Sorting Fuct from Fiction – US Supreme Court decision of the registration of profanities

Designer Erik Brunetti’s line has been given a green light after justices agree ban blocks free expression. Justices came to that conclusion after the designer Erik Brunetti’s fashion line ran into trouble with the US patent and trademark office (PTO), which registers product names. Brunetti was seeking a trademark for his brand, FUCT, which he says is pronounced letter by letter. (The brand’s Twitter bio suggests it stands for “friends U can’t trust.) But the trademark office wasn’t thrilled with the branding and turned down Brunetti’s registration, under a law banning “immoral or scandalous matter”. In the words of PTO authorities, FUCT was “a total vulgar”.

Yesterday, the US Supreme Court gave its decision on the registration of the FUCT brand as a trade mark in respect of clothing.

The applicant had applied to register the name of its existing clothing brand FUCT as a trade mark in the US but the initial application was refused by the USPTO on the grounds that the proposed mark was scandalous and immoral. The decision was challenged by the applicant on the basis that the ban on registering the mark was an impediment to his free speech. In giving its the decision, the US Supreme Court accepted that the trade mark will be read (at least by some) as a reference to a swear word, but by deciding which trade marks where immoral the USPTO was discriminating on the “basis of viewpoint”. This follows a similar decision of  the US Supreme Court in relation to disparaging marks given in relation to an application of “The Slants” made by the Asian-American front man of the band of the same name.

The case can be contrasted with the registration of FCUK by French Connection, which was challenged in 2006 on the grounds that it was contrary to public policy or accepted principles of morality. In that case the UKIPO decided that a registration of the word ‘Fuck’ would not generally be acceptable to the public (and the use of that word was also prohibited by the Advertising Standards Agency).  That point was not challenged before Arnold QC (acting as an Appointed Person) and was consistent with the earlier rejection of the trade mark ‘FOOK’. However, the registration of FCUK was allowed on the basis that it was not itself a swear word.  Whilst it could be used in a way which evoked the swear word (and the applicant had used it in such a manner), this did not mean that the mark should necessarily be revoked.  The USPTO also allowed FCUK to be registered as a mark in the US.

The latest decision from the US Supreme Court is a further relaxation of the rules around the registration of contentious and scandalous marks in the US.  It is doubtful that any trade mark registry will now be flooded with marks containing profanities, but brands seeking to maintain a rebellious edge will no doubt see how far the boundaries can be pushed not only in the US but in the UK and other countries.

For any IP and/or trademark-related advice, please contact Ross Waldram on 0207 822 2222 or rwaldram@gscsolicitors.com

https://www.theguardian.com/law/2019/jun/24/fuct-fashion-supreme-court-strikes-down-trademark-office-ruling

 

Corporate Voluntary Arrangements. A legitimate tool?

There has been much press coverage of late about corporate voluntary arrangements and the retail trade.

Corporate voluntary arrangements came into existence under the Insolvency Act 1986. The relevant sections are 1 to 7 inclusive. Insolvency rule 2 also applies.

The directors of the company may make a proposal for a CVA to its creditors for a composition in satisfaction of its or a scheme of arrangement of its affairs.

The company must registered under the Companies Act 2006 in England and Wales or Scotland. There are provisions in respect of overseas companies but I will not address those the purposes of this article. Where the nominee is not the liquidator or administrator company, as is usually the case, he or she shall then 28 days (or longer if the court provides) after he has he or she has given notice of the proposal for a voluntary arrangement submit a report to the court stating whether in his or her opinion on the proposal and arrangement has a reasonable prospect of being approved and implemented, whether it should be considered by meeting of the company and by its creditors and finally his or her opinion that the date, time and place at which such a meeting should take place.

For the purposes of enabling the nominee to prepare his or her report the person intended to make the proposal should submit to the nominee a document setting out the terms of the proposed voluntary arrangement (and the nominee usually assists in drafting this), a statement of the company’s affairs containing particulars of his creditors and debtors or other liabilities as well as any other prescribed information. There may be modifications to the proposals and also the proposals cannot limit the rights of secured creditors without their consent. After the conclusion of the meeting the chairman of such meeting shall report the results of the meeting to the court and also given notice of the results of the ratings meeting to such person as may be prescribed

Essentially the proposals have to achieve 75% of votes in favour in value to those who attend in person or by way of a proxy. If this is achieved then the proposals as approved are binding on all creditors who received notification of the creditors meeting

There are provisions in the Act for an application to be made to the Court on the basis of unfair prejudice against the interests of a creditor, member or contributory or if there is being some material irregularity at or in relation to the meeting company or in relation to the relevant qualifying decision procedure.

The Court has wide powers in dealing with such an application. It may revoke or suspend any decision improving the CVA. It may also give a direction for the summoning of a further meeting as well as directing any person to seek a decision on the company’s creditors.

The supervisor CVA also has the power to apply to court for directions alternatively for the winding up of the company or for an administration order.

Rule 2 of the Insolvency Rules go into somewhat greater detail, in particular, the requirements as to the contents of the proposal.

It is possible to apply for a CVA either with or without a moratorium against enforcement against the company but I will not address those the purpose of this article.

There has been much press coverage in respect of landlords being allegedly prejudiced by CVAs which have been approved in favour of a tenant being a retailer with multiple outlets. The reason for this is that landlords view themselves as having rent reductions imposed on them which are unfair. There has even been a report that a well-known high street retailer in all its forthcoming leases will insist that if a tenant in the same shopping centre enters into a CVA so resulting in a reduction of rent that automatically its own rent to the same landlord be reduced along similar lines. Such a position will not endear itself to landlords.

Various landlords have expressed considerable concern about CVAs being abused to their detriment. My personal view is that a CVA is a statutory contract and that if 75% of creditors in value approve it (together with any modifications) then it is a legitimate use of an existing statutory mechanism.

I expect that it will not be long before there is a challenge in the courts by a retail landlord on the basis of unfair prejudice. It will be interesting to see how that goes.

For further advice in relation to CVA or in general on any insolvency or corporate recovery related issues, please contact Richard Curtin on rcurtin@gscsolicitors.com or on 0207 822 2222.

Forcing change by ‘naming and shaming’ – gender pay gap reporting

The government now sees equal pay as a vote winner. The requirement for large companies (250+ staff) to publish their gender pay gap figures is not new. It was first proposed, but not implemented, by the Labour government under the Equality Act 2010 and rejected by the Tories during the coalition government, preferring a voluntary approach. This resulted in minimal responses. However, the majority of UK employers are small to medium sized companies, so the impact of these regulations will be limited.

Publication of gender pay gap information for large companies is now required by April 2018. There are no financial penalties for failing to comply and any enforcement action by the ECHR is likely to be minimal. It is the ‘naming and shaming’ from government websites or league tables which will be most damaging for a company if their figures do not look good.

Some companies may well have valid reasons for gender pay differences. Whilst explanations can be provided with the published information, these may not be sufficient to counter the reputational damage caused by negative publicity.

The government hopes that having given companies 12 months to prepare for publication, that will allow them sufficient time to address any gender pay disparity and implement change. It is already starting to take effect.

However, if the government is serious about promoting gender pay equality, it should consider reinstating equal pay questionnaires which were abolished during the coalition government. Without a statutory process, it is far harder for women (and men) to establish if their co-workers are being paid more than them for the same work. Gender pay differences will not be resolved simply by ‘naming and shaming’ large companies.

Thousands of employers will begin to record their gender pay gap figures for the first time and will have to publish their first figures before April next year.

The rules which will be enforced by the Equality and Human Rights Commission require companies who employ more than 250 people to provide data about their pay gap, the proportion of male and female employees in different pay bands, their gender bonus gap, and a breakdown of how many women and men get a bonus. The legislation will affect around 9,000 companies, who collectively employing more than 15 million people.

https://www.theguardian.com/society/2017/apr/06/gender-pay-gap-law-could-have-significant-impact-say-experts

Autumn’s ‘ASK GSC’ in the Asian Wealth Magazine

In the latest ASK GSC pages, our experts answer questions from AWM’s readers.

Justin Goldspink, who specialises in Media and Intellectual property, explains how to approach setting up a joint venture between a UK-based tech company and a firm in India.

Legal perspective on pregnant employee’s redundancy is given by Head of Employment, Tessa Fry.

Finally, Sana Sheikh, who advises on private client law, comments on how inheritance tax rules can affect a family business.

Pitfalls of Leasehold Property – Ground Rents

There are two main types (tenure) of property you can buy in England, Freehold and Leasehold. With Freehold, you will own the property and the land that it sits upon and they are usually houses. With Leasehold, you will own the property but not the land it sits upon so you will usually have a landlord to whom you pay an annual rent for the “ground”, and this is what is known as ground rent.

All Flats will have a Leasehold title (even if you are told you are buying a share of the freehold).

There are over four million leasehold properties in England, according to a government estimate. While 1.4 million are houses, the majority are Flats. Some 69% of all new build homes in 2016-2017 were Flats.

Now, imagine how you would feel, if your Landlord was able to take your Flat away from you. You have spent hundreds of thousands or even millions of pounds buying your dream Flat, or perhaps it was an investment Flat, a pension pot or maybe this Flat was a future provision for a child or grandchild. Do you think it is really possible that such a valuable asset could be taken away from you and for what reason? How about that you forgot to pay the ground rent or you got into arrears with your ground rent?

There are numerous pitfalls to buying and owning a Flat but two main problems with owning a Flat, where you have to pay ground rent is the topic of this article.  These problems have been highlighted in the press in recent years and the government have had various consultations but no real action has yet been taken to address the problems.

The first problem is the rising ground rent. When you bought your Flat, you might have thought the ground rent was not such a big sum, perhaps £50 or £100 per annum. However, more and more Flat owners are finding (especially with new build Flats) that ground rent is doubling every 10 or 20 or 25 years. So, very quickly you could be paying quite a large sum of money for ground rent.  This can have an effect on the value of your Flat especially if it is your intention to hold onto the Flat for a number of years or to be handed down from generation to generation. Some new build Flats in London start ground rent at over £1,000 per annum and gradually rise during the term of the long lease.

The second problem arises because of an oddity in the Housing Act 1988. The Housing Act 1988 was introduced to protect tenants of short-term lettings under an Assured Shorthold Tenancy agreement.  If you have ever rented a Flat or House you may be familiar with this type of tenancy agreement. What the Housing Act 1988 was not meant to do, was apply to Flats sold on long leases for a lot of money, but it can. That is because, Flats with long leases that pay ground rent which is above a certain level are automatically treated as an Assured Shorthold Tenacy agreement.  So, it came as a huge surprise to some Flat owners, who found themselves in court for not paying the landlord the ground rent, and to make it worse they found that the court was on the landlord’s side, even though the amount of ground rent was so little compared to the value of their Flat. What is important to understand, is being in arrears of ground rent gave the landlord the mandatory ground to ask the court for repossession and however unfair it seems, the courts hands were effectively tied and they had no choice but to follow the law and grant an order for repossession.

Lots of suggestions have been made to the government during consultations to try and tackle these problems, which are only going to worsen over the years if not dealt with. One option, was to get rid of leasehold properties and whilst this is likely to happen for leasehold houses (eventually) it is highly unlikely for Flats.  Another suggestion was for payment of ground rent to be scrapped totally. This option would certainly get my vote, because if payment of ground rent were scrapped a) Flat owners could not be held to ransom by their landlords for increasing ground rent that devalues the capital asset and b) this oddity of the Housing Act 1988 where an expensive Flat was treated as a simple assured shorthold tenancy agreement simply would not exist. Conversely of course, how would those landlords who have made those ground rent investment purchases be compensated?

Don’t be put off buying a Flat but hopefully the above will make you think about some of the potential pitfalls in buying Flats that you may not have thought about before or simply not be advised about in previous purchases. Buying Flats can be complex, try and make informed decisions and get the full picture from someone who knows what to look out for!

For further information please contact us on +44(0)20 7822 2222

Settlement agreements in employment disputes

Unfortunately, there may be a time in any employment relationship where things must be brought to an end.

Employment law in this country is complex, and the ending of the employment relationship may entitle the employee to various claims (not only under the contract of employment, but also under the law generally). Accordingly, we would always recommend that legal advice is sought before terminating someone’s employment.

If the parties agree, the best way of dealing with potential claims from the employee that are a concern for the employer is for the employer and employee to enter into a settlement agreement.

Typically, under a settlement agreement, the employee will agree to waive all claims relating to their employment and its termination in exchange for receiving a lump sum of money from the employer (some or all of which may be payable tax free). So, if drafted correctly, the settlement agreement can be seen as a win-win.

To be legally binding, the employee will need to take legal advice on the settlement agreement from an independent solicitor who has no links to the employer.

For advice on employment matters, please contact David Nathan on 020 7822 2222 or at dnathan@gscsolicitors.com

Another successful event – celebration of International Women’s Day

Last week GSC Solicitors hosted hand-picked female guests for a networking evening with inspirational women while celebrating IWD and having a sushi-making master class.

Seena Williams of GSC’s Real Estate team gave a small speech on buying leasehold and ground rent and Private Client‘s Sana Sheikh gave practical tips on how to safeguard assets and pass down wealth to the next generation.

A short video from the event can be viewed here:

For further information on property-related issues or wealth/assets/wills, please do not hesitate to contact us on 0207 822 2222.

The importance of providing employees with written terms

It is not uncommon to come across employees who have been employed for years and who say that they have no written contract of employment

What those individuals may not be aware of is that it is a legal requirement for an employer who has employed someone for at least one month to provide that individual with certain information regarding their employment.

The information must be in writing and has to be provided to the employee within two months of the start of their employment (from April 2020, such written information will need to be provided on or before the first day of employment).

There is certain information which must be provided in writing such as the employee’s start date, job title, place of work, hours of work, pay details, and holiday entitlement. However, the employer is free to include further information regarding the employee’s employment, often in the form of a more comprehensive employment contract.

In certain circumstances, if the information is not provided, or is inaccurate, the employer could be required to compensate the employee financially, so employers should be aware of their obligations.

For advice on employment matters, please contact David Nathan on 020 7822 2222 or at dnathan@gscsolicitors.com

Commercial property & non-residents – significant change

A significant change to the taxation on non-residents

owning commercial property is to be introduced from April 2019.

The rules follow the change in legislation for UK residential property that come into force in April 2015. They have now extended this to commercial property and so all UK commercial property held through non-resident individuals, offshore companies and trusts will be within the scope of UK Capital Gains Tax (CGT).

How is it calculated

Only increases in value arising after April 2019 will be subject to tax, so historic gains will be protected and investors that have held assets since before this date will only be subject to tax on a disposal to the extent their asset has increased in value since April 2019.

Non-resident companies and unit trusts will be taxed at the corporation tax rate (currently 19 per cent) while individuals and other entities will be taxed at capital gains tax rates (currently 20 per cent for higher and additional rate taxpayers).

Who is caught?

The new regime applies when there is a direct disposal of UK commercial property. However, it will also include indirect disposals (for example where a non-resident holds a property through a company, and the shares, rather than the underlying property, are sold).

For an indirect disposal to be taxable, the following two conditions must be met at the date of disposal:

  1. The entity being disposed of must be ‘property rich’; and
  2. The non-resident must hold a 25% or greater interest in the entity, or have done so within the five years ending on the date of disposal.

Property rich test
This will apply where, at the time of disposal, 75% or more of the value of the asset disposed of derives from UK property. The test will be based on the gross asset value of the entity, i.e. without relief for any mortgage or other interest costs – and will use the market value of the asset(s) at the date of disposal.

The ownership test
This test will look at the interest which a non-resident, together with related parties, has held in a property rich entity at the date of disposal, or at any point during the previous five years.

Impact of double tax treaties

It is important to take account of any relevant double tax treaties when considering the new rules. The taxing rights will generally sit with the UK as the country where the property is situated, but the position is more complex for indirect disposals. To reflect this, anti-forestalling provisions took effect from 22 November 2017 which prevent holdings from being restructured so as to avoid the charge.

ATED – related CGT

The government intends to structure the new rules so that as far as possible one regime applies for all disposals of interests in UK immovable property by non-residents. The Government is, therefore, considering harmonising the Annual Tax on Enveloped Dwellings (ATED)-related CGT regime with the new rules.

If you wish to discuss how the new rules on commercial property may affect you please get in touch with us by contacting James Cohen  who is also a notary public and STEP qualified: jcohen@gscsolicitors.com or 0207 822 2222.