Update: IP and IT

Case law on intellectual property continues to develop, and in the current economic climate more companies appear willing to litigate IP disputes, so further case law is likely during 2009.

Practitioners would also do well to stay on top of perennial issues with IP in practice. They should ensure that, when acting for suppliers where IP is generated under a contract, ownership of the IP only vests in the buyer (if it is to vest at all) on payment. Where the licensee or customer goes into liquidation the IP rights will remain with the consultant/supplier if payment has not been made and can be retrieved just as with any retention of title clause. Practitioners should also ensure that conditions of sale and purchase deal with IP, as plenty of clients use them where a more specific IP agreement might be better.

Co-operation agreements and the law

Many IT companies co-operate with others in their commercial arrangements. In recessionary times it is very common to band together to make cost savings and the like. Sometimes this is lawful and sometimes it breaches competition law. In December, the EU began consulting over its written rules in this area '“ in particular the Specialisation and Research & Development Block Exemption Regulations and the Horizontal Guidelines. The purpose of the review is to evaluate how these rules have worked in practice. The Commission welcomes comments up to 30 January 2009. The EU regulation will apply to joint R&D. Plenty of private companies collaborate with universities in joint projects and draft their joint R&D agreements to comply with the EU regulation.

The current EU rules in this field expire on 31 December 2010. They must be renewed by then, and will probably be done so in modified form. Now is the time for businesses to comment to the Commission on those rules.

In addition, the accompanying guidelines set out guidance on more general collaborations, such as joint purchasing arrangements, collaborative online B2B purchasing hubs and websites and other forms of collaboration with competitors at a horizontal level. 'Horizontal' is used here to mean between companies at the same level of trade, compared with 'vertical' arrangements which are those between supplier and distributor down the distribution chain, which are not as potentially anti-competitive.

Comments can be sent by email to comp-greffe-antitrust@ec.europa.eu, specifying the reference 'HT.1407 '“ stakeholder input.' A questionnaire is available at: https://ec.europa.eu/competition/consultations/2009_horizontal_agreements/index.html.

Abuse of market power

Competition lawyers are regularly asked what conduct amounts to an abuse of a dominant position in the IP field. It is therefore helpful that the EU is working on guidance in this area. The European Commission has published draft guidance on its enforcement priorities in applying EC Treaty rules on abuse of a dominant market position (Art.82) to abusive exclusionary conduct by dominant undertakings. Such conduct aims to exclude actual competitors from expanding or would-be competitors from entering a market, thereby potentially depriving customers of more choice, more innovative goods or services and/or lower prices. The guidance, the Commission says, 'sets out the Commission's determination to prioritise those cases where the exclusionary conduct of a dominant undertaking is liable to have harmful effects on consumers... The paper provides guidance by setting out an approach to deal with abuses of a dominant position by companies. This is in line with our approach to restrictive business practices and merger control, and to recent individual cases of abuses of dominant position. It will ensure that the Commission's intervention is effective, and should leave dominant undertakings in no doubt that they will find the Commission in their way wherever their conduct risks increasing prices, limiting consumer choice or dissuading innovation. Clear rules protecting consumers and promoting innovation are all the more important in times of economic difficulty such as these.'

The guidance paper sets out an economic and effects-based approach to exclusionary conduct under EC anti-trust law.

The Commission has also issued FAQs on the draft guidance.

The Guidance Paper only addresses exclusionary abuses. The Commission, during its internal review, has apparently discussed exclusionary conduct as well as exploitative conduct, such as charging excessively high prices, or price discriminating between customers. However, the focus of its work has been on exclusionary conduct. The guidance suggests it may be harder to prove abuse of a dominant position (so perhaps for dominant companies is good news) and in addition the guidance is more in line with international current thinking and views of economists (so is also a better stance for the Commission to adopt).

Is software a supply of services?

Anyone practising in 2000 will remember the legal issues arising over whether software counted as 'goods'. If the software failed to operate on 1 January 2000, it was in breach of the Sale of Goods Act 1979 (SGA) implied conditions. Very little litigation resulted and indeed the writer made more money on talks and the two editions of her book on Y2K than in subsequent litigation as companies wisely settled their disputes. However, it remained an issue of interest. In Falco Privatstiftung and Thomas Rabitsch v Gisela Wller-Lindhors (Case C-533/07) a question was referred to the European Court of Justice:

'Is a [licence agreement] a contract regarding 'the provision of services' within the meaning of Article 5(1)(b) of Council Regulation (EC) No 44.2001 of 22 December 2000?' (the Brussels regulation on jurisdiction in the EU). The case could be very material, potentially affecting issues such as implied conditions under the SGA and the Supply of Goods and Services Act 1982, and also exclusion of liability under UCTA.

Interference with business

In Tiscali v BT [2008] EWHC 3129 (QB) (16 December 2008) the High Court allowed Tiscali to use an alleged breach by BT of the Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection from Misleading Marketing Regulations 2008 to show the tort of interference with its business by unlawful means. These means arose from a letter BT sent to Tiscali customers exhorting them to change to BT broadband. Such tort would not require dishonesty to be proved, unlike the traditional tort of malicious falsehood. The decision by the judge to allow amendment of the claimant's case in these terms suggests that the regulations may indeed give competitors a means to use against competitors.

A commonly asked question about the above regulations is whether they can be used 'against' competitors, rather than to simply found a complaint to the ASA and thereafter obtain enforcement by criminal penalties by trading standards officers. It seems they may be useful in litigation and against competitors following this case.

A conference on the regulations is being held on 12 February, at which the Department for Business and PromoVeritas are speaking (details from susan@singlelaw.com. A copy of the judgment is at https://www.bailii.org/ew/cases/EWHC/QB/2008/3129.html).

New FOIA guidance

IT lawyers advising the public sector wrestle on a regular basis with the Freedom of Information Act and the risks it brings in terms of obligation to disclose confidential contact information held by public sector clients.

The Information Commissioner has issued new guidance under the Freedom of Information Act. The three sets of guidance relate to when a public body may keep information confidential.

'It will not be enough for the public authority to simply speculate as to why the third party's commercial interests would, or would be likely to be prejudiced; the third party where possible must be asked for their opinions,' said the guidance. 'If the third party does not put forward any concerns regarding any prejudice to its commercial interests, then a public authority should not speculate on their behalf'.

The exemption in this area is not absolute and a public interest test must be performed. For businesses the concern is that information in contracts with public bodies may be disclosed to competitors. The Department of Justice has some guidance in this field too, which goes into a high level of detail about what information at what stages must be disclosed by public bodies, such as the range of prices tendered. Its general guidance is at https://www.justice.gov.uk/guidance/foi-exemptions.htm.

The ICO's guidance for third party concerns, guidance for contracts and guidance for personal information can be found at www.ico.gov.uk.

A key is a key

In R v S & Anor [2008] EWCA Crim 2177, the Court of Appeal ordered men to disclose encryption keys. The men said handing over the keys might lead to them being incriminated, so they pleaded that they had no obligation to do so. However the court said it was simply like being required to hand over the physical key to a locked drawer containing letters. They had been served with notices under the Regulation of Investigatory Powers Act ordering them to hand over encryption passwords. Failure to hand over the keys was a criminal offence once a RIPA order was made, and they could face up to five years in jail if national security was at risk.

The judge said that the right not to self-incriminate does not apply to evidence that has an existence independent of the person involved. The judge quoted a previous ruling which established that principle:

'There is a distinction between the compulsory production of documents or other material which have an existence independent of the will of the suspect or accused person and statements that he has had to make under compulsion. In the former case there is no infringement of the right to silence and the right not to incriminate oneself. In the latter case there could be, depending on the circumstances,' said the ruling in the 2003 case of R v Kearns [2002] EWCA Crim 748.

The court said that the key did exist independently of the two men's wills, as did the data on the computers.

'In this sense the key to the computer equipment is no different to [sic] the key to a locked drawer,' said the judge. 'The contents of the drawer exist independently of the suspect: so does the key to it. The contents may or may not be incriminating: the key is neutral. In the present cases the prosecution is in possession of the drawer: it cannot however gain access to the contents. The lock cannot be broken or picked, and the drawer itself cannot be damaged without destroying the contents.

'The actual answers, that is to say the product of the appellants' minds, could not, of themselves, be incriminating. The keys themselves simply open the locked drawer, revealing its contents,' he said.

RIPA was changed last year to bring into force the legal requirement for people to divulge encryption keys. It has been opposed by human rights activists and defended by the government.

Death of Sir Hugh Laddie

Finally, Sir Hugh Laddie, the very well-known and popular intellectual property judge and then consultant and academic who resigned from the judiciary because he found it 'boring', died on 28 November 2008 at the age of 62. He will be sadly missed by all intellectual property lawyers.

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