Legal & Government Affairs Update Issue 2 - 2019 | FAST

Legal & Government Affairs Update Issue 2 - 2019

News

Scale of piracy revealed: piracy websites near 190 billion visits in 2018

Research published by data analytics firm MUSO has revealed that the number of visits to piracy websites in 2018 came in just shy of 190 billion. This illustrates the vast scale of online piracy and the challenge facing rights holders to prevent piracy.

MUSO’s data covers five key areas of piracy: film, television, publishing, music and software. Television piracy was by far the most widespread; websites offing pirates TV programmes made up 49% of activity.  Film and music were lower, with 17% and 16% of traffic respectively, and publishing accounted for 11% of traffic.

The good news for readers is that software piracy websites were the least visited, accounting for 6% of activity. However, this still translates to well over 11 billion visits to such sites. If even a small portion of these visits results in a person illegally downloading software then the scale of piracy represents a huge potential loss to rights holders.

Injunctions to block access to websites which encourage flagrant piracy have been commonplace for a number of years but these are often difficult and costly to obtain.

While such actions do slow down piracy, joined up action between businesses and law enforcement is often necessary to take on the largest piracy websites. But even this is not always effective. A good illustration the difficultly in tackling piracy is the saga of the piracy website The Pirate Bay. The Pirate Bay was founded in 2003 and has often been the most popular piracy website on the internet in the years since. Actions against the website have results in large fines and jail terms for its founders, seizing of physical servers and domains, and injunctions blocking the website. Despite all of this, The Pirate Bay is still up and running. The web traffic analysis company Alexa Internet currently ranks The Pirate Bay as the 240th most visited website on the internet as of March 2019.

Initiatives such as the EU's Copyright Directive place more of a burden on websites to prevent infringing content, but if we cannot stop websites responsible for encouraging deliberate infringement then rights holders are still left with inadequate protection online.

 

Legislative Updates

Computer Associates UK Ltd v Software Incubator Ltd

In this recent case the Court of Appeal ruled that the distinction in regulation 2(1) of the Commercial Agents (Council Directive) Regulations 1993/3053 ("the Regulations") between Goods supplied on a physical tangible medium and software supplied electronically is still to be regarded as good law no matter how much the world may have moved on in the meantime.

Background

Computer Associates (CA) UK Ltd produced release automation software (RAS), supplied and made available to customers by link within an email. In 2013 CA UK entered into a distribution non-exclusive agreement with The Software Incubator (TSI) under the terms of which TSI agreed to promote the software in the UK and Ireland. TSI subsequently entered into another agreement with a company called Intigua to promote their software. CA decided consequently to terminate their agreement with TSI. TSI sued CA for damages for breach of contract. The application of the Regulations to the Agreement was of material importance to the outcome of the case.

In the High Court CA denied liability. They argued that the Agreement was for the negotiation and promotion of the supply of software which as it is provided electronically does not fall within “the sale of goods” for the purposes of the definition of “commercial agent" in Regulation 2(1) of the Regulations. The High Court disagreed and ruled in favour of TSI holding that electronically supplied software did count as Goods for the purposes of the Regulations and the Regulations therefore applied.

CA appealed to the Court of Appeal. In the Court of Appeal CA won the argument. The key issue in the Court of Appeal was whether or not the software was considered to be Goods within the meaning of the Regulations. Lady Justice Gloster held that "the judge in the High Court was wrong in law in holding that the software, which was supplied to the appellant’s customers electronically and not on any tangible medium, constituted “goods” within the meaning of reg.2(1) of the UK’s Regulations." L J Gloster went on to hold that 'despite the problems of principle which arise if one excludes electronically supplied software from the definition of goods, I am not persuaded that it is open to this court to impute what many might think was a common-sense meaning of "goods" to the legislators of the Directive in 1986 and the Regulations in 1993 when the Directive was implemented. To do so would be contrary to precedent. This court cannot simply ignore the weight of judicial authority that supports maintaining the tangible/intangible distinction."

So if you are supplying software on a tangible medium the rules around the supply of Goods still apply, compared to the supply of software online. The law as ever is a little bit behind modern business practices as software supplied electronically is essentially the same once activated as if supplied on a tangible medium…..

Consultations

UK Government Publishes "Online Harms" White Paper and Launches Consultation on Proposals

On 8 April 2019, the UK Government published its Online Harms White Paper which sets the ambitious goal of tackling harmful content online without undermining the benefits of digital technology or stifling innovation. The White Paper calls for consultation from individuals and organisations on the wide range of proposals put forward.

The Government is looking to address hateful and harmful content that exists online. Platforms such as Facebook, Twitter and Google have the potential to be misused by some to spread illegal or abusive content. The forward to the White Paper identifies the broadcast on Facebook of the tragic events that unfolded in the Christchurch shootings as just one of the examples of the way extremist content can be spread online.

The White Paper sets itself a broad scope and identifies a number of key areas of harmful online activity to tackle, including:

  1. serious illegal content and activity which threatens national security or the physical safety of children;
  2. online abuse and bullying;
  3. terrorist propaganda and the distribution of materials designed to aid and abet terrorist attacks;
  4. the distribution of child abuse materials;
  5. the spread of disinformation by hostile actors designed to undermine democratic values and principles;
  6. criminal gangs using social media to promote gang culture and incite violence, including the illegal sale of weapons; and
  7. other online behaviours or content which can cause serious harm, even though they may not be illegal in all circumstances, such as harassment, bullying or intimidation.

When collected together, this makes for a frightening list. While the internet must be considered an overwhelmingly positive development it is also true that the unregulated online environment has at least contributed to the social ills listed above.

The Online Harms White Paper proposes a programme of action to tackle harmful digital content and will establish a statutory duty of care to make companies tackle harm caused by content or activity on their services. This will be overseen by a newly established independent regulator which will be given powers to take enforcement action against companies who have breached this statutory duty. Alongside the power the impose fines, the new regulator will be able to impose liability on individual members of senior management.

The White Paper also proposes to consult further on the enforcement powers that will be granted to the regulator, particularly to ensure a level playing field between companies established in the UK and those which entirely operate from overseas. The White Paper considers powers that would enable the regulator to disrupt the business activities of non-compliant companies and block non-compliant services, for example by forcing internet service providers to block offending companies or by requiring them to be removed from search results.

Some negative responses to the UK Government's proposals have included criticism of the definitions of the harms, which have been called vague, and around the lack of specificity about how the new regulator will be set up. Businesses need clarity on exactly what they can and cannot do or these proposals risks creating an environment where companies may be forced to take overly conservative steps to limit content that could fall foul of the regulator, impacting the benefits of the internet and the growth of innovation.

There is also a question of how compatible this regulation would be with the EU's e-Commerce Directive, which limits the liability of online companies for illegal content until they have  knowledge of its existence on their website, and have failed to remove it in good time. Much like the Copyright Directive that was adopted by the EU (discussed in March's newsletter), the regulations proposed in the White Paper would require companies to take much more proactive steps to monitor and remove illegal content. This perhaps signals the beginning of a shift in the European approach to internet regulation.

While the White Paper only applies to the UK, it is possible that other countries will adopt a similar model and look to increase the burden of digital regulation. The European Union's has often been critical of FAANG[1], and has had no issue with imposing large fines on the US tech giants, the most recent of which saw Google hit with a €1.5billion antitrust fine. It is not difficult to imagine the UK model spreading to other Member States which have supported imposing a more "hands-on" approach to policing digital platforms.

However the development of policy in this area is still in the early stages and the White Paper should be seen as the start of a conversation, rather than a set of final decisions. If the UK Government can reduce the "harms" outlined in this White Paper then we as an industry should be supportive of this social outcome.

The UK Government is looking to consult on the ambitious proposals outlined in the White Paper from the "widest possible audience". Questions raised at the end of the White Paper range from how the government can do more to build a culture of transparency, trust and accountability,  how the regulator should function and be scrutinised, what powers should be granted to the regulator and what affect these proposals could have on innovation.

The consultation will close on 1 July 2019. Readers wishing the access the White Paper and respond to the consultation can do so here:

https://www.gov.uk/government/consultations/online-harms-white-paper

 

[1] Facebook, Apple, Amazon, Netflix and Google

 

Book Recommendation

The Uninhabitable Earth: A Story of the Future by David Wallace-Wells

And on a different note: The Uninhabitable Earth by David Wallace-Wells paints a stark picture of what the near-future could have in store if climate change isn’t tackled. Beyond the expected floods, droughts, famines and wildfires, Wallace-Wells outlines how climate change would lead to mass-migration, economic collapse and an increase in armed conflict. It makes for difficult reading but clarifies the scale of the damaging effects of climate change in urgent terms.

The book is light on solutions, but in fairness is more concerned with spreading awareness of the problem. If there is any good news it is that we already have many options to tackle climate change at our disposal. This book is enlightening for readers looking to understand more about what climate change has in store, just don't be surprised if the future looks bleak.