Lawyers from 28 countries analyse the legal challenges faced by start-ups

The 3rd IBA Silicon Beach Conference - All Along the Spectrum – From Start-Up to IPO/Exit and Beyond was held in Santa Monica, California from 1 to 3 February 2017. We at ELZABURU’s entrepreneurship and start-ups area (Legal & Business Department) had the chance to attend this international gathering as the only representatives from Spain.   

IBA (International Bar Association) is the largest lawyer network in the world. The conference brought together internationally renowned lawyers and expert academics, public institution representatives, entrepreneurs and venture capitalists to analyse the legal challenges faced by start-ups(1).

The conference offered interesting panel sessions and dynamic roundtable discussions on current issues, latest trends and strategies for developing, expanding, funding and exiting from a start-up company.

Of particular interest as far as IP is concerned were the sessions on the legal implications of the development of mobile applications, as well as those in which participants shared experiences in the development of a start-up company’s effective IP protection strategy. Without going into a full summary of the sessions, we would like to highlight the following debates and ideas:

1. Apps of Things (AoT)

The development and use of digital tools and services is growing at lightning speed.

Some time ago, we attended a vehement legal debate on this subject, which constitutes a global strategic priority and an area of intense legislative development.

Nevertheless, the sector referring to Apps of Things (AoT) - apps which turn our day-to-day objects into connected, intelligent devices capable of catering for a wide range of user needs, deriving from, and made possible by, the concept of the Internet of Things (IoT) – continues to be a trend, generating fresh challenges for lawyers and developers alike, and in this market start-ups play a particularly important role.   

The extent of personal data collection and exchange is continuing to grow significantly. People are disseminating an ever-increasing volume of personal data on a global scale. In fact, we have recently been coming across unprecedented cases concerning the implications of the collection of data and personal information by new technological devices that are, by default, “permanently active” and continuously recording, for instance, the voices of users within the private setting of their homes. We refer here to the recent privacy cases involving the intelligent device “Amazon Echo”, which includes the new voice control system (“Alexa”), one of the most promising recent technological advances(2).

These incidents ensure that the debate on the meaning and scope of the right to personal data protection, the new privacy model and user security is kept alive.

The Spanish Supreme Court applies CJEU doctrine in respect of use of third parties’ trademarks as search engine keywords

Judgment 105/2016, rendered by the Civil Chamber of the Spanish Supreme Court on 29 February, establishes the criteria pursuant to which the use of a third-party trademark as a search engine keyword must be examined in order to determine whether it infringes the trademark holder’s exclusive rights.     

To that end, the Supreme Court has followed in the footsteps of Alicante Court of Appeal and applied the doctrine established by the Court of Justice of the European Union in its judgments of 23 March 2010 (joined cases C-236/08 -Google France v Louis Vuitton-, C-237/08 -Google France v Viaticum- and C-238/08 - Google France v Centre National de Recherche en Relations Humaines), 12 July 2011 (C-324/09, L'Oréal SA v eBay International AG) and 22 September 2011 (C-323/09, Interflora Inc. v Marks & Spencer plc).

According to that doctrine, the use of third parties’ trademarks as keywords in principle infringes the trademark holder’s rights.  Nevertheless, since exclusive trademark rights are not absolute, under certain circumstances such use will not be considered as infringing.  Those circumstances are as follows: 

i) where the use of the trademark is not liable to affect the ‘product origin indicating’, advertising or investment functions of the trademark; and 
ii) where it is clear to the average Internet user that the goods or services advertised do not come from the trademark holder or from an undertaking economically connected to it.              

Unauthorized use of a trademark in advertisements published on the Internet without the consent of the advertiser

The Court of Justice of the European Union has just delivered a judgment (case C-179/15) in response to a request for a preliminary ruling submitted by the Fővárosi Törvényszék (Budapest Municipal Court, Hungary) in relation to the interesting question of the interpretation to be given to Article 5(1)(a) and (b) of the First Council Directive in a case where unauthorized use is made of a mark in an advertisement published on the Internet without the consent of the advertiser or which remains there despite the efforts of the latter to have it removed.

The background

The parties to the main proceedings out of which the question arose are a motor vehicle manufacturer and a Hungarian company engaged in the retailing of motor vehicles and their parts and in the repair and servicing of such vehicles.

In 2007 the two had entered into an after-sales service agreement under which the Hungarian company was entitled to describe itself as an authorized dealer of the motor vehicle brand. The agreement expired in March 2012.

While the agreement was in force, the Hungarian company ordered from an online advertising services provider the publication on the website www.telefonkonyv.hu of an advertisement in which the company was presented as an authorized dealer. The publication was to cover the years 2011 to 2012 only.

Following the expiry of the agreement, the Hungarian company tried to  remove from the Internet any advertisement in which it was presented as an authorized dealer of the brand to which the contract related. To that effect it contacted the provider it had engaged and also wrote to various operators of other websites on which advertisements, describing it as an authorized dealer, had appeared. However, those requests went unheeded.

In view of the ongoing use of its trademark, the motor vehicle manufacturer brought a legal action seeking: (i) a declaration that the Hungarian company had infringed the trademark through those advertisements; (ii) that the Hungarian company be ordered to remove those advertisements, to refrain from any further infringement and to publish a corrigendum in the national and regional press.

In its defence the Hungarian company argued that the only advertisement it had placed on the Internet was the one published on the website www.telefonkonyv.hu and that the others had been published without its consent. In this regard it submitted an expert report showing that the advertisements had been reproduced by certain providers of Internet advertising services without its knowledge or consent and that this is in fact a common commercial practice in which some operators engage. 

In these circumstances the Budapest Municipal Court stayed the proceedings in order to refer the following question to the Court of Justice for a preliminary ruling:

“Must Article 5(1)(b) of [Directive 89/104] be interpreted as meaning that the trade mark proprietor is entitled to prevent a third party named in an advertisement on the internet from making use, for services of that third party identical to the goods or services for which the trade mark is registered, of a sign likely to be confused with the trade mark, in such a way that the public might be given the mistaken impression that there is an official commercial relationship between the undertaking of that third party and the trade mark proprietor, even though the advertisement was not placed on the internet by the person featuring in it or on his behalf, or it is possible to access that advertisement on the internet despite the fact that the person named in it took all reasonable steps to have it removed, but did not succeed in doing so?”

An end to unrestricted banking secrecy when investigating online sales of counterfeit goods

In its judgment of 16 July 2015 (Case C-580/13) the Court of Justice of the European Union (CJEU) placed limits on national laws protecting banking secrecy. In response to a request from Germany's Bundesgerichtshof (Federal Court of Justice) for a preliminary ruling on whether Germany's national banking secrecy law contravened Directive 2004/48/EC on the enforcement of intellectual property rights, the CJEU held that the Directive precluded a national provision which allows, in an unlimited and unconditional manner, a banking institution to invoke banking secrecy in order to refuse to provide the judicial authorities with information concerning the name and address of an account holder in the framework of proceedings dealing with the infringement of an intellectual property right.

In 2011 Coty Germany, exclusive licensees to the Community trademark for Davidoff Hot Water, purchased a bottle of perfume bearing that mark from an Internet auction platform and paid the purchase price into the seller's bank account with Stadtsparkasse Magdeburg. On observing that the perfume was counterfeit, Coty Germany asked the auction platform for the real name of the holder of the account from which the perfume had been sold under an assumed name. The party in question admitted to being the account holder but denied having sold the perfume and refused to furnish any additional information, relying on her right not to give evidence.

Coty Germany then asked the bank, Stadtsparkasse Magdeburg, to furnish the name and address of the holder of the bank account in which it had deposited the purchase price for the counterfeit perfume, but the bank refused to do so, invoking banking secrecy.

Coty Germany therefore instituted civil proceedings with the Landgericht Magdeburg (Regional Court, Magdeburg), which ordered the Stadtsparkasse to supply the information requested. This order was overturned by the Oberlandesgericht Naumburg (Higher Regional Court, Naumburg), ruling that under German civil law the bank was entitled to refuse to give evidence in civil proceedings. Coty Germany appealed this decision to the Bundesgerichtshof (Federal Court of Justice), which stayed the proceedings and referred a question to the CJEU for a preliminary ruling.

The question highlights the need to reconcile the right to an effective remedy and the right to intellectual property, on the one hand, and the right to protection of personal data, on the other.

Essentially the CJEU has held that, taken in isolation, the provision of national law that allows unlimited refusal by a banking institution to furnish information concerning the name and address of an account holder who engages in activities infringing an intellectual property right, inasmuch as the wording of the provision contains no condition or qualification, is liable to frustrate the fundamental right to an effective remedy and the fundamental right to intellectual property by preventing the competent national authorities from ordering the release of personal data pursuant to Article 8.1 of the above-mentioned Directive.

This ruling furnishes explicit support for national laws ensuring a fair balance between the different fundamental rights in question and clearly places limits on banking secrecy in investigations of cases of infringement of intellectual property rights. Given the invisibility available to sellers of counterfeit goods on the Internet, identifying the holder of the bank account into which payments are made can be critically important – in many cases the only way to uncover an infringer. The CJEU's ruling can be expected to have greater impact on civil matters in Spain, since it limits the banking secrecy that can be invoked in civil proceedings, and less on criminal matters, in which examining judges already enjoy broad powers to investigate crimes and set aside fundamental rights. In any case, the ruling is a big step forward in being able to combat the runaway scourge of sales of counterfeit branded goods on the Internet.

Author: Juan José Caselles

Visit our website: http://www.elzaburu.es/en

The CJEU endorses the "right to be forgotten" in the EU

Paul David
(via Flickr)

On 13 May 2014, the Court of Justice of the European Union (CJEU) handed down its judgment in case no. C-131/12 between Google and the Spanish Data Protection Agency (AEPD).

On 5 March 2010, Mr. Costeja González filed a complaint with the AEPD against the publisher Vanguardia Ediciones S.L., Google Spain, S.L. and Google Inc. In the complaint he requested that La Vanguardia be required to remove or alter pages so that his personal data no longer appeared, or to use certain tools made available by search engines in order to protect the data. Mr. Costeja González also requested that Google Spain or Google Inc. be required to remove or conceal the personal data relating to him so that they ceased to be included in the search results and no longer appeared in the links to La Vanguardia. All these requests were based on the fact that the embargo proceedings to which Mr. Costeja González had been subjected at the time had been fully resolved for a number of years and were now entirely irrelevant.

On 30 July 2010 the AEPD dismissed the complaint against the publisher and upheld the complaint against Google Spain, S.L. and Google Inc., requiring them to withdraw the data from their index and prevent future access thereto. Google Spain, S.L. and Google Inc. proceeded to lodge appeals against the Audiencia Nacional (Spain’s High Court) requesting that the AEPD’s judgment be vacated.

Under these circumstances, the Audiencia Nacional suspended the proceedings and referred a series of preliminary questions to the CJEU:

• The territorial application of EC Directive 95/46;
• The definition of the scope of responsibility of search engines as providers of content in relation to EC Directive 95/46;
• And the scope of the right of erasure and the right to object in relation to the right to be forgotten.

First of all, the CJEU classified the activity of a search engine which consists of “finding information published or placed on the internet by third parties, indexing it automatically, storing it temporarily and, finally, making it available to internet users according to a particular order of preference” as “processing of personal data”, thus converting the operator of the search engine into the controller of that processing of personal data, and the guarantor that the requirements of EC Directive 95/46, as well as the full and effective protection of the rights of the individuals in question, be fulfilled.

Turning to the territorial application, the CJEU rejected Google’s argument that Google Search did not carry out the processing of personal data as part of its activities in Spain. The CJEU ruled that Google Spain, S.L. must be regarded as an establishment within the meaning of Directive, since it is the subsidiary of Google Inc. in Spain. When a company with a seat in a third state has an establishment in a Member State and carries out the processing of personal data for the purposes of the service of a search engine in the Member State establishment, the Directive considers that this processing is carried out ‘in the context of the activities’ of the establishment if the intention is to promote and sell its goods and services in that Member State.

With regard to the extent of the responsibility of search engines as content providers in relation to the Directive, the CJEU stated that the controller of a search engine is obliged to remove from the list of results displayed following a search made on the basis of a person’s name links to web pages published by third parties and containing information relating to that person.  The CJEU added that this obligation also exists in a case where that name or information is not erased beforehand or simultaneously from those web pages, and even when the publication is lawful. According to the CJEU, a structured overview of the information relating to the individual in question may potentially affect his private life.

The CJEU in turn identified the need to consider the user’s right to access information on the one hand, and the affected individual’s right to protect his personal data on the other. This balance depends on the nature of the information in question and the role played by the affected individual in public life.

Finally, the CJEU introduced the possibility that after a certain time the affected individual may exercise his right to be forgotten and request that the list of results obtained be removed. If it is found that the list of results is at this point in time incompatible with the Directive, the information and the links displayed therein must be removed. These results are to be deemed incompatible when they appear to be inadequate, irrelevant or no longer relevant, or excessive in relation to the purposes for which they were processed and in the light of the time that has elapsed.

This judgment affects more than 220 appeals lodged by Google against decisions issued by the AEPD that are currently pending before the Spanish Audiencia Nacional.

Authors: Cristina Espín, Alejandra Reyes

Visit our website: http://www.elzaburu.es/

Directive on the retention of data declared invalid by the Court of Justice

Via Wikimedia

On 8 April 2014 the Court of Justice handed down its judgment in the cases of Digital Rights Ireland against the Irish authorities and of the Austrian Constitutional Court against the Government of Carinthia and Mr Seitling, Mr Tschohl and other complainants, Cases C-293/12 and C-594/12, declaring the invalidity of the Directive on the retention of telecommunications and electronic communications data of 2006, hereinafter the “Directive”, with effect from the date on which the Directive entered into force.

What were the requirements of the Directive? What type of data was retained?

With the goal of combating terrorism and other serious offences, the Directive required telecommunications companies and internet operators to register and retain the following data from all types of telephone calls (fixed and mobile as well as unanswered calls) and e-mails during a period of between 6 and 24 months, depending on the applicable legislation in each state:

• In the case of fixed telephones, the data of the calling telephone number and destination number, the names and addresses of the persons calling and those to which the telephone numbers were registered at the time of connection, as well as the telephone service used and from where they were calling, but not the content of the conversation, which required judicial authorisation.

• In the case of mobile telephones, the identifier of the device was also required.

• In the case of internet, the dynamic and static IP addresses assigned by the internet access provider, the name and address of the user and data necessary to identify the date, time and duration of a communication.

• In the case of a pre-paid card, data regarding the date and time of the activation of the service also needed to be retained.

Reasons for the invalidity of the Directive

The Court of Justice indicates that the requirements on telecommunications operators imposed by the Directive entails a wide-ranging and particularly serious interference of the fundamental right of individuals to privacy and the protection of their personal data, given that there are no substantive and procedural limits in the Directive regulating and restricting those interferences to what is strictly necessary, thus exceeding the limits of the principle of proportionality.

In fact, the judgment states that “the Directive covers, in a generalised manner, all persons and all means of electronic communication as well as all traffic data without any differentiation, limitation or exception being made in the light of the objective of fighting against terrorism and serious crime.”

Consequently, the judgment holds that the said data taken as a whole, what we call Big Data, may provide very precise information concerning the private lives of the persons whose data has been retained, such as the habits of everyday life, permanent or temporary places of residence, the activities carried out in their daily life, when going out or on holiday, the relationships, friends, of those persons and the social environments frequented by them, in short all their life, thoughts, beliefs, feelings, location, and that of their children, current accounts, without prior information provided or consent sought to process that data, basic principles of the fundamental right to the protection of personal data.

Blocking user access to copyright-infringing websites – an option?

By Tobias Myrstrand Leander
Vía Flickr

The Court of Justice of the European Union (CJEU) has issued its judgment in Case C-314/12 dealing with a request for a preliminary ruling regarding interpretation of Article 8.3 of Directive 2001/29/EC (on harmonization of copyright in the information society) referred by Austria's Oberster Gerichtshof. The Austrian court asked whether copyright holders could apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright.

The case involved a rightholder who had applied for an injunction to force an Internet access provider to prevent its customers from accessing the website of a third party who was not itself a customer of the said access provider

The issue raised by the matter was whether the third party – who owned an infringing website – could, under Article 8.3 of the Directive, also be deemed to be using the services of providers of access to persons seeking to access the website in question.

The CJEU's decision is incontrovertible in ruling that the infringing third party was indeed using the services of access providers who allowed their customers to access the infringing website irrespective of whether or not there was a contractual link between provider and infringer. This means that an injunction may be ordered against all service providers, not only against the one that provides services to the infringer as its customer.

The judgment further rules that an injunction may be ordered without having to prove that an Internet service provider's customers have actually accessed a website containing unlawful content, because injunctions are aimed not only at bringing infringements of copyright and related rights to an end but also at preventing such infringements.

Nevertheless, the Court goes on to specify that the measures to be adopted by service providers in compliance with injunctions issued under the legislation cited may not unnecessarily deprive users of lawful access to the information while at the same time need to be reasonably effective so that they cannot be readily circumvented by users.

Accordingly, the judgment entitles copyright holders to apply to the courts for injunctive relief against Internet service providers whose services are used by users to access unauthorized material, and relief may comprise blocking access by users to copyright-infringing third-party websites such as websites providing downloads or streaming of films without the rightholder's consent.

Author: Joaquín Rovira 

Visit our website: http://www.elzaburu.es/

Can an EU resident purchase a counterfeit product from a Chinese online sales website, even if it is for private use?

By Frank Williams
Vía Wikipedia

The user will certainly be able to buy it. But may never end up receiving it: on entry of the counterfeit product into the EU territory the Regulation relating to the seizure by customs authorities of goods suspected of infringing intellectual property rights will be applied and, as a result, the counterfeit product will be seized and, as the case may be, destroyed.

This is the judgment handed down by the Court of Justice (Second Chamber) in case C-98/13, which was just published on 6 February 2014.

The facts of the case date back to January 2010 when a Danish citizen (Mr. Blomqvist) bought a Rolex watch from a Chinese online sales website and paid for it through the same website. The parcel was sent from Hong Kong to the address of Mr. Blomquvist in Denmark, but was seized by the Danish customs authorities pursuant to EC Regulation no. 1383/2003, which was in force at the time, on grounds of infringement of the industrial and intellectual property rights of the rightholder, Rolex. The Danish importer opposed the destruction of the watch on the grounds that he had bought it lawfully for his own personal use.

The Court of Justice ruled that, although the sale of the goods occurred through a website located in a country outside of the EU, the holder of the industrial and intellectual property rights cannot be denied the protection afforded to that holder by the customs regulation and that, as a result, the counterfeit goods must be prevented from entering the EU territory. It is not necessary to check whether the goods have previously been the subject of an offer for sale or advertising targeting European consumers, because the sale has been accredited.

Consequently, this judgment represents a serious warning to those purchasing goods online: counterfeit goods purchased from websites outside of the EU can be seized and destroyed when they enter EU territory, irrespective of the use made of them.

Authors: Transi Ruiz, Juan José Caselles

Visit our website: http://www.elzaburu.es/

The selection and use of a reputed trademark as a keyword with “due cause” does not constitute infringement of the rights of the trademark holder. Judgment of the CJEU of 22 September 2011, Interflora (C-462/09).

1.    Background.  Interflora, the famous network of independent florists with whom clients may place orders in person, on the telephone or via the Internet, brought legal action in the United Kingdom against Marks & Spencer (one of the main retailers in the United Kingdom) for having selected the registered trademark INTERFLORA, as well as other variants, as a keyword, which meant that when the term “Interflora” was entered into the Google search engine, Marks & Spencer advertisements appeared under the heading “sponsored links”.  The text of the advertisement did not, however, include the term “Interflora”, but it did contain references to M&S and <marksandspencer.com>.  The High Court of Justice (England & Wales), Chancery Division, stayed the proceedings and referred a number of questions to the Court of Justice of the European Union (CJEU) for a preliminary ruling.  All of the questions were aimed at elucidating the extent to which Marks & Spencer’s conduct might constitute infringement of Interflora’s trademark rights.

2.    Findings.  The CJEU first of all refers to the doctrine enshrined in the judgments of 23 March 2010 (joined cases C-236/08 to C-238/08 Google) and 25 March 2010 (case C-278/08 BergSpechte), and stresses that the sign selected by an advertiser as a keyword constitutes use in trade.  The court confirms that the use of the mark is made in relation to the advertiser’s goods or services, even where the sign selected as a keyword does not appear in the advertisement itself, and in order for the trademark holder to be able to prevent such use, the existence of a double identity situation, as described in Article 5.1(a) of the “Trademark Directive”, will not suffice; rather, the use must have, or be liable to have, an adverse effect on the functions of the mark (the essential function ofguaranteeing the origin of the product to consumers and the advertising function), as well as the newly-coined trademark’s “investment” function which, despite overlapping with the advertising function to a certain degree, refers to the measures taken by a trademark holder “to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty”.

The second part of the judgment analyses the dispute from the standpoint of Article 5.1(b) of the “Trademark Directive” and from the perspective that the INTERFLORA trademark has a reputation.  The court finds that the holder of a reputed trademark is entitled to prevent the use of its mark by third parties where that use takes unfair advantage of the distinctive character or the repute of the trademark or is detrimental to that distinctive character or repute.  Based on case-law arising from the judgments handed down in cases C-408/01 Adidas and C-487/07 L'Oréal, the court holds that the selection of a sign identical or similar to a reputed trademark as a keyword within the context of an Internet referencing service does not necessarily contribute to a reduction in the sign’s distinctive character and its becoming a generic term.

In the final part of the judgment, the CJEU states that a trademark with a reputation selected within the context of an Internet referencing service by a party other than the trademark holder can be construed as having been used with due cause and within the scope of healthy and fair competition where the sponsored link advertisement proposes an alternative to the goods or services of the trademark holder without offering a mere imitation of the trademark holder’s goods or services, without causing dilution or tarnishment, and without adversely affecting the functions of the trademark in question. 

3.    Remarks.  This judgment once again tackles the boundaries of legality in the use of third-party trademarks as keywords, although it introduces two new aspects in respect of previous judgments.  On the one hand, it refers to the trademark’s “investment” function and, on the other hand, it tackles the dispute from the standpoint of a trademark with a reputation.  The court once again defends the principle of free competition, but provides the national courts with a series of guidelines and tools so that they can resolve any disputes arising between trademark holders (including holders of reputed trademarks) and those who select those marks as keywords based on the wording of the sponsored link and its content.

Author: Luis Baz

Visit our website: http://www.elzaburu.es/