Update: IT/IP

The last six months have been a very interesting time for intellectual property and IT law developments. Hardly a day went by without data protection and privacy issues cropping up in the news, and there even appears to have been more intellectual property cases than usual '“ perhaps a symptom of the recession.

When money is short people fight over every penny and the continued spread of internet technology means continuous novel applications of IP and IT law in new areas. But English common law is well suited to adapting itself to these new areas.

Draft block exemption and internet selling

Every ten years the EU updates its block exemption regulations. In July it issued new versions of the block exemptions for vertical agreements and accompanying guidelines and consulted on the replacement to the motor vehicle distribution block exemption (see https://ec.europa.eu/competition/consultations/2009). It is also consulting on the new R&D and specialisation block exemption regulations and guidelines.

Comments are sought on the vertical agreements block exemption and guidelines by September. The draft new regulation can only now be used if the parties' joint market shares are under 30 per cent. The other major change from the current regime will be the new rules on internet selling, as they are of particular importance in the IT field.

The current general distribution rules are fairly straightforward. It is illegal to stop a distributor making sales outside their exclusive territory, but it is acceptable to prevent them from actively selling outside their area. Internet selling has muddied the waters. The section on internet selling in the current EU guidelines has been modified in the new draft.

The new draft will make certain requirements that are currently often placed on distributors illegal. These include, inter alia:

• requiring an exclusive distributor to prevent customers located in another exclusive territory from viewing its website or requiring the distributor to put on its website automatic re-routing of customers to the manufacturer's or other exclusive distributors' websites;
• requiring an exclusive distributor to terminate consumers' transactions over the internet once their credit card data reveal an address that is not within the distributor's exclusive territory; and
• requiring a distributor to pay a higher price for products intended to be resold by the distributor online than for products intended to be resold offline.

Generally a website is not considered a form of active selling to certain customers unless it is specifically targeted at these customers. An online advertisement specifically addressed to certain customers is a form of active selling to these customers. However, the supplier may require quality standards for the use of the internet site to resell his goods, just as the supplier may require quality standards for a shop or for advertising and promotion in general which is common with franchising arrangements and selective distribution systems. The supplier may require its distributors to have a brick and mortar shop or showroom before engaging in online distribution. The same considerations apply to selling by catalogue.

An outright ban on internet or catalogue selling may be objectively necessary and may fall outside article 81(1) if it does not restrict competition that would take place in its absence given specific circumstances such as to ensure a public ban on selling dangerous substances over the internet or by mail order for reasons of safety or health. The supplier cannot reserve to itself sales and/or advertising over the internet.

These are interesting rules and are often raised by our clients who sell online. In addition, the UK Office of Fair Trading has just issued its annual report which makes for interesting reading in the competition law field (https://www.oft.gov.uk/shared_ oft/ annual_report/644197/hc475.pdf).

The eBay judgment

In L'Oreal SA & Ors v EBay International AG & Ors [2009] EWHC 1094 (Ch) (see solicitorsjournal.com, 28 May 2009), the English court held that eBay is not liable for illegal goods sold on eBay in a sensible judgment which reflects that eBay works as a conduit rather than a seller.

The judge looked at the old Amstrad case where English courts said selling a double-deck cassette recorder which users could use to make copies did not make Amstrad liable for the copyright infringement, because 'mere knowledge on the part of the supplier of equipment that it would probably be used to infringe someone's copyright does not make the supply unlawful; nor does an intention to supply the market for such user'.

Although the judge found it a difficult case he found: 'As a matter of domestic common law, eBay Europe are under no legal duty or obligation to prevent infringement of third parties' registered trademarks.'

Import of counterfeit goods

Companies wanting to stop counterfeit goods entering the UK may now be obliged to go to court, leading to higher costs and making it harder to settle disputes. There will only be ten days in which to take court action if goods are suspected to be counterfeit and entering the UK.

HMRC has reversed its policy on the burden of proof in relation to goods stopped at borders. It will now release goods unless immediate court action is taken. HMRC said that it will only seize goods permanently if ordered to do so by a court. It will detain them for ten days initially, and up to 20 days on further application. If no court case is taken by then the goods will be released.

'The UK implementation of [the regulation] provides for procedures similar to, but not identical with, those required under the Council Regulation,' said an HMRC letter. 'We have been advised that departure from the precise requirements of the Council Regulation is not permissible as the regulation is directly applicable within the UK. We are therefore obliged to modify our procedures to align fully with the requirements of the Council Regulation.'

Up to now a witness statement was enough. 'We now accept that the burden of proof should be upon the rights holder who must confirm the infringing nature of the goods by taking legal proceedings,' said HMRC's letter. It said it would contact rights holders when goods are detained and keep them for ten days.

It went on to say that to maintain the detention beyond ten working days, the rights holder must initiate proceedings to determine whether an intellectual property right has been infringed, or reach agreement with the owner of the goods to abandon them.

I have already had two cases where proceedings were instituted against a client very quickly because of this change and what might otherwise have been sorted out cheaply and quickly becomes much harder to settle because of the costs of the court action having to be started.

Bloggers exposed

Anonymous bloggers have no right to keep their identities secret, the High Court has ruled. In an uncomfortable ruling for thousands of bloggers who publish under a protective pseudonym, Mr Justice Eady refused to grant an injunction to stop The Times revealing the identity of police officer Richard Horton, a detective constable with Lancashire Constabulary, who also writes a blog under the name of 'Night Jack'.

Horton included anecdotes about his work that could be traced back to real cases, including underage sex and rape cases, as well as advice for his readers on what to do if they became a criminal suspect. His activity broke police rules.

Eady J ruled, in The Author of a Blog v Times Newspapers Ltd [2009] EWHC 1358 (QB), that Horton had no 'reasonable expectation' to privacy because 'blogging is essentially a public rather than a private activity'.

He went further than this, stating that even if Horton could have claimed he had a right to anonymity, he would have ruled against this on public interest grounds: 'If it were the case that the defendant's article 10 right of freedom of expression here is indeed conditional upon establishing a public interest (which I do not believe it is), it would seem to me quite legitimate for the public to be told who it was who was choosing to make, in some instances, quite serious criticisms of police activities and, if it be the case, that frequent infringements of police discipline regulations were taking place.'

New data protection standard

The first British Standard on management of personal data has been published called 'BS 10012:2009 Data Protection '“ Specification for a personal information management system' (https://www.bsigroup.com/en/Shop/ Publication-Detail/?pid).

Compliance necessitates the development of a personal information management system. The standard requires that 'a senior management team is tasked [sic] with issuing and maintaining a policy which sets a clear framework and demonstrates support for, and commitment to, managing compliance' with the law and best practice. There are then 15 commitments to be made and a senior manager must be made accountable for managing personal information in the business. They must keep an inventory of all the information processed within that organisation.

The standard also includes a complaints procedure and right of appeal and audits.

E-commerce law

A major review of the law is contained in the BIS (BERR) Consumer White Paper issued in July, including replacement of parts of the Supply of Goods (Implied Terms) Act 1973, the Sale of Goods Act 1979, and the Supply of Goods and Services Act 1982. From an IT law point of view, from 2010 it is proposed that there will be a single complaints register, called the Enhanced Intelligence System, for people caught out by an online scam and to deal with breaches of consumer law and other problems on line. It will be part of the current advice service Consumer Direct.

The information will be available for use by the police, Trading Standards and the Office of Fair Trading. The enforcement powers of bodies such as these will be reviewed and there may be changes to the UK's anti-hacking law, the Computer Misuse Act.

The White Paper 'A Better Deal for Consumers '“ Delivering Real Help Now and Change for the Future' is directly accessible at https://www.berr.gov.uk/files/file 52072.pdf.

Higher fines for copyright infringement

Those breaching rights relating to software and other copyright in the UK could find themselves at risk of fines under the criminal provisions of IP law of up to £50,000, not the current £5,000 under new plans. The Intellectual Property Office is consulting on the changes. They will not however beef up prison sentences despite the proposal in the 'Gowers Review' of IP rights which suggested that this might be done (further information is at https://www.ipo.gov.uk/response-gowers36.pdf).

Data protection notification costs

Organisations with a turnover of £25.9m or more and 250 or more staff will be required to pay the Information Commissioner's Office (ICO) an annual notification fee of £500 with effect from 1 October. The current fee is just £35.

The new fees are in the Data Protection (Notification and Notification Fees) (Amendment) Regulations 2009. The new fee structure will apply to notifications and renewals from 1 October (the regulations are at: https://www.opsi.gov.uk/si/si2009/ pdf/uksi_20091677_en.pdf).

ICO annual report

In July the Information Commissioner's Annual Data Protection and FOIA Report was published for 2008/09. The full annual ICO Report 2008/09 is at https://www.ico.gov.uk/upload/documents/library/corporate/detailed_specialist_guides/annual_rep.

Draft Services Regulations 2009

The Draft Services Regulations 2009 which, inter alia, set out information which services providers including lawyers must give to customers have now been published.

They implement the EU Services Directive 2006/123/EC. A copy of the draft regulations is at https://www.berr.gov.uk/whatwedo/europeandtrade/europe/servicesdirective/legislation/page5128.