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Technology Newsletter 05/2013

17 May 2013

Copyright Licensing Promoted by Swedish Copyright Act

The Swedish Government has suggested a number of amendments to the Swedish Copyright Act in a proposal referred to the Swedish Council on Legislation. The amendments will make it easier for authors and users to enter into agreements regarding the use of copyrighted materials. The proposal aims to extend the possibilities of using so-called “contractual licences” through which the right to use works of authors who are not represented by any organisation may be obtained by concluding a contract with such organisations. In this way, the parties on the market will be able to resolve some of the difficulties which may occur when large amounts of material are used and many authors are concerned by concluding a single contract.

According to the proposal, public authorities and companies may conclude contractual licences in order to use copyrighted works available in the workplaces. Furthermore, libraries and archives will have the corresponding opportunity to digitise their collections and make them available to the public, and radio and television companies will be able to make their programmes available via the Internet.

The proposal also includes rules on general contractual licences. Such licences would give the parties on the market the opportunity to identify situations where contractual licences are more preferable than individual contracts.

The amendments are suggested to come into force on 1 November 2013.


Extract of 11 Words Protected by Danish Copyright Act

In a judgement rendered in March 2013, the Danish Supreme Court interpreted the scope of application of the Danish Copyright Act. The Supreme Court stipulated that an extract from a newspaper or another publication comprising 11 words can receive protection under the Act.

The case concerned a specific ”data capture process” carried out by the Danish company Infopaq International A/S (“Infopaq”). The process allowed Infopaq to make electronic searches for keywords requested by customers in newspapers and other publications and to notify the customers if their keywords appeared.

The process involved the following steps:

  • Infopaq manually registered the publications concerned in a database.
  • Infopaq scanned the publications and transferred them as files to a server.
  • The server translated the files into data that could be processed digitally.
  • The files were processed to find keywords requested by customers. When a keyword was found, a file was generated and certain information was captured and sent to the customer by email. The information captured included exactly 11 words from the relevant article consisting of the keyword and its five preceding and five succeeding words. The file was then deleted.
  • At the end of the process a cover sheet was printed out in respect of all the pages where the relevant keyword was found.

The association of Danish daily newspaper publishers, Danske Dagblades Forening, which assists its members in copyright issues, alleged that the process was in violation of the Danish Copyright Act, since Infopaq was acting without authorisation from the relevant right holders.

It was undisputed that the process involved two acts of reproduction. However, it was disputed whether the reproductions (storing and subsequent printing out of 11 words) could be regarded as acts of reproduction which are copyright protected. If the reproductions were found to be protected, the parties disagreed as to whether the reproductions could be regarded as “transient” since the exclusive right of reproduction is subject to an exception, which allows acts of temporary reproduction that are “transient”.

Since the Copyright Directive (2001/29/EC) is transposed into the Danish Copyright Act, the Supreme Court referred questions to the European Court of Justice concerning the interpretation of the directive.

With reference to the judgement of the European Court of Justice, the Supreme Court stated that the process would sometimes extract sentences or parts of sentences that are subject to copyright protection. Since it was undisputed that the printing of the 11 words on a cover sheet was not a “transient” reproduction covered by the exception from the right of reproduction, the Supreme Court found that Infopaq was not allowed to apply the process.

The Supreme Court went on to assess whether the process would fulfil the conditions relating to a “transient” reproduction if the last step of the process (printing of the sheet) was disregarded. The conditions relating to a “transient” reproduction were laid down by the European Court of Justice:

” … an act can be held to be ‘transient’ only if its duration is limited to what is necessary for the proper completion of the technological process in question, it being understood that that process must be automated so that it deletes that act automatically, without human intervention, once its function of enabling the completion of such a process has come to an end.”

In light of this definition the Supreme Court stated that the evidence submitted regarding the process did not reveal whether the file was deleted promptly and without human intervention from the computer memory. Therefore the Supreme Court found the process to be in violation of the Danish Copyright Act.


Norwegian Authority Granted Protection for a Trademark Used as Keyword

The Court of Appeal for Western Sweden and the Swedish Market Court have recently ruled on disputes regarding the use of competitors' trademarks as keywords in advertising on Google AdWords. In these cases, the approach of the Swedish Courts has been quite restrictive. The Courts have, so far, dismissed all the claims made by the proprietors of the trademarks and have found that this type of advertisement does not constitute trademark infringement, misleading advertisement or taking unfair advantage of a proprietor’s trademark. In Norway, however, the Norwegian Competition Council (the ”Competition Council”) recently found that a company’s use of a competitor’s trademark in advertising on Google AdWords was not in compliance with the Norwegian Marketing Control Act.

The proprietor of a trademark, Teppeabo AS (“Teppeabo”), had claimed that Teppeland AS’s (“Teppeland”) use of Teppeabo’s trademark as a keyword fell within the scope of the general prohibition in Section 25 of the Norwegian Marketing Control Act (the “Marketing Control Act”) of acts contrary to good business practice among traders. In addition, Teppeabo claimed that the advertisement constituted misleading advertising under Section 26 of the Marketing Control Act and trademark infringement under Section 30. The Competition Council, which took guidance from the ECJ’s case law, found that the use of Teppeabo’s trademark did neither constitute misleading advertising nor trademark infringement.

However, the Competition Council held that the use of Teppeabo’s established trademark as a “hidden doorway” for network traffic to Teppeland’s website constituted an unreasonable use of Teppeabo’s efforts and results which fell within the scope of Section 25 of the Norwegian Marketing Control Act. The Competition Council emphasized that it is the goodwill which the competitor has created for the trademark that causes the Internet user to use the trademark as a keyword. Therefore, the Competition Council found that Teppeland did take unfair advantage of Teppeabo’s reputation and thus ruled in favour of the proprietor of the trademark.

The Competition Council’s approach clearly deviates from that of the Swedish Courts in the sense that the Swedish Courts have focused on the effects of the advertisement, while the Competition Council appears to prohibit the use of competitors’ trademarks as keywords as such. It remains to be seen whether this statement will have any effect on the approach of the Swedish, Finnish and Danish courts to this kind of advertisement in the future.


New Mandatory Legislation on Late Payments

New Finnish legislation implementing Directive 2011/7/EU on combating late payment in commercial transactions has entered into force as of 16 March 2013. The directive was implemented through the issuance of a new Act on Payment Terms in Commercial Contracts (30/2013), and related changes were made e.g. to the Interest Act (633/1982) and the Act on Debt Collection (513/1999).

The new legislation referred to above will apply to payments for goods or services between entrepreneurs, or between an entrepreneur and a contracting authority when the creditor is an entrepreneur. The new legislation is mandatory and cannot be deviated from to the detriment of the creditor.

According to the new legislation, if the debtor is an entrepreneur the term of payment may exceed 60 days only when this has been explicitly agreed upon. If the debtor is a contracting authority, such as e.g. a state or municipal authority or a state enterprise, the maximum term of payment is 30 days, unless the parties have explicitly agreed otherwise and the special nature and characteristics of the contract justify a deviation. In this case, the maximum term of payment for contracting authorities is 60 days.

Furthermore, the new legislation increases the statutory interest rate for late payment under commercial contracts to 8 percentage points above the prevailing reference rate in accordance with the Interest Act, which brings about an increase of one percentage point compared to the former statutory interest. Entrepreneurs are also allowed to charge a standard collection fee of EUR 40 in case of a delay in payment. A contractual provision that excludes the creditor’s right to interest for late payment or to a standardised collection fee is usually ineffective.

The new legislation will not affect contracts entered into before 16 March 2013, but commercial contracts entered into after 16 March 2013 will be subject to the new legislation.


Information Society Code - An Umbrella for Electronic Communications Provisions

The Finnish Ministry of Transport and Communications has been preparing a comprehensive reform of the legislation on electronic communications. The draft code, which consolidates nine different acts, aims at updating and harmonising the provisions on electronic communications.

The draft code introduces several improvements to the position of service users, such as improved protection of privacy, information security and safety in buying electronic services. As regards service providers, the reform aims at clarifying the legislation by e.g. simplifying the licensing system. The service providers will also be subject to new obligations in relation to consumers.

The draft code has already reached the consultation stage and the deadline for submitting comments ended on 13 May 2013.


Data Protection: Working Party 29 Adopts Opinion on Apps on Smart Devices

On 14 March 2013, the European data protection authorities and the Article 29 Working Party (WP29) published a joint opinion on the application of EU data protection legislation on mobile apps (WP29: Opinion 02/2013 on apps on smart devices, the "Opinion"). The Opinion points out the main data protection risks pertaining to mobile apps and also clarifies the legal framework and obligations thereunder as applicable to the various players involved in the development and distribution of mobile apps.

Data Protection Risks

The WP29 points out the following issues as being the main data protection risks to end users of apps: i) lack of transparency; ii) lack of free and informed consent; iii) security measures; and iv) disregard for the principle of purpose limitation.

Apps are able to collect large quantities of personal data from the end user's device. In an app context, this may include location, contacts, the unique device identifier, the identity of the user of the phone, credit card and payment data, SMS, browsing history, email messages, social network authentication credentials, pictures, videos, and biometrics etc. However, the app users are rarely given sufficient information about the processing (e.g. what data will be collected, for what purposes and by whom). In addition, insufficient security measures may lead to data breaches and unauthorised processing of personal data. Also, the apparent trend towards data maximisation and the elasticity of purposes for which personal data are being collected further contribute to the data protection risks found within the current app environment.

Legal Framework

In the Opinion, WP29 has clarified the legal framework applicable to the processing of data collected through apps. It notes explicitly that the principles of the EC Data Protection Directive (95/46/EC) apply in any case where the use of an app on a smart device involves the processing of personal data of individuals. To identify the applicable national legislation, it is essential to identify the data controller of the processed data. There are many parties involved in the development and distribution of apps and the data controller may be the app developer, the operating system and device manufacturer, the app store, and/or other third parties.

In addition, the specific consent requirement contained in Article 5(3) of the E-Privacy Directive 2002/58/EC applies to the storing or accessing of any information (not only personal data) on mobile devices. Article 5(3) of the e-Privacy Directive requires consent from the user, having been provided with clear and comprehensive information, before the placing and retrieving of information from a device.

The WP29 takes the view that EU data protection law applies not only to entities with an establishment in the EU processing personal data via an app, but also to any entity located outside the EU which collects personal data from app users located in the EU, regardless of the location of the app developer or the app store. While the WP29's opinions are not legally binding, they give a clear indication of how the data protection authorities in the EU would interpret their national laws and therefore the Opinion should be taken into account when developing new apps intended for individuals in the EU.

Key Recommendations

In its conclusion, the Opinion sets out a series of recommendations in respect of the various players involved in the development, distribution and technical capabilities of apps. The Opinion describes the obligations of app developers, app stores, operating system and device manufacturers, and third-party advertising providers. The vast majority of the conclusions and recommendations are, however, aimed at app developers since they have the greatest control over the precise manner in which the processing is undertaken or information is presented within the app. However, the other players in the app market may also be subject to the same data protection responsibilities. Key conclusions and recommendations include, among others:

  • All players must be aware of and comply with their obligations as data controllers when they process personal data.
  • App developers must provide the app end users with a readable, understandable and easily accessible privacy policy describing the processing activities. This privacy policy should be intended for European users.
  • App developers are obliged to ask for the consent of the user before the app starts to retrieve or place information on the device and they are also obliged to ask for granular consent for each type of data the app will access. Furthermore, users have the right to withdraw their consent at any time and should be provided the opportunity to do so in a simple way (e.g., via an option to uninstall the app and have all data deleted).
  • App developers must respect the principle of data minimisation and only process the data which are necessary in order to perform the desired functionality.
  • Operating system and device manufacturers should enable users to uninstall apps and ensure all user data is deleted.
  • In the same way as app developers, app stores must pay special attention to apps directed at children in order to protect them from the unlawful processing of their data. Furthermore, children’s data should never, neither directly nor indirectly, be used for behavioural advertising purposes.
  • It is recommended that app stores subject all apps to a public reputation mechanism and provide feedback channels through which users can report privacy and/or security problems.

The full Opinion is available on the website of the European Commission here.


Ban on Marketing Not Revealing Actual Total Sales Price

The Finnish Consumer Ombudsman has imposed a marketing ban due to illegal marketing on a network and telecommunication services operator (the “Company”) as a result of the Company not informing consumers of the total costs of fixed-term contracts in their marketing.

The company has been marketing mobile phone contracts, entertainment service packages and other products which have been offered through a fixed-term contract for a term varying from six months to two years. The company has highlighted the length of the contract and the required instalment to be paid for one month in an attention-attractive way in its marketing materials. However, the total costs for the whole duration of the contract have not been disclosed in the same advertisement or in an equally attention-attractive manner.

This sort of advertising is against the Finnish Consumer Protection Act (“CPA”), which requires that the total sales price, including all taxes and surcharges, must be clearly disclosed in the marketing of specific consumer products. According to the provisions of the CPA it would therefore be misleading to disclose the sales price in such a way that the consumer has to calculate the sum based on two or more figures constituting the total price. The requirements of the CPA concerning price indications are not met if the total sales price is hidden in the background of the advertisement or behind a link.

As a result of such marketing, the Consumer Ombudsman imposed a marketing ban reinforced by a conditional fine of EUR 100,000.00 on the Company. This ban further emphasises the importance of meticulous disclosure of price information.


Practical Implications of the German Federal Court´s Decision on Patentability of Stem Cells

At the end of November 2012, the German Federal Court of Justice (Bundesgerichtshof) gave its final decision in litigation between the neuroresearcher Oliver Brüstle and the environmental protection organisation Greenpeace e.V. ("Greenpeace"). In the actual case Greenpeace was seeking annulment of the German patent (German patent No. DE 19756864) held by Mr Brüstle, which relates to neural precursor cells and the processes for their production from human embryonic stem cells ("hESC") and their use for therapeutic purposes. The Bundesgerichtshof had also requested clarification from the European Court of Justice regarding the interpretation of the so called morality clause of the Biotech Patent Directive (Article 6.2.c of the Directive 98/44/EC). The final ruling by the Bundesgerichtshof confirms that methods for the use of embryonic stem cells can be patented, as long as the stem cells are harvested without destroying embryos in the process.

The Bundesgerichtshof stated in its decision that Sec. 2 para. 2 no. 3 of the German Patent Act rules out patentability if the technical teaching of the patent application necessitates destruction of human embryos or their use as a base material for the invention. Hence, the patent of Mr. Brüstle was considered invalid only to the extent that it covers precursor cells derived from hESCs which were harvested by destroying the human embryo. Otherwise the patent of Mr. Brüstle was held as valid.

Thus, patents that expressly or implicitly require destruction of human embryos are prohibited by the German Patent Act, even if the destruction of the embryo does not constitute a part of the patent claim. In practice, this means that the use of human embryonic stem cells as such is a permissible subject matter, but the technical teaching may not comprise or necessitate the destruction of human embryos. The decision has important practical implications: it is not possible to circumvent the prohibitions of the German Patent Act by innovative wordings of the patent claims. However, it is not necessary to disclose permitted harvesting methods in the patent claims either.


Disclaimer: Hannes Snellman Technology Newsletter is intended for information purposes only. It should not be relied upon as legal advice nor should it be used as a basis for any action or final decision without specifically verifying the applicability and relevant issues on their merits in each individual case.