All questions
Year in review
i Liquidated damages
On 16 July 2021, the Supreme Court handed down its long-awaited decision in Triple Point Technology,5 confirming the orthodox approach to construing clauses which specify the amount of damages that will be payable in the event of delay (liquidated damages clauses). The court held that, unless a contract clearly provides otherwise:
- termination will not extinguish any liquidated damages that have accrued as a result of delays up to the date of termination, regardless of whether work was completed as at that date; and
- in relation to delays after termination, a party can seek damages for breach of contract under the general law.
Given the prevalence of liquidated damages provisions in IT and outsourcing contracts, the decision in Triple Point Technology will be of particular interest to the IT community.
ii Damages for loss of control and representative actions
A further seminal Supreme Court decision – this time in relation to alleged breaches of the Data Protection Act 1998 (DPA98) and the use of representative actions in this context – was delivered on 10 November 2021 in Lloyd v. Google.6 In overturning the Court of Appeal’s decision, the Supreme Court held that, absent proof of financial loss or distress, damages for loss of control of personal data under Section 13(1) of the DPA98 are not actionable. In addition, while the claim satisfied the ‘same interest’ test under Rule 19.6(1) of the Civil Procedure Rules insofar as liability was concerned, the requirement that claimants prove individual financial loss was considered a barrier to the claim being brought as a representative action. The decision in Lloyd v. Google was welcomed by data controllers and provides clarification in relation to the evolving area of collective redress for consumers.
iii Wasted expenditure and exclusion clauses
In April 2022, the Court of Appeal handed down its judgment in the long-running dispute between CIS and IBM over the failed implementation of a new IT system,7 overturning the first instance decision that had considered the extent to which a claim for wasted expenditure caused by repudiation was excluded by the contract.8 Having concluded that wasted expenditure is a recognised and recoverable type of loss (distinct from loss of profits), and that a plain reading of the words in the exclusion clause did not come close to excluding a claim for wasted expenditure, the Court of Appeal emphasised the principle that:
the more valuable the right, the clearer the language of any exclusion clause will need to be; the more extreme the consequences, the more stringent the court must be before construing the clause in a way which allows the contract-breaker to avoid liability for what may be his catastrophic non-performance.
This decision contains useful guidance on the construction of exemption clauses and the different types of loss that may be covered by such clauses.
iv Regulatory and industry developments
The year 2021 also saw several UK government-led consultations and initiatives looking at the need for increased regulation of, and rights associated with, certain emerging technologies. In March 2021, the UK Intellectual Property Office published the results of its first consultation on the interaction between IP rights and AI development and innovation. A further consultation was launched in October 2021, looking at (among other things) the extent to which patents and copyright should protect inventions and works created by AI, and measures to make it easier to use copyright-protected material in AI development to support innovation and research.9 The UK government has also been considering ways to improve the regulation of digital assets, confirming in January 2022 that ‘qualifying cryptoassets’ will fall within the financial promotions regime of the Financial Services and Markets Act 2000.10 The government also announced an insolvency scheme in May 2022 to manage the collapse of certain cryptocurrencies – known as stablecoins – where such assets are considered to have systemic importance to the UK financial system.
v Russia
The impact of economic sanctions on Russian businesses and individuals has also been felt in the technology sector. Following the issue by the Russian government of Decree No. 299, certain licensing rules in Russia have been suspended, enabling the unauthorised use of patents, trademarks and industrial designs in exchange for a ‘proportional economic compensation’ paid to the IP owner.11 For owners connected to ‘unfriendly countries’ (the United Kingdom being designated as one of 48 such countries),12 the compensation has been set by the Russian government at a flat rate of zero per cent, increasing the risk that IP rights will be freely infringed in Russia.13
vi Litigation funding
The past year has also seen a steady increase in the volume of claims that attract litigation funding, with patent infringement cases being a particularly strong growth area.
