Mills & Reeve: Technology Law Update

Deal or No-deal? Brexit and financial services

On Monday, the Department for Exiting the EU published a presentation explaining the UK Government’s vision for the future UK-EU partnership on financial services, seeking to establish the principles of autonomy, bilaterality and co-operation.

Under the first of these, autonomy,it is proposed that each party (UK/EU) would be able to set its own rules.

Under the second, bilaterality, it is suggested that for as long as there is equivalence, the withdrawal agreement should set out “where cross-border service provision would be permitted and assessed under respective regimes” and that where there is to be disengagement then the two parties should “use consultation and mediation to explore solutions and agree timescales appropriate for the scale of changes before they take effect”.

Under the third principle, co-operation, it is suggested that EU and UK regulators should continue to cooperate as now, both “day-to-day and in crisis”.

The presentation is here.

Of course, this is only one party’s proposal and both parties to the negotiation have repeatedly reminded us that nothing is agreed until everything is agreed, but it is helpful to understand where the Government is coming from.

Today, the Department published guidance on what a no-deal Brexit would mean for the financial services industry. The document starts by setting out how the UK will continue to welcome EEA financial services businesses and will allow them up to three years after Brexit to complete an application for UK authorisation. It then goes on to explain that it cannot unilaterally solve the difficulties a no-deal Brexit would throw up for UK businesses with EEA customers. In many ways, this is unsurprising as all the UK could ever confer is access to its own market.

The $64,000 question for businesses in that position is whether they wait to see whether there is a deal that effectively allows passporting to continue or respond to the “nudge” in the final paragraph of that section (headed “Individual and business customers – EEA customers (including UK citizens living abroad) of UK firms operating in the EEA”) and set up an EU-authorised subsidiary through which to trade with those customers post-Brexit.

We will continue to watch this space with interest!

Tim Winn

Celebrities and social media stars under the spotlight for hidden endorsements

UK enforcement watchdog the Competition and Markets Authority is opening an investigation into whether social media stars are being open about paid-for endorsements.

Online influencers are taking over from traditional media outlets in areas ranging from parenting to pets. Italian fashion phenomenon Chiara Ferragni was profiled by Harvard Business School in 2015 as she considered how best to monetize her "Blonde Salad" blog. She has since launched her own clothing and accessories line and runs a magazine site highlighting fashion and beauty products.

Online gamers like Mark Fischbach (Markiplier) can run up billions of views for their videos, developing a loyal following particularly among younger enthusiasts. Forbes reports that Fischbach occasionally partners with brands if he thinks “it makes sense for his fan base”.

The CMA is concerned that fans and followers can be led to believe that a product endorsement represents the star’s own view, rather than being a paid-for promotion. CMA Senior Director George Lusty explains

“If people see clothes, cosmetics, a car, or a holiday being plugged by someone they admire, they might be swayed into buying it.

 So, it’s really important they are clearly told whether a celebrity is promoting a product because they have bought it themselves, or because they have been paid or thanked in some way by the brand.”

The Consumer Protection from Unfair Trading Regulations 2008 rules out commercial practices that are considered to be unfair. This specifically includes:

"Using editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer (advertorial)."

The CMA is inviting input from the public and expects to give an update later in 2018. It is likely to try to agree any changes with the brands and influencers involved, but can seek a court ruling if necessary.

Why re-use of online images by schoolchildren is illegal

Copyright is an old right, and adapting it to our digital era is an ongoing project. The latest piece of European legislation in this area is still under development. With its controversial proposals for a new right for press publishers whose material is used online, and content monitoring measures for online platforms, it is currently bogged down in disputes between supporters of publishers and musicians, and free internet campaigners.

There has also been a steady stream of court rulings on what is and is not allowed under existing laws. The latest involves a seemingly innocent use of a photograph of Cordoba in a school project, which was then proudly displayed on the school website.

A German secondary school pupil found the photograph in an online travel magazine and used it to illustrate a presentation about Spain, including a reference to the source website. The photographer, Dirk Renckhoff, objected. Although he had authorised use of the photograph on the travel website, he said, re-use on the school website infringed his copyright.

The preliminary opinion by the Advocate General took the side of the school.  He concluded that there was no “communication to the public” because

• the image was secondary compared to the whole school project
• the photograph had been freely accessible on the travel website with no restrictions on use given
• the pupil and school had no profit motive.

If the copyright owner had wanted to control dissemination of the image, he could have taken steps to assert the copyright and to control dissemination of the work.

The CJEU disagreed, ruling in favour of the photographer. The reposting of the photograph was an act of communication to the public, and made the image available to a “new public” - users of the school website. Allowing reposting like this would mean that a copyright owner loses his power of control over the initial communication of the work, and could no longer have it taken down or modified. In addition, the copyright owner could not earn further licence fees from use of the work.

This might look like a tough decision, given the circumstances. But it will be welcomed by creators of online content. The more permissive approach proposed by the Advocate General would have made it much more difficult for creative types and their publishers to control what happens to material once it appears online.

The situation is different when using hyperlinks (as in the Svensson and GS Media cases). Including hyperlinks to copyright material is usually permitted, so long as it does not circumvent a restriction like a paywall, or give access to material that is known to be illegally published. This is partly because the copyright owner retains control of the underlying material. If the owner wants to remove the original posting, she can do so and the hyperlink will become obsolete.

Claire O'Brien

Consultations on free trade agreements – an opportunity to shape the future

The Department of International Trade has launched public consultations on possible free trade agreements with the United States, Australia and New Zealand, as well as possible accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The plan would be to finalise new agreements during the implementation period envisaged by the draft EU/UK Withdrawal Agreement. The agreements would take effect from January 2021.

The United States, Australia and New Zealand are some of our closest strategic allies with whom we have no existing trade agreements. The US is the UK's largest single national export market. Australia and NZ have a commitment to modern, high quality trade agreements. While there are many other markets the UK will look to for new agreements in the future, agreements with these three countries could provide a strong start to delivery of the UK's independent trade policy. 

The CPTPP is an existing agreement involving Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. It is signed, but not yet in force, and can be viewed in full on the New Zealand Foreign Affairs and Trade website.  If the UK were to accede to the agreement it would account for 17% of global GDP. Covering a broad range of goods, services and investment as well as addressing areas like the digital economy and intellectual property, the agreement is an ambitious successor to the now defunct Trans-Pacific Partnership developed under Barack Obama. An assessment of the impact of joining for the UK can be seen here. 

The four consultations are available online. They will remain open until 26 October.

Simon Elsegood

What’s the future for drones?

Drones are finding increasing uses in a wide range of applications from life-saving delivery of medical supplies to remote locations, through filming, commercial deliveries, agricultural and construction monitoring, to military and surveillance operations. Innovation foundation Nesta has carried out an analysis of the future for drone technology in the urban environment. The research for this project involved partnership with five British cities to analyse the possible roles for drones in our towns and cities. 

The growth in drone use is striking. Civil Aviation Authority commercial licences have increased from five in 2010 to over 4,500 at the time of writing. Highlighting both the exciting potential and risks attaching to this rapid development, the report calls for public involvement and a new approach to regulation to shape the next steps for this rapidly expanding technology.

Drone regulation is currently under the civil aviation regime. The Air Navigation Order 2016 controls how and where drones may be operated, requiring use within the visual line of sight of the operator, for example. It has recently been updated to improve safety, in response to increasing reports of incidents with aircraft. It now restricts all flight above 400 feet and within one kilometre of airport boundaries. Forthcoming changes will require registration for owners of drones above 250g, and online safety tests for drone users.

Operation outside of these limits – beyond visual line of sight, for example, requires the development of a safety case in order to obtain CAA approval.

Of course, other laws and regulations also affect drone use, including privacy and cybersecurity laws. Compliance with these need to be built into drone operations as they develop. But restrictions on use of air space could act as a brake on potentially beneficial developments of the technology.

While regulation to promote safety is important, the Nesta report queries whether a new approach is required to enable the technology to fulfil its potential.

“.. as drone use continues to grow, there is an opportunity to take a more flexible, anticipatory approach to regulating drones; based on enabling, rather than simply curtailing certain uses.”

The current restrictive approach, with exceptions granted on a case-by-case basis, works for now, but the report argues that a more systematic approach will be needed in the future. It suggests an automated system of permissions linked to an unmanned traffic management system for all but the most challenging uses.

Paul Knight

Two new funding programmes for UK SMEs

Innovate UK’s innovation loans

Innovate UK has up to £10 million in innovation loans to support game-changing ideas being developed by small and medium-sized businesses in the UK.

The loans are for highly innovative late-stage projects in any area of technology or the economy that can demonstrate a clear route to commercialisation and economic impact, and are promised to be "flexible, patient and affordable".

They will be made available through Innovate UK Loans Ltd, a wholly-owned subsidiary of Innovate UK.

Competition information

• the deadline for registration is midday on 29 August 2018
• you could get an innovation loan of between £100,000 and £1 million
• your project should be in late-stage experimental development and can last up to 5 years
• up to 100% of your eligible project costs are available
• only single, UK-based SMEs can apply.

Further information on the innovation loan and how to apply can be found here.

 

Business Basics Fund - boosting SME productivity

The Government has also unveiled a new £8 million fund to boost the productivity and performance of small businesses.

Boosting national productivity and increasing workers’ earning power forms a key part of the government’s modern Industrial Strategy. The Business Basics Fund, run by BEIS in partnership with Innovate UK, will help businesses, charities, trade organisations and public sector organisations support small businesses in adopting tried and tested technologies (like accountancy, CRM or HR software, cloud computing or payment systems), and modern management techniques to boost productivity.

Details about the funding available, the application process and further guidance is available from the Innovation Funding Service. There will be a total of £2 million available in this first call under Business Basics Fund.