Technology Newsletter Issue 2/2014
Seeking Injunctions Based on Standard Essential Patents Violated EU Antitrust Rules - Decision by the European Commission
The European Commission found that Motorola Mobility had abused its dominant market position by having sought and enforced injunctions against Apple for its standard essential patents, even though Apple had been willing to license the patents and be bound by a court decision on the appropriate royalties (see the Commission’s press release IP/14/489, 29 April 2014). The patents had been part of a central industry standard for mobile communications technology, and Motorola had given a commitment to license the patents to other companies on fair, reasonable, and non-discriminatory terms.
The Commission also found it anticompetitive for Motorola to demand that Apple refrain from challenging the validity or infringement of the patents, and simultaneously threatened Apple with the enforcement of an injunction.
The Commission did not impose a fine on Motorola, as national courts had expressed divergent views on the legality of the injunctions on standard essential patents with regard to Article 102 of the Treaty on the Functioning of the European Union, and because the EU courts had not yet issued any rulings on this question. The Court of Justice of the European Union is expected to give its decision on the issue soon, in response to a request for a preliminary ruling regarding mobile technology patents and the abuse of a dominant market position (C-107/13 Huawei Technologies).
In a similar case against Samsung Electronics (see the Commission’s press release IP/14/490, 29 April 2014), the Commission accepted Samsung’s commitment to refrain from seeking injunctions in Europe for its standard essential patents and decided to make Samsung’s commitments legally binding. Samsung’s commitments cover a period of five years and include any company agreeing to negotiate for up to 12 months and have the licensing terms determined by a court or an arbitrator, if no agreement can be reached.
The Commission’s findings are significant as they provide some level of legal certainty regarding the availability of injunctive relief for standard essential patents. The decisions have, however, been criticised for going too far. Negotiations between the parties may be disrupted if the seeking of an injunction, not just the enforcement of an injunction, is seen as an abuse of a dominant market position.
Proposed Changes to Increase the Fairness of the Conditions Relating to Transfer of Copyright
The Finnish Ministry of Education and Culture has prepared and given a draft Government Bill proposing to revise Section 29 of the Copyright Act on the adjustment of an unreasonable condition in an agreement on a transfer of copyright. The purpose of the proposed changes is to increase the fairness of the conditions under which copyright can be transferred and the fair compensation for the transfer.
According to the draft Government Bill, if a provision of an agreement on the transfer of a copyright would be unfair compared e.g. to other similar agreements in the relevant industry, such provision may be adjusted or set aside. The assessment of fairness would apply to the payable compensation as well as to the other terms of the transfer. The draft Government Bill also sets forth several criteria which may be taken into account when evaluating the fairness of the contract, such as whether the compensation for the transfer of the copyright to the author has turned out to be disproportionate when compared to the economic benefit generated by the transferred copyright.
Generally, the proposed changes may strengthen the position of authors in relation to assignees. The draft Government Bill is currently being circulated for comments from the industry quarters.
Royalties to Swedish Musicians Following a Dispute over the Classification of a Mobile Phone
Copyswede, an organisation representing copyright holders in Sweden, took legal action against Sony Mobile demanding the mobile phone manufacturing company to pay more than SEK 2 million in royalties. Copyswede claimed that Sony Mobile’s mobile phone model W715 Walkman (imported in 2009 and 2010), with an integrated device similar to an MP3 player, obliged the company to compensate the authors pursuant to the Swedish Act on Copyright in Literary and Artistic Works. According to said act, royalties must be paid on the import or manufacturing of devices on which sounds or motion pictures may be recorded and which are especially suited for the production of copies of works for private use, such as USB memory sticks, MP3 players, recordable cassette tapes, and compact discs.
Sony Mobile objected and argued that the mobile phone was not especially suited for the production of copies of works as it was not mainly used for that purpose. The mobile phone had other features that were more important to the users and it was rarely used to copy music. Furthermore, the mobile phone’s storage capacity, in which the supplied memory card should not be included, was small (80 MB).
The Lund District Court ruled that the mobile phone – including the supplied memory card on 8 GB – was especially suited for the production of copies of works for private use. However, the court reduced the amount of the compensation to SEK 296 200, arguing that the mobile phone had a number of features not involving the copying of music and that its storage capacity was also used for purposes other than storing music, such as storing photos, videos, and games.
Unitary Patent Protection in the EU
In a recent Government Bill (prop. 2013/14:89), the Swedish Government proposed that the Swedish Parliament approve the Agreement on a Unified Patent Court (the ‘UPC’), which was signed on 19 February 2013 by 25 EU Member States. The Government Bill also includes legislative amendments necessary to adapt the Swedish Patents Act to the unitary patent protection. The amendments are proposed to enter into force at the same time as the unitary patent protection will be applicable in Sweden, which is scheduled to take place in 2015. Other legislative amendments included in the Government Bill relate to priority documents and translations, which are proposed to enter into force on 1 July 2014. The unitary patent protection will allow a patent owner to obtain a European patent with unitary effect on a one-stop-shop basis, providing cost advantages and reducing administrative burdens. The UPC will create a unified and specialised jurisdiction in patent matters, avoiding multiple parallel court proceedings possibly leading to divergent decisions, and enhancing legal certainty.
Furthermore, the Swedish Government has proposed, in said Government Bill, that the Swedish Parliament approve the agreement by Sweden, Lithuania, Latvia, and Estonia on the creation of a Nordic-Baltic regional division of the UPC, which was signed on 4 March 2014. According to the agreement, the regional division will be located in Stockholm and the procedural language will be English. The regional division will allow judges and representatives within the region to maintain and develop expertise in patent law while providing necessary proximity to the parties. This agreement between Sweden and the Baltic states is the first agreement on a regional division of the UPC. For now, Finland and Denmark will not participate in the Nordic-Baltic regional division as they plan on establishing their own local divisions of the UPC.
Finland Yet to Decide on the Ratification of the Agreement on a Unified Patent Court
The Agreement on a Unified Patent Court (the ‘Agreement’) was signed on 19 February 2013. To become effective, the Agreement must be ratified by at least 13 Member States including France, Germany, and the United Kingdom. As soon as this has taken place, the Agreement will enter into force for those 13 Member States and thereafter for any other signatory Member State who ratifies the Agreement. In Sweden, the Swedish Government has recently proposed that the Swedish Parliament approve the Agreement (please refer to article ‘Unitary Patent Protection in the EU’ above for further details). In Denmark, the Danish Government held a referendum on 25 May 2014 on the ratification and as an outcome Denmark will ratify the Agreement. Finland has not yet reached a decision on the ratification or the schedule thereof.
According to the Agreement, the participating countries may set up a local or regional division of the Court of First Instance. As preliminary measures, discussions regarding the division set-ups have been held between the Nordic Countries and the Baltic States. The outcome of these discussions was a so-called decentralised regional division model in which Sweden and the Baltic States will participate and the sole procedural language of which will be English. Finland has found the one-language system and the decentralised model, where sessions are held in different countries of the regional division, problematic from the perspective of the parties. Because of this, Finland has decided to opt out of the regional division and, should it decide to ratify the Agreement, it intends to set up its own local division to act in connection with the Market Court.
Russian Civil Code - Changes to the Procedure for Entering into License Agreement for the Use of Computer Programmes and Databases
One of the key changes made to the fourth part of the Russian Civil Code devoted to intellectual property rights, is the changes relating to the conclusion of a licence agreement on the use of computer programmes and databases in electronic form. The changes are expected to enter into force on 1 October 2014.
The current Article 1286 of the Russian Civil Code stipulates that a licence agreement for the use of computer programmes and databases can be entered into in a simplified manner. It is sufficient to specify the conditions of such a contract on a physical medium (CD-ROM) accompanying the computer programme or database or on the box in which it is sold. By playing the disc on the computer, the user agrees to the relevant terms and conditions and the licence contract is thereby created.
According to the new amendments of the Russian Civil Code, the above-mentioned rules relating to the simplified manner of entering into a licence agreement will also be applied if the terms and conditions of the licence agreement are presented to the user in an electronic form. This is relevant in connection with the sale of programmes and databases over the Internet. By activating the programme or database on a computer, the user automatically agrees to the terms and conditions of the licence agreement, thereby giving rise to such an agreement.
Additionally, as a result of the amendments, the licence agreements will also be considered royalty-free, unless the parties have agreed upon the amount of the remuneration in the contract.
EU Data Protection Regulation Leaps Forward - Proposal for Regulation Accepted by Parliamentary Vote
The European Commission proposal for a data protection regulation (the ‘Regulation’) was passed by a vote of 621 to 10 with 22 abstentions in the European Parliament plenary session on 12 March 2014. The main content of the Regulation, which is proposed to replace the current Data Protection Directive from 1995, has been briefed in the previous issues of HS Technology Newsletters (please see HS Technology Newsletters 3/2013, 9/2013 and 12/2013). The vote by the Parliament follows the lead European Parliamentary Committee’s (i.e. the Committee on Civil Liberties, Justice and Home Affairs, LIBE Committee) positive opinion, which was adopted by the LIBE Committee in October 2013. The LIBE Committee had substantially changed the original draft legislative text proposed in January 2012 by the European Commission (please see a summary of the changes HS Technology Newsletter 12/2013).
The passing of the reform in the plenary vote means that there is no need to start the legislative process over in the Parliament even if the composition of the Parliament changes following the upcoming European elections this May. To become law, the proposed Regulation has to be adopted by the Council of the European Union, currently in the process of defining its position for negotiations with the European Parliament. However, in contrast to the European Parliament, the Member States in the EU Council have been unable to find common ground on a number of issues and have called for further technical analysis. Thus, although the Parliament’s vote paves the way for the Parliament to enter into trilateral negotiations on the final text of the Regulation with the EU Council and the Commission, given the previous course of the adoption process, the negotiations with the EU Council will no doubt be lengthy and the EU institutions’ aim of finalising the Regulation by the end of 2014 seems still rather ambitious.
The CJEU’s Landmark Ruling on the ‘Right to Be Forgotten’
An internet search engine operators’ responsibility for the processing of personal data on third-party web pages was established by the Court of Justice of the European Union (‘CJEU’) in an epochal ruling on 13 May 2014.
The case (C-131/12 Google Spain v AEPD and Mario Costeja González) concerns a request for the removal of a newspaper announcement referring to the claimant, a Spanish national Mr Costeja González. The announcement, for a real-estate auction for the recovery of the claimant’s social security debts, was visible on the website of a local newspaper, which was first requested to remove it from its site. Secondly, either Google Spain or Google Inc. was requested to remove or conceal the personal data relating to the claimant so that the data would no longer appear in the search results and in the links to the newspaper’s web page.
The request against the newspaper was rejected in the early national stages of the proceedings, but the second request, against Google, was upheld and brought before the CJEU by a Spanish court.
In the interpretation of the provisions of the applicable 1995 EU Data Protection Directive (the ‘Directive’), three notable and expansive perceptions were established by the CJEU:
- Google activities were seen to constitute data processing. The Court noted that the activities of a search engine were classified as data ‘processing’, as it ‘collects, retrieves, records, organises, discloses, and makes available’ personal data. The Court further noted that the activities were classified as data processing even where they exclusively concerned material that has already been published by third parties.
- Wide territorial scope of application of the Directive. Google Spain is a Spanish subsidiary to US-based Google Inc. It promotes and sells advertising space on Google, orienting its activities towards Spanish inhabitants. As Google Spain was held to fall within the material scope of the Directive as a data controller, the provisions of the Directive regarding the territorial scope of the data processing became applicable. The Court found that Google Spain’s activities of promoting and selling advertising space fulfilled the criteria of effective and real exercise of activity through stable arrangements, as set out in the Directive. The interpretation enabled the court to treat the controller as a single economic unit consisting of Google Spain and Google Inc. together.
- Google was established as a data controller. The Court held that when the operator of the search engine determines the purposes and means of the processing of the data, the operator is to be understood as the data ‘controller’ within the definition of the Directive.
Only a few weeks after the ruling, Google is facing a surge of requests for the removal of online content. The long-term implications of the ruling are also weighty, as the stand taken by the CJEU substantially widens the scope of application of the Data Protection Directive, both territorially and materially. The currently effective Directive is in the process of being replaced by an EU Data Protection Regulation, and the institutionalisation of the ‘right to be forgotten’ is included in the proposal. The implications of the ruling are problematic in many respects. As the CJEU repeatedly emphasised in its ruling the fact that the privacy and data protection implications of the processing by a search operator are ‘distinct from and additional to’ the implications of publishing on a web page, further demarcation is to be expected in the near future.
Second EU Payment Service Directive
The first EU Directive on Payment Services (‘PSD’) was adopted in 2007 and it entered into force in 2009. According to the European Commission, the PSD aims, among other things, to establish a modern and comprehensive set of rules applicable to all payment services in the EU, and to make cross-border payments as easy, efficient, and secure as national payments within a Member State. In July 2013, a proposal for a second Payment Service Directive (‘PSD2’) was presented by the European Commission. It has now been handed over to the European Council and the European Parliament, and provided that there are no delays, it could be adopted later this year, whereby it would enter into force at some point in 2016.
The new Directive introduces the concept of a ‘third party payment service provider’ (‘TPP’) into European law. According to the PSD2, a TPP is a payment service provider that provides services based on access to payment accounts in the form of either ‘payment initiation services’ or ‘account information services’. In short, payment initiation services mean services where, at the payer’s request, the TPP can check for the availability of funds in the payer’s bank account, as well as request and initiate a payment. Account information services mean that the TPP will be able to access the information contained in the payer’s bank account. These types of services are not new as such, but have largely been unregulated at the EU level. Among other things, the services can be used by individuals for a smoother experience when paying for services online. Instead of individuals having to provide their payment details every time they buy something online, they could complete a transaction with only a few clicks, while the TPP actually initiates the payment ‘behind the scenes’.
Assuming that the PSD2 is adopted, Member States will have to ensure that payers have the right to make use of a TPP in order to obtain payment initiation services and account information services. On the other hand, the TPP will have obligations of its own. For example, the personalised security features of the user must not be accessible to other parties, and sensitive payment data or personalised security credentials must not be stored. However, some unresolved issues remain. For example, the European Payments Council has noted that, according to the proposal for the PSD2 in its current form, in case of an unauthorised payment transaction in which a TPP is involved, it is the account servicing payment service provider (bank) that has to refund the amount of the unauthorised payment transaction to the payer. In other words, it is the bank that has the primary responsibility towards the payer in case anything goes wrong, even if this is a result of TPP involvement. However, the bank may afterwards be able to claim financial compensation from the TPP. It is still too early to say what the effects of the PSD2 will be since it has not yet been adopted, and it is likely that the last word has not yet been said regarding its wording. However, if adopted, the PSD2 will certainly clarify the legal position of both TPPs and related services, releasing them from the legal limbo in which they are currently hovering.
Data Retention Directive Declared Invalid
On 8 April 2014, the Court of Justice of the European Union (the ‘CJEU’) declared the Data Retention Directive (2006/24/EC, the ‘Directive’) to be invalid.
The Directive aims to harmonise the Member States’ provisions on the obligations of the providers of publicly available electronic communications services or of public communications networks with respect to the retention of certain data generated or processed by them, in order to ensure that the data are available for the purpose of the investigation, detection and prosecution of serious crime, such as organised crime and terrorism.
The CJEU’s decision came in response to the requests for a preliminary ruling by the Irish and Austrian courts on the question of whether the Directive complied with the EU Charter of Fundamental Rights, namely the right to respect for private life and the right to the protection of personal data.
In summary, the CJEU ruled that the retention of data for the purpose of their possible transmission to the competent national authorities satisfies an objective of general interest, namely the fight against serious crime and public security. However, the EU legislature had exceeded the limits imposed by the requirement of compliance with the principle of proportionality by having adopted the Directive. The CJEU stated that the Directive entails ‘a wide-ranging and particularly serious interference with the fundamental rights to respect for private life and to the protection of personal data, without that interference being limited to what is strictly necessary’.
In light of the CJEU’s advocate general’s advisory legal opinion on the case from December 2013, the decision to overturn the Directive was somewhat expected. In Sweden, the regulatory authority has announced that it will not currently take action against operators that do not store data in accordance with the Swedish Electronic Communications Act in which the Directive’s rules on data retention were incorporated in 2012. Several operators have also stopped storing customer traffic data. Due to the current situation, the Swedish Government has set up an inquiry to examine what legislative amendments are required on account of the CJEU’s decision to declare the Directive invalid.
Privacy Authorities around the World Conduct Mobile App Sweep
This year, the Global Privacy Enforcement Network’s focus area during the international privacy sweep (the ‘Sweep’) held between 12 and 18 May 2014 was the mobile apps.
The Sweep involved 27 privacy data protection authorities from around the world, including the Finnish Office of the Data Protection Ombudsman. The Sweep focused on the ways in which mobile apps collect and use personal data, and it aimed to ensure that consumers are fully aware of these ways.
The participating authorities’ plan was to look at some of the most popular apps or apps that are of particular interest in their respective countries. Among the issues to be followed and later analysed were the ways in which the apps gather personal data, the types of consents they seek, whether those consents exceed what would be expected on the basis of the app’s functionality, and whether the apps generally comply with the transparency principles when collecting the data (e.g. whether they specify the purpose for which such data is collected).
The results of this year’s Sweep are expected to be published in autumn 2014.
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.