you for accidental spills. Now an employee slips on ice cream and you face a lawsuit. You may have detailed that any injury caused by accidental spills is the responsibility of the employee (as they should follow legislation of mopping, drying and placing a sign to warn others) but your no win no fee lawyer sees a loophole. Ice cream in its solid form can’t spill. Therefore your template doesn’t apply to trips and falls from the product you sell.

Many have lost thousands if not millions of pounds trying to save money with templates and in some cases they are enough but if you’re at risk of being sued, such as for health and safety, for privacy policies or terms and conditions, you need to ensure your documents are watertight.

The Lengthy T and C’s

Pop over to any well-known brand and have a flick through their terms and conditions. You’ll see how lengthy they are. They not only protect against big lawsuits they protect against the everyday almost absolving a company of all responsibility.

Claims such as “we will not be held responsible for…” “We reserve the right to…” “Our refund policy clearly states that…” These statements although innocent looking when you scan through the T and Cs and tick the box to say you agree stop the company been taken to court instantly.

With a drafted document you’ll be able to explore every angle to use the knowledge of a solicitor and tap into his expertise. Your solicitor will present you with worst case scenarios you hadn’t thought of but were thankful he or she brought them up.

In any area of law where you need to be protected it’s worth calculating how much you could lose should your legal document be challenged and then fail to stand up in court. Then see if the investment in bespoke document drafting is worth it.

FREE WEBINAR – IP RIGHTS: What You Should Know + Q&A

LogoThe Legal Stop is proud to host this FREE webinar with Q&A featuring a leading expert in intellectual property law who will provide attendees with the most up-to-date information about protecting your intellectual property rights.

If you are a technology based start-up, entrepreneur, or simply interested in protecting your intellectual property rights, we encourage you to join us!

Our expert will discuss the implications of intellectual property in business, with a specific emphasis on:

What is intellectual property?

Brief explanation of what Intellectual property is

What about your IP

Many businesses don’t realise that they have valuable IP which is often unprotected. However, most businesses have IP:

  • It is usually much more valuable than physical assets
  • Why not carry out an IP health check?

What can you do with your IP?

IP is valuable not just because your business may use it. There are other things you can do with IP, such as:

  • Sell
  • Licence
  • Franchise

Explanation as to ways you can protect your intellectual property?

Copyright:

  • Words
  • Images

Trademarks

Patent

Registered Design

Avoid costly mistakes – Q&A

At the end of the webinar there will be Q&A where attendees will be able to ask various legal questions they might have.

The webinar will take place on Tuesday 17th December 2013, at 1 pm UK time (which is 5am PST). The webinar is totally FREE and you can register here

The webinar is hosted by The Legal Stop together with Start-up Direct

 

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