Naked Law

Word Scrap Continues

Following on from Sarah's post earlier this year, the Scrabulous application has now been removed from Facebook but only for US and Canadian users of the site.  The removal of the application comes after Hasbro, the owner of the rights to "Scrabble" in the US and Canada, commenced legal action for copyright and trade mark infringement.  However, Scrabulous is currently still available to UK users of Facebook although perhaps not for much longer as Mattel, the owner of rights to "Scrabble" in the UK, has launched legal action against the developers of Scrabulous.

In response, those behind Scrabulous have released a new version of the game called "Wordscrapper" although it remains to be seen whether this will put an end to the disputes surrounding the game.  Scrabulous has been hugely popular with Facebook users and fans have embraced "Wordscrapper" whilst shunning online versions of the Scrabble game by Mattel and Hasbro and even calling for boycotts of Hasbro products.  This is sure to annoy Mattel and Hasbro and it will be interesting to see what happens next.

Sweet victory

How much sweeter is a perfume when it is supplied by a selected distributor? Dior, Guerlain, Kenzo and Givenchy have clearly placed their marker in the French eBay case (in the perfume claims), where they have apparently succeeded in having eBay fined for permitting the auction of genuine branded products, because they were not being supplied through the appropriate distribution channels established by Dior, Guerlain, Kenzo and Givenchy for (as well as for counterfeit products in the handbag claims, discussed in my earlier post). Of course, if the brand holders are right that no branded products for which there is an established exclusive or selective distribution network can be supplied through eBay, it could also solve the problem of counterfeit sales at a stroke, at least where the brand name is mentioned. Establish a network and eBay can exclude all such products from its auctions.

However, this does, as ipKat notes, seem to raise some rather odd questions. Where did these products originate from in the first place? If they were on the market in the EU, then the brand owners rights should have been exhausted. And presumably they were being supplied by the brand owners or distributors within the brand owners' network. If so isn't there some breakdown in this network- unless network members are supplying large enough quantities for these to be resold on eBay, in which case the brand owner has already been paid? Shouldn't the brand owners take action against them? Or more profoundly, do we seriously think that selective distribution networks are justified for something like perfumes and many other branded goods, other than as a means for maintaining high prices? I can't remember when I have been helped by a store assistant in buying a perfume.

The Establishment bytes back

Do the French eBay decision and the US Google decision mark a real turning point in the very long legal honey moon for internet businesses? The early years of the internet were often described as a Wild West where laws did not apply. Of course, only partly true. Often too many laws applied; but few were applied. And an environment thrived which has created not just large and successful businesses, but new business models which now underpin the modern economy.

However, while politicians and legislatures have recognised the value of such an economy, and provided harmonisation and light touch regulation, established businesses have seen their business models undermined, frustrated at the impotence of existing rights and enforcement regimes to provide meaningful protection. Now perhaps the tide is turning. Despite the electronic commerce directive (which is intended to provide freedom for ISPs from regulation) a French Court has fined eBay (in the handbag claims) for failing to take adequate action to remove counterfeit handbags from auction sale.

The Directive is intended (amongst other things) to ensure that ISP hosts do not have burdens placed on them to keep track of what is going on and prevent it. If a host is notified of an alleged infringement it should take suitable steps to remove it; but shouldn't that mean just to stop that (specific) act of alleged infringement, not any other ones which are like it? If a take-down notice can properly apply to a range of potential infringements other than the specific one identified then effectively the host has a monitoring requirement imposed on it, which is not permitted under the Directive; on the other hand, if it only applies to the individual identified act of infringement then a rights holder has a monumental task to police possible infringements.

There has always been a concern that if a host does more than just host - eg provides some monitoring - that it may find that it is no longer protected under the Directive. It is unclear whether eBay has ironically fallen foul of this in its attempt to provide rights holders, through its VeRo programme, with tools to assist them identifying potential infringement, or perhaps with its other restrictions such as control over who may auction trade mark goods, and the types of auction they may enter. Or is this, a French judge being persuaded to protect a French institution - the fashion industry - just evidence of the Establishment rallying its forces more effectively against e-Commerce? If not a change in sentiment within the French court system - one could be forgiven for not being very surprised that a French court has decided this way - perhaps an astute choice of forum to make the point.

Even so, there are strong signs that political pressure, even if not public sentiment, is everywhere shifting towards much more rigorous protection of intellectual property rights, and even perhaps a trace of an idea that the incumbent e-commerce service providers would not be too unhappy with some shift now that they are incumbent. Either way there are clearly some very interesting battles to be fought out here because the interests of a very free and open market which lowers the costs of intermediaries (the cost of "doing the deal") is very much in tension with the fact that making it easy to do the deal makes it easier to do the illegal deal. Some changes will undoubtedly be on the way, but let us hope that they are not ones which stifle innovative new businesses.

Where there be film, there be pirates

Domestic bliss is regularly interrupted in this Naked Lawyer's house whenever we rent a DVD and have to sit through the opening sequences. You know the ones I mean – “you wouldn’t steal a [car/handbag/puppy]”, “piracy is a crime”, “you won’t get a warranty on a pirate DVD”… (all perfectly true). But hang on: “Piracy is stealing” (and this is where I start to rattle my popcorn and shout at the screen) – no it’s not! Call me a picky lawyer (ok, I admit it), but surely “stealing” refers to the offences set out in the Theft Acts – that is, broadly, depriving someone of something tangible that belongs to them. It does not refer to copyright infringement, and the Act that sets out the infringement offences certainly does not use the language of “stealing” and “theft”. Copyright infringement does not, at its heart, involve the taking of tangible property – the whole point is that copyright is an intangible right which can only be misused (or “infringed”) by others, not put in a sack and slung over your shoulder.

Now the film industry (along with the music and software industries) would have you believe that copyright infringement is theft because you are “stealing” the money that would otherwise have been paid to them if someone had bought a genuine copy of the film/song/application rather than a pirate one. This has always seemed to me to be a gross oversimplification. Just because someone buys a fake DVD doesn’t mean, had they not been able to do so, they would have otherwise bought the real deal. In fact, I would have thought that many people simply don’t want to pay the higher prices of the genuine copies and so, if they can’t get cheaper pirate ones, may not bother at all. In any event, the loss of a chance for the film company to make some money (ie. because someone already has a fake DVD) is not the same thing as stealing money the film company already has in its bank account.

Clearly, given my profession, I would not advocate piracy or condone the distribution of fake DVDs. But I do object to the inaccurate marketing used by film makers to try to prevent it. Yes, the public should be educated as to the ownership of rights in films and what they are and are not entitled to do with their copies. But they should not be subject to veiled references to crimes which do not apply and which, to me, look like unnecessary scaremongering.

And with that, I’ll put the popcorn back down.

Larry's still not happy

Mark and I went along to the SCL's annual lecture last night to see Prof Larry Lessig talk about "corruption 2.0".  I'd not seen him speak before (though I've followed the output from his blog for some time).  Once I'd got used to his staccato powerpoint style (does every word really need a separate slide for emphasis?), I was (predictably) wowed and convinced by many of his arguments.

I particularly liked his (more familiar) arguments about the scope and effect of copyright insidiously expanding to make contemporary "read write" culture illegal - though his point that legislators do just get things wrong (climate change, copyright extension, recommended diets) - and the lack of US privacy legislation - made me feel suitably indignant.  As I was supposed to feel.

And the "remix" section was great too.  It's never a bad thing to be reminded about some of those classic YouTube moments, such as Blair and Bush duetting to Lionel Ritchie's "Endless Love".  I've always been a big fan of some of the "mashups" my pal William puts on his Christmas compilation CDs, notably including the Beatles' "Christmas Time Is Here Again" with Boston's "More Than a Feeling".

I was only sad that there weren't more people there to see the performance.  In a theatre holding up to 460, I reckon there were no more than 100 people present.  Was this because the SCL had been over-ambitious in its choice of venue?  Or the conflict with the Chelsea v Liverpool match?  Or the fact it was a Wednesday night?  Or is Prof Lessig too radical for the taste of most tech lawyers?

Fair Commentary?

Everyone seems to have a view at the moment on the ongoing Harry Potter litigation between JK Rowling and Steven Vander Ark, the maker of the Harry Potter Lexicon. Ms. Rowling and Warner Brothers Entertainment, the company that produces the Harry Potter movies, are suing Mr. Vander Ark’s publisher, RDR Books, to prevent publication of the Harry Potter Lexicon (an encyclopedia of words and phrases from the Harry Potter books).

Joan Smith in the Independent commends Ms Rowling for standing up for authors’ rights. Ms Smith points out that the typical British author earns 33% less than the national average wage and comments that Ms Rowling is "defending the rights of thousands of writers, most of whom don’t earn enough to live on".

Others have been more sceptical about the motives behind the litigation. Sunny Hostin from CNN comments that "Rowling is a billionaire and Vander Ark is a mere muggle: a librarian", suggesting that Ms Rowling is being greedy and that the case is merely a quest for more money. Ms Rowling has insisted that this case is not about money but about having control over her work.

Although, of what relevance is it that Ms Rowling is a billionaire anyway? Surely this case is about copyright infringement and whether Mr Vander Ark’s use of the Harry Potter stories constitutes fair use? Whilst everyone is busy expressing views on the motives behind the litigation and whether or not the case should have been brought, most appear undecided on the central issue as to whether Ms Rowling’s copyright has actually been infringed. Perhaps this is because, as the judge hearing the case, Judge Robert Patterson, commented "this case is in a murky state of the law". Judge Patterson has even commented, somewhat amusingly considering his profession, that "litigation is not always the best way to solve things".

It is expected that the case could go on for years if either side decide to appeal the decision (which is not expected for some weeks yet) and so it seems that we may be debating the motives for, and hopefully the outcome of, this case for years to come.

More on EULA hoops

Wendy Grossman writes an intetesting piece in The Guardian today about EULAs, following up on Sarah's recent post on the subject and picking up on the theme of confusing and convoluted drafting.  Wendy says "Eulas are becoming more, not less, important because so many devices mix hardware and software".  She also picks up on Sarah's observation that it's not always the lawyers who are to blame for bad drafting:

"One reason that so many Eulas seem so restrictive and so difficult to read, [Sarah] ... says, is that - contrary to appearances - they're often not drafted by lawyers, but instead pasted together out of pieces of text from other contracts."

When the chips are down

The Mills & Reeve team returned triumphant from the Court of Appeal recently after the Court held in favour of our client by upholding the High Court's decision in the case of (1) Laurence Wrenn (2) Integrated Multi-Media Solutions Ltd v Stephen Landamore [2007] EWHC 1833 (see IPKat's previous post on the High Court case). Rebekah Richards acted for Stephen Landamore in successfully opposing Laurence Wrenn's claim that the High Court had erred in its findings on the ownership of software written by Mr Landamore. Rebekah worked alongside the excellent Giles Fernando of 11 South Square.

I thought now would be a good time to get some inside information from Rebekah on the case. These are my questions with Rebekah's thoughts.

So remind us: what was the background?

In short, it is a software ownership dispute between our client (Mr Landamore) who is a highly skilled software engineer and Mr Wrenn who commissioned the software. The software in question enables OEM in-car audio devices to operate with other branded audio devices. Mr Wrenn is a businessman with an interest in the audio car market. In 1988, Mr Wrenn incorporated a company called In Car Developments Limited ("ICD") to market the interfaces to car manufacturers. From 2001 Mr Landamore wrote computer programs for use in different kinds of in-car audio interfaces which Mr Wrenn marketed through ICD (now insolvent). No written agreement was entered into dealing with the ownership of the software or payment of royalties. Relations between Mr Landamore and Mr Wrenn deteriorated. Mr Wrenn started to argue that he should have access to the source code. Mr Landamore claimed that there were outstanding royalties due to him from Mr Wrenn.

In April 2005, Mr Wrenn and Mr Landamore attempted to settle matters by incorporating a company known as Integrated Multi-Media Solutions Limited ("IMMS") and entering into an agreement known as the IMMS Agreement. The Agreement contained a clause relating to intellectual property in which the parties acknowledged and accepted that the rights in the software would be owned by IMMS. Mr Wrenn and Mr Landamore were joint shareholders and directors of the company. However, the IMMS Agreement was never brought into effect and IMMS remains a deadlocked company.

Eventually, in April 2006 Mr Wrenn issued High Court proceedings against Mr Landamore claiming that he owned the software and should have access to the source code of the programs. Mr Landamore counterclaimed against Mr Wrenn for unpaid royalties relating to chips which Mr Landamore had programmed with object code for Mr Wrenn.

What was the High Court's decision?

The case was heard by Robert Englehart QC (sitting as a deputy High Court Judge). The Judge held that prior to April 2005, the copyright in the software was owned by Mr Landamore subject to an exclusive royalty-bearing licence in favour of Mr Wrenn. The Judge gave effect to the IMMS Agreement in deciding that, from April 2005, the ownership to the software vested in IMMS.

As the Judge decided that the jointly owned company owned the software, he did not have to rule on the issue of whether it was owned by Mr Wrenn or Mr Landamore. However, he did go on to deal with the question of what terms the court will imply into agreements relating to the ownership of intellectual property, where there was no written agreement dealing with this issue. The Judge adopted the "minimalist approach" set out in the case of Ray v Classic FM (i.e. the court will imply the minimum term necessary to make an agreement between parties workable). In doing this, he concluded that an exclusive licence in favour of Mr Wrenn was all that would have been required to make the agreement work. It would not have been necessary to imply a term that the copyright should have been assigned to Mr Wrenn (which would give him full ownership of the software).

Turning to Mr Landamore's counterclaim for unpaid royalties, the Judge awarded him £45,324.24 plus interest. In reaching this decision, the Judge had to decide whether in making the agreement for Mr Landamore to write the software for the interfaces, Mr Wrenn was acting personally or on behalf of his insolvent company, ICD. Mr Wrenn argued that he was contracting on behalf of ICD and therefore not personally liable to pay Mr Landamore the royalties. Mr Landamore relied on various documents which suggested that Mr Wrenn viewed himself rather than ICD as the contracting party. The evidence on this issue did not paint a consistent picture as it pointed in both directions. However, on balance, the Judge concluded that the arrangement for Mr Landamore to write the software was made between them personally. Although ICD would be marketing the interfaces (and benefiting from the work), it was Mr Wrenn who had engaged Mr Landamore to do the work.

What was the basis of Mr Wrenn's appeal to the Court of Appeal?

Mr Wrenn claimed that the Judge had erred in his findings and appealed to the Court of Appeal on two grounds:

The dealings between him and Mr Landamore relating to the commissioning of the software and programming work were not personal. Instead, Mr Wrenn argued that it was his company (ICD) that had contracted with Mr Landamore and so he should not be liable to pay Mr Landamore the royalties.

The Judge's finding that Mr Wrenn was an exclusive licensee to the software should have given him an entitlement to sue personally for alleged infringements. Mr Wrenn relied on s101 of the Copyright, Designs and Patents Act 1988 ("the CDPA") which allows an exclusive licensee to take advantage of all the rights and remedies available to the copyright owner.

What did the Court of Appeal decide?

The Court of Appeal refused Mr Wrenn's appeal.

On the first ground of appeal, it had been open to the Judge in the High Court to reach the conclusion that Mr Landamore contracted with Mr Wrenn personally and Mr Wrenn was liable to pay the outstanding royalties. Although the evidence did point in both directions, it was clear that the initial contract was personal and that ICD was Mr Wrenn's vehicle.

On the second ground of appeal, it was not open to Mr Wrenn to argue that he was entitled to sue personally for alleged infringements as an exclusive licensee. This was because, as at April 2005, the copyright in the software vested in IMMS. Mr Wrenn's counsel at trial had conceded in his closing submissions that, if IMMS owns the copyright, no remedy for infringement could be claimed by Mr Wrenn. A further difficulty for Mr Wrenn was that an exclusive licensee is only entitled to sue under s101 CDPA if his licence is in writing and is signed by the copyright owner. Mr Wrenn had no written licence and an implied exclusive licence would not suffice.

Are there any lessons for software developers (or people commissioning software)?

The case highlights the problem with oral contracts and the importance of dealing expressly with IP ownership in written agreements before entering into commercial relationships. It is a lesson that people commissioning software (who have paid for this work) do not necessarily own it.

The starting point is that the first owner of the software is the author (in this case Mr Landamore) unless the author is an employee and creates the work in the course of employment. Ownership remains with the author unless it is transferred by written assignment to the commissioner. Alternatively, the commissioner could have a licence to use the software.

Where the courts are forced to intervene (as in the present case), it will generally apply the minimum term necessary to make the agreement workable (following the principle in Ray v Classic FM). Courts are very reluctant to imply full transfer of copyright to the commissioner which is often what the commissioner will be seeking.

From the software developer's point of view, an agreement clearly recording who is liable to pay royalties and the amount of royalty is clearly advisable. Otherwise, the court will have to look at the evidence of both parties (which may well be contradictory, as it was in the present case) before reaching a decision. All in all, the message is that written agreements dealing with important issues such as IP ownership helps avoid the need for time-consuming litigation to determine ownership when the relationship deteriorates.

Money for old dope

Some of us have to plan for old age and dependents. But if you were a performer the State will do it for you – at least it seems that the French State will, having undertaken during their presidency of the European Commission to resuscitate a proposal that was thought to have been put to bed once and for all. Extension of copyright protection for performers and recordings (now from 50 to 95 years, rather than the slightly more modest 70 years rejected in the Gowers Review) is apparently back on the agenda in the European Union. With majority voting on IP matters in the EU shortly to become a reality, and supporters like Cliff Richard who is to say it will not get through, especially if the big business sting is taken out of it by ensuring (at least when it is implemented) that the right belongs to the artist rather than the record company.

I suggest that we all lobby the European Parliament for an extension of performance rights to lawyers - performing in Court, performing in negotiations - entitling them to an inalienable right to a share of the benefit to their client for 95 years. That would surely make all Euro MPs vote against it. Indeed, why should this proposal not be widened to other intellectual property rights such as patents, or more generally to service providers – perhaps even to politicians for political services rendered!

A beer and open source cocktail

We are planning to mix up a heady concoction of ale and conversation (about open source software) in a Cambridge drinking establishment on Wednesday next week (27 February). 

We are hoping to bring together some interested (and, with a bit of luck, interesting) parties to chat about some of the perennial issues around open source (its "viral effect", the extent to which it can be used by businesses to make money, the concerns of investors in early stage software businesses) - as well as some more recent issues (such as changes in the new GPLv3 last year).

We have already invited a number of clients and contacts along, but if you would be interested in joining us, please send me an email, and (space allowing) I will let you know the details.