Mills & Reeve: Technology Law Update

Cookies - we ask if the rules are too strict

We have been discussing whether the revised rules on cookies have made any real difference to an internet user’s awareness and acceptance.

A cookie is a small file, typically of letters and numbers, downloaded onto a user’s device when they access a website. Cookies are then sent back to the originating website each time the user makes a further visit. Cookies are useful because they allow a website to recognise a user’s device.

EU-wide rules controlling the use of cookies come from the Data Protection Directive and the E-Privacy Directive. Under that system, users had to be given a right to opt out of the storage of or access to cookies. In 2009 the rule was amended by the Citizens' Rights Directive. This introduced a change so that the use of cookies would only be allowed on condition that the user concerned has given his or her consent (opted-in) having been provided with clear and comprehensive information about the purposes of such processing. The change had to be implemented by May 2011. At the time the switch from opt-out to opt-in was strongly criticised by website operators and advertisers.

In 2010, an EU advisory body, the ‘Article 29 Working Party’ demanded stricter opt-in standards for cookies, setting the tone for implementation by member states.

The UK implemented the rules on time, and rather ahead of other European countries. The UK Information Commissioner’s Office, the ICO, was fairly relaxed about achieving compliance, recognising that it was not always easy to comply with the revised rules. It allowed a lead-in period of 12 months for organisations to develop ways of meeting the new requirements.

The ICO has invited complaints through its website about cookies since the system was changed. Numbers of complaints have been small and falling. Between October and December 2013, only 53 concerns were reported about cookies. By comparison, in the same period, individuals used the website to report 29,529 concerns about unwanted marketing communications.

In our experience many users simply click on the ‘accept’ box to get rid of the cookies notice without really thinking about what they are being asked. More sophisticated types may control the use of cookies via their web browsers, but the level of concern does not seem to justify the EU’s strict approach to this area.

ISP told to prevent access to an illegal film downloading site - UPC Telekabel

Under an EU law on Copyright in the Information Society European countries must make available injunctions against ‘intermediaries’ whose services are used to infringe copyright. Can a completely unconnected internet service provider, or ISP, be an intermediary?

A new ruling says that it can. So a copyright owner may be able to slap an injunction on an ISP. It does not matter that there is no contractual link between the ISP and the operator of the illegal website.

Here films were made available illegally for streaming or downloading by a website kino.to. Film production companies Constantin Film and Wega had rights in some of the films. They asked the Austrian court for an injunction against major Austrian ISP, UPC Telekabel. The ISP had no relationship with the operators of kino.to and had not provided them with internet access or storage space. But customers of the ISP had used the kino.to service.

The Austrian court granted an injunction without saying exactly what measures the ISP should take to stop its customers accessing the illegal website. The obligation was to achieve the result rather than specifying what measures had to be taken, and the ISP would have to decide how to achieve it. To avoid a fine the ISP would have to show that it had taken all the measures that could be expected of it.

The ISP said that the various blocking measures which might be introduced could all be technically circumvented and some of them would be excessively expensive. But the EU court said that the Austrian injunction was reasonable. The ISP could be expected to work out for itself what measures to take that would be ‘sufficiently effective to ensure genuine protection’ of the film rights or at least ‘making it difficult to achieve and seriously discouraging internet users’ from using the service.

This ruling raises the prospect of ISPs being required to comply with vague and open-ended injunctions to prevent their customers from accessing unconnected illegal websites.

Why Bitcoins are hitting the headlines

For the un-initiated, Bitcoins are an anonymous, decentralised, ‘crypto-currency’, absent of regulation or legislation. Combined with having no real physical existence, the unique properties of Bitcoins have led to increased attention in the media.

Bitcoins can be acquired either through ‘mining’, (the lending of computing power by individual miners to process Bitcoin transactions which are recorded on the public ledger or ‘blockchain’), or they can be purchased from Bitcoin exchanges. At the time of writing, an individual Bitcoin has a trading value of just over 350 GBP but reached its highest value of just under 750 GBP in November 2013. Bitcoins are now accepted by over 1000 merchants including fashion websites, pubs and online dating services. However, Bitcoins have become associated with the ‘dark web’, linked to the sale and purchase of illicit substances and money laundering due to their virtual quality and thus limited traceability.   

In addition to the volatility of the market, Bitcoin theft by hackers is a real possibility. On 28 February 2014 one of the top three Bitcoin exchanges, Mt Gox, filed for bankruptcy with reports suggesting that the site was shut down after it discovered that nearly 744,000 Bitcoins (approximately £210m) had been stolen due to a security loophole.  

Despite the risks associated with this virtual currency, 2014 has been declared by some as the year of the Bitcoin wannabe. Litecoin, Peercoin and Anoncoin are all alternative crypto-currencies, albeit with much lower currency units and values. Large companies and financial institutions are also trying to move into digital currency, for example, eBay recently applied for a patent for its ‘Gift Token’ idea which can be used to make purchases without a Paypal account. JP Morgan has also made repeated patent claims for a digital currency regulated by the bank but to date these have all been rejected or cancelled.

Digital currency could be the way forward for online purchasing. However, it may be a long time before a safe, secure means of anonymous online payment is possible. 

European Sales Law plan moves forward

One of the best features of the internet is its ability to transcend geography. E-commerce lends itself naturally to cross-border transactions. A proposal for a new legal structure to support pan-EU online transactions is working its way through the European process, now receiving resounding approval from the European Parliament. Commissioner Viviane Reding calls it 'a win-win deal for small and medium sized businesses and for all consumers in Europe'.

The plan is for an optional European Sales Law to free businesses and consumers from worrying about national rules. Requiring the agreement of both customer and seller, it would be available for sales of goods and digital content, and for business to business as well as business to consumer transactions.

This initiative looks at first sight like a promising addition to the online legal landscape. But neither the UK nor the German government likes it. They say that harmonising national laws is the way to go, and this new proposal is unworkable and incomplete.

If the planned law makes it through the process, businesses may find themselves under pressure to use it, with potential for a lot of uncertainty and litigation.

Welcome news for hyperlink users - the Svensson case

Yesterday brought welcome news for users of internet hyperlinks. The top European court ruled that using hyperlinks to freely available news articles is allowed.

Swedish newspaper journalists had complained that the use of hyperlinks to connect to their articles from a news searching website, Retriever Sverige, was wrong. But the articles were already available on newspaper’s own freely accessible website. The court decided that there had been no communication of the articles to a ‘new public’ and so the journalists could not object.

In contrast, if an article had only been available to subscribers to the newspaper’s website, but the hyperlink gave access to non-subscribers, then there would have been publication to a ‘new public’ requiring the journalists’ consent.

The court added that it would not make any difference whether or not it would be clear to the user clicking on the link that they were being redirected to a new site.

This decision is based on a law dealing with copyright in today's information society. The court said that EU countries cannot give a greater degree of protection in their own laws. European law is meant to be harmonised in this area. Differences in the level of protection between countries would lead to problems in cross-EU business.

Although the judgment seems clear, there remain questions around the effect of a website's terms and conditions of use, even where content is freely available. Providers of online material may choose to respond by restricting their free access content, and tightening up their terms of use.

In-app purchases and unfair billing

Further to our recent blog article “Last chance to comment on OFT consultation on online games”, there have been significant positive developments across the pond.  In the US, the Federal Trade Commission (FTC) has handed down the first punishment over charging and billing arrangements in children’s smart phone and tablet apps.  Last June, in settlement of a class action brought against them by angry parents facing up to thousands of dollars in charges, Apple Inc. offered credits or refunds for unauthorised payments. Refunds include sums of £4,000 and £1,700 to two UK households for charges racked up by an eight year old girl and a five year old boy, respectively.  The FTC has now extended the existing refund programme by ordering Apple to reimburse all unauthorised payments to a value of at least $32.5 Million (£19.6 Million). 

Apple first fell foul of the FTC by allowing a 15 minute window within which unlimited in-app purchases could be made without any safeguards.  This practice was stopped by Apple in March 2011; however, the FTC has continued its focus on Apple to further address unfair billing practices.  Apple has made changes and improved protections on in-app purchases but the FTC action means that they will now be required to change their billing procedures to make sure that express consent from the account holder is given before any charges are made. 

Consumer advocates and analysts say that the problem extends far beyond Apple but the action of the FTC sends a clear message to other firms to improve protection for children online.  At present, Windows Phone has a “kids corner” so that children can play safely online and the Google Nexus IO tablet has individual user accounts to allow multiple users to use one tablet independently without affecting other users’ settings, accessing their details or spending their money.  Google offer a 15 minute refund window for app purchases but refunds for in-app purchases, which take place ‘within games’, remain at the discretion of the developers. 

In the UK, on 21 November 2013, the Office of Fair Trading (OFT) closed its consultation on the eight proposed principles in relation to online and app-based games.  It is hoped that the final version will be published early this year and these principles will serve as guidelines to platform owners and developers for avoidance of targeted enforcement action.  With the FTC crackdown on Apple and the OFT promise to share its principles worldwide, the aim of achieving international safeguarding standards seems to be coming a step closer.

Vidal-Hall v Google – cookies can cause distress

A recent decision in the English High Court about internet cookie use has been making waves.

The judge decided that a claim form could be served out of the jurisdiction (on Google in California). This sounds like a dull procedural application, but it is exciting interest because of the comments of the judge about how people can object to the use of what might seem to be fairly trivial information about them.

A group of individuals complained that they had suffered distress as a result of how Google had used cookies on Apple's Safari browser.

Traditionally, they might just have argued breach of confidence. But the procedural rules involved required there to be a different kind of legal wrong - a tort.

Since the Naomi Campbell litigation in 2004 misuse of private information has been developing as a new tort. And in the subsequent Michael Douglas/Hello!  litigation the Court of Appeal explained that someone’s privacy can be invaded by further publication of information or photographs that had already been disclosed to the public.

So what kind of private information might be protected? Naomi Campbell and Michael Douglas had objected to photographs and stories in the papers. Can data collected using cookies really be private information? The individuals bringing the case against Google said that private information about them could be gleaned from targeted advertising that appeared on their screens as a result of the cookies. Other people might see the screen and draw their own conclusions about that person’s characteristics or feelings. The judge concluded that this could be enough to be private information, and disclosing it could cause distress.

The individuals were also allowed to rely on the Data Protection Act 1998. Material appearing on their screens could be ‘personal data’ deserving protection. The judge was influenced by a European Working Party report on the Data Protection Directive, saying that search histories were personal data if the relevant individual could be identified.

Interflora v Marks and Spencer- take care when using keywords!

The High Court has recently ruled in Interflora’s favour in its long-running dispute with Marks and Spencer (Interflora, inc and Interflora British Unit v Marks and Spencer plc and Flowers Direct Online Limited [2013] EWHC 1291 (Ch)).

What is keyword advertising?

Keyword advertising is where a search engine (e.g. Google) is paid by an advertiser to display advertisements on its search engine results page when an internet user types in a search term.

The use of other companies trademarks are often used as keywords as they allow the advertiser to attract the attention of consumers who are familiar with their competitor’s brand and provides them with the opportunity to attract these consumers to their website and offer them an alternative product or service. This practice has been recognised by the courts as promoting competition.

Facts of the case

Marks and Spencer (M&S) had purchased the key word “INTERFLORA” in Google Adwords when advertising its own flower delivery service. “INTERFLORA” is a registered UK trademark and Community trademark owned by Interflora who operate a flower delivery network in the UK.

This meant that adverts for M&S’s flower delivery service were displayed when consumers typed “Interflora” into Google. The INTERFLORA mark was not visible in the M&S advertisements and was not used on the M&S website. The court found that a significant proportion of consumers then clicked on the M&S adverts apparently believing that the M&S flower delivery service was part of the Interflora network.

The High Court judgment

The High Court ruled that M&S had infringed Interflora’s trademark when it used the “INTERFLORA” mark as a keyword in its advertisements.

Mr Justice Arnold came to his conclusion essentially because the M&S advertisements did not enable a reasonably well informed and reasonably attentive internet user, or enabled them only with difficulty, to ascertain whether the service referred to in the advertisements originated from Interflora, a company in its network, or from a third party unconnected with Interflora’s network.

The ruling highlights that the onus is on the advertiser to ensure its adverts are clear as to the origin of the goods or services which it is advertising. Mr Justice Arnold found that M&S had failed to discharge their responsibility as it was not made clear that the M&S flower delivery service was not part of the Interflora network and was instead competing with it. There was nothing in M&S’s advertisements which would have allowed the consumer to distinguish the true relationship between M&S and the Interflora network.

While the ruling is to an extent particular to the facts of the case, businesses should review their existing, and carefully consider proposed new, Adwords, for potential trademark infringements.

Personalised Pricing in the Online Marketplace

We thought it worth flagging that the Office of Fair Trading published a report in May to help consumers understand how the use of their personal information and internet conduct is affecting the price they pay for goods and services online. The report also offers valuable guidance to online retailers, explaining how to avoid unfair, misleading or aggressive practices when personalising prices.

In summary, the report found no evidence of online businesses using cookies or repeat searches to increase prices. In fact, the OFT discovered that personalised pricing is commonly used to benefit consumers, for example by targeting people with certain online behavioural patterns in order to offer them a discount.

However, the message coming out of the report is that online retailers should, in general, be more transparent about the information they are collecting from consumers and how it is being, and will be, used. The OFT has reiterated that it will consider enforcement action if it finds evidence of any misleading or unfair practices online.

Local TV Comes A Few Steps Closer

The roll-out of local television has taken a few steps forward over the last couple of weeks.  On 4 February, Ofcom announced the award of the London local TV licence to ESTV Limited, which will operate under the London Live name.  With a potential audience of up to 4 million homes, the London service will have the largest reach of all local TV services in the UK.  Applications were received by Ofcom to run local TV services in 19 of the 21 areas in which Ofcom invited applications.  15 local TV licences have now been granted, with further awards expected in the coming months.  No applications were received in Swansea or Plymouth and Ofcom will soon be seeking final expressions of interest for those local TV licences.

More significantly, Ofcom finally awarded the local TV multiplex licence for digital terrestrial TV (DTT) on 28 January.  Delays in the multiplex licence award had been causing frustrations for local TV service licence holders keen to push ahead with their broadcast plans.  The multiplex licence was awarded to Comux UK Limited, a company which will be owned by the holders of the local TV service licences and supported by Canis Media.  In addition to the areas in which Ofcom has already started the process of licensing local TV services (including Birmingham, Leeds, London, Manchester and Norwich), Comux has offered to cover a range of other locations (including Bedford, Cambridge, Luton and Stoke) if local TV services licences are awarded in those areas.  Once DTT broadcasting starts later this year, local TV channels will be found at position 8, in England and Northern Ireland, and position 45, in Wales and Scotland, on the Freeview electronic programme guide (EPG).

Finally, Mills & Reeve client Mustard TV, the local TV licence holder in Norwich, launched its online service on 31 January, with a lively mix of news, sport and lifestyle programming.  Other local TV licence holders will be doing the same soon as they continue to build towards the first DTT broadcasts later in 2013.