Commercial Law International

By: Ainsley Brown

It would seem that Android, the smartphone software platform, has landed Google in some hot water. And, no it’s not some glitch in the system – Android users can now breath a sigh of relief.

The hot water comes in the form of a lawsuit filed in the US District Court for the Northern District of California: Oracle of America Inc. v. Google Inc.. In the suit Oracle claims that Google in developing Android “knowingly, directly and repeatedly infringed Oracle’s Java related intellectual property.”  Parts of Java, according to Oracle, were included in the “stack” or package of software that forms Android.

Although Android was introduced less than two years ago it has fast become one of the most widely used smartphone operating systems and forms a major part of Google’s strategy to establish a beachhead in the fast growing mobile world. Android guarantees Google a platform for its search and advertising service as well as providing a hedge in case rival smartphone makers decide to block Google from their systems in the future. If Google loses the suit it could result in a major rethink in Google’s mobile strategy as Oracle could either force a redesign of Android or in all likelihood exact fees from some type of licensing agreement.

By: Ainsley Brown

In a pervious post – Litigation … A New Investment Vehicle – I introduced you to the Therium, a third party litigation fund in England that was using litigation as an investment vehicle. At the time I thought Therium was a brilliant idea and this is position I still maintain.

Its times for a serious rethink of the Champerty Act

Despite my praise, maybe because of it, I wondered what would be the feasibility of such a scheme in Canada, more particularly Ontario?

If such a scheme didn’t already exist it ought to. Yes, why not? A third party investment fund willing to back meretricious claims that otherwise would never be pursued due to the lack of funding in exchange for a percentage of any funds recovered. What could be better? After all in Canada entrepreneurship in litigation is not an alien concept, we have “no win, no fee” schemes and Class Action legislation country wide basically allowing lawyers to underwrite Class litigation.

With these facts it should therefore be a simple matter of bringing together all the right commercial elements, right?

Well, not so fast, things are not as simple as that. There is still the matter of – the archaic and anachronistic – prohibitions of maintenance and champerty.

As will be argued later it is not that I believe that these prohibitions make a third party litigation fund impossible – not at all- however I do believe that until its repeal the Champerty Act, which prohibits both maintenance and champerty, such a fund would be severely hampered. In fact the fund itself could potentially be mired in litigation to defend its own existence.

So what are maintenance and champerty?

In the simplest of terms maintenance is the funding of litigation by a third party who is a stranger to the dispute. And champerty is the funding of a litigation by a stranger third party in exchange for a percentage of the win. However, I think Lord Justice Steyn in Giles v. Thompson put it best: “In modern idiom maintenance is the support of litigation by a stranger without just cause. Champerty is an aggravated form of maintenance. The distinguishing feature of champerty is the support of litigation by a stranger in return for a share of the proceeds.”

The main policy consideration that underlies the Champerty Act has a long vintage, dating back to an English statue of 1305 – yes that’s 705 years.

Stay tuned for Part II for details on the policy history of the Champerty Act and why its repeal is long over due.

By: Ainsley Brown

Be careful what you say, always sound advice

Solicitors be aware of the advice you give a client or even potential clients about their chances of success, it may come back to haunt you

: Levicom vs. Linklaters is as much a lesson in professional responsibility as it is in professional liability.

In pervious post, ‘World’s Second Largest law Firm, Linklaters, Sees Off €50 Million Negligence Claim,’ I wrote about the slap on the wrist – a £5 nominal damages judgment –  that Linklaters received in the High Court for giving negligent advice; however the story did not end there. The High Court decision was appealed to the Court of Appeal and this time the ‘Magic Circle’ firm did not escape with a slap on the wrist, becoming potentially liable for a claim of £37 million.

So what is the story here?

In a nutshell, Linklaters was sued by its former client Levicom International Holdings BV (Levicom), a Baltic telecommunications company, after what Levicom claimed was negligent advise. Linklaters was retained to represent Levicom after a joint venture with the Swedish company Tele2 went awry. Based on the advice it received, one that overstated its chances of success – ‘a 70% chance of success’ – Levicom took a hostile position, even refusing several settlement offers from Tele 2 to its later detriment. It was this over estimation – negligent over estimation – of its chances of success according to Levicom that caused it to take such a harsh line which eventually resulting in the case being settled on less favorable terms than the pervious settlement offers.    

Solicitor's advice on chance of success: more an art than a science

Mr. Justice Andrew Smith, sitting in the High Court however was only partly convinced. Justice Smith agreed that Linklaters was in fact negligent in its advice, however it could not be said that such negligence caused Levicom to settle on less favorable terms. Linklaters was however in breach of contact for its negligence however with the lack of causation it only got a slap on the wrist – a £5 nominal damages judgment.

The Court of Appeal agreed with Mr. Justice Smith also finding Linklaters to be negligent, however it disagreed with his causation analysis. In the court’s judgment as was explained by Lord Justice Jacob: “when a solicitor gives advice that his client has a strong case to start litigation rather than settle and the client does just that, the normal inference is that the advice is causative.” He later went on to say: of course the inference is rebuttable – it may be possible to show that the client would have gone ahead willy-nilly. But that was certainly not shown on the evidence here.”

In effect what the court was saying is that once a solicitor gives advice as to the strength of a client case and acting on that advice the client follows the recommended course of action it can be said that the solicitor caused the client to take said action. However, this is only an inference and simply shifts the burden of proof from the client to the solicitor to prove otherwise. This is the approach endorsed by the Lord Justice Jacob: “the judge [Justice Smith] should have approached the case on the basis that the evidential burden had shifted to Linklaters to prove that its advice was not causative. Such an approach would surely have led him to a different result.”

There is no word on if Linklaters is going to appeal the decision to the Supreme Court.

By: Ainsley Brown

The trade skirmish that has erupted between China and the European Union over shoe tariffs has been one that I have being following very closely here on Commercial Law international. And, yes you guessed it, each side continues to exchange salvoes; the latest being China moving from the consultative stage of the World Trade Organization’s (WTO) dispute resolution procedure to the next stage, which is the request for the formation of a WTO Panel (tribunal) – click here for a break down of the WTO’s dispute resolution process.

As far as the Chinese concerned the 16.5% duty imposed by the EU violates WTO rules by being protectionist, namely the EU has not demonstrated that is shoe industry has or will suffer material damage from Chinese imports. The EU for its part has countered with the claim that its anti-dumping measures are not protectionist and are WTO compliant.

It will be interesting to see who will prevail in the end.

As an interesting aside a new front – an internal EU – has recently opened up in this battle and has to be watched closely. The Federation of European Sporting Goods Industry (FESI), the organization that represents many EU based sporting goods manufactures such as Adidas, Fila, Nike and Umbro, last month has taken the EU Commission to the European Court of Justice (ECJ). The FESI has launched suit in the belief that “the EU’s decision to extend the duties for a further 15 months in December 2009was based on inappropriate investigation and a flawed analysis of the facts,” according to its own press release.

It will be interesting to see what influences either proceeding will have other the other. For example what if the ECJ sides with the FESI, on what basis would the EU then justify the continuation of the duties at the WTO if its own internal court has ruled against it?

Lastly it will also be very interesting to watch if the Vietnamese, affected by the same tariffs, will join the Chinese in their complaint and how this would affect the recently launched EU-Vietnam trade talks?

All very interesting, indeed!

By: Ainsley Brown

As previously reported in another post, four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek and by all accounts gain compensation in South Africa. Well, I am please to report that the farmers have indeed gotten – some measure of – justice in South Africa.

Symbolic victory.....they matter

Justice for the farmers comes in the form of the seizure of a property owned by the Zimbabwean government located in Cape Town, this after a South African court ruling allowing this property and perhaps others to be attached and likewise seized. The South African ruling was a move at the enforcement of a Southern African Development Community (SADC) tribunal’s ruling that found that the Zimbabwean government’s seizures of white owned farms illegal and racist.

The property in no way comes close to reflecting the full value of the farms seized but it does represent a very important symbolic victory for the farmers – and yes symbols do matter.

By: Ainsley Brown

The investment banker who turned down €7.9 million in severance to sue for over €10 million has won his case against the French bank Société Générale (SocGen).

The banker in question, Mr. Raphael Geys, was the head of SocGen’s London based European fixed income financial sales division until 2007 when he was given the sack. Mr. Geys argued in the English High Court that he was essentially dismissed because he was too successful – doubling the revenues of the division in three years – and that he was entitled to over €10 million in severance. The bank for its part offered Mr. Geys €7.9 million in severance but later withdrew the offer claiming that due to provisions in his employment contract Mr. Geys had disentitled himself  to any severance by initiating suit.

George Leggatt QC, sitting as Deputy Judge of the High Court, not only ruled the Mr. Geys was entitled to severance but that he was entitled to over €11 million’s worth. Judge Leggatt ordered an interim payment of €11 million immediately, leaving it up to the parties to come to settlement on the final sum. However, if the parties could not reach agreement, the final sum would be determined by the court.

At last report the bank was seeking leave to appeal the decision.

By: Omar Ha- Redeye and posted on Slaw on March 23, 2010. 

Luxury good maker Louis Vuitton Moet Hennessy (LVMH), who produces Moet & Chandon champagne and Dior perfume, claimed that Google’s advertising polices violated their trademark.  The practice in question was the use of key words related to brand names by counterfeiters, who would then link to online stores.

Based on reported coverage of the case, the European Court of Justice made several main findings in a decision released this morning:

1. Google has not infringed copyright simply for allowing companies to purchase trade mark key words
2. Google cannot be liable for advertising requests if it removes them when informed that a trade mark has been abused
3. Trade mark owners have the right to stop their use in AdWords when they suggest they are linked to the owner or create confusion about the owner
4. Companies can still claim compensation if a court rules that the misuse of trade mark damages the brand
5. Google will be liable for infringement if it does not act quickly to stop the misuse of trade mark

Both sides are claiming victory.

A copy of the decision can be found here, and a summary of the case by the court here.  Google’s blog post in response to the case can be found here, and a press release by LVMH can be found here.

By: Ainsley Brown

Wachovia bank has agreed to pay $160 million to US authorities in order to settle charges brought against it. The bank was accused by the US Justice Department and banking regulators of not having sufficient controls in place to prevent Mexican drug cartels from laundering millions of dollars through the bank using exchange houses –casas de cambio - that dot the US-Mexican boarder.

The Justice Department have agreed to stay the charges against Wachovia for 12 months, provided the bank fulfill its obligations under the settlement. A key plank of this agreement is for Wachovia to hand over the proceeds of narcotics sales being held in its coffers – $110 million – and it must also pay a $50 million fine to the US Treasury.

How did Wachovia find itself in this situation?  

With the ratcheting up of the drug trade and its related violence along the US-Mexican border there were growing concerns by many banks in the US for the potential for money laundering. To address these concerns many of the banks either or both put in place additional monitoring procedures or curtailed their dealings with the casas de cambio. However, this was not the case with Wachovia. Between 2004-2007, while other banks were pulling back from their dealings with the boarder exchanges, Wachovia increased its.

It is worthy of note that since its acquisition in 2008 by Wells Fargo, Wachovia has ended its dealing with the exchanges.

By: Ainsley Brown

Four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek by all accounts gain compensation in South Africa.

A South African court has ruled recently that the farmers have the right to seek out and seize Zimbabwean government property in South Africa. The North Gauteng High Court ruled that the judgment in favour of the farmers handed down in December 2008 by a Southern African Development Community (SADC) tribunal was fully enforceable in South Africa. With this ruling the High Court made it clear, if there was any doubt, that as a signatory of the SADC treaty South Africa has an obligation to uphold and enforce judgments coming from a SADC tribunal.

The ruling clears the path for non-diplomatic property owned by the government of Zimbabwe to be subject to a writ of attachment, seized, and possibly sold to satisfy the judgment. Additionally, it also clears the path for similar moves by other white farmers.

But why South Africa? Zimbabwe is also a signatory of SADC, why not enforce the tribunals judgment there?

The simple answer is that for these farmers South Africa wasn’t so much a matter of choice but one of necessity. In fact the same could be said of the use of the SADC tribunal. The framers only tuned to the tribunal when it was clear that they could not get justice at home – the Zimbabwean judges being either complicit or too afraid to stand up to the Mugabe regime.

The SADC tribunal’s ruled in December 2008 that the farm seizures were racist and were an act of thief. It ordered the government to compensate those farmers that had lost their property and to leave those farmers remaining unmolested to continue their farming activities.

This was a great victory for the farmers, well so they thought until they tried to get the tribunal’s judgment registered and enforced in Zimbabwe. There they encountered the usual judicial opposition, this time with a judge dismissing their application because of the enormity of reversing the President’s land seizures.

Imagine that a judge dismissing your case because of the enormity/implications for an illegal government policy; just imagine. To that I have these words and I shall say them thrice: Rule of Law, Rule of Law, Rule of Law.

Fortunate for the farmers the High Court in South Africa knows and will fully up hold the Rule of Law.

By: Ainsley Brown

This forms part of the Middle Passage Law Series on Law Is Cool.

American International Group, better know by its acronym AIG, it seems these days can rarely catch a break. It just seems negative news follows negative news for this company. This time the negative news for this too big to fail company – deeply wounded by the global credit crunch and later recession – has two of its units being accused of racial discrimination in their lending practices.

It is important to note that AIG has not been found guilty of anything; in fact it wasn’t even accused of any wrong doing.

WHAT?

I know, I know, it seem like I am saying that AIG is involved yet not involved in this case. And yes that is exactly what I am saying.

All of this may seem totally contradictory but let me assure you it is not. What we have here is a classic illustration of legal reality vs. public perception of a company’s brand. In order to be successful companies have to be mindful of the differences between these two concepts and effectively manage their interrelation.

The Department of Justice (DOJ) allegations were never directed at AIG, the parent company, but were instead directed at two of its subsidiaries –AIG Federal Savings Bank (FSB) and Willmington Finance Incorporated (WFI). Both banks were accused of not sufficiently monitoring the activities of mortgage brokers who sold mortgages that they funded. The brokers were, according to the DOJ, offered African-American borrowers less favorably borrowing terms than similarly financially situated whites. The two have agreed to settle the case with the DOJ and have agreed to pay at least $US6.1 million without admitting liability as part of the terms of settlement.

The case broke no new ground as far as banks in the US being accused of racial against minorities, namely African-American and Latino-Americans, in fact similar settlements or even full blown litigation involving other US banks will surely be making the headlines in the near future. The case however did break new legal ground in that for the first time US authorities held a lender directly responsible for the racial discriminatory acts of brokers. As a consequence, from now on banks will have a positive duty to monitor the activities/policies of brokers that they fund, to the best of their ability, in order to ensure that they are not using race to determine borrowing terms. This duty also of course carries with the co-duty to take positive action whenever a bank believes that a broker is using race.

From a strict legal perspective AIG, the parent, hands remain totally clean is this matter. It is important to reiterate that AIG was never accused of anything; the allegations were solely directed at the two subsidiaries. And no this is not a simple matter of splitting hairs, while related all three companies are separate. The legal concept of the corporate veil - the independent legal identity of companies, even if related – is a fundamental one in corporate law. The corporate veil is best understood as a shield that is used to protect all the right that come with incorporation. This is not to say that it can never be lifted/pierced, for it can, but this is only done in rear and specific instances where for example fraud is alleged or where for some reason the directing/controlling mind of a corporation needs to be identified.

However, these allegations go beyond strictures of the corporate veil and this is where public perception of the brand and effective management of that brand become important.  AIG and its army of brand management specialists both know that the general public are often not so discerning as to make the distinction between parent and subsidiary; as far as the public is concerned AIG is AIG.  This is the reason I believe that there was such a quick settlement – the last thing AIG, the parent, needs is a protracted legal battle involving accusations of racial discrimination, albeit involving subsidiaries. This would be a public relations nightmare.