The SPL’s big bar bill (broadcasting rights)

Over the past couple of years I have written periodic updates regarding the rights of English (or English-based) pub landlords to use “foreign” decoders to screen football matches in their pubs.  Following the European Court of Justice (“ECJ”)’s decision as reported in Football Association Premier League v QC Leisure, in  my post from last February I offered this summary of the state of play:

The ECJ decided that national legislation banning the use of overseas (non-UK, but EU supplied) decoders amounted to an unlawful restriction on competition, and it was probable that only certain elements of Sky’s broadcast of match footage was protectable by copyright….Provided a landlord is using an EU decoder of some description, the consequences very much remain to be seen.  Perhaps the best way to summarise the current situation is to borrow some football terminology:

1. Win – Use a decoder supplied by Sky
2. Lose – Use a decoder without paying for it, or a decoder obtained from/that accesses the feed of a non-EU rights holder
3. Draw – Use a decoder supplied by a EU (but non-UK) rights-holder

A new development in the pub landlords v football rights holders battle emerged on Monday, when it was reported that the Scottish Premier League (SPL) is facing a £1.7m damages claim over its legal bid to stop a pub group screening live matches via a Polish broadcaster.  The case in question is The Scottish Premier League Limited v Lisini Pub Management Company Limited. 

The background of the case

The story starts way back in 2006, when new Rangers boss and “fitness fanatic” Paul Le Guen was at war with Barry Ferguson, and present-day SPL player of the year Charlie Mulgrew was being “made into a man” (and what a hunky one!) at Wolves. 

The SPL took proceedings back in against Lisini Pub Management Co Ltd for unlawful broadcasts of Celtic games in autumn 2006 using a broadcast signal from Poland.  At the start of 2007 Lisini signed an undertaking saying that they would stop using foreign decoders.  They then used a Polish decoder to screen a match in April 2007.  The SPL then obtained interdict to prevent any more use of foreign decoders.  And the case was then sisted to see what the ECJ had to say about the use of decoders supplied by EU rights-holders. 

Of course, as described above, the ECJ decided that the use of foreign decoders was probably OK, and Lisini Pub Management Co Ltd is now counterclaiming against the SPL, seeking damages of £1,761,749. 

The decision

In the Outer House of the Court of Session Lord Woolman refused to dismiss Lisini’s counterclaim, concluding:

 In my view the English Premier league case has an important bearing on the present action. The material facts are virtually identical. The ECJ gave clear answers to the precise questions referred to it. Its decision means that subscribers in member states are entitled to access broadcast signals from other member states. An EC citizen living in (say) Germany should not be prevented from obtaining a signal from Sky, BBC, RAI, Nova or Polsat.

The SPL sought to argue that the ECJ arrived at its conclusions without any detailed investigation of whether banning the use of overseas (non-UK, but EU supplied) decoders would actually have an anti-competitive effect on the market for live football broadcasts.   Lord Woolman found this argument “unconvincing”. 

What’s not reported amongst the “SPL face £1.7m claim” headlines is that I think Lisini will have to work quite hard to actually prove such a huge loss.   It will be interesting to see how they reach that figure – it’s not exactly “small beer”.

Spring seminars

As part of Brodies’ spring seminar programme, we will be hosting two seminars involving Techbloggers:

• Brand protection in the new internet landrush – this seminar will look at what you can do to protect your brand online – whether social media, web 2.0 or good old fashioned cybersquatting. The seminar will be hosted by IP experts Gill Grassie and Robert Buchan, with a guest speaker from domain management specialists, Demys
• How insolvency can impact upon your brand and intellectual property rights – this seminar brings together our intellectual property and insolvency experts to talk about the importance of intellectual property rights and what can be done to protect and exploit these in the event of insolvency, and the impact of insolvency on licence agreements and commercial or supply contracts. The seminar will feature Gill Grassie and Robert Buchan and our insolvency lawyers Rachel Grant and Jonanna Clark.

The events are free and will be held at our offices in Edinburgh, Glasgow and Aberdeen.

For more details and information on how to register, please go to our Events Page.

We look forward to seeing you there.

The new Unitary Patent – European opportunity or risk?

After over 40 years of false starts we now have a new legal framework providing for the possibility of obtaining a Unitary Patent with Europe-wide effect, which can be litigated across its entire geographic scope in one central court. Whilst the UK government has welcomed the new framework as an efficient and cost saving one said to make enforcement of patents easier in Europe, it has faced criticism by many patent onwners and patent professionals.

Although no definite date has been fixed for its introduction it is likely that the new system will come into effect in 2015. It is important that all organisations which already have European patent protection in place and/or are considering applying for new or additional patent protection are aware of the development and consider the potential impact of it upon them and their patenting strategy.

We have prepared a briefing note on this important topic which can be accessed here

Increased drug testing in the UK?

A consultation by the UK Government and the UK Intellectual Property Office has found widespread support for an extension to what is known as the “bolar” exemption. This exempts certain drug testing/research activities from liability for patent infringement in the UK. For many years the current UK exemption was seen as narrower and less liberal than most other European countries with the fear that this meant that more and more clinical research trials were taking place outside the UK due to the fear that those instructing and/or carrying out the research faced liability for patent infringement in the UK in relation to tests related to new or non generic drugs.  This was claimed to have resulted in a depleted skill base and increasing delays in getting new drugs to the market in the UK. 

Although no concrete assessment has been carried out there is a legitimate concern that the current position is placing the UK at a competitive disadvantage in the field of clinical research trials resulting in significant financial loss. Clearly a key issue in the assessment of where and who to instruct to carry out such trials will be the potential risk of liability for patent infringement. It is not surprising then that 94% of responses supported a wider exemption.

The consultation results conclude that Section 60(5) of The Patents Act 1977 should be widened and amended to include an exemption from infringement for activities involved in preparing or running clinical or field trials involving innovative drugs for the purpose of gaining regulatory approval in any country (i.e. not just for obtaining drug or regulatory approval in the UK or EU). It is likely that this will also extend to health technology assessment activities for example in compiling data to support assessment by organisations such as The National Institute for Health and Clinical Excellence (NICE).

The next step is legislative reform and given the clear support from both government and the related pharmaceutical and clinical research industries it is anticipated that the revisal could be in place in 12 months time.  At a time when there are wider initiatives such as the Patent Box (offering a very attractive rate of tax in the UK as from April 2013 for revenue generated from qualifying patents) aiming to encourage more innovation and investment in research and development in the UK, this proposal is to be welcomed. Hopefully this will result in more home based trials which should benefit pharmaceutical and life sciences organisations as well as clinical research organisations – all of whom are key players in the Scottish economy.

 

Kim Dotcom and Mega: Legal FAQs

You’re probably familiar with Kim Dotcom, the German-Finnish internet entrepreneur who currently resides in New Zealand, and is being pursued by the US Department of Justice regarding accusations of a “Megaupload” business empire built on rampant infringement of US copyright laws and the Digital Millennium Copyright Act. 

Much of what is currently being written about Mr Dotcom simply churns trite facts without actually offering much in the way of explanation.  I thought a blog which answered some of the main questions would be helpful.

How does the US have jurisdiction over Megaupload?
Why would Megaupload Limited, with its registered office in Hong Kong, be subject to US copyright laws and to the Digital Millennium Copyright Act?  The answer is that Megaupload deliberately carried out business in the US and with US residents.  The site leased more than 1,000 servers in North America (525 were at Carpathia Hosting, which received $13 million from Megaupload).   

Wired provides great analysis here, but the general principal is that individuals and companies can’t gain the benefits of doing business in a jurisdiction without complying with its laws and being subject to its enforcement efforts – assuming that the jurisdiction can gets its hands on you in “terrifying real life”. Which brings us to extradition!

Will Dotcom be extradited?
Under New Zealand’s Extradition Act, any request for extradition from New Zealand must relate to an “extraditable offence” which is defined as an offence that:

• Carries a maximum penalty of not less than one year’s imprisonment in the requesting country; and
• Involves conduct that would be regarded as criminal had it occurred in New Zealand, and would have carried a similar penalty

Unfortunately for Kim Dotcom, breach of copyright is just as illegal in New Zealand as it is in the US. 

Part 3 of the Extradition Act also provides a mechanism by which the requirements to provide evidence establishing a prima facie case in support of the extradition request can be replaced by the simpler “record of the case” procedure. This mechanism is available to select countries, including the US.  (A guide to New Zealand extradition prepared by the New Zealand Ministry of Foreign Affairs and Trade can be read here.)

Nevertheless the US is struggling to extradite Dotcom and is also struggling to make its case against Megaupload and the “conspirators” (Dotcom and various associates).  Dotcom actually received an apology from the Prime Minister of New Zealand for illegal surveillance.  A helpful timeline of the various legal twists and turns can be read here.

What’s the new service that he’s offering?
Kim Dotcom has launched a new service, Mega, which he says is distinct from Megaupload, and which he also insists is legal.

Mega is offering all users 50GB of free cloud storage, making it a potentially compelling competitor to the likes of Dropbox (2GB free) and SkyDrive (7GB free) — if you’re not worried about the service getting shut down like its predecessor.

Mega offers client-side encryption, meaning that (arguably) even Mega doesn’t know what is on the files that clients upload.  The only way a client file can be decrypted is if the client makes both the encrypted file and also the private encryption key publicly available.  This would presumably breach acceptable use of Mega, and Mega also has in place a take down process similar to what other content sharing websites (such as YouTube) offer, and which is required under US law in order for the website operator to qualify for “safe harbor” protection from copyright infringement claims.

Of course, the predecessor site Megaupload had a take down process as well, so this leads us to the next obvious question.

Is Mega legal?
Dotcom still insists that Megaupload was legal, despite the US Department of Justice’s claims that Megaupload’s overall operating model was geared towards criminal intent, because:

• the vast majority of users did not have any significant long term private storage capability;
• continued storage was dependent upon regular downloads of files occurring;
• files that were infrequently accessed were usually rapidly removed, whereas popular downloaded files were retained;
• only a small portion of users paid for storage subscriptions, meaning that the business was dependent on advertising revenue, and displaying adverts to downloaders;
• an incentive programme was adopted encouraging the upload of “popular” files in return for payments to successful uploaders; and
• (potentially most damning of all) there was a comprehensive take down process in use for child pornography and terrorist propaganda, but this same take down process was not deployed to remove infringing content.

Initial impressions would suggest that Mega does not share these strategies.  Certainly Dotcom would have to be incredibly foolish to not apply the take down  process this time around.  In fact, it’s perhaps a credit to Dotcom’s slick advertising/media persona, and Mega’s attractive user interface, that initial bloggers thought Mega would “dismantle copyright forever”.

As Jonathan Bailey succinctly puts it (in by far the best analysis of Mega which I have read):

where Megaupload provided incentives and tools that encouraged users to upload (often illegal) files for mass download, Mega  does not and in fact has a structure and service that puts barriers up against mass downloading of files, legal or otherwise.

What is certain is that we can expect plenty of fun and games over the next few months. 

When Mega launched this week as “The Privacy Company” their claims of super-security were bound to come under the highest levels of scrutiny (some cloud providers definitely perform better than  others in the security stakes – see my colleague Leigh’s analysis).  Yesterday the story was that Mega’s encryption was substandard, today the story (which is emerging as I write) appears to be some form of encryption prize – Kim Dotcom himself has just Tweeted:

We welcome the ongoing #Mega security debate & will offer a cash prize encryption challenge soon. Let’s see what you got ;-)

Who knows what tomorrow will bring?

Amazon AutoRip – sell your CD collection and get a free digital music library?

At a time when digital rights owners are trying to use the courts to restrict the application of the first sale/exhaustion doctrine to digital rights, Amazon’s announcement today about its new AutoRip service might cause some surprise.

As part of its launch of AutoRip, which gives customers that purchase a CD from Amazon a free MP3 version that can be streamed or downloaded from Amazon’s Cloud Player, Amazon has said that any CD that a customer has bought from Amazon since 1998 will automatically be made available to that customer in MP3 format. At no additional cost.

Why is this interesting? Well the customer may sold that CD on many years ago. Indeed, he may have bought the CD as a present for someone else. Yet even though the customer has transferred on his ownership of the physical CD (and, therefore, the accompanying licence to listen to the music on that CD), Amazon appears to be giving that customer a digital copy for free (it has no way of knowing otherwise). Over a 15 year period, that could add up to a considerable amount.

Resale and exhaustion of rights
Under the principle of exhaustion (or “first sale doctrine” in the US), once a manufacturer has sold something, he cannot control onwards sale or transfer by the purchaser. This has led to lots of litigation trying to restrict the application of this principle to downloaded software and music. Digital copies do not suffer degradation, therefore a second hand digital copy is no different to a “new” purchase. If a bouyant resale market is established, this is likely impact on the sales of “new” copies of media.

However, it stands to reason, that once you’ve sold something on, you no longer have any rights to use it. Indeed, in a European Court of Justice ruling last year, the court stated that in order for a licensee to legitimately resell a software licence the original copy had to be removed from the computer in question. In other words, the licensee had to cease using it.

Applying that principle to AutoRip, once an Amazon customer has sold a CD he has purchased from Amazon, he no longer has a right to listen to it (or to have a ripped copy on his computer under the US fair use doctrine). AutoRip essentially brings those rights back to life.

If/when the courts ever confirm that restrictions on reselling digital media content are unlawful (as the European courts have done in relation to downloaded software), that raises the possiblity that consumers could separately sell their physical and digital copies. Again, its difficult to see how rights holders could police this seperate divestment of rights.

Is this just smart marketing?
I think AutoRip is a clever marketing step by Amazon.

When negotiating licences for AutoRip and the Cloud Player with the major record labels, the cost of enabling AutoRip to be applied to historic purchases is likely to have been pretty low to Amazon. Yes, some people will have sold their old CDs, but many people will have not. And those that did will likely have kept a(n illegal) digital copy before they did so (and therefore could “cleanse” their digital copy using iTunes Match). I doubt that the the record labels view this as losing them any revenue (unless resales of digital media are eventually permitted).

But from Amazon’s point of view it gives long time customers a ready made cloud music library for free (remember, there’s no annual fee for content acquired through AutoRip). What better way to build a customer base for your cloud based music service and boost your future sales of physical CDs at the same time? It may also allow Amazon to charge a greater premium for CDs over the cost of digital only sales.

Whether this makes a dent on Apple/iTunes’s dominance remains to be seen. But once again it shows a another shift away from a music industry driven by enforcing intellectual property rights through siloed rights allocation, to one where a wider commercial view is taken to music distribution.

Managing the legal risks with BYOD

I have an article in this month’s edition of Supply Management, the journal for the Chartered Institute of Purchasing and Supply.

The article looks at how organisations can manage some of the legal risks arising out of allowing staff to use their own smartphones, tablets and other devices for work purposes (“bring your own device” or “BYOD”).

In particular, I look at:

• how to manage the information security risks and the benefits of mobile device management software as a way of controlling access to enterprise data;
• the software licensing issues that can arise from allowing staff to access the enterprise network through a virtual desktop such as Citrix or from a device that isn’t owned by the employer; and
• the importance of a BYOD policy, and what this should cover

The article is essential reading for any organisation that allows (or is thinking of allowing) staff to access enterprise systems on their own devices. This applies regardless of whether such access is provided under a formal BYOD scheme or is done on a “turning a blind eye” basis.

As my employment law colleagues noted in our recent seminars on BYOD, the latter approach is likely to lead to problems, as the employer may be unable to take disciplinary action against the employee in the event of an information security breach. In contrast, a properly drafted BYOD policy will put the employer in a far better position – in terms of setting expectations with its employees (and managing misconduct) and compliance with its obligations under data protection laws.

You can read the article on the Supply Management website.

European Commission considers reform of laws protecting business/research knowhow

The European Commission has announced a consultation on the effectiveness of laws protecting business and research knowhow.

Knowhow and trade secrets
The Commission notes that in many instances the protections offered by many forms of intellectual property rights are only available in certain circumstances, or are costly to apply for and/or maintain.

An inventor of a patenable invention will also need to keep the invention secret until the patent application is made (because inventions that form part of the prior art (ie they are in the public domain) cannot be patented). A failure to do this is likely to mean that the invention is not patentable, in which case the commercial value of the invention may be lost.

For this reason, many organisations often protect their intellectual assets by keeping them secret, and rely upon contractual and common law confidentiality undertakings, and other remedies such as espionage and theft. Confidentiality undertakings can be enforced by obtaining a court order to stop the recipient of confidential information from using that information, and compensation for damages.

The limits of confidentiality undertakings
However, these remedies are of limited use. For example, no exclusive rights to use the information are granted, and it is not possible to stop someone else creating the same knowhow (for example, by independent research or reverse engineering) and marketing it in parallel.

This means, for example, that there would be nothing to stop me independently coming up with the recipe for Irn Bru (a trade secret) and marketing the product my self (as long as my branding of the product did not infringe AG Barr’s trade marks).

In addition, the way in which trade secrets or knowhow is protected varies between different member states. This means that such information is not always properly protected in cross border business, and may not act as a sufficient deterrent against misappropriation.

The Commission is concerned that this could dissuade organisations from sharing confidential business information with business partners in other member states, who might otherwise be able to help develop innovative products.

The consultation
The Commission is therefore looking for views on how the law currently operates and how trade secrets and knowhow is used by organisations, with a view to considering reform of the law in this area.

The consultation closes on 8 March 2013.

Significant changes to Scottish IP Court Rules

The Scottish IP Dispute Resolution Regime – Big Changes AND all for the Better

Significant changes to the Scottish Court of Session Intellectual Property Action rules will come into force on Monday 19 November 2012.  These have been driven by the desire of the Scottish IP judges and Scottish IP practitioners to improve Scotland as a forum for resolving IP disputes.

We believe that these new rules are the most significant changes since the inception of the relevant rules dealing with Intellectual Property Actions in the Court of Session.

We have prepared an e-bulletin setting out the changes that have been made, which can be found here.

For further information please get in touch with your usual Brodies contact or Gill Grassie/Robert Buchan who are both partners in our IP Dispute Resolution team.  

 

 

 

Amazon and Kindle library story highlights limited rights over digital media library

Yesterday the media picked up on the story of “Linn”, who was notified by Amazon that her account had been closed because it had been associated by Amazon with another account that had been closed for abuse of Amazon’s polices. Amazon has apparently refused to provide any further information, simply referring Linn to its terms of use, which provide Amazon with fairly wide rights to suspend accounts.

“Plenty more online bookstores out there. What’s Amazon’s loss is iTunes’ gain” you might say. Well, yes. But Linn has a Kindle, and the effect of her account being terminated is that she was unable to access any Kindle e-books previously “purchased” using the account (contrary to reports, her Kindle was not wiped, but as her old Kindle is broken she has been unable to download the books in her library onto a replacement Kindle).

Unfortunately for Amazon, Linn is the friend of a Norwegian tech journalist called Martin Bekkelund, and the story was covered by a wide range of high profile media outlets such as the Guardian, Yahoo!, Computing (and now BrodiesTechBlog). A link to the original story on Martin Bekkelund’s blog was also retweeted to 300,000 odd people by the broadcaster and columnist Catlin Moran.

Ownership vs a right to use
Whilst this has turned into a bit of a PR disaster for Amazon (and once again shows the power of Twitter to run with a story and influence popular opinion), it also provides a timely reminder of the difference in rights to the purchase of traditional media such as paper books and CDs and digital media.

John has blogged about this before. As the Amazon terms of use document notes:

Kindle content is licensed, not sold”. Should you attempt to break the DRM security block or transfer your purchase to another device, Amazon may legally “revoke your access to the Kindle Store and the Kindle Content without refund of any fees

and…

Your rights under this Agreement will automatically terminate if you fail to comply with any term of this Agreement. In case of such termination, you must cease all use of the Kindle Store and the Kindle Content, and Amazon may immediately revoke your access to the Kindle Store and the Kindle Content without refund of any fees.

In other words, if you misuse your content (or your wider Amazon account), Amazon can take it off you.

Whilst Amazon has now apparently restored Linn’s account at the time of writing Amazon has still not explained what Linn is alleged to have done wrong, or why her account was suspended (this, to my mind, is the more concerning bit of the story, given the impact of the suspension – if I were Linn then I would submit a subject access request to Amazon EU SARL (Amazon’s Luxembourish trading company for its European operations, and the data controller in respect of Amazon.co.uk).

Either way, those creating in valuable digital libraries that are subject to DRM controls should pay careful attention to their compliance with terms of use.