Mills & Reeve: Technology Law Update

Mind your ts and cs

As we head into the New Year, and with the recent headlines that this year's sales shoppers have broken records for online sales, it is clear that internet shopping and services are increasing in demand. Its therefore an ideal time to take stock of whether your website terms and conditions are up to scratch.

The European Commission, in the spirit of giving during the Christmas period, has published a code of online rights and principles applicable to consumers within the EU in the course of their use of electronic services and networks. The code itself is not legally enforceable, but can provide a useful checklist which you can review your website terms and conditions against in order to ensure that they comply with the relevant EU and national laws. 

Merry Christmas and a Happy New Year from all the team here at Mills & Reeve. 

Patents County Court: the new guide is out

A new user guide to the Patents County Court has just been issued.  You can access it here, on Courts Website. 

The Court it should be emphasised is not just patents -- it does masses of other cases with as many as 80% of its cases in the last two years being on trade marks, passing off, designs and copyright, and include licensing disputes and other related matters

Nor is it just "county": it will sit anywhere in England and Wales and will hear cases in which damages could be as high as £500,000.  It has heard cases between individuals and small and medium sized businesses -- which is its primary focus -- but also multi-nationals, such as Unilever and SC Johnson & Son.

The guide provide you with vital information about the court and how to use it.

The key feature, well tried and tested now, is that its has a fast and effective procedure; and in almost all case, if you were to lose, you have a limited liability in costs to the other party.

So far, since its rules were changed in 2010, it has been highly popular.

Freedom day for copyright? Government to introduce wider exceptions to infringement

The Business Secretary, Vince Cable has been active again -- announcing proposed changes to allow more "fair use" of copyright works.

The changes, set out in a report from the UK IPO, "Modernising Copyright: a modern, robust and flexible framework", on which the IPO has already consulted, will permit more extensive use of copyright works without adversely affecting copyright owners.  Some key elements:

• Home users will be permitted to store on multiple media/devices -- but not to share their copies with others (even in their family);
• Educational use will be extended to more work types and permitted to education more generally rather than just designated educational establishments -- and there will be significantly increased freedom for digital use of content in education, including provision over distance learning programmes
• Use for research in non-commercial data mining and similar activities  (as well as private study) will not infringe, widening scope for exploring information stored in copyright works -- but whether the non-commercial restriction will be wide enough to permit practical research is an open question still;
• The role of the Secretary of State in opening up opportunities where copyright owners use DRM or other technological protection means to prevent these activities, has been re-emphasised, as has the opportunity for owners to take advantage of this by offering "DRM lite" at a higher price.
• Several other changes are proposed, including making it easier to modify and adapt copyright works for use by disabled people.

Small beer perhaps, but there is not all that much the UK Government can do when one takes into account its commitments under international conventions, and there are some significant opportunities here.  Some comments:

• Media shifting for private users will make many things private users already do legal -- but there will probably be lots more things that private users feel are fair game which will still not be fair use. 
• The widening exceptions for educational use will help wider education - by museums and non-conventional education establishments; and remove some irritating idiosyncrasies which will make it easier to produce more exciting teaching materials -- but, as more educational institutions look to monetise their digital teaching opportunities, there will (not surprisingly) be significant obstacles to selling their teaching materials;
• Opportunities for digital mining for non-commercial research could open up significant avenues of research, and researchers could be taking account of this now for future grant applications for academic research -- but what happens if they then want to make commercial use of the results?  Until it is clear what the boundary between non-commercial and commercial is, can one be sure that the rsults of the reseach can be used?
• Users of DRM -- digital rights management or other technological copy protection measures, should look at the opportunities for producing separate DRM protected and DRM relaxed products to take advantage of what happens when users would like a product which they can media shift, or annotate for disabled people, or use in a wider educational context.  And DRM appliers can probably take advantage of this now, even while there is uncertainty as to how the legislation may work out.

We look forward to seeing and commenting on the detailed proposals. 

Volte Facebook: Do website terms and conditions stick?

Facebook/Instagram have apparently learnt the quick way whether their proposed new terms and conditions would be acceptable – see Newsnight (18.12.2012) and NY Times and clarified in the Guardian.  However, their repeated “skirmishes” with the public over terms and conditions highlights a larger concern: the fact that everyone knows, including those running web sites, that the large majority of users do not read terms and conditions before using a web site – even if the web site requires the user to click to agree; still less look at changes in terms.  Is it now time to limit what terms web site owners can enforce without showing that there is a real prospect of those terms being read and understood by the user and willingly accepted? Is “zombie” acceptance by clicking on an unknown quantity really acceptable?  Shoule we even contemplate a Europe wide approach to such terms?

The issue was emphasized in the recent “free" face cream opportunity (Guardian), where users signed up to (expensively paid for) monthly deliveries unless they cancelled within a short time period.  Of course many had not read the small print which told them this would happen.

In a more recent case, Spreadex v Cochrane, in May this year David Donaldson QC (sitting as a deputy judge) rejected Spreadex summary judgment claim for £50,000 incurred on betting on the site.  Spreadex relied on a click to agree term which said that the users would be liable for all (spread betting) trades using their user ID.  Cochrane said that the use resulting in his £50,000 bill was unauthorized – by young son of his girl friend, while the computer had been left on – facts which had to be accepted because this was a summary judgment application.  The judge held primarily that (because Spreadex’ terms committed it to nothing, as it could refuse to accept any trade) there was no contract.  He also decided that, if there had been a contract, the term would have not been enforceable against a consumer under the Unfair Terms in Consumer Contracts Regulations 1999.  One reason, amongst others, was that a user was most unlikely to have read this specific term, let alone understood it amongst the 49 pages of terms and conditions, which was itself only one of 4 documents the user was invited to read – maybe every time they logged on!  In which case Spreadex would presumably never have done any business.

A similar case, but not click-to-agree arose in the USA in 2009: Hine v Overstock.com.  There the decision was also on an interim issue.  The claim was over a much smaller sum, a restocking charge of US$30, but it was brought as a representative action. 

However, should one need to rely on these type of judgments which still leave users (and web site owners) with considerable uncertainty and in many cases are “in the wings” – relying on extreme cases?  Bluntly, is it not time to accept, as most high street shops do, trading on the internet is done on a common set of key contractual conditions?  On can address specific procedural issues for getting the goods or service to the customer, of course.  And if a web site owner wishes to change them they need to show much more positive acceptance (and an expectation of understanding) by the user than mere “acquiescence in ignorance”? 

A race for protection -- a "patently" fast track

The Government has innovation and intellectual property protection in its sights again.  Not however like tax avoidance: more ideas for promoting protection are rolling off the stocks.

Vince Cable, the Business Secretary, has announced a package of measure to be introduced next year, especially to help young and innovative companies. Amongst them will be a fast track to trade mark protection and patent protection.

A trade mark will be registrable in a mere 5 days! One has to ask whether this is a good investment of effort, although it will be cheered by small businesses.  The much greater issue in the trade mark field is of trade mark “clutter” – the fact that there are so many trade marks registered by the Community Trade Mark Office (which of course also applies to the UK) for goods and services for which they are not used which means that it is often a long road to finding a trade mark which is free of obstacles to register.  To be fair the UK IPO is currently consulting also on this issue after some apparent disappointment of a report commissioned earlier this year, and the Max Planck Institute's report in 2011 (Allensbach Study -- see para 3.5, page 39: 21% see a problem, 79% do not see a problem or express no opinion -- a view which many professionals say conceals the fact that trad mark clearnace has become expensive and difficult).

The patent process can be shortened to 90 days (for a fee)  – compared with 4½ years in the UK (and much more in the European Patent Office).  The UK IPO already will grant patents in a year, on request and a favourable wind.  But 90 days does seem exciting, especially in the era of the Patent Box (the regime for obtaining income tax relief for profits products or services for which there is a UK or EPO patent registered).

More news on these innovations later.

Copyright agreement not as sharp as a Wilkinson blade

Wilkinson v London Strategic Health Authority ([2012] EWPCC 48) yet again (Harmony featured a couple of weeks ago) shows the (expensive) traps in agreements relating to copyright.

Wilkinson had written some excellent material for teaching communication skills to nurses.  Predecessors of the London Strategic Health Authority (LSHA) wanted to use this, amongst other material in a “unified” training product.  The agreement said that LSHA would own all the work which was carried out for them – which used the pre-existing material known as the “Wilkinson Variant”.

LSHA wanted to use this (the developed material AND the pre-existing material) in a programme of licensing abroad (although as an English NHS body their primary interest was in the England).  Wilkinson saw red, and sued for infringement, saying, not unreasonably, that the rights in the pre-existing material belonged to her.  The LSHA countered by saying that the rights belonged to them.

In a Pyrhhic victory for both parties His Honour Judge Birss QC decided that the agreement had not assigned rights in the pre-existing material to the LSHA.  However, it had assigned rights in the developed work to the LSHA.  Therefore, in order to give commercial efficacy to the agreement, a (non-exclusive) licence would be implied for the LSHA in respect of the earlier material.  The kicker however was the scope of this licence: Wilkinson argued that it should be restricted to use within the NHS; the judge held that it should be unrestricted.

Effectively LSHA had all that they wanted – and only a bill for about 1/3 of the costs.  The lesson is that a lot of money can be spent on resolving disputes over loose wording in copyright matters.  The razor needs to be sharper next time.  Practitioners will see that this licence was greater in scope than many of them would have anticipated – the next agreement (if it relies on implied licences, which of course it would be better if it did not) needs to be more tightly worded.  The case also illustrates some of the problems for resolving disputes where the issue is costs, especially if costs depend on a conditinal fee agreement.

Hey! That's my data!

I have been advising recently on a potential claim relating to “ownership” of data, where a company outsourced some of its administrative functions and now, due to a perfect storm of a poorly implemented subcontracting arrangement, and an insolvency, it now has no contractual right to obtain its data from the storage provider ultimately holding the data relating to the outsourced functions.

There are plenty of lessons to be learned from this scenario but for this post I’ll comment briefly on ”ownership” of data or information because last month, in an entirely unrelated data-related kerfuffle, the Technology and Construction Court refused an application made by Fairstar Heavy Transport to require an individual (its ex-CEO) and a cloud storage provider to hand over emails which had been forwarded to the ex-CEO’s service company’s email address, meaning that responses had not reached Fairstar’s servers. Worse for Fairstar, the forwarded emails were apparently automatically deleted from Fairstar’s servers. It was thought that the emails contained information important to Fairstar in respect of a different dispute involving a Chinese shipyard.

The application was made on the basis that Fairstar had a proprietary claim to “ownership” of the content of the emails – in other words, that Fairstar owned the content of the emails as property. Other legal issues prevented Fairstar from making other possible claims such as contractual “ownership” or an intellectual property claim – primarily that Fairstar was seeking to avoid enforcing the ex-CEO’s service contract for other reasons.

The judge dismissed the application after a review of the relevant case law, which he noted suggest strongly that in English law there is no general proprietary right in content or information. It’s a timely reminder that, despite increasingly expressed views that “the data belongs to X”, legal rights in data and information are less robust, and more complicated, than one might think. Various intellectual property rights may potentially exist in a data set, or an email exchange, depending on the circumstances, and the use of data or information provided by one party to another might be limited by contract – but don’t simply assume that “it’s our data”: it might not be that straightforward.

 

Trade secrets are being discussed EU-wide...

Hot on the heels of the Information Commissioner (see below), the European Commission has anounced a public consultation to collect views about how business and research know-how is protected across the EU (perhaps with one eye on a New Year's Resolution). 

About time, some might say.  As the Commission itself has noted, keeping vaulable information secret is often the only or most effective way that businesses have to protect their intellectual property - after all, not every good idea is patentable.  The Commission has picked up concerns regarding the effectiveness of legal protection against the misuse of confidential information, which is currently only regulated at national level (without harmonisation across the EU), and decided to analyse the situation.

Changes to the laws on the protection of confidential information are likely to be highly relevant to the technology sector.  You can follow, and contribute to, this consulation on the Europa website between now and 8 March 2013.

Subject access requests - don't miss your opportunity to comment on the new code of practice

The Information Commissioner's Office (ICO) has just launched a consultation on a new draft code of practice for organisations dealing with subject access requests.

We are often asked for guidance about what needs to be disclosed to an employee following a subject access request. The code of practice is intended to explain the relevant rules in clear and simple language and the aim of the consultation is to gather comments on how it can be improved so that organisations can easily understand and apply those rules.

The closing date for the consultation is 21 February 2013. It can be accessed here.

The price of public support – what’s a trade mark worth

Starbucks and Google and others are being roundly criticized for not paying enough tax in the UK. This  was the subject of another round of criticism from MPs yesterday ("Tax paid by some global firms in UK ‘an insult'"), and more argument on Newnight last night

Much of the debate focusses on the issue of transfer pricing -- and in particular how much that brand is worth.  Is this a Google or Starbucks issue -- or is it in the hands of HMRC?

A transfer price should be chosen which reflects the real value of the goods, services or rights conveyed from abroad to the UK; that should give a sensible and fair result. One can of course hope (or entice) more of the value of those goods or services to be created in the UK.

However, it seems that there is an issue with HMRC setting - or agreeing - that value for the brand and trade mark rights. Perhaps a different approach should be taken.  Brand value is (substantially) a reflection of a customer's willingness to buy again – or to encourage their friends to buy again. Some brands clearly have some level of intrinsic value (in the sense that people want it because it is that brand, rather than because the brand signifies a satisfactory product or service) - "I must be seen wearing Channel"; but for others, especially those for lower cost, higher consumption goods, such as Starbucks, the key decision to go back is local customer experience. Now that local customer experience is precisely that – it is generated in the UK, and belongs initially to the provision of those goods or services in the UK.

Therefore supplies in the UK should not be subject to payment of a significant royalty for use of the brand, since the brand value has been built up, and initially resides, entirely locally - most customers rely on the brand because they or their friends in the UK bought something previously in the UK.

Of course typically the licence agreement under which the brand is licensed confers ownership of the rights in the brand, and any goodwill accruing, on the licensor – usually in a foreign (low tax) jurisdiction. But if that is the case, for each purchase of a product in the UK a small piece of value is transferred out of the UK - that piece of goodwill.  If that is the case, should not that value stream then attract tax, just as a remittance of dividends to the owner attracts tax? And pehaps that tax could be levied retrospectively? Comments please.

 

　

　

 

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