UK: Latest Commercial Trends. How Might They Affect You?

Last Updated: 1 December 2004
Article by Bill Gornall-King and Mark Blunden

Bill Gornall-King and Mark Blunden, two of the Partners in Boyes Turner’s Commercial & Technology group comment on the latest commercial trends and their implications for businesses.

Bill what is the principal role of your group at Boyes Turner?

Our group has two roles, to ensure that clients recognise and take advantage of relevant commercial opportunities and to help protect them from events and situations which can damage their ability to do business. Our work covers risk assessment in commercial contracts, outsourcing, IPR & technology licensing, franchising, as well as competition law issues and data protection. To be effective means investing a significant amount of time in developing a detailed understanding of our clients’ systems, culture and objectives: really getting to know their management teams. Having the largest group of specialist commercial lawyers in the region makes this investment possible.

Mark, Bill talked about managing risk effectively, what are some of the areas of risk that businesses should be considering?

Most businesses have addressed LAN/WAN security, however, the increased use of mobile devices that integrate with these is an area that few have sorted out. You can now access your work files and e-mail from anywhere at any time using a PDA or even your phone. However, a question mark still remains over security and the potential exposure of commercially sensitive and confidential data.

In a recent survey nearly 70% of businesses provided remote access to their systems but only half had any form of security covering mobile devices. The use of remote access has risen by nearly fifty per cent over the last two years. This is a potentially massive problem and we have seen cases of ‘Bluejacking’ - hacking into Bluetooth devices - and "man-in-the-middle" schemes - intercepting Wi-Fi data.

Security measures such as personal firewalls and encryption of data must be a pre-requisite for all business mobile users. However, the increasing use by employees of their own mobile devices, which often have few if any security features, makes this a particularly difficult area to manage.

Bill, many businesses are outsourcing key parts of their operations outside the UK to create competitive advantage. The immediate cost advantages are clear, but does it really work in the longer term and what are the potential problems?

Off-shore outsourcing has become increasingly attractive. However, the press is littered with stories of underperformance, cultural issues, failure to deliver promised cost savings and cases of protracted (and expensive) disputes.

In many situations agreements have been entered into on the basis of headline cost savings without weighing these up against the increased business risk that is created.

A prime candidate for outsourcing is often IT. However, there is a tendency for senior management to fail to appreciate its value as a key business asset as well as the risk associated with outsourcing it. In particular, there are issues over the maintenance of ERP systems including accounting, purchasing, manufacturing, inventory, order entry, distribution, CRM and even payroll. Virtually all of a company's data and secrets reside within these and if they were to disappear or malfunction the chances are some companies wouldn't survive. Using an outsourcer that has a fully staffed back up operation is an option, but the additional cost of this can significantly increase prices and eat into cost savings.

Even where risk and cost are carefully evaluated problems can arise. Commonly insufficient attention is paid to the most essential phase of an outsourcing project – planning, including the setting of parameters and performance indicators and exit planning.

Mark, do you think that the recent European Court of Justice’s ruling on dominant companies being forced to licence their Intellectual Property will have much effect on businesses in the region?

Recent changes to EU competition law could have a major impact on companies which own the copyright, patent and other intellectual property rights in their technologies.

The recent European Court of Justice case (IMS Health GmbH v NDC Health GmbH) has implications for dominant businesses that own their own intellectual property and refuse to grant a licence to a competitor (in a secondary market). Basically, there are a host of penalties including a fine of up to 10 per cent of group company turnover for an abuse of a dominant position.

How far courts will take this is currently unknown, however the implications are clear - businesses can now be compelled (in certain circumstances) to grant intellectual property licences to competitors. It is not unimaginable that dominant businesses will be forced to enter secondary markets, impacting on smaller competitors and consumer choice. The result is likely to be an increase in dominance for the largest owners of intellectual property, which was not the intended outcome.

Clearly these are just some of the issues that management teams will have difficulty keeping on top of. What should they do?

Firstly they should ensure that they have access to specialist commercial advice. Ideally, all businesses should have a specialist in-house legal adviser. However, many do not feel that they can support this cost. An alternative is to use a law firm such as ours. However it is important to select one that has a proactive approach and is willing to invest in developing a long term relationship. If they are not prepared to make this investment then businesses would be advised to stay clear and find one that will.

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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