Mills & Reeve: Technology Law Update

EU court scrapes at website terms of use

In a controversial decision on the protection and control of databases, the European court suggests that you may be able to exert greater control through your website terms and conditions over an unprotected database, compared to one that is protected by copyright or database right.

Ryanair welcomed the decision explaining that it has been

'engaged in several legal cases against screenscraper websites across Europe to prevent its customers from being subjected to extra charges and to ensure Ryanair has appropriate contact details to communicate with its customers'.

In this case Ryanair objected to screen scraping from its website by a Dutch company, PR Aviation. PR Aviation offered a web-based service allowing customers to search for low-cost flights, compare prices and book a seat.

Ryanair’s own website included terms of use, restricting use to private flight bookings and specifically prohibiting screen scraping by other website operators. Those terms said:

‘The use of automated systems or software to extract data from this website or www.bookryanair.com for commercial purposes, (‘screen scraping’) is prohibited unless the third party has directly concluded a written licence agreement with Ryanair in which permits it access to Ryanair’s price, flight and timetable information for the sole purpose of price comparison.’

Ryanair initially complained that PR Aviation was infringing both its copyright and database rights by its use of the data, and contravening the website terms of use.

European law offers two kinds of protection for databases. Copyright is available where a database amounts to an intellectual creation by virtue of the selection or arrangement of their contents. The separate database right, created in 1996, protects a database where there has been a substantial investment in the obtaining, verification or presentation of the contents. The 1996 Database Directive controls the contractual restrictions that a database owner can impose on legitimate users.

The dispute started in the Dutch courts. They had decided that Ryanair’s website was a database but did not qualify for either of the two types of protection. But PR Aviation argued that the rules on contractual restrictions should still apply.

The European court disagreed – contractual restrictions for unprotected databases were not regulated by the Database Directive and should be left to national law.

So it would seem that contractual restrictions on an unprotected database can potentially be tougher than those on a protected one.

Pinning down the boundaries of patentability after Alice – help from the US Patent Office

Those working in the technology space need to know the extent to which they (and their competitors) can protect the results of their R&D, and so the boundaries of patentability are vital. Unfortunately, these are not always clear, especially for new areas of technology, and they seems to shift one way and the other with the latest court decisions.

In Europe we have a collection of exclusions from patentability that are set out in the European Patent Convention. These present their own difficulties, as discussed here. We have also been watching with interest recent developments in the patentability of computer-related inventions on the other side of the Atlantic.

The decision of the US Supreme Court in Alice Corp. v. CLS Bank attracted a lot of attention, as it seemed to narrow the availability of protection. The patent in that case dealt with a computerised scheme for mitigating “settlement risk” in financial transactions. It fell the wrong side of the line - the subject-matter of the claim did not amount to significantly more than an abstract idea and was not protectable.

Since then, other judgments have also rejected patents for computer related inventions. These cover areas such as computerised Bingo games, systems for providing transaction performance guarantees and an internet procedure for showing an advertisement before delivering content.

The recent decision in DDR Holdings, LLC v. Hotels.com, LP offered a glimmer of hope for applicants. A patent claiming a way of making two e-commerce web pages look alike by using licensed trade marks, logos, colour schemes and layouts was found valid. It provided a specific way to automate the creation of a composite web page.

Now the US Patent Office has published useful Interim Guidance on Patent Subject Matter Eligibility. This brings the key US decisions together and explains briefly how each one was decided.

As well as computer-related inventions, the Interim Guidance addresses biotech and medical inventions, looking in particular at the Myriad and Mayo cases.

Users of the patent system are invited to comment on the Interim Guidance and ask for other examples to be covered.

Counter-Terrorism Bill – industry unhappy with planned measures to access to IP address data

British Home Secretary Theresa May’s latest Counter-Terrorism and Security Bill seeks to require communications service providers to retain and make available to government details of who is using a particular IP address. But industry commentators are unhappy with the proposals and say that they will not work in practice.

The Bill covers a range of controversial measures, with only a small part (s.17) addressing communications data. The explanatory notes to the draft Bill tell us that the purpose of these provisions is to

‘enhance law enforcement agencies’ ability to investigate terrorism and serious crime by extending the retention of relevant communications data to include data that will help to identify who is responsible for sending a communication on the internet or accessing an internet communications service.’

The new Bill would do this by amending July’s hasty and hotly disputed Data Retention and Investigatory Powers Act 2014, discussed on this blog here.

The Bill would add a new category of ‘relevant internet data’ to the DRIP Act's category of 'relevant communications data', to include data which could be used to identify the IP address used by the sender or recipient of a message. Like the DRIP Act, these provisions would only last until the end of 2016.

The Bill would also give the Home Secretary the right to make regulations to give effect to its objectives.

Industry commentators say that the Bill simply will not work from a technical perspective. Relying on IP addresses does not make sense, as they can be spoofed, reassigned or shared among multiple users. The Internet Services Providers' Association, ISPA, has expressed its dissatisfaction, complaining of a ‘distinct lack of engagement with industry’ on this issue.

Keyword confusion - Interflora v Marks & Spencer sent for retrial

Online retailing is growing fast. Research suggests that it makes up over 12% of UK retail sales, with the US and Germany close behind. Many of the advertising and promotional techniques used in e-commerce are necessarily different from those deployed in more traditional sales methods. One of the techniques currently popular is the use of keyword advertising such as Google’s AdWords.

The AdWords system, where retailers bid to have their advertising shown among the results of a Google search for a particular keyword or phrase, is central to the long-running dispute between flower delivery network Interflora and British retailer Marks & Spencer. Where a user searches for a word or phrase including a registered trade mark, can another business use the AdWords system to have their advertising appear in the search results? The trade mark in question was INTERFLORA, with Marks & Spencer bidding to associate their advertising for delivered flowers with that word. Another allegedly offending activity involved bidding not on ‘interflora’, but also on flower-related terms without negatively matching ‘interflora’.

In a High Court decision in the case, discussed here last year, the judge decided that the trade mark was infringed in these circumstances. He concluded that the normal internet user could not easily see whether the advertised service was in some way connected with the Interflora network. Interflora obtained an EU-wide injunction against M&S.

We had thought that last year’s decision was the end of the story, but the Court of Appeal has upturned the apple (blossom) cart and sent the case back for a retrial.

What were the Court of Appeal’s reasons for the upset?

Referring back to the European Court’s analysis of the case in 2011, the Court of Appeal said that using keywords identical to a registered trade mark was not ‘an inherently objectionable practice’. A judge must assess whether the activity adversely affected key functions of the trade mark: indicating origin (can users work out who was providing the service?) and the investment function (can the trade mark owner develop a reputation using the trade mark?).

The Court of Appeal picked out a number of legal errors in the 2013 High Court decision, where the judge had not followed European decisions properly. These included a reversed burden of proof where the keyword was not identical to the trade mark, and use of the ‘initial interest’ doctrine. Without these errors, said the appeal court, the outcome of the trial may well have been different.

Another trial? The case started in 2008 and has been through almost every possible stage in the process. The Court of Appeal even considered whether it could make a final decision itself to save another episode in the litigation, but it concluded, reluctantly, that the case would have to be tried again.

One could say that this one is a late bloomer.

Website blocking orders against ISPs - Cartier and 1967

Two recent UK cases have underlined the vulnerability of internet service providers to allegations of IP infringement. ISPs can no longer says that they merely provide the roadways along which traffic, both good and bad, can pass. They are now being expected to police those roads and impede the progress of wrongdoers.

In 1967 Ltd v British Sky Broadcasting Ltd, a case brought by record companies and music industry representative bodies (the BPI and PPL), the court ordered blocking by the UK’s five main ISPs, Sky, BT, EE, TalkTalk and Virgin, of 21 websites. These websites involved offered an organised directory of content where users could browse and select from sound recordings and other content, and then illegally download it. The judge decided that the websites were infringing by communicating copyright protected work to the public, authorising infringement by their users and acting as joint infringers with users.

The ISPs will have to block access to the infringing websites at their own cost.

This follows another recent decision (Cartier International AG v British Sky Broadcasting Ltd) against the same ISPs. That case was brought luxury brand owners, Richemont, who said that their CARTIER and MONTBLANC trade marks were infringed by use on websites offering counterfeit products.

There was some uncertainty here because Article 11 of the EU Enforcement Directive, that deals with IP owners obtaining blocking orders against intermediaries, had not been spelled out in UK law. The Government had taken the view that the general rules on granting injunctions were enough and a specific extra rule was not needed. (In the music case the record companies were able to call on a specific provision in the Copyright, Designs and Patents Act 1988 that deals with injunctions against service providers.)

The Cartier decision goes into detail about how blocking of websites might be achieved, and will provide a useful tool for IP owners in the future.

Richard Plaistowe

Adopting an orphan – a new licensing scheme for material of unknown origin

Now that copying and reproducing material electronically is so easy, you can find yourself infringing copyright almost without thinking. Where a film clip, photograph, piece of music or text, for example, does not obviously belong to anyone, can you just use it or do you have to steer clear? This has up to now presented a problem (at least for those with a reputation to protect).

'Orphan work' is the legal term used to describe creative material that attracts copyright or similar protection but whose owners cannot be found to ask permission for use. There is a vast amount of material falling into this category – photographs, films, diaries etc. – which others would like to use. Now they will be able to.

The UK Intellectual Property Office has set up a new scheme (under the Copyright and Rights in Performances (Licensing of Orphan Works) Regulations 2014) to grant licences of orphan works. Access to the material will not be free. The IPO will charge an administration fee and will also set and collect a licence fee for the lost owner in case they notice that the work is being used and come forward. The fee should reflect what a similar work would command in a normal licensing context. Licences will be restricted to seven years, with no right to sub-licence, and can be refused on any reasonable grounds.

A register of the licences already granted will be searchable so that copyright owners can find out whether their works are being used. They will have eight years to come forward and claim the licence fees.

Applicants to use the material will be required to carry out a diligent search for the owner before being able to access an IPO-granted licence, and detailed guidance has been issued on what that diligent search should entail. An applicant will have to provide details of the search they have carried out along with the licence application.

Note that certain cultural and heritage organisations will not need to use the scheme. They are granted a special exemption under separate regulations implementing EU Directive 2012/28/EU. These rules will allow non-commercial use of orphan works by, for example, publicly accessible libraries and museums, without the need to obtain a licence. You can work out whether you can benefit from this exemption here.

Presumably many people will carry on using material without the hassle and expense of searching, applying for a licence and paying the fees, in the hope that they will not be caught, but for those who want to make sure that they are not infringing, the scheme is a great way to make sure you are in the clear.

Let’s take another look at Specsavers v Asda

Well-known optical retailer Specsavers uses a logo composed of green overlapping ellipses overlaid with its name ( you can see their branding here). Specsavers had registered as a Community trade mark a black "wordless" version of the linked ellipses. Asda started using branding for its own opticians service that included ellipses that touched but did not overlap, overlaid with the words "ASDA" and "Opticians" in each ellipse.  Specsavers sued Asda for trade mark infringement.

This case has been to the European court and back and now – hopefully in its last appearance – has been looked at by the English Court of Appeal. Asda and Specsavers having settled their differences, the Court of Appeal had to deal with a dispute between the UK registrar of trade marks and Specsavers, with essentially the following question.

Had Specsavers made enough use of their "wordless" linked ellipses mark through the use of the green logo with their name? (Failure to make genuine use of a registered trade mark for five years means that it can be struck off the register.)

The Court of Appeal allowed the appeal by Specsavers –  the registration of the wordless mark should not be revoked for non-use. Specsavers had made genuine use of the  "wordless"  mark through extensive use of the green logo with their name. 

So should everyone register a mark of just the background shape of their logo, as well as the full logo? The trade marks registrar was concerned about the prospect.

The judge was keen to emphasise that this was an unusual case. He said that cases of this type had to be determined on their facts. Here Specsavers had managed to show that consumers do see the overlapping ellipses as indicative of Specsavers and not merely as background. Examples of taxi drivers looking out for overlapping green ellipses were mentioned.

The judge said in passing that ‘The mark appears in this image in black. It is, however, registered without any colour limitation and so is registered in respect of all colours’.

How this fits together with the EU’s recently issued common approach on the use of black and white marks, discussed here, is shrouded in darkness.

Richard Plaistowe

PayPal to embrace Bitcoins?

In our previous article on Bitcoins (available at http://www.technology-law-blog.co.uk/2014/03/why-bitcoins-are-hitting-the-headlines.html), we discussed the risks and volatility associated with digital currency. However, Bitcoins could soon have renewed credibility and purpose following PayPal’s announcement that it will be enabling limited Bitcoin payments.

PayPal is being understandably cautious and is not processing Bitcoin payments through its payment hub just yet. Instead, PayPal has entered into agreements with three of the largest Bitcoin payment processors: BitPay; GoCoin; and Coinbase to process payments.

At this stage PayPal will simply be enabling specific retailers to receive payments by Bitcoin, however, PayPal subsidiary ‘Braintree’ recently confirmed that it was working on a way to process such payments. Whilst initially confined to North American sellers of digital goods, if the service is successful, we anticipate a roll out of Bitcoin payments being processed globally by PayPal which will allow online retailers such as eBay to accept payment for goods by Bitcoin.

This is definitely a step forward for supporters of virtual currencies and may lead to safer and more reliable Bitcoin transactions as well as increased support for digital currency from the business community.

Related articles

Why Bitcoins are hitting the headlines

Don’t be misleading or aggressive to your customers – that’s obvious, isn’t it?

From 1 October 2014 consumers will have new rights to complain that they have been subjected to misleading or aggressive sales practices or demands for payment, thanks to the Consumer Protection from Unfair Trading (Amendment) Regulations 2014.

Rules have been in place since 2008 that make misleading or aggressive sales activity illegal, but consumers will now have the right to take action directly against traders. They may be able to unwind the contract (if they complain within 90 days), obtain a discount on the price paid and even damages for (amongst other things) financial loss or distress caused by the misleading or aggressive practice.

You are probably thinking this won't apply to your business. However, some household names have fallen foul of the rules and there have been some high profile instances of misleading price promotions and misleading price comparison advertising. After 1 October 2014, these misleading sales practices could result in claims from unhappy consumers, in addition to a fine (or in the most serious cases, imprisonment).

So how do the new Regulations apply?  The new Regulations apply widely to products and services, with a specific amendment to include digital content. An omission can amount to misleading information if it creates a misleading impression overall. The definition of business is expanded to include the activities of government departments and public authorities, and consumers will now include individuals acting partly (but not mainly) within the scope of their own business.

Government guidance on the new Regulations gives the example of a mobile phone provider advertising fast 4G internet speeds, and a sales assistant in an independent store saying that there is good coverage in a particular part of the country. When the customer finds that the actual speeds she can obtain are slower than stated, and coverage is poor, both the mobile phone company and the independent store would be at fault. The customer could unwind the contract (meaning she can cancel the contract and obtain a refund) if she complains before the 90 days are up, or if later than this, she could receive a discount of up to 100% of the amounts due. With an example like this, there is a grey area between what is clearly misleading and what could be described as normal advertising practice.

The new Regulations also catch aggressive or misleading demands by traders for payment. This could apply where a business pursues individuals for payments for illegal software or music downloads - businesses will need to tread carefully in these circumstances.

To be clear, the new Regulations do not require the extensive changes to the customer interface that were brought in by the June regulations on information and cancellation rights, but they will increase the importance of appropriate training being provided to consumer-facing sales teams and of careful price promotion policies, in particular, for consumer-facing businesses.

The UK: “the FinTech capital of the world”?

Chancellor George Osborne today announced his plans intended “to cement Britain’s position as the centre of global finance and global technology.”

His comments were made at the launch event of the new UK trade body for finance and technology, 'Innovate Finance'. A government review will now analyse the benefits and threats of digital currencies and the role that cryptocurrencies such as ‘Bitcoin’ could play in UK business.

Separately today, demonstrating the significance of this sector, UKTI published “Landscaping UK FinTech”, a report containing independent research by Ernst & Young that estimates that the FinTech market in payments, platforms, software and data analytics alone is worth £20bn to the UK annually.
Against this backdrop, George Osborne stated: “recognising that the world of finance as we know it is changing in front of our eyes, I can today announce that the Government will start a major programme of work exploring the potential of virtual currencies and digital money.”

Osborne acknowledged in his speech that ‘alternative’ payment systems are becoming ever more popular as they are quick and convenient for today’s increasingly tech-savvy consumers. However, he also highlighted the importance of being aware of the risks that accompany the new technology.
As we have previously written, the Bitcoin market has been volatile and security issues relating to virtual currencies appear yet to be fully appreciated or adequately addressed. Earlier this year, after Mt Gox (one of the top three Bitcoin exchanges) shut down, reports suggested that that nearly 744,000 Bitcoins (approximately £210m) had been stolen due to a security loophole.

The government review will look into whether regulation of the sector is required. Certain countries (Iceland and Vietnam) have banned the use of virtual currencies altogether. There are a host of interesting issues to be resolved, not least the thorny issue of defining what constitutes a ‘cryptocurrency’ in the first place, and also the broader question of whether regulation of a ‘virtual’ currency is inherently futile (as monitoring and enforcement would be at best technologically challenging and at worst impossible). It will be interesting to see how the UK government’s approach evolves in due course, when the new review concludes.