A text transcription follows.
This transcript is for anyone with a hearing impairment or who for any other reason cannot listen to the MP3 audio file.
The following is the text spoken by OUT-LAW journalist Matthew Magee.
Hello and welcome to OUT-LAW Radio, where we hope to keep you up to date with the latest news and the most fascinating features from the world of technology law.
My name is Matthew Magee, and this week we look at a long-awaited court ruling that gives IT services companies' sales teams some cause for relief.
But first, here are some of the top stories from OUT-LAW.COM, where you can read breaking technology law news throughout the week.
UK asks EU court to rule on what is a counterfeit
and
Hotels group wins control of one and a half thousand domain names in a single action.
The Court of Appeal has asked Europe's highest court to rule on whether UK authorities can seize counterfeit goods passing through the UK and allow brand owners to take legal action against the companies behind the fakes.
A haul of 400 fake Nokia phones was seized by Her Majesty's Revenue and Customs (HMRC) as they passed through Heathrow Airport. Nokia confirmed that they were fakes and asked HMRC to impound them under the Counterfeit Goods Regulations.
The phones, though, were only in transit, travelling from Hong Kong to Colombia, both outside of the EU. HMRC refused to impound the phones because trade mark infringement could only have taken place if trading had happened and that was only possible if the goods had been put on the market. When Nokia sued, the High Court backed HMRC.
Nokia has appealed the High Court ruling and the Court of Appeal has asked the EU's highest court, the Court of Justice, to decide whether or not fake goods in transit through the EU from one non-EU country to another can be seized by customs authorities.
A hotels group has gained control of over 1,500 domain names, using a dispute resolution process to take control of them from one man in Germany who controls over 70,000 domain names.
The single case, heard by the World Intellectual Property Organisation (WIPO)'s arbitration centre, transferred 1,519 domain names to the Inter Continental Hotels Group (IHG), refusing to transfer just 10 of the names.
WIPO’s uniform domain resolution policy allows for the taking of one case to settle many disputes as long as the domain names are held by the same person, in this case German resident, Daniel Kirchhof. The rules also allow companies to take a joint case against a holder of domain names if they are related and have a common interest in the case.
Those were some of the top stories from this week's OUT-LAW News.
This week the UK's big IT firms got what they have long been waiting for: a High Court ruling in a dispute between IT services company EDS and Sky TV owner BSkyB.
This decision was the product of a six year long process, including eight months of hearings alone; an estimated £70 million in legal fees and an astonishing near-500 page ruling by Mr Justice Ramsey.
Sky had sued EDS over its sale to Sky of a customer relationship management system. The £48 million project failed and Sky eventually had to build the system itself at a cost of £265 million. Sky claimed fraudulent misrepresentation: it said that EDS misled it when selling the system.
The result? Even at this early stage it looks mixed. EDS, now owned by HP which is appealing the decision, lost and will have to pay out to Sky, but it didn't lose badly.
The ruling blamed EDS' fraudulent misrepresentation on only one individual, an EDS Managing Director called Joe Galloway, meaning at least that EDS' entire sales process was not culpable.
Raini Zambelli is a lawyer with Pinsent Masons, the law firm behind OUT-LAW, and she must be one of the few people already to have looked in some detail at the 500 page ruling. She first outlines why this was being followed so intently by the IT industry.
Raini Zambelli: It is so important to the IT industry because when bidding or pitching for huge projects like this it is often the case that sales teams will go out with the best scenario they can present to the client and make huge promises which sometimes they then fail to deliver on. The most important feature of this case, really is what Judge Ramsey would have to say about EDS’ failure to deliver what BSkyB said it promised it would.
The case hinged on whether or not EDS went too far in the promises it made in its sales process. Everyone in the industry expects some over-promising to go on at sales time, but Zambelli says that the trouble is that what many buyers of these big systems really need is an honest broker, a company that will give them some genuine guidance.
Raini Zambelli: Usually the IT supplier is in an invidious position of liaising between the client that really wants a whizzbang computer system but doesn’t understand what it will take to get there. For any client going out to procure IT services they do place a lot of care and reliance in the expertise of the IT provider because often it will be an unknown area for the client. It is incumbent really, on the IT supplier to base their pitch on reality, on what they are able to deliver based on what they know about the project at that time. In this case it was found the promises that were made had no basis in reality and Mr Galloway was held responsible for that.
Sky believed that honest guidance is the last thing it got. Zambelli outlines its claims.
Raini Zambelli: There were five key grounds of misrepresentation that BSkyB alleged against EDS. They related to the resources that EDS was going to provide. The number of employees being sufficiently skilled and sufficient in number to actually deliver the project. The second was technology. That the technical solution EDS had proposed was proven that it was tried and true and would work for BSkyB. The third was about methodology. That EDS’ approach to designing and building the CRM system would adopt suitable processes to ensure it stuck to the milestones and timeframes initially agreed to between the parties. The fourth was about time. The length of time that it would take. This being of critical importance given the business benefit BSkyB hoped to obtain from the system, and the last was the cost that EDS would deliver the project on budget and it was a budget around £48 million. So those were the five grounds of misrepresentation BSkyB alleged against EDS.
Mr Justice Ramsey agreed with only one of those claims, and even then only partially. He said that, yes, Sky had suffered fraudulent misrepresentation over the timing of the project, but that this was because of the dishonesty of Galloway alone, not of EDS as a whole. Zambelli says that because of this, the ruling will not force a sea-change in IT sales processes that might otherwise have been the result of this case.
Raini Zambelli: Right now a lot of sales teams do tend to operate somewhat independently from the broader business and the fear for, well for EDS, for the broader IT industry was that a wholesale review of sales processes at that big phase would be required. The case does not perhaps carry as great significance at this point for the wider IT industry as was anticipated because the fraudulent conduct that BSkyB succeeded on was attributed by Justice Ramsey solely to the one individual, the Managing Director of EDS that led the bid, and was also involved in the renegotiation of the project in 2001.
If this ruling and the expected £200 million plus payout are the result of one rogue employee, what can companies do to try and ensure that they are not in EDS' position in the future? Zambelli says: not a whole lot.
Raini Zambelli: There is very little an organisation can do to mitigate against the possibility of a rogue employee stepping out and telling bald-faced lies about what the business can do. Yes, the business can ensure its recruitment processes are tightened and veto all resumes coming in or curriculum vitaes to make sure they are correct and don't themselves contain false information about what their employees have done so far. But on the presumption that an organisation can trust its employees it can’t really protect itself against the risk that it might have hired someone who is really very good at telling lies.
HP is asking for permission to appeal the decision. But Zambelli says that there will be little wiggle room at the Court of Appeal.
Raini Zambelli: Prospects of an appeal being allowed are likely but the appeal points will have to be quite limited. We are talking here about a 460 page judgment that will be referred to for many years to come for its statements on negligent misstatement, on entire agreement clauses, contractual estoppel; there is a lot of gold here in this judgment, absolutely. The appeal points must necessarily be limited to questions of law not questions of fact and Justice Ramsey has absolutely attended to every question of fact that has led to his findings of law. Questions on appeal would be far more limited to whether Justice Ramsey erred in his finding on the five grounds of misrepresentation.
So after six years and hundreds of pages, a major source of anxiety for IT suppliers has been settled, kind of. As is so often the case, the outcome isn't quite as straightforward as many expected.
That's all we have time for this week, thanks for listening. Why not get in touch with OUT-LAW Radio? Do you know of a technology law story that you think we should cover? We'd love to hear from you on radio@out-law.com. Make sure you tune in next week; for now, goodbye.