Google facing antitrust inquiries

On 21 September 2011, the Senate Judiciary Subcommittee on Antitrust opened a hearing to look at the state of competition in online search engines.

The subcommittee is specifically looking at whether Google abuses its market position by fixing its search results to promote its own websites and services. Opening the hearing, the honourable Herb Kohl said “For the last five years or so, Google has been on an acquisition binge, acquiring dozens of Internet-related businesses, including, in health, finance, travel, and product comparison. This has transformed Google from a mere search engine into a major Internet conglomerate. And these acquisitions raise a very fundamental question – is it possible for Google to be both an unbiased search engine and at the same time own a vast portfolio of web-based products and services? Does Google’s transformation create an inherent conflict of interest which threatens to stifle competition?

In response to the concerns raised, The executive chairman of Google, Eric Schmidt, who gave evidence before the subcommittee on 21st September, said “I can assure you we’re not cooking anything…..Google does nothing to block access to any of the competitors and other sources of information.”

When asked by the subcommittee whether Google was a monopoly company, Mr Schmidt said the search engine giant was “in that area“, adding that it recognised it had a special responsibility because of its position.

The US Federal Trade Commission (FTC) is also investigating the same competition issue and the New York Times reported that FTC officials privately debated this month whether to allow the agency’s Bureau of Competitions to issue subpoenas to Google, and the FTC is now close to moving forward with handing out the court orders. The Financial Times reportedly said that attorneys-general in California, New York and Ohio have also launched antitrust investigations into Google. US law dictates that for any breach to have occurred, an actual detriment to customers must be identified.

Closer to home, Google is also subject to an investigation by the European Commission, launched in November 2010. This followed various complaints by other search engines and companies, most notably Microsoft, all of whom allege that Google gives unfavourable treatment to their services in unpaid and sponsored search results, coupled with an alleged preferential placement of Google’s own services.

Google offers two types of search result – unpaid results that are displayed in the main body of the page and “ads” (previously called sponsored links).

The investigation will try to determine whether Google’s method of generating unpaid results adversely affects the ranking of other organisations, specifically specialist search providers, such as price comparison sites. Google argues that these sites are ranked poorly because the websites duplicate information from other sites.

Finally, the investigation is also probing how Google deals with advertising partners. It has been alleged that Google imposes exclusivity obligations on advertising partners, which Google has refuted.

Whereas an offence is only committed in the US if the authorities can establish that there has been a detriment to consumers, there is no such requirement in EU law. The European Commission will need to examine Google’s actual search algorithm and email trail to determine whether EU laws have been followed. If a breach of EU law has been committed, the European Commission can fine a company up to 10% of its annual global turnover.

Apple crushes Samsung’s Galaxy tablet in Germany as global battle lines are drawn

Despite the Europe-wide ban being lifted following a challenge from Samsung, the Dusseldorf district court has now reinstated the ban on the sale of the Galaxy tablet across Germany saying that it does infringe Apple’s IP.

This tussle is only a small part of the global IP battle between these two tech giants which is currently raging across the US, Australia and South Korea.  In Europe at least, Samsung appears to be on the back foot as it was forced to withdraw its Galaxy Tab 7.7 from the IFA electronics fair in Berlin, one of the most important showcases in the industry.

However, Samsung has counter-claimed that Apple has infringed its wireless patents.  And Apple is facing another challenge from HTC for infringement of patents which they acquired from Google.

Lawsuits are now being used as anti-competitive weapons to stall rivals’ product launches.  The battle lines are being drawn: Apple v Samsung, Google and HTC; Apple v Android. Perhaps this will prove to be less one-sided than you might first imagine.

Patent registration – don’t bottle it up

A recent Court of Appeal (CA) ruling has highlighted the importance of assignees/licensees of patents registering their interests with the Intellectual Property Office (IPO) without delay.

The patents concerned, held by the claimant, Schütz, were for a bulk container for liquids that contained a flexible bottle in a metal cage. The defendant, Werit, had used the product and replaced damaged or worn bottles with bottles that it had developed. The bottles were then sold in the original caging.

The Court of Appeal overturned the High Court’s ruling and held that the patented product should be considered as a whole, and the cage and the bottle as component parts. By putting a new bottle into the cage, Werit was effectively completing the patented product. In doing so without a licence, Werit had infringed Schütz’s patent.

However, Schütz’s patent licence was granted in 1994 and not registered until 2008. Section 68 of the Patents Act 1977, as amended in 2006, provides that “…the court…shall not award [the claimant] costs or expense unless…the transaction, instrument or event is registered within the period of six months beginning with its date…”. Nonetheless, the CA decided it would not be unfair for Schütz to recover costs for the period after it had registered its licence as it had ‘put its house in order’.

All assignees or licensees of patents must protect their interest by registering it with the IPO. This ensures potential third party purchasers are put on notice of the interest and will protect a costs claim in the event of patent infringement.

(Case: Schutz (UK) Ltd v Werit UK Ltd and another [2011] EWCA Civ 927, 2011)

Patent S-pending

Patents are now the corporate weapon of choice for both shielding commercial interests and vanquishing upstart rivals.

Google has accused Microsoft and Apple of trying to undermine Android by buying up technology patents to drive up the cost of Android-powered devices. The licence fees charged for the use of the patents could arguably amount to an extra tax on companies and choke them out of the market. Following the blog post comment, Microsoft retaliated by stating that Google had been invited to bid with it on key patents but turned them down.

Apple and Samsung are suing each other in courts around the world over the rights to tablet technology. The patent dispute has caused Samsung to cancel the launch of its Galaxy tablet in Australia.

Rovio, the makers of Angry Birds (which has just surpassed 300 million downloads), is being sued by patent licensing company, Lodsys. Licensing companies, essentially acting as patent banks, are being criticised for protectionist patent purchasing which is stifling innovation and has the potential to distort the technology market if anti-competitive licence fees are demanded. Reports also abound of aggressive intimidation tactics where they sense a whiff of infringement.

Speculative spending on patents allows companies to sit back and gauge the value of technology; before swooping to reap licence fees or issue proceedings where it proves profitable.

In the world of technology, patents can make or break a company. And, somewhat predictably, it is the creative spirit of an entrepreneurial startup that ends up broken.

BT ordered to scupper online pirates

The High Court has ordered BT to block access to Newzbin2, an illegal filesharing site. The original Newzbin site was shut down following a successful action for copyright infringement. However, it appears the operators simply upped anchor and moved offshore, beyond the reach of the UK courts, and set up Newzbin2, an almost identical website located at the same URL. So now the industry has set its sights on the ISPs.

The successful test case against BT was brought jointly by 20th Century Fox, Universal, Warner Bros, Paramount, Disney and Columbia Pictures, all members of the Motion Picture Association (MPA). The landmark ruling has generated headlines, debate and trended on Twitter. However, the blocking technology won’t be finalised until October. Ironically, the movie industry bosses have ensured that now more people than ever know about the notorious Newzbin site and they have three months to plunder and pillage the site’s content.

This is clearly not the silver bullet in the fight against online copyright infringement. Blocking sites via ISPs naively underestimates the ability of the internet to evolve and circumvent restrictions. It also raises questions of censorship, initiated by deep-pocketed Hollywood moguls protecting their commercial interests.

Perhaps, rather than suing every variant of every website and cutting off one head to watch two grow back, the industry should listen to its customer base. The music industry is getting the hang of legal downloads, why not TV and movies?

The Data Retention Directive: Intrusive and ineffective?

The European Data Protection Supervisor (EDPS), Peter Hustinx, has published an opinion stating that the Data Retention Directive “does not meet the requirements imposed by the fundamental rights to privacy and data protection”.

The much discussed EU Data Retention Directive (the “Directive”) requires all telecomms providers to retain the data necessary to identify the sender, recipient, data, time, duration, type, equipment and location of all the emails, phone calls and texts of all citizens. The information must be available to be handed over to national police for use in criminal investigations.

When it was implemented in 2006, the Directive was seen by many as a knee jerk reaction to the threat of terrorist attacks. The EDPS was critical from the outset and has described the Directive as “the most privacy invasive instrument ever adopted by the European Union”.

The latest EDPS opinion is in response to the European Commission’s Evaluation Report on the Directive. The Commission intends to propose amendments to the Directive ‘later this year’.

The legal and political storm around the Directive is now gathering momentum. Already courts in Germany, Austria, Romania, Sweden, and the Czech Republic have ruled that the Directive in its current form is unconstitutional.

Later this year, the European Court of Justice (ECJ) will rule on the constitutionality of the Directive following a referral from the Irish High Court. The case was brought by Digital Rights Ireland, a member of the European digital civil rights group EDRi, on the grounds that a state should not be allowed to impose a regime of mass surveillance on its entire population without any evidence of wrongdoing.

The debate over the balance between state interests and the protection of individual rights and freedoms is becoming more intense and more prominent in the public consciousness. Civil rights groups and the media are turning up the volume. However, where national security is concerned, the counter-arguments are unlikely to be heard in the open.

State security agencies have a clear argument in favour of accessing personal data in order to prevent serious crime and the extent of any amendments to the Directive will undoubtedly be highly tempered by The Powers That Be. However, recent crime statistics released by the German police show that the blanket retention of telecommunications data has had no positive impact on the number of cases solved.

If they want to keep the blanket data retention requirement, the spooks may need to gather more intelligence in order to satisfy the EU that it is proportionate and does not go beyond what is necessary.

But, back in the glaring light of the public arena, the future of the Data Retention Directive remains in the ECJ’s hands.

Twitter leaks super injunctions – Technology Hares and Legal Tortoises?

Twitter appears to be the only party benefiting from the recent super-injunctions furore as reports abound of record traffic to its UK site. Meanwhile the UK courts have been left looking toothless and out of touch.

The grant of any super injunction, a gagging order prohibiting the media from even referring to the existence of legal action, is highly controversial; but, when they can be bypassed with such apparent impunity by the myriad tentacles of social media, their enforceability and therefore value becomes highly dubious.

UK v Twit-book

They have also been seen as a “rich man’s justice” providing a large fig leaf for celebrities trying to cover up their extra-marital affairs. However, that is not quite fair and we are now seeing how they can be deployed to protect those who are clearly on the right side of the moral landscape. A ground-breaking injunction was recently granted to a mother, who wants to withdraw life support from her severely brain-damaged daughter, that specifically bans the publication of restricted information on Twitter or Facebook. However, the enforceability of such an injunction is untested and under dispute.

Twitter and Facebook are registered in the US and assumed to be outside British jurisdiction. But some argue that if the sites can be classified as ‘publishers’ of information for mass consumption in the UK, then the UK courts may be able to bite back.

In 2009 the High Court ruled that Google was merely a ‘facilitator’ and not a publisher of its content and could not be held liable for defamation from its search results. Nonetheless social media sites arguably do more than present links to other websites and should be held responsible for their content. Sites such as Facebook clearly feel they have a sufficient degree of ownership to merit the editing and censorship of offensive content. Why should they be treated differently from other types of media?

The problem with Twitter

Twitter, however, has attempted to distinguish itself. The Rules, Privacy Policy and Terms of Service effectively dissociate the social media site from its content by:

  • requiring users to confirm that they:
    • are self-publishing; and
    • consent to US jurisdiction in respect of any legal action; and
  • declaring that Twitter may not monitor, control or take responsibility for the content posted on the site.

A Twitter spokesperson said the company “strive[s] not to remove tweets on the basis of their content” but that it would remove “illegal tweets and spam”.

With the eye-watering speed at which news stories are now breaking, and the rise of ‘citizen-journalism’, it is now Twitter that gets the first chance to rule on illegality. By the time the UK courts get on the scene to assert their learned legal reasoning it is often too late.

Keeping up with the Techies

Calls are echoing around Westminster for Parliament to step in. Jeremy Hunt, the culture secretary, has said that “technology and Twitter is making a mockery of the privacy laws…we need to get into a situation where regulation and legislation is up to speed with changes in technology”.

The law can never be anything more than reactive to technological change. And, even where it reacts quickly, lawmakers are left exasperated as the battlefield once again shifts.

Globalisation

Technology operates on a universal level; borders are crumbling, jurisdictions are becoming blurred. National laws are ineffective against the reach of the internet and in any event fail to carry the enforcement clout necessary to deter or even intimidate the corporate behemoths. Privacy laws and technology regulations won’t stand a chance unless they too find a way to operate on a global scale.

South Tyneside Council fights Twitter on its home turf

The mysterious blogger, Mr Monkey, and his lurid allegations against various South Tyneside councillors have led the council to take action to unmask related Twitter accounts.

Richard Moss, of the BBC, said the council has set “an international legal precedent” by winning a court case in California to compel Twitter to release the details of some of its account holders. This is understood to be the first time anyone from the UK has gone to America to challenge the anonymity of Twitter users. The Giggs-gate/Twitter proceedings were played out in the High Court in London.

Ahmed Khan, independent South Shields councillor and Mr Monkey suspect no. 1, said he was told by Twitter the information released included IP identities, mobile phone numbers and email addresses.

Tweeters beware. It’s open season.

http://www.bbc.co.uk/news/uk-england-tyne-13588284

I Spy Services turn off consumers: Location based privacy services to be handled with care

The privacy debate rages on. The dark, faceless forces of ‘technology’ stand accused of invading our personal spheres, snooping, spying and exploiting consumers.

The backlash could be devastating for technology companies that handle highly sensitive personal data, in particular, providers of location-based services (LBS)  - applications and websites that provide services or information based on your current location. This includes apps/websites that let you find the nearest cashpoint, automatically show your local weather forecast, and allow you to ‘check-in’ at that new wine bar.

Following the rise of smartphones, this emerging market has the potential to transform the way we interact with our surroundings. However, it also provides companies with a robust history of an individual’s movements which, when combined with other personal data, builds a disturbingly detailed consumer profile.

In the light of various privacy leaks, consumers are becoming wary about collection and abuse of their personal details and location privacy. Fears about increasing intrusion from e-behemoths such as Google and Facebook has made consumers sceptical and even cynical. In this competitive market, businesses need to act now in order to build consumer trust in LBS or risk alienating both existing and potential users. Mechanisms to safeguard consumer privacy will ensure users feel comfortable and enhance brand loyalty.

While the law catches up with technology, businesses have the opportunity to stand out from the tech crowd and empower consumers to take control of their own personal data and location information. A clear, strongly worded privacy policy and the use of privacy-enhancing technologies such as anonymisation and encryption will address consumer concern and avoid negative publicity. Companies need to balance consumer trust against data mining and conclude that the commercial value of establishing robust privacy protection is paramount to a sustainable business model.

This alert was written by Simon Halberstam (partner) at Kingsley Napley LLP. If you need assistance, please contact Simon Halberstam on 020 7814 1258 or shalberstam@kingsleynapley.co.uk

Cookies – handle with caution

On 26 May 2011 the law governing the use of cookies will change. Users will need to be provided with an opportunity to explicitly give their consent prior to having cookies downloaded on to their computers or mobile devices.

Frustratingly the government and the Information Commissioner’s Office (ICO) currently have no clear idea as to how the new legislation on cookies should be implemented by web managers. There is no guidance in the amended E-Privacy regulations as to exactly how “consent” should be given. The Government has left that remit with the ICO, and, as its latest briefing highlights, there is as yet no clear-cut method of ensuring compliance.

The consequences of non-compliance

UK-based web managers that do not make any changes to their websites before the morning of 26 May will not automatically be liable to a fine from the ICO. The ICO recognise that implementation of the new law will need to be phased. However, what all web managers need to be doing now is considering and planning their options for achieving compliance. If the ICO were to make any enquiries into a website shortly after the 26 May, a response explaining such preparatory steps might well be enough to avoid any sanctions. However, failing to make any changes to your website and being unable to demonstrate any consideration of implementation methods could lead to sanctions from the ICO.

What needs to be done now?

Web managers in the UK should therefore be doing the following:

  • Ascertaining what type of cookies are used by their sites and how they are downloaded onto users’ machines (effectively a “cookie audit”).
  • Deciding on which method(s) of obtaining consent is best for their website, given the cookie audit.
  • Recording the cookie audit and implementation methods in an easily digestible form should the ICO ever investigate the site during this transitional period.

Suggested methods of implementation

The list is non-exhaustive and will doubtless get longer, but here are a few options which have been suggested to procure user consent before cookies are downloaded:

  • Pop-ups each time a cookie is to be downloaded onto a user’s machine.
  • Having in place a privacy policy setting out the site’s use of cookies; the terms of which a user must positively agree to upon visiting the site (i.e. via a tick box).
  • Settings and feature-led consent. If cookies are downloaded when a user does something e.g. watches a video or personalises the site, obtaining the user’s consent prior to that action for compliance.

Web managers should be reminded that where the use of cookies is “strictly necessary” for the disclosed central purpose of the site, no consent needs to be given by the end user to their deployment. The most common situation in which this applies will be where a website remembers the contents of a user’s shopping basket as they navigate the site.

What next?

Ultimately, it is intended that consent will be provided through users’ web browsers and the Government is currently working with the major browser manufacturers to this end.

The ICO will be drafting further advice on the new law in the near future, potentially including other suggested methods of compliance and also how and when it intends to begin enforcing the regulations.

This alert was written by Simon Halberstam (partner) at Kingsley Napley LLP. If you need assistance please contact Simon Halberstam on 020 7814 1258 or shalberstam@kingsleynapley.co.uk