HomeInsightsNeed to Know – 2012.11.19

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General

Court of Appeal refuses to imply into supply agreement a term for fixed exchange rate between euro and sterling in respect of payment in sterling for goods priced and invoiced in euros.

Government publishes response to European Commission’s proposal for Common European Sales Law.

Technology

Ofcom publishes final regulations and timetable for 4G mobile spectrum auction.

Office of Fair Trading calls for information about online personalised pricing practices.

Apple fails to comply properly with Court of Appeal’s publicity order relating to its findings of non-infringement by Samsung of Apple’s Community Registered Design for a tablet computer.

Broadcasting

Ofcom to investigate BBC’s Newsnight and ITV’s This Morning programmes broadcast on 2 and 8 November 2012 respectively for reaches of Broadcasting Code.

Ofcom imposes financial penalties of £40,000 and £20,000 on E! Entertainment UK Limited and Sunrise TV Ltd respectively.

Publishing

European Newspaper Publishers’ Association calls on EU to recognise value of creative content and ensure respect for copyright in digital environment.

Film & TV

High Court finds BSkyB’s use of “NOW TV” trade mark for internet TV service not an infringement of Starbucks (HK) Ltd’s Community registered trade mark for “NOW”.

Gambling & Betting

Office of Fair Trading expresses concern that implementation of Consumer Rights Directive in UK could mean some contracts between consumers and gambling operators will not be regulated.

Advertising

ASA finds highly stylised nature of Toyota ad glamorised reckless driving.

Clearcast publishes updated Notes of Guidance on its interpretation of the BCAP Code.

General

Court of Appeal refuses to imply into supply agreement a term for fixed exchange rate between euro and sterling in respect of payment in sterling for goods priced and invoiced in euros. 

In March 2007 Procter & Gamble entered into an Asset Sale and Purchase Agreement with the defendant Svenska for the sale of, among others, plants in Manchester and Orleans manufacturing paper tissue towels.  P&G was, however, unwilling to sell certain elements of its proprietary manufacturing technology known as CPN belt technology and the parties therefore agreed that P&G would replace this at each of the plants with equipment known as TAD equipment. 

To enable Svenska to obtain products for Manchester and Orleans without delay the parties entered into a Transitional Supply and CPN Conversion Agreement in October 2007, under which P&G agreed to sell Svenska various products manufactured at both plants.  The Schedule to that agreement and documents attached to that Schedule recorded that prices for those products were established according to a manufacturing and component budget costed in euros.  At the foot of the document recording “final transfer prices” there was a notation: “£/€ exchange rate 1.49164”. 

Article X of the Transitional Supply agreement provided that payment for the goods would be made in pounds sterling for products shipped from the UK and euros for products shipped from France.

Svenska’s case was that the commercial objective of the parties to the agreement was that Svenska should have the benefit of the agreed sale of the two plants immediately and should therefore bear no more than the cost of production of the respective goods supplied from Manchester and Orleans.  Accordingly, the prices payable for products supplied from Manchester should reflect the goods budgeted for at Manchester.  Since it was known that those costs would be incurred mainly in sterling, the provision in article X for payment in sterling for goods produced in Manchester should be construed as providing for a fixed rate of exchange, the appropriate rate being that on which the budget was based, as shown in the notation. 

Applying Belize v Belize Telecom [2009] 1 WLR 1988, the Court of Appeal said that the question in the present case was simply what the Transitional Supply agreement, construed in its commercial context, would reasonably be understood to mean.  The starting point must be the language used by the parties, read against the background of the particular transaction.

The court accepted that, broadly speaking, the parties’ objective had been to enable Svenska to have the immediate benefit of the two plants notwithstanding the delay in physical handover.  However, what mattered for present purposes was that the parties chose the euro as the currency in which they prepared the budget, and, therefore, the currency in which to express the prices calculated by reference to the budget.  They did so, the court noted, notwithstanding the fact that they were both aware that many of the costs incurred at Manchester would be incurred in sterling.  As for the notation, the court considered that its purpose was to explain the rate in which sterling costs had been converted into euros for the purpose of the budget.  If it had been the parties’ intention to adopt that rate for the payment of all goods supplied from Manchester, it would have been a simple matter to express the price of goods supplied from that plant in sterling.  However, “the parties conspicuously failed to take that step”. 

The provision in article X for payment in sterling of the price due for goods supplied from Manchester did not, in the court’s view, detract from the clear terms of the agreement by which the price was expressed in euros.  The distinction between the money of account and the money of payment was well understood and an agreement to make payment in a currency other than the currency of account did not in itself alter or otherwise affect the measure of the obligation.  (The Procter & Gamble Company v Svenska Cellulosa Aktiebolaget SCA [2012] EWCA Civ 1413 (1 November 2012) – to read the judgment in full, click here). 

Government publishes response to European Commission’s proposal for Common European Sales Law.

The Government published a Call for Evidence document on the European Commission’s proposal on 28 February 2012.  The consultation closed on 21 May 2012.  The Government has now published the findings and its response to them.

The Call for Evidence demonstrated that while there was broad support for the objective of increasing cross-border trade, most UK stakeholders did not see CESL as a viable way of achieving that aim.  The legal and consumer sectors were particularly strong in their opposition, the Government says.  A minority of respondents, largely from small business organisations, expressed some support for the aims of the proposal.  There was, however, no clear support from any sector for the proposal as currently drafted.

Issues raised by responses to the Call for Evidence provided a number of recurring themes in response to the questions posed:

Evidence of need: respondents did not believe that sufficient need for the proposal had been demonstrated.  They were unconvinced that contract law presented a significant enough barrier to warrant such a complex and wide-ranging proposal.  They believed other barriers were more significant and that these would not be resolved by this proposal.  Many respondents were unconvinced that CESL was required or could achieve the results anticipated by the Commission.

Legal uncertainty: respondents believed that the content of CESL would lead to significant legal uncertainty.  There was felt to be a fundamental problem in creating a distinct law for the sale and supply of goods and services, separate from other contractual procedures.  Respondents argued this would only lead to uncertainty and incoherence.  Jurisprudence in the area would also take years and perhaps decades to establish.  This would lead to significant delays and expense in the resolution of disputes and interim uncertainty regarding the interpretation of the law.

Confusion: respondents believed that the introduction of a second regime of contract law would create confusion for both consumers and businesses.  They argued that a new law was neither necessary nor practical and specifically noted the length and complexity of the CESL proposal.  Many respondents believed that the implementation of further legislation in this area would make it harder, not easier, for businesses to agree contracts and for consumers to know their rights with certainty when purchasing across borders.

Cost: respondents believed that the costs of the proposal would outweigh the possible benefits.

The Government says that it is concerned that there are “fundamental flaws in both the principle and practical operation of CESL”.  According to the Government, evidence indicates that it is “most unlikely to produce the results the Commission claim” and that “the proposal will be both time consuming and cumbersome to negotiate and implement, rather than providing a simple and practical solution to the immediate challenges presented to businesses, consumers and the growth of the Single Market”.

The Government concludes that there are elements of CESL that do not provide sufficient clarity or legal certainty. The instrument is too complex; incomplete in parts (some significant aspects of a contractual relationship are not covered); unworkable for certain types of contract; uncertain, both as to whether a contract is valid and as to the certainty of its terms; and unclear on its applicability, in particular how its provisions interact with other EU law.

The Government therefore concludes that it “does not feel able to support the CESL proposal”.  It would therefore encourage the Commission to carry out a “careful and specific review of the barriers to cross-border trade, considering the most appropriate solutions to them, before proceeding any further with negotiation of this proposal”.  For a link to the full Response, click here.

Technology

Ofcom publishes final regulations and timetable for 4G mobile spectrum auction.

Ofcom says that the new spectrum will be used to deliver “superfast” 4G mobile services across the UK and will almost “double the amount of airwaves currently available to smartphones and tablets that use 3G networks”.

The rules set out in detail the process involved in the auction, from applying through to bidding and finally issuing the licences to use the spectrum.  Ofcom has also confirmed reserve prices for the different lots of spectrum on offer, which total £1.3 billion, and outlined the timetable for the auction process.

A provisional date of 11 December 2012 has been set for submission of applications by prospective bidders.  Ofcom will confirm the date in two weeks time, once the regulations have come into force.

Prospective bidders must submit their applications to Ofcom together with an initial deposit by the deadline.  Ofcom will then review the applications to determine who can go on to bid in the auction.  Bidding is due to begin in January over a number of weeks.  Bids will be placed online over secure internet connections, using software that has been developed specifically for the auction.  Bidders will be informed what they have won and its cost in January/February 2012 and licences will be granted and paid for in February/March 2012.  The new 4G services are expected to go live in May/June.  To read Ofcom’s full statement, click here.

Office of Fair Trading calls for information about online personalised pricing practices.

The OFT has launched a call for information to explore the extent to which businesses are monitoring online shoppers and using the data to target them with personalised prices, and whether any action is necessary under the OFT’s powers.

Ofcom says that some businesses monitor consumer behaviour online, collecting and recording information about individual shoppers’ purchasing habits, websites they have visited and the items and services they have looked at, as well as the type of device or internet browser they use.  The OFT will look at how businesses use such consumer information, including whether they change the prices they offer individual shoppers as a result.

The OFT says that it will consider business and technological developments in the online shopping market, consumers’ understanding of how their information is used and whether they are being treated unfairly in law as a result of any firms using this monitoring practice.

As part of its work, the OFT will be consulting with a number of its international counterparts, including the US Federal Trade Commission, on commercial uses of consumer data.

The OFT will be gathering information over the next six months and would like to hear from interested parties including online retailers and software providers.  It will publish its findings in Spring 2013.  For further information and details on how to respond, click here.

Apple fails to comply properly with Court of Appeal’s publicity order relating to its findings of non-infringement by Samsung of Apple’s Community Registered Design for a tablet computer.

On 18 October 2012 the Court of Appeal dismissed Apple’s appeal from the High Court’s decision that none of Samsung’s “Galaxy” tablet computers infringed Apple’s Community Registered Design (CRD).  The court had also, due to the uncertainty Apple had created in the market place by pursuing litigation in different jurisdictions, issued a publicity order requiring Apple to “disperse the fog of confusion it had created”. 

The original publicity order issued by the Court of Appeal had required Apple to provide on the homepage of its UK website a link entitled “Samsung/Apple UK judgment” to a notice stating that there had been no infringement by Samsung together with hyperlinks to both the High Court and Court of Appeal judgments.  The order had also required Apple to place advertisements in certain newspapers and magazines to the same effect.  The order had also stated that: “Nothing in this Order shall prevent [Apple] from publishing any comment information regarding the dispute between the parties in respect of the Samsung Galaxy Tablet computers in issue in this appeal”. 

Samsung complained that Apple had failed to comply properly with the order made and that the court should make a further, clearer and more specific order. 

Sir Robin Jacob, giving the lead judgment, agreed with Samsung, saying that: “I have to record that Apple’s compliance with the newspaper advertisement order was lackadaisical at best”.  The order had required Apple to place the ads “in the earliest available issue”.  Apple did not arrange the placement of the ads until 16 November for all newspapers and magazines.  The court described this as “self-evident non-compliance with the newspaper/magazine aspect of the publicity order”.

As for publicity via its website, the link on the homepage led the viewer to a notice that Samsung said was a mixture of the notice ordered by the court along with material added by Apple.  Instead of simply publishing the text of the notice as ordered, Apple broke it up interspersing it with text of its own devising.  This text was, the court said, misleading and undermined its intended effect, namely to clear up the uncertainty that Apple had created.  In particular, Apple had said that the judgments concerned a comparison between Apple’s iPad product and Samsung’s Galaxy product when, in fact, the judgments had concerned Apple’s CRD, which was not like its iPad product, and Samsung’s Galaxy product.  Further, it had made misleading comments regarding decisions taken by the German and USA courts in parallel proceedings.  The effect was, the court found, that readers would believe that the UK court had come to different conclusions about copying, which was not true as the UK court had made no findings about copying, and that its findings were at odds with the decisions in these other jurisdictions, which was also not the case.  Apple had therefore “muddied the water” even further.

The court therefore ordered Apple to state on its homepage that the notice it had originally published had been inaccurate, misleading and had not complied with the first court order.  The court also said that Apple had to publish the original notice without modifications or additions.  Finally, in order to mark the court’s disapproval of Apple’s conduct, it ordered that costs should be awarded against Apple on an indemnity basis.  (Samsung Electronics (UK) Ltd v Apple Inc [2012] EWCA Civ 1430 (9 November 2012) – to read the judgment in full, click here).

Broadcasting

Ofcom to investigate BBC’s Newsnight and ITV’s This Morning programmes broadcast on 2 and 8 November 2012 respectively for reaches of Broadcasting Code.

On 2 November 2012 the BBC’s Newsnight programme broadcast an interview with a victim of sexual abuse that wrongly implicated the Conservative peer, Lord McAlpine, as the perpetrator.  On 8 November 2012, presenter Philip Schofield on ITV’s This Morning programme handed the Prime Minister, who was being interviewed, a list of names allegedly involved in child abuse that he had collated from the internet.

Mr Rob Wilson MP subsequently wrote to Ofcom seeking confirmation that the regulator would investigate: a) whether ITV was in breach of s 7 of the Broadcasting Code by failing to provide an opportunity to respond to the individuals whose names had been disclosed by Philip Schofield; and b) whether the BBC was in breach of the same section of the Code by failing to provide the individual against whom allegations of child abuse had been made an appropriate and timely opportunity to respond to the allegations before the programme was broadcast.

Ofcom confirmed that it would indeed investigate: a) the application of generally accepted standards by ITV and the BBC; and b) the application of standards to prevent unfair treatment to an individual and unwarranted infringements of privacy. 

In its letter to Mr Wilson MP, Ofcom said that it had “general duties” under s 3 of the Communications Act 2003 to (amongst other things) secure the application, in the case of all television and radio services, of standards that provide adequate protection to members of the public from: a) the inclusion of offensive and harmful material in such services; and b) unfair treatment in programmes included in such services and unwarranted infringements of privacy resulting from activities carried on for the purposes of such services.  Accordingly, it has begun investigations into both the BBC and ITV programmes. 

In his letter to Ofcom, Mr Wilson MP had also queried whether the current wording of s 7 of the Code created a potential loophole in relation to innuendo and social media, which broadcasters could use to avoid the fairness requirements of the Code.  Ofcom responded by saying that it was “able to investigate and properly address the issues raised by the broadcast of these programmes and the resulting speculation on social media” and that it did “not consider that there [was] a potential loophole…” as described by Mr Wilson MP.  To read Ofcom’s response to Mr Wilson MP in full, click here.

Ofcom imposes financial penalties of £40,000 and £20,000 on E! Entertainment UK Limited and Sunrise TV Ltd respectively.

The penalties followed Ofcom’s findings in Broadcast Bulletins 203 and 204 from April 2012.

In the case of E! Entertainment, the broadcaster had broadcast consecutive episodes of Girls of the Playboy Mansion at various times during the day on 27 December 2011.  The content of these episodes had included material that was unsuitable for pre-watershed broadcast and the episodes were broadcast during the Christmas holiday period, when it was likely that children would have been watching.  The broadcaster was therefore found in breach of Rule 1.3: “Children must also be protected by appropriate scheduling from material that is unsuitable for them”.  Because the breach was “serious and repeated”, Ofcom decided that a financial penalty should be imposed.

As for Sunrise TV, the broadcaster had broadcast the programme Beauty Simplified on 13 June 2011, 13 and 14 July 2011, and 27 September 2011, which was a regular one-hour item, broadcast in Hindi and English, that offered viewers advice about beauty and well-being.  Throughout the show a very prominent, permanent banner was displayed encouraging viewers to call the show using a premium rate telephone number.  The presenter also regularly encouraged viewers to call.  Ofcom found that the broadcaster was in breach of the UK Code of Broadcast Advertising in respect of: a) Rule 2.1, which states, “Advertisements must be obviously distinguishable from editorial content, especially if they use a situation, performance or style reminiscent of editorial content, to prevent the audience being confused between the two.  The audience should quickly recognise the message as an advertisement”; b) Rule 11.2.3, which states [Teleshopping for these products or services is not acceptable] “medical treatments for humans or animals”; and Rule 11.13.1, which states “Advertisements must not contain offers to prescribe or treat remotely (including by phone, post, e-mail or fax).  That does not preclude advertisements containing offers to distribute general information on health-related matters, such as leaflets or information packs”.  Again, because the breaches were “serious and repeated”, a financial penalty was imposed.  To view the adjudications in full, click here and here.

Publishing

European Newspaper Publishers’ Association calls on EU to recognise value of creative content and ensure respect for copyright in digital environment.

At its General Assembly on 9 November 2012 in Dublin, ENPA adopted the “Dublin Resolution” urging the EU to acknowledge the value to newspaper publishers of copyright laws.

According to ENPA’s Resolution, the quantity of professional press content will keep growing “as long as there is the right EU legislative framework to enable continued investment in authoritative news media content”.  Publishers rely on copyright legislation when developing new business models, it says, and they need legal certainty when considering investment in new products and services.

However, creating original content is costly and often complex and without copyright, publishing and news-gathering “will be the poorer”, the Resolution says.  ENPA believes that the existing EU copyright framework already “provides an appropriate balance between rights holders and users in terms of rights and exceptions”.

As for the digital environment, “respect for copyright is needed more than ever”, the Resolution states.  The digital environment has not reduced, but increased, the need for copyright protection.  Publishers must be able to rely on copyright to ensure sustainable production and delivery of a wide range of authoritative content to European consumers.

Accordingly, “there should be no weakening of the EU copyright framework by the introduction of new exceptions and limitations”.  News media publishers in Europe need protection from any encroachments on freedom of the press, burdensome regulation, advertising restrictions, copyright infringement, parasitism and “free riding” on content.  At a time when the newspaper industry is facing significant challenges, “the EU should not consider any re-opening of the Copyright Directive (2001/29/EC), without a thorough economic and legal impact assessment”.  According to ENPA, future jobs and growth in the professional press sector in Europe depend on this legislative framework.

The professional press sector has “an essential contribution to make towards the quality of public discourse on the internet”.  The Resolution therefore calls on the EU institutions and national governments “to ensure that the news media sector can continue to rely on a stable copyright framework for the development of paid-for business models”.  To read the Resolution in full, click here.

Film & TV

High Court finds BSkyB’s use of “NOW TV” trade mark for internet TV service not an infringement of Starbucks (HK) Ltd’s Community registered trade mark for “NOW”.

When BSkyB announced it was to launch a new internet TV service under the name NOW TV, Starbucks (HK) Ltd (together with two other companies all of which were part of the same Hong Kong-based group of broadcasting, media and telecommunications companies) issued trade mark infringement and passing off proceedings against BSkyB in respect of Starbucks’ Community trade mark for NOW (registered for telecommunications and broadcasting services) and the group’s various TV services operating under the NOW sign.

BSkyB’s logo was as follows:

 

 

Starbucks CTM was as follows:

 

 

BSkyB counterclaimed for a declaration that the CTM was invalid.  It also applied to OHIM for cancellation of the CTM on the grounds of non-use.

The High Court found that Starbucks’ CTM was not inherently distinctive for a TV service.  It was therefore precluded from registration by Article 7(1)(c) of the Community Trade Mark Regulation (207/2009/EC) in relation to the services in question “because NOW would be understood by the average consumer as a description of a characteristic of the service, namely the instant, immediate nature of the service”.  The figurative elements of the CTM did not affect this conclusion, the court said.  In the alternative, the court said, if the inclusion of the figurative elements did mean that the CTM did not consist exclusively of the unregistrable word NOW, then the CTM was devoid of distinctive character and therefore unregistrable by virtue of Article 7(1)(b).

As for infringement, the court found that there was no doubt that the signs used by BSkyB were used in relation to identical services to that of Starbucks’ CTM.  However, none of them included anything like the figurative elements of the CTM in question.  The only common element was the word NOW.  It followed, therefore, that there was no likelihood of confusion.  Accordingly, even if the CTM were valid, it would not have been infringed. 

Starbucks’ passing off claims also failed as the evidence was not substantial enough as at the relevant date to give rise to protectable goodwill.  There was also no direct evidence of residual goodwill.  As regards the third claimant’s IPTV service in Hong Kong Arnold J said that mere accessibility to a website will not give rise to protectable goodwill.  Further, he said, merely viewing a website will not necessarily amount to being a “customer” of the service in question.  There was no need for viewers of the service to pay for it in order to be “customers”, but here the claimants were making the service available in the UK for the purpose of attracting more Hong Kong customers.  Therefore, viewers of the service in the UK could not be said to be “customers” in the UK.  (Starbucks (HK) Ltd v British Sky Broadcasting Group Plc [2012] EWHC 3074 (Ch) – to read the judgment in full, click here).

Gambling & Betting

Office of Fair Trading expresses concern that implementation of Consumer Rights Directive in UK could mean some contracts between consumers and gambling operators will not be regulated.

Responding to the Government’s Consultation on Implementation of the Consumer Rights Directive (2011/83/EU), the OFT said that consumer protection in the gambling sector “needs to be very carefully considered”. 

The provisions in the Directive will apply, subject to some exceptions, including gambling contracts, to all contracts for the sale of goods and services by traders to consumers, whether the transactions are within the UK or effected across EU borders. 

In order to ensure that the Directive will be implemented in such a way as to make UK legislation compatible with it, the Government proposed that it would simply copy the wording relating to the exceptions.  The OFT said that if it does this there is a possibility that some contracts may fall within the exemption but may not fall under the definition of gambling as set out in the Gambling Act 2005.  “This could result in consumers having no protection”, it said. 

The OFT noted that, as Recital 31 of the Directive makes clear, the rationale for excluding such contracts is so that Member States can put in place increased consumer protection measures in this area of potentially high detriment, not that such contracts will be completely unregulated.  In the UK such protection is created by the Gambling Act 2005 and the supervisory regime it creates.  Therefore, the OFT believes that “the exemption should be clarified to ensure that only contracts which fall within the supervisory regime created by the Gambling Act should be exempt from scope of the [Directive]”.  To read the OFT’s response in full, click here.

Advertising

ASA finds highly stylised nature of Toyota ad glamorised reckless driving.

An ad on YouTube, promoting the Toyota GT86, appeared during a third party video.  The ad was set in an animated virtual world in which a male character described not being real and how he had no feeling, until he drove the GT86.  The car was shown being driven at speed, being followed by a police helicopter and being chased through narrow virtual streets.  The car was then shown escaping the city and following signs to “the end of the world”.  The car burst through a glass barrier onto a real road.

Two complainants challenged whether the ad was irresponsible and condoned dangerous driving.  Toyota responded that this was not the case because, amongst other things, the ad was highly stylised and set in a fantasy environment such that the driving scenes featured were impossible to emulate.

Whilst the ASA accepted that in the world where the ad was set, cars could drive themselves, objects could miraculously appear or disappear and certain everyday objects were contraband, it considered that the roads, public spaces and the car featured in the ad were recognisable as such and were not significantly different from those in the real world.  The ASA therefore considered that the driving featured, and in particular the speeds shown, could be emulated on real roads.  Significantly, the ASA also considered that the highly stylised nature of the ad glamorised the reckless manner in which the car was driven.  Because it considered the ad portrayed speed, and the way the car could be handled in a manner that might encourage motorists to drive irresponsibly, the ASA concluded that the ad was irresponsible and condoned dangerous driving in breach of CAP Code rules 1.3 (Social responsibility), 19.1, 19.2 and 19.3 (Motoring).  To read the ASA Adjudication on Toyota (GB) plc (14 November 2012) in full, click here.

Clearcast publishes updated Notes of Guidance on its interpretation of the BCAP Code.

Clearcast says that the Notes of Guidance are “useful for advertisers and agencies who needed help interpreting the code for the making of their ads and subsequent clearance for broadcast”.  Since the Code went live in September 2012, Clearcast has, it says, “been using and interpreting it and a dedicated team have now compiled the guidance we want to issue to amplify the new rules”.

The Notes of Guidance is a “living document”, Clearcast says, that can be updated as and when rules change.  Clearcast has therefore invited suggestions and comments from advertisers and agencies.  For a link to the revised Guidance, click here.

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