Update | Intellectual property/IT: Meltwater, draft EU technology transfer regulation, credit card charges

The most interesting recent case is that of news reporting service Meltwater - Public Relations Consultants Association (PRCA) v Newspaper Licensing Agency [2013] UKSC 18. Although the court has referred issues in the case to the CJEU, readers can rest easy for now that the UK's highest court has held that using the internet at work does not require their law firm to buy a licence from the Newspaper Licensing Agency (NLA). Browsing is not copying, the court has held, which will be a relief to many who were watching this case with considerable concern as it could have resulted in rendering illegal all kinds of activities. However, it remains the case that firms circulating newspaper articles to clients and staff do need to buy a licence from the NLA.

Everything in moderation

IT lawyers are often asked by clients to have libellous material removed from the internet. The section of the Defamation Act, which has now received Royal Assent, relating to web postings is section 5. This provides in section 5(2) a defence where the operator of a website can show that "it was not the operator who posted the [defamatory] statement on the website". However, by section 5(3) the defence is defeated if the claimant shows that:

"(a) it was not possible for the claimant to identify the person who posted the statement;

(b) the claimant gave the operator a notice of complaint in relation to the statement; and

(c) the operator failed to respond to the notice of complaint in accordance with any provision contained in regulations."

Those regulations have not yet been drafted. It is possible for a claimant to 'identify' a person only if the claimant has sufficient information to bring proceedings against the person. It sounds as though if websites cooperate, hand over identifying details and take down defamatory posts when brought to their attention as is the law under the existing ecommerce regulations, they will remain relatively safe. The defence is "defeated if the claimant shows that the operator of the website has acted with malice in relation to the posting of the statement concerned... The defence under this section is not defeated by reason only of the fact that the operator of the website moderates the statements posted on it by others."

Moderation has always been an interesting issue. Sometimes it is wiser for sites to allow all posts to appear in discussions online and only remove those that come to their attention as illegal or for breaking their rules. It is less work for the site and encourages people to post as they know most of what they write will immediately appear.

Some sites instead only post some comments and vet them carefully which can be counter productive. However, the new Act makes it clear that it will not matter if you moderate or not for the purposes of defamation actions.

Scatter-gun approach

Readers unfamiliar with the law on 'groundless threats' made in the area of IP should obtain some familiarity as it has long been the case that solicitor firms can be personally liable when writing litigation letters on behalf of clients if the letter falls into this category. Always beware the client who wants their solicitor to send threatening letters to all and sundry in a public scatter-gun approach to any potential litigation. Make sure new or junior lawyers are aware of the current legal position on threats actions. The Law Commission is consulting until July 2013 on the law in this field. Details are at: www.ipo.gov.uk/pro-policy/consult/consult-live/consult-2013-lawcommission.htm.

Competition and IP lawyers have been busily examining the draft EU technology transfer regulation, which from April 2014 will replace the existing regulation. The regulation is not substantially changed. The changes are very minor and it is still a draft. A draft of updated intellectual property guidelines has also been issued, again very much like the current guidelines. The Competition Law Association and the Licensing Executives Society expect this month to submit comments on the draft regulation. For those unfamiliar with this field the regulation sets out which restrictions are prohibited under EU competition law (article 101 TFEU). Patent, know-how and software copyright licences falling within the scope of the regulation are "exempt" from EU competition law. Therefore most licences are drafted to take account of the current 2004 regulation.

Changes include passive selling. Under the existing regulation an absolute ban on both passive and active selling of the licensed products outside the licensed territory for two years from first licensing is allowed. The new draft removes the exemption given for passive selling in that two year period. In future licences may only contain bans, no active marketing outside a licensee's exclusive territory, which is the same as for distribution agreements.

The current regulation 240/04 say it is permissible to terminate a licence if the licensee challenges the rights validity, but not to include a clause which prohibits challenges. This is reflected in most extant licences. The new version in article 5.1(b) prohibits a restriction on either party, not just the licensee, challenging the validity of any of the rights the other party holds in the EU only and termination in the event of such a challenge. If this change goes ahead many licences will need to be modified by 30 April 2015, when the transitional period ends, a year after the regulation comes into force.

Many licensees make improvements to the technology. Currently they must be allowed to keep ownership of any severable improvements, which they can use without infringing the IP rights in the original technology. Other improvements can be assigned back or licensed to the licensor. Again most licences in the EU reflect this position.

The new regulation in article 5 removes the reference to 'severable'. Paragraphs 119-122 of the draft guidelines make clear that non-exclusive grant backs of licensor improvements are acceptable. If a fee is paid by the licensee for an exclusive grant back or assignment of licensee improvements the guidelines say it may be easier to justify the restriction but they do not say it would be exempted, so it is likely that model licences will be altered once the regulation is in force simply to provide that improvements of the licensee will be owned by the licensee and licensed back on a non exclusive basis to the licensor. There is no definition of 'improvement' limiting it to severable improvements.

The market share criteria in the regulation are unchanged. The list of hard core prohibited restrictions in article 4 remains the same and the list maintains the current distinction between restrictions in agreements between competitors and non-competitors. There is some tinkering with the definition of competing undertakings and market-share definition, which is a slight improvement but will still mean in practice it can be hard to know who falls in this category. The guidelines are also updated as regards settlement of litigation agreements and technology pools. Overall the amendments are very minor as was the case when the vertical regulation was revised in 2010.

The consultation ends on 17 May 2013. Copies of the consultation and drafts are at https://ec.europa.eu/competition/consultations/2013_technology_transfer/index_en.html.

International impact

A US IP case would not normally be relevant in the UK but most IP lawyers spend a lot of time on free movement of goods, exhaustion of rights and export and import issues, often internationally, and so some cases are worthy of note. The US Supreme Court has reached its decision in the case involving Supap Kirtsaeng of Thailand who imported legal non-counterfeit copies of student textbooks which were cheaper when bought from the official source in Thailand. He re-sold them in the US.

Under EU law, readers will know that there is exhaustion of rights in the EU/EEA, but not when goods are imported - see the case involving import of genuine Levi's jeans from the US by Tesco. The CJEU held that Levi's could assert their trademark and prevent its import. Not so, under US law, and a good thing - free trade and removal of international trade borders tends to be beneficial. Capital and trade controls lead to 'fortress' nations which are isolated.

Here the defendant argued he was protected under US law by a first sale right. The US Supreme Court said: "We ask whether the 'first sale' doctrine applies to protect a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad Can that buyer bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner? Can, for example, someone who purchases, say at a used bookstore, a book printed abroad subsequently resell it without the copyright owner's permission? In our view, the answers to these questions are, yes. We hold that the 'first sale' doctrine applies to copies of a copyrighted work lawfully made abroad."

The Consumer Rights (Payment Surcharges) Regulations 2012, implemented from April, form the part of the consumer rights directive which provides that retailers must not mark up credit card charges in many cases. It is sensible if clients are alerted to this change in the law. Regulations say that "a trader must not charge consumers, in respect of the use of a given means of payment, fees that exceed the cost borne by the trader for the use of that means". The original Department for Business, Innovation and Skills (BIS) consultation looked at this phrase and said the regulations just aim to prevent payment surcharges.

It seems that a business might still charge operational costs directly relating to the credit card payment to the customer, but not indirect costs such as those of running the business as a whole. There is BIS guidance available on the regulations. It seems that administration charges and booking fees can still be charged to customers. The guidance on the new regulations is at https://www.gov.uk/government/publications/consumer-protection-payment-surcharges-regulations-2012-guidance.

More generally a response by the government to proposed changes in a Consumer Rights Bill is likely to be published at the end of May.

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