IT/IP update

Infringement of database rights

In Beechwood House Publishing v Guardian Products Ltd & Precision Direct Marketing Ltd [2011] EWPCC 22, the court considered what is a substantial part of 'data' in determining if infringement had occurred. The claimant had a database of GP practices, which, as is common with such lists, contained some 'seed' (fake) addresses to catch infringers. In this case guidance was given on what constitutes a substantial part of data for infringement purposes in the context of loading data onto computers and use in mailing lists. The defendant bought a database from a company that had misused the claimant's database.

The judge said infringement of database rights was a tort of strict liability and it did not matter that the defendants had acted without knowledge of any infringement. It is worth reminding clients of this in IP cases as they often believe that the fact they accidently infringed is a defence. The court looked at the investment the claimant had made in its database '“ about 2,000 telephone calls made, 4,783 records were identical and about 11 per cent of the defendant's database was from the claimant.

The defendant said over time the parts obtained from the claimant became more and more out of date and less and less valuable. The judge said that didn't matter '“ they were still charging for lots of GP names and addresses that had remained the same. Even 11 per cent of the database being copied represented a substantial amount of work. Loading the data on a computer was an infringement, as was printing address labels.

It is wise to advise clients when buying databases and indeed in their standard terms of purchase on purchase orders to include a clause stating that, if any of what is delivered infringes IP rights and leads to third-party claims, the supplier will fully indemnify the buyer. That can provide some useful protection in such cases as can buying from a long-standing and reputable list broker.

The high value of commercial data is resulting in quite a large number of database right cases at present. Forensic Telecommunications Services Ltd v West Yorkshire Police and Mr Hirst [2011] EWHC 2892 (Ch) is another such case. FTS sued West Yorkshire Police and a Mr Hirst for taking their data. The court held there was no copyright in the data itself, relying on SAS Institute Inc v World Programming Ltd [2010] EWHC 1829. The case also included a claim for breach of confidentiality.

What was taken was a table of address data, referred to as the 'PM Abs' addresses, which are needed to take data from Nokia mobile telephones once the user has deleted such data but before the memory is completely deleted on a regular basis by Nokia. Mr Hirst was working in this area and decided to post online details of 39 PM Abs pairs of data on a forum for those involved in this area, which is how the alleged infringement of FTS' rights came to light.

The man at FTS who had originally worked out the PM Abs addresses had used trial and error. Also quoting Case C-5/08 Infopaq, the judge said there was insufficient intellectual creativity.

The court then looked at a table of addresses and said in that case copyright did not exist in it as it was not intellectually creative enough. However, the court found there was database right in the data. The court also found that the information was confidential and Mr Hirst should not have posted it on an online forum.

Preventing illegal downloading

On 24th November 2011 in Case C-70/10 Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL (SABAM), the CJEU ruled that EU law precludes the imposition of an injunction by a national court that requires an internet service provider to install a filtering system with a view to preventing the illegal downloading of files. The court said: 'Such an injunction does not comply with the prohibition on imposing a general monitoring obligation on such a provider, or with the requirement to strike a fair balance between, on the one hand, the right to intellectual property, and, on the other, the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information.'

The court held that the injunction in this case would require Scarlet actively to monitor all the data relating to each of its customers to prevent any infringement of intellectual property rights. And the injunction would impose general monitoring which is incompatible with the Electronic Commerce Directive. The CJEU said: 'Such an injunction would thus result in a serious infringement of Scarlet's freedom to conduct its business as it would require Scarlet to install a complicated, costly, permanent computer system at its own expense.'

The effects of the injunction would not be limited to Scarlet, as the filtering system would also be liable to infringe the fundamental rights of its customers, i.e. their right to protection of their personal data and their right to receive or impart information, which are rights safeguarded by the Charter of Fundamental Rights of the EU. The injunction would involve a systematic analysis of all content and the collection and identification of users' IP addresses from which unlawful content on the network is sent. Those addresses are protected personal data. Second, the injunction could potentially undermine freedom of information since that system might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications.

The court found that, in adopting the injunction requiring Scarlet to install such a filtering system, the national court would not be respecting the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the right to receive or impart information, on the other.

It decided that EU law precludes an injunction made against an internet service provider requiring it to install a system for filtering all electronic communications passing via its services that applies indiscriminately to all its customers, as a preventive measure, exclusively at its expense and for an unlimited period.

Data protection and private email accounts

If a minister or other official communicates with others using a private email address (to avoid the scrutiny of civil servants and the like) are such email addresses still subject to the Freedom of Information Act 2000? Yes: the Information Commissioner's Office has published new guidance making it clear that information concerning official business held in private email accounts is subject to the Freedom of Information Act.

Information commissioner Christopher Graham said: 'It should not come as a surprise to public authorities to have the clarification that information held in private email accounts can be subject to Freedom of Information law if it relates to official business. This has always been the case '“ the Act covers all recorded information in any form.'

The ICO says: 'FOIA applies to official information held in private email accounts (and other media formats) when held on behalf of the public authority. Such information may be exempt and will not necessarily have to be disclosed.

'It may be necessary to request relevant individuals to search private email accounts in particular cases. The occasions when this will be necessary are expected to be rare.

'Adherence to good records management practice should assist in managing risks associated with the use of private email accounts for public authority business purposes.'

Internet selling bans

In Case C-439/09 Pierre Fabre Dermo-Cosmétique (PFDC) in October 2011 the CJEU examined the area of internet selling bans. In the EU Vertical Guidelines, which expand upon what restrictions are allowed under EU competition law, particularly under the vertical block exemption, there has for the last 11 years been a paragraph stating distributors should in general be free to sell over the internet, although it has been said that in some cases an internet selling ban would be justified. In the PFDC case the CJEU found that there was insufficient justification for the total ban on internet selling imposed on selective distributors. The case did not hold that total internet selling bans are prohibited.

Even though the products included contact lenses the CJEU did not believe there were technical justifications for a ban on the dealers operating over the internet as someone might have been fitted elsewhere, know their prescription and then safely seek to buy the product online. PFDC is part of the Pierre Fabre group. It manufactures and markets cosmetics and personal care products and has several subsidiaries, including, inter alia, the Klorane, Ducray, Galénic and Avène laboratories, whose cosmetic and personal care products are sold, under those brands, mainly through pharmacists, on both the French and the European markets.

The products in question are not classified as medicines and are, therefore, not covered by the pharmacists' monopoly laid down by French law. However, distribution contracts for those products in respect of the Klorane, Ducray, Galénic and Avène brands stipulate that sales must be made exclusively in a physical space and in the presence of a qualified pharmacist, thereby restricting in practice all forms of internet selling.

In October 2008, following an investigation, the French Competition Authority decided that, owing to the de facto ban on all internet sales, PFDC's distribution agreements amounted to anti-competitive agreements contrary to both French law and European Union competition law. PFDC challenged that decision before the Cour d'appel de Paris (France), which then asked the Court of Justice whether a general and absolute ban on internet selling amounts to a restriction of competition 'by object', whether such an agreement may benefit from a block exemption and whether, where the block exemption is inapplicable, the agreement may benefit from an individual exemption under article 101(3) TFEU.

In its judgment the court said that in order to assess whether a contractual clause involves a restriction of competition 'by object', regard must be had to the content of the clause, the objectives it seeks to attain and the economic and legal context of which it forms a part.

As regards agreements constituting a selective distribution system, the court has already stated that such agreements necessarily affect competition in the common market. Such agreements are to be considered, in the absence of objective justification, as 'restrictions by object'. However, a selective distribution system is compatible with European Union law to the extent that resellers are chosen on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and not applied in a discriminatory fashion; that the characteristics of the product in question necessitate such a distribution network in order to preserve the product's quality and ensure its proper use; and, finally, that the criteria laid down do not go beyond what is necessary. These are the tests all competition lawyers bear in mind in advising a client as to whether a selective distribution system is justifiable for their products.

The court said that it has not accepted '“ as it has already stated in the context of the sale of non-prescription medicines and contact lenses in other cases '“ arguments relating to the need to provide individual advice to the customer and to ensure his protection against the incorrect use of products, put forward to justify a ban on internet sales. The court ruled that the need to maintain the prestigious image of PFDC's products is not a legitimate aim in restricting competition.

As to whether a selective distribution contract may benefit from a block exemption, the court said that the exemption does not apply to vertical agreements that have as their object the restriction of active or passive sales to end users by members of a selective distribution system operating at the retail level of trade. A contract clause that de facto prohibits the internet as a method of marketing at the very least has as its object the restriction of passive sales to end users wishing to purchase online and located outside the physical trading area of the relevant member of the selective distribution system. Consequently, the block exemption did not apply to that contract. However, such a contract may benefit, on an individual basis, from the exception provided for in article 101(3) TFEU, if the referring court finds that the conditions laid down in that provision are met. The case will now return to the French courts for a decision.