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The global rigid film producer Klöckner Pentaplast will acquire Farmamak from Gözde Girişim Sermayesi Yatırım Ortaklığı A.Ş. (Gözde Girişim). Farmamak will operate as a subsidiary within the Klöckner Pentaplast Group.
Klöckner Pentaplast, a world-leading producer of rigid films for the pharmaceutical, medical devices, food and consumer packaging and beverages, has signed a definitive agreement to acquire the rigid film producer Farmamak. Farmamak is a leading rigid film producer in Turkey (and the surrounding regions) and currently resides under Gözde Girişim.
“We are excited for our first acquisition since 2011, together - with Farmamak as a local leader - this transaction allows us to improve our customer focus in Turkey and throughout the Middle East to improve our regional service and capabilities,” commented Wayne M. Hewett, Chief Executive Officer, Klöckner Pentaplast.
“Always a pioneer and innovator in its field, Farmamak introduced many industry firsts and achieved sustainable growth over a number of years. I am sure that under the ownership of Klöckner Pentaplast, the business will further build on this solid heritage and see further growth,” explained Gözde Girişim CEO Mustafa Aydemir.
Farmamak, with sales of TRY 155 million (EUR 47 million), employs around 230 people and its production site is located in Gebze, Turkey. “Integrating Farmamak into the Klöckner Pentaplast Group shows great confidence in the potential of our company and our employees and brings more opportunities in the market to unlock further growth," said Kurt Kuruç, Managing Director of Farmamak.
The transaction is subject to approval by the competition authorities. Until such approval is granted, Klöckner Pentaplast and Farmamak will operate independently.
Interview - Umit Akin - Akin Law Office:
Please tell me about your involvement in the deal?
I have served as in-house counsel and vice president at international companies for over a decade as I was in charge of domestic and international legal and regulatory affairs and investments reporting directly to the Board, the Chairman and the CEO. I also used to have chairs on the boards of numerous domestic and international subsidiaries of same group of companies. My experience of lecturing at various private and public Universities should also be noted.
Over two decades of broad-based experience in academic lecturer, general counsel and senior executive roles with principal law schools in Turkey and Turkey-based international group of companies, I had extensive experience in M&A projects on both buyer and seller sides, as well as corporate governance, international investments, competition law, privatisations and public procurement law experience, which has helped my office quickly become one of the leading full-service law firms in Istanbul since its establishment on 2012. The Office now has a broad client portfolio that consists of domestic and international investors operating in various sectors such as telecommunications, energy, media, automotive, real estate, education, and food and beverages.
Yildiz Holding has become one of our most valuable clients for years. Our office has been successfully representing and assisting Yildiz Holding on various M&A projects. I believe the reason Yildiz Holding decided to work with our office is down to the quality of our services, as we excel at managing and limiting risks through preventive measures; being decisive and acting in line with a strong ethical code.
Why is this a good deal for all involved?
We, all the lawyers of both buyer and seller, managed deal negotiations successfully and succeeded in finalising all the agreements, which was satisfactory for all parties involved and in parallel to joint understandings of our clients.
Our excessive expertise in representing both buyer and seller sides in various M&A projects also helped in understanding and creating solutions to the claims of the seller, and eased the deal negotiations.
What challenges arose? How did you navigate them?
Advising your clients on the seller side in such complex projects, where multiple interested parties and specialists are involved, is always a challenging exercise. Time pressure was applied by demanding clients, as I have always been asked how quickly I can return the documents with my remarks.
Deutsche Beteiligungs AG (DBAG) recently announced that it is investing alongside its advised DBAG Fund VI in Polytech Health & Aesthetics GmbH (Polytech), a provider of high-quality silicone implants. DBAG and DBAG Fund VI will acquire a majority interest in Polytech in a management buyout (MBO); DBAG will hold approximately 18% in the company and DBAG Fund VI about 76%. Polytech’s management will acquire the remaining shares.
The vendor is company founder Wilfried Hüser. The parties to the contract, which was signed on Tuesday, agreed not to disclose the purchase price. DBAG will invest up to EUR 12 million from its balance sheet for its interest. The transaction is contingent on approval by the cartel authorities, and the agreement is expected to be completed In November.
Following the investments in telecommunication and software provider Telio in December 2015 and Frimo, a tooling and plant provider, in August 2016, Polytech is the third management buyout that DBAG structured alongside DBAG Fund VI in its current 2015/2016 financial year. Polytech is the tenth investment entered into by DBAG Fund VI, which, subsequent to this transaction, is now invested in excess of 75%.
Polytech (www.polytechhealth.com) is a leader in the development and production of silicone implants in Europe. Polytech, the sole German manufacturer of such products, specialises in breast implants used in reconstructive and aesthetic plastic surgery. The implants are manufactured exclusively at the company’s domicile in Dieburg (near Frankfurt, Germany) under clean-room conditions, where its staff of 170 work in development, production, quality control and distribution.
Interview - Andreas Schmitz - Alvarez & Marsal:
Please tell me about your involvement in the deal?
Alvarez & Marsal provided buy-side financial and tax due diligence support on this transaction. The team was led by Juergen Zapf and Andreas Schmitz out of our Frankfurt office.
Why is this a good deal for all involved?
The owner was looking for an investor that has experience in developing small and mid-size companies. Polytech has grown nearly 30% per year over the last three years and for the current year has forecast revenue of more than EUR 30 million, about half of which are generated in Germany and Western Europe. The track record of growth and ability to expand Polytech by further developing ‘Made in Germany’ products to grow internationally made Polytech attractive for DBAG.
What challenges arose? How did you navigate them?
As a relatively small owner-managed company, the level of formal financial information was less that one might normally expect in a due diligence process needed for a private equity sponsor to invest. However, our approach to due diligence in using senior diligence professionals with many years of experience enabled us to work closely with target management and adapt their existing financial and non-financial information to get our client what they needed to invest.
Lawyer Monthly hears on the topic of family law, in particular regards to divorce and separation, and children-related disputes. Led by Hilary Lennox and her colleagues, the team at Five St Andrews Hill talks about international regulations surrounding child abduction and relocation, what reforms are needed surrounding surrogacy law, and also touches on the ins and outs of forced marriage and the tax advantages of marriage.
The Five St Andrews Hill family team is a growing team qualified in several jurisdictions and maintains a strong presence in all areas of family law providing practical advice and effective court advocacy.
Members are experienced family practitioners also in extradition, crime and public law, which is a great base when advising clients and solicitors in London and Internationally as there is generally an overlap.
Our barristers act in leading and landmark cases and understand how sensitive family cases can be. The team are friendly and approachable and treat all enquiries in complete confidence.
What are the most common disputes that arise in relation to divorce and separation in UK?
The most common disputes in family law arise in matters of finance: financial relief proceedings and children proceedings.
Financial relief consists of the assets of the marriage and how they are divided up amongst the parties. If it is a long marriage (twenty years and over), the starting point is then 50/50. These assets may include the house(s), most often being the largest asset, pensions, businesses and tangible goods; even the family dog. Valuations of the house are consistently argued over! Pensions are always an issue as the pensions will not be realised until a party attains the requisite age. A business which has been acquired or set up during the marriage will also be placed in the family pot! Parties can be reluctant to have those businesses valued, particularly from an independent forensic accountant assigned by the court.
The second most common dispute is the children; the disputes are where and with whom the children will live and how often the second party will spend time with their children. The courts are inundated with parties coming to court with applications for child arrangement orders under the Children Act 1989. This can determine where the child(ren) will live or how often one party can see their child(ren). Prohibited steps orders may prevent parties from attending at the children’s school or taking the children overseas for holidays if the facts require that. Non-molestation and occupation orders (as mentioned by Gemma Lindfield below) arise when it’s time to stop domestic abuse or remove one party from the family home.
Child maintenance can also be an issue, particularly where one party believes the other is earning more than they say. Child maintenance is obligatory for any biological parent of the child, at least until they reach the age of 18. So how much must one party pay? That is determined by your income and lifestyle. On a maintenance application, vouching documentation verifying your income must be filed with the court so the Judge can make proper provisions for the child.
Does the case relating to the children always have to be decided by the Court?
On the 19th July 2016 ‘The Family Law Arbitrators Children Scheme’ was launched, backed by the President of the Family Division. The Children Arbitration Scheme will deal with a range of private law children matters, including:
Over 40 arbitrators have already been trained under the Children Arbitration Scheme and more are expected to follow once the scheme gets properly underway.
It has been argued that the Scheme will provide a flexible alternative to court proceedings.
The advantages will be:
Obviously, as with a court application involving children, the welfare of the child is paramount [1] in the decision making process. The instruction of an independent social worker to ascertain the wishes and feelings of the children will be a key part of the new Children Arbitration Scheme, where appropriate.
An interesting situation will arise if the children, as in the case of Mabon v Mabon and Others [2], want to be heard, being independently represented by Counsel. Currently, the Arbitrator will not meet or interview the children. One assumes that should such a situation arise then the case will have to be transferred to the Court.
What circumstances necessitate the use of domestic injunctions in a divorce case? What are the specific protection measures for children?
Since the Family Law Act in 1996, it is possible for a spouse, or other associated person, to apply for an Occupation Order or a Non-Molestation Order. These are civil orders, although the breach of the latter is a criminal offence with a maximum penalty of 5 years’ imprisonment. Both orders may be applied for without notice to the other party, in the first instance.
An Occupation Order delineates the rights of those who are entitled to live in the family home. It may be used to remove an abusive spouse from the matrimonial home or restore the injured parties to it. On occasions, it can outline who may use what part of the home. It may also outline who is to pay the rent or the mortgage. The court will take a wide range of factors into account when deciding whether to make an occupation order. These include, but are not limited to: the housing needs and housing resources of each of the parties and any relevant child or children; the parties’ respective financial situations; the likely effect of either making or not making an order on the health, safety and wellbeing of the parties or any child; and the conduct of the parties. Often, occupation orders are made when one party has used or threatened violence against the other. In making provision about the rights of the spouses over the matrimonial home, it therefore protects any children who are involved.
A Non-Molestation Order essentially injuncts an abusive spouse, or associated person, from being abusive towards the victim and any children of the marriage. The order may prohibit various types of conduct. Examples are: from being physically or emotionally abusive; contacting the applicant and any children; and coming within a certain proximity of the applicant and any children. The order often prohibits direct or indirect contact or abuse, to prevent the situation where an abusive spouse may ask third parties to harass or abuse an applicant on their behalf. A Non-Molestation Order can also allow an abused spouse space and confidence to pursue divorce proceedings, knowing that they will not be influenced by the actions of their abuser.
Do you think that current legislation needs to change to reflect modern day relationships and if so, how?
Reform in surrogacy law is needed to reflect modern families. In June 2016, the government indicated there would be a review after a case in which it accepted the law discriminated against a single father of a child born via a surrogate who was refused a parental order.
Surrogacy in the UK is currently restricted and legally complex. Surrogacy contracts are unenforceable, which means that everyone relies on each other to honour the agreement. If there is a dispute about who should care for the child after the birth (and who should have contact), an application can be made to the family court for a child arrangements order.
Many parents cross borders for surrogacy. The US, Ukraine and Georgia are common destinations. The law is not internationally governed, so knowledge of the law in the destination country is essential. UK law currently treats the surrogate as the child’s legal mother. Who is treated as the child's father/second parent is complicated, and depends on factors including the surrogate's relationship status and where conception takes place. The English law solution is a parental order, which reassigns parenthood fully and permanently to the applying couple and extinguishes the legal status and responsibilities of the surrogate (and her partner). The Court will then examine whether the surrogate properly ‘consented’, whether payments exceeded ‘reasonable expenses’ and issues of domicile.
A review of the law should ensure that there is legal framework accessible and clear from the outset; that transfer of parentage is immediate. Currently, the surrogate is treated as the legal mother and it takes many months for parenthood to be transferred, leaving everyone in limbo. Internationally, this can be extremely problematic. Finally, there ought to be some clarity about ‘reasonable expenses’. More honesty and transparency would be more likely to protect all concerned.
On what grounds are pre-nuptial agreements enforceable?
Unfortunately pre-nuptial agreements are not enforceable in the UK contrary to popular belief. When you hear prenuptial agreements some think of an iron clad document protecting their assets feverishly; for example in the US George Clooney’s film ‘Intolerable Cruelty’, about an iron clad contract called ‘the Massey pre-nup’. In the UK pre-nuptial agreements are generally a useful guide for the court to determine the intentions of the parties. However, independent legal advice should be sought by each party to prevent any inference of duress which could negate the intentions.
How does international law fit in to family law?
A number of the team have vast experience in extradition, criminal and public law and are qualified in several jurisdictions. This is a great base when advising clients. London is a diverse city where assets are owned all over the world. Most family law cases now in London, be it finance or children, have an international element.
In nearly every family finance case I do, I have property portfolios all over the world including in the US, India, Nigeria, Ireland, Tanzania, Spain and eastern European countries. Our finance cases have property portfolios all over the world, which still form part of the marital pot and must be valued and adjudicated in London once the parties’ habitual residence is the UK.
How does International family law apply to children?
Given how international London is, there are a large number of child relocation cases. Members are involved in international child abduction and child relocation. These cases can develop quickly and need immediate action. A simple scenario is when the breakdown of a relationship occurs and one party wants to return home and take their child(ren) with them.
This scenario is not easy if it’s Europe (Brussels II applies), but it is even more difficult when it’s back to a country like the US, Australia or in Africa where the distance alone is an issue. Determining contact with that child is the prevailing issue and the financial position of parties is relevant when determining how to facilitate the contact when the child is thousands of miles away. If a country is not a signatory to ‘The Hague Convention’, it may be impossible to seek the return of that child. There are several countries not signatories to the Hague convention including but not limited to Pakistan and Iran.
Does the child have a say in the court room?
The starting point is Article 12 of the UN Convention on the Rights of the Child (CRC) which states:
“States Parties shall assure to the child who is capable of forming his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child.”
Whilst the CRC has not been incorporated into UK domestic law, Mr Justice Peter Jackson has stated that “Article 12 of the CRC caries a moral, though not legal, authority.” [3]
The procedural rules in England and Wales left it to professions to communicate with the child and pass on that communication to the Court. In private law proceedings, it is carried out by CAFCASS [4] reporting officers, and in public law proceedings (care proceedings) it is carried out by the Children’s Guardian [5] with the help of the child’s lawyer.
It is not always the case that a CAFCASS reporting officer or the Children’s Guardian will automatically be accepted as the “Voice of the Child” in court. In the case of Mabon v Mabon and Others [6] was an action by the mother against the father for a Residence Order. A CAFCASS officer filed his first report and all six children were jointed in the proceedings as partied to be represented by the Guardian. During the trial the three eldest children, 13, 15 and 17, sought to be separately represented; the Judge refused. On appeal to the Court of Appeal the children’s application was granted. In the case of Mabon v Mabon there was a conflict between the mother, the father and the Children’s Guardian. The old system of paternalistic approach has been replaced by considering, where appropriate, the child’s wishes. Of course, such attendance or non-attendance will depend on the age and level of understanding of the child and other considerations
Who else on the team is involved in forced marriage and family law matters?
Katherine Duncan & Jacqueline Julyan S.C.
Jacqueline has an international family practice and is an expert in the field. Such is Jaqueline’s knowledge, that she is often called upon to provide expert reports to international courts on international family law is a Fellow of the International Academy of Matrimonial Lawyers (IAML), and serves on a number of committees. She is a member of the International Society of Family Law (ISFL) and the Family Law Bar association (FLBA).
Katherine Duncan, instructed by the Metropolitan Police Services, successfully secured a forced marriage protection order, to prevent a teenage girl from being forced into marriage. Her father had made threats to take her abroad against her will and have her raped and married to a man of his choosing. When she refused, he threatened to kill her. The forced marriage protection order was made against the girl's father, mother and elder brother. As part of the order, a passport order was granted to prevent the girl from being taken abroad, and to prevent her father leaving the country without first notifying the police.
What are the current tax advantages of being married and are there any tax advantages for co-habiting unmarried couples?
Couples who are married or in a civil partnership can claim the Marriage Allowance if the following apply: one partner does not earn any money or their income is under £11,000; and the other partner's income is between £11,001 and £43,000. You can still apply for a Marriage Allowance if one partner is currently receiving a pension, or you live abroad (provided you are entitled to a Personal Tax Allowance in the UK). A Marriage Allowance allowed the partner who is earning the lower income to transfer £1,100 of their Personal Tax Allowance (currently the first £11,000 of a person's income is tax free) to the higher earning partner. This can reduce their tax bill by up to £220.
The Capital Gains Tax exemption is effectively doubled for married or civil partnership couples. Spouses can transfer assets between each other tax-free during their lifetime. Currently Inheritance Tax is charged at 40% on estates worth more than £325,000. However, if you are married or in civil partnership, all assets can be passed to the surviving spouse without Inheritance Tax being levied. When the second spouse dies, it is possible that the two allowances can be combined when passing on assets to the next generation. This means that couples who are married or in civil partnership can leave £650,000 to their children before inheritance is applied.
Cohabitating couples do not benefit from these tax advantages. However, many pension schemes recognise cohabiting partners alongside spouses and civil partners, provided certain conditions are met. Typically these conditions require the couple to have been financially dependent on one another and living as if married. All couples, whether they are married or living together are treated in the same way when they are assessed for entitlement to most welfare benefits, Working Tax Credit or Child Tax Credit.
[1] Section 1 Children’s Act 1989
[2] [2005] 2 W.L.R 460
[3] [2011] EWHC 1082 Fam
[4] Children and Family Court Advisory and Support Service
[5] Appointed under Rule 16.3 of the Family Procedure Rules 2010 as amended (FPR)
[6] [2005] 3 W.L.R. 460
Major automotive supplier The Sertec Group has announced their largest ever take over with the 100% acquisition of UK Midlands headquartered WILD automotive (AWC Industries Ltd) creating a £250m turnover Group with 10 manufacturing plants across the UK, Germany and Hungary.
The WILD group of businesses specialise in the manufacture of high quality technical components and assemblies for Automotive OEMs and Tier 1 suppliers. Whilst Sertec currently manufactures wire products, this is not its core capability and the acquisition of WILD will significantly enhance the company’s offering to both existing and potential customers. With WILD’s manufacturing plants in Witton Birmingham, Redditch, Hungary and Germany, this is the perfect fit for Sertec to fulfil its European expansion plans.
The acquisition is precisely the kind of accelerated growth provided for by the £20m funding invested in Sertec by Business Growth Fund (BGF) and Lloyds Banking Group back in February this year. Both have invested further to support this latest transaction, alongside Santander Bank, which makes its first syndicated contribution to the growth plans of Sertec. In addition, K&H provided local asset finance in Hungary.
The Midlands deal team at PWC acted as both lead advisor on the acquisition and provided debt advisory support for the refinancing with Weightmans providing legal advice to Sertec. Quercus & Penningtons acted on behalf of AWC Industries.
Pennycuick Collins advised Sertec on the condition of the premises they were acquiring as part of the transaction. Pennycuick Collins’ building surveyors carried out surveys of all the properties and either assessed the dilapidations liability or prepared a schedule of condition to restrict the clients liability for dilapidations at lease end. The firm’s reports provided Sertec with an overview of the condition of the premises and allowed them to make informed decisions and negotiate the best possible terms. Pennycuick Collins’ team was led by Building Consultancy partner, Adrian Roddick, on this transaction.
TorQuest Partners is pleased to announce, alongside its co-investors and PNC Mezzanine Capital, the firm has partnered with Polycor, Inc. (Polycor), a Canadian Quebec-based natural stone producer, in its merger with Swenson Granite and its wholly owned subsidiary Rock of Ages, two of the leading American granite quarriers and manufacturers. TorQuest now owns majority control of all the merged companies.
On a combined basis, the business will be amongst the largest natural stone companies in the world, operating over 30 quarries, primarily in Quebec and the US Northeast, serving a diverse range of end markets.
Alan Lever, Partner at TorQuest, said, "Polycor, Swenson Granite and Rock of Ages are each leaders in their respective markets. We are excited to bring these businesses together under one umbrella, creating the largest dimensional stone company in North America.”
"Swenson Granite and Rock of Ages are brands known for the superior quality of their products in their markets. We continue to see unique opportunities for our Company and are eager to pursue these initiatives alongside Swenson Granite and Rock of Ages. In addition, we are excited to build a productive relationship with TorQuest and its co-investors, and we are very happy to continue our partnership with PNC,” said Patrick Perus, CEO of Polycor.
Eric Berke, Managing Partner at TorQuest, said, "This is the seventh platform investment for TorQuest Partners Fund III and continues our strategy of partnering with exceptional management teams to build industry-leading businesses and support their continued growth.”
No financial terms for the transaction were disclosed.
The largest alcohol manufacturer and distributor in the Baltics, Amber Beverage Group, a part of SPI Group, has acquired a significant equity stake in Fabrica de Tequilas Finos, a tequila brand owning and production facility based in the town of Tequila, Mexico.
Amber Beverage Group welcomed the partnership with Fabrica de Tequilas Finos and the opportunities it will offer to expand distribution into the US and South and Central America.
The portfolio of Fabrica De Tequilas Finos consists of over 20 tequila brands including KAH, Don Camilo, Agave 99, Zapopan and Tonala.
Ferro & Méndez, S.C. firm supported and provided all the legal advice and services required by Amber Beverage Group related to the acquisition of Fabrica de Tequilas Finos, SA de CV, a state of the art distillery founded in 1999.
Ferro & Méndez’ involvement included all the aspects of the acquisition, such as the practice of an expanded due diligence, including the completion of all pre-closing and post-closing matters. Roberto Ferro led the project; the areas of specialization required for this matter where Corporate, Intellectual Property, Labor and Real Estate. Ferro & Méndez keeps providing general advice on all the day- to-day obligations and services of the Mexican company.
Growth Capital Partners (GCP) recently announced that it has completed a transaction with Arrow Business Communications, investing alongside management and providing a significant acquisition fund to enable Arrow to continue their ambitious growth strategy and further develop their strong presence in the industry.
Recent strategy has seen Arrow completing seven acquisitions in the last six years and whilst this has seen the business nearly treble in size and successfully transform from its mobile roots to a much broader based business communications supplier, the Arrow team are focused on complementing organic growth with larger acquisition opportunities which strengthen their hosted, data and IT services portfolio.
Kemp Little acted as exclusive legal advisor to the shareholders of Arrow Business Communications, a leading UK telecoms provider with multiple tier one MNO relationships. Arrow was formed as a division of Sony Communications in the early 1990s until a management buyout led by current CEO, Chris Russell, in 2003. Since 2003 the business has undertaken numerous roll up acquisitions.
Following the recent investment, Arrow and GCP will work in partnership, with management and GCP each having a 50% shareholding in the business. Kemp Little LLP has supported Arrow Business Communications since the 2003 management buyout.
Charles Claisse (Head of Corporate) led the transaction with support from the corporate team, including from Glafkos Tombolis (corporate partner). The team called on specialist input from Kemp Little LLP’s commercial technology, telecoms, intellectual property, regulatory and employment teams.
This transaction follows on from a series of other private equity and M&A transactions in 2016. Kemp Little LLP in this period has acted for and opposite private equity funds and trade buyers undertaking digital and technology (and technology enabled) acquisitions and investments with the geographies involved including the UK, the US, Japan, Australia and mainland Europe.
Rightscorp, a Los Angeles-based provider of copyright monetization and data services, monitors the global Peer‐to‐Peer (P2P) file sharing networks to seek out and find illegally downloaded digital media on ISP networks.
US Law makes piracy illegal, and nobody is legally entitled to participate in piracy with impunity – not even Internet Service Providers (ISPs). Furthermore, the holders of Intellectual Property rights can today hold a third party – including ISPs – accountable.
Beginning is 2011, Rightscorp sent daily notices of infringement to Cox Communication. Rightscorp sent Cox detailed information regarding Cox subscribers who were repeatedly distributing BMG’s copyrighted music. Rightscorp repeatedly requested that Cox use Rightscorp’s free service to help reduce repeat infringement on the Cox network. By 2014, BMG saw three years of continuing illegal distribution of its copyrighted music by Cox subscribers and saw no evidence that Cox was terminating service to repeat infringers as required to maintain Cox’s Safe Harbor. In November 2014, BMG sued Cox for copyright infringement. In August 2016, Judge Liam O’Grady entered $25 million final judgment against Cox Communications in favor of BMG Rights Management in the Eastern District of Virginia.
This third party liability in IP rights infringement goes back a number of years in US case law, and was brought to the forefront in the 1996 case Fonovisa Inc. v. Cherry Auction, Inc. In that case, Cherry Auction operated an outdoor market in Fresno, California, with vendors paying a fee in exchange for booth space. Cherry Auction repeatedly leased space to vendors who sold counterfeit recordings. Fonovisa Records, an American Spanish language record label, repeatedly warned – and eventually successfully sued – Cherry Auction. The case advanced important concepts of secondary copyright infringement at the appellate level.
The implications of this body of law became clear to Internet service providers who saw that their facilities were being used to illegally trade copyright-protected materials. Faced with the prospect of third party liability, ISPs subsequently went to Congress to seek a shield from liability. They hit the jackpot, with the four Digital Millennium Copyright Act ‘safe harbors’. These provide protection from third party liability for: transmitting (transitory digital network communications); caching; storing (information residing on systems or networks at the direction of users); and linking (information location tools).
However, these safe harbors are not unconditional. Before an ISP can take advantage of any of the four safe harbors, it must meet two conditions: first it must refrain from inhibiting Standard Technical Measures - the means by which copyright owners may identify or protect copyrighted works - meaning that ISPs can't thwart efforts to police copyrights.
ISPs must also adopt a Repeat Infringer Policy; a policy that terminates, in appropriate circumstances, subscribers who are repeat infringers, inform their subscribers and account holders of this policy and reasonably implement this policy.
Why does this matter? Because peer-to-peer piracy represents 20% of all North American upload traffic. This includes the infringement of movies, video games, software and books. Today, Rightscorp, a Los Angeles-based copyright monetization company, uses software that monitors the global Peer‐to‐Peer (P2P) file sharing networks to seek out and find illegally downloaded digital media.
Rightscorp is currently tracking thousands of subscribers, who it says are flagrantly and repeatedly distributing its clients’ copyrights, despite multiple notifications to the ISPs of these infringements. These downloads do not only take the form of single songs, but also of complete movies, entire albums and full discographies containing hundreds of files. This continues despite the law, and despite the ISPs' own policies.
On behalf of digital media copyright owners, and working in conjunction with major ISPs, Rightscorp automatically sends out copyright infringement and demand notices to ISPs whose users have illegally downloaded digital media. The violators remit payment to Rightscorp for the copyright infringement and Rightscorp makes payment to the copyright owners.
Many infringers who do not pay are disconnected by their ISPs. Rightscorp's technology system monitors the global P2P file sharing networks and sends emails to ISPs using the notice format which is specified in the Digital Millennium Copyright Act (a United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization (WIPO), criminalizing production and dissemination of technology, devices, or services intended to circumvent measures, commonly known as digital rights management or DRM, that control access to copyrighted works) with the date, time, song title and other specific technology identifiers to confirm the infringement by the ISP’s customer. Rightscorp uses this format because ISPs are used to dealing with it. Notices sent by Rightscorp are not required to be in any particular form, since their purpose is simply to place the ISPs on actual notice of the piracy occurring on their networks.
Under US Federal Copyright Law, once the ISP has actual knowledge of copyright infringements that take place using its network, it has specific duties in relation to the enforcement of the rights of the owners of the material in question (if the ISP desires the protections of the ‘safe harbors’). Every ISP is required by law to enforce a policy that provides, in appropriate circumstances, for termination of internet service to subscribers who become repeat infringers. Many ISPs have “terms of use” that include strongly worded policies that threaten termination of service for subscribers that use the network for illegal activity such as copyright infringement.
Some ISPs elect not to enforce those policies in any meaningful way, presumably because they want to avoid the financial impact of terminating subscribers (especially those with expensive high-capacity service of the type required by high-volume P2P infringers). These ISPs have essentially elected to take the gamble that no copyright holder will hold them accountable (or that the costs of being held accountable will be less than the profits they have reaped in return for supplying the “pipes” for piracy). Other ISPs take the opportunity to use the Rightscorp service as a component in their repeat infringer policies.
By passing along Rightscorp’s notice, and thus notifying its subscriber of an infringement, the ISP is advising the customer that based on current laws, the user who receives a notice is liable for up to $150,000 in damages.
By clicking on the link supplied, the customer is able to send a payment to Rightscorp. The company then passes on a percentage to the copyright owner. The particular instance of copyright infringement can thus be settled between them and the copyright owner quickly and affordably.
Rightscorp’s aim is to encourage rights holders to hold ISPs accountable for repeat infringement of their content by seeking termination of repeat infringers.
Sovos Compliance, a global leader in tax and business-to-government compliance software, recently announced that it plans to acquire Atlanta- and Sao Paulo-based Invoiceware International, expanding the company’s capabilities in Latin America and adding the industry’s only solution for handling electronic invoicing and fiscal reporting in multiple countries from a single platform.
Sovos, which is backed by London-based HgCapital and Vista Equity Partners, currently helps some of the world’s largest companies consolidate their compliance solutions for Latin America, EMEA and North America. Invoiceware successfully supports dozens of multi-national companies itself, including The Coca-Cola Company, Kellogg and Pfizer, and its solutions will be available immediately to Sovos clients.
Sovos plans to expand its presence in Latin America to better support its current and future multi-national clients, starting with Invoiceware’s Sao Paulo location.
Marks Baughan acted as exclusive financial advisor to Invoiceware International in its sale to Sovos Compliance, an HgCapital and Vista Equity portfolio company. The firm’s team consisted of Nick Baughan (Managing Member), Chris Rose (Director), Bill Takeuchi (Director) and Joe Loreto (Associate).
According to Nick Baughan, the transaction had a number of structural complexities and unique tax considerations. Invoiceware had legal entities in the US and Brazil, while Sovos is a US-based company backed by UK-based and US-based private equity funds. Regulatory requirements and tax implications across multiple geographies were taken into account as the final transaction structure was determined.
As electronic drones are becoming more popular, more advanced, and cheaper by the day, concerns are also rising as to the rules surrounding privacy, airspace, and property.
The military have been using drones for some time now, but with rumours that some companies may eventually be using drones for delivery, that drone racing might actually be a thing of the future, and that these flying machines are increasingly becoming a danger to aircrafts, what else are we unaware of, and what more should we be thinking about in anticipation of a potential drone revolution?
This month’s ‘Your Thoughts’ is dedicated to answering these questions, as well as those in regards to legislation, camera restrictions, property and privacy matters, identification, and much more. To shed light on some of these issues, we reached out to several experts and professionals in their field, who have given particular insight into advent of drone technology and the aforementioned considerations to be made.
Jonathan Nicolson, Assistant Director of Communications at the Civil Aviation Authority (CAA):
The CAA’s prime focus is air safety. While we keep all our rules and regulations under constant review we do already have legislation in the UK aimed at securing the safety of other airspace users. The European Aviation Safety Agency (the EC body for civil air safety) has already published proposed new regulations to unify the safety oversight of drones. This ranges from small consumer devices to large commercial drones. These proposals build on existing regulations.
The EASA rules propose differing levels of regulation depending on the size of the drone (based on its risk to other aircraft), but don’t propose to limit size or restrictions. The ability to have extremely large civil drones has existed for several years and large drones (equivalent in size to the military ‘Watchkeeper’ drones) have already been flown in civil airspace in the UK.
Consumer and other small drone users should abide by existing UK legislation aimed at ensuring drones are safely separated from other airspace users. As far as the operation of large drones – these have already been flown in UK airspace as part of a trial with UK air traffic control body NATS.
Further work needs to be undertaken to develop the technology to allow these drones to safely integrate into uncontrolled airspace – the part of the airspace system not directly controlled by ATC and used by a variety of aircraft from private flying, military operations to police helicopters.
Drone registration is a complex issue with many options. On one hand having the details of drone owners would mean they could be contacted with safety information. But very few drones are ever located following an incident so registration to track users for investigation / follow up action could be less of an argument. From our perspective we believe educating users on how to fly safely and therefore preventing any incident is preferable.
We have already seen amazing development in the drone industry in a very short space of time and this will certainly continue.
Dr Kevin Curran, Senior Member of the IEEE and Senior Lecturer in Computer Science at the University of Ulster:
A case can be made for limiting drones until legislation is implemented, but in practice this is very difficult. The authorities need to concentrate on educating users, unless an outright ban is made on the sale of drones, which is nearly impossible. Individuals and businesses should of course be aware of the safety issues. People are worried about drones falling from the skies, drone blades injuring people and, of course, collisions with commercial aircraft. What the public fail to understand however, is that modern un-crewed aerial systems can be preprogramed to avoid no-flyover zones – both uploaded by the public and those set by airports and military. Modern drones also are beginning to ship with anti-collision systems on board and these make a big difference for future safety.
Ultimately, the rules governing use of drones are still evolving. In the UK, the House of Lords EU Committee posits that in the near future all commercial drone operators should register their drones, which will include leisure users in the long term. A key recommendation is that drone flights must be traceable, effectively through an online database, which the public could access via an app. They foresee, as more people buy drones as gifts, there are likely to be many more cases of people using them in circumstances that present risks, or rub up against either civil aviation law or data protection. Laws will be forced to change as a result.
Restrictions do apply to different sizes of drones. The laws applying to the use of cameras on drones are the same as recording images of other people without their consent via the Data Protection Act. Drones will play a big role in aerial photography both in business, personal and advertising. We may also see drones being used to advertise at public events and in public spaces in general.
Drone owners need to consider carefully whether they are going to be recording images of other individuals in public spaces as opposed to in their own homes or gardens, as there they run the risk of breaking data protection law. Likewise, they need to be careful when sharing recordings on social media.
Airspace issues are a big problem for drone use. Many countries are now rushing to enforce compulsory registration of all commercial and civilian drones due to concern over the use of drones by individuals with little or no knowledge of aviation rules. Typical restrictions include flying it within 150 metres of a congested area and 50 metres of a person, vessel, vehicle or structure not under the control of the pilot. In effect, users must fly drones "within sight". Owners must not go above 400 feet in altitude or further than 500 metres horizontally. If they wish to exceed this, they need to seek explicit permission from the Civil Aviation Authority (CAA).
In 2015, a UK Airprox Board (UKAB) reported 23 near misses between aircraft and drones. Twelve were given an A rating – meaning there was "a serious risk of collision". In one incident a drone passed within 25m of a Boeing 777 near London Heathrow Airport. There is a case of an individual named Robert Knowles was fined £800 and ordered to pay costs of £3,500 after being prosecuted by the Civil Aviation Authority (CAA) for flying a drone within 50 metres of the Jubilee Bridge on the Walney Channel and flying over a nuclear installation, the BAE System submarine-testing facility.
Authorities around the world are aware of the crimes that drones can be used for. Since December 2015, the Federal Aviation Administration (FAA) mandates that all owners of model aircraft, small unmanned aircraft or drones, or other RC aircraft weighing between 0.55 and 55 pounds need to register online before flying their drones. This is a step towards identification plates of a sort, requiring drone owners 13 years and older to submit their name, email and home address to receive a Certificate of Aircraft Registration/Proof of Ownership. This will include a unique identification number owners must affix to any drone they own and operate exclusively for recreation.
Delivery is a common use for drones and has been since their early days. In five years, it will not be uncommon to see drones delivering packages. Grocery delivery is just the beginning. Amazon, of course, is the highest profile company seeking to usher in guidelines for autonomous drone deliveries. Other major drone players such as Parrot, Cyphy Works, Skyward & DJI are also contributing to the debate. One of the more likely retailers to use them will be local pharmacies, people can place their repeat prescriptions online with local health clinics, have the prescription automatically forwarded to the pharmacy, then use drones to deliver medicine to local homes.
Some benefits of drone deliveries are cost savings for businesses, an increase in customer reach and a faster speed of response. The price of fuel is only going to go up in the future, along with the other large costs associated with maintaining delivery fleets. Therefore, the economics of the situation will push a lot more of this business to the skies. Furthermore, customers win as the goods could be delivered in almost real time.
Rufus Ballaster, Partner, Carter Lemon Camerons LLP:
The overwhelming majority of the current rules which govern airspace, property rights and privacy rights are the product of eras when the widespread commercial use of drones was barely conceivable. This means that, at face value, many of the potential commercial uses of drones may be illegal as the law stands.
Originally, unless qualified, property rights were considered to go “down to the depths and up to the skies.” With the dawn of the aviation age, that principle was qualified by what are now the Civil Aviation Authority (CAA) regulations.
With the introduction of these regulations, the common law rights to challenge trespassers were overridden to allow commercial aviation, both literally and figuratively, to take off. CAA regulations apply to most flying objects both in relation to the use of Upper Strata airspace and indeed Lower strata –below 1,000 feet from ground level the complexity being that a drone would have to comply with property law obligations not to trespass as well as CAA drone rules in order to stay squeaky clean.
For drones weighing 20kg or less, CCA regulations require prior consent whenever a drone is flown near people, within 50m of a person or near a structure, vehicle or vessel which is not under the control of the drone operator.
For drones weighing 20kg or more, the regulations are more stringent. These drones need permission, a qualified pilot and a certificate of airworthiness. A delivery service concept would need to have this in mind and ensure discussions took place with the CAA.
Just as a construction crane is an object which is not entitled to trespass over a boundary without an oversail licence, a drone is an object which, if it is used in a way which has not been permitted, will be committing a trespass into a property owner’s land.
However, we would have no railways, no drainage systems, no motorways, no airports and airlines, no radio, nor TV transmission had previous generations of law makers and the general public not made regulations compromising property rights, for the public good, so that in a properly controlled way those services to start to happen.
If drone delivery proves technologically achievable at a reasonable cost, then there will be some debate about the balancing of the rights of many and the rights of the few as well as worries about safety standards. I, for one, expect the law to be played with enough to find that the Englishman’s castle is that bit less secure from intrusion in relation to being overflown by these mechanical beasts of burden than they are today.
Emma Wright, Commercial Technology Partner at Kemp Little said:
Civilian drone use is regulated in the UK by the Civil Aviation Authority (CAA) for drones up to a mass of 150kg, at which point jurisdiction currently shifts to Europe. To avoid the more burdensome regime a drone must fall within the definition of a ‘small unmanned aircraft’ which is essentially a drone of up to 20kg without its fuel but including any articles or equipment. There are clear risks and benefits from widespread use of commercial drones as they have a broad range of applications and our congested airspace together with the forces of gravity, means the potential for harm to the public or damage to property cannot be ignored.
The UK CAA admitted earlier this year that the rules and regulations around drone use are “evolving.” Currently commercial drone services provided by companies require prior permission regardless of size where the service falls within the definition of ‘commercial operation’ in the Air Navigation Order 2016 which is: “…any operation of an aircraft other than for public transport—(a) which is available to the public; or (b) which, when not made available to the public, is performed under a contract between an operator and a customer, where the latter has no control over the operator, in return for remuneration or other valuable consideration.” The intent is exactly the same as the previous definition of ‘aerial work’ in the 2009 Air Navigation Order. There are various regulatory requirements needed including insurance and the equivalent of passing a driving test in order to get permission from the CAA. For non-commercial operators flying drones under 20kg this can be carried out without permission subject to the operator remaining within ‘direct, unaided, visual contact’ with the drone throughout its flight. The boundary is set as five-hundred metres horizontally and four-hundred feet vertically from the operator otherwise permission from the CAA is needed. Additional safeguards also exist including no-fly zones in order to protect buildings, other obstacles and the wider public and segregated airspace. By-laws also exist in specific areas (such as the New Forest) where permission is needed before flying.
The distinction between commercial use seems fine: if a company buys a drone for its own internal site mapping or internal operations, providing it meets the other restrictions, it does not need permission.
The EU is looking to harmonise the licensing and permitted use of drones across Europe. Across the UK we can expect a crackdown on irresponsible use of drones regardless of use, I suspect in a similar way that applies to drivers of vehicles. However, if irresponsible use becomes an increasing problem, a broader licensing regime is likely to be imposed and a way of identifying all drones and their operators in order to hold them to account similar to a vehicle’s registration plates. Clearly if we get to the stage that drones operate on the basis of automation, then the regulatory regime is likely to need to be revisited just like in the case of connected cars.
Where the drone collects and processes personal data (regardless of distance if living individuals can still be identified) this is caught by the UK Data Protection act 1998. The ICO has recently extended its CCTV Code of Practice to include public use of drones where they are collecting information about individuals. Clearly filming without permission is arguably a breach of privacy.
There are clear benefits for removing vehicles from the roads. Of course the licensing and regulatory requirements for drone use and ownership will need to be weighed up in any costs benefit analysis.
The technology is constantly evolving with drones becoming faster, flying at longer ranges, and carrying increasingly sophisticated equipment. Hopefully there will be significant improvements to aerial avoidance technology to allow the use of drones to be used for more commercial purposes.
Neil Falconer, Commercial Property Solicitor at Thorntons:
As with any newly formed technology that pushes the existing legislative framework, there is a propensity for media and political backlash to push for new and possibly heavy handed provisions. This needs to be restrained to focus on the real harm that the technology is creating and if the expansion of any legislative provisions would actually address this harm.
There are fantastic potential developments in drone use, such as crime prevention, fire detection and control, search and rescue, scientific research, inspection of industrial structures (oil rigs, power plants, pylons and power lines), media and journalism and creative and artistic projects. Indeed a search of drone footage on YouTube displays page after page of impressive aerial footage showing a landscape vantage point that brings pleasure to the viewer and the film maker. On that basis it should be kept in mind that the vast majority of “hobbyist” drone use is benign and brings happiness to many people. Further the vast majority of commercial drone use is saving industry a great deal of money, and the potential use in the area of accident and emergency can save lives. The future development of effective drones in all these areas and many more is dependent on their commercial success to allow future development.
From an Intellectual Property and Media perspective the main issues surrounding drone use are privacy and harassment. Encroachment on privacy through drone use offers a detachment between the potential infringement and the perpetrator not previously seen in privacy cases. This is a trend that echoes through other areas of technology. While an individual may not dream of screaming abuse at a celebrity in public, they may do so on social media. While an individual may not climb up a garden wall with camera in hand, they may fly a drone from a distance and obtain equally private footage.
It would therefor follow that any regulatory framework of drone use in relation to privacy and harassment should act to remove that detachment and sense of anonymity as much as possible. Drone filming of individuals on their own private property would almost certainly constitute a breach of data protection and privacy law; but if the footage is uploaded online within the hour the practical options available to the victim of the breach are minimal. Tracking the origins of the footage can be difficult and ongoing legal action in celebrity cases would only serve to raise the profile of the original infringement. As with many breaches of privacy happening on an online platform, the victim may feel it is easier to ignore it and move on, following the logic that the less a fuss you make of it, the quicker the issue will pass.
Technological advances are inevitably faster than legal ones. However, the remedy for irresponsible drone use may be a technological solution. The compulsory registration and tagging of drones, potentially offering the ability to reveal the details of the drone operator in real time, would remove this aspect of anonymity and demand the accountability of the operator.
Hopefully the accountability of users along with the enforcement of privacy and data protection law would create enough of a deterrent to prevent misuse becoming a common issue. Furthermore the requirement for drone users to be on a register would allow for operators who breached these laws to be prevented from future drone ownership.
