UK: Technology eBulletin - May 2009

Last Updated: 7 February 2011
Article by Frank Jennings

In these uncertain economic times, technology businesses are facing new challenges and new risks, protecting and valuing your intangible assets becomes increasingly important.

In this edition, we look at the problem of data scraping which affects many online businesses when information from the company's website is systemically stolen and used to boost competing businesses. We also look at stemming liability for "consquential loss" in contracts and protecting your IP rights abroad.

DMH Stallard's Technology Group provides a complete range of intellectual property protection services. We are recommended in the leading Legal Directories Chambers and Partners and Legal 500 for our work in this area.

I hope you find this eBulletin useful and interesting. Please let me know if you have any suggestions about any other information that you would like to see in the eBulletin or any other way in which we can improve it.

Protect Your Business By Blocking Scraping

By Frank Jennings and John Yates

Almost all online businesses with a large online presence and listings are targets of systematic data theft – commonly known as scraping, Web harvesting or Web data extraction. During these attacks scrapers systematically steal large amounts of information from the company's web site, in clear breach of the terms and conditions, and use it for example to boost a competing business.

Data Scraping or Data Harvesting is theft of property from websites and has been going on as long as companies have been publishing data and images on the web. Today it is done on an industrial scale as some entities believe that it is easier to steal data than to create it. There dozens of commercially available packages that offer tools and anonymity to Scrape.

A system called ASSASSIN, developed by Sentor, can detect and block scraping and data theft around the clock, in real time. The Assassin Anti Scraping system is an expert system that analyses traffic and requests to websites in an unobtrusive way. By analysing usages and traffic patterns it scores requests and concludes whether they are made by human or web robots. It can detect Scrapers using anonymous proxy services or large amounts of open proxy servers to avoid detection. The system retains all forensic data which gives the choice to apply blocks, warn off scrapers or prosecute perpetrators. The Yell.com white paper on ASSASSIN case study is available at http://www.sentor.se/en/ASSASSIN_case_study.pdf

Chasing the money...

By Frank Jennings

Most contracts are stuffed in a drawer after signature and only see the light of day again when things go wrong, and technology contracts are no different. At that point, everyone turns to the liability clause to work out how much it will cost them.

It is common practice for technology suppliers to exclude liability for "consequential losses" when negotiating contracts. However, it can be difficult to quantify such losses and it is important to get to grips with this, particularly in a recession when more people are willing to litigate to secure (or prevent) a payout.

Most businesses know that a total exclusion of liability is probably not enforceable but that they might be able to limit their liability. It is well established that a business may be entitled to receive compensation for:

1. losses naturally resulting from the breach – often a company will seek to limit rather than exclude these losses
2. losses as a probable result of the breach which were in the contemplation of the parties at the time contract was made

Typically the second type of loss is considered to be consequential loss but there have been several cases over the years which suggest that matters are not simple. Despite excluding liability for consequential loss in their contracts, companies have had to pay damages in a variety of different situations:

  • where a supplier installed a telephone system at a law firm and had not configured the supporting software correctly, the supplier was found liable for the additional cost incurred by the law firm as a result of a third party fraudulently routing international phone calls through the system
  • where a ship owner's employee was accidentally killed by an employee of a port authority, the port authority was found liable for the ship owners' liability to the deceased's next of kin
  • where a supplier contracted with a hotel chain for the hire of minibars and those minibars were found to be faulty, the supplier was required to pay damages to the hotel chain for loss of profit and removal and storage of the faulty minibars, as well as repaying the hire fee.

In addition, when contracting with consumers, if the term "consequential loss" is used in an exclusion clause, that clause will not be effective.

You should ensure you take care when drafting liability clauses, particularly in the current economic climate where claims are more likely to be brought and the clauses more likely to be tested. Technology companies should undertake a review of their contracts now to ensure they are sufficiently protected.

Keep your intellectual property safe in foreign markets

By Sarah Birkbeck

First published in Sussex Enterprise's Business Edge magazine March 2009

There are many horror stories about copycat manufacturers stealing designs of products ranging from microprocessors to carpet patterns.

Although Chinese copies have hit the headlines in recent years, authorities in many other countries don't pay much attention to intellectual property either.

A survey by Chubb Commercial Insurance in the USA last year, found that small companies were even more likely to suffer from losses of intellectual property in foreign markets than the larger corporations. So what can be done about this? How do you protect yourself? Sarah Birkbeck, a partner specialising in IP and IT litigation at the Gatwick office of law firm DMH Stallard, has these suggestions for Sussex Enterprise member companies:

- Intellectual property (IP) is often the most valuable asset in a business and the protection of it needs to feature in the business's strategy.

  • It is important at the start of any commercial relationship to make the other party aware of how seriously you take the protection of your IP.
  • Do this by insisting that they sign your confidentiality or non-disclosure agreement right at the outset – if they won't do business on that basis be prepared to walk away.
  • Don't just assume that registration costs will be prohibitive; there are options that can make it more attractive including community-wide protection of rights and multiple applications.
  • If you do think your rights have been infringed take advice early, quite often just getting the other party to "cease and desist" can be a good first step and needn't cost a fortune.

    An important element of any action you take will be to show you have suffered or will suffer some economic loss. For that reason it's important to ensure your overseas markets are all actively managed. Budgets and forecasts, as well as actual revenues, are an essential part of quantifying that. The formal agreements with agents and distributors are also important in demonstrating your presence in the market. Don't forget that these agreements should also define what happens to your intellectual property when they terminate.

DMH Stallard Corporate Review 2008 and 2009

By Tim Aspinall

Please click here for a review of the Corporate department's 2008 and 2009

Looking back on 2008 from the current perspective seems strange in many ways. We saw continued growth for many clients, supported by private equity funding. Acquisition programmes for many continued.

Gatwick M&A activity was supported by new clients such as Hillcrest Care Ltd and Valens Resources Plc, and established clients like Friday Holdings, Park Holidays and Loewy. The success of Gatwick is marked by sustained relationships with successful acquisitive clients. Many of these clients are supported by Private Equity investors.

The City team continued to flourish, with an increase in international work, in various off-shore jurisdictions; India and the Middle East remain strong markets. Despite the steep overall decline in transactions on AIM/PLUS Markets, we advised on the placing of shares for Newland Stockbrokers, and the IAF Group plc, the de-listing of Mercury Group from AiM, various pre IPO fund raisings, and an off-take.

As the public markets have declined, we have seen a corresponding increase in private placing and offshore investment opportunities.

Banking transactions have been reduced over the course of the year, but our team have been kept busy with reviews and renegotiations of facilities. We have also had to advise on covenant breaches, and debt to equity swaps.

2009 and Beyond

Quality investment vehicles, for private investors will continue to attract funds, preparing us for the re emergence of the public markets. Despite the generally downbeat mood, well funded UK, and overseas buyers, are in a strong position to buy or create contractual/corporate joint ventures.

As trusted advisers to clients we expect to help identify opportunistic acquisitions, assess investment/purchase offers, and rationalise/reorganise their businesses.

This is a market which calls for an experienced team and a strong network of professional contacts, to ensure deals can be successfully competed at the optimum level.

"Sectors where we see opportunity for growth include technology, biofuel, recycling and waste, waste to energy, suppliers to mainstream energy/oil and gas businesses, and those with public sector clients."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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