With copyright and trade mark law reform top of the agenda in Europe, Legal Business talks to IP lawyers about the implications of a groundbreaking copyright case and the EC’s proposed changes to the European trade mark system.
`It always used to be that copyright cases were literally about copying – that’s hardly an issue any more,’ reflects Taylor Wessing’s Mark Owen, who joined the firm as a partner from Harbottle & Lewis in early April. He is talking about the long-running landmark copyright case NLA v PRCA (Meltwater), which the UK Supreme Court referred to the Court of Justice of the European Union (CJEU) on 17 April.
‘Digital law rights is the evolving battleground, and specifically what users are allowed to do with copyright, and where that line is drawn. It’s being developed by the courts almost on a daily basis,’ he adds.
The decision by the Supreme Court is the latest important stage in the four-year dispute over the application of copyright law when viewing material on the internet: whether viewing a website, which is cached on a computer, is an act of copying which requires a licence, just as if you had photocopied a newspaper (see box ‘Meltwater: the facts’).
It is the second copyright case to reach the Supreme Court, after the high-profile Lucasfilm dispute between Star Wars creator George Lucas and costume designer Andrew Ainsworth in 2011 – which featured Owen for Lucasfilm – and is a hot topic of discussion among intellectual property (IP) practitioners.
Larry Cohen, partner at Latham & Watkins in London, says while the case is significant for the development of copyright law in Europe, the argument is essentially about who pays. ‘The case went to the Supreme Court and now for clarification to the EU, so it’s important legally and commercially,’ he says. ‘It’s a continuation of the type of battle that music publishers had been fighting and apparently losing until they devised a decent formula, because everyone expected free content on a browser.’
According to the International Telecommunication Union, the United Nations’ specialised agency for information and communication technologies, the number of internet users stands at over 2.7 billion – an estimated 39% of the world’s population – with Europe being the region with the highest internet penetration rate at 75%. As such, IP practitioners broadly welcome the move for greater clarification on the scope of digital copyright infringement. Wragge & Co head of IP Gordon Harris says it is ‘phenomenally important’. ‘The clarification will dictate how we use the internet or how we don’t use it,’ he comments. ‘It is a nice interpretation on what constitutes a temporary copy and a big issue that’s been vexing the publishing world for a long time.’
‘You have a generation of young people who have lived all their lives with the internet,’ adds Harris. ‘They don’t think there’s anything wrong with uploading content. I’m not saying that’s right, but the social norm is gravitating that way. The younger people are bigger users, this has led to this feeling that big businesses are exploiting the masses. It has real legs. And if the law doesn’t adapt, it will be ignored. That would be a very dangerous place to be.’
Meltwater: the facts
The origins of the case trace back to September 2009 when the Newspaper Licensing Agency (NLA) launched a licensing scheme for payment by media monitoring organisations and their customers, arguing that an end-user’s machine made copies of the copyright protected data in its cache, which was no different to using a photocopier.
Dutch holding group and media service Meltwater referred the scheme to the Copyright Tribunal to assess the reasonableness of licence fees. The Public Relations Consultants Association (PRCA) expressed the same concerns, and both argued that neither Meltwater nor its customers needed a licence from the NLA or any publisher because browsing content online does not require the copyright owner’s permission, as it is protected under the `temporary copyright’ exception under UK law.
The NLA subsequently filed proceedings in London’s High Court. In November 2010, Mrs Justice Proudman ruled in favour of the NLA and newspaper groups, including the Guardian News & Media, the Telegraph Media Group, and the Independent Print Ltd. Describing the dispute as a `battle royal’ where each side accused each other of `spin’ and `mud slinging tactics’, Proudman determined that clients of Meltwater were in breach of copyright because they did not hold a licence from the NLA. Consequently, the PRCA lodged an appeal in July 2011, which was dismissed, affirming that the NLA’s online licensing scheme was applicable to media monitoring services, including Meltwater and PRCA members. It signified an important milestone in copyright law and advancements for those in the publishing industry seeking payment for online material.
The PRCA tried again and appealed to the Supreme Court, with the PRCA represented by 11 South Square’s Henry Carr QC and 8 New Square barrister Andrew Lykiardopoulos, instructed by Baker & McKenzie. The NLA was advised by a team that included Blackstone Chambers’ Robert Howe QC and Maitland Chambers’ Edmund Cullen QC, and instructed by Berwin Leighton Paisner.
On 17 April a judging panel including Lord Sumption, Lord Neuberger, Lord Clarke, Lord Carnwath, and Lord Kerr were asked to examine Proudman’s interpretation of the temporary copyright exception in the Copyright, Designs and Patents Act 1988. Sumption said the issue potentially affected `millions of non-commercial users on the internet’, who may unknowingly incur civil liability without the authority of the rights owner. The judges acknowledged material that is stored on a temporary basis can still be subject to copyright protection but the exception in the act contains an exclusion for any temporary reproduction which is essential for the lawful browsing of online material.
`Similar issues may arise when viewers watch a broadcast on a digital television programme via a set-top box,’ said Sumption. His views starkly contrasted those of Proudman, who said a licence was required for browsing because it `affects the operation of a service that is being made available on a commercial basis’.
The Lords referred the matter to the Court of Justice of the European Union, which will make a final ruling on the caching of data and what constitutes temporary or transient reproduction of a copyright work.
This applied to the end-users of copyrighted material. The exemption does not mean that those responsible for uploading copyrighted material do not need a licence from the copyright owner to do so.
Evolving copyright
In November 2010, the government announced an independent review of how the IP framework supports growth and innovation. Led by Professor Ian Hargreaves, the review reported to government in May 2011, with recommendations to ensure the UK’s IP framework was able to foster economic growth and support innovation in the digital age, and in effect boost the UK’s reputation as a friendly environment for new digital business.
At the time, Prime Minister David Cameron commented: ‘The founders of Google have said they could never have started their company in Britain. The service they provide depends on taking a snapshot of all the content on the internet at any one time and they feel our copyright system is not as friendly to this sort of innovation as it is in the United States.’
Owen says the review achieved little. ‘In the end, the result of that was the Enterprise Bill [now the Enterprise and Regulatory Reform Act, which received royal assent on 25 April],’ he observes. ‘Hargreaves found he couldn’t do very much, but it was his attempt to try and make us more like the US.’
As it stands, the new act’s primary functions will only make provisions for copyright on photography – a collective licensing scheme that will take effect in 2014. Digital copyright, particularly on the issue of temporary copies, has remained in the dark until Meltwater – an anomaly of the social media age.
Yet despite Cameron’s desire to bring the UK’s legislation in line with the US, across the Atlantic the position is similarly ambiguous. The Associated Press v Meltwater case in New York looked at Meltwater’s private subscription service – scanning news sites for stories and delivering search results to clients. Associated Press (AP) argued that the service infringed the copyright of several newspapers, while Meltwater put forward the classic US ‘fair use’ defence – largely based on the freedom of speech amendment. New York district court judge Denise Cote found that Meltwater had infringed AP’s copyright by taking excerpts of articles and distributing them without a licence. AP described it as a ‘clear and sweeping victory’. However, Corynne McSherry, IP director at Electronic Frontier Foundation, which filed an amicus brief backing Meltwater, said the decision to distinctly separate Meltwater’s services from a search engine could muddy the waters and cause a wave of litigation.
Given what has happened in the US, the Meltwater case in the UK could potentially have a huge impact for advisers and clients alike by providing a clear framework from which lawyers can offer appropriate advice for potential disputes.
‘We see an increasing number of copyright disputes, particularly with an EU dimension, as protecting and extracting value out of content is central to our clients’ operations and their business models,’ says Joel Smith, an IP partner at Herbert Smith Freehills.
‘IP is coming more and more onto the world stage because it is affecting individual users, as well as businesses, so now a lot of people who are not IP specialists are considering its impact from a broader viewpoint – I would say that is a good thing,’ says Graham Smith, partner at Bird & Bird.
‘You now have to look at sources outside IP law to be able to advise, and a clear trend is that IP lawyers need to be equipped with broader knowledge and a much broader outlook than they have had to in the past,’ he continues.
‘As the pace of development of new technologies increases there is an increasing need for IP lawyers not just to advise on protection of the new technologies but also on the legality of the new business models that accompany them,’ adds fellow Bird & Bird partner Peter Brownlow.
As the UK Meltwater case now moves to the European courts for final judgment, clarity on the issue will benefit the European Union as a whole as well as IP lawyers.
‘There is some room for legal doubt even though the preliminary view of the Supreme Court is wholly in accord with common sense,’ says Bristows’ partner Paul Walsh. ‘The issue has immense significance economically and it makes sense to refer to the CJEU for an opinion that applies to all EU member states.’
‘New business models are driving re-examination of the copyright laws because every time something new comes along, we have to ask how the law can be applied to this situation,’ comments Owen. ‘At the same time, there’s lots of change going on in the law, principally from the Courts of Justice in Luxembourg, but also in the UK courts, and legal developments in the US are also increasingly influential. So, it’s a very exciting time to be a copyright lawyer and there’s a lot of work.’
Spring cleaning: the EU trade mark reforms
In March 2011, the Max Planck Institute (MPI) published its study on the functionality of the European trade mark system. The Munich-headquartered MPI produced draft amendments to the Trade Marks Directive and the Community Trade Mark Regulations in light of the study.
Exactly two years later, the European Commission announced a package of initiatives to reform the EU trade mark regime into a more reliable, efficient and cheaper model – an antidote to the current outdated system. The proposals are predicted to be adopted in spring 2014, following which member states must implement the changes into existing national law.
The Commission claims it wants to `foster innovation and growth’ by making the European trade mark system more `accessible and efficient’ for businesses operating there. To do this, it aims to harmonise and streamline registration procedures, including at member state level; modernise and `increase legal certainty’ in existing provisions through amendments; and facilitate co-operation between national registries and the Office of Harmonization for the Internal Market (OHIM).
Conditions for businesses are expected to improve, as brand owners will benefit from greater protection against counterfeits, including fake goods, in transit through EU territory. The new provision will also enable businesses (especially small and medium enterprises) to apply for trade mark protection according to their actual business needs, at a cost covering those needs. The proposals aim to harmonise fee structures for registrations and renewals of Community Trade Marks (CTM) and national trade marks, which will attempt to de-clutter the register.
CTM applicants currently have to pay an online filing fee of €900 – or €1,050 if you use paper – covering up to three classes of goods or services. The new system – a one-tier model – will charge €775 for one class and €825 for two. Further, applications for marks in a language not recognised within the EU will no longer be applicable for registration.
Trade mark cycle
The ambiguity embedded in copyright law is just one issue facing IP lawyers. Like the warm welcome afforded to Meltwater, those who know the sector also view Europe’s recent proposals for trade mark reform as a positive development in ‘soft’ IP (the term used to describe trade marks, copyright and designs – as opposed to patents, described as ‘hard’ IP).
The draft legislation was introduced in late March and is set for implementation in spring 2014 (see box, ‘Spring cleaning: the EU trade mark reforms’). In particular, the proposed amendments seek to improve the protection for brand owners against counterfeit goods, particularly when in transit through the EU. Another important feature includes removing the requirement for there to be a ‘graphical representation’ of trade marks, potentially clearing the path for registering sounds and smells as trade marks.
‘It will lead to quite a lot of disputes because it may be difficult if not impossible to search these rights readily at the registries,’ says Jeremy Drew, a partner at Reynolds Porter Chamberlain (RPC). ‘Also, I think there will be lobbying to gain mini monopolies. For example, trademarking the smell of green grass for tennis balls is quite different from saying I can protect the word “Dunlop” for a tennis ball. There’ll be more disputes, especially around how broad the resulting protection is – there will likely be more work for lawyers.’
‘Every so often, we’ve had a change in company legislation followed by small amendments in the following years to make it better. Trade mark reform has taken a similar if slower route,’ says Cohen. ‘From 1994 through 2008 and 2009, there have been incremental changes but a fundamental review for trade marks is now taking place and should leave us with a better and stronger product without watering down the fundamentals. But I’ll bet in five years’ time, there will be some further need for change because there always is. No matter how well they draft, there’s always room for the courts to interpret the changes because you can’t think of every step.’
Nevertheless, the changes introduce procedural developments which, if implemented effectively, will ultimately help facilitate trade. Having had little change in 20 years – perhaps a sign of an already oiled machine – it largely codifies the existing system, and reverses the effects of the recent controversial decision in Nokia v HMRC over the limited scope of power currently held by customs.
In 2008, HM Revenue & Customs (HMRC) at Heathrow airport intercepted a consignment of counterfeit Nokia mobile phones that had been dispatched from Hong Kong and were in transit to Colombia. After Nokia confirmed the goods were fake, HMRC refused the Helsinki-based company’s request to detain the goods on the grounds that they did not constitute ‘counterfeit’ goods under the Counterfeit Goods Regulation. The loophole is that the goods were destined for Colombia and there was no evidence to suggest they would enter the EU market. The highly anticipated CJEU judgment on the Nokia case was finally delivered in early December 2011, and found that customs actions taken against goods suspected of infringing certain IP rights could extend to stopping and seizing a shipment in transit should the destination of the goods be difficult to identify. The case continues, as it will now be referred back to the UK Court of Appeal.
‘Nokia is following the reforms with interest. We welcome those proposals which harmonise the laws relating to national marks with European Trade Marks and simplify the system,’ says Louise Pentland, executive vice president and chief legal officer at the mobile network giant. ‘[We] expect that harmonisation and simplification of laws will help to reduce costs for all European business and better enable them to compete in a global market. [The clarification] will help brand owners to work with customs to more effectively combat the global, criminal activities of counterfeiting, addressing the increasing sophistication of those who manufacture and deal in such goods. We are pleased that this is being addressed in the current draft.’
Simon Ayrton, a partner at IP boutique Powell Gilbert, says it is an important development for global brand owners, whose businesses are dependent ‘not only on stopping counterfeits entering the EU market, but also blocking the transit of those goods through the EU to other parts of the world’.
Bristows’ Walsh agrees, arguing that the recent reforms are a good idea because ‘philosophically, it is difficult to be definitive about the law of trade marks’.
‘I sometimes think of trade marks as a bit like nutrition,’ he says. ‘We’ve been eating forever and branding for centuries, but every few weeks there is the latest healthy diet and every few months there is a new theory about the function of a trade mark. The right approach is not to be over-analytical or over-prescriptive. I don’t think you need to change trade mark law every few years. Obviously, one needs to adapt to game-changers such as the internet and mobile commerce. However, the underlying principles should remain the same. This should not be a technology-driven debate.’
David Stone, a partner at Simmons & Simmons and a member of the MARQUES Task Force – the group that undertook a study of the existing system in 2009 and made suggested amendments to the European Commission – says the current amendments are a sensible response.
‘For the most part, [the Commission] is refining what was already there,’ he says. ‘None of it is wholesale or massive change. Where perhaps the changes are greatest is in the [Trade Marks] Directive, because what the Commission has done is to try to harmonise national practice across the 27 (soon to be 28) EU member states much more than previously. I think that’s the result of having had years of operation of the European system, and we see that it works. If the changes to the directive are passed, all member states will have to offer oppositions and cancellation proceedings before the national trade mark office rather than having to commit to full-scale court proceedings. The cost savings are an incredible advantage to rights holders, particularly [small and medium enterprises].’
In addition, illegal goods in transit will be confronted and tackled, without the obstruction of legal technicalities such as the scope of jurisdiction.
‘In general, having clear and relevant trade mark rights encourages trade mark owners to sell their products in EU countries and invest in building a market reputation for their products,’ says Brownlow. ‘In that sense, clarifying and updating the EU trade mark system makes it easier to protect brands and therefore increases the competitiveness of the EU.’
It is arguable whether the reforms will boost business activity and therefore the reputation of Europe as a competitor on the international market. But the real issue for lawyers working within this specialist sphere is being prepared for any up and coming developments, and likewise keeping an eye out for cases that will advance the state of copyright law.
‘The days where you could half do IP or a little bit every now and again are behind us. Cases like Meltwater show how quickly things move and how you have to be plugged into and understand both the market and the law in which they operate,’ says RPC partner Paul Joseph.
‘[Clients are] not interested in what happened five years ago – they want to know what’s happening now and what they need to do to shift and react to it.’
And just as the law has had to evolve to catch up with the digital age, so has the practice of IP law to keep up with clients’ changing needs. Those that stay on top of these issues will be the ones that succeed in this thriving practice area. The reinvention of IP as a strategically key practice area continues. LB
sarah.downey@legalease.co.uk