Laurence Kaye on Digital Media Law

Cyber-Bullying and online grooming

Dear reader

Here's a report really worth reading, produced by ENISA (European Network & Information Security Agency) on helping to protect against the risks of cyber-bullying and online grooming, featuring a scenario on data mining / profiling of data available on the Internet.

Download ENISA Report - Cyberbullying_v3 31

Have a good weekend. I'll be at the Society of Young Publisher's Annual Conference, speaking with Lynette Owen, copyright Director of Pearson Education, on 'The Changing World of Rights".

Thought for the weekend: "11:11:11" is a palindrome which occurs once every 100 years. Is this the day for taking big decisions?

Regards

Laurie Kaye

The New Consumer Rights Directive

Dear reader

My colleague Sherif Malak has been busy ploughing his way through the new Consumer Rights Directive, which merges 4 existing EU consumer directives into one set of rules (including the Distance Selling Directive ), was final adopted by Europe’s Council of Ministers earlier this month. 

Bottom line: this Directive takes some important  steps to harmonising consumer protection for online purchases. It should - at least in theory - make it easier for e-tailers trading cross border to have a common, pan European set of rules in certain key areas of consumer protection such as cooling periods and the provision of information online to consumers. Whilst member states have two years to implement it, e-traders would be well advised to be aware now of what's coming down the compliance track.

The Directive, infamous for extending the cooling-off period for consumers by generally allowing them with 14 days to withdraw from purchases from distance sellers, further updates and upgrades a number of provisions in the previous directives, as well as providing new rules to “ensure a high level of consumer protection and establishing the real retail internal market, making it easier and less costly for traders to sell cross border and providing consumers with a larger choice and competitive prices.”

Most significantly it seeks to do this by harmonising consumer law not only by providing a minimum level of protection for consumers but, perhaps more unusually, by going further and, subject to a few specific areas, prohibiting Member States from introducing or maintaining more stringent protections.  Of equal note is its bringing of consumer rights into the 21^st century, by targeting e-commerce (including m-commerce) by express reference to online and digital services and content.

So what’s new protections will be available for consumers?  Some main ones are:

• An extended 14 day cooling-off period to withdraw from purchases made at a distance if consumers change their mind (and which is extended to a year if they are not duly informed of this right).
• A 14 day period by which traders must provide a refund (including original delivery costs) following a consumer’s withdrawal.
• The banning of pre-ticked boxes for “extra services” and of charging consumers for credit card fees and hotlines in excess of the actual cost to the trader (a certain airline should take particular note!)
• Greater clarify with respect to information provided for digital content including hardware and software compatibility requirements and details of technological protection methods.
• A right to withdraw from purchases of digital content before it is actually downloaded (as opposed to when it is made available for download e.g. via a link in an email).

Together with the recent announcements from 5 of the “big 6” energy companies that they will end cold calling door-stop selling practices and the extension of the Advertising Standard Authority’s remit earlier this year in March to cover the digital non-paid for space, many might 2011 looks like it is shaping up to be the “year of the consumer”.

However, before despairing at the potential additional costs, traders would do well to keep the following points in mind:

• Traders, especially e-tailers, will now have a reduced legal compliance burden when targeting more than one EU country: the Directive creates a level playing field with respect to the requirements of consumer law in each Member State.
• The Directive finally acknowledges that a trader may withhold a refund until the cancelled goods have been returned (or failing that, proof from the consumer that they have been sent back).
• A model withdrawal form and cancellation instructions can be used by traders to make compliance with the rules easier.
• The extension to the cooling off period is, in effect, 5 calendar days, and not double!  This is because  previous cancellation period was 7 working days i.e. a minimum of 9 calendar days (possibly more during periods with public holidays).
• Customers will now be under a time-limited statutory duty to return cancelled goods within 14 days.
• If a consumer has opted for anything other than the least expensive delivery option, the trader only need refund the latter in the case of cancellation.
• The Directive explicitly acknowledges that consumers will be liable for any diminished value of goods resulting from their handling (other than handing required for inspection and testing).
• The initially proposed requirement for traders to pay for return postage for cancelled purchases over 40 euros has been scrapped.
• So too has the requirement that traders must deliver purchases to consumers in any Member State (which together with the ECJ’s recent rulings in the FAPL cases, could struck another blow for territoriality).

So, all in all, there appears to be enough advantages for traders in ushering the new regime of consumer rights that will soon be upon us!

Have a good week

Laurie Kaye / Sherif Malak

 

Digital Media - Hotting up

Dear reader

I hope you've had a good Summer. As temperatures cool, things are hotting up on the digital media law front.With the Government's Response to the Hargreaves Review now published, we can expect action on the copyright front. Whilst there's a general consensus that most of the Hargreaves Recommendations are sensible, some will meet strong opposition and others with questions about how they'll work in practice. The proposals are a copyright exception for 'data mining', and the proposed 'Digital Copyright Exchange', both fall into the latter category. I'm going to explore both of these in upcoming posts so please stay tuned to my Blog.

Meanwhile, I think it's worth taking a step back to look at the big picture in digital media law. I think we're still in the middle of the 2nd industrial revolution. The first one took around 70 years - roughly 1760 to 1830. So if you take the late 1980's as our starting point, (remember the "Information Superhighway", a phrase which surfaced around then?), we've still got 15-20 years to go to complete revolution no.2. But surely, I hear you say, as the digital revolution is powered by broadband, not steam, the timelines are different? Of course, in one sense, that's true. But the digital revolution is multi-speed. Whilst processing power and broadband increase exponentially, establishing new social norms in the digital space and establishing viable legal and business models solutions, takes time.

A good example is the issue of legal liability of digital intermediaries like ISP's and 3rd party service providers such as eBay. More than 10 years ago, both the E-Commerce Directive (2000) and the Copyright Directive (2001) created a legal framework which gave certain legal immunities for intermediaries against liability for illegal content they carried or hosted, whilst at the same time making it clear that rights owners could still in certain circumstances compel them to take action to remove infringing content.

Fast forward to 2011, national Courts are still trying to work out how these provisions work in practice. We've seen this most recently in the European Court of Justice decision in July this year in L'Oreal v.eBay which, amongst other things, examined the legal action which a trade mark owner can take against eBay where it's trade marks are being infringed on eBay. We also saw this in the recent (July 2011) High Court decision in Twentieth Century Fox v. BT. Both cases illustrate that, within certain overall rules, hosts and intermediaries can be compelled to take action to remove infringing content.

I'll be looking at all these issues in forthcoming posts.

Have a good week.

Laurie Kaye

Cookies - A guide to the perplexed

Dear reader

My colleague Sherif Malak has been munching his way through the subject of cookies. We hope you'll find this helpful!

If you’ve sorted through the flurry of guidance and commentary thrown up over the last couple of weeks concerning the UK’s implementation of the changes to the e-Privacy Directive, you would be forgiven for feeling slightly bewildered.  As a certain fuzzy blue Sesame Street character might say, “it’s all about the cookie.”  The exact type being a small file that is sent to and stored on a user’s terminal (normally through their internet browser) when they access a website.  The information in the cookie can then later be read by the website server.

These online cookies, like their culinary counterparts, come in a variety of flavours – temporary, persistent, third party - and carry out a variety of different functions – verification, authentication, analytics, behavioural tracking.  The new rules apply to all of them and the UK’s implementation of the amendments to the EU e-Privacy directive, which recently came into effect on 26 May 2011, has already been met with a great deal of controversy.  So what are the new rules, why such controversy and where do website providers stand in light of them?

The new rules change the previous ‘informed opt-out’ arrangement to an ‘informed opt-in’ regime i.e. except for cookies that are “strictly necessary” for the service requested by a user, web site providers must obtain users’ consent whenever they wish to store or access cookies on their machines.

But what is consent? The operative provisions are quite ambiguous, in part because the European Parliament, only managed to get wording that consent was neither ‘explicit’ nor ‘prior consent’ into the recitals and not the operative provisions of the Directive.  The situation wasn’t helped by the Article 29 Working Party’s view advocating prior, specific, informed opt-in based consent. 

In its implementation, the UK Government has included part of the recitals to the Directive, the infamous ‘Recital 66’, in the operative provisions of the implementing Regulations which, under 3A state that “consent may be signified by a subscriber who amends or sets controls on the internet browser.”   But hopes that website providers could rely on users’ browser preferences were dashed when DCMS announced in its April open letter that current browser settings would be unlikely to be sufficient to provide consent as things stand.  Whilst the Government will be looking to work with browser manufacturers in the near future to improve their privacy settings so that providers can rely on such settings, in the meantime consent has to be sought in some other manner.   The DCMS made clear however, that where consent for cookies is concerned, the Directive does not use the word ‘prior’ did not “preclude a regulatory approach that recognises that in certain circumstances it is impracticable to obtain consent prior to processing.”

So where does that leave things?  Cue the ICO with new guidance and on the eve before the Regulations take effect, the somewhat inelegant implementation of the rules for its own website leaving website developers shivering at the thought of having to use pop up consent boxes that ominously state “One of the cookies we use is essential for parts of the site to operate and has already been set.”

I won’t go through the ICO guidance here as it is clearly written, however it does leave many questions unanswered, including what providers should do where third party cookies are concerned.  And what of cookies originally set as a first party cookie but subsequently read in a third party context?  Cookies that are highly privacy intrusive cookies are likely to need prior consent but what exactly is needed for cookies that aren’t strictly necessary but are not privacy intrusive?  Where prior consent may not be needed, is prominent notice enough?

Despite this ambiguity , I don’t think all this should be too much cause for concern at the moment.  The ICO has made clear that it will provide organisations with a grace period of 1 year to comply with the new rules.  Although they must show that they are “taking steps” to comply, the aesthetically displeasing ICO implementation surely indicates that the solution to obtaining consent for cookies is one that lies with the underlying browsing technology, whether that be “browsers” as we know them today or the soon to be commonplace ‘in-App’ browsing functionality on smartphones.   Older browsers might require a separate approach but as web developers adopt new technology, such as HTML5, such exceptions will become far less of a problem.  Indeed, Google has already announced that it will phasing out support for older browsers from 1 August.

Although what the new rules require may still be a little grey, one thing is quite clear: software developers are now on notice – technology is a clear favourite to this legal ‘problem’.  Cookie settings must be built into code and in anticipation of clear demand for such features, there’s no reason why this new breed of software won’t be with us by the time the ICO grace period expires.

Regards

Laurie

E-tailing now = 7.2% of UK GDP, so make sure you mind the 'shop'

Dear reader

Well, there you have it. Today's 'Financial Times' cites a recent report from the Boston Consulting Group telling us that we are now a nation of "digital shopkeepers". Domestic online shopping, broadband access and net exports of digital goods and services made up 7.2% of UK GDP, making the 'Internet Industries' the fifth-largest contributor to GDP,  ahead of the construction, education and transport industries. About half represents e-commerce.

 But as the digital store grows bigger, so managing brand reputation oline gets more important. Social media like Blogs and Tweets are where the public voice is heard - witness the online response to the new  'Gap' logo which consigned it to instant oblivion.

Domain Names

There's no doubt that online free speech is part of the Internet's DNA. But there's an inevitable tension between that and protecting corporate reputation online.The IHATERYANAIR.CO.UK decision was interesting in this context. Nominet is the Internet registry for .uk domain names. Ryanair brought a complaint under Nominet's Dispute Resolution Service, seeking a cancellation of the 'ihateryanair.co.uk' domain name from the owner of the criticism website. For sure, ryanair is not without its critics and this site is certainly one. This complaint was successful on the sole ground that it generated income through sponsorship on the site and that, as the domain name used the Ryanair trade mark to draw people to it, the site was unfairly benefiting from Ryanair’s rights.

It was ruled that there was undoubtedly a link between the respondent's financial advantage and the respondent's use of the complainant's trade mark in (specifically) the domain name (rather than in the content of the website). The respondent only earned money because of the traffic to the website, and such traffic must have been influenced by the domain name.

Their advertising revenue from the site was about £350! The Expert’s opinion in Ryanair was that “commercial links have no place on a criticism website”.

What's also interesting is that the derogatory content of the website had no bearing on the decision. In other words, the question of whether the criticism website was defamatory was not relevant to the decision.

Legal liability for UGC

 These days, building a strong e-commerce business means engaging with the business' online community. So user generated content is now at the heart of online business. The law (E-Commerce Regulations) gives websites owners a defence against defamation claims regarding content posted by third parties which they  host. However, that immunity is forfeited if the website owner monitors the site because the defence does not apply if the owner exercises editorial control.

In Kasche v. Gray decided in July this year, the Court had to decide whether the immunity was lost if a website operator monitored some but not all of the posted content. Was the immunity lost for the whole site if the owner monitored some posts only? The Court decided "no". A online business is regarded in e-commerce law as an "information society service" and the Court decided that a single blog post could be treated as an "information society service" in isolation, so that if that post was monitored, it did not mean that the legal immunity for non-monitored content elsewhere on the site was lost.

Well, happy shopping and have a good weekend.

Laurie  Kaye

When is a sale not a sale? Answer - when it's a licence

Dear reader

If you're a regular reader of my Blog - which I hope you are! - you'll know that one of the recurring themes in my blog postings is about how new business models in the creative and technology industries are being driven by the shift from physical to digital distribution - from selling goods to licensing rights. Several recent US cases have highlighted how this shift can impact on traditional royalty structures and on re-sale rights.

On the issue of royalties, FBT Productions v. Aftermath Records  illustrates what can happen when what was regarded as secondary exploitation – licensing – at the time a deal was agreed, becomes a primary revenue stream, in this case licensing digital distribution rights for downloads to Apple.  At the heart of the dispute between Eminem’s production company FBT, and the record company Aftermath was whether licensing Apple to sell digital files of Eminem recordings constituted ‘masters licensed’ or ‘records sold’. The distinction under the agreement between FBT and Aftermath was significant. ‘Records sold’ entitled Eminem to receive between 12% and 20% of the adjusted retail price of all “full price records sold in the US” whereas FBT would received 50% of Aftermath’s net receipts on ‘masters licensed’ by them!

In fact, the US Appeal Court decided in FBT’s favour who, of course, argued that the deal with Apple was a licensing deal, carrying the higher royalty rate. It illustrates that great care needs to be taken in the use of terms such as “sale” and “licence” in the context of digital distribution deals.

There is another significant difference between selling physical goods – DVD’s, books etc – and licensing the right to use content. In the US, the ‘first sale’ doctrine, similar to the principle of ‘exhaustion of rights’ in the EU, means that when a physical good such as a book is lawfully sold on the market, the owner of the rights in that book cannot control the subsequent re-sale of that good. However, this doesn’t apply to rights licensed. You can immediately see how this can impact on the secondary market for goods. This distinction was illustrated in Vernor v. Autodesk. Here, the US Court of Appeal considered whether Mr Vernor, an ebay merchant, had the right to resell Autodesk software packages that he purchased from their customer.  Ruling in favour of Autodesk, the Court concluded that Autodesk’s original customer was a licensee and not an ‘owner of a particular copy’ of the software.  The use of the term ‘licence” in the bundled documentation together with restrictions dictating how the software could be used meant that the original customer did not have any right of re-sale to Mr Vernor in the first place.

The case yet again demonstrates how critical the use of the terms ‘licence’ and ‘sale’ can be, this time within the context of developing software for distribution and, as also highlighted here, when dealing in the secondary market for software.

The issue as to whether goods are sold or instead rights licensed is still very much a live one.  The US Court of Appeal is still yet to hear further arguments concerning ‘sale’ and licence’, this time in relation to computer games (MDY Industries v. Blizzard Entertainment) and promotional music CDs (Universal Music Group v. Augusto).

I'll be posting a more detailed analysis of the cases on my website shortly, and I'll send you a link to it in my next post.

Have a good week!

Laurie Kaye

 

 

 

Digital Agenda for Europe - Can Europe deliver?

Dear reader

With summer fast receding, the European Commission is busying itself on its ambitious vision for Europe's social market economy for the next 10 years. Central to that vision is its 'Digital Agenda' whose overall aim is to deliver sustainable economic and social benefits from a digital single market based on fast and ultra fast internet and interoperable applications. "It's time for a new single market to deliver the benefits of the digital era" says the Commission which wants to open up access to content, make online and cross border transactions easy, build 'digital confidence' and reinforce a single market for Telecoms services.

You can get a good overview of the Commission's agenda here. There are a possible 101 actions to implement this vision. You can find them here.

True to its consumer-driven vision, the Commission is encouraging 'user created policy', the Commission asks 'Why not propose an idea?' to make the Digital Agenda a reality. The best ideas will get the chance to be presented at a forthcoming conference. The closing date for submitting ideas online is 24th September. So you'd better get moving. You can find details here.

Will the Commission deliver on its vision? One things for sure, it's determined to encourage growth in cross border digital goods and services so you can expect to see plenty of action on the regulatory front. What's essential is that we get a regulatory environment which encourages investment in viable business models to give consumers what they want. It's a challenge no-one can afford to ignore. So get thinking!

Have a good week,

Laurie Kaye

Legal Update - Contracts (BSkyB v EDS)

Dear Reader,

If you will indulge us veering slightly away from the usual digital media and IP topics, we would like to turn to matters contractual by drawing your attention to a very important recent case - BSkyB v EDS [2010] EWHC 86 (TCC). You can find the full 468 page Judgment here. Or, if you don't have a spare week to plough through it, we've picked out the key points in our legal update below.

The significance of this case extends to all industries so the publishers and media companies amongst you should take note of the below as much as the IT suppliers and outsourcers - and everyone in between.

The key point to draw from this case is a reminder that anything said by a party before entering into a contract might expose that party to a claim for misrepresentation, depending on the nature of the statement made, the other party’s reliance on it, and the provisions of the contract itself.

**Legal Update**

The recent case of BSkyB v EDS has emphasised that suppliers need to be extremely careful about what they say in the course of pre-contractual negotiations. This is because they might find that they make statements which amount to negligent – or even fraudulent – misrepresentations. This is the position EDS (a supplier of IT services) found itself in, having made pre-contractual promises to BSkyB (its customer) and then failing to deliver against those promises.

Fraudulent misrepresentations

Suppliers need to be aware that liability in respect of fraudulent misrepresentations cannot be limited by reference to any contractual term. This case demonstrates the way in which an employee who makes unsubstantiated statements during a pre-contractual pitch or tender can potentially incur huge penalties on behalf of his company. The interim award to BSkyB in this case was £200 million. This is despite the fact that the contract between EDS and BSkyB contained a cap on liability of £30 million. Such caps on liability cannot be made to apply to fraudulent misrepresentations.

Negligent misrepresentations

However, liability in respect of negligent misrepresentations can be limited by contract with careful drafting.

It is important for suppliers to include a properly drafted ‘entire agreement’ clause in order to exclude any liability for negligent statements made in pre-contractual negotiations (although as noted above, no such clause can exclude liability for fraudulent misrepresentations). It is also important for suppliers to include a cap on liability (supported by adequate insurance) and carefully thought out exclusions and limitations of liability provisions in order to exclude or limit liability for negligent misrepresentations.

Customers, on the other hand, should ensure that key representations and promises made by suppliers pre-contract are included in the contract. In this way, customers can avoid the argument as to whether or not they relied on pre-contractual representations – instead, they will be able to sue for breach of contract in the event the supplier fails to deliver against those promises.

Summary

Where your company is acting as a supplier (whether of goods or services), the main point is to have the right procedures in place to ensure no pre-contractual promises are made which you cannot deliver against. In addition, well-drafted contractual provisions can offer protection.

Where your company is acting as a customer (particularly in the purchase of IT services), it should identify those key pre-contractual promises on which it will rely (e.g. timescales, milestones, technical specifications) and include them as terms of the contract. It should consider the potential losses it may suffer as a result of the supplier failing to deliver as promised and whether or not it is prepared to allow the supplier to limit or exclude liability for such losses.

You can find more guidance on contracts in the Checklists & Guidance Notes in Knowledge Zone.

Yasmin Joomraty

Laurence Kaye Solicitors

London Book Fair - "e-books: the hot legal issues"

Dear Reader,

This is a bit last minute but if you happen to be at the London Book Fair tomorrow, Laurie is chairing a discussion  on e-books ('the hot legal issues'). It's at 2.30pm, in the Cromwell Room, Earls Court 1.

For those of you who won't be attending (whether prevented by volcanic ash or otherwise), we will blog about the key points discussed and we'll put the slides in Knowledge Zone on our website in due course.

In the meantime, an article of mine has been published in this month's edition of the 'e-commerce law and policy' newsletter.

The article seeks to outline the scope of the various debates over the wide-ranging principle of net neutrality. In particular, the article considers the various proposals to regulate the internet (e.g. to protect legitimate interests of copyright owners and consumers) and the counter arguments that the internet should operate free of restrictions in an open, accessible and unfettered way. You won't be able to access the newsletter unless you are a subscriber, so we have posted the article on our website here.

We hope to see some of you tomorrow,

Yasmin Joomraty

Laurence Kaye Solicitors

Web 2.0, UGC, Mash ups: who owns the data, who is responsible?

Dear reader

I gave a presentation on this subject at the European Directory Publishers Conference in Barcelona on May 29th. (I arrived just as the Barcelona team were on their triumphal tour around the City. As a Manchester United supporter, the pleasure of being in this great City was small compensation!).

The directory publishing industry has moved rapidly from a traditional, print-based business with a well-established annual cycle of data gathering, production and distribution to the front line of Web 2.0. Whilst print still continues, the hot topics are now about building online communities and search-driven directories 'on the fly' combining proprietary content, web harvested information and user generated content.

So I thought you might like to read my presentation given to the conference and to take a look at my slides. You can view them here.

Have a good week.

Laurie