YOU HAVE WON A NEW APPLE IPAD…

avatar Posted on May 23rd, 2013 by Mary McAvinue

…Did the heading entice you to read further? I am sorry to say – you haven’t won an Apple IPad – I was only trying to grab your attention to get you to read this blog piece! And this is exactly the type of misleading marketing activity that PhonepayPlus (the UK’s premium rate phone number and service regulator) is ramping up its efforts to stomp out in the Premium Rate Service (PRS) industry. Premium rate services are services that are charged to a customer via their mobile phone bill or deducted from the customer’s pre-paid account.

PhonepayPlus recognises that consumers are being misled by online digital marketing practices into purchasing premium rate goods and services that often they did not want and in some cases they didn’t even realise they were being charged for.  Common practices include typosquatting, clickjacking, likejacking, misleading SEM/SEO, misleading banner ads, pop-ups and pop-unders, content-lockers and spam.

In an effort to combat the misleading digital marketing practices in the PRS industry, PhonepayPlus is proposing to introduce guidance (which supports and builds on previous guidance) aimed at PRS providers who use digital tools to promote their services. The Guidance sets out PhonepayPlus’ expectations around specific digital marketing practices in order to meet the requirements of the regulator’s Code (essentially the requirements of transparency, fairness and privacy).

PRS providers who subcontract their digital marketing to third parties are not let off the hook. PhonepayPlus has found that these third parties, who are generally paid on a performance basis, are as a result, often incentivised to mislead and have been behind many of the misleading digital marketing practices it has seen in the PRS markets over the past year. The Guidance strongly reinforces that responsibility for ensuring that digital marketing is compliant with the Code remains with the PRS provider.

The introduction of this Guidance is part of PhonepayPlus’ overall strategy to ramp up its efforts to stomp out these practices, a strategy which has seen an increase in enforcement action including hefty fines for breach of the Code of Practice by PRS providers.

Providers would be unwise to ignore this opportunity to feed into and shape the regulation of the digital marketing practices of their industry. PhonepayPlus’ consultation on this draft Guidance closes on 27 June 2013.

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Don’t be a coward when approaching IP ownership

avatar Posted on May 23rd, 2013 by Chris Eastham

A recent case provides a timely reminder of just how important it is to address the ownership of intellectual property early on when embarking on a new business venture.

Last Friday, Justice Asplin handed down her judgment in the case of Coward v Phaestos Ltd [2013] EWHC 1292 (Ch).  In the case, a husband and wife team began work on a venture providing hedge fund management services to professional investors.  Key to that business was an automated system which made investment decisions based on mathematical models and algorithms implemented in software and databases.

 The partnership was founded in the early nineties, although the exact date was not agreed upon by the pair, who have since divorced.  The corporate structure of the business had, by the time this dispute occurred, become quite complex to reduce certain tax liabilities.  However, the key issue in the case was that Mr Coward, who wrote much of the software to be used by the business, did not expressly set out his ownership to the intellectual property in that software.  Following breakdown of the personal and business relationships, a dispute arose as to the ownership of the intellectual property in the software involving a number of claims and counterclaims alleging breach of copyright and database rights.

On the facts the High Court eventually held that the software formed part of the partnership assets, but lengthy and costly litigation could have been avoided if the issue had been dealt with during formation.

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Watching Cyberspace: “Snooper’s Charter” Revived?

avatar Posted on May 21st, 2013 by Chris Eastham

It was no surprise that, following opposition from several quarters, the Communications Data bill proposed by the Home Secretary Theresa May did not feature in the recent Queen’s Speech.  What was included however, was a statement that “in relation to the problem of matching internet protocol addresses, my government will bring forward proposals to enable the protection of the public and the investigation of crime in cyberspace”.  The question is, what can be achieved practically through legislation, and what impact might this have on the privacy of private communications?

The draft Communications Bill was put forward in June of last year, and was intended to give the police and intelligence services access to a wider pool of information about communications.  The proposed legislation would have given the Secretary of State powers to order telecommunications services and systems providers to generate, and retain necessary communications data (the “who, when, where and how” about a communication, but not its content).  This would have been a substantial change, as communications service providers currently only have to retain communications data that they generate as part of the day-to-day business of providing the communications service.

Opposition to the bill came from a number of sources, among them the Deputy Prime Minister Nick Clegg and privacy campaign group Big Brother Watch.  Emma Carr, Deputy Director of the campaign group stated that “recording the websites we look at and who we e-mail would not have made us safer”, and “it would have made Britain a less attractive place to start a company and put British companies in the position of being paid by the government to spy on their customers” – certainly a difficult position for any communication service provider.  As a result of the opposition, the bill was dropped in December 2012.

However, Her Majesty’s statement may be a revival of some aspects of the so-called ‘snooper’s charter’, indicating the government’s wish to pass legislation to more closely match individuals’ identities to IP addresses.  But would such legislation be feasible?  Some technology experts think not – for example Professor Tafazolli of Surrey University’s Centre for Communications Systems Research who believes that “the problem stems from the way that the fixed internet has been designed”.  There are not enough IP addresses to go around and, because more than one person may be associated with a single IP address or an IP address may be dynamically assigned (every time a person logs on), it would be technically difficult to link an IP address to a particular person.  Professor Tafazolli suggests that a person’s internet use might be linked to their device’s MAC address, but this would require a fundamental change to how addresses are allocated on the internet – something that would require global co-operation, not just legislative action in Britain.

Concern has been expressed by some commentators following the announcement as there are worries that wider powers would put innocent people at risk of wrongful suspicions, and that measures taken could in any event be bypassed by tech-savvy criminals.  However, the particular focus of the Queen’s message implies that any such measures will, if technical issues can be overcome, be less intrusive than under earlier proposals.  This may in part be driven by the government’s need to allay any fears the public may have that innocent citizens’ privacy will be under threat.

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Convergence: striking a regulatory balance

avatar Posted on May 13th, 2013 by Sean Brogan

With the continued rapid convergence of traditional and new media platforms, the European Commission has adopted a Green Paper aimed at facilitating a public discussion on the future of the audiovisual media landscape in the EU.

The paper identifies the need to develop an appropriative framework through which to continue to encourage and promote convergence whilst also maintaining the core values which underpin traditional media regulation (such as media pluralism, cultural diversity and protection of minors). Though an alternate regulatory framework is not proposed, the paper recognises the potential for changes to the legislative instruments currently in place.

Legislation such as the Audiovisual Media Services Directive and the E-Commerce Directive, which form the foundation of convergence related regulation in the EU, are relatively new beasts (the AMSD in particular was only drafted in 2007 and enacted in 2010). However, given how quickly technology in this area continues to change, impacting how we access and digest content, it is timely that a review of the current regulatory framework occurs. It will be interesting to see how the discussion unfolds, and ultimately the approach the European Commission takes towards regulation.

The deadline for submission of comments on the Green Paper is 31 August 2013 and the Green Paper can be located at https://ec.europa.eu/digital-agenda/sites/digital-agenda/files/convergence_green_paper_en_0.pdf.  

If you would like to discuss any aspect of the consultation process, you can contact me at sean.brogan@ffw.com

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G-Cloud: 3rd framework iteration goes live

avatar Posted on May 13th, 2013 by Lisa Comber

Cloud-based solutions have become more prevalent over the last decade but it is only over the last few years that the UK Government has really started to embrace cloud solutions.  As a result, in February 2012 the Government launched the “CloudStore”, an online catalogue of ICT services and products which Government departments can purchase, with complete pricing transparency.  
 
The CloudStore has been evolving quite rapidly over the last 12 months and, on its third framework iteration (known as the G-Cloud iii framework), it currently has over 700 suppliers (more than 80% are SMEs) and more than 5,000 services.  G-Cloud Programme Director and Head of IT at the Home Office, Denise McDonagh, reports that at end of March 2013 there were nearly 1,000 invoiced purchases and sales of over £18.2m.  These numbers are expected to increase as a result of the Government mandating that, from 5 May 2013, all Government departments must follow the “Public Cloud First policy”.   As a result of this policy, any Government department wishing to purchase ICT products and services must first consider whether any of the solutions being offered through the CloudStore can meet its requirements.  Only if it can demonstrate that alternative offerings offer better value for money than those offered through the CloudStore will it be able to deviate from using those cloud-based ICT products/services. 
 
Here are some key facts about the G-Cloud iii framework:
  • It is split into 4 lots: infrastructure, platforms, software and specialist cloud services. 
  • It boasts numerous benefits for Government departments including lower prices, rapid deployment, access to innovation and no stranded investment costs. 
  • Government departments do not need to run their own OJEU as the Government Procurement Service has already done this.  A mini-competition also does not need to be done (only direct awards are permitted).
  • The Government Procurement Service has agreed the call-off terms which Government departments will contract under to procure the ICT products and services. 
  • The framework lasts for 12 months (which the Government Procurement Service can extend by up to 6 months).  Individual call-off contracts can last up to 12 months or, in exceptional cases, 24 months.
  • Because the cloud market is constantly evolving, the Government plans to run new frameworks every 3 to 6 months.
  • PSN services are not currently available on the G-Cloud.
  • In support of the Government’s transparency agenda, details of all public sector spending under the framework is published in the CloudStore.
The legal terms which underpin the G-Cloud iii framework run to 59 pages, and this includes 22 pages of call-off terms.  In addition to the call-off terms, the supplier’s terms will also apply but they will not prevail over the call-off terms in the event of a conflict.  When purchasing ICT products and services, Government departments will not be allowed to alter or add any supplementary terms that materially change the G-Cloud services, including the supplier terms and the service definitions (e.g., service levels, service credits and customer responsibilities).  There are a very small number of provisions within the call-off terms which can be changed by Government departments, such as limits of liability, but no other changes are permitted. 
 
Further information can be found at: http://gcloud.civilservice.gov.uk/.

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ReDigi and UsedSoft: approaches to the re-sale of second hand downloads

avatar Posted on April 18th, 2013 by Emily Parris

In a decision earlier this month, a US district court in New York has ruled that ReDigi, the operator of an online marketplace for pre-owned music downloads, is liable for copyright infringement.  The decision is enormously important not just for the music industry where, according to the latest IFPI Digital Music Report, 35% of industry trade revenues came from digital channels in 2012, but for other digital distribution channels, including ebooks, games and movies.  The ruling will certainly have a chilling effect in the US on the creation and development of marketplaces for second hand digital assets.

The outcome of the US ruling has been keenly awaited in Europe, where the legal position on the re-sale of downloaded digital content is not certain.  Many argue that a ruling last year from Europe’s top court in a case involving Oracle and software reseller UsedSoft paves the way for the development of marketplaces for used digital items in Europe, at least in respect of software, and, potentially, more widely.

In an article published today on www.ffw.com, David Naylor and I consider the ReDigi and UsedSoft decisions and what appear to be increasingly divergent approaches in the EU and the US. 

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Update: UK consumer regulator investigates free-to-play games aimed at children

avatar Posted on April 18th, 2013 by David Lewis

On 12 April 2013, the UK Office of Fair Trading announced that it was launching an investigation into whether some “free” web and app-based games that encourage in-app purchases may violate laws protecting consumers from unfair trading practices, especially when aimed at children. The OFT is concerned that “children and their parents could be subject to unfair pressure to purchase when they are playing games they thought were free, but which can actually run up substantial costs”. It’s the first time an EU consumer protection regulator has examined online games in this way and its outcome could have a global impact.

What happens next?

As part of its investigation, the OFT has written to several developers and publishers in the online and mobile games market that use the free-to-play model. It will be conducting interviews with those companies as well as considering the views of parents and other stakeholders, before releasing a report on its findings in October 2013 and deciding whether to take any enforcement action based on the evidence it has gathered.

What is the OFT looking for?

The OFT has made it clear that it is “not seeking to ban in-game purchases” but wants to ensure that children and their parents are protected from potentially unlawful practices when using free-to-play games. The main UK legislation the OFT will refer to is the Consumer Protection from Unfair Trading Regulations 2008 (“2008 Regulations”), which implement the EU’s Unfair Commercial Practices Directive in the UK. Although each case will differ, the key factors the OFT will focus on in deciding whether a game has been marketed or sold in a way that falls foul of the 2008 Regulations include:

- whether children have been targeted and strongly encouraged to make an in-app purchase or persuade a parent / adult to do so for them; and

- whether the information given to users at the point the app is downloaded or accessed is transparent as to the true costs of playing the game.

The OFT will also be looking more broadly at whether the free-to-play model for games is generally misleading, commercially aggressive, or otherwise unfair.

Conclusions

It’s unlikely that the OFT’s investigation will lead to any proposals to change existing regulations, but the regulator has made clear that it will not shy away from taking direct action against the worst offending publishers or developers if necessary. Whilst it can publically censure companies (which can cause significant reputational damage), the OFT cannot impose civil or criminal penalties itself. However it can use the UK court system to do so and serious breaches of the 2008 Regulations can lead to a large fine and even a jail sentence. The OFT is also likely to collaborate with other regulators, such as the Advertising Standards Authority, to enforce industry codes where needed and to raise public awareness of this issue. Other EU regulators will no doubt be watching closely and may well follow suit by scrutinizing the online games market in their local territory more closely or by stepping up enforcement action.

Pending the outcome of the investigation in Q4 2013, the increasing number of companies with games that include in-app purchases or microtransactions should consider how transparently they communicate cost information to customers and would be well advised to steer clear of targeting children directly to make in-app purchases altogether.

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Software sub-licence survives termination of head licence

avatar Posted on March 7th, 2013 by Paul Barton

In a recent decision, VLM Holdings Limited v Ravensworth Digital Services Limited [2013] EWHC 228 (Ch), the English High Court held that a sub-licence of software was capable of surviving the termination of a head licence. 

The facts

VLM Holdings (the claimant) owns the copyright in certain software that facilitates online printing services.  It granted an informal licence to its UK subsidiary VLM (UK) Limited to exploit the copyright in the software.

VLM (UK) Limited granted a licence to use the software to an estate agency (“Spicerhaart”) so it could use it to print its property particulars and other documents.  When Spicerhaart started to experience problems with the printing services it received from VLM (UK) Limited and because it considered the software a business critical system it obtained a right to its own copy of the software which it hosted on its servers to promote business resilience.

VLM (UK) Limited went into liquidation and VLM Holdings terminated its informal licence to exploit the software. VLM Holdings then granted an exclusive licence in respect of the software to Ravensworth (the defendant), which was a rival printing company.  Ravensworth sought to exploit its copyright in the software and approached Spicerhaart in this regard.  Spicerhaart responded that it already had a valid licence which it had obtained from VLM (UK) Limited.

Ravensworth complained to VLM Holdings that the existence of Spicerhaart’s sub-licence negated its own exclusivity, and claimed that it was a material breach of the terms of the exclusive licence.  It terminated the agreement with VLM Holdings on the ground of that breach.  VLM Holdings then made a claim against Ravensworth for breach of the agreement, and Ravensworth counterclaimed for breach by VLM Holdings.

The key issue in the case was whether Spicerhaart’s sub-licence survived the termination of the head licence from VLM Holdings to VLM (UK) Limited.  If the sub-licence survived, VLM Holdings was in breach of the terms of its exclusive licence to Ravensworth.

The Judge’s conclusions and decision

Mr Justice Mann rejected VLM Holding’s contention that a sub-licence automatically terminates upon termination of the head licence and held, on the facts of the case, that VLM Holdings had granted to VLM (UK) Limited rights that were sufficiently wide to permit the grant of a sub-licence to Spicerhaart which was capable of surviving the termination of the head licence.  In reaching that conclusion, the judge considered the following facts were relevant:

1.                     VLM Holdings and VLM (UK) Limited had common directors.

2.                     As its trading company, VLM Holdings permitted VLM (UK) Limited to do what was necessary to exploit the software.

3.                     The Spicerhaart sub-licence was something that the directors of both VLM (UK) Limited and VLM Holdings wanted in place to further the business of VLM (UK) Limited and for the exploitation of the software generally.

4.                     Both VLM Holdings and VLM (UK) Limited knew that the purpose of the Spicerhaart sub-licence was to protect Spicerhaart from disruption to its use of business critical software and if VLM Holdings could terminate that sub-licence by terminating the informal licence to its subsidiary this purpose would be frustrated.

Spicerhaart was unaware that VLM (UK) Limited was not the actual owner of the copyright in the software. The sub-licence had described VLM (UK) Limited as the owner.  The judge took the view that VLM Holdings was to be treated as an undisclosed principal with the consequence that the permission granted to Spicerhaart was to be treated as a permission granted by VLM Holdings as well as by VLM (UK) Limited.

The judge also said that because VLM Holdings had allowed VLM (UK) Limited to include a recital in Spicerhaart’s sub-licence stating that VLM (UK) Limited was the owner of the copyright and also to conduct itself as if it was the owner, VLM Holdings was therefore estopped as against Spicerhaart from asserting its ownership free of the Spicerhaart sub-licence.

The effect of the judge’s findings was that the termination of the informal head licence between VLM Holdings and VLM (UK) Limited did not affect Spicerhaart’s licence of the software with the judge concluding that the Spicerhaart licence remains in force and that VLM Holdings was in breach of its agreement with Ravensworth by failing to give Ravensworth the exclusivity agreed.

The full judgement can be accessed here: http://www.bailii.org/ew/cases/EWHC/Ch/2013/228.html

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Tax compliance to be considered as part of public procurements

avatar Posted on February 19th, 2013 by Paul Barton

The Government has announced details of its plans to use the public procurement process to deter tax avoidance and evasion.

Under a new policy, intended to apply from 1 April 2013, bidders for contracts to be awarded by central government (that exceed the thresholds for the application of the public procurement rules) will be required to self-certify whether they have had an “occasion of non-compliance” with the tax rules. A new “pass/fail” question will be developed and will be incorporated into the standard core pre-qualification questionnaire. The answer to this question will be taken into account in the selection stage of the procurement procedure.

In addition, all contracts must include a clause requiring the supplier to keep the contracting authority notified of changes in relation to tax compliance and providing remedies in the event of non-compliance.

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European Central Bank combats payment fraud!

avatar Posted on February 8th, 2013 by Samantha Sayers

The European Central Bank (ECB) has issued EEA-wide recommendations aimed at improving the security of internet payments and increasing consumer confidence. 

Payment service providers (PSPs) that provide internet payments services – such as executing card payments or credit transfers over the internet, registering card payment data for use in e-wallets, electronic direct debit mandates and transferring e-money between electronic accounts -  are affected.  So, too, are governance authorities (GA) of payment schemes – the bodies accountable for the overall functioning of the schemes promoting payment instruments.  Online retailers will also be affected, as PSPs will have to obtain contractual assurances e-merchants that their systems meet stringent security requirements prescribed in the recommendations.  E-merchants are also encouraged to follow the ECB’s best practice guidance, although this will not be mandatory.

The recommendations are the outcome of a public consultation, and were developed by the European Forum on the Security of Retail Payments, a voluntary cooperative initiative whose members include a number of central banks of a number of EU Member States as well as regulators.  The recommendations are based on four core principles:

1. PSPs and governance authorities (GAs) should regularly assess the risks associated with providing internet payment services to keep up to date with evolving security threats

2. Initiation of Internet payments and and access to sensitive payment data (data which could be used to carry out fraud) should be protected by strong customer authentication;

3. PSPs should implement effective authorisation processes and monitor transactions to spot abnormal payment patterns; and

4. PSPs and GAs should engage in customer awareness and education programmes on security issues.

The ECB recommendations are a step-up in the regulation of internet payments and will apply in addition to the Payment Card Industry’s Data Security Standards (PCI DSS).  The existing PCI DSSs have been adopted by large organisations such as MasterCard and in 2011 theUK’s Information Commissioner emphasised that failure to comply with these standards puts companies at risk of being fined for breaking data protection laws. In addition, on 1 February 2013 the PCI SSC (Security Standards Council) issued guidelines for e-commerce security to help e-commerce companies understand and meet the security requirements of the Council.

PSPs and retailers will need to start preparing their systems to meet the 1 February 2015 implementation deadline.  This only gives organisations 2 years in which to ensure compliance. So it’s time to get serious about your security!

Posted in Information Technology, Mobile payments, Uncategorized
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