Mills & Reeve: Technology Law Update

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.

New PCI DSS Cloud Computing Guidelines

On 7 February, the PCI (Payment Card Industry) Security Standards Council issued the PCI DSS Cloud Computing Guidelines Information Supplement.  The PCI Security Standards Council develops, manages and raises awareness around payment data security though its PCI Data Security Standard (PCI DSS).  PCI DSS compliance is a benchmark for online merchants and payment service providers.  The Cloud Computing Information Supplement sits alongside, and does not replace, PCI DSS.  The guidance will be of use to both cloud service providers and merchants using cloud technologies for the storage and processing of cardholder data.  Using the guidance will help cloud providers and cloud customers to identify and define their respective security responsibilities, a process that is essential in achieving and maintaining PCI DSS compliance.

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. 

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”? 

Suspend your disbelief – online copyright infringers not feeling threatened

The tentative implementation of the Digital Economy Act 2010 continues, and a new report from Ofcom outlines the state of play in respect of online copyright infringement. The DEA acknowledged the special role that ISPs play (or could play) in controlling or influencing their subscribers’ use of the net, and intends that Ofcom will produce a code setting out rules for ISPs to follow in relation to notifying their subscribers of allegations of copyright infringement. Ofcom’s full report is here.

Some key findings that caught my eye are:

1. 47% of all computer software products consumed online were estimated to be illegally obtained;
2. Only 22% of 471 people surveyed said that receiving a letter from their ISP threatening them with suspension of their internet access would put them off infringing copyright;
3. One in six internet users over the age of 12 are estimated to have downloaded or streamed online content illegally over the tested three month period; and
4. 44% of all internet users said they were either ‘not particularly confident’ or ‘not at all’ confident in terms of what is legal and what isn’t online.

The current proposal for Ofcom’s initial anti-piracy code is here. Technical measures such as suspension of internet connections are still a way off. No doubt businesses that rely on online content and digital product distribution will be interested to know how accurate that 22% figure turns out to be on a grander scale once the initial code is implemented and notifications start going out.

Could almost every website on the planet really be in legal jeopardy?

The publication of a Nevada court judgment has led to some sensationalist headlines about the validity of website terms of use. For example, the Business Insider website has announced that "Almost Every Website On The Planet Could Be In Legal Jeopardy". So we thought we'd better comment on this.

The Nevada court's conclusion that an online retailer (Zappos.com) could not rely on an arbitration clause set out in its website terms of use when challenged by individuals who had purchased goods through the website was based on the fact that these individuals had never been required to indicate their agreement to the website terms when using the website and making their online purchases.

Online retailers are already strongly advised to require users to click to agree to their website terms and privacy policy at the point of sale and whenever personal data are collected from the user. If Zappos had taken this step, then the Nevada court's judgment would almost certainly have been different.

However, requiring website users who just visit your website to browse content (without making any purchases or submitting personal data) to click to agree to website terms of use would most probably put people off browsing your website. After all, it is established practice for websites to simply have terms of use applicable to browsing users included in a link on each website page. In light of the 2009 Swimming Pool & Allied Trades Association case (as previously discussed on Naked Law) and the ICO's guidance on getting consent to the use of cookies, under English law it may be sufficient to include a prominent link to your website terms and a statement that if the user clicks through to another page on the website, this will be taken as an indication of the user's agreement to the website terms of use.

Ultimately, the steps taken to obtain agreement from people just browsing your website should be proportionate to the likelihood that you will need to rely on your website terms against those people.