Commercial Awareness Update - April 2019!

[Angel]

Hi everyone!

Hope you have all been well, and welcome to the first commercial news update in April! Happy reading!

Commercial News Update - 3rd April 2019

Topics covered this week:

1. Progress in US-China trade talks – @Abstruser
2. Approval of Draft EU Copyright Directive – @kitk
3. Jaguar Land Rover’s victory in the Chinese Courts - @bugsy malone
4. The Mueller Report – @Angel

(Personal views of authors may be implied)

Progress in US-China trade talks (by @Abstruser)

The story:

Last Friday, China and the US concluded the latest round of trade talks between the two countries. US Treasury secretary Steven Mnuchin described the talks, which took place in Beijing, as “candid and constructive”, and negotiations are expected to continue in Washington this week.

The negotiations take place against the backdrop of an uneasy truce between the two countries. President Trump had previously threatened to increase tariffs on $200 billion worth of Chinese goods from 10% to 25% if a trade agreement was not reached by March 1. However, in mid-February, President Trump delayed the deadline in light of progress being made in negotiations, stating that “[t]he date is not a magical date because a lot of things are happening.”

Presently, 10% tariffs continue to be applied on $200 billion of Chinese goods, including items such as soybeans and medical equipment. As President Trump did not officially commit to extending the deadline, the threat of higher 25% tariffs still hangs over US-China trade negotiations.

Spokesmen for both countries have indicated that a trade agreement is not expected to be reached for a significant while yet. Chinese officials stated that they hope to reach an agreement by April or May, while US economic advisor Larry Kudlow stated “If it takes a few more weeks, or if it takes months, so be it.”

Impact on businesses and law firms:

The ongoing political tension between both countries is particularly disruptive for businesses running international operations. US LNG supplier Cheniere, for example, has been unable to renew substantial supply contracts with its Chinese buyers, due to China imposing 10% tariffs on US LNG imports. Similarly, one of China’s largest carmakers, Guangzhou Automobile Group suspended its plans to export its new line of sports vehicles to the US due to steep tariffs on Chinese cars.

Law firms will likely continue to monitor the political landscape and take steps to manage political risk in clients’ business activities. The US-China trade talks also serve to underline the growing trend of countries concluding preferential trade agreements with one another. For instance, just last year, the EU concluded two prominent trade agreements with Singapore and Canada. The proliferation of these international agreements, which are governed by international law, is likely to continue creating new opportunities for law firms to assist businesses with treaty interpretation and dispute resolution under these agreements.

 

[Angel]

Approval of Draft EU Copyright Directive (@Kit)

The story:

Last week, the European Parliament approved the final draft of the Copyright Directive.

Under Article 15 of this Directive (previously Article 11), if platforms do not negotiate licences with publishers and journalists or if publishers do not waive their rights, platforms will not be able to reproduce longer fragments of articles under headlines. Individual words and “very short extracts of a press publication” are not covered by this. Hyperlinking and “private or non-commercial uses of press publications by individual users” are also exempted from this.

Under Article 17 of this Directive (previously Article 13), online platforms must negotiate licenses for copyright protected works like songs or video clips before publishing user-uploaded content that incorporates them. They must also use their “best efforts” to remove copyrighted user-uploaded content that infringes copyright and prevent their future upload.

Content uploaded for the purposes of caricature, parody or pastiche is exempted from this. Also, platforms which have been operating for less than three years in the EU, have a turnover of less than €10 million, and fewer than five million monthly users are subject to lighter obligations.

Moving forward, the Directive must be approved by the European Council. If so approved, the EU’s 27 member states will have two years to implement the Directive following its publication in the Official Journal of the EU.

Impact on businesses and law firms:

This Directive is likely to increase the remuneration available to publishers, broadcasters and artists, as well as their ability to enforce their copyright via, for example, collective licensing agreements.

However, there is some legal uncertainty as to scope of this Directive applies. For example, although organisations that have been exempted from the rules under this Directive include non-profit online encyclopaedias and open-source platforms, it is unclear what other types of organisations are exempted. Also, concepts such as the extent of extracts can be exempted from this Directive are open to interpretation. Furthermore, it is unclear how the obligations under this Directive interacts with the “safe harbour” provisions in the EU’s e-Commerce Directive.

The Directive has been criticised for effectively imposing an unduly burdensome and expensive obligation on online platforms to install upload filters for a wide range of content. This can, in turn, impede the growth and innovation of start-up online companies. There are also concerns that certain platforms might shut down or limit their services in the EU toavoid the increase in the obligations placed on them.

IP and TMT practices are expected to handle more work in drafting and negotiating the relevant licensing agreements, as well as advising content producers of their rights and content platforms on their policies to ensure compliance with the Directive. There might also be more litigation as to the interpretation of the scope of the Directive.

 

[Angel]

Jaguar Land Rover’s victory in the Chinese Courts (@bugsy malone)

The story:

Last week, Jaguar Land Rover (JLR) won a 3-year long case in the Chinese courts against a Chinese copycat car brand. The court found that the Range Rover Evoque model has five unique features which were directly copied by Jiangling Motor Corporation in their Landwind X7 model.

The court ruled the similarity of the two vehicles had led to widespread consumer confusion. They ruled that all sales, manufacturing and marketing of the Landwind X7 must cease immediately, as well as, pay compensation to JLR.

It is worth noting that international carmakers tend to be reluctant to bring matters to litigation because it risks damaging the reputation of their brands in the Chinese market.

The impact on businesses and law firms:

This was a welcomed ruling for JLR. It strengthens confidence in investing in China and the fairness of intellectual property adjudication in the Chinese courts. JLR’s Head of Legal Department said that “the ruling is a clear sign of the law being implemented appropriately to protect consumers and uphold their rights from being confused or misled, whilst protecting business investment in design and innovation”.

Several international carmakers have complained about local brands copying their designs, but this is the first case of its kind, where China has supported a foreign company over a Chinese carmaker. This is significant because carmakers have long operated in China with the knowledge of potential copycat operators in the market, partly in order to gain access to the world’s largest car market and a key source of profits for many of the major operators. The result could set a precedent for other brands to file against copycat makers.

The ruling also came at an interesting time, given the current trade war situation between China and the US, which many argue was caused by Chinese tech protectionism and IP theft.

 

[Angel]

The Mueller Report (@Angel)

The Story

Two years ago, American lawyer and government official, Robert Mueller, was appointed as a special counsel to investigate the Russian meddling into the 2016 U.S. election campaign. As a special counsel, Mueller would somewhat be independent from the Department of Justice’s usual chain of command even though he is still ultimately under the DOJ’s supervision. This investigation came to an end in March 2019.

The Mueller Report is focussed on the findings of two main matters. First, on the alleged Russian attempts to disrupt the 2016 election (often shorthanded as ‘obstruction’). Second, on whether Trump’s associates were involved with the Russian interreference in the 2016 campaign (often shorthanded as ‘collusion’), and if any financial crimes were committed by them. These investigations probed into the links and contacts between the people associated with the Trump campaign and the Russian government, and the handing over of campaign polling data from the Trump campaign chair to a Russian associate to enhance Russia’s interests.

Upon completion of the 400-pages report, only a redacted 4-pages summary containing the ‘principal conclusions’ of the report were disclosed to key members of Congress by Attorney General Willliam Bar. The full report has yet to be made available to the public despite the public and parliamentary pressure to do so. The conclusion from AG Barr was that special counsel Mueller ‘did not find that the Trump campaign or anyone associated with it conspired or coordinated with Russia in its efforts to influence the 2016 U.S presidential election.’.

Impact on businesses and law firms

Prior to the release of AG Barr’s summary of the Mueller report, the views on the effects of the report on markets are diverse. While some sees it as a relieve to a persistent concern for the past two-years, others expected a more disastrous outcome. Some strategists and political analysts speculated that the report risks causing uncertainty to President Trump’s administration, which may make investors lose confidence in the US government’s tax and regulatory agenda. This would cause adverse market reaction which may, in turn, potentially encourage the US government to take actions that may be unwelcoming to the market in order to distract the public from the report’s contents. For a detailed explanation, see https://www.marketwatch.com/story/w...ck-market-heres-what-it-would-take-2019-03-21.

Interestingly, the report has not in fact had much effects on the market since it was announced. Although the report clearly states that it ‘does not exonerate’ President Trump, its findings based on AG Barr’s summary is arguably a major political victory to President Trump. That is, while the legal jeopardy is not yet completely gone, analysts agreed that it is significantly decreased, and the chances of having the POTUS removed from office on grounds of impeachment is further reduced. (Note: impeachment is a process in which Congress (the lower chamber of the US legislative body) can put certain officials, including the President, on trial for a broad scope of offences provided in the US Constitution).

The conclusion of this report is somewhat a closure to the matter for now, which may explain the modest market impact. The closure would arguably provide more time for Congress to focus on other important political and legislative agenda such as the US-China trade talks and budget planning.

 

[Bugsy Malone]

Hi everyone,

We are pleased to have a new writer starting this week @Moni Owoade

Commercial News Update - 10th April 2019

The topics covered this we are:

1. Facebook user data found on Amazon's cloud computing servers (by @Abstruser);

2. The up coming Aramco bond deal (by @Moni Owoade);

3. The UK launches investigations into video game subscription plans (by @bugsy malone).

1. Facebook user data found on Amazon's cloud computing servers (by @Abstruser)

The story:

Last Thursday, researchers at cybersecurity firm UpGuard found hundreds of millions of Facebook user information on Amazon’s cloud computing servers. The data, which was publicly available on Amazon’s servers, belonged to two datasets originating from two third-party Facebook app companies.

One of the datasets originated from a Mexican company called Cultura Colectiva, and contained over 540 million Facebook user records. The other belonged to an app called At The Pool, and contained plain-text passwords for over 22,000 users. It is unclear whether these passwords were for the At The Pool app or for Facebook accounts.

Importantly, although the data originated on Facebook and was stored on Amazon’s servers, neither Facebook nor Amazon had any control or ownership over the data itself. This is because the data was independently ‘created’ by the third-party companies, who tracked and collected the data, and stored (for a fee) on Amazon’s servers via Amazon Web Services.

Impact on businesses and law firms:

Data leaks and privacy infringements have become seemingly commonplace for Facebook. Just three weeks ago, Facebook came under fire for admitting that during a routine internal review, it discovered that it had accidentally stored millions of users’ passwords in a readable format. As for market reaction, Facebook’s shares fell about 1.4% on Thursday after UpGuard published its findings.

Authorities all around the world are grappling with the implications that digital data has for all manner of laws such as competition, copyright and personal privacy. In February, the German Federal Cartel Office ruled that Facebook had breached competition rules by collecting user data without their consent to provide targeted advertisements, disadvantaging smaller advertising platforms. US authorities are now conducting criminal investigations into Facebook and its data sharing agreements with other companies, in response to the Cambridge Analytica scandal. Two weeks ago, the EU Parliament approved the text of the new EU Copyright Directive, which holds internet platforms like YouTube directly responsible for copyright infringements (such as using a copyrighted song without consent) which occur on their platforms.

For law firms, last Thursday’s revelation serves as yet another reminder of the importance of data, and data privacy, in the new digital era. Law firms are likely to remain busy with data protection related work, such as advising on compliance with regulations, arranging data transfers between companies and across countries, and updating clients as the regulatory landscape continues to evolve.

 

[Bugsy Malone]

2. The upcoming Aramco bond deal (by @Moni)

The Story:

On March 29th the Saudi Arabian State Oil Company (Aramco) filed a Base Prospectus with the SEC as part of its upcoming bond issuance. This is Aramco’s first entry into global capital markets and the prospectus which was filed as a regulatory requirement under SEC rules, gave investors their first look into the financials of the world’s most profitable company, which previously was well known for keeping its operations and sheer size very secret.

Rumours about Aramco’s size last circulated in 2017 as the company began to prepare for a potential 2018 IPO. The offering was expected to be the largest IPO of all time and the company was valued at close to $2 trillion. However, the Kingdom chose to delay the offering and taken a more gradual approach by entering the debt capital markets first. Aramco’s prospectus confirmed investors previous expectations and led to extremely high investor demand. In 2018, Aramco earned $111 billion in net income, surpassing Apple ($59.5 billion) and summarily outperforming peer oil companies like Royal Dutch Shell and Exxon Mobil. This headline profit is enormous, yet not surprising given Aramco is the world’s largest oil producer, delivering 10million barrels per day, which is 10% of global supply.

While Aramco does not necessarily need the cash, the proceeds of the Bond will help fund the $69 billion acquisition of a majority stake in SABIC, Saudi Arabia’s premier petrochemical producer, which would allow Aramco to diversify its revenue sources and strengthen potential growth. Investors are enthusiastic about the offering and the offering received over $60 billion in initial orders. The offering is particularly appealing as Investors are eager to provide funding to companies who do not necessarily need an additional cash injection and as a result are unlikely to default.

Impact on businesses and law firms:

While the sheer size of Aramco’s balance sheet and headline net income are enough to make its upcoming bond offering and future IPO a crucial one for both the energy sector and financial markets in general, the transaction will also be interesting to watch because of the company’s close ties to the Saudi Government.

In addition to being a smart business decision for a company looking to IPO in a few years, Aramco’s SABIC acquisition also aligns with the Kingdom’s Vision 2030 plan which aims to diversify the Kingdom’s economy away from oil production and is representative of the key role it plays in Saudi Arabia’s economic development. Aramco has always enjoyed close ties to the government, who is currently the company’s sole shareholder. In fact, given Saudi Arabia’s historical dependence on oil, many believe that for many years Aramco provided most of the government’s revenue. Aramco’s close ties to the government are especially important given Saudi Arabia is an absolute monarchy, where the monarch has full authority over the laws governing Aramco’s structure. The sovereign’s ability to significantly alter Aramco’s profile was demonstrated in 2017, the government stepped in and lowered Aramco’s income tax rate from 85% to 50% and reimbursed the company for previous costs it had incurred on behalf of the government. Aramco also points to the fact that the Kingdom determines how much oil the company produces, “based on sovereign energy security goals or any other reason”. In this case, the government’s actions served to benefit Aramco, however this may not always be the case. This is especially concerning given the lack of clarity around the process through which Aramco would make a claim against a government.

Investors in Aramco’s bond offerings and future interactions with the capital markets may look to price in Aramco’s relationship with the government and the risk of negative government interaction. This pricing is to some extent already reflected in the fact Aramco has received the same credit rating as the Sovereign, despite its strong financial profile, and its bonds are offering similar yields. However, in addition to pricing in these risks, it will be interesting to see if investors will seek any further legal protections either as part of this transaction or future offerings, and what legal tools will be available to provide such protection.

3. The UK launches an investigation into video game subscription plans (by @bugsy malone):

The story:

Last week the UK’s Competition and Markets Authority (CMA) decided to launch a consumer law investigation into video game companies Miscrosoft, Sony, and Nintendo. The CMA are concerned over the legality of the companies’ practices concerning their use of auto-renewals for subscription services like Xbox Live. They are also concerned about the barriers consumers face to cancel these plans and the terms and conditions attached.

The CMA has written to the companies requesting information on their online gaming contracts. They intend to investigate whether the biggest online gaming companies are being fair with their customers when they automatically renew contracts, and whether people can easily cancel or get a refund.

The impact on businesses and law firms:

The gaming sector has see exponential growth over the past few years. In 2018, the global video games industry reached a value of $135bn, up over 10% from 2017. Alongside this growth, roll-over contracts like subscription plans have become more and more common place. This has attracted the CMA’s attention.

The UK’s investigation was followed by the launch of similar EU investigations. The CMA have stated that if they find the companies are not treating people fairly under consumer protection law they are prepared to take immediate action. This could have serious repercussions, not only for the online gaming companies in question, but potentially other companies operating similar roll-over subscription plans, as they may have to restructure their business models if the CMA is not satisfied.

It will be interesting to see how this story progresses over the next few months and if the CMA decide consumer protection laws have been broken, the knock on effects of this.

 

[Abstruser]

Hi everyone,

The topics covered this week are:

1. UK Online Harms White Paper by @kitk
2. Arrest of Wikileaks founder Julian Assange by @Abstruser
3. Recent French court decision against Bayer Monsanto by @Moni

1. UK Online Harms White Paper by @kitk

The story:

Last week, the UK government’s Department for Digital, Culture, Media and Sport and Home Office jointly released the Online Harms white paper. This proposes new laws which are to be interpreted and enforced by an independent regulator.

According to the white paper, there would be a new statutory duty of care imposed on companies that allow “users to share or discover user-generated content or interact with each other online”, such as social media platforms and search engines. These companies could be punished for failing to take “reasonable and proportionate action” to tackle content like child abuse, terrorism and revenge pornography, and conduct such as cyberbullying, spreading disinformation and encouraging self-harm.

The white paper proposes the following penalties for the breach of this duty of care: imposing fines on the companies, forcing internet service providers to block offenders, forcing third parties to disrupt their activities by, for instance, removing them from search results, and imposing fines on senior management of the relevant companies.

The government will set out its formal legislative plans after a consultation on these proposals, which ends on 1 July 2019.


Impact on businesses and law firms:

The white paper’s proposals are likely to increase the obligations imposed on the relevant technology companies. This would be both in terms of policing the user-generated content on these companies’ platforms and in funding the regulator of these new proposals. As there is no “carve-out” for the type of companies to which the proposed regulations apply, there are concerns that this could be unduly burdensome and expensive for smaller companies. This can impede the growth and innovation of such companies and, in turn, result in greater market dominance of Big Tech.

There is also legal uncertainty as to the scope of content and conduct to which these proposals apply. It is difficult to define the level and likelihood of harm posed by certain content or conduct, as well as determine how harmful the content or conduct must be to warrant action being taken against it and what type of action is deemed “reasonable” in tackling such content. For example, in the context of “disinformation”, there is an issue of who defines or how what is “fake news” and whether it is relevant to consider if the people spreading it are doing so unintentionally.


2. WikiLeaks founder faces possible extradition to the US (by @Abstruser)

The story:

Last Thursday, WikiLeaks founder Julian Assange was arrested at the Ecuadorian embassy in London, where he had spent the last 7 years in political asylum. WikiLeaks is a non-profit organization that facilitates anonymous publishing of secret information. Notably, in 2010, WikiLeaks released hundreds of thousands of classified documents, leaked by former US Army intelligence analyst Chelsea Manning, revealing the true extent of civilian deaths incurred during the US intervention in Afghanistan and Iraq.

Assange first sought asylum at the Ecuadorian embassy in 2012 after losing an appeal in the UK Supreme Court against extradition to Sweden, where he had faced a number of sexual harassment charges. He later explained that he had sought asylum to avoid the possibility of being extradited from Sweden to the US, where he was potentially wanted for espionage, a charge which carries the death penalty. The sexual harassment charges were dropped by Sweden in 2017, but Assange remained liable in the UK for breaching the terms of his original bail in 2012.

On Thursday morning, Ecuador withdrew its asylum, citing Assange’s “breach of international treaties” and “discourteous and aggressive behaviour”. British police promptly entered the embassy and arrested Assange for breach of bail conditions in 2012. At the police station, Assange was ‘further’ arrested under a second extradition warrant “on behalf of the United States authorities”. A US federal court has ‘indicted’ (i.e. charged) Assange for conspiring with Chelsea Manning to commit computer intrusion and access classified documents.

At the House of Commons, Theresa May stated that the arrest “goes to show in the UK, no one is above the law”. The Westminster Magistrates’ Court has since found Assange guilty of breaking his 2012 bail conditions. However, it remains to be seen whether the UK will allow Assange to be extradited to the US. He is scheduled to appear for extradition hearings in May.


Impact on businesses and law firms:

There is much concern that the charges against Julian Assange could have profound effects on press freedom and journalism worldwide, an issue which directly impacts businesses such as media and news outlets, and their ability to disseminate information to their consumers. Although Assange has been charged with “conspiracy to commit computer intrusion”, an activity that seems to have little to do with traditional journalism, Harvard law professor Yochai Benckler has stated that “sections of the indictment are vastly overbroad and could have a significant chilling effect”. For example, the indictment states that “it was part of the conspiracy that Assange encouraged Manning to provide information and records from departments and agencies of the United States”. The Committee to Protect Journalists has voiced concern that targeting the relationship between a publisher and its source in this manner could have “deeply troubling” consequences for investigative journalism. Further, as the Center for Constitutional Rights pointed out, the indictment “is a worrying step on the slippery slope to punishing any journalist the Trump administration chooses to deride as ‘fake news’”.

Apart from the US indictment, the extradition hearings scheduled in May could also raise interesting legal issues about international human rights, which may be of note to law firms practicing in this area. Many have noted that the US’s persistence in prosecuting Assange raises questions of political motivation, and concerns of whether Assange would be given a fair trial should he be extradited to the US. The UN Special Rapporteur on Torture has stated that extraditing Assange to the US would put him at a “real risk of serious violations of his human rights”, such as his right to a fair trial, freedom of expression, and freedom from inhuman or degrading treatment. It remains to be seen whether the UK will allow Assange to be extradited to the US.

For those that may be interested, the indictment and official press release issued by the US Department of Justice are available to read here: https://www.justice.gov/usao-edva/pr/wikileaks-founder-charged-computer-hacking-conspiracy

 

[Abstruser]

3. Bayer Monsanto is found liable for farmer’s sickness by French Courts (by @Moni)

The story:

On April 11, a French court ruled in favour of 55-year old farmer Paul Francois, who has fought a ten-year battle against Bayer Monsanto; a pharmaceutical and agriculture conglomerate. Francois who fell ill in 2004, suffered memory loss, headaches, and stammering, and has since alleged that his illness was a result of him inhaling Lasso, a now banned herbicide manufactured by Monsanto. As a result of his illness, Mr. Francois had to stop work and is seeking €1milllion in damages.

Mr Francois and his lawyers argued that Monsanto failed to include sufficient safety warnings on the Lasso label, despite the fact that the herbicide contained hazardous chemicals. Lasso has been banned in France since 2007, and had already been withdrawn from several countries before that.

In its ruling, the court found that Monsanto should have indicated “a notice on the specific dangers of using the products in vats and reservoirs” on Lasso’s labelling and instructions. Moreover, it noted that Mr Francois’ expertise as a farmer did not excuse the lack of an accurate warning on the product.

Previous rulings in French courts had found Monsanto legally responsible for poisoning Mr Francois; however, those judgements were overturned by France’s top court, which in turn ordered a new hearing. The latest ruling was an appeal against that decision, and as a result François’ case will be heard again in another Lyon court which will make a ruling on the damages.

In addition to its legal battle in France, Monsanto is also facing several lawsuits in the United States regarding its most popular weed killer, Roundup. Roundup contains the active ingredient glyphosate, which allegedly causes cancer. The company has been found liable in two trials in which plaintiffs have been awarded tens of millions of dollars.


Impact on businesses and law firms:

The ongoing litigation against Monsanto has thrown into question Bayer AG’s acquisition of the company in 2018. Bayer acquired Monsanto in a $63 billion deal last year and Monsanto’s legal troubles since the merger have led to resulted in losses of €30 million in market value since August 2018. Following the announcement of the most recent legal decision, Bayer’s shares fell about 1.5% before recovering.

These losses have led some of Bayer’s largest shareholders to criticize the company’s management for underestimating the legal risks of the acquisition. Last year, they sought a legal opinion from Linklaters for reassurance that Bayer management had complied with its fiduciary duties to shareholders when acquiring Monsanto for $64 billion last year. The situation is particularly concerning for Bayer’s shareholders because it seemingly is not a situation that management can control or resolve. They are instead left to hope that their legal teams are able to persuade judges and juries that Monsanto is not liable for the plaintiffs’ illness, which so far, they have failed to do. Nevertheless, Bayer’s largest shareholders may look to take a vote of no confidence against management, which could result in further concern for the company and leave it vulnerable to attacks from activist shareholders who may seek to break it up.

Despite the most recent ruling, Francois’ legal battle is likely still ongoing as the company said it was considering an appeal. Bayer Monsanto’s shareholders will be watching closely to see if the French ruling leads to another surge in litigation, as was the case with the US ruling. Although they are appealing the California cases, more than 11,000 plaintiffs are seeking damages. In addition to diminishing investor confidence, surges in litigation also generally lead to significant costs for firms, which cause erosion to their bottom line and help to further reduce investor confidence.

 

[Bugsy Malone]

(24th of April 2019) Hello and welcome to this week's write up

Topics include:

1. Apple and Qualcomm resolve patent dispute (by @Abstruser );

2. German Court Case Against Google (by @Moni);

3. Jet Airways Suspends Domestic and International Flights (by @bugsy malone)

1. Apple and Qualcomm resolve patent dispute (by @Abstruser)

The story:

Qualcomm is the patent holder for some of the technology that allows mobile phones to connect to the internet and mobile networks. Several phone manufacturers, including Samsung and Apple, pay Qualcomm licensing fees to use that technology in their mobile phones.

In 2017, Apple instructed its manufacturers to stop paying Qualcomm royalties, on the basis that the chipmaker was overcharging Apple for the use of its technology. In particular, Apple was challenging Qualcomm’s practice of charging royalties on every mobile phone sold by licensees, irrespective of whether those mobile phones used Qualcomm chips. In addition, those royalties were charged at 5% of the value of each handset, which Apple argued overlooked the value of other smartphone features such as facial recognition and cameras. Qualcomm responded by counterclaiming that Apple was stealing intellectual property by using its technology without paying licensing fees.

After two years of litigation, Apple and Qualcomm reached a settlement last week, putting an end to their bitter multibillion dollar dispute. According to a joint statement released by both companies, the settlement includes a six-year licensing arrangement and a chip supply agreement. Apple also paid an undisclosed one-off sum to Qualcomm. Analysts from UBS have estimated the sum to be somewhere between $5 billion to $6 billion.

Impact on businesses and law firms:

The chip supply agreement reached as part of the settlement marks the likely return of Qualcomm chips to Apple’s iPhones and other devices. This is particularly significant because Qualcomm, alongside Huawei and Sony, is one of the frontrunners in the race to roll out 5G technology. Apple had been touting the release of a 5G smartphone for April 2020. However, rumours had been circulating over the past few months that Intel, on whose chips Apple’s iPhones were reliant, would not be able to release a 5G smartphone chip in time for 2020.

Shortly after the Apple-Qualcomm settlement was announced, Intel announced that it was abandoning its plan to develop 5G chips for smartphones. Intel’s shares fell around 2% on the same trading day. Conversely, shares in Qualcomm rose as high as 24% on the day that news of the settlement was released, making it Qualcomm’s best trading day since 1999. Apple shares also rose about 1%.

Although Apple and Qualcomm have agreed to drop all lawsuits against each other, Qualcomm is still facing multiple antitrust lawsuits from competition law enforcers worldwide. This could generate work for law firms practicing competition law worldwide. In 2011, Qualcomm signed an agreement with Apple committing the iPhone maker not to purchase chips from any other chipmakers. Last year, the EU Commission found this to be an abuse of Qualcomm’s dominant market position, and fined the American chipmaker €997 million. Qualcomm is currently appealing this decision. Similarly, following a loss in the Korean Supreme Court in February, Qualcomm is liable to pay $242 million to the Korean Free Trade Commission for its anti-competitive trade practices. Qualcomm is also being investigated by US officials for its anti-competitive practices.

 

[Bugsy Malone]

2. German Court Case Against Google (by @Moni)

The story:

On Friday the 12th of April, a German price-comparison portal, Idealo GmBH filed a suit against Google alleging that the company had abused its position as the most dominant search engine by favoring its own price-comparison service in its search results. The suit was submitted to the state court in Berlin and is based on the EU Competition Authority’s 2017 decision to fine Google €2.42 billion for manipulating search results to favour its own comparison-shopping service. Following the EU Competition Authority’s landmark ruling in 2017, Margrethe Vestager, the EU Competition Commissioner at the time, encouraged companies to use the ruling as a basis to seek damages against Google. Idealo, is the first major company to heed Ms Vestager’s call to action and sue Google on the basis of the 2017 ruling.

Idealo, is a leading price-comparison service and is majority-owned by publisher, Axel Springer. Idealo filed a suit against Google’s US and European entities and is claiming that Google made it harder for users of its search engine to find links to Idealo, after it started promoting its own price-comparison offering, Google Shopping. As such, Idealo is seeking €500 million in damages from lost revenue. The company’s lawyer said that the potential damages could increase if the judge accepts his request to subpoena data from Google to determine the precise scale and period during which Google committed antitrust violations.

Impact on business and law firms:

Despite the fact that Google has, “already made a wide range of changes to (their) products to address the commission’s concerns,” Idealo’s suit, if successful, could open the door for other companies, who feel they have suffered damage as a result of Google’s actions, to take legal action. In fact, this is to some extent Idealo’s goal, as they hope that their suit will be a signal to other companies who had previously been wary of taking on the Tech giant.

Moreover, many argue that despite Google’s recent efforts, Google’s changes are not making a significant difference for small price-comparison portals. Kelkoo Group, a British price-comparison company, took legal action in the U.K against Google before the 2017 ruling, plans to use evidence cited in the decision in its own litigation against Google. BEUC, a European federation of Consumer Protection Groups, has written to the EU Competition Authority arguing that Google is still not in full compliance with the commission’s ruling.

Although it has been two years since the ruling, it appears Google will continue to face challenges regarding the combination of its search engine and price-comparison tool. Whilst, Google appealed the ruling, the EU Commission views the ruling as proof that illegal behaviour took place, thus paving the way for companies to take legal action against the company. Many believed the EU’s ruling had ramifications not only for Google but for all large tech companies as they consider how they design products and services. Google and other tech giants, who have found themselves under close scrutiny in Europe over the past few years, will certainly be concerned about risk of litigation following EU Commission rulings.

3. Jet Airways Suspend Domestic and International Flights (by @bugsy)

The story:

Jet Airways, once India’s largest airline, has been forced to suspend all flights after failing to secure emergency funding. It hoped to secure interim funding from its lenders, a consortium of investors led by the State Bank of India but after a 6 hour meeting its request was denied. With no means of purchasing essential commodities to keep its planes in the air, the entire airline is grounded for the foreseeable future.

Timeline of key events:

• November 2018: Jet Airways faced huge financial losses with debts over $1.2bn.
• December 2018: Jet Airways was unable to pay employee wages.
• March 2019: A quarter of the company’s fleet was grounded and the owner, Naresh Goyal, gave up his 51% stake in the company in an effort to raise funds.
• April 2019: The company’s fuel supplier refused to refuel planes until they were paid. Planes have begun to be seized by other airlines for non-payment of fees.

Impact on businesses and law firms:

Jet Airways is still hoping to secure investment but that could take a long time. The more time that passes the less attractive it becomes. For example, it was forced to cancel international flights as it was not operating the minimum required number of planes, losing its valuable slots at Heathrow airport.

Routes from Mumbai to London and Dubai, and from Delhi to London, Dubai and Singapore have suffered a huge loss (tens of thousands of passenger seats each week) from Jet Airways’ suspension of international flights. Other Indian airlines are rushing to fill this capacity deficit in the country’s aviation sector. Jet Airways’ rivals, which are struggling with limited airport infrastructure, will be looking to make the most of this opportunity by expanding their fleet and leasing newly available planes. The ministry of civil aviation has already formed a committee to temporarily allocate Jet Airways’ vacant slots at airports (a prerequisite to schedule a landing or take-off) to other carriers, even as Jet Airways awaits funds from potential investors to revive operations. Rivals will also have a new talent pool of previous Jet Airways employees such as pilots, cabin crew, technical and airport staff.

These measures, however, have so far had limited success in bridging the demand supply gap of Jet Airways prime slots in busy Mumbai and Delhi airports. This has raised airfares at peak summer travel season. For example, at the beginning of April 2019, fares were 15% higher compared to last year, and last minute bookings are 18% higher year-on-year, according to online travel portal Cleartrip. This could be beneficial for airline profits or could lead to decreased demand from passengers not willing to pay higher fares.

 

[Jaysen]

3. Bayer Monsanto is found liable for farmer’s sickness by French Courts (by @Moni)

The story:

On April 11, a French court ruled in favour of 55-year old farmer Paul Francois, who has fought a ten-year battle against Bayer Monsanto; a pharmaceutical and agriculture conglomerate. Francois who fell ill in 2004, suffered memory loss, headaches, and stammering, and has since alleged that his illness was a result of him inhaling Lasso, a now banned herbicide manufactured by Monsanto. As a result of his illness, Mr. Francois had to stop work and is seeking €1milllion in damages.

Mr Francois and his lawyers argued that Monsanto failed to include sufficient safety warnings on the Lasso label, despite the fact that the herbicide contained hazardous chemicals. Lasso has been banned in France since 2007, and had already been withdrawn from several countries before that.

In its ruling, the court found that Monsanto should have indicated “a notice on the specific dangers of using the products in vats and reservoirs” on Lasso’s labelling and instructions. Moreover, it noted that Mr Francois’ expertise as a farmer did not excuse the lack of an accurate warning on the product.

Previous rulings in French courts had found Monsanto legally responsible for poisoning Mr Francois; however, those judgements were overturned by France’s top court, which in turn ordered a new hearing. The latest ruling was an appeal against that decision, and as a result François’ case will be heard again in another Lyon court which will make a ruling on the damages.

In addition to its legal battle in France, Monsanto is also facing several lawsuits in the United States regarding its most popular weed killer, Roundup. Roundup contains the active ingredient glyphosate, which allegedly causes cancer. The company has been found liable in two trials in which plaintiffs have been awarded tens of millions of dollars.


Impact on businesses and law firms:

The ongoing litigation against Monsanto has thrown into question Bayer AG’s acquisition of the company in 2018. Bayer acquired Monsanto in a $63 billion deal last year and Monsanto’s legal troubles since the merger have led to resulted in losses of €30 million in market value since August 2018. Following the announcement of the most recent legal decision, Bayer’s shares fell about 1.5% before recovering.

These losses have led some of Bayer’s largest shareholders to criticize the company’s management for underestimating the legal risks of the acquisition. Last year, they sought a legal opinion from Linklaters for reassurance that Bayer management had complied with its fiduciary duties to shareholders when acquiring Monsanto for $64 billion last year. The situation is particularly concerning for Bayer’s shareholders because it seemingly is not a situation that management can control or resolve. They are instead left to hope that their legal teams are able to persuade judges and juries that Monsanto is not liable for the plaintiffs’ illness, which so far, they have failed to do. Nevertheless, Bayer’s largest shareholders may look to take a vote of no confidence against management, which could result in further concern for the company and leave it vulnerable to attacks from activist shareholders who may seek to break it up.

Despite the most recent ruling, Francois’ legal battle is likely still ongoing as the company said it was considering an appeal. Bayer Monsanto’s shareholders will be watching closely to see if the French ruling leads to another surge in litigation, as was the case with the US ruling. Although they are appealing the California cases, more than 11,000 plaintiffs are seeking damages. In addition to diminishing investor confidence, surges in litigation also generally lead to significant costs for firms, which cause erosion to their bottom line and help to further reduce investor confidence.

This is a really good update.
In-depth article by the FT on this today: https://www.ft.com/content/a139ef68-b07c-11e9-bec9-fdcab53d6959
Here's Linklaters' legal opinion: https://www.bayer.com/en/summary-ex...-duties-monsanto-acquisition.pdfx?forced=true