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   Small Steps for a Company - A Giant Leap Towards IP Strategy

   Embrace the world. As in life in general, changes happen every day in the business world and at an accelerating pace. A deal is closed, CEO fired and a new one hired and a new co-operation is launched. There are always numerous decisions to be made that have implications for the overall business strategy and even IP strategy, the work is ongoing. Still, there are some fundamental elements of IP strategy to consider, and actions to be taken, that do not change whether a company is a digital age start-up singing in the choir of disruption or a multimillion-euro company producing familiar old-stand-by types of products. There are few small steps every company should and can take in order to get closer to receiving the benefits of a well-structured IP strategy. A word of warning, though: this does not require superpowers, digitalization, IoT, disruption or lots of money, but only a clear business strategy and some hard work. Is it a personal branding scheme? No, although that has been a hot topic lately. This is a to-do-list to get you closer to having something you can call an IP strategy. The beauty of intangible rights is that you have to document them to make them visible. My list is harshly oversimplifying it, but still, the core does not change even though it would be fleshed out in practice with consulting terms and more detailed instructions. Now, I will not promise to write more on this subject when the snow comes, because it just might do that any given day! You can always rely on the short and cold Finnish summer. Luckily, you can take on the above list despite of the weather!

   Published: 15.8.2017

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   Wrapping up the 2017 General Meeting Season

   Increasingly Active Institutional Investors Large pension insurance companies are major shareholders in many Finnish listed companies, and their policies have a major impact on how listed companies are run here. For example, during this past general meeting season Ilmarinen Mutual Pension Insurance Company announced a blanket shareholder policy that it will not vote for share issue authorisations for boards if they exceed ten per cent of the company’s total number of shares or are valid for over 18 months. Ilmarinen justified this position by stating that it does not want new shares to dilute its holdings excessively, and that it wants the validity of authorisations to be limited to the term of the board being elected in the meeting in questions. We thought Ilmarinen’s new policy concerning the maximum size of share issues authorisations was a surprising move, as it differs from general market practices and international voting recommendations. It is a good idea for major shareholders to inform listed companies of planned policy changes in good time before the general meeting. Institutional investors and law firms that regularly assist in general meetings should work together to make sure that companies preparing for their general meetings are well informed of what to expect. We believe that institutional investors will take an increasingly active approach to their holdings in the years to come, as growing social interest and scrutiny leads them to pay more attention to the responsibility of their investment and ownership practices. More Extensive Auditor’s Reports and Key Audit Matters Amendments to the Auditing Act led to auditor’s reports being longer and more tailored this year. They now provide more comprehensive information than just a statement that the accounts have been drafted in compliance with the law. Auditors presented the new style of auditor’s report and auditing process in many general meetings this season. Their presentations and the key audit matters describing the nature and the company’s operations and its finances were interesting and brought a breath of fresh air to the meetings. Contrary to our expectations, these presentations did not give rise to much discussion. This could be for the best, though, as answering questions about the company is the job of the management, not the auditors. Say-on-Pay Directive to Put Remuneration Schemes on General Meeting Agendas The changes brought by the ‘say-on-pay’ directive will also have an impact on Finnish general meetings in the coming years. The amendments made to this EU directive governing shareholder rights will lead to remuneration policies having to undergo a more thorough review in general meetings in a few years from now. Once the amendments to the directive have been adopted in Finnish legislation, shareholders will discuss remuneration systems and reports in general meetings. To date, it has only be necessary to discuss the remuneration of the board. In order for this reform to be successful, companies will have to draft their remuneration proposals with great care and shareholders will have to be willing to discuss the subject constructively.

   Published: 8.6.2017

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   Quality Contracts Faster than Ever – Kicking Our Services into High Gear with Automation

   Our review of AIs led us to the conclusion that the credible AI applications currently available for our field still have a long way to go from the perspective of providing our clients with efficiency benefits. The technology as it stands today still requires a great deal of manual work by lawyers. Many firms have opted to wait and see how this technology develops. The discussions we have with our clients have made it clear that the demand for efficiency and new ways of working is already here. We also looked into other options and found that document automation has a great deal of potential across our firm. We piloted automation in our M&A service, and the early results impressed us even with our already high expectations. Following this rapid pilot stage, the automation tool has been widely adopted in our other services. Skipping to Added-Value Work Clients are less and less willing to pay law firms for routine work, and instead expect high-quality, added-value legal services to support their own operations. Our M&A team drafts a wide range of legal documents for our clients, such as sale and purchase and other transaction agreements, due diligence reports and corporate minutes. Producing these documents has traditionally started with a laborious drafting stage that involves a great deal of routine work. For example, drafting a sale and purchase agreement involves choosing whether the agreement is for the buyer or the seller, what the purchase price mechanism will be, what representations and warranties the seller is willing to give and so on. These kinds of individual choices affect the form and contents of the entire document. Language and content review has also required a lot of work, particularly from younger lawyers. These kinds of choices are exactly what the automation tool automates. In practice, it works by having the lawyer fill out a short questionnaire based on which the system produces a template that is as close to ready as possible. Thanks to careful coding and testing by our lawyers, this kind of automation works not just for simple documents, but equally well for complex agreements that can have as many as 30–40 variants. Handling such extensive variables manually always involves the risk of human error. Automation helps reduce these risks while saving time: in our timed tests, we were able to produce the first draft of a sale and purchase agreement in half the time as before. Automation allows us to skip more quickly and cost-effectively to the stage of the project that produces the most benefits for our clients. Up-to-Date Model Documents Are the Foundation for Automation Given all of the above, why is document automation still relatively rare in the Nordic countries? We think that one of the main reasons besides the required investment is that firms haven’t done enough ground work. We have invested a great deal of time in creating and developing high-quality model documents long before beginning the automation process. For us, this work and the up-to-date models it has produced have been an essential factor in successful automation. The results and experience we have gained have been so impressive that we are even discussing how we could help our clients adopt similar systems to automate their own documents. The demand is clearly there, and we are ready and willing to take this step with our clients.

   Published: 31.5.2017

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   Work Isn’t What It Used to Be, So It’s Time to Look to the Future

   The Markets for Big Companies Are Recovering, Small Companies Are Growing Fast Many of our clients operate in fields that have been heavily affected by the structural changes taking place in the Finnish economy. For example, the changes affecting the tech cluster and paper industry, which have been the long standing pillars of our economy, have shown up in our day-to-day business as decreasing volumes and the need to rationalise operations. The slump that these fields have been in for some time now is finally showing signs of passing, which has led to, for example, our client companies increasing hiring. Nevertheless, the Finnish economy still needs a boost, which is expected to come from the healthy positive trend currently being seen in the service sector, improving work productivity and export growth—including in the industries that have suffered most from the economic slump. I have been especially cheered up by the strong growth I’m seeing in smaller companies: it has become natural for them to go international at an early stage, make use of advanced technology and offer high-margin services and products that can be profitably produced in Finland. When Work and Worker Don’t Meet The turnover of private service industries grew at a rate of about 3.6% last year, with the pace picking up towards the end of the year. Finland’s economic development following the financial crisis would have been much more grim without the construction and service industries holding up our transitioning economy. The recent growth of the service sector has been in the form of relatively traditional jobs, but this won’t be able to sustain our budding growth indefinitely. The number of working age citizens started to drop in Finland already in 2010, and our situation is much worse than in other Nordic countries. Unless we find ways to improve productivity, we are facing an unavoidable drop in working hours, overall production and negative economic growth. The major challenge for our competitiveness is also an incidence problem, in which the right employees and workforce needs are not meeting for some reason. This is a real national challenge for us. Treating the Symptoms, Not Fixing the Problem Discussions about Finland’s competitiveness often confuse apples and oranges. Our long-term competitiveness factors, such as infrastructure, education, technological aptitude and health care, are in good shape. Our problems are in shorter term competitiveness: Finland has high labour costs and our work productivity is lower than in other countries—not to mention the effect of exchange rates. Though we have been making moderate labour market decisions over the past few years, they don’t solve our structural problems. At best, we are treating symptoms, not the disease itself. The best solution to market-based problems is not likely to be a centralised, political model, but a market-based one. Such a model would reform establishment-level agreement practices and employment legislation to match the challenges of today, and preferably also those of the near future. Some good examples can be found quite close by in our European neighbourhood, for example, in Germany. Technology Making Inroads Even into Expert Services One concrete source of improved productivity that has been raised is the expansion of the use of robotics, artificial intelligence and their various applications into expert service industries. Automation is already quite far along in industry, but expert fields are just now taking their first steps. The biggest reasons for this slower development in expert fields have been the high cost of technology and the resulting marginal costs of investments as well as the fact that business models have been based on traditional human work. The next big wave of outsourcing in expert fields is expected to take place in Finland when the degree of automation in the field is high enough that it is simply no longer sensible to do the work oneself, but also not to ship it out to be done by hand in an overseas service centre, whether owned by the company itself or by an external service provider. Technology Creates New Work Robotics and AI solutions will reduce or even do away with many current jobs, but will also create new ones and new income models. Above all, they will increase efficiency and improve the scalability of services compared to traditional operating models. Indeed, Finnish companies should be at the forefront of adopting the latest technology, even if doing so temporarily weakens current profit models.  It is both the blessing and curse of digitalisation that if something can be disrupted, it probably will be sooner or later. Finland’s next competitiveness leap won’t happen by fine tuning old models, but will require innovation solutions relating to the productivity of human work, leading with knowledge and establishment-level agreement practices—not to mention major investments in technology and expertise. Tatu Tulokas   Tatu Tulokas the managing director of Silta Oy . He is a member of Service Sector Employers Palta’s industrial policy committee and a member of the General Assembly of the Confederation of Finnish Industries. Castrén & Snellman is Silta’s business partner in employment law services.      

   Published: 29.5.2017

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   Procurement Pioneers Benefit from Innovation Partnership

   To date, innovation-positive public contracting authorities in Finland were stuck between a rock and a hard place. Procurement regulations did not allow for product development cooperation with private companies to lead to a finished commercial product or to the purchase of a service directly from the partner company. Many projects were stifled before they could get off the ground. New Innovation Partnership Offers Solutions Fortunately, the reform of the Public Procurement Act has changed things. Innovation partnership is a new concept allowing contracting authorities to combine the product development phase and the contract for the finished solution into a single whole. A public-sector purchaser can choose innovation partnership when there are no ready solutions on the market for the contracting authority’s needs—in other words, when it is necessary to create something new. The object of innovation can be very different in different procurement projects. For example, innovation partnership could be used to develop robotics or artificial intelligence solutions for welfare services or to seek new solutions for the energy efficiency and comfort of buildings. The contracting authority can choose one or more innovation partners with which to engage in development work. The contracting authority can reduce the number of partners during the development phase of the product or service and can purchase the solution from the company whose results are best suited to the authority’s needs. Innovation Partnership Raise New IPR Challenges in Public Contracts Innovation partnership also poses new contractual challenges. The contracting authority needs to decide in advance the model according to which the authority and its partners will share any IPRs that may be created in the partnership. The Public Procurement Act also requires that the contracting authority state the IPR arrangements in the request for tender documentation. Though contracting authorities may be tempted to demand all rights to inventions or software for itself, this contractual model is one that corporate partners rarely find acceptable. It makes more sense to find a middle ground in which the contracting authority’s competitive edge (if such is being sought) is secured without preventing the partner from commercialising its development work elsewhere. Ownership of IPRs is rarely a financially sound choice contracting entities, and sufficient rights can be secured through extensive rights of use. After all, contracting authorities seldom plan on commercialising the results of development work themselves. In a situation with several innovation partners, the definition and protection of existing IPRs takes centre stage. Only by making sure that none of the parties’ existing rights are abused can the willingness of each partner to contribute their expertise to the project be ensured and an open and innovative development environment created. The best results are always obtained when it is a win-win situation for everyone involved.

   Published: 22.5.2017

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   The Fintech Field is Buzzing in the Nordic Countries: Where Do We Stand Now?

   What are the major Nordic fintech trends right now, and how does Finland measure up? We also asked our colleagues in Vinge and Gernandt & Danielsson from Sweden, Kromann Reumert in Denmark and Simonsen Vogt Wiig in Norway to provide their view on how their local fintech scenes are developing. The Battle for Nordic Fintech Dominance Is On According to a review by Deloitte , Sweden is leading the race for mastery of the Nordic fintech market, with Finland in second place measured by invested euros (Denmark is ahead of us at the moment in the number of investments). Like Finland, Denmark and Norway are not giving up the contest without a fight. A variety of organisations and even state authorities in every Nordic country are investing in seeking out and making use of the opportunities provided by fintech. The Finnish Ministry of Finance has established an expert group to monitor and promote the development of finance technology, and the Financial Supervisory Authority has also established an Innovation HelpDesk to speed up the development of Finnish financial innovations. All the Nordic countries have also seen the formation of various fintech associations, such as Finland’s Fintech Finland network, Sweden’s Swedish Financial Technology Association and Denmark’s Copenhagen Fintech. Growth Opportunities for Traditional Banks, Too The PSD2 EU directive that enters into force at the start of 2018 will force banks to allow third-party service providers access to the accounts and payments of the banks’ customers. Worst case scenarios have been painted in bold letters in brick and mortar banks, but threats have been slowly transforming into opportunities. One interesting example is Accenture Strategy’s estimate that Nordic banks could increase their turnover by up to 5 billion euros by 2020 if they could leverage their cooperation with fintech companies. All of Finland’s large banks are running various programs and digital incubators to get in on the opportunities provided by new technology. Who will customers choose when the user experience and price level of banks and fintech begin to meet? According to the Finnish Financial Supervisory Authority, domestic investment service companies and investment fund companies are mainly trying to get by on their own, even though automated investment advisory and big data will have a major impact on these sectors. Fortunately, Finnish banks have woken up to Nordic competition and have taken some major steps in payment services. One example is the real-time mobile transfer service Siirto, which enables customers of different banks to make real-time money transfers ‘from cell phone to cell phone’. In Sweden, the Swish app is developing consumer habits towards a future without cash: in Sweden, as many as four out of five transactions are made using cards or mobile applications, and even children have adopted card payments . Vipps, which is owned by Norway’s largest commercial bank, and Danske Bank’s MobilePay are holding their positions as the most used mobile apps in their respective countries. According to the bank relevance index published by EY , Finnish consumers are more loyal to traditional banks and the financial services offered by them than their neighbours. The index shows that Finns do not lightly change service provider or seek out alternative providers. This may also be a factor cooling the eagerness of Finnish banks to act as fintech pioneers. Focus Still on Financing Rounds, Not Large Transactions With the exception of a few shooting stars, fintech mergers and acquisitions in the Nordic countries have remained small, and the focus is clearly still on financing rounds for fintech start-ups. However, now that traditional players have become active, financing has become easier to acquire and the numbers are rising. Swedish fintech giant Klarna raised 35 million dollars of debt capital in June of 2016. Of Swedish banks, Swedbank and SEB have been particularly active shoppers. SEB was one of the largest investors in private financing service company Tink’s 85 million krona investment round, to name just one example. Our colleagues in other Nordic firms all agree that the clear trend is toward traditional players increasing their cooperation with or buying up start-ups rather than competing with them.

   Published: 19.5.2017

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   New Public Procurement Act Comes Down Hard on Employment Law Violations

   Mandatory Exclusion Grounds Certain employment law violations are mandatory exclusion grounds in public procurement procedures. This means that they force public contracting authorities to exclude companies where such a violation has occurred from the tendering process. These kinds of mandatory exclusion grounds include work safety offences, working hours offences and work discrimination. Under the previous act, mandatory exclusion grounds mainly concerned things like money laundering and the financing of terrorism. The new act brings mandatory exclusion grounds much closer to everyday business. Discretionary Exclusion Grounds In addition to mandatory exclusion grounds, the Public Procurement Act defines other kinds of employment law violations as discretionary exclusion grounds. The Public Procurement Act allows public contracting authorities to exclude companies from tender processes that have committed serious errors that cast doubt on their reliability or that have violated their employment law obligations under either legislation or collective bargaining agreements. However, the contracting authority must be able to prove that the violations occurred. Discretionary grounds can include all kinds of violations, from groundless termination of employment to violations of cooperation negotiation obligations or failures to pay salaries. Discretionary grounds are not limited to violations punishable under the Criminal Code or even to acts tried in court. In practice, contracting authorities have extensive discretion to apply these exclusion grounds, but do have the obligation to abide by the principle of proportionality. Extensive Group of Relevant Individuals The group of individuals relevant to both mandatory and discretionary exclusion grounds, i.e. individuals who could commit an act leading to exclusion, is extensive. It includes: Interpretations vary as to just how wide a group of people is covered by the above expressions. They are highly likely to include at least the managing director and deputy managing director, the members of the board and holders of procuration rights. In the case of discretionary exclusion grounds, the company itself may be the party that committed the violation. Fix Your Mistakes On the other side of the coin, the Public Procurement Act does take into account efforts by companies to fix their mistakes. A company can carry out remedial measures and submit proof of its reliability to the contracting authority despite having being subject to grounds for exclusion. If the contracting authority considers the evidence of reliability to be sufficient, it cannot exclude the company from the tender process. We highly recommend that companies expand their compliance processes to include ensuring that the necessary remedial measures are carried out if employment law violations occur. Doing so will allow companies to significantly reduce the risks these violation can pose in public tender processes. Companies whose core customer base is made up of public contracting authorities should in any case pay closer attention to their employment law obligations.

   Published: 4.5.2017

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   Get Investors into the Market – Top Tips from Recent IPOs

   Last autumn’s most significant event in the Finnish capital markets was the listing of the Finnish telecommunications group DNA , the largest Finnish IPO of the decade. Other Finnish companies that have recently made an initial public offering include Lehto Group, Vincit, Pihlajalinna and Suomen Hoivatilat, with Fondia and Next Games being the newest entrants to the list. The promising market situation encouraged us to invite recently listed companies and IPO advisors to a workshop to share their experiences and thoughts last month. DNA’s Senior Vice President Christoffer von Schantz also gives valuable hints for companies seeking to list themselves (in Finnish only). We have collected some of the best points both from the workshop and from Mr von Schantz here.    Investors Want a Clear Strategy It may be easier said than done to formulate a crystal clear business description and strategy in a form that is understandable to investors. However, a company seeking listing should have a clear understanding of its strategic strengths and what its business is ultimately all about. The company’s management should also be able to deliver this message convincingly to investors. It is absolutely worthwhile to go through this exercise; the materials created for the IPO will be of great value even after the listing.   An Investor Story Inspires and Provides Credibility The speakers in our workshop underlined the importance of having a consistent and credible investment story. It cannot be made up out of the blue, but must be based on hard facts. A company seeking listing must win the attention of investors by providing not only a good investment theme – such as an up-trending sector – but also a lucrative business and capabilities that outshine the competition. What are the true needs that your company is responding to? And why should anyone be interested in investing in your company? The IPO materials, such as the prospectus and marketing materials, must reproduce the investment story in a consistent and coherent manner. The company’s internal communication also plays a vital role in explaining the reasons for the listing to the company’s own personnel and other stakeholders, such as shareholders and customers. The Business Must Keep Running Despite an Ongoing IPO Going public is not a value per se . Following an IPO, a company can find its business on even more solid ground with improved financial success. Preparing a company for an IPO also involves creating capacity to meet the requirements imposed on listed companies. Success must originate with the company, but advisors can play a significant part in this success. In a demanding listing project, responsibility for tasks must be clearly divided within the project team, and the personal chemistry must be right both in the company and in relation to the advisors. It is important to think in advance about how the company’s internal dynamics function. Operations cannot be stopped for the duration of the listing project, but must keep running as usual. Additionally, information must flow well both within the company and to the advisors. A listing project should also be customised to support the company’s own brand image, and an IPO should not change the company’s own distinctive culture. For example, we have been happy to see that DNA has held on to its bold and straightforward identity now that it has become a listed company. An IPO will always echo positively in the market. In DNA’s case, dreaming big was truly fruitful.

   Published: 27.4.2017

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   Dynamic Purchasing Systems – Bringing Procurement into the Digital Age

   A similar system was already available under the old Act on Public Contracts, but despite the name, it was far from dynamic. In a DPS, requests for tender and tenders are made electronically, so using a DPS requires a tendering system. The reform of the Act on Public Contracts removed the more burdensome aspects of the system and made the interface more streamlined and flexible. Now that tendering systems have become more commonplace, dynamic purchasing systems are also expected to be used more often. From Orthodontics to Robotics By law, contracting entities can use a DPS for customary procurements of goods and services. However, this expression shouldn’t be taken too narrowly, as the system is well suited to more than just the procurement of bulk products. Elsewhere in Europe, contracting entities and tenderers already have a great deal of experience of using dynamic purchasing systems, and the scope of contracts is extensive. Among other things, these systems has been used to procure event services, occupational therapy equipment, orthodontics, taxi services, waste transport services and alarm systems. Finnish contracting entities have recently established dynamic purchasing systems for, e.g. coaching services, robotics and road surfacing contracts. Establishing a DPS Published in HILMA, Individual Tender Processes Are Not When a contracting entity establishes a DPS, it must publish a notice in HILMA. At this stage, the contracting entity can divide the system into classes for goods, services and construction contracts, so one system can serve several different types of procurement. For example, the contracting entity can divide transport services into different classes according to who the services are aimed at. The actual tender processes are carried out in the system itself. The contracting entity drafts the request for tenders and sends it via the system. In other words, a company cannot participate in tender processes until it has been accepted into the system. On the other hand, a DPS does not impose an obligation on companies to submit tenders. When the contracting entity publishes a request, the supplier can decide separately for each request whether it is able to submit a tender. Flexible Participation for Companies In order to join a dynamic purchasing system, tenderers must meet the contracting entity’s requirements. In this respect, a DPS is no different from other procurement processes. However, the contracting entity must accept all suitable companies. In other words, it cannot limit the number of tenderers. The law also requires that the contracting entity make decisions on accepting or rejecting companies within strict deadlines. Accepted companies must be entered into the system without delay. What makes a DPS attractive is that companies can seek to join at any time while the system is in use. The law sets no limits the duration of a DPS, and the HILMA notification remains available for as long as the system in use. This means that even if a company does not fulfil the requirements at the time the procurement notice is published, it can remedy its shortcomings and seek to join later. Minor deficiencies do no lead to the same consequences as in, for example, framework contracts, in which purchases can only be made from suppliers originally accepted into the framework contract. Dynamic Benefits Dynamic purchasing systems have already been put to good use abroad and have proven to be an agile way of carrying out a wide range of procurements. These same benefits will find their way into Finland once these systems become a customary part of the competitive tendering landscape and both contracting entities and companies get used to using them. We have high hopes that contracting entities will seize this opportunity to take a fresh approach to public procurement.

   Published: 19.4.2017

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    Are You Playing Hide-and-Seek in Your Business?

    Transparency Is the Key The common feature of the current legislative initiatives is transparency. Pressure to be more open has been coming from corporations’ interest groups, the authorities as well as investors. This combined front has added urgency to many legislative projects, particularly on the EU level, and it would be wise to not drag out a game of hide-and-seek, but to proactively get out in front of the upcoming changes. There are several mandatory legislative projects currently pending in the EU that are aimed to increase transparency and public trust in responsible business practices: As I mentioned at the start, the pressure for more transparent and responsible business practices is strong from a number of directions, and the EU has answered this pressure with legislative initiatives. New legislation will, naturally, also introduce new sanctions intended to enforce compliance. However, the sanctions relating to the reforms that are already in force are quite moderate. In the end, it is more important that companies listen carefully to the wishes and thoughts of their own stakeholders with respect to corporate behaviour than that they just seek to avoid formal sanctions. At its best, legislation provides a unified framework for how to inform stakeholders about these matters, and it is worth preparing for the upcoming requirements. This post was inspired by a presentation given by Rosanna Tufo from CSR Europe in Helsinki in March 2017. 

    Published: 10.4.2017