HomeInsightsNeed to Know – 2012.08.13 (2)

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General

House of Lords Select Committee on Communications publishes Call for Evidence on media convergence.

High Court finds that “necessity to give business efficacy is not the only relevant type of necessity” when considering implied terms in contract.

Technology

Committee of Advertising Practice publishes revised Help Note on Speed Claims in Broadband Advertising extending scope to cover mobile data services.

HMRC publishes guidance on Patent Box.

Data Protection

European Economic and Social Committee publishes Opinion on proposed European data protection reforms.

Publishing

High Court grants permanent injunction to prevent disclosure of private information concerning details of sexual relationship, but not in relation to “bare facts”.

Gambling & Betting

High Court finds that customers, including business customers, of betting exchanges are not required to pay horserace betting levy.

Advertising

ASA rejects complaint that Dark Shadows ad was offensive and irresponsible because it contained sexual references about a 15-year old girl.

Institute of Practitioners in Advertising responds to HM Treasury’s Creative Sector Tax Relief Consultation arguing that excluding advertising is “illogical”.

General

House of Lords Select Committee on Communications publishes Call for Evidence on media convergence.

The Committee has announced an inquiry into media convergence and its public policy impact. As part of that inquiry, it is inviting interested organisations and individuals to submit written evidence by 24 September 2012.

Media convergence refers to the phenomenon of traditionally distinct media activities beginning to overlap as frontiers between previously separate industries start to dissolve.  Recently, converged devices have become a mass market reality, giving people access to types of content, which were conventionally distributed over different platforms, on one single platform.   For example, newspapers are no longer just printed but are also available  online and carry video packages with the look and feel of traditional TV; broadcasters publish websites including text-based articles similar to online print; scheduled programmes are broadcast but also available on-demand, both on digital channels and a variety of websites; network operators are participants in the market for original content; user-generated material vies for online audiences alongside professionally produced content; and professional and amateur bloggers share the same debates.

Whilst convergence can bring opportunities for new businesses, it also creates some “pressing issues for public policy”, according to the Committee.  The question it asks is whether the “broadcast ecology” established in the UK, which brings together commercial enterprise and public service values for both consumers and citizens in which a high level of quality and public trust has been secured, should be created for what the Committee calls a “potentially much more anarchic converged world”.  Whilst the internet has “opened up access to lots of innovative and exciting content”, it also poses some “real threats to quality, social values, trust, privacy etc”.  The question is, the Committee says, “[h]ow do we help encourage the good things to develop, while addressing the risks?

Specific questions posed in the Call for Evidence include:

  • Is it still possible to have different regulatory approaches to different media industries e.g. broadcasting and the internet?
  • To what extent are consumers satisfied with the different approaches?
  • How can effective competition be ensured when services are increasingly being packaged together?
  • What is the impact on the industry of the need to provide “hybrid products”?

The Committee says that it will draw on the evidence to make “forward-looking but concrete recommendations”.  It aims to report to the House, with these recommendations, early in the New Year.  To read the Call for Evidence in full, click here.

High Court finds that “necessity to give business efficacy is not the only relevant type of necessity” when considering implied terms in contract.

The High Court has found that it was “necessary to spell out the meaning and effect of the Agreement” to imply a term into an agreement between the claimant and defendants that the defendants were obliged not to take any steps to remove the claimant from his position as director of a Guernsey company, Tetragon Financial Group Ltd (TFG), unless and until a “Termination Event”, as set out in the agreement, had occurred.  This was despite Article 88(e) of the Articles of Association of TFG giving the directors power to remove a fellow director on notice.

Additionally, the court found that the defendants were obliged, pursuant to a further assurance clause in the agreement and in order to give effect to clause 5 of the agreement, which gave the claimant a right to be re-appointed as director at every AGM subsequent to his initial appointment at the first AGM, not to invoke Article 88(e) or any other power to remove the claimant from office.

Without implying a term, or acting so as to give effect to clause 5, the court said, the claimant’s right to re-appointment became pointless in the event that, as had happened here, the defendants were to use Article 88(e) to remove a fellow director.

The court also noted and applied the age-old principle that a party to an agreement must not do anything of his own motion to render further performance of the agreement impossible, which was effectively what the defendants had done by removing the claimant from office.

On the implication of terms, the judge said that, whilst “necessity still remains a touchstone for the implication of terms”, it was also true that, “necessity to give business efficacy is not the only relevant type of necessity”.

The court examined both Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 (PC) and Mediterranean Salvage & Towage v Seamar Trading & Commerce Inc [2009] 1 CLC 909.  In Belize, the Privy Council had distilled the conventional wisdom that the implied term must “go without saying”, or be “necessary to give business efficacy to the contract”, saying that the question was: “is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?”  However, in Mediterranean Salvage, which followed Belize, the Court of Appeal had said that it must still be “necessary to imply the proposed term and that the Privy Council in Belize had not, by bringing in the requirement of asking what the instrument was reasonably understood to mean, in any way resiled from the proposition that an implied term must be “necessary”.

In this case, the court said that: “necessity still remains a touchstone for the implication of terms, even after the assimilation of implied terms with interpretation in Belize”, but the business efficacy type of necessity did not have to be demonstrated in every instance of the implication of a term and it was not the only relevant type of necessity:  “The express terms of an agreement may work perfectly well in the sense that both parties can perform their express obligations, but the consequences would contradict what a reasonable person would understand the contract to mean.  In such a case an implied term is necessary to spell out what the contract actually means”.  (Alexander Edward Jackson v Patrick Giles Gauntlet Dear [2012] EWHC 2060 (Ch) (25 July 2012) – to read the judgment in full, click here).

Technology

Committee of Advertising Practice publishes revised Help Note on Speed Claims in Broadband Advertising extending scope to cover mobile data services.

In September 2011, CAP and BCAP published a new Help Note on Speed Claims in Broadband Advertising.  The guidance was intended to ensure that consumers are not misled by broadband speed claims, for instance, “Up to 20Meg”.  CAP and BCAP have now published a revised Help Note extending the scope of the guidance to cover mobile data services.

The key principles of the Help Note are that:

  • advertised maximum speeds should be based on the actual experience of an ISP’s customers; and
  • advertisers should be able to demonstrate that the speeds claimed in their advertising can be achieved by a reasonable proportion of consumers.

Following the public consultation that led to the new guidance, CAP and BCAP were concerned that further work was required to ensure that the guidance did not unfairly impact on mobile providers as a result of the significant technological differences between their platform and those of fixed line providers.  The objective in revising the guidance was to maintain the original principles of the Help Note, whilst ensuring that they could reasonably be applied to the specific circumstances of mobile data services.

The guidance is subject to a further three-month period of grace for mobile providers to allow them an opportunity to implement any changes to their advertising and related business practices.  The ASA has agreed not to consider complaints made about mobile services under the terms of the Help Note until 1 November 2012.  Complaints about fixed line services will continue to be considered.  For a link to the Help Note, click here.

HMRC publishes guidance on Patent Box.

The Patent Box enables companies to apply a lower rate of corporation tax to profits earned after 1 April 2013 from its patented inventions and certain other innovations.  The relief will be phased in from 1 April 2013 and the lower rate of corporation tax to be applied will be 10%.

The guidance explains that an organisation can only benefit from the Patent Box if it is a company liable to corporation tax and it makes a profit from exploiting patented inventions.  The company must also own or exclusively license-in the patents and must have undertaken “qualifying development” on them.  This includes making a significant contribution to either:

  • the creation or development of the patented invention; or
  • a product incorporating the patented invention.

If the company holds licenses to use others’ technology it may still be able to benefit from the Patent Box if it has:

  • rights to develop, exploit and defend rights in the patented invention;
  • one or more rights to the exclusion of all other persons (including the licensor); and
  • exclusivity throughout at least an entire national territory.

To be “relevant intellectual property income”, it must come from at least one of the following:

  • selling patented products;
  • licensing out patent rights;
  • selling patented rights;
  • infringement income; or
  • damages, insurance or other compensation related to patent rights.

The guidance also includes information on how and when to claim and gives examples of calculations.  There are also specialist HMRC units located throughout the UK who are able to assist with claims.  To read the guidance in full, click here.

Data Protection

European Economic and Social Committee publishes Opinion on proposed European data protection reforms. 

In the Opinion, recently published in the Official Journal of the European Union, the EESC generally welcomes the direction taken by the European Commission, endorses the proposed choice of enabling provision, and agrees in principle with the objectives of the proposal.

The EESC says that it is “divided in its views as to whether a regulation is the best choice given the task in hand and calls on the Commission to do more to demonstrate and justify the reasons that make this instrument preferable to a directive, if not indispensable”.

Further, the EESC says that it “regrets the fact that the stated principles of the right to protection of personal data are qualified by an excessive number of exceptions and restrictions”.

In the context of a digital economy, the EESC shares the Commission’s opinion that, “individuals have the right to enjoy effective control over their personal information” and considers that this right should be extended to cover the “various purposes for which individual profiles are drawn up on the basis of data collected by numerous (legal and sometimes illegal) methods and its processing”.

The Opinion continues that since this is “a matter of fundamental rights”, harmonisation by means of a Regulation to cover specific areas should nevertheless leave Member States free to adopt provisions under national law in areas not covered, as well as provisions that are more favourable than those set out in the Regulation.

The EESC nevertheless welcomes the focus on creating a proper institutional framework to ensure that the legal provisions function effectively, both at company level (through data protection officers) and in Member States’ public administrations (through independent supervisory authorities).  However, the EESC says the Commission’s approach should be “more in line with the real needs and expectations of the public”.

The EESC also suggests various improvements and clarifications to the proposed text.  In particular, it suggests a better definition of rights, stronger protection for the public in general and of workers in particular, more clarity on the nature of consent, on the lawfulness of processing and on the duties of data protection officers and data processing in the context of employment.

The EESC also considers that some aspects that have not been addressed should be included.  Search engines, the majority of whose revenue comes from targeted advertising thanks to the collection of personal data from and profiling of visitors to their sites, should come within the scope of the Regulation, as should websites providing storage space and, in some cases, cloud computing software.  The same should apply to personal information published on social networks, which, in accordance with the right to be forgotten, should allow data subjects to modify, erase or delete their personal information.

Lastly, the EESC calls on the Commission to reconsider certain aspects of the proposal that it deems “unacceptable” in sensitive areas such as child protection, the right to object, profiling, certain restrictions on rights granted, the threshold of 250 workers for the appointment of a data protection officer, and the way in which the “one-stop shop” is organised.  For a link to the Opinion, click here.

Publishing

High Court grants permanent injunction to prevent disclosure of private information concerning details of sexual relationship, but not in relation to “bare facts”.

The first claimant was a wealthy man in his 70s with two grown up children from his first marriage.  He subsequently remarried to his second wife, to whom he was still married and with whom he lived.  The second claimant was born in Russia and had been in a relationship with the first claimant for a few years before becoming pregnant with twins.

The defendant was alleged to be the person who had threatened to disclose to the first claimant’s grown up children and his second wife (the “first family”) the fact that the second claimant was due to give birth to twins in a few weeks’ time and that the first claimant was the father.  It was alleged that he had threatened to disclose the information, together with photographs, a video and other documents including emails containing financial and medical information, unless he was paid a very substantial sum of money (£1.5 million).  There was strong evidence before the court that such threats had been made at various times.

The first claimant did not make the payment demanded.  In January 2012, the claimants applied to the court for an interim injunction to prevent disclosure of private information.  Mr Justice Tugendhat held that the claimants were not entitled to an interim injunction to prevent disclosure to the first claimant’s grown up children and his second wife of the bare facts that the first claimant was in a relationship with the second claimant and, further, that he was the father of twins to whom the second claimant was due to give birth in a few weeks’ time.  However, he granted an interim injunction in respect of other private information such as medical details and personal financial information.

At trial, the claimants contended that sexual relationships were at the core of private life.  The court found that, subject to the proviso identified by Tugendhat J relating to the bare facts, the information that the defendant threatened to disclose was indeed information that attracted a reasonable expectation of privacy.

The court noted that a permanent injunction would only be appropriate if the court was satisfied that there were grounds for apprehending that the defendant would disclose the information in question in the future or engage in the allegedly harassing conduct.

The court found that the evidence from both claimants of their fear and concern as to existing and future threats was “clear” and it had “no hesitation in accepting such evidence”.  The defendant’s conduct therefore fell within the provisions of the Protection from Harassment Act 1997.

As to the balancing exercise to be carried out between the claimants’ Article 8 rights, the defendant’s Article 10 rights and the issue of the public domain as identified in s 12 of the Human Rights Act 1998, the court found that the information was private and no good grounds had been advanced which could justify disclosure pursuant to Article 10.  The fact that the second claimant may have spoken to friends was insufficient to bring the information into the public domain as identified in s 12.  Accordingly, the rights as existed pursuant to Article 10 were weak and substantially outweighed by the privacy rights of the claimants.

The court granted the permanent injunction sought for two reasons: 1) the defendant’s denial of any of the alleged conduct in the face of strong evidence to the contrary; and 2) the defendant’s statement about resorting to the mass media.  The judge said: “I have no confidence that unless restrained by a permanent injunction there will not be an attempt by the defendant to disclose the private information…. I am conscious that in making such an order it imposes a significant restriction upon the defendant but the information which he seeks to disclose is private, and this step is necessary to properly protect those affected by such disclosure”.  (SKA v CRH [2012] EWHC 2236 (QB) (31 July 2012) – to read the judgment in full, click here).

Gambling & Betting

High Court finds that customers, including business customers, of betting exchanges are not required to pay horserace betting levy.

The claimant, William Hill Organisation Ltd, sought judicial review of the decision of the Horserace Betting Levy Board that customers of betting exchanges are not required to pay the horserace betting levy pursuant to s 27 of the Betting, Gaming and Lotteries Act 1963 (mostly repealed by the Gambling Act 2005, other than the provisions relating to the levy, which have been provisionally repealed).  The Association of British Bookmakers was an interested party in support of William Hill and internet betting exchange, Betfair, was an interested party in support of the Board.

Under the 1963 Act, only a “bookmaker” can be made to pay the levy.  William Hill contended that those who enter into betting transactions through a betting exchange in the course of their business are bookmakers within the meaning of the Act.  The Board had accepted legal advice that such persons, including companies, were not bookmakers and had made the decision that they were not liable to pay the levy.

Under the Act, a “bookmaker” is any person carrying on the business of “receiving or negotiating” bets.  William Hill argued that business users of betting exchanges “received” bets within the meaning of the Act.

The court observed that betting exchanges are “creatures of the Internet” and are called exchanges because they do not themselves normally take a position on a bet.  An exchange is rather an online marketplace in which users can place bets at odds they are willing to offer and sums they are willing to bet.  The exchange then matches the bet with a corresponding bet, thereby taking no risk itself.  Betfair accepted that it was a “bookmaker”, but said that its users, including its business users, were not.

The court said that the question was not whether, in the course of business, a person received bets, but whether he carried on the business of receiving bets.  Someone who operated a betting shop received bets, the court said, as his business was that of receiving bets.  However, a person who operated through a betting exchange may in the course of doing so find himself receiving a bet, but he did not carry on the business of receiving bets.  He was not, therefore, a bookmaker and, accordingly, was not liable to pay the levy.

As reported in the media, William Hill has lodged an appeal of the decision with the Court of Appeal.  (R (William Hill Organisation Ltd) v The Horserace Betting Levy Board [2012] EWHC 2039 (Admin) (20 July 2012) – to read the judgment in full, click here).

Advertising

ASA rejects complaint that Dark Shadows ad was offensive and irresponsible because it contained sexual references about a 15-year old girl.

A TV ad, for the film Dark Shadows, showed a male vampire character rising from a coffin.  He asked “What is the year?” and another character replied “1972”.  The vampire was then shown asking a girl “What is your age?”  She replied “15.”  The vampire then said “15 and no husband, we must put those birthing hips to good use at once.

The complainant challenged whether the ad was offensive and irresponsible, because it contained sexual references about an underage girl.

The ASA investigated the ad under BCAP code rules 1.2 (Responsible advertising), 4.2 (Harm and offence) and 5.5 (Children) but did not find it in breach.

The ASA considered that in the context of the ad most viewers would understand that the vampire was a fantasy character, who having been born and lived a long time in the past would have very different values to his contemporaries in the 1970s.  The ASA considered that the jovial tone of the ad, the playful music, and Johnny Depp’s reputation for playing unusual and quirky characters, meant that most viewers would not see the vampire as threatening or his proposition as serious.  The ASA noted that the girl and her mother did not appear scared by the vampire’s remarks but that their reactions emphasised how outmoded his beliefs were.

Although the ASA considered that younger children might not understand the narrative of the ad or grasp the playful tone, it noted that it had been given an ex-kids restriction by Clearcast and that Warner Bros had taken a responsible approach to ensure younger children were not targeted by the ad.  The ASA considered that most viewers would not believe that the girl had been portrayed or represented in a sexual way, and therefore it concluded that the ad was not offensive or irresponsible.  To read ASA Adjudication on Warner Bros Entertainment UK Ltd (8 August 2012) in full, click here.

Institute of Practitioners in Advertising responds to HM Treasury’s Creative Sector Tax Relief Consultation arguing that excluding advertising is “illogical”.

The IPA says that it “fundamentally disagrees with [the Treasury’s] decision to exclude advertising material from the proposed creative sector tax reliefs”.

In its response, the IPA states that “although it is encouraged to see the Treasury considering extending the sort of tax relief that applies to the film industry to other output oriented creative industries (animation, high-end television and video games) it believes that it is illogical in dealing with such creative production to specifically exclude advertising material for the following reasons”.  Its reasons are that:

  • “advertising tends to be at the forefront of creative technological developments which this tax relief is aimed at, since it requires effective and innovative work for use across new and traditional media”;
  • ad agencies look to the same production companies that also specialise in animation and high-end television.  “Without a flourishing ad industry, high-end creative productions would therefore not be able to draw on such a pool of highly-skilled film crew, lighting companies, post-production houses and animators, and would be forced to go overseas”; and
  • HM Treasury has failed to acknowledge that overseas competition for creative production expertise applies to the advertising industry.

As a result the IPA says that “the criteria for tax relief should be the nature of the creative work, not the purpose for which it is intended”.  To read the IPA’s press release in full, click here.

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