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Of course Parliament did not have Google Adwords in mind when it created the Trade Marks Act 1994 but the English courts are now having to apply 20th century trade mark legislation to 21st century technology. For a detailed explanation of what Google Adwords involves, a brief description of all the current cases, the background law and the inconsistency of decisions in courts throughout the EU please see Pitmans’ previous article on keywords on our website.

In short, there has been a flurry of cases brought by brand owners against Google for trademark infringement in order to stop their competitors buying their trademarks as keywords. The result of competitors purchasing trademarks as keywords is that Google shows adverts for competing products at the top of the results page in a sponsored link section when that trademark is entered as a search term. Google have deep pockets and are the obvious target for brand owners but are Google’s actions equal to trademark infringement? This question had been referred to the ECJ for determination.

On 23 March 2010 the ECJ handed down its first judgment in relation to Google Adwords marking the beginning of unity and clarity across Europe on this matter. The case is called Google France, Google Inc. v Louis Vuitton Malletier; Google France v Viaticum Luteciel; Google France v CNRRH Pierre Alexis Thonet Bruno Raboin Tiger, a franchisee of Unicis and involved a counterfeiter purchasing Louis Vuitton’s trademarks as keywords in conjunction with the keywords “imitation” and “copy”. Louis Vuitton brought an action against Google for trademark infringement for the supply of its trademarks as keywords.

A few key definitions were explained at the beginning of the ECJ’s judgment. The first, was that of “natural results” on Google. When an internet user performs a search on the basis of one or more words, the search engine displays sites which appear best to correspond with those words. The court called these “natural results”. Natural results differ to the adverts that appear under the heading “sponsored links” which are displayed on the right hand side of the natural results or above the natural results. The court freely used the word “ad” in its judgment instead of the word advertisement which is surprising as abbreviations are not usually accepted. The end user in this scenario was defined as a “normally informed and reasonably attentive internet user”. The exact meaning of this definition will undoubtedly need further clarification.

The three questions before the ECJ were are follows:

Must Article 5 (1) (a) and (b) Directive 89/104 be interpreted as meaning that the provider of a paid referencing service [Google] who makes available to advertisers keywords reproducing or imitating registered trade marks and arranges the display favourably on the basis of those keywords, advertising links to the sites offering infringing goods is using trade marks in a manner which the proprietor is entitled to prevent?

The ECJ held that Google is not using the mark within the meaning of the case law. For those of you who are wondering why, take a step back and think about what Google is actually doing. It is selling advertising space. Google does not chose the keywords or write the text of the advertisements for advertisers. What Google is doing is effectively no different to selling billboard advertising space to Adidas next to a Nike shop. Keywords are just an efficient method of dictating on which results page an advertisement will show.

The court expanded on its decision by stating that advertisers are using the mark within the meaning of the case law when purchasing keywords. However, the proprietor of the mark cannot oppose such use unless the use causes detriment to any function of the trademark. The relevant functions to consider in this scenario are indicating origin and the function of advertising.

The court created the following test for whether the function of indicating origin is adversely affected. “The function of indicating origin of the mark is adversely affected if the ad does not enable normally informed and reasonable attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or a third party.”

It is for the national courts to decide on a case-by-case basis whether the function of indicating origin has been adversely affected.

The advertising function of the mark was not adversely affected at all as the natural results will show the proprietor of the mark as one of the highest in the list.

In the event that the trade marks have a reputation, may the proprietor oppose such use under Article 5(2) Directive 89/104?

As the ECJ already decided in answer to the first question that Google are not using the mark within the meaning of the case-law, Google are not liable under Article 5(2) either. Please see Pitmans’ previous article for a breakdown of Article 5 Directive 89/104.

May the provider of the paid referencing service be regarded as an information society service consisting of storage of information provided by the recipient of the service within the meaning and protection provided under Article 14 Directive 2000/31?

Even though Google could not itself be liable for trade mark infringement, the court considered whether Article 14 of the E-Commerce directive could provide a defence in a situation where Google might be considered jointly liable with an advertiser.

Article 14 Directive 2000/31 states “where an information society service is provided that consists of the storage of information by a recipient of the service, Member States shall ensure that the service provider is not liable for the information stored at the request of a recipient of the service on condition that:

(a) the provider does not have actual knowledge of illegal activity or information; or
(b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information.”

The ECJ held that Google Adwords provided an information society service for the purposes of the E-Commerce Directive.

The court examined whether Google’s role is “neutral in the sense that its conduct is merely technical, automatic and passive pointing to a lack of knowledge or control of the data which it stores.” It concluded that Google’s current role of concordance between a keyword and a search term entered by an internet user is not sufficient to justify Google having knowledge or control.

Therefore, Google qualifies for exemption from liability under Article 14 as long as it has not played an active role giving it knowledge over the data stored. It must also remove illegal data expeditiously upon obtaining such knowledge. The point at which involvement by Google will go beyond passive, automatic and technical is to be determined on a case-by-case basis by the national courts.

What does this mean for brand owners?

Brand owners will not be able to stop Google providing their trademarks as keywords to competitors through Google Adwords. Brand owners will be able to stop advertisers using their trademarks in the text of their advertisements in the sponsored links if the end user cannot ascertain whether the goods/services in the ad belong to the trademark owner or the advertiser.

What does this mean for advertisers?

Advertisers are not infringing a trademark by purchasing it as a keyword as long as they ensure that their advertisements clearly show that they are not the trademark proprietor. This will be explored more by the national courts in the future.

What does this mean for Google?

The level of Google’s involvement with choosing keywords and the text of the advertisements must stay at zero. If Google gets involved with drafting advertisements or helping customers to chose keywords in the future, Article 14 may no longer provide protection.

Google must remove infringing material once notified about it. Interestingly, the American courts are currently deciding what level of knowledge Google and/or You Tube need to have about infringers before the “safe harbour” no longer applies. Obviously this is US law but the outcome might lead the way for international change. If Google wanted to be helpful to brand owners it could ask for authorisation from the trademark proprietor when a trademark is purchased as a keyword in relation to identical goods and or services.

Conclusion

The simple supply and purchase of keywords does not constitute trademark infringement. Google is free from liability at the moment but its role must remain passive.

What remains unclear is at what point will the content of the ad not enable normally informed and reasonable attentive internet users, or enable them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or a third party? The outcome of Interflora v M&S in which advertisers’ liability will be explored further by the ECJ will no doubt shed some light on this subject. You can read about the case of Interflora v M&S in Pitmans’ previous article on keywords on our website.

Holly Strube
Solicitor, Corporate

Before the recent election, amongst the battle cries about ‘Broken Britain’ and the promises about reducing the deficit, another area was being trumpeted as a key issue. In the middle of March first the Conservatives, then Labour emphasised the importance to their policies of the advance of technology in the UK. This article looks at what happened when the dust settled and what made it into the Conservative-Liberal Democrat Coalition’s programme for government.

In March, shortly following the release of the review which the Conservatives commissioned Sir James Dyson to undertake on how to turn Britain into Europe’s leading generator of new technology, the Conservatives launched the Conservative Technology Manifesto. The Manifesto contained three key commitments:

to create jobs by opening up government data to enable businesses and social entrepreneurs to use this information to build new services and applications;

to build a 21st century technological infrastructure; and

to fix Government IT procurement by breaking up government IT contracts into smaller components to allow SMEs to compete for governmental work.

How have these fared when the prospect of governing the country became a reality and compromise became the name of the game for the new Coalition government?

Open data

In the Technology Manifesto the Conservatives promised to publish government data sets in full online to enable them to be used by businesses and social entrepreneurs. They estimated (backed up by Dr Rufus Pollock) that this would create £6 billion in additional value for the UK.

Besides the above pledge the Conservatives placed emphasis on the type of information they would ensure was published, which would largely relate to public expenditure. The Technology Manifesto stated that the Tories would publish online every item of central government expenditure over £25,000 including the relevant contracts in full (with lower limits for the publishing of tender documents and local government spending), and salary details for public sector workers.

These aspirations have made it into the Coalition document pretty much unscathed. Commitments to reveal the salaries of public sector workers have prevailed and indeed, have been actioned for the top bracket of public earners already. Further, there are commitments from the Coalition to publish government ICT contracts online and to require full, online disclosure of all central government spending, contracts over £25,000 and council spending over £500 (including all contracts and tender documents in full).

Even more interestingly, these promises have been fleshed out from the initial proposals in the Manifesto: there is a commitment to ensure that data is published in an open and standardised format to maximise the potential use of the data and to minimise the cost of that usage. There is also a promise to create a ‘right to data’ allowing the public to request data sets, which should allow a more natural evolution whereby the public can access what they want rather than waiting for the government to decide what the public might want.

What does a 21st Century technological infrastructure mean in practical terms?

Broadband was a key promise area under this head. The Conservatives said they would enable the UK to be the first country in Europe to extend superfast 100 mbps broadband access across most of the population. The Coalition’s programme does not commit to the specification of the speed of broadband (perhaps they were concerned about a faux pas akin to Labour’s inadvertent promise to supply broadband at the impossibly fast two megabytes per second by 2012 rather than 2 megabits per second!) but does promise superfast broadband.

Just how to supply this service appears to have been considered more fully by the Liberal Democrats and the Conservatives. David Cameron promised before the election to “unleash private sector investment” to build his superfast broadband network, allowing Labour to voice concerns that parts of the country would be left behind since it would not be profitable to supply broadband to them. The Coalition document tackles this issue by promising to ensure that remote areas are serviced by fast broadband at the same time as more populated areas and outlines use of part of the TV licence fee as a possible way of achieving this.

Before the election the parties had begun to consider how to harness technology to improve the process of governing the country. Although everyone seemed in agreement about broadband, other ideas were a bit more varied. Labour envisaged using technology to revolutionise the provision of services to its citizens by making those services interactive and able to organically evolve, suggesting a personalised platform. Whether the Coalition will seize the possibilities and also develop a system which will allow us to deal with public services with convenience akin to internet banking remains to be seen.

An idea which has not made it into the Coalition’s programme was the Conservatives’ statement in their Manifesto that they would introduce a Public Reading Stage to allow the public to have their say as part of the legislative process, harnessing the wisdom of a wider audience to spot potential problems with bills before they become law.

IT procurement

The Coalitions’ programme for government makes a large commitment to the technology. sector by promising to consider the implementation of the Dyson Review in order to make the UK the leading hi-tech exporter in Europe. It also undertakes to refocus research and development tax credit on hi-tech companies, small firms and start-ups. Backing this up are the commitments outlined above to publish the details and content of government tender and contract documentation together with a promise to promote small business procurement by aspiring to award 25% of government contracts to small and medium-sized businesses.

The commitment to enable large ICT projects to be split into smaller components has survived and has been joined by a pledge to create a level playing field for open source software.

What does this mean for the Technology Sector?

Perhaps surprisingly given the many topics that were presumably under discussion when forming the Coalition, a great deal of the goals in relation to technology have made it into the Coalition’s programme for government despite there being no specific “Technology” heading in the document. Not only have the pledges made it into the programme despite larger, headline grabbing issues like the deficit, but they also appear to have been considered properly by the parties. It does not seem to have been the case that proposals about technology were just added to the Coalition document to bulk up the areas on which the Liberal Democrats and the Conservatives agreed!

It seems that the emphasis on Technology touted before the election has not only survived the power games but may be seriously viewed by the Coalition as part of the solution to some of our economic problems. Ideas which were in their early stages in the Technology Manifesto have been developed in what appears to be a considered way, making them more tangible. Hopefully over the next five years the majority of the UK will have increasing access to fast broadband and the possibilities for imaginative business-minded individuals will be opened up by the growing availability of datasets!

Samantha Ladbrook
Solicitor, Corporate

The long awaited judgment in the case of BSkyB-v-EDS finally arrived at the end of January amid a flurry of comments from many in the IT industry. Now that the dust has begun to settle a bit, we can begin to see what lessons are emerging from the case for both suppliers and customers, as well as their lawyers.

The Facts – in brief

Back in 2000 BSkyB entered into an agreement with EDS for the supply of an IT system which would give BSkyB a cutting edge CRM (customer relationship management) application. As part of the procurement process for the new system and in negotiations leading up to the signing of the contract, EDS made a number of statements (or representations) about its ability to build and deliver the new system to meet BSkyB’s requirements.

One of the key statements made by EDS was that go-live for the new system would be achieved in nine months. The court decided on the facts that this was a fraudulent misrepresentation by EDS and awarded interim damages to BSkyB to the tune of £200 million (the parties have now settled the case with final damages of £318 million (including legal costs) being payable to BSkyB). The deciding factor in the court’s finding of deceit was the dishonesty of the person at EDS who was responsible for ‘selling’ the new system to BSkyB. He was shown to have lied about his qualifications and experience, and to have done no credible planning or analysis to support the statement that the new system would be up and running in nine months.

Some lessons for Suppliers……

• Be very careful about just telling the customer what it wants to hear, whether in the tender documentation or in person. The customer might want to have a system which is in place by a certain date but before giving the customer that assurance, the supplier has to have undertaken a detailed planning exercise which shows that this is achievable with the timescales, completing all the necessary tasks and making use of available resources. If it is not achievable, then say so and why;

• Consider a review of your internal procedures, rules and training to ensure that your sales team does not make any statements at any stage of the bid process or during contract negotiations which are not true (or reasonably believed to be true) or against which you cannot deliver;

• Check carefully before submitting any bid documentation to the customer that all statements made in the bid can be substantiated (so that, if necessary, they can be proved with reliable evidence in court). This means that all steps in the planning process should be clearly documented and retained within the business. If the planning process involves use of white boards, make sure that the thought processes involved are captured in written form. Likewise, verbal discussions and decisions at internal planning meetings should also be captured in written documents;

• There is nothing wrong with incentivising the sales team through promises of commission and bonus arrangements, but make sure that the bid and negotiating teams are balanced by the involvement of others with financial, commercial and legal expertise. This means that sales behaviour which is incentivised by remuneration rewards should be tested and tempered by a risk management culture;

• It is good practice to have others within the company review draft tender documentation before it is submitted to the customer. This is the so-called ‘Red Team Review’. The members of this team should be made up of people who are experienced in projects of a similar nature but have had no direct involvement with the particular bid. Again, their skill set should cover financial, commercial and legal. The team should be briefed about the project and the client’s requirements. The purpose of the review is often two-fold: (i) to consider the documentation as objectively as possible and where necessary ask questions or suggest improvements and (ii) consider how the customer might score the bid against the evaluation criteria;

• Always keep an internal risk list which identifies material risks which could arise in the project and the steps to be taken to deal with or minimise such risks. The list should be created honestly and openly, identifying not only known risks for this project but also potential risks which have arisen in other similar projects. Bear in mind though that the list may have to be disclosed later as part of a court case, so what is said about each risk should be consistent with what has been said to the customer in relation to such risk; and

• As part of the recruitment process, be diligent in the background checks undertaken into your prospective employee’s experience and qualifications listed in his CV. So for example, does he really have an MBA from a recognised business school or did he really work for that company for all that time? It is better to find out about your top sales person from having been through this process rather than to later discover in court that all is not quite as it seems!

And for Customers……

• Be sensible about your requirements and how these are expressed in the ITT. These must be real business requirements rather than a wish list. So, for example, if you want the system to go-live in nine months, give reasons why and ask the supplier to identify likely risks which might prevent this. In other words, don’t put the supplier into a position where it has to put its neck on the line about timescales and/or price if it wants to win the work;

• Be prepared to engage a team of good, professional advisers to help assess the bid and to challenge statements and assumptions made by the supplier. Don’t always accept at face value what the supplier has said, especially if reliance on a statement now could lead to problems for the business in the future if it turned out not to be true (although BSkyB succeeded on its claim for fraudulent misrepresentation there were four other claims for misrepresentation made against EDS on which it did not succeed);

• When evaluating any bid, if a statement from the supplier about timescales or price seems unrealistic, be prepared to challenge that statement and if still not satisfied, maybe reject the bid in favour of one which is more realistic, but perhaps a bit more expensive. Public sector IT bids are usually evaluated against criteria to identify the most economically advantageous tender but this does not necessarily mean selecting the bid with the lowest price; and

• If you are relying on representations made by the supplier either in the bid/tender process or in contract negotiations, make sure that where these are material they are incorporated into the contract as an express term or warranty.

Anything for the Lawyers?

• The case does not introduce any new principles of law. Claims alleging fraud must still be pleaded very carefully with clear supporting evidence, and it will still be difficult to persuade the court to accept the claims. The burden of proof remains the civil standard (i.e on the balance of probabilities) with the standard of proof required being commensurate with the gravity of the allegation;

• Court cases involving claims of fraudulent misrepresentation are rare in the UK. It may be that following this highly publicised case there will be more claims of this nature made against suppliers, but there is nothing to suggest that this case will make it any easier for those claims to succeed. Having a key defence witness who was shown to be dishonest certainly helped BSkyB but may not be easy to achieve in a different case;

• The case highlights the need for entire agreement clauses to be drafted so that there is a clear acknowledgment by the customer that it has not relied on (and therefore the supplier will not be liable for) any pre-contract representations, whether innocent or negligent. It still remains that liability for fraud or fraudulent misrepresentations cannot be excluded or limited in the contract; and

• If fraudulent misrepresentation can be proved, caps on liability in the contract will not apply. This means that the customer can claim for all pecuniary loss flowing from the relevant statement. The damages will be assessed so as to put the customer in the same position it would have been in had it not relied on the false statement.

Although the case has now been settled and there will be no further court proceedings, the judgement of the court at first instance does provide us with plenty of pointers as to good market practice in an otherwise unregulated industry.

Another point to bear in mind is that the facts of this case occurred almost ten years ago. One would hope that suppliers are now better prepared and organised when it comes to putting together bids, and that customers are better advised and more realistic in what they ask their potential suppliers to deliver.

But then again, there are still problems with the delivery of many big IT projects and there will no doubt continue to be further high profile failures in both the public and private sectors. So it is not inconceivable that, despite these lessons learned, customers in future will be making similar claims for misrepresentation, breach of contract and even deceit when things do go wrong. Maybe now suppliers will be better prepared and able to resist such claims.

Andrew Priest
Partner, Information Technology

Using Open Source Software

Many software applications are now being created using open source software (OSS). In the retail industry OSS is increasingly seen in point of sale (POS) technologies as well as in software for inventory and stock management systems. Whilst the use of open source software by a retailer has certain benefits when compared to the use of proprietary software, there are also certain risks involved.

What is open source software?

OSS is software which has been written and licensed for use on the basis that it can be freely re-distributed, there is access to the source code, modifications can be made to it and works derived from it may also be distributed under the same terms as the original software licence. OSS may be ‘free’ in terms of price but it is not ‘free’ in terms of use. OSS is provided under licence and there are currently 65 different types of licence which have been approved for use with OSS. Each of these types of licence contains different terms and conditions for use of the software – some licences are ‘permissive’ in nature and contain few restrictions on how the software may be used, others are ‘restrictive’ and impose quite stringent terms. Read the rest of this entry »

Pitmans, the Thames Valley ‘Law Firm of the Year’ 2008/09 award winner, has boosted its Corporate team with the appointment of Andrew Priest as Information Technology Partner, who joins the firm’s London office from Pinsent Masons LLP.

Andrew is a senior IT lawyer specialising in IT outsourcing projects and other major IT contracts including software related arrangements and online gambling. At Pinsent Masons he led teams on numerous deals, and mentored junior lawyers. Andrew also holds an MBA from Manchester Business School.

In recent years Andrew has advised on a number of significant IT projects in both the private and public sectors including, notably, deals for Whitbread Plc (desktop outsourcing), William Hill Online (online gaming), the Legal Services Commission (delivery transformation), Vertex Data Science (IT outsourcing) and Genting Stanley Alderney (online gaming). Andrew has also previously advised on ICT arrangements for the Department for Work & Pensions, Fujitsu Services, AOL UK and the Highland Council.

Commenting on the appointment, Christopher Avery, Managing Partner at Pitmans, said:

“This new hire is in line with Pitmans’ growth plans for our firmly established London office, which recently saw the addition of a new sport and entertainment practice. Andrew’s expertise in the TMT sector will further boost the firm’s existing offering in this area”.

Andrew Priest added: “I am looking forward to developing the firm’s ICT practice, building on a good range of existing clients in London and the M4 corridor. ICT systems are increasingly important for many businesses, not only in terms of internal processing but also in enabling delivery of strategic objectives in the marketplace“.