Need to Know – 2015.03.16

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General

Intellectual Property Office publishes study on criminal sanctions for copyright infringement under Copyright, Designs and Patent Act 1988.

Intellectual Property Office publishes IP Finance toolkit to help businesses understand and present value of their IP to potential lenders.

High Court ruling demonstrates that an exclusion of common law remedies requires clear contractual language.

High Court holds that, in a claim for specific performance, the party seeking access to certain documents did not need to give reasons as to why it wanted such access.

Technology

Ofcom announces major review of UK digital communications.

Council of European Union gives Latvian presidency a mandate to negotiate with European Parliament on rules to cut mobile phone roaming fees and ensure net neutrality.

Ofcom commences own-initiative monitoring and enforcement programme to assess compliance by communication providers (CPs) with General Condition 11.4.

Data Protection

Court of Amsterdam says that Google Spain judgment should not be used as a back door to suppress unpleasant news reporting.

Information Commissioner’s Office raids a call centre connected to millions of nuisance calls.

Litigation

Courts and Tribunals Judiciary announce pre-trial review experiment in Chancery Division.

Music

PRS for Music and Police Intellectual Property Crime Unit shut down illegal UK karaoke website.

Publishing

Ofcom consults on proposed measurement framework for media plurality.

Court of Justice of European Union finds France and Luxembourg in breach of VAT Directive (2006/112/EC) by applying reduced rate VAT to supply of e-books, and European publishers react by urging EU Commission to change VAT system.

Advertising

Committee of Advertising Practice issues guidance on using swearing and expletives in ads.

ASA finds today’s tech-savvy consumer would not be misled by storage claims in Microsoft HP Stream 11 promotion.

General

Intellectual Property Office publishes study on criminal sanctions for copyright infringement under Copyright, Designs and Patent Act 1988.

The study, entitled “Penalty Fair?”, was commissioned by the IPO to provide an evidence-based view on whether the criminal sanctions for copyright infringement available under the CDPA 1988 are currently proportionate and correct or whether they should be amended.

The study focuses on the difference in the sanctions available for online copyright infringement compared to those relating to physical goods.

The research gathers quantitative data from 2006 to 2013, qualitative views and evidence from stakeholders and sets out the arguments for and against any change in the law.

The study shows that opinions on whether there is a case for change are divided.  Many industry bodies argue that higher penalties are necessary and desirable and that there is no justification for treating physical and online crime differently.  Other stakeholders suggest that these offences are, in fact, different and raise concerns about a possible chilling effect on innovation.

The study concludes that:

  • the online criminal provisions of the CDPA are hardly being used, if at all, and do not provide access to appropriate and proportionate sentences for serious infringement cases;
  • there is a case for increasing sanctions relating to online offences, especially if the civil case law is believed to have developed to a point where prosecutions can now be brought successfully against criminal activity;
  • custodial sentences in excess of two years have been used for physical copying offences and the data did not provide a basis for concluding that the level of physical penalties was inappropriate; and
  • there is logic to placing serious online copyright offences into a more serious category that carries a maximum sentence of at least five years.

To access the study, click here.

Intellectual Property Office publishes IP Finance toolkit to help businesses understand and present value of their IP to potential lenders.

Developed by the IPO, the toolkit aims to support small businesses to use their intellectual property assets to secure the finance they need for company growth.  It also aims to assist banks to recognise the value of IP in a business.

The toolkit has been developed to:

  • help lenders and businesses talk the same language when understanding the value of IP;
  • encourage and guide businesses to document their IP assets ahead of any application for finance;
  • help businesses to develop more effective IP management and commercialisation strategies; and
  • raise awareness of the wide variety of finance options available for IP-rich businesses.

Minister for Intellectual Property, Baroness Neville-Rolfe DBE, said: “The IP Finance toolkit will help businesses to present the security and financial worth of their IP when seeking finance and help banks recognise the value of IP in a business. It will assist businesses which are rich in intangibles, but lack traditional assets, to make a stronger case when they need to access the finance they need to grow”.

For a link to the toolkit, click here.

High Court ruling demonstrates that an exclusion of common law remedies requires clear contractual language.

Allowing an appeal against a decision of the Grain And Free Trade Association Board of Appeal that a buyer was not entitled to reject a cargo of wheat, Mr Justice Eder disagreed with the Board’s determination that the fact that the claimant’s inspection company had failed to provide a contractually compliant inspection certificate meant that the claimant was precluded from rejecting the goods on grounds of non-conformity.  The judge found that while the independent right of an FOB buyer to reject the goods may be modified or even excluded by agreement, in this case the words in the contract did not have that effect.  In reaching that decision, the judge stressed that the exclusion of common law remedies should not be lightly inferred and that clear words are necessary to exclude the independent right to reject goods for non-conformity.  Even where there is a contractual mechanism for determining the quality of goods, failure to follow the relevant procedure will not, in the absence of express wording to the contrary, prevent a buyer from rejecting goods which on the “totality of the evidence” do not conform with the description of the goods (Aston FFI (Suisse) SA v Louis Dreyfus Commodities Suisse SA [2015] EWHC 80 (Comm) (23 January 2015) – to read the full judgment click here).

High Court holds that, in a claim for specific performance, the party seeking access to certain documents did not need to give reasons as to why it wanted such access.

In December 2012, Quarzwerke, a German company, agreed to purchase from Alfa Financing 67.2% of the shares in a Bulgarian company called Kaolin AD and its subsidiaries, which were spread mostly across Eastern Europe.

The sale and purchase agreement stated that Quarzwerke had to retain the Kaolin group company documents that related to the pre-sale period for ten years and to allow Alfa Financing “reasonable access” to them.  

In June 2014, Alfa Finance gave written notice to Quarzwerke requesting access to certain documents.  Quarzwerke did not comply with the notice for various reasons.  Alfa Finance therefore issued proceedings for specific performance.

Quarzwerke argued that the court should not grant the order because all that it was required to do under the contract was to grant “reasonable access” to the documents of the group companies and Alfa Finance had not demonstrated why it was reasonable for it to access the broad range of documents it sought.

Quarzwerke’s concern was that Alfa Finance was seeking, in some way, to circumvent the disclosure process in an arbitration matter that was on going between the parties.  In the court’s judgment that was not an objection that had any substance because Alfa Finance had a clear contractual entitlement to access the documents and to copy them.  Alfa Finance must have sought them for a reason, and one of the reasons that must reasonably have been in contemplation at the time the sale and purchase agreement was entered into would have been in connection with disputes that might be referred to arbitration.

Further, the court said, it was not necessary to examine Alfa Finance’s reasons for seeking access to the documents in order to determine whether access was reasonable.  The reference to reasonable access extended, the judge said, only to the method and timing of access.  Therefore, access had to be at a reasonable time and by a process that was reasonable and practicable to meet.  The timing and process set out in the draft order was reasonable and appropriate and therefore amounted to “reasonable access”.  In addition, the reasons for Alfa Finance seeking to exercise its contractual rights were “neither here nor there”, because that was exactly what it was doing, i.e. exercising its contractual rights.  Accordingly, the court granted the relief sought.

In a post judgment note, given following a request by Quarzwerke for clarification of the judge’s reasoning, the judge said that a construction requiring Alfa Finance to explain or justify its wish for access would be “wholly uncommercial” and a “recipe for potentially endless dispute”.  The construction the judge preferred also fitted the words more naturally, the word “reasonable” being referable to the access itself, and not to the reasons for access.  (Alfa Finance Holding AD v Quarzwerke GmbH [2015] EWHC 243 (Ch) (26 January 2015) – to read the judgment in full, click here).

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Technology

Ofcom announces major review of UK digital communications.

Ofcom has announced an overarching review of the UK’s digital communications markets to ensure that communications providers and services continue to meet the needs of consumers and businesses.

The Strategic Review of Digital Communications will examine competition, investment, innovation and the availability of products in the broadband, mobile and landline markets.

Ofcom anticipates that the review will focus on three aspects in particular:

  • ensuring the right incentives for private-sector investment, which can help to deliver availability and quality of service;
  • maintaining strong competition and tackling obstacles or bottlenecks that might be holding the sector back; and
  • identifying whether there is scope for deregulation in some areas.

The first phase of the review will examine current and future market factors that may affect digital communications services, and current regulatory approaches.  To inform this work, Ofcom intends to engage over the coming months with a wide range of stakeholders, including industry, consumer groups, the Government, and devolved administrations through meetings and workshops.  This phase of the review is expected to conclude with a discussion document in summer 2015.

Ofcom then expects to conclude the review’s second phase by outlining initial conclusions around the end of the year.

To access the review’s terms of reference, click here.

Council of European Union gives Latvian presidency a mandate to negotiate with European Parliament on rules to cut mobile phone roaming fees and ensure net neutrality.

The mandate to negotiate a new Regulation covers:

  • EU-wide rules on an open internet, safeguarding end-users’ rights and ensuring non-discriminatory treatment in the provision of internet access services; and
  • changes to the current roaming regulation, representing an intermediate step towards phasing out roaming fees all together.

The other parts of the original Commission proposal on the telecommunications single market (“A Connected Continent”) have been left out by common decision of the Council.

The Regulation would apply from 30 June 2016.

As far as roaming is concerned, the draft Regulation sets out a new pricing mechanism, which will make it much cheaper to use mobile phones when travelling abroad in the EU.  Essentially, consumers will be able, within certain limits, to make and receive calls, send SMSs and use data services without paying anything extra on top of the domestic fee.  Once the basic roaming allowance is used up, the operator will then be able to charge a fee, but such fee must be much lower than current charges.  For making calls, sending SMSs and using data services, the roaming fee must not be higher than the maximum wholesale rate that operators pay for using the networks of other Member States.  For receiving calls the maximum surcharge must be the weighted average of maximum mobile termination rates across the EU.

The next step is for the Commission to assess, by the middle of 2018, what further measures may be needed with a view to phasing out roaming charges all together.  

As for net neutrality, the draft Regulation enshrines the principle of the end-users’ right to access and distribute the content of their choice on the internet.  It also ensures that companies that provide internet access treat traffic in a non-discriminatory manner.

The draft Regulation sets common rules on traffic management so that the internet can continue to function, grow and innovate without becoming congested.  Blocking or slowing down specific content or applications will be prohibited, with only a limited number of exceptions and only for as long as it is necessary.  For instance, customers may request their operator to block spam, and blocking might be necessary to prevent cyber attacks through rapidly spreading malware.

As regards services other than those providing internet access, agreements on services requiring a specific level of quality will be allowed, but operators will have to ensure the quality of internet access services.

The presidency will negotiate the terms of the draft Regulation with the European Parliament on behalf of the Council.  Both institutions must approve the Regulation before it can be adopted.  For further information, click here.

Ofcom commences own-initiative monitoring and enforcement programme to assess compliance by communication providers (CPs) with General Condition 11.4.

Ofcom has launched a monitoring and enforcement programme to assess CPs’ compliance with the provisions in GC11.4 and determine whether any further action, including enforcement, is required in the event of non-compliance.

Under GC11.4, CPs are required to apply to a third party assessor, or “Approval Body”, for approval of their metering and billing system in compliance with the Ofcom Metering and Billing Direction 2014.  CPs have to obtain approval for these services as soon as is practicable.  CPs are also required to comply with any directions made by the Approval Body in connection with the approval.  

Ofcom’s objectives for this monitoring and enforcement programme are:

  • to ensure that CPs comply with the timescales for the approval process set out in the Metering and Billing Direction 2014;
  • to identify any risks that may affect a CPs’ compliance with GC11.4; and
  • to ensure that consumer confidence in the accuracy of their bills is maintained.

Ofcom says that it may initiate separate investigations of named providers.  Alternatively, Ofcom may move directly under the programme to take enforcement action where, for example, it has reasonable grounds for believing that a CP is contravening GC11.4.  For further information, click here.

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Data Protection

Court of Amsterdam says that Google Spain judgment should not be used as a back door to suppress unpleasant news reporting.

In a case interpreting the “right to be forgotten” principle as developed in the Google Spain decision, the claimant was a senior accountant who had featured in news reports following an argument with his building contractor that had resulted in him having to live in a container on his country estate for some time.  It was reported that the accountant had failed to pay the contractor’s bills, at which point the contractor had changed the locks.

The accountant was attempting to assert his right to be forgotten in respect of the Google search results relating to reports of this incident.  He ultimately ended up in court against Google who had refused to remove results relating to this story from its search function.

The case turned on whether the search results pointing to news articles covering the accountant’s “container story” were still relevant.  The court ruled that they were still relevant because the saga was still being mentioned in news reports first published at the end of last year (relatively recently) but suggested that at some point in the future, they may lose this quality of relevance.

Perhaps of most interest is what the judge said prior to giving judgment: “The [right of removal] is not meant to remove articles which may be unpleasant, but not unlawful, from the eyes of the public via the detour of a request for removal to the operator of a search machine.”

This case stresses the important role played by search engines in making news stories available to the public.  News organisations should welcome the acknowledgment that the courts are not open to Google Spain becoming a covert route to the suppression of uncomfortable news reporting. 

Information Commissioner’s Office raids a call centre connected to millions of nuisance calls.

On 12 March 2015, the ICO raided a call centre in Hove thought to be responsible for making millions of nuisance calls.

The business was believed to be using automatic dialling technology to make four to six million recorded telephone calls a day about debt management or payment protection insurance.  The calls were made anonymously, were sent without consent and it was impossible to opt out of receiving them.

Documents and computer equipment were removed for further examination.  The ICO says that it will now consider what action is necessary in order to compel the organisation to comply with the rules regarding recorded telephone calls.  This may include issuing a civil monetary penalty and/or an enforcement notice.  For further information, click here.

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Litigation

Courts and Tribunals Judiciary announce pre-trial review experiment in Chancery Division.

The Chancery Division is to experiment with holding pre-trial reviews in all cases estimated to last five days or more. 

From the beginning of next term, whenever a case with an estimate of at least five days is fixed to come on for final hearing on or after 1 March 2015, a pre-trial review before a judge will be arranged at the same time, to take place about four weeks before the trial.  Among other things, the judge hearing the pre-trial review will be concerned to check that the time estimate is realistic and that the parties have taken appropriate steps to agree a timetable for the trial.  To read the press release, click here.

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Music

PRS for Music and Police Intellectual Property Crime Unit shut down illegal UK karaoke website.

Detectives from PIPCU shut down an illegal UK karaoke website (www.karaoke-world.co.uk) on 11 March 2015 following a referral from PRS for Music.

The unlicensed BitTorrent site directed users to a catalogue of tens of thousands of copyright music files, in particular the latest chart music and karaoke hits.

Like most BitTorrent trackers, the site had rules for its members to abide by.  One of the rules required users to immediately “seed” files, i.e. upload any file they have downloaded so that others can download it.  If a file was not seeded for more than 24 hours, the user was deemed to be a “Hit and Run” and their account was disabled.

The music service also offered VIP memberships for users of the website, which ranged from £5.00 to £90.00.

PIPCU detectives arrested the man believed to behind the website at a police station in Dewsbury on 11 March 2015.  The 46-year-old was taken to a police station in Halifax for questioning and later received a caution.  To read the PRS for Music press release in full, click here.

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Publishing

Ofcom consults on proposed measurement framework for media plurality.

Following a request from the Department for Culture, Media and Sport, Ofcom published a Call for Inputs on media plurality in October 2014.  The regulator is now consulting on a set of indicators to inform a measurement framework for media plurality.

Ofcom defines plurality as:

  • ensuring a diverse range of independent news media voices across TV, radio, print and online, high overall consumption across different demographic groups, and consumers actively using a range of different news sources; and
  • ensuring balance amongst organisations and news sources so no one voice has too much influence over public opinion or the political agenda.

Ofcom has not been asked to measure media plurality, but is consulting on a set of indicators to inform a proposed measurement framework for media plurality.

Ultimately, policy on media plurality and what would constitute “sufficient” media plurality is a matter for Government and Parliament.

Ofcom has developed a proposed framework based on advice it gave to DCMS in 2012.  Ofcom’s proposed media plurality measurement framework is structured according to the following categories:

  • availability: the number of providers and indicating the potential for a diversity of viewpoints;
  • consumption: the reach of different news sources, their share of consumption and the extent to which consumers source their news from a range of news sources;
  • impact: the potential for news sources to influence opinion; and
  • contextual factors: additional qualitative factors which cannot be quantified, but are an important part of measuring media plurality.

The closing date for responses is 20 May 2015.  To access the consultation documentation, click here.

Court of Justice of European Union finds France and Luxembourg in breach of VAT Directive (2006/112/EC) by applying reduced rate VAT to supply of e-books, and European publishers react by urging EU Commission to change VAT system.

In the case of Luxembourg, the CJEU found that the application of a reduced rate of VAT (3% in this case) to the supply of electronic books did not comply with the VAT Directive.  In the CJEU’s view, the derogation provided for in Article 110 of the Directive did not justify the application by Luxembourg of a reduced VAT rate to the supply of electronic books.  Overall, the CJEU found that, by applying the reduced VAT rate to the supply of electronic books, Luxembourg had failed to fulfil its obligations under Articles 96 to 99, 110 and 114 of the VAT Directive.

As for France, the CJEU found that, by applying a reduced rate of VAT (5.5% in this case) to the supply of digital books, it had failed to fulfil its obligations under Articles 96 and 98 of the VAT Directive.

ENPA, the European Newspaper Publishers’ Association and EMMA, the European Magazine Media Association, reacted by urging the European Commission to “update urgently its VAT system to the reality of today’s digital market”.

The Associations urged the Commission to present, “without further delay”, legislative proposals allowing Member States to apply to digital press the same zero, super reduced and reduced VAT rates that currently apply to printed media.  This could be done in the context of the Commission’s forthcoming work programme to achieve a Digital Single Market in Europe, they argue.

ENPA and EMMA say that such change is “indispensable to remove a major obstacle to the further development of the digital press market in Europe”.  Lowering the VAT rate on digital press would promote the access of European citizens to authoritative and independent press content on all platforms, which plays such a crucial role in European democracy, they say.  (Case C479/13 European Commission v French Republic (5 March 2015) and Case C-502/13 European Commission v Grand Duchy of Luxembourg (5 March 2015) – to access the judgments in full, go to the curia search form, type in the case numbers and follow the links.  To read ENPA’s press release in full, click here).

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Advertising

Committee of Advertising Practice issues guidance on using swearing and expletives in ads.

The guidance comes in the wake of the recent ASA adjudication on Booking.com in which the ASA considered that repeated references to “booking” in phrases like “It doesn’t get any booking better than this” were relevant to the advertiser name and its URL.  The use of “booking” was therefore in context and given that the ad did not actually use explicit language, it did not breach the Advertising Codes.  The ASA also cleared, on similar grounds, a Burger King campaign in 2010 which attracted complaints from people who believed that the references such as “KING TASTY” and “KING GREAT” alluded to a swear word.

The guidance also gives examples of ads that were considered acceptable or found to cause offence according to the medium used, the specific audience and the product, for example where the swear word was central to the product itself.  To read the guidance in full, click here.

ASA finds today’s tech-savvy consumer would not be misled by storage claims in Microsoft HP Stream 11 promotion.

A TV ad promoted the HP Stream 11 and depicted two women discussing the features of the product.  The first woman asked “Where’s your stuff?”, to which her friend replied “Right here babe, on my HP Stream”.  As they viewed some photos, the first woman asked “Are all your snaps on there?”, while gesturing to the product.  The second woman said “Yeah, it’s got loads of Cloud storage …”, as she tapped the device.

Four complainants, who understood that Cloud storage meant most users’ files would not be stored on the device and could only be accessed when online, challenged whether the ad misleadingly implied that all a user’s files were stored on the device.

The ASA said that while the initial impression created by the ad was that all the owner’s “stuff” was all stored on the device, most viewers were likely to understand the concept of the Cloud and the fact that Cloud storage could only be accessed with an internet connection.  Therefore, once the owner stated “it’s got loads of Cloud storage”, viewers would be aware that, while some files could be stored on the device’s hard drive, files could also be stored remotely in the Cloud storage available through OneDrive.  Because it considered most viewers would be familiar with the Cloud and the concept of remote storage, and would understand that the device offered storage both on its hard drive and on the Cloud, the ASA concluded that the ad was unlikely to mislead.  To read ASA Adjudication on Microsoft Corporation (11 March 2015), click here.

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