Naked Law

Sky v EDS judgment out: IT suppliers beware

2010-01-27T16:06:12+00:00

IT lawyers have been muttering about the case between BSkyB and EDS (now HP-owned) for a number of years. Finally, today the judgment is out - and initial reports (and here) suggest that it doesn't look good for EDS (though the final decision on damages will come later).

In short, EDS were contracted to provide a CRM solution to BSB in Scotland for £48m. Things went wrong. BSB terminated the contract, finished the job itself for £265m and sued EDS for damages. EDS/HP argued that a £30m liability cap applied. BSB argued that a pre-contractual misrepresentation should not be subject to the cap - and it looks as though the judge agreed. Sky are reported to say that it "anticipates that EDS will be liable to pay Sky an amount of at least £200 million".

I haven't read the judgment yet - it's apparently 468 pages long - but this should make bid teams think very carefully about what representations they make when trying to make a sale ...

Tech businesses: are you up for the CRC?

2010-01-27T14:38:40+00:00

Tech businesses may be heavy users of energy so they should be aware that from 1 April they may need to register for the Government's first major climate change initiative, the Carbon Reduction Commitment (CRC - more here). The CRC is a mandatory carbon emissions trading scheme and aims to give organisations financial and PR incentives to reduce their energy use. In turn this will help the Government meet the commitment it signed up to in the Climate Change Act 2008 to reduce the UK's greenhouse gas emissions by 80% by 2050.

The scheme will work by the Government setting a scheme-wide cap on the amount of CO2 that the group of registered organisations can collectively emit in a year. Organisations will have to forecast how much CO2 they expect to emit from nearly all energy sources (not just electricity) in that year and purchase allowances from the Government to set off their expected emissions. At the end of the year, the organisations will have to calculate how much they have actually emitted and the Government will publish a league table showing each organisation's relative performance. Those at the bottom of the table will suffer monetary penalties and need to buy more allowances, not to mention that it could be a potential PR disaster.

Organisations will be required to fully take part in the first phase of the CRC if, in 2008, they had at least one half-hourly electricity meter and consumed at least 6,000 megawatt hours of electricity each year. Those organisations that have a half-hourly meter but do not meet the consumption threshold will still be required to disclose information about their electricity use to the Environment Agency.

Although calculating consumption may be tricky, it is important that organisations do not just ignore the registration requirements. Failure to do so will attract a fine of £5000, increasing by £500 daily until an organisation does register! The Government has estimated that around 5,000 organisations will need to register for full participation in the first phase of the CRC and it is highly likely that some IT intensive companies will be included in this first phase, at least for the reporting requirements if not the full trading scheme. This might mean looking at consolidation of servers, outsourcing, 'micro measurement', and optimising IT infrastructure.

Software developers: who owns your code?

2010-01-22T15:13:47+00:00

A recent High Court case provides a reminder about the ownership of IP rights in software in an employment context.

A quick recap: software is protected by copyright. Usually, the software developer will own the copyright in the software unless he is employed, in which case his employer will own it. Copyright protects the source code; it does not protect the ideas behind the software.

In Burrows v Smith, a computer games designer failed in his claims for copyright infringement and breach of confidence against his former employer.

Mr Burrows was employed as a senior games designer for Circle Studio Ltd when he proposed a game called 'Traktrix' (although he had been working on the idea for years before). Circle liked the idea and the proposal was developed into a design document but the game had to be substantially revised after receiving feedback from distributors. Mr Burrows was involved in the development of the game at both stages.

In using the game, the High Court held that there had been no breach of confidence by Circle because in proposing an idea for a game to his employer, Mr Burrows was doing exactly what he was being paid to do as a games designer. There was also no evidence to show that Circle knew Mr Burrows had been working on the game prior to his employment.

Mr Burrows alleged copyright infringement on the grounds that Circle's design document copied significant sections of an original document setting out the game concept that he had produced before working for Circle. The Court rejected the claim because no-one at Circle had ever seen this original document, and held that the only reason the design document would have incorporated parts of the original document was because Mr Burrows had incorporated those parts himself.

The result is not surprising in these circumstances, but there are a couple of other questions that weren't specifically covered:

What if Circle had known that Mr Burrows had been working on the idea prior to his employment?

Copyright does not protect an idea. The fact that Mr Burrows had the idea for the game before meeting Circle is irrelevant. If he contributed the idea as part of his employment, Circle would be entitled to use it and to write code that implements that idea. Even if Mr Burrows didn't give Circle the idea as part of his job, if they came across it by some other means then, barring some form of confidentiality arrangement between Circle and Mr Burrows, Circle would be entitled to use it.

If Mr Burrows contributed code for the game that he had written prior to joining Circle, then he would need to look at his employment contract to check what happens to the rights in that game. In the absence of an assignment of rights to the company, the likelihood is that the company would have some form of (potentially very broad) licence to use the code.

What if Mr Burrows wrote the game whilst employed by Circle but wholly in his own time?

Under statute, copyright is only automatically owned by an employer if it is created by the employee in the course of his employment. On that basis, code written in an employee's spare time and outside of the scope of what he is doing for his job would belong to the developer. However, many employment contracts (particularly for jobs that are centred around the development of IP for the company to exploit - such as software development) include the transfer of ownership to the company in much broader cases. This might capture any code developed that relates to the business of the company (eg. any computer games), whether written entirely at home and not using company resources.

The moral for both employers and employees, then, is to check the IP clauses in your contracts very carefully.

Would you like an e-Go?

2010-01-21T15:31:14+00:00

On Monday night, Mills & Reeve's Cambridge office was the venue for a talk by Tony Bishop to the Cambridge Hi-tech Association of Small Enterprises (CHASE). Tony is the man behind the business strategy, marketing and production of the award winning e-Go Aeroplanes and he explained how the e-Go project had developed out of the love for aviation that he and co-founder Giotto Castelli share.

Attendees were treated to a stunning simulator demonstration and it soon became clear that the fast and extremely manoeuvrable canard plane is not for the faint hearted. However, experienced pilots with a bit of spare cash are likely to find the £20,000 - £30,000 price tag attractive, and Tony also impressed upon us the e-Go's green credentials - it is said to be efficient and ecological, as well as exciting, ergonomic and easy to fly.

There are plans to develop an alter e-Go, with two seats instead of one, and some of the entrepreneurs in the room volunteered to help Tony with the bank loan application required for this further development, such was the desire to see the vision become a reality! It will be interesting to see if the business takes off...

Apple rationing? If Kodak gets its way...

2010-01-15T17:14:26+00:00

Over the last few months the choice of iPhone providers in the UK has increased from 1 to 4, removing for many the perceived hassle of switching networks and (hopefully) resulting in more competitive pricing. But all that could change if Kodak's complaint to the US International Trade Commission is successful.

Kodak is threatening to sue both Apple (and RIM, the manufacturer of BlackBerrys) for alleged infringement of its picture previewing patents, and has asked the ITC to prevent both companies from distributing phones which include that technology. According to reports, Kodak already licenses this technology to other major mobile phone manufacturers and Kodak's chief intellectual property officer is quoted as confirming that its "primary interest is not to disrupt the availability of any product but to obtain fair compensation for the use of [its] technology".

So they don't want to stop you buying one, but they will if they are not getting royalties for it. Entirely justifiable from an IP point of view; clearly if Apple and RIM are using Kodak's IP they should be paying for that. It's just slightly unfortunate in the context of the recently expanded UK iPhone market that those royalties would undoubtedly end up being paid by the consumer.

Licence to read? Paper v screen

2010-01-15T15:52:00+00:00

There has been a fair amount in the press recently about e-books and readers such as Kindle and the like, and whether their increasing popularity spells the end for hard copy books (eg. here and here). Personally, I just can't see that happening - the appeal of books is more than just their words, and reading on screen and without the ability to easily flick about doesn't appeal to me. But it occured to me that there's another aspect to book-buying and reading that does not easily translate from print to digital.

If I buy a book, read it and really enjoy it, I often want to lend it to someone else to read. Legally, I can do this because I own the book - which of course is not to say that I own the words. I don't. I have the right to read them and to give the book to others to read, but I largely don't have the right to copy the book and share those copies around.

But if I pay to download an e-book, I am entitled to read it on my device but I am highly unlikely to be allowed to copy the electronic file and give it to someone else. That's because the people that publish e-books want that other person to pay to download their own copy. Whereas with a book, if you give it to someone else there is still only that single copy in existence, if you transfer an electronic file to someone you are creating a second copy - which is exactly the same issue that the music industry has been battling for the last few years with file sharers. I could just give my reader device to someone else with the e-book on it, but that's neither economical or convenient - I'm presumably going to want to hang on to the device to read the next book.

As with the music industry, I assume e-book publishers will try to use a combination of technical security and pricing to protect revenues from e-book downloads - although physical books are so cheap now due to Amazon and other online retailers that I can't see myself being tempted away from the real thing. But the real legal issue here is, again, that copyright laws and the rights granted to owners of copyright were decided way before any concept of the internet existed. I imagine this will just become another battle ground between consumers' expectations and publishers' revenue generating models.

New ICO powers to penalise data breaches

2010-01-15T15:04:00+00:00

We reported back in November that the ICO had issued draft guidance on monetary penalties for serious breaches of the Data Protection Act. The guidance was approved earlier this week by the Secretary of State for Justice, Jack Straw MP, and is expected to come into force on 6 April 2010.

It means that the ICO will have the power to impose penalties of up to £500,000 on organisations for losses of personal data. The level of penalty will depend on the gravity of the breach and whether the breach was accidental or deliberate, as well as other factors, including the size of the organisation and its financial resources.

The Commissioner has said that he "will not hesitate to use these tough new sanctions for the most serious cases where organisations disregard the law". A warning for companies to comply with the data protection principles, or be prepared to pay a hefty monetary sacrifice.

M&R launches procurement portal

2009-12-22T14:44:21+00:00

Readers interested in changes to the UK's procurement regime may want to take a peek at the procurement portal we launched recently. This follows changes implemented following the Remedies Directive that took effect at the weekend. Public authorities are now more exposed to challenges if they fail to comply with the Procurement Regulations - and in particular may find that contracts are rendered "ineffective" if there is a breach.

You may also want to join in with the discussions on our new procurement law blog following further changes to procurement law ...

Updates will soon be available for your computer

2009-12-22T11:57:24+00:00

With the Noughties nearly over, the European Commission's case against Microsoft's naughty abuse of its dominant market position appears to have finally been brought to a close.

Those with good memories (or a dislike of the Internet Explorer web browser) may recall that in January 2008, the European Commission began looking into a potential breach of European competition law by Microsoft following a complaint that it was tying its Internet Explorer web browser to Windows and so abusing its dominant market position. Perhaps unsurprisingly, the European Commission took a preliminary view that by doing this, Microsoft was gaining an artificial distribution advantage on more than 90% of PCs.

Back in 2004, Microsoft was fined £331 million for bundling its Media Player with the Windows package - the European Commission decided that this also amounted to an abuse of Microsoft's dominant market position. Having already had this wallet-lightening experience, in order to deal with the web browser complaints, earlier this year Microsoft offered commitments that it would ensure PC manufacturers and users will be able to:

install any web browser on top of Windows;
make any web browser the default browser on new PCs; and
turn off access to Internet Explorer.

Last week the European Commission announced that it was making these commitments legally binding, meaning that by mid-March 2010, all internet users who have Internet Explorer set as their default web browser should have been presented with a "Choice Screen" giving them the option to switch to Apple Safari, Google Chrome, Mozilla Firefox, Opera, AOL, Maxthon, K-Meleon, Flock, Avant Browser, Sleipnir or Slim Browser. So don't forget to click on the "Install Updates" icon.

This Naked Lawyer wonders if most individuals are already too set in their ways for the "Choice Screen" to make much of a difference, but is making a New Year Resolution to try using a different browser when surfing the web.

Possibly realising that "it is more blessed to give than to receive" (Acts 20:35), Microsoft has also given a public undertaking to promote interoperability between its products and those created by other companies. Microsoft claims that this undertaking "represents the most comprehensive commitment to the promotion of interoperability in the history of the software industry". The interoperability package being offered to third parties is available from its website. There may well be some interesting experimentation going on during the teen years of the third millenium anno domini.

Cyber Monday - a good thing?

2009-12-14T12:00:18+00:00

The 7 December this year was declared by Retail Decisions (ReD) , a world leader in card fraud prevention, the busiest on line trading day of 2009. It reported that over £370m was spent on that day, with £33m being spent in the lunch hour. This is an increase in 17% over the busiest day last year.

With the top ten sales on "Cyber Monday" being electronic gifts it may be worth reminding ourselves some of the obligations imposed on on-line traders. An on-line store should, amongst other things, provide contact information for the trader, clear information about the total price for the goods, a clear product description and clear information about the consumer's rights, particularly in relation to the right to return goods for no reason within 7 days of purchase.

Earlier this year the EU carried out an investigation into misleading and unfair practices on websites selling consumer electronic goods. The EU investigated 369 sites and found that 55% of them showed irregularities. The most common one being providing misleading information about consumer rights. 66% of the problem websites generally did not inform buyers of their right to return goods or their right to receive a refund as opposed to a credit voucher.

It may therefore be worth checking your rights in the event of needing to return goods or requesting a refund and possibly not trusting what you are told!