An IT contract is a multi-faceted vehicle for companies not only to protect their interests, but also to set the tone for customer relationships and create an image of their business for outsiders. Businesses can control the way their contracts are perceived simply by abiding by a number of standardized guidelines and ethics for creating these key legal documents.

Set out below are some top tips in drafting IT contracts to ensure that everyone involved benefits:

# 1 Plain Legal Language

Draft the contract with the reader in mind. The reader is not necessarily a lawyer nor a legal advisor. Anyone involved in the business arrangements should be able to pick up the contract and understand what has been agreed. Writing legal contracts in plain language also indicates goodwill. Although legal security should never be compromised, there is never any real incentive to burden IT contracts with superfluous legal language. Contracts should be readable to ensure customers take a real interest in what is being agreed. By adopting a simpler approach, it could reduce customer inquiries relating to contract language/comprehension — and in turn, diminish customer support requests.

# 2 Avoid Unnecessary Technical Abbreviations

In IT Contract technical abbreviations are frequently used. For example, a common abbreviation used in IT Contracts is “AAA” – or “Triple A” – which refers to a framework for intelligently controlling access to computer resources, enforcing policies, auditing usage, and providing the information necessary to bill for services. Another common abbreviation is SLA (Service Level Agreement) which is a critical annex to many IT Contracts. Those not working in the IT industry are unlikely to be aware of these acronyms so it is vital to provide for definitions in the definitions section in order to facilitate the reading and to avoid technical abbreviations which are not strictly required.

# 3 Transparency

Technology trends in the industry have moved away from obscurity in the legal language used and now tend towards much greater more transparency of language. Whether a contract is transparent or obscure speaks volumes about the approach of a company in its business dealings. Transparent contracts also indicate a positive level of trustworthiness.

# 4 Comprehensive and Short IT Contract

It is always advisable to keep the contract as short as possible: one of the main benefits of having shorter contracts is that there is less room for confusion. As a rule of thumb, stay within a maximum of 10 pages where possible. If necessary, collect all the technical information in the annexes. Also never overlook the importance of your company’s legal positing in your contractual agreements which takes priority over the length of the contract.

# 5 Balance the Use of Electronic Signatures

Many countries enable IT contracts to be signed with an electronic signature. This is quicker and easier than a handwritten signature, and in many cases carries greater evidentiary weight. However, when parties from different countries are involved in the agreement, the electronic signature may be an open issue due to different technology applied in different countries.

# 6 Balanced Agreements

IT contracts are moving away from a one sided standard drafted by the commercially stronger contractual party, i.e. the vendor, towards a fairer and more balanced starting position. Contract negotiations have a tendency to balance themselves. During the creation process it is ever more difficult to get the parties to accept the terms of a contract if they are deemed unnecessarily burdensome on one the weaker party.

# 7 Developing an Effective End User Agreement

End User Agreements act as a safety blanket for companies. Not only do they protect the company from issues which may crop up, they also speak volumes about the company to the users. They determine what sorts of liberties users and resellers can take with the software. There is a lot of nuanced information that goes into an End User Agreement so it is important to evaluate this carefully.

# 8 Don’t use NDA’s for Data Security

One of the most common tech buyer mistakes is to rely on non-disclosure agreements (NDA’s), or non-disclosure clauses, to protect data. Non-disclosure terms protect trade secrets, not data held or accessed by the vendor—and certainly not private data.

A security data clause should cover procedures for protecting data: encryption, passwords, dual control restrictions, physical protection of servers, etc. And data clauses should address compliance with laws and privacy policies, as well as e-discovery policies, which cover when and how the vendor can give data to the other party in a lawsuit.

# 9 Don’t let Exceptions Swallow your IP Indemnity

In many IT contracts, the vendor indemnifies the customer for IP suits regarding the vendor’s technology. If a third party sues the customer, claiming use of the vendor’s tech infringes a patent, copyright, or trade secret, the vendor normally defends its position and pays its own legal costs and may be ordered to pay any court settlement amount ordered.

However, the standard indemnity language may include exceptions that try to avoid vendor liability. For this reason, it is important to review all the exceptions included in the IT contract very carefully.

# 10 Include, Read, and Edit Specifications (even if you’re IT-illiterate)

It’s odd how often tech contracts fail to say what the technology is supposed to do.

Software is almost always adaptable and flexible. It can do countless complex things, so it can’t just be assumed that everyone agrees on what it is supposed to do. Warranties become vague or meaningless without good specifications, because a warranty promises that the tech will work, and no one knows what “work” means. For this reason, it is essential to have clear well drafted specifications. Once the specifications are clear and well prepared, the rest of the contract should become more effective to better protect the positions of the contracting parties.

Back in January of this year, the Commercial Chamber of the Milan Court issued an interesting order in the preliminary injunction proceedings instigated by Pest Control Office Limited against 24 Ore Cultura s.r.l., the organizer of an “unauthorized” exhibition of Banksy works of art owned by private collectors – The art of Banksy. A visual protest – and displayed in the Mudec museum of Milan.

Although it may appear as an open and shut case, one should not jump to conclusions or be misled by the use of the word “unauthorized”. To fully understand the position it’s helpful to step back and look at the wider factual framework.

While Banksy is generally well known as a somewhat mysterious and fascinating street artist who became wildly popular through his/her anti-war, anti-consumerism, anti-authoritarianism approach what is lesser well known is the role played by Pest Control Office Limited, which acts as the handling service for BANKSY. In a nutshell, Pest Control answers enquiries and determines whether Banksy is actually responsible for a certain piece of artwork, issuing the relevant paperwork.

In addition to the “anti-list” above, there is another interesting aspect: Banksy is (or maybe it is more appropriate to say – was) notoriously anti-copyright, once claiming that copyright is for losers. Yet, we are commenting here on what appears to be an interesting win – or partial win – for Pest Control Office Limited, and thus in a way Banksy, regarding the use of Banksy’s name and trademarks on merchandising products sold in the Mudec museum gift shop.

It appears that Pest Control obtained an injunction order against the marketing and sales of specific products sold in the gift shop, based on its enforcement of certain registered trademarks – owned by Pest Control – eg: for the wordmark “BANKSY” and the figurative marks “Girl with balloon” and “Rage, the Flower Thrower”. It therefore seems that this once anti-copyright artist is getting less anti-copyright…

Returning to the legal perspective: the most interesting aspects of this decision involves the use, on a variety of generic products such as stationary and similar consumer goods, of the BANSKY trademarks and the catalogue of the exhibition containing the representation of the works of art displayed in the museum.

While the Milan Court found the use of the above mentioned trademarks in promotional material for the exhibition to be lawful and in line with the principle regarding professional correctness (i.e. it does not lead to a belief that there is a commercial relationship between the parties, it does not discredit the trademarks, it does not diminish their value nor does the organizer of the exhibition present a product that imitates the product protected by the exclusivity) the Court held that a different conclusion should be reached for use of said trademarks in the case of merchandised products.

The Milan Court found that the use of the trademarks on generic consumer goods – with no correlation to the exhibition – is in itself sufficient to find that this use is indeed unlawful. Moreover, Banksy’s name placed under Bansky’s alleged quote is not sufficient to exclude an unlawful use, given how the purely commercial purpose of this combination excludes any presumed relevance to the fact that the sign is associated with a sentence attributable to the artist.

Moving onto the issue of the exhibition’s catalogue, Pest Control brought forth a claim for unfair competition, which the Court examined in great detail.

The Milan Court started by assessing whether Pest Control Office Limited was considerable as a competitor of 24 Ore Cultura s.r.l. in any way relevant under the applicable law. By examining the documentation filed in the proceedings, the Court reached the conclusion that Pest Control does operate in the same field as 24 Ore Cultura s.r.l. (i.e. exhibitions) at the very least as the entity that authorizes the exhibition of original Banksy pieces.

The Court notes that the exhibition organized by 24 Ore Cultura s.r.l. comprised works of art bought by private collectors with the artist’s authorization – once again hinting at the fact that Banksy may be leaving the door ajar to let in some IP rights when it suits him/her.

Having clarified this, the Court underlined that selling/transferring an original reproduction of the art piece, does not automatically include the transfer of the economic rights on said piece. Settled case law has established that the photographic reproduction of a work of art in a catalogue amounts to economic use of the same and falls in the scope of the artist’s exclusive right of reproduction.

That being said, 24 Ore Cultura s.r.l. produced the agreements it had with the various private collectors in which the latter authorized the reproduction of the pieces of art and granted their use for the creation of a catalogue and of merchandising.

Nonetheless, the Court found that such documentation was unable to overcome the obstacle provided by the previously mentioned transfer of rights by the artists. In other words, said agreements do not prove that the artist transferred the right of economic use to the private collectors, who, therefore, would not be in the position to transfer such rights in the first place.

However, according to the Court, this is not sufficient to satisfy an unfair competition claim, given the lack of evidence that such acts damage the party who raised the claim, namely Pest Control.

The Court, adroitly framing the matter, highlighted that Pest Control only instigated the proceedings enforcing its registered trademarks and did not instigate the proceedings on the basis of the right to economically use Banksy’s work. Moreover – and in any event – the documentation on file did not allow the Court to determine whether or not Banksy transferred his/her economic rights, including reproduction, to Pest Control Office Limited. Pest Control was therefore deemed to lack the essential requisite of the prima facie case when the Court examined its claim against the use and sale of the catalogue, and consequently lacked an essential requisite for obtaining a preliminary injunction order on the catalogue.

Thus, the Court dismissed Pest Control’s motion regarding the catalogue but granted the measures requested against the market and sale of the merchandised products.

The existence of a selective distribution network may be included among the ‘legitimate reasons’ for not exhausting trademark rights, provided that it complies with antitrust law, the trademarked product is a luxury item and there is a real harm to the image of prestige the manufacturer seeks to maintain through the adoption of a selective distribution system as a result of product marketing by third parties not belonging to the network.

Selective distribution is defined in Article 1, letter e) of Regulation (EU) No. 330/2010 as “selective distribution system’ means a distribution system where the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to distributors selected on the basis of specified criteria and where these distributors undertake not to sell such goods or services to unauthorised distributors within the territory reserved by the supplier to operate that system”.

Therefore, the prohibition of reselling products to resellers outside the network represents the distinctive feature of selective distribution, since by means of such system products are sold exclusively through resellers who meet specific standards of professional competence. This allows the manufacturer to ensure service consistency at the points of sale, coordinated management of logistics, training of specialists and monitoring of the disposal phase of unsold products.

Two recent orders of the IP Chamber of the Court of Milan sanctioned the interference with the selective distribution system legitimately implemented by the trademark holder, making findings of trademark infringement. These rulings have confirmed the situations in which there may be exceptions to the principle of trademark exhaustion once the products have been put on the market by the brand owner.

The first action was brought by L’Oréal and Helena Rubinstein against a retailer outside their selective distribution network and decided with an interim order issued on 19 November 2018. It also concerned the resale of products under the trademarks “Giorgio Armani”, “Lancôme”, “Cacharel”, “Yves Saint Laurent Beauté” and others of which the claimants in the action are licensees, in the outlets and on the e-commerce platform of an unauthorized reseller. The claimant argued, in particular, that (i) the principle of trademark exhaustion does not apply if packaging is altered by removing the Anti-Diversion Code; (ii) the lack of consent to the placing on the market of products parallelly imported from countries outside the European Economic Area; (iii) and that a deliberate interference with the selective distribution system had occurred.

The second decision was brought by Landoll as proprietor of the trademarks ‘Nashi’ and ‘Nashi Argan’, and decided with an interim order issued on 18 December 2018. It also concerned the resale of the claimant’s professional cosmetic products bearing its trademark by a reseller not belonging to its selective distribution network, who resold products online both on its own website and a third-party e-commerce platform.

Both decisions are in line with the established case-law which, in order to come within the exceptions to the principle of exhaustion, requires the following conditions to be satisfied:

(i) the selective distribution system implemented by the trademark owner complies with the antitrust rules;

(ii) the adoption of a selective distribution system is necessary to protect the trademarked products, which is particularly the case for luxury items;

(iii) the reselling methods put in place by third parties outside the network damage the image of luxury and prestige that the trademark owner seeks to maintain by means of a selective distribution system, or produce a confusing effect regarding the existence of an actual commercial link between the trademark holder and the unauthorized reseller.

 

(i) The legitimacy of the selective distribution system

The first requirement to be met is the legitimacy of the selective distribution system implemented by the trademark owner, i.e. its compliance with antitrust law is met.

According to established case law of the EU Court of Justice, a selective distribution system can be considered compliant with the rules set forth in Article 101 of the EEC Treaty, if selectivity is made necessary by particular technical requirements, linked to the peculiarities of the trademarketed products (e.g. they require special pre- and after-sales assistance services that not all dealers are able to provide), or it is necessary to protect the prestige and reputation of the brand, provided that the selection of distributors is based on “objective criteria relating to the qualifications of the seller, his staff and his facilities”, which are “laid down uniformly for all potential resellers” and “not applied in a discriminatory fashion” (CJEU, 11 December 1980, C-31/80; CJEU, 13 October 2011, C-439/09).

More recently, in a well-known case concerning the resale of luxury cosmetic products on a third-party e-commerce platform, it was confirmed that Article 101 TFEU should be interpreted as meaning that a selective distribution system for luxury items primarily aiming at preserving the luxury image of products complies with such provision on condition that the choice of retailers is made in accordance with the criteria developed by the EU case-law referred to above (CJEU, 6 December 2017, C-230/16, ‘Coty’).

It is up to the national court, which is called upon to determine whether there are ‘legitimate reasons’ for the trademark holder to be able to oppose the further marketing of its goods, to determine whether selective distribution contracts comply with antitrust law. In particular, it should verify that the distribution agreement does not contain any of the hard-core restrictions set out in Article 4 of Regulation (EU) No. 330/2010 (price, territory, consumer sales and cross-selling), or that it is exempted from market share threshold set forth in Article 3 (market share not exceeding 30%), and that the agreement complies with the three conditions for selective distribution, based on purely qualitative criteria, laid down in paragraph 175 of the Guidelines on Vertical Restraints of the European Commission – i.e. (i) the nature of the product in question must necessitate a selective distribution system, in the sense that such a system must constitute a legitimate requirement, having regard to the nature of the product concerned, to preserve its quality and ensure its proper use; (ii) resellers must be chosen on the basis of objective criteria of a qualitative nature which are laid down uniformly for all and made available to all potential resellers and are not applied in a discriminatory manner; (iii) and that the criteria laid down must not go beyond what is necessary.

In the above rulings, the Court of Milan examined the distribution contracts put in place by L’Oréal and Landoll and concluded that the quality criteria developed, implemented and used in selecting authorised dealers were fully consistent with the aim of safeguarding the luxury image of the products being distributed, that they had been applied in a non-discriminatory manner and were proportionate to the objective pursued.

In particular, the Court noted that “the general sales conditions applied by L’Oréal, in accordance with the Guidelines on Vertical Restraints of the European Commission, expressly specify that the trademarked products were intended to be sold throughout the European Economic Area through a network of authorised selective distributors on the basis of quality criteria which are described in detail …. establish in detail the quality and location of the sales outlets, the characteristics of the brand and the sales outlet, and the minimum professional skills of authorised retailers’ (L’Oréal Order, p. 11). In the same way, the Landoll ruling also noted that the adoption of a selective distribution system ‘appears to be aimed at ensuring, by means of the proven professional training of authorised persons – or by means of training and specialisation – the appropriate use of the products in relation to the needs of the final customer, thereby also contributing in this respect to the need to safeguard the image and prestige of the products’ (Landoll Order, p. 3).

 

(ii) Luxury products

Having established the existence and lawfulness of the selective distribution system, there is a requirement to assess whether there is a need to protect the trademarked products which is particularly the case for luxury items.

In this respect, EU case-law affirmed that the quality of luxury goods is not only the result of their material characteristics, but also of the style and prestigious image which bestow on them an aura of luxury, which is essential for them in order to be distinguished by consumers from other similar products. Damage to said luxury aura may therefore affect the quality of the products themselves (see CJEU, 6 December 2017, C-230/16; CJEU, 23 April 2009, C-59/08).

Therefore, according to EU case law, due to their characteristics and nature, luxury products may require the implementation of a selective distribution system to preserve their quality and ensure their proper use. However, no criteria were established to determine when a product can be considered as ‘luxury’.

In the two cases examined by the Court of Milan, the products in question were clearly considered luxury items, so that no in-depth examination of the applicability of the judgement of EU case-law was necessary in this case.

The reasoning in Coty specifically concerned luxury goods, since this was the reference subject for the preliminary ruling. However, one might ask whether it can also be applied to products of a different nature. It seems reasonable to presume that the reasons justifying the legitimacy of the provisions for the distribution of luxury products can also be applied in other contexts where the same sort of protection that legitimize the adoption of a selective distribution system is necessary, or where the access of dealers to third-party e-commerce platforms is likely to undermine the legitimate objectives pursued by choosing this form of distribution, such as, for instance, ensuring pre-sales consultancy for a proper use of the product.

 

(iii) The Existence of Prejudice

The trademark owner must then prove that the resale methods put in place by the third party outside the network is such as to damage the reputation of the products bearing the mark and the image of luxury and prestige that the trademark owner seeks to maintain precisely by means of the adoption of a selective distribution system.

The existence of a prejudice is undoubtedly the most controversial requirement, as it implies an assessment by the Court of both the third party’s specific selling methods and the conditions applied by the owner to his authorised dealers.

In this regard, both decisions examined here are in line with the quite restrictive approach already adopted in many cases by the Court of Milan, according to which the existence of a selective distribution network, even if lawful and concerning luxury goods, does not in itself exclude the exhaustion of the exclusive rights. Based on this restrictive approach, it is also necessary to prove the existence of significant harm to the trademark (or to the products bearing the trademark) caused by the third party and resulting from the factual circumstances of the case (see Court of Milan 13 March, 2016).

On this point, the L’Oréal order clarified that it would not be sufficient to demonstrate that the method adopted by the retailer outside the network does not comply with the quality standards required of authorised distributors (and therefore with the conditions laid down in the selective distribution contracts). It is still necessary to ascertain the concrete existence of a prejudice. In this respect, the order states that “the sales methods provided for by the L’Oréal selective distribution system do not constitute a parameter for the lawfulness of the defendant’s conduct. As already clarified by this Court, the conditions of sale stipulated by the holder of the right with the resellers, as clauses having inter partes effect, are not enforceable against third parties pursuant to Article 1372, second paragraph of the Italian Civil Code. The methods of selling cash & carry are not incompatible in their essence with the prestige and aura of luxury of the brand … the danger or the possibility of a serious harm would not be sufficient to justify an exception to the principle of exhaustion, but its actual existence is required. It follows thus that the harm in question must result from specific factual circumstances of the case”.

In the Court’s view, it is therefore not sufficient to show that the arrangements adopted by the third party do not comply with those imposed on authorised dealers. The trademark owner needs to prove that they are in fact detrimental to the aura of prestige of the mark.

It could be argued that in this respect the EU case-law highlights the mere lack of control by the trademark owner in the context of a sale by dealers not belonging to the network, which, according to the CJEU, leads to the existence of harm. Specifically, the CJEU in Coty stated that: “The absence of a contractual relationship between the supplier and third-party platforms is, however, an obstacle which prevents the supplier from being able to require, from those third-party platforms, compliance with the quality conditions that it has imposed on its authorised distributors. The internet sale of luxury goods via platforms which do not belong to the selective distribution system for those goods, in the context of which the supplier is unable to check the conditions in which those goods are sold, involves a risk of deterioration of the online presentation of those goods which is liable to harm their luxury image and thus their very character” (cf. “Coty”, pt. 48-49).

It would be reasonable to acknowledge that any sale outside the selective distribution system legitimately established by the trademark holder is liable to cause harm, both to the holder and to its network of authorised distributors, who undertake to comply with the conditions specifically laid down in the contract in order to protect the reputation and renown of the trademarked products. In other words, there is no need to prove a serious and significant harm to the trademark caused by the third party resulting from the factual circumstances of the case.

On January 10, 2019, the Commercial Chamber of the Court of Rome issued a decision on the applicability of the exemptions of liability provided for in Directive 2000/31 EC to internet service providers. With this decision, the video sharing platform Vimeo – which offers services similar to those of YouTube – was ordered to pay Euro 8.5 million  in damages to Mediaset – the largest commercial broadcaster in Italy.

The decision brings to an end proceedings which lasted more than six years commenced by the well-known Italian television broadcaster after realizing that numerous excerpts of its own television programmes were being published on the defendant’s platform. According to Mediaset, Vimeo – even though not itself responsible for the act of uploading – should nevertheless be held liable for such publications, since it had not removed the disputed content upon receipt of the plaintiff’s requests which were sent before and after the commencement of the proceedings.

Vimeo requested that the case be dismissed and based its defence on the argument that it was to be classified as a mere intermediary which does not control the content published by users and is therefore covered by the exemptions from liability under Directive 2000/31 EC. Regarding the requests received, before and after the start of the proceedings, Vimeo considered removing those individual videos accessible through specific links (URLs) identified by the righ tholders – and such removals were made by Vimeo – was sufficient action on its part. On the other hand Vimeo alleged that it was under no obligation to remove videos which – though extracted from the same programmes as those set in the requests – were published on different links (URLs).

With the decision of 10 January, the Court of Rome upheld the claims of the plaintiff and held Vimeo liable for negligence having failed to comply with what the Court regarded as its removal obligations.

The Judge, in reaching its decision, reiterated a consolidated approach of both the Court of First Instance and the Court of Appeal of Rome, dismissing Vimeo’s argument on the need to specify links (URLs). The Court found that there was ‘no legal basis of the sector, nor Community case-law’ which obliges the right holder to communicate link (URL) data to the provider, whereas ‘a precise indication of the programme’ titles’ must be regarded as sufficient to obtain the removal of all the videos extracted from the programmes themselves. In fact, the Court of Rome confirmed that the ‘URL is technical data that does not coincide with the individual detrimental content on the digital platform, but only represents the ‘address’ where the content is available’.

The Court of Rome also pointed out that providers are always required to comply with the ‘duty of care’ obligation so that it is reasonable to expect – in order to detect and prevent certain types of illegal activities – that the level of care required is determined by the state of the art.

In this case, in the opinion of the Court Appointed Expert, there are technologies currently in existence (so-called ‘video fingerprinting’) that allow the provider to ‘identify, within the material present on its digital platform, material corresponding to specific illegal content, even without the prior knowledge of the URL’.

According to the Court, ‘it would be reasonable’ to expect Vimeo to use the existing technology ‘to identify [ex-post] the specific audiovisual content illegally published on its website, following the appropriate request’ received by Mediaset.

Vimeo, having ‘limited itself to remove from its own website only the infringing contents’ Mediaset had identified with the URL ‘without making any further effort made possible by the state of the art to also identify and remove further audiovisual contents’ extracted from the same television programmes (reported by the copyright holder in the requests), had not been diligent. The Court also observed that Vimeo had never even argued ‘what detriment its hosting provider activity would have suffered if it had adopted the available technologies to carry out the necessary verification and control activities’.

Regarding the damages the Court used – as a benchmark – settlement agreements made between Mediaset and different providers and ordered Vimeo to pay Euros 563,00 for each minute of the videos unlawfully published.

According to the Court of Rome, the actions which – pursuant to Article 14 of Directive 2000/31 EC – must be taken by providers ‘upon obtaining knowledge of facts or circumstances from which the illegal activity or information is apparent’ may vary over time and must be assessed in the light of technological developments.

While waiting for the Supreme Court’s decision on a case concerning similar issues – expected in the coming months – the web giants will have to assess whether the procedures currently implemented to protect copyright are appropriate or if the principles expressed by recent case-law require them to update such policies taking into account their duty to remove infringing content using existing technology.

In the aftermath of the publication of the Commission’s Communication on standard essential patents (SEPs), two rival workshops were established within the framework of the European Standards Organizations CEN and CENELEC with the purpose of establishing a code on best practices for SEP licensing.

After the first workshop (WS-SEP), backed by IP Europe, produced a first draft of its Guidance for licensing SEPs in 5G and the IoT, it is now the turn of the second workshop (WS-SEP2), acting with the support of the Deutsches Institut für Normung (DIN), and jointly chaired by the Fair Standards Alliance and ACT | The App Association. On January 29, 2019, a draft document setting out principles and approaches to the licensing of standard essential patents (SEPs) for 5G technologies and IoT devices was published by the working group and is now open for consultation.

The document is an interesting read for the entire FRAND community and proposes a number of fundamental principles, the main ones being the following:

  1. Injunctions: SEP holders should not threaten or seek exclusionary remedies, including injunctions, except in exceptional circumstances and only where FRAND compensation cannot be addressed via adjudication (e.g. due to the risk of insolvency of the alleged infringer).
  2. License availability: A FRAND license should be made available to anybody wishing to implement the relevant standard, including upstream component suppliers. In addition, requests by OEMs to have the supplier engage in the process and negotiate a license with the SEP holder should not be viewed as an indication of unwillingness by the OEM.
  3. Transparency: SEP holders should provide prospective licensees with sufficient information to assess the FRAND nature of the offer, including regarding the terms of comparable licenses. Patent holders should not exploit their information advantage regarding the value of the SEP portfolio or prior licenses and should not rely on secrecy claims and NDAs to impair the possibility for licensees to valuate the portfolio on a FRAND basis (on this last point, the draft guidance also provides a template list of materials SEP holders should allegedly provide to meet their FRAND obligation).
  4. FRAND methodologies: in line with the position taken by the Commission in its Communication on SEPs, FRAND methodologies should not “include any element resulting from the decision to include the technology in the standard” and should take account of royalty stacking, to set “a reasonable aggregate rate for the standard.”

All interested parties can send comments on the draft document until March 28, 2019 (see here for additional details on the consultation process).

La blockchain si sta facendo strada anche nell’IP quale strumento di lotta alla contraffazione.

Questa tecnologia, sviluppata come sistema per concludere transazioni finanziarie e che letteralmente significa catena di blocchi, consente la creazione di un database distribuito per la gestione di transazioni condivisibili dai partecipanti alla rete, strutturato appunto in blocchi contenenti al loro interno transazioni, che sono collegati tra loro in modo tale che ogni transazione contenuta in essi debba essere validata dalla rete stessa.

Il crescente interesse per l’applicazione della tecnologia blockchain nella lotta alla contraffazione risiede nel meccanismo di aggiunta delle transazioni al registro distribuito, che consente, in sintesi, di attribuire a quest’ultimo caratteristiche di non duplicabilità, incorruttibilità e trasparenza.

La blockchain sta trovando applicazione in una sempre crescente varietà di campi tecnici, dal web-monitoring alla tracciabilità dei prodotti agroalimentari e di lusso e non solo.

Com’è noto, in Italia la norma che avrebbe attribuito una sorta di riconoscimento giuridico del sistema dei registri distribuiti (blockchain) e dell’efficacia probatoria delle transazioni ivi annotate è stata recentemente stralciata dal Decreto Semplificazioni 2019.

Notizie diverse arrivano invece dalla “terra di mezzo”. La Corte Suprema del Popolo Cinese lo scorso settembre ha emanato delle Rules che hanno ammesso la blockchain come mezzo di prova legale. Queste Rules hanno in particolare stabilito che i dati provenienti dal mondo digitale possono essere utilizzati come prove in giudizio, sempreché possano essere verificati con metodi che includono firme digitali, timestamp e blockchain.

Tutto ciò è stato accolto positivamente in un paese in cui regna la rigidità e il formalismo nella raccolta della prova e avrà conseguenze interessanti in particolare in materia di raccolta della prova nei giudizi IP, sia in materia di contraffazione, che di validità del titolo.

Includere la blockchain tra i mezzi di prova consente infatti di semplificare il gravoso onere in capo al titolare del diritto, che in Cina di norma è obbligato a disporre investigazioni e notarizzazioni di siti web, con costi e tempistiche molto elevati. Le prove che sono state archiviate e verificate su piattaforme blockchain possono dunque essere utilizzate in giudizio, senza la necessità di coinvolgere un notaio che ne autentichi l’autenticità.

Le Rules si collocano nell’ambito delle norme procedurali dei nuovi tribunali specializzati nelle controversie di internet, che si occupano di svariate materie collegate all’uso di internet nelle transazioni (Proprietà intellettuale e non solo). Questi tribunali specializzati sono stati istituiti nelle città di Hangzhou nell’agosto 2017, Beijing e Guangzhou, rispettivamente ad agosto e settembre 2018.

Recent GDPR Developments in Italy

Can we say that Italy took the new privacy rules set out in GDPR seriously?

Italian businesses have carried out many preparatory activities in view of 25 May 2018, the date of full applicability of the European Union’s General Data Protection Regulation No. 679/2016 (“GDPR”): a large number of privacy policies have been amended and updated, Data Protection Officers have been appointed and mailing lists have been reviewed and updated to comply with the new provisions

After the first few months with the GDPR in full force, this article takes a critical look at the current state of affairs

Although the GDPR has direct effect in Italian law and thus required no implementation, the Italian Council of Ministers approved a Legislative Decree (no. 101/2018) with the purpose of harmonizing the Italian Privacy Code (D. Lgs. n. 196/2003) with the new GDPR provisions. The Italian decree entered into force on 19 September 2018.

There are several new provisions regarding amongst others the consent of minors, which in relation to the direct offer of “information society services” must be given by those exercising parental responsibility where a child is under 14 years; the legal basis for data processing have been identified in laws and regulations as well as in “the performance of a task carried out in the public interest or in the exercise of official authority”; privacy policies on the management of CVs must be provided to the candidate at the time of the “first useful contact”, after the candidate spontaneously sends the CV to a company/organization; privacy requirements for small to medium sized enterprises have been simplified; new penalties have been introduced in relation to unlawful data processing; illegal communication and disclosure of data processed on a large scale; violations of the provisions on remote controls and surveys of workers’ opinions, etc.

Moreover, based on a recent public notice from the Italian Data Protection Authority (“IDPA”), it appears that the number of complaints filed with the IDPA are up 42% since 25 May this year: more than 2.500 complaints and reports have already been filed with the IDPA compared to 1,795 received in the same period last year.

In addition, the IDPA has received more than 40,000 communications of DPO data and more than 300 cases of data breaches have been notified.

In conclusion it seems the GDPR provisions have evidently been taken very seriously by Italy becoming more and more widely applied, thus enabling more effective protection of personal data.

As all FRAND aficionados should already know, with a judgment handed down yesterday the Court of Appeal of England and Wales upheld Birss J’s first instance decision in Unwired Planet v Huawei (the appeal decision is available here, whilst Birss J’s decision is available here).

In doing so, the Court agreed with the first instance court in holding that a global SEP portfolio owner can comply with its FRAND obligations by offering a worldwide licence, whose terms can be determined by the UK Courts, and, if that offer is refused by the implementer, is entitled to an injunction covering the UK territory based on the UK SEPs in dispute in the UK national proceedings.

In reaching this conclusion, the Court agreed with Birss J’s findings that global portfolio licensing is efficient and in line with industry practice of the mobile industry, echoing the relevance given to “recognised commercial practices in the field” by the CJEU’s decision in Case C‑170/13 – Huawei (not expressly cited by the Court of Appeal in support of this finding, though).

The Court also dismissed Huawei’s appeal on the non-discrimination prong of the FRAND commitment, holding that the FRAND obligation does not amount to a “most favoured nation” approach to licensing, an approach which had been rejected by ETSI at the time it set its IP Policy. Instead, in the Court’s view, a SEP holder’s FRAND undertaking only requires it to offer licences which reflect the proper valuation of its portfolio, in a global assessment which has to consider the FRAND obligation as a whole. This, of course, does not exclude the relevance of the parallel obligations stemming out of competition law, as mandated by the CJEU in its Huawei decision (which expressly refers to “licensing agreements already concluded with other competitors” as a relevant factor “to check whether [the SEP holder’s] offer complies with the condition of non-discrimination”) or in MEO-Serviços de Comunicações e Multimédia SA v Autoridade da Concorrência. This issue, and the meaning in the context of FRAND licensing of the notion of competitive disadvantage under Article 102 TFEU, was however left unaddressed by the Court, as it only focused on the obligations not to discriminate stemming out of the FRAND commitment.

Finally, the Court confirmed Briss J’s view that the steps outlined by the CJEU’s Huawei decision only amount to a safe harbour and do not automatically trigger liability under Article 102 TFEU if not complied with by the SEP holder: whether an abuse of dominance exists is to be assessed taking all circumstances of the case into account. In the Court’s view, the only exception to this principle is to be found in the SEP holder’s obligation to alert the alleged infringer prior to file suit, as the language used by the Huawei decision on the point is clear cut and excludes interpretations that do not view this step as a compulsory pre-condition for bringing action.

In terms of next steps, the Court of Appeal refused permission to appeal to the Supreme Court and, unsurprisingly, Huawei has indicated that they intend to seek permission to appeal to the Supreme Court itself.

The decision has already received a warm welcome by SEP holders, as it opens the door to global FRAND rate setting in the framework of national infringement proceedings. It is yet to be seen, however, whether the Court’s findings will remain applicable in future cases, where the defendant timely objects to jurisdiction or applies for a stay of the FRAND related issues pending resolution of other preliminary issues to be decided in foreign, more convenient, fora . These steps were indeed not taken by Huawei and it is also on this basis that the Court of Appeal dismissed Huawei’s jurisdictional challenges (see [112]). Also, should these jurisdictional issues be overcome in future cases (such as in the pending Conversant v. Huawei and ZTE appeal, where some of these issues are currenly being discussed), one is left wondering whether the current praise might soon be reconsidered, as the approach of the UK Courts is progressively adopted by jurisdictions where SEP holders might be less inclined to litigate matters such as the global FRAND rate for their entire SEP portfolios.

Also, there is one passage of the decision of the Court which is difficult to reconcile with the CJEU’s Huawei decision and the general consensus on the contents of the FRAND obligations of SEP holders. The Court of Appeal indeed disagreed with Briss J that there is only one set of FRAND terms for any given set of circumstances. In the Court’s view, it is perfectly possible that there is more than one set of FRAND terms. The Court then went on arguing that if both the SEP holder’s and the implementer’s offers are found to be FRAND, it is the offer of the SEP holder that should prevail and should be accepted by the licensee. With the words of the Court, if both the (global) license offered by SEP holder and the (national) license offered by the implementer were FRAND, “the global licence would, on this hypothesis, be fair, reasonable and non-discriminatory. It would then be a matter for the prospective licensee whether to accept it”. This of course implies that, in the Court’s view, the SEP holder would be entitled to injunctive relief against a willing licensee, i.e. against an implementer willing to take a license on terms which, even if diverging from the equally FRAND terms requested by the SEP holder, were nonetheless found to be FRAND by the Court. This is obviously a conclusion hard to agree with, which is probably the result of the fact that the point was addressed only in obiter in the decision, given that the Court had previously found that Huawei’s offer limited to the UK patents was not FRAND.

The decision also includes additional interesting findings on a variety of aspects (from the presumption of dominance conferred by SEPs, to the, partially unsatisfactory, attempt to reconcile its findings on non-discrimination with the US and German precedents on the point). We will cover them all very soon.

As the proposed “Directive on Copyright in the Digital Single Market” suffers a halt with the European Parliament declining to vote and rescheduling approval for September 2018, one of the main stumbling blocks is the likely ‘invasive’ nature Art. 13 requiring Internet Service Providers to pre-emptively scan, filter and block copyright-infringing contents which many in the industry consider too onerous.  A recent ruling by the Court of Milan, once again, had to tackle the tricky and difficult issue of the extent the ISP’s liability, determining the scope of the injunction against ISP. In particular, the Court of Milan ruled on the admissibility of a Preliminary Injunction order issued against network access providers that extends not only to the domain name whose content has been found to be illegal, but also to all the different domains that provide the same content to the public (the so-called “alias” sites). The IP Milan Chamber found that such a ruling is compatible with the general prohibition according to which ISPs do not have a surveillance obligation, challenged at the EU level, and at the same time complies with the principles of proportionality, effectiveness and dissuasiveness of PI measures.

Following the PI proceedings brought by Arnoldo Mondadori S.p.A., the Court of Milan, on 12 April 2018, ordered Fastweb S.p.A., Telecom Italia S.p.A., Tiscali Italia S.p.A., Vodafone Italia S.p.A. and Wind Tre S.p.A., in their role as network access providers,  to pay the costs for the implementation of the most appropriate technical measures that prevent users from accessing a portal that provided complete versions of Mondadori’s publications, either through the domain name “Italiashare.net” – the content of which was deemed unlawful – or through the “alias” sites, accessible through any domain name.

The case stemmed from an initial PI appeal brought by Mondadori against the same network access providers, as well as the hosting company, to obtain an order preventing access to the “Dasolo” portal by the recipients of the services, regardless of the top level domain adopted (“.it”, “.org”, “.net”). “Dasolo” illegally catalogued and provided the users with full versions of numerous magazines published by Mondadori (among many, “Chi”, “Cucina Moderna”, “Donna Moderna”, “Grazia”, “Panorama”, “Sale & Pepe”).

After having examined and distinguished the different liability profiles of the providers that perform data transport functions (the so-called “mere conduits”) and of those that store contents (the so-called “hosting” activity), the Judge for the first PI proceedings ordered the service providers to disable access “to all the sites with second-level domain name ‘dasolo’ regardless of the top level domain adopted” (“a tutti i siti con nome di dominio di secondo livello ‘dasolo’ indipendentemente dal top level domain adottato”, Milan Court, ord. 24 July 2017).

However, this measure did not prove to be sufficiently effective, since in a short time the “Dasolo” portal had become operational again by changing its second-level domain to “Italiashare”, while continuing to publish the same illegal content.

Therefore, Mondadori requested out-of-court that the network access providers adopt all the technical measures necessary to also disable this new domain. The providers refused on the grounds that a specific judicial or administrative measure would be necessary to extend the injunction to the different second-level domain “Italiashare”. Hence Mondadori’s new PI motion was aimed at obtaining a more far-reaching injunction, which could be extended to all different second-level domains that provide the same illegal content to the public (the so-called “alias” sites).

This is the framework for the recent order which is examined here. In fact, the Milan Court clarified that such an order is compatible with the fact that ISPs do not have a preventive surveillance obligation, since they are not subject to any general obligation to monitor the network, since their intervention is always subject to specific notification by the right holder.

The Directive on electronic commerce only prohibits the imposition on ISPs of a general duty of preventive surveillance, and conversely requires them to implement effective measures for both repression and prevention of offences, using the detailed reports of the right holders, who are therefore reserved a proactive role in the protection of their rights. The First Instance Court further observes that the prohibition of a general obligation to monitor is not in any event of exempting effect here, since the electronic commerce Directive provides that “this does not concern monitoring obligations in a specific case” (DIRECTIVE 2000/31/EC, Whereas No. 47).

Such an order was also considered to be both effective and proportionate. The principle of the proportionality of PI measures must always be balanced with the principle of the effectiveness of copyright protection, which requires the court to take all appropriate measures to prevent the recurrence of unlawful acts since, if, for any infringement subsequently found, the intervention of the court was necessary “no injunction could ever be issued for the future, contradicting the very nature of this type of conviction, ontologically projected to prevent the continuation and repetition of the offences to come”.

It is in this perspective that the Court of Justice has in fact ruled that injunction orders “must be sufficiently effective to ensure genuine protection of the fundamental right at issue,” that is to say “they must have the effect of preventing unauthorised access to the protected subject-matter or, at least, of making it difficult to achieve” (CJEU, 27 March 2014, in Case C-314/12, Telekabel).

The Court further observes that the admissibility of the so-called “Dynamic Injunction“, i.e. orders which also extend to sites not expressly indicated in the PI order and which therefore overcome the inconvenience of having to establish subsequent judgements to strike and pursue phenomenologically identical violations, has also been confirmed by the European Commission, when interpreting the Enforcement Directive.

The Court therefore concludes the order by requiring the Respondents, in their capacity as network access providers, take the most appropriate technical measures to prevent the recipients of their services from gaining access to the portals which provide the public with the same illegal content as that at issue in the proceedings and relating to the Magazines, either through the domain name “Italiashare.net” or through the “alias” sites, reachable through any domain name, within a maximum of ten working days of receipt of specific notification of violations reported by the applicant, with the right of the recipients of the request to reimbursement of technical costs strictly necessary and inherent to the request itself.

A positive injunction, supported by a penalty that requires ISPs to take all necessary measures to prevent access to all future alias sites that make the same illegal content available to the public and regardless of the first or second level domain actually adopted, is certainly a far-reaching order, but one that poses many implementation issues.

With particular reference to the implementation of the order, the Court of Milan, in the well-known Mediaset Premium case decided by the Court of Milan, had instead refused to extend the order to alias sites that did not yet exist, even if their content was identical, since this would have required a private party to check whether the content was lawful or not, whereas “the current legal system does not seem to allow a private party to be given the status of a body permanently delegated by the judge to fill in the preceptive content of a measure of its own” (Court of Milan, order  27 July 2016, Mediaset Premium).

The order under review seems to go beyond the conclusions of the previous Mediaset Premium in favour of a more effective protection for right holders, which is certainly desirable, following the most recent and extensive interpretation of Community case-law on the liability of intermediaries, while at the same time denoting the growing attention of national courts to the need for right holders to obtain effective measures to combat online piracy.

However, there remain the problems that the previous Mediaset case had reported with regard to the methods of execution of the PI order, since the positive order commented herein shifts the assessment of illegality to a private level, leaving it in fact to the agreement or unity of views on the illegality of the content between the holder of rights and the ISP, relegating the intervention of the judge at the time of non-compliance by the ISP to the request for disabling the alias.

With a judgement dated 26 April 2018, the General Court of the EU held that the famous Argentinian football player – and multiple Ballon d’Or winner,  Lionel Andrès Messi, could  register his mark ‘MESSI’ for sports and gymnastics clothing, footwear and equipment notwithstanding the opposition by the owner of a highly similar earlier sign “MASSI” registered  for similar goods. The trade mark applied for is represented below:

This matter commenced back in November 2011 when Mr Messi’s trademark was opposed by Mr. Jaime Masferrer Coma who had an earlier trade mark registration for clothing, shoes and bicycle helmets, protective clothing and gloves.  The Opposition Division upheld the opposition against Mr. Messi’s application on the basis of the similarity of the signs ‘MESSI’ and ‘MASSI’ and the similarity and identical nature of the goods.  Mr. Messi lodged an appeal to the Board of Appeal of the EUIPO against this initial decision but the appeal was dismissed in 2014.

According to the Board of Appeal, there would be a likelihood of confusion between the two trade marks in view of the high similarity of the signs and of the goods covered (in particular, sports equipment and clothing, though not limited to the field of football).  The Board of Appeal held that there was a likelihood of confusion because of the similarity between the dominant elements of the two marks which are almost identical visually and phonetically. Regarding the conceptual differences arising due to the fame of Mr. Messi, the Board of Appeal considered that this differentiation would only be perceived by the football and sport lovers ie: only by a part of the relevant public and not by the whole of the relevant public, and that this was not sufficient to result in a risk of confusion for the public.

The Sixth Chamber of the General Court, led by the Italian President, Judge Rapporteur Mr. Berardis, took a different view. The EU judges did not question the findings of the Board of Appeal concerning the visual and phonetic similarity of the signs, but they did challenge the assessment of the conceptual similarity and the resulting assessment of the likelihood of confusion between the two signs.

According to the General Court decision, Mr. Messi is a public personality well-known to the vast majority of the public. The average consumer “reasonably well informed and reasonably observant and circumspect” when purchasing sport-related (but not just football-related) clothing and accessories could only but associate the sign “MESSI” with the famous football player. Although it would be true that not all the public would know the details regarding his career and achievements, the General Court thought it highly unlikely that a part of the public would have never heard of him or know who he is.

The General Court considered that the fame of Mr. Messi did not need to be further demonstrated by the applicant with documentary evidence – which had not been done in a timely fashion during the administrative phase of proceedings before the EUIPO – as – according to the General Court – Messi’s name is so well known, that there is no need for further proof. Such fact could have been known and thus taken into account by the Board of Appeal when reaching its decision, thus it did not need to be invoked or supported by evidence by any of the parties even in the administrative phase.

The General Court concluded that the conceptual differences between the signs, linked to the fame of Mr. Messi, are so striking that they are able to neutralise the visual and phonetic similarities between the signs at issue. Thus, it affirmed that the Board of Appeal erred in considering that there was a likelihood of confusion and it annulled the decision of the EUIPO.

The Spanish company, JM-EV e hijos, current owner of the sign “MASSI” has two months to decide whether to bring an appeal against this judgement, limited to the points of law, before the Court of Justice.

This judgement recalls the “PICASSO” case (T-185/02 and appeal C-361/04 P) where the reference to the famous painter (whose heirs, who had licensed the use of the name to the car manufacturer Citroën, were the opponents), due to his fame, ruled out any conceptual similarity with respect to the contested DaimlerChrysler’s trade mark application “PICARO”, both covering similar goods which had nothing to do with art painting, namely motor vehicles.

Hence, according to the EU case law in question, famous persons’ names as trademarks seem to be double edged weapons when it comes to the likelihood of confusion test. On the one hand they can be very resistant to oppositions like in the recent “MESSI” case, but also, on the other hand, oppositions having famous persons’ names as their basis are not able to impede similar signs to be later registered, as in the “PICASSO” case.

It will be interesting to see how famous personalities will actually ride the wave of this EU case law – and whether an appeal is filed.

 

 

Benedetta Marsicola