Legal & Government Affairs Update Issue 4 - 2018
EU Parliament rejects copyright reform law
On 5 July 2018, the European Union Parliament voted to reject a series of considered by some to be highly controversial copyright reforms aimed at updating the rules around the use of copyright works (content) online. The vote was relatively close, with 318 MEPs voting against the plans compared to 278 who voted in favour. A letter was signed by technologists and luminaries urging rejection citing a threat to the internet suggesting the law would be contrary to principle established under Article 15 of the InfoSoc Directive. The plans will now go back to the drawing board ahead of a second round of voting in September.
Articles 11 and 13 of the proposed law were the most contentious and drew widespread criticism. Article 11, dubbed a "link tax", would require websites to pay news organisations for linking their stories, while Article 13 would require websites to check and filter all content prior to uploading for copyright infringement.
Both of these proposals were criticised by campaigners as unworkable and potentially damaging to the online hosting / website communities or platforms. Arguably, major tech companies were also set to incur significant costs in implementing these changes, which would have required them to significantly step up content monitoring for copies of content on their sites. The vast amount of material hosted (YouTube alone has over 300 hours of video uploaded every minute!) would make the pre-filtering of content incredibly costly, potentially requiring a change of business models for platforms such as perhaps Facebook and YouTube.
Those in support of the reforms say they are vital to protect the interests of copyright holders, media companies and publishers, many of whom see their work copied across various websites without permission and to the benefit of those running the sites. Campaigners have stated that change is needed to empower licence holders and publishers in the digital age and protect the future of the music industry in particular, which is facing challenges to monetise including the revenue share conundrum of online streaming services.
While the proposals were ultimately rejected, the European Society of Authors, Composers and Publishers of Music said the vote was a “set-back but not the end.” Lobbying has already commenced as the next round debate gets underway and it is hoped that a sensible balance could be struck, as reform looks to address the often very legitimate concerns of copyright holders and licensors without damaging the fundamental principles of an open internet.
Legislation & Case Law Updates
Computer Associates UK Ltd v The Software Incubator Ltd: Supply of Software is not Sale of Goods
In the case of Computer Associates UK Ltd v The Software Incubator Ltd, the Court of Appeal has held that software provided in the form of a download is not a "sale of goods". This is of particular note to software providers, as the means through which software is supplied to a customer potentially impacts the rights available to them.
The case concerned whether a licence to download software amounts to the "sale of goods". The software in question was release automation software ("RAS"), which is used to facilitate and automate the introduction of bespoke software across large computer operating systems. The software was supplied electronically via an email which contained a link to an online platform from which the customer downloaded the software. The software was never provided in any tangible medium.
While the case itself concerned broader issues of the rights afforded to commercial agents, the key finding of the Court was that, under English law, only tangible property can be considered "goods". Therefore a distinction can be drawn between software supplied in a tangible medium (such as on a disk) and software supplied by way of download only.
The Court's decision here related specifically to the use of the term within the context of the Commercial Agents (Council Directive) Regulations 1993 but it is likely that their interpretation will be applied more broadly. Of particular note is the effect of this judgment on the Sale of Goods Act. If the interpretation in this judgment is applied to this Act then the terms it implies into contracts (in particular requiring the goods to be of satisfactory quality and fit for purpose) would not apply when software is provided purely digitally.
This approach contrasts directly with the approach set out in the Consumer Rights Act 2015 where the sale of digital content is treated as the sale of goods, to ensure that there is a consistency of approach on remedies that consumers may avail themselves of irrespective of the medium on which they bought the digital content (for which read software). The digital content provisions in the Consumer Rights Act are directly based on the equivalent sale of goods provisions in the Sale of Goods Act 1979 (as amended). It is irregular to have a situation in law where the sale of digital content under the Consumer Rights Act is treated as the sale of goods but in a business to business context is subject to a different approach. Perhaps the Supreme Court will give in due course some consideration to this point or that Parliament has the opportunity to consider the question further.
UK Government launches consultation on the Centre for Data Ethics and Innovation
The Creation of the Centre for Data Ethics and Innovation was announced by the Chancellor at the 2017 Autumn Budget. This Consultation outlines the Government's proposals for the Centre and seeks views on its operations and priority areas of work.
The Centre's aim is to identify measures needed to strengthen and improve the ways in which AI and data are used and regulated, including suggesting best practice and how to improve regulations. Its work will seek to maximise the numerous potential benefits of AI and the use of data while looking to minimise any harmful effects, such as by manipulating consumer decisions or opaque decision making.
The consultation provides a good overview of the proposed organisation and focus of the Centre and seeks views on a numerous aspects of the Centre, including: it's role and objectives, working practices and activities, proposed areas of focus, priority projects, and its role in relation to Government and stakeholders.
The Centre will likely have a key role in shaping the UK's future landscape concerning AI and data, potentially impacting software in the context of the use of algorithms, automated decision making and modelling using data sets containing information on individuals.
Readers wishing to find out more about the Centre's proposed activities and respond to the consultation can do so here: