Is “fit for purpose” fit for purpose?

Channel 4 News’s Michael Crick issued an impassioned cri de coeur on Twitter last night:

I had to agree with him:

This led to an interesting discussion on Twitter, which got me thinking more about this increasingly ubiquitous expression.

“Fit for purpose” is a phrase that frequently gets bandied about in business circles, particularly in relation to technology contracts. Disgruntled buyers will protest that the software wasn’t “fit for purpose”, or that the hosted service they are using isn’t “fit for purpose”. And, as was pointed out in the discussion on Twitter, politicians are also fond of the phrase – ever since John Reid declared in 2006 that the Home Office wasn’t “fit for purpose”.

John Reid may have pushed the phrase out to a wider audience, but the explosion in popularity of “fit for purpose” had started some years before this, as this Google Ngram shows:

Google Ngram of 'fit for purpose'

As I said in my reply to Michael Crick, though, I’m not sure that people who use the phrase always have a clear understanding of what it means. Certainly it usually gets used in situations far removed from its original context in sale of goods law, in particular (today) s.14 Sale of Goods Act 1979.

The Sale of Goods Act describes two different ways in which goods can be “fit for purpose”. The first is as part of what it means for goods to be of “satisfactory quality”. This includes:

fitness for all the purposes for which goods of the kind in question are commonly supplied. (s.14(2B))

The second (and what is normally meant by “fitness for purpose” in the context of the sale of goods) is in s.14(3), which applies where the buyer makes known to the seller “any particular purpose for which the goods are being bought”. In that case:

there is an implied term that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied.

So those are two fairly narrow and specific meanings. And before anyone runs away with the idea that these are just two statutory underlinings of a more general concept, s.14(1) slams the door firmly shut on this, at least as regards the sale of goods:

Except as provided by this section and section 15 below and subject to any other enactment, there is no implied term about the quality or fitness for any particular purpose of goods supplied under a contract of sale.

So the use of the phrase “fit for purpose” to describe services or software, let alone government departments, is some way removed from that original meaning – though, to be fair, it can also be seen that the wider use isn’t wholly at odds with the legal meaning.

But why is this a problem? Why shouldn’t people, in a business or technological context, use a phrase that has meaning for those in the discussion, even if it annoys legalistic pedants? There’s no reason at all why they shouldn’t – provided the pitfalls are recognised. In particular:

  1. “Fit for purpose” is often used in a rather imprecise sense and, like a lot of business jargon, may often be a symptom of imprecise thinking – which may come back to bite people later on.
  2. People who say “fit for purpose” often think they are talking in “legal” terms, which can cause confusion when the legal position turns out not to support them as they’d expected.

The biggest problem comes when the buyer ends up dissatisfied with what they’ve got out of an IT contract, and protests that the software or service wasn’t “fit for purpose” – only for the seller to point out that they’ve complied with what the contract actually said they’d do, even if this turns out not to be what the buyer wanted; perhaps because the buyer thought they’d be able to rely on some general principle of “it has to be ‘fit for purpose'”.

In any event, whether lawyers (or Michael Crick) like it or not, “fit for purpose” is here to stay. How should commercial lawyers handle this phrase? The best thing is to find out what our client’s “purpose” is, what “fitness” for that purpose looks like, and then put that into the contract – rather than the vague phrase itself.

Though I hope we can be forgiven for occasionally wanting to let off steam on Twitter about it, too. 😉 

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Privacy Impact Assessments and SMEs [wonkish]

ICOI attended an SCL meeting last week discussing the ICO’s current consultation on Privacy Impact Assessments (submissions for which close tomorrow).

The SCL is preparing its own response to this consultation, but as I’m not involved in that process, and as the discussion led to my forming some fairly strong views on how the current draft guidance applies to SMEs, I’m submitting my own response (in a personal capacity) to the consultation.

Basically I think that the current proposal will completely alienate SMEs (not to mention many larger companies), who will see no relevance to what comes across as a highly complex and bureaucratic process – for all its claims to “flexibility”. However, at its heart, the concept of a Privacy Impact Assessment (PIA) is one that could be useful to SMEs, if the guidance were constructed in a simpler, more “bottom-up” way.

My draft answers are after the fold. Suggestions for improvement are welcomed…

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Cyclometric testing for lawyers

World Brompton Championships 2008 - photo by Tim Branch

Photo by Tim Branch.

Great piece in today’s FT by Lucy Kellaway arguing that how you ride a bike shows what you’re really like at work. As she puts it:

I’ve always fancied that as a group, cyclists make relatively good employees. All of us are vaguely fit [some of us more vaguely than others]. We have the wherewithal to be reliable and punctual. When the trains stop running as a result of a little wind – as they did in London last Monday – we still get to work on time [speak for yourself, Lucy – I worked from home]. We are risk-takers and ever so slightly rebellious, which works quite well – especially in a job like journalism.

But as Ms Kellaway goes on to point out, cyclists aren’t a unitary group at all: fast or slow, with or without helmets, jumping red lights or respecting the rules of the road, and so on. Or (to add one of my personal bugbears) weaving in and out of traffic, passing buses on the inside, and so on.

So I can see what Ms Kellaway means when she says that watching people ride a bike will tell you far more about their aptitude as employees than any amount of psychometric testing: the black-clad, headphone-wearing banker with no lights, the pedestrian-scattering baby-pink Brompton rider, and so on (“it is the red light that is the richest point for data gathering”). The bike test weeds out non-team players and those men who are incapable of allowing themselves ever to be bested by a woman.

Kellaway also pre-empts my own objection when I saw the title of her piece:

Some cyclists may protest that they are aggressive in the saddle only to become pussycats at their desks, but I don’t agree: on a bike you are close to death and so become a more intense version of your true self.

This pulled me up, because I tend to think I am rather different on a bike than at my desk. I like to think I work in a calm, professional, collaborative way; by contrast, on a bike I become rather more aggressive and sweary (as a certain driver who pulled out from a side road in front of me this morning could testify, had she even noticed my existence).

But then I thought about it a little more, and I think this is a fair description of how I cycle: assertively, but not recklessly. I follow the rules of the road pretty faithfully: stopping at red lights, not riding on the pavement (my absolute, number one personal bugbear), and so on. I prefer to take and hold the lane in slow traffic rather than weaving around queuing vehicles – it’s safer, and to my mind more assertive, even if fractionally slower. My mantra (often muttered under my breath at some taxi driver who seems to doubt my right to exist) is “it’s a road vehicle” – which implies both rights and responsibilities. And yes, if you cross me then I’m likely to respond pretty firmly, but without losing control.

Perhaps those are not such bad traits for a lawyer – and if Kellaway is right that cyclists are “risk-takers and ever so slightly rebellious”, perhaps that’s not always bad for a lawyer, either. Or perhaps I just fit into the “red-light refuseniks” category:

When there is a big group of bikes together at a light, it takes a particular sort of cyclist to break the consensus and ride off, but once he has done that, others follow, leaving just one or two behind. I would hire these red-light refuseniks at once – but only for jobs in audit or compliance.

Ouch.

“I have read, understood, and agree with this blog post”

An unimaginative, T&C-drafting hack, yesterdayI did wonder whether to come into work this morning, after I read John Kay’s piece in the FT on why reading T&Cs is a waste of time. Adding to the sense of futility this could engender about my chosen career was Prof Kay’s assertion that the lawyers who draft such documents are “mostly unimaginative hacks rather than hotshots of the profession”. How very dare you!

However, Prof Kay does make some very good points about why “there is nothing ‘irrational'” about ignoring the small print on websites or on the back of dry-cleaning tickets. To say that consumers ought to read all the T&Cs they encounter is to take an excessively “legal and economic” view of human behaviour. In fact:

The reality is that the terms of exchange in a market economy are defined by social expectations and enforced by the mutual need of the parties to go on doing business.

I agree. Another reason why I rarely bother to read the T&Cs on consumer websites, at least where they are based in the EU, is that I tend to assume that consumer protection legislation will step in to protect me from anything too outrageous hidden away in the legal terms. (I’m a little more beadily cautious with US-based sites. But only a little.)

The main reason, though, is that it is not merely rational to ignore the T&Cs, but actively irrational to insist on reading them all. To take just eight of the websites and digital services that I use on a regular basis, here’s a quick, back-of-a-fag-packet word count for their legal terms:

Google

  • Terms: 1814
  • Privacy: 2223
  • Total: 4037

Twitter

  • Terms: 3491
  • Privacy policy: 2235
  • Total: 5726

Tumblr

  • Terms: 5122
  • Privacy policy: 3403
  • Total: 8525

Facebook

  • Terms: 4308
  • Privacy: 2120
  • Cookies: 401
  • Total: 6829

Amazon UK

  • Terms: 5334
  • Privacy: 2834
  • Cookies: 932
  • Total: 9100

LinkedIn

  • Terms: 7558
  • Privacy: 6983
  • Total: 14541

YouTube

  • Terms: 3636
  • Community Guidelines: 722
  • Total: 4358 (NB: YouTube shares Google’s privacy policy)

Apple

  • iTunes Terms: 14274
  • Privacy: 2467
  • Total: 16741

That’s a total of 69,857 words for just eight websites – and that’s ignoring the multiple linked guidelines that sites such as Facebook have in addition to their core legal terms. This is the length of a shortish novel: extend that out to every website you use each day, and you’ll quickly be heading towards a reading challenge of Tolstoyan dimensions.

So why bother having these terms in the first place? Why does my employer have its own terms that are quite long? Why do I not feel a deep sense of personal futility when called upon occasionally to draft terms for websites or online services? Well, to return to Prof Kay’s point quoted earlier:

The reality is that the terms of exchange in a market economy are defined by social expectations

That’s all very well, but every business will know there are customers out there who will, not to put too fine a point on it, take the piss: “You never said we couldn’t do that! It doesn’t say we can’t in your terms!” So well-drafted consumer T&Cs are there, not to override the “social expectations” that are the true heart of the deal, but to embody those expectations and to protect them from abuse – by either party. Conversely, the occasional rows that blow up about a website’s terms usually stem from an attempt by that site to override users’ “social expectations”.

All that said, I believe (and fervently hope) that over time, as we all become more accustomed to life on the internet, and as the social expectations become more clearly understood by both businesses and consumers, the need for lengthy T&Cs will diminish – and we’ll see those word counts start to reduce.

The last word on this, though, should go to Eddie Izzard, who hit the nail on the head when it came to the infamous iTunes Terms and Conditions: see this gifset (the final frame from which adorns the top of this post).

Opening the Patent Box

A patent (unboxed), yesterdayIn recent years, the UK government (both this government and its predecessor) have come up with various ideas aimed at incentivising innovation through the tax system. The best known of these is probably the Patent Box (10% corporation tax rate on profits from patented inventions), but for many companies, the new R&D Expenditure Credit (the “above the line” replacement for the existing R&D tax credit regime) is of at least equal interest.

That’s all very well, but how is this actually playing out in the market? The Patent Box and RDEC apply from 1 April 2013, so there have now been six months to see how companies (and HMRC) respond to the new regime. A seminar I attended yesterday, hosted by Keltie, provided some useful insights into this from a team of PwC tax specialists.

Here are some of the trends identified by PwC which particularly struck me: 

  • Some companies that expected to benefit from the Patent Box are not doing so. PwC cited one manufacturer that campaigned vigorously for the Patent Box, but has found that its pension liabilities wipe out its trading profits – so the 10% tax rate has no benefit for it.
  • The Patent Box shows signs of having its desired effect of drawing businesses back into the UK. PwC mentioned an Anglo-Swiss company which is looking to bring its IP back into the UK once its current tax arrangements in Switzerland come to an end.
  • One difficulty companies are having is mapping their patents onto their products, in order to demonstrate that the products are generating income from patented inventions. HMRC are taking a hard line on this.
  • Companies need to ensure there is good communication between IP managers and tax teams. HMRC will not look kindly on a company that keeps claiming under the Patent Box using patents that have been allowed to lapse.
  • While the Patent Box tends to get most of the attention in the press, it is the RDEC that is proving most popular with companies so far – mainly because it offers cash upfront rather than a tax rebate later in the process.
  • The definition of “R&D” used by HMRC is very broad. You don’t have to be doing “blue-sky” research: incremental improvements are enough. What matters is that you are reducing “technological uncertainty”. Once you have “resolved technological uncertainty” – e.g. you reach a point where you can start commercial production – then the RDEC ceases to apply.
  • Manufacturing and R&D companies contracting on “cost-plus” terms (common with MoD contractors) will need to renegotiate these to disregard the RDEC, as this operates as a reduction of cost rather than a rebate on tax. This is one reason why the existing R&D tax credit scheme will continue to run alongside RDEC until 2016.

Some strange discrepancies are emerging between patent law and the Patent Box legislation (or at least HMRC’s interpretation of it…). For example:

  • The definition of an “exclusive” licence in the Patent Box legislation seems to differ from the definition in patent law. While the speakers didn’t go into details, it sounds as if the Patent Box definition may be somewhat wider.
  • HMRC is taking a restrictive approach to “systems” patents. For example, if a patented system has five components, of which three are incorporated into the product and two are “back-office” elements outside the product, HMRC are saying that the product does not qualify for the Patent Box as the patented invention is not “incorporated” into the product.
  • The seminar ended with a rather abstruse discussion about “use patents” – i.e. what used to be called “Swiss-type” claims, where the patent is not for the product (or component) itself, but for the use of a known product in a new way. HMRC are perceived to be resistant to this type of invention.
  • It also remains to be seen how HMRC will deal with interim patent applications, where the original priority application is dropped once the full application is made a year later. If HMRC insist on dating the Patent Box rebate only from the date of the full application, rather than the priority date of the interim application, this could have a major impact on patent practice.
  • The consensus was that HMRC doesn’t understand patent law, and doesn’t yet realise that it is going to have to learn.

What about HMRC’s attitude in all this? The picture seems to be a mixed one:

  • The relevant HMRC teams are actively encouraging companies to consider the Patent Box and RDEC, and are keen that companies engage with them early in the process to ensure they don’t make any mistakes that will reduce the benefit to them.
  • That said, as noted above HMRC are taking a hard line on some of the requirements, and are showing some idiosyncratic interpretations of patent law.
  • HMRC are also keen to remind people of the anti-avoidance provisions in the legislation: you can’t artificially incorporate patents into your products (e.g. putting a patented sticker on a car won’t mean the car qualifies for the Patent Box), and you can’t artificially relocate your IP in the UK to try to qualify. “It’s a generous regime, but don’t take the mickey,” is the message.
  • HMRC like to talk to the development teams within companies, particularly so they can find out how the patented invention is incorporated into the product. 

It will be interesting to see how the Patent Box and RDEC develop over the next few years – especially given the political hostility that they are already attracting in some quarters. I heard a speaker last year wonder aloud as to how long it would take for the Patent Box to be perceived, not as a creative incentive to innovation, but as a “tax loophole”, and it seems to be coming to pass already (FT link, naturally… 🙂 ).

First!

This may or may not come to anything – part of me wonders if launching a new “blawg” is a bit 2007 😉 – but it could be useful at times to have an overspill for thoughts that won’t fit into 140 characters. Don’t expect tremendous regularity of posting.

Why “Back to the Thames”? Because I work with my back to the Thames…