Consumer Protection from Unfair Trading Regulations 2008

The Consumer Protection from Unfair Trading Regulations 2008 (CPRs), implemented as a result of the Unfair Commercial Practice Directive (Directive 2005/25/EC), came into force on 26 May 2008. The new legislation is aimed at protecting consumers against unfair, misleading or aggressive marketing practice.

The UK adopts a sector-specific approach to legislating trading and unlike other EU member states does not have a general fair-trading duty. Therefore, in order to prevent "gold plating" the UK Government implemented the Directive by copying it into existing Regulations; in particular sections 20-26 of the Consumer Protection Act 1987 and the Trade Descriptions Act 1968. The CPRs also revoke and replace the Control of Misleading Advertisements Regulations. The Regulations apply equally to both goods and services and also extend to intangible rights such as cancellation rights.

CPRs include a general prohibition (Regulation 3) of unfair commercial practices. This can include a lack of professional diligence, or the adoption of a practice that materially distorts, or is likely to materially distort the economic behaviour of the average customer. Even if the information is factually correct, if it deceives the typical customer into making a transaction he/she would not otherwise have taken, the use of the information is prohibited. Regulations 5 and 6 prohibit misleading actions and misleading omissions. This can be where a product is marketed in a way that creates confusion with a product, trademark, trade name or other distinguishing mark of a competitor. Regulation 7 prohibits aggressive commercial practices which can include intimidating or exploiting customers and restricting their ability to make free or informed choices.

The "typical consumer" is reasonably well informed and reasonably observant. However, there are certain groups to which an exception is made, for example children. Examples of aggressive practices can include pressurising bereaved families to buy expensive coffins when they are at their most vulnerable and doorstep traders who insist on taking a consumer to the bank to collect money for immediate payment.

The legislation also includes a blacklist of 31 unfair practices. These commercial practices are always considered to be unfair and are therefore prohibited. Consequently there is no requirement to prove the effect, or likely effect on the average customer, in order to prove the breach.

A significant example of one of the blacklisted unfair practices is "promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by the same manufacturer when it is not". This is an example of copycat packaging or marketing and is of particular significance to brand owners that want to take action against the offender. The UK does not have a specific law against unfair competition and therefore brand owners previously had to rely on their intellectual property rights (trade marks, designs or copyright) and the law of passing off to protect themselves against copycat products.

Anyone with a legitimate interest is entitled to raise a complaint against unfair commercial practices but this must be brought before one of: the Local Authority Trading Standard Services, the Department of Enterprise, Trade and Investment in Northern Ireland or the Office of Fair Trading. These all have a duty to enforce the CPRs and this may be achieved through enforcement orders, and criminal proceedings. However, unlike in Ireland, there shall be no powers of granting compensation for the consumer that raised the complaint. Furthermore, the Trading Standards Institute has warned that resources are limited and that only the most serious cases will be investigated. There is no direct right for third parties to raise court proceedings under the CPRs.

Business Protection from Misleading Marketing Regulations 2008
The Business Protection from Misleading Marketing Regulations 2008 (BPRs) also came into force on 26 May 2008 with the aim of preserving business-to-business protection within the new framework of the Unfair Commercial Practice Directive (Directive 2005/29/EC).

The fundamental objective of the BPRs is to protect businesses from misleading advertising by other businesses. The BPRs effectively replace the criteria provided by the Control of Misleading Advertisements Regulations 1988 (repealed by the CPRs) in determining whether an advert is comparative. However, the BPRs have the additional remit of ensuring that where an advert is comparative, it is not a misleading act or omission detailed in the CPRs.

There are two key offences under the BPRs; namely, advertising which misleads businesses (Regulation 3); and comparative advertising (unless it complies with the provisions of Regulation 4).

The BPRs define "advertising" widely and can include any representation made by a business in the promotion of their goods or services. In assessing whether advertising is misleading, the enforcing authority will examine whether the advert deceives or is likely to deceive a business that it intends to induce and whether its economic behaviour has changed as a result. In terms of comparative advertising, the enforcing authority will identify if the business concerned is a competitor and whether it has suffered injury or is likely to suffer injury as a result of the comparative advert.

Where a business contravenes the BPRs, it is only the enforcing authorities (Office of Fair Trading, the Trading Standards Services and the Department of Enterprise, Trade and Investment in Northern Ireland) that are capable of taking action against the business. The BPRs grant enforcement authorities several powers including the ability to carry out investigations where the authority can enter premises with or without a warrant and the ability to seek an injunction requiring the business to act within the parameters of the BPRs. It is also possible for BPRs to impose criminal sanctions for breaches. This extends to the officers of a business and could result in a company director receiving a fine of up to £5,000 or a prison term of up to two years.

01/07/2008

OS Map Copyright Infringement: A warning to all

A recent case from the Court of Appeal concerning infringement of Crown copyright in Ordnance Survey (OS) mapping data, highlights the importance of ensuring that appropriate licences are in place before undertaking work on third parties' copyright material.

Green Amps Limited (Green Amps), a windfarm business, has been embroiled in a court battle with Her Majesty's Stationery Office (HMSO) and OS over the right to use government produced mapping data. The Court of Appeal has upheld the High Court's decision requiring Green Amps to stop infringing Crown copyright without a licence. The courts held there was no defence to infringement of copyright based on section 29(1) of the Copyright, Designs and Patents Act 1988 (CDPA), which provides an exception for "research", as the use of the data was not for research but ultimately for commercial purposes. The courts also rejected an argument that use of OS data for planning applications constituted use in judicial proceedings under section 45 of the CDPA. They also held that the Re-Use of Public Sector Information Regulations (Regulations), (which govern the re-use by third parties of documents held by UK public bodies, the procedure for granting licences by such bodies and the fees they can charge for such licences) did not provide a defence to infringement of copyright, because the OS was entitled to charge for the supply of the maps under a licence. This article examines the Court's reasoning and shows that it took a commercial and pragmatic stance when interpreting the above legislation.

Green Amps was trying to develop software to streamline windfarm planning applications. To do this it downloaded the entire OS data set to create a mapping tool. The mapping tool created correlates the different mapping layers contained in the environmental statements which form part of a windfarm planning application. The method by which Green Amps downloaded the material without a licence caused the courts alarm. The courts even described it as being “covert”. During the summer holidays Green Amp employed a student, who had password details to use his university’s licence for the OS system for non-commercial research only. However, after the student left, his password details remained on Green Amps’ computers. Green Amps was then able to download mapping data for free from the OS system without the OS’ and HMSO’s permission.

When the OS became aware of the copyright infringement, they offered Green Amps a commercial licence to download the material for £16,000. Nick Brown, the chief executive of Green Amps, rejected this and tried to negotiate a non-commercial licence. Mr Brown, who also represented Green Amps, argued that non-personal government data should be available for re-use for free. In the High Court he even claimed a “God-given right of access” to OS maps, although he tried to substantiate this by focusing on the re-use Regulations.

The Court of Appeal's reasoning in dismissing the appeal was as follows:

CDPA Section 29(1)
For there to be a defence to an act of infringement, the copy must be “for the purpose of research”, and that research should be “for a non-commercial purpose”. It was held that the second of these requirements was not satisfied because the end goal of Green Amps was to make use of the OS data in a commercial manner. Further, it was held that Green Amps’ actions could not be fair dealing, considering, the “covertness” and the extent of the copying.

CDPA Section 45
Mr Brown contended that because the OS materials would be used for planning applications, it would not infringe copyright because it was for the purpose of judicial proceedings. Mr Brown stated that a planning committee is a quasi-judicial tribunal determining parties’ rights. However, the courts did not agree. While accepting that some of the planning system is quasi-judicial, a planning application is not a judicial proceeding because it is not deciding a person’s legal rights or liabilities. (For example an applicant does not have a legal right to undertake a particular development.) It should be noted that when a planning application is determined at a public inquiry or the decision gets passed to judicial review, an applicant could copy OS maps for that purpose.

Re-use of Public Sector Information Regulations 2005
As stated above, the Regulations govern the re-use by third parties of documents held by UK public bodies, the procedure for granting licences for such use, and how much they can charge. The supply of OS maps was held to fall within the "public task" of the OS and so it was entitled to charge for their re-use. Regulation 15 sets out how licence fees will be determined, and that they must not exceed a reasonable return on investment by the public body. The OS licence for proposed re-use was not excessive due to the expenditure incurred in producing the maps. Further, the Regulations did not give Green Amps a defence for breach of copyright.

The courts also dismissed other arguments by Mr Brown. One such argument was that OS maps are indispensable to planning applications but this was dismissed as the use of OS maps is not a mandatory requirement of the planning process, and even if it were mandatory, it would not be a defence to infringement. The courts spent no time considering his proposition of a "greater good" defence (Green Amps should be excused because its actions assist in the fight against global warming) or that charges for the use of essential data are a breach of human rights.

This case clearly emphasises the need for businesses to have the appropriate licences in place before using third parties' copyright material. If not they could face legal action. It also raises interesting points regarding the Regulations and the application of the judicial proceedings defence, as well as providing a glimpse of things to come in the debate over charges for public sector information.

01/07/2008

Microsoft wants you to watch your manners

On the 29th of May Microsoft filed a patent application for an attention-grabbing new technology that attempts to enforce what Microsoft identifies in their application as a "digital manners policy" (DMP). The patent delineates proposals for a technology, which can affect the use of mobile phones, digital cameras and other digital devices.

The technology seemingly has the capacity to bring devices into parallel with what can be called common social conventions, ensuring compliance with rules and etiquette. In simple terms, the technology will restrict the use of particular features of a device in certain locations, which can be achieved by disabling such features or the device entirely.

It would be a challenge to find someone who has not faced interruption in the cinema from the ringing of another's mobile phone. DMP technology is attractive in the sense that (as cited in the patent) it may be used to automatically switch mobile phones to vibrate mode in a cinema. The technology may further be utilised in a hospital or onboard an aircraft to restrict mobile phone usage.

The patent application also envisages that the technology can be operated to disable cameras in sensitive security areas. The patent even goes as far as saying that the technology could be used:

"in particular zones to limit the speed and/or acceleration of vehicles, to require the use of lights, to verify an indication of insurance coverage and/or current registration, or the like.”

It would appear that Microsoft have a vision for the technology which seems to be wide reaching for what is described in the patent application itself as "socially undesirable" intrusions. On the one hand this is encouraging and can be seen as an initially attractive concept. However, although the patent application is in its infancy hostility has already been cast in its direction. For example, is it realistic to expect consumers to willingly submit to the technology? While it is highly desirable not to have the infuriating interruption of a mobile phone ringing in the cinema, it is true that those who are troubled about such intrusions are likely to switch their own phones off or to silent in the film theatre without the aid of DMP technology to do it for them. Those that are not equally courteous would be unlikely to accept the existence of DMP technology controlling their phone.

Furthermore, Microsoft quite clearly has filed the patent application as they see this as an area where money is to be made. However, the issue of whether an organisation would be willing to pay for the technology attracts attention. It is a case of need versus want and whether organisations feel that they really need to pay for the use of DMP technology may be a limit on its effectiveness and impact.

An argument, which passes into the realms of speculation, is the typical slippery slope argument which often goes hand in hand with the innovation of new technologies and advancements. It could be suggested that the technology would be open to abuse by governments and other organisations as a means of controlling the public. However, such arguments are perhaps unwarranted at such an early stage in the patent application process.

Moreover, the successful operation of the technology will go further than the mere acceptance of Microsoft's patent application and will have some reliance on the support of mobile phone manufacturers. This may preclude the implementation of the technology, as it would appear that the technology would only really work where a blanket system exists covering every device.

Microsoft's application is undoubtedly an interesting one and whether the patent will be granted remains to be seen. However, it surely will be followed by many of us with great interest.

01/07/2008

European Court judges in favour of comparative advertising

In a significant ruling, the European Court of Justice (ECJ) has ruled that a company is entitled to use a competitor's trademark in its own advertisements in order to draw comparisons with that competitor's products or services. This judgment is an important development in this area of the law and is certain to be at the centre of debate over trademarks and advertising for some time to come.

The case arose from a series of advertisements run by Hutchison 3G Limited (3G) that drew comparisons between its services and those of its competitors. The advertising campaign included several advertisements, each drawing comparisons between 3G's service and the cost of similar services provided by other major UK mobile phone operators.

O2 Holdings (O2) took issue with one advertisement in particular which made use of several moving images of bubbles – similar in style to O2's well-known bubble design trademark. O2 argued that 3G's use of the moving bubble images fell within the terms of Article 5(1) of the Trade Marks Directive which gives owners of registered trademarks the right to prevent other parties from using the trademark where there is a danger of confusion in the minds of consumers between the mark used and the product being marketed.

In countering the action brought by O2, 3G argued that their advertisement did not fall within the terms of Article 5(1) and that, further, the Misleading and Comparative Advertising Directive gave it the right to use O2's trademark for the purposes of objectively comparing its service with that of competitors. 3G argued that there was no risk of confusion to consumers in its use of a bubble sequence similar to O2's trademark.

While at first instance O2's claim was rejected, O2 appealed that judgment and 3G also contested the judge's finding that, although its use of the trademark had been justified as comparative advertising, it had fallen within the Article 5(1) infringement under the Trade Marks Directive.

The question of whether use of a trademark in a piece of comparative advertising should be considered under the Trade Marks Directive at all was referred to the ECJ which has now found that any such advertisements should be considered only in terms of the Misleading and Comparative Advertising Directive.

The ECJ found that if the use of a competitor's sign in an advertisement is not confusing for consumers then there is no question of considering the advertisement under the terms of the Trade Marks Directive. If, however, there is the risk of some element of confusion then the advertisement will be open to being considered as an infringement under the Trade Marks Directive, even if the advert might appear on the face of it to be a comparative one.

While this judgment is clearly not a great result for O2 in this instance, it does provide trademark owners with a fairly clear set of criteria to guide them on when they might consider a company's use of their trademark in an advertisement as an infringement.

One factor that was given some consideration in the guide was the likelihood of confusion between trademarks arising in the course of a comparative advertisement. By their nature, it is difficult to see how most advertisements that compare one company's products with those of competitors could give rise to confusion, as the intention is usually to make distinctions between the two. Nevertheless, the judgment from the ECJ provides some welcome guidance to both trademark owners and company's using comparative advertising as to how to work within the rules. Whether this judgment means the end of arguments over comparative advertising is, of course, a different matter altogether.

01/07/2008

Report highlights need for clarity on rights to Intellectual Property from Collaborations

The Select Committee on Innovation, Universities, Science and Skills (the Committee) has now published the report of its inquiry into Renewable Energy Generation Technologies.

The Committee found that the funding landscape for energy-related research, development, demonstration and deployment is too complex and recommended that the Government review and clarify the role of each funding organisation, and develop a strategy for communicating the remit of each funding body.

Concern was also expressed by the Renewable Energy Agency that SMEs may be dissuaded from collaborating on projects funded by the Energy Technology Institute (ETI) over fears that they will effectively have their intellectual property rights (IPR) "stolen" by the ETI's industrial partners.

The ETI was established as a unique 50:50 public private partnership, funded equally by the UK Government and member companies such as EDF Energy, Shell, BP, E.ON UK, Caterpillar and Rolls Royce creating the potential for a £1 billion Institute over 10 years. Its mission is to accelerate the development, demonstration and eventual commercial deployment of a focused portfolio of energy technologies, which will increase energy efficiency, reduce greenhouse gas emissions and help achieve energy and climate change goals.

The Committee recommended that the ETI should address the concerns of SMEs with regard to the exploitation of IPR generated during ETI-funded projects and believes that the ETI's guidelines on the exploitation of IPR should be formulated to encourage interaction between SMEs and the ETI's partner organisations. The Committee recognised that a careful balance must be struck between meeting the wishes of SMEs, and giving the ETI's members an appropriate return on their investment.

The report highlights the need for businesses and organisations entering into collaborative arrangements to ensure that they understand exactly what they will be getting, and what they will be giving up. Ownership of IPR and rights to access it should be clearly spelled out in a written agreement. Vague concepts like "jointly owned IPR" should be avoided unless the parties know what it really means for them.

By ensuring that the terms are clear and unambiguous, and that everyone gets what they thought they were going to get, a "collaboration" is more likely to operate in the true spirit of the word and be a success for all those involved.

If you would like any further information on this topic please contact Graeme Moffett.

01/07/2008

The Lion, the Witch and the Law Suit

June 2008 was a busy month in Narnia. Not only did it see the release of Prince Caspian, the film of the second book in the Chronicles of Narnia series, but also the deadline for an 11-year-old boy to respond to the World Intellectual Property Organisation (WIPO) in Geneva on a 128-page complaint submitted by CS Lewis Ltd, the company which now owns the rights to the author's work.

Devoted Narnia fan, Comrie Saville-Smith was given the domain name "narnia.mobi" as an 11th birthday present from his parents. Proceedings have now been brought against his father, Richard, alleging that the domain name was purchased in bad faith with the intention of making financial gain from the Narnia name.

The WIPO Arbitration and Mediation Centre is the pre-eminent forum for the resolution of domain name disputes relating to top level generic international domains such as .com, .net and .mobi. Such disputes mostly arise from a growing practice known as cyber-squatting, where a third party registers a pre-existing trade mark as a domain name and either seeks to sell the domain name to the trade mark owner for an inflated price or keeps the domain name and relies upon the reputation of the trade mark to attract business to its own site.

To establish cyber-squatting under the Uniform Domain Name Dispute Resolution Policy (the policy used by WIPO to determine domain name disputes), a trade mark owner must prove three things:

1. the way in which the domain name is identical or similar to its trade mark; 
2. that the domain name holder does not have any legitimate interest in the domain name; and 
3. that the domain name was registered in bad faith.

It seems that it is the third element, the presence of bad faith, which will prove most difficult for CS Lewis Ltd to establish. Edinburgh-based Saville-Smith strongly denies that there was any financial motivation behind the purchase, which is one of the most important factors for evidencing bad faith registrations.

In the UK courts, cyber-squatting is often dealt with under the law of passing off, which has tended to protect the rights of the trade mark owner. The key precedent in this field is a 1999 case, British Telecommunications plc v One in a Million Limited, in which a number of large companies, including BT and Marks and Spencer, successfully sued domain name dealer, One in a Million Ltd, for passing off after it had purchased a large number of domain names containing the companies' names.

In that case, the Court of Appeal held that an intention to appropriate another's goodwill, i.e. passing off, could be inferred even if there is a possibility that no such appropriation would take place. It was unlikely that One in a Million ever intended to trade under the domain name and pass its goods or services off as those of any of the companies involved. This may not bode well for the Saville-Smiths should WIPO decide in their favour and CS Lewis then seek to pursue its claim in the British courts. In their favour, however, would be the distinguishing factor that in the One in a Million case, the domain name holder intended to sell the registrations to the trade mark owners for a profit. The Saville-Smith family, on the other hand, claim that it has refused to sell the domain name to CS Lewis despite being asked to name its price.

In the meantime, the narnia.mobi domain name has been frozen by WIPO pending the outcome of the proceedings, which is expected to be announced within a month of the response deadline, 23 June.

01/07/2008