FAST Legal Update Issue 1 - 2019 | FAST

FAST Legal Update Issue 1 - 2019

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Julian Hobbins
General Counsel at FAST

 

Covered in this update

Introduction

Headline Stories

Legislative Updates

Case Law Updates

Book Recommendation

 

Introduction

I had hoped that in the time since my last newsletter our Members of Parliament would have sorted out the mess they are in over Brexit. Sadly (if unsurprisingly) things have only become worse. It is now impossible to say with any certainty what will happen on or after April 12th. So instead in this Newsletter I am focussing on some recent developments that our industry needs to be aware of.

The UK Government has now published its guidance on IP and Brexit which is extremely helpful and important to be aware of. On a slightly different note I have devoted much of the resort of this edition to the ongoing war being waged by the EU against big American Tech, or the FAANG war as I have dubbed it. In the most recent developments the European Parliament has now approved the Copyright Directive, a thinly veiled attack on the digital platforms. I have set out in some detail what the Directive might mean for the digital platforms, rights holders and our industry with an analysis of Article 3 (Text and Data Mining), Article 11 (the link tax) and Article 13 (the YouTube amendment). Continuing on a theme the French Tribunal has become the latest court within Europe to take Google to task where it has found declared Google's terms and conditions unfair. Google's in-house team must be busy at the moment as Google has also been fined £1.49bn euros by the European Commission for violating competition law in the online advertising market. You can read about all this and more in the stories that follow.

 

Headline Stories

UK Government publishes guidance on IP and Brexit

On 16 January 2019, the UK Intellectual Property Office (IPO) published a guide on the future of intellectual property (IP) law following Brexit. The guide covers a wide range of IP rights and confirms the position set out in the set out in the UK/EU Withdrawal Agreement: that the UK will continue to protect all existing registered European Union Trade Marks, Registered Community Designs, and Unregistered Community Designs as it leaves the EU.

Holders of IP rights registered under an EU wide system, such as EU trade marks or registered community designs, looking to this guide to provide clarity on how Brexit will impact the rights and protections they currently enjoy in the UK will be disappointed. While the Government is keen to stress it plans to ensure these rights will continue to be effective in the UK post-Brexit, the guide does not state any specific plans on how the Government proposes to do this.

Copyright

The guide confirms UK copyright laws will continue to comply with EU copyright directives while it remains a member of the EU. The various international treaties and agreements protecting copyright the UK is a party to means that the majority of UK copyright works will continue to benefit from worldwide protection after the UK leaves the EU. This includes books, music, films and software. However Brexit is likely to affect certain cross-border copyright mechanisms and the UK is exploring arrangements on IP co-operation to continue the effectiveness of cross-border copyright enforcement once the UK leaves.

Trade marks

The guide confirms the existing UK trade mark system will be largely unaffected by Brexit. In the meantime, EU Trade Marks (EUTMs) will continue to be valid in the UK and in the remaining EU Member States once the UK leaves. UK businesses will still be able to register EUTMs post-Brexit, although these will no longer cover the UK.

For all EUTMs registered before the UK leaves, the UK Government intends to ensure continuity of protection and avoid the loss of existing rights EUTM holders have in the UK. It is exploring options to do so but unfortunately the guide does not clarify what exactly the UK intends to do to ensure continuity of protection for EUTM rights in the UK. One possible option could be to offer all EUTM holders the option of being granted an automatic UK trade mark when Brexit occurs but the UK has yet to commit to an approach.

The Government also notes the UK is part of the Madrid System, an international trade mark system which allows users to file a single application and a single fee to protect a trade mark in 113 territories (including across the EU). This can be used by UK businesses looking for broad cross-border protection post-Brexit.

Designs

The UK system for protecting designs will be unaffected by Brexit. The guide goes on to consider the impact of Brexit on Registered Community Designs (RCD), unregistered rights and rights of representation.

Registered community designs

Registered Community Designs will continue to be effective in the UK while it is still a member of the EU and will still be effective in the remaining Member States once the UK Leaves. Where RCDs are concerned, the guide repeats much the same pledge as for EUTMs – the Government will seek to ensure continuity of protection and avoid the loss of existing rights RCD holders have in the UK. UK businesses will still be able to register RCDs post-Brexit, although these will no longer cover the UK.

Once again, the Government notes the UK is part of an international system which permits cross-border protection of RCDs with a single registration. The Hague System for the International Registration of Industrial Designs allows for registration of up to 100 designs in over 68 territories.

Unregistered designs

Where unregistered designs are concerned, the current unregistered Community designs system (which gives designs automatic 3 year protection from copying across the EU) will remain in effect while the UK is a member of the EU. Once the UK leaves, unregistered designs will continue to be protected in the UK by the UK specific unregistered design right. Currently this has a narrower scope than the EU design right but the UK has said it plans to establish new schemes to match the full scope of the Community design right in the UK.

Patents

The current European patent system will not be affected by the UK's exit from the EU because it is governed by the separate European Patent Convention, which is unrelated to the EU. Existing European patents will be continue to be effective in the UK and across the EU post-Brexit and UK business can continue to apply for them post-Brexit.

The UK intends to stay as a member of the Unified Patent Court and unitary patent system after it leaves the EU, having ratified the Unified Patent Court Agreement on 26 April 2018. The unitary patent system will apply across Europe and the Unified Patent Court will deliver judgments of cross-border patent disputes.

Conclusion

While the UK Government is clearly committed to ensuring Brexit has a minimal impact of existing IP rights, the position is far from certain and readers are advised to consider carefully the impact of Brexit on their IP.

Readers wishing to read the IPO's guide in full can do so by following the link below:

https://www.gov.uk/government/publications/ip-and-brexit-the-facts/ip-and-brexit.

 

Legislative Updates

Final text agreed for the new EU Copyright Directive

On 26 March 2019 the European Parliament approved the final text of the new EU Copyright Directive that had been negotiated behind closed doors in trialogue sessions between the European Commission, the European Council and the European Parliament. Many readers will have seen the heated debate around the Directive from those both for and against the proposals. In summary the key changes in the Directive are:

  • Internet platforms are liable for content that users upload
  • Some uploaded material, such as memes or GIFs, now specifically excluded from directive
  • Hyperlinks to news articles, accompanied by “individual words or very short extracts”, can be shared freely
  • Journalists must get a share of any copyright-related revenue obtained by their news publisher
  • Start-up platforms subject to lighter obligations

The two most controversial articles are articles 11 and 13. I have summarised below the positions on Article 11, Article 13 and on Article 3 – Text and Data Mining.

Article 11 – dubbed the "Link Tax"

Article 11 will require websites to pay news organisations for linking to their stories with snippets of the articles, save for mere "hyperlinks" or "very short extracts of a press publication". The practice of posting snippets of articles alongside links is common on many internet platforms and would likely fall foul of article 11, meaning that these websites would have to rethink how they link to articles if they want to avoid being in breach of Article 11. They would be allowed to place "very short extracts" next to a hyperlink but what does "very short" actually mean in practice? Unfortunately the relevant Recital does not help. By way of purported guidance it just says: "it is important that the exclusion of very short extracts should be interpreted in such a way as not to affect the effectiveness of the rights provided for in this Directive". If that is not definitive of a tautology I don’t know what is.  Absent any guidance on what is meant by "very short extracts" we may have to wait for a European court ruling on what that might mean in practice. In the meantime dear members remember to copy only very short extracts next to hyperlinks to avoid being in breach of Article 11….?!

Article 13 – dubbed the "Meme Ban"

Article 13 will make "online content sharing services" ("Digital Platforms" such as YouTube, twitter, Pinterest, Facebook etc…. ) liable for all user generated content that they host. These Digital Platforms will be held liable for copyright infringing material uploaded to their site by users unless they can show they have "made best efforts to obtain an authorisation". But what will this mean in practice? Those who oppose Article 13 say that the only way this can be done is via monitoring software which means that everything that is uploaded to a larger digital platform will have to be monitored and checked and taken down if it is found to be infringing. There is nothing in Article 13 that actually requires the digital platform to use software to monitor digital uploads, but if they are under an obligation to use "best efforts" to avoid liability, what else could this mean in practice, especially for the really popular platforms like YouTube and Instagram? There is a fear that this requirement could be oppressive and lead to legitimate content being removed.

But the Directive has gained the support of the large media organisations including the record labels and the film studios, and is generally favoured by those wishing to give more power over copyright ownership to the original rights holders, who they say have not been properly recompensed because of the way that digital platforms allow their content to be streamed free of charge over the internet.

The Directive strikes a new balance between rights holders and platforms. In future the platforms will have to take responsibility for policing user generated content and if they fail to use their "best efforts" in doing so will be liable to the original rights holders as if they had committed the infringement themselves.  In response I think we are likely to see an increase in licensing deals between the largest platforms and the biggest rights holders to show compliance with Article 13 but what impact will it have on rights holders and digital platforms who do not have the legal resources to enter into such agreements? Many large internet companies and internet grandees like Tim Berners Lee have also complained that these changes will damage the functioning of the internet and harm innovation in Europe and freedom of expression everywhere. So what will happen next?

As with Article 11 it may fall to the European Court to assess what "best efforts to obtain an authorisation" might actually mean in practice.

Article 3   Text and data mining for the purposes of scientific research

Finally and less controversially the Directive in Article 3 sets out the legal basis for the Text and Data mining exemption. IT is much more restrictive than what had been proposed initially. It now provides an exemption for "for reproductions and extractions made by research organisations and cultural heritage institutions in order to carry out text and data mining of works or other subject-matter to which they have lawful access, for the purposes of scientific research". The exemption however does not apply to private non-commercial users of the internet. So unless a company can show that it is a research or cultural heritage organisation, carrying out text and data mining for the purposes of scientific research, they will not be able to rely upon the exemption. Members are invited to express their views on this exemption. Are we happy as an industry with the balance that has been struck? Please let me know.

Member States will have 24 months to transpose the Directive into national law but given the current state of Brexit it is impossible to know if or when it might apply in the UK.

 

Case Law Updates

French Tribunal declares Google's terms and conditions unfair

On 12 February 2019, the Tribunal de Grande Instance in Paris (Paris Tribunal) issued a ruling criticising Google's 'Terms of Use', declaring 38 clauses unfair and void after carrying out a review of the terms and conditions which apply to users of Google.

The action was brought by the French Consumers’ Association ‘Union Fédérale des Consommateurs - QUE CHOISIR’ (UFC), which brought a similar challenge to Twitter's terms and conditions last year. Twitter also received a reprimand from the Paris Tribunal, which invalidated the copyright licence clause for user-generated content found in Twitter's terms and conditions (covered in the November 2018 edition of this newsletter).

The Paris Tribunal declared 38 of the 209 clauses reviewed invalid; particularly those relating to privacy, data protection and copyright.

Google was quick to update its terms and conditions in response to the action against it. Prior to this ruling, Google changes the sections of its terms and conditions related to privacy and data protection with the aim of tackling some of the UFC's concerns. It is therefore worth noting that some of the criticism of the Paris Tribunal will not apply to Google's latest set of terms.  

However Google's changes did not address all of the concerns raised by the Paris Tribunal's decision.

Google's copyright clauses (clauses 15 and 16 of the terms and conditions) were not updated prior to the tribunal's ruling. And much like in the Twitter case, these clauses were the subject of particular criticism.  

Clause 15 broadly states that the user of Google's services retains ownership of intellectual property rights and clause 16 grants Google a royalty free, worldwide licence to reproduce, modify and publish the content that is uploaded for the purpose of providing its services.

Google's copyright clauses were found to be noncompliant with the requirements of the French Intellectual Property Code (FIPC). There are two key points to note about the FIPC, which makes French copyright law different from that of many other countries:

  1. The FIPC does not distinguish between and licence and an assignment of intellectual property; an
  2. The FIPC contains a prohibition on assignment and licencing of future works and has strict requirements for licencing intellectual property rights. Any licence must specifically state the work for which rights are being transferred, the exact rights being transferred and the scope and duration of any use to be valid.

Therefore under French law, clause 16 is apparently too broad and cannot apply to content uploaded to Google in the future. Clause 15 was declared invalid because the Tribunal found that the claim the user maintained full ownership of the existing rights was contradicted by clause 16, which granted Google a full licence to use their content.

As with Twitter, this demonstrates how easily general terms and conditions applied worldwide by an online platform can fall foul of the law in certain jurisdictions. It remains to be seen how Google responds to this ruling but it appears it will have to get a specific licence to use each piece of copyrighted content uploaded to or created on its platform. In practice, it would be terrible for user experience to force them to sign off on a new licence every time they left a review of Google Maps or sent an email using Gmail. Is French law fit for purpose given the way online platforms function?

With Twitter's and Google's terms and conditions already successfully challenged, will the UFC turn its attention to another one of the internet giants next? 

Antitrust: European Commission fines Google €1.49 billion for abusive practices in online advertising

As reported on the European Commission website: "The European Commission has fined Google €1.49 billion for breaching EU antitrust rules. Google has abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google's rivals from placing their search adverts on these websites."

Commissioner Margrethe Vestager who is in charge of competition policy is quoted as saying: "Today the Commission has fined Google €1.49 billion for illegal misuse of its dominant position in the market for the brokering of online search adverts. Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites. This is illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate - and consumers the benefits of competition.”

How should we understand this judgment? I am not a competition lawyer and do not want to be drawn into a debate about whether or not Google's actions warrant a fine of this size.  But I do have a few questions: Why is it only the European regulators who are taking Google to task? In the last five years the European Commission has fined Google nearly 10bn euros for anti-competitive behaviours: the case above; 5bn euros for the terms on which it made its Android software available; and 2.44bn euros for prioritising its shopping ads above other providers. But no US regulatory has taken any equivalent action. So either this is symbolic of the European Commission having a better grasp of the principles of competition law over their American counterparts or, as I fear, is symptomatic of a growing rift between the USA and Europe which cannot be in the long term interests of either the EU or the USA. Whither May's Britain now?

Court rules imposing a suspended sentence does not preclude the award of additional in copyright infringement case

At a hearing on 12 December 2018, the Court of Appeal decided that a court could impose both a suspended sentence for contempt of court and award additional damages. Although the court confirmed this principle, in the case in question it elected not to award additional damages as the breach of the injunction giving rise to the custodial sentence was not considered to be flagrant so as to warrant an additional damages award.

In the case of Phonographic Performance Limited v Andrew Ellis t/a Bla Bla Bar, a claim was brought by Phonographic Performance Limited (PPL), a UK music licencing company, against Andrew Ellis. Mr Ellis was found to be in breach of an injunction preventing him from engaging in copyright infringement by restraining him from playing music in public without a licence and was given a suspended prison sentence. PPL then petitioned the court to award it additional damages under the Copyright, Designs and Patents Act 1988, which permits additional damages in excess the levels of actual loss to be awarded for flagrant copyright infringement.

Initially the High Court ruled that additional damages could not be awarded, stating "... there is very clear authority that the court should not fine a contemnor at the same time as imposing a custodial sentence as punishment for a contempt." PPL appealed the decision on the basis this was an incorrect principle.

The Court of Appeal dismissed the case but agreed with PPL that the principle formulated by the High Court was incorrect; there is no reason why a court cannot impose both a fine and a custodial sentence for contempt of court. As the High Court's decision was flawed, the Court of Appeal examined again whether additional damages should be awarded. It found that the breach my Mr Ellis resulted from his misunderstanding of the injunction and therefore the copyright infringement was not flagrant. Additional damages were not awarded.

This is a self-contained but interesting point of law, particularly relevant where copyright holders are the victims of sustained infringement. If an injunction is obtained and breached by an infringer, a copyright holder should note that additional damages could be awarded if the infringement is flagrant, in addition to a custodial sentence.

 

Book Recommendation

Hello World: How to be Human in the Age of the Machine by Hannah Fry

Artificial Intelligence (AI) looks set to be a hot topic in 2019 (just as it was in 2018). In Hello World: How to be Human in the Age of the Machine, Hannah Fry takes an in-depth yet accessible look at the influence of AI, data and algorithms in our lives, ultimately posing some fundamental questions about the role of AI and our use of algorithms in society.

Hannah Fry is an associate professor in Mathematics of Cities at University College London working with mathematical models to study human behaviour. Readers might be familiar with her appearances on radio and television in the UK or her popular TED Talks.

This book provides an excellent introduction to the mathematics behind the computer algorithms we experience every day and what they can and can't do, giving detailed examples of how they are transforming our lives. You may find yourself a bit less comfortable with the expanding role machines play in your life after reading this book.