channel hopping knock out - Out

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OUT-LAW MAGAZINE
Autumn 2006 Issue 15
out-law
TAX HAVEN ISLANDS
© 2006 SONY PICTURES. CASINO ROYALE GOES ON GENERAL RELEASE ON 16TH NOVEMBER
CHANNEL
HOPPING
NET FIRMS HEAD FOR
KNOCK
OUT
DON KING’S WACKY
WORLD OF DEFAMATION
FROM BRUSSELS
WITH LOVE
GOOGLE
GAMBLES
ON COURT
SHOWDOWN
legal advice for technology businesses from out-law,
part of international law firm pinsent masons
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ISSUE 15
out-law
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BEST OF OUT-LAW.COM
EDITORIAL
COLUMN: OFF THE RECORD
ROUGH DIAMOND: DEFAMATION
COVER STORY: GOOGLE
FEATURE: CHANNEL ISLANDS
OUT-LAW MAIL BAG
COLUMN: BULLYING
OUT-LAW LITE
MOST WANTED!
BEST OF OUT-LAW.COM
© 2006 SONY PICTURES. CASINO ROYALE GOES ON
GENERAL RELEASE ON 16TH NOVEMBER
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2
THE BEST OF
OUT-LAW.COM
The pick of the best legal news from OUT-LAW.COM
29% of departing directors
admit stealing data
Almost a third of company directors surveyed have admitted to
stealing corporate information,
with memory sticks making theft
easier than ever.
In a survey of 1,385 business
people, 29% of company directors
admitted to stealing confidential
corporate information when they
left a company. The survey, conducted by polling company YouGov
on behalf of software company
Hummingbird as part of
Hummingbird’s Information
Management Survey, found that
24% of the thefts involved using
memory sticks or MP3 players to
move data and 18% used email.
Judge cuts chip suit
Around half of Advanced Micro
Devices’ antitrust case against
Intel has collapsed after a
Delaware judge ruled in Intel’s
favour on a procedural motion.
The judge also postponed a trial
until 2009.
AMD argues that the world’s
largest chipmaker has behaved in
a monopolistic way, alleging that
Intel made customers sign exclusive deals and offered rebates on
Intel chips if they did not buy AMD
technology. It says that PC makers
were threatened with retaliation if
they supported AMD.
Some of the claims related to
its behaviour in Germany, the UK,
Taiwan and Japan but a judge has
ruled that those allegations cannot be heard by the district court
in Delaware because they are outside its jurisdiction. AMD is said
to be thinking of appealing. It is
also conducting parallel cases
outside of the US.
There is a live European case
and the European Commission
raided Intel offices last year.
Earlier this month the
Commission took over an existing
German case involving allegations
that Intel forced a German retailer
into stocking only Intel products.
Raids have also taken place in
South Korea. Japan’s Fair Trade
Commission ruled in 2005 that
Intel did abuse monopoly power.
Be nicer to Microsoft
The US Government directly lobbied the EU’s Competition
Commissioner in an attempt to
influence her on Microsoft’s
behalf.
The US embassy in Brussels
contacted Commissioner Neelie
Kroes just before she was to
decide what fine to impose on
Microsoft in an ongoing antitrust
battle with the company. The
embassy asked her to be “nicer”
to the world’s biggest software
company. Kroes went ahead and
fined Microsoft €280.5 million in
July. She later told a Dutch newspaper that the embassy’s
intrusion was unwelcome and that
such behaviour is “not done”.
Online gambling crackdown
A law making it illegal for credit card companies to
process payments for online gambling from US residents
was passed on 29th September by the Senate and will
become law when signed by President Bush. It covers
everything from sports betting to casino games.
The Republican party attempted to attach the
legislation to a defence-related bill which was certain to
pass. That attempt failed, but it managed to attach the law
to another unrelated bill, addressing security at sea ports.
Democrats accused Republicans of forcing through the
law quickly in order to garner support ahead of
congressional elections on 7th November. Online gaming
companies, many of them British, have said that they will
cease all operations in the US for the foreseeable future.
WWW.OUT-LAW.COM
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Do not try the
cheerleader defence
Neglecting your wireless security could bring the police to your door
WWW.OUT-LAW.COM
Unless you change your router’s
default settings, you’ll never
know. But the police might. So
they’ll impound your compute r a n d , i f t h ey f i n d no
incriminating files, they might
give it back; or suspect that you
knew how to cover your tracks.
It’s your word against theirs. So
ke e p yo u r h o m e n e t wo rk
secure. For criminals, accessing an insecure network is as
e a s y a s p u t t i n g on a
balaclava.
Your office wireless network
is more likely to have good
security – but perhaps you
should check. A quarter of business networks are unsecured,
according to a recent wireless
survey by RSA Security. Its
tests in London this year found
that 22% of access points still
had default settings that put
networks at risk. RSA points
out that these offices are at risk
of data theft and virus infection. It follows that they could
also face difficult questions
from police tracing terrible
crimes. They might not prove
anything against your company; but nor is it an investigation
your business wants.
We don’t hear of such investigations today, but that could
change. While the percentage
of vulnerable net works is
falling, it is falling slowly – and
the total number of networks
is rising fast. RSA reports a
73% year-on-year rise in the
number of wireless hotspots in
London.
T h e p ol i c e d on ’ t l i ke
anonymity breaking evidential
chains. Will they push for new
laws that make unsecured networks illegal, or grounds for a
claim that the operator is aiding and abetting the
commission of a crime? After
all, our Data Protection Act
already has certain expectations
of office networks that hold
personal data. While the police
don’t care about extending
these expectations to protect
movies and music, they do care
about hacking and child porn;
and right now they probably
care even more about terrorist
communications. At a time
when air travellers can’t carry
toothpaste, it doesn’t seem
quite so far-fetched to foresee
the banning of safe havens for
criminal communications.
That may or may not happen.
But for now, if nothing else, fix
yo u r w i rel e s s s e c u r i t y.
Otherwise you could find yourself reported in the press as
helping the police with their
enquiries in connection with a
terrible crime. Nobody wants
that. ■
[email protected]
EDITORIAL
The message
b o a rd s a re
a l i ve w i t h
misguided
advice about
wireless netSTRUAN ROBERTSON
w o r k s .
Switch off your security, they
say: you’ll get away with murder.
It follows the news that the
music industry has dropped a
lawsuit against Tammie Marson
of Palm Desert, California.
Marson argued that the fact
that her computer contained
illegal music files downloaded
over her internet connection
was not proof of a crime. As a
cheerleader teacher, she said,
hu n d re d s of g i rl s p a s s e d
through her house, any one of
whom could have used her PC.
She also ran a wireless network
without security – so anyone
outside her house could have
used her net connection.
Observers in homes without
cheerleader traffic were fascinated by the wireless defence.
“I’m going to open my network
to the neighbourhood,” was a
typical comment. “Screw the
RIAA!” But think this through:
suppose someone outside your
house uses your connection to
download child porn to a laptop, hack into a bank or launch
a denial of ser vice attack .
AT A TIME WHEN
AIR TRAVELLERS
CAN’T CARRY
TOOTHPASTE, IT
DOESN’T SEEM
QUITE SO FARFETCHED TO
FORESEE THE
BANNING OF
SAFE HAVENS
FOR CRIMINAL
COMMUNICATIONS.
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Don’t assume something won’t come to light
just because it is said ‘off the record’
COLUMN
It’s just
not cricket
A c r ic ket
s c a nd a l h i t
the world’s
front pages
when
it
DAVID BARKER
t u r ne d out
that umpire Darrell Hair had
made an ‘off the record’ offer
to leave the game quietly for
$500,000. Hair had been one
of the umpires who decided
that Pakistan had tampered
with the ball in a Test Match
against England. The Pakistan
team walked out and a Test
was forfeited for the first time
in cr icket histor y. Hair ’s
motives were subsequently
called into question and the
press focused their scrutiny on
his fate.
Hair had been in communication with Doug Cowie,
u mpi re ma na ger of t he
International Cricket Council
(ICC). He said in an email that
he would leave the game for
half a million dollars. That was
intended as a strictly confidential email but within days was
plastered across the world’s
front pages.
Is nothing sacred? Is confidentiality ever possible now?
There is a lesson here. The
business world may turn on
frank discussions, but you
should always think about the
legal basis upon which a communication is made. So what
does the expression ‘off the
record’ really mean? People say
it all the time, but it has no
clearly recognised legal effect.
It seems to be shorthand for “I
shouldn’t tell you this, but I
will”. But then the recipient
seems to take this as licence to
tell everyone else too, but ‘off
the record’, of course.
In reality, there are two ways
in which party A may communicate with party B in the
knowledge that party B will
not blab to all and sundry. The
first is confidentiality. This arises either where there is an
agreement that the communication is confidential, or where
t he law i mpl ie s i t .
Confidentiality is a tremendously useful way of getting
business done. But be warned:
confidentiality is rarely a bar
to disclosure of documents in a
legal dispute. The tribunal
might be willing to restrict disclosure of material which could
be used for ulterior purposes
– like data about pricing – but
this is a narrow exception to
the general rule that it all has to
come out. Hence the ICC’s
decision to disclose the email
in relation to a disciplinary procedure against the Pakistan
team’s captain.
The second basis for withholding documents arises
where they are covered by
without prejudice privilege.
This can arise where there is
a dispute between party A and
party B and they have a frank
negotiation as a means of trying to resolve that dispute. To
avoid confusion, it is best if the
parties agree that the discussions are without prejudice at
the outset.
So, what went wrong for
Hair? Well, confidentiality on
its own was not enough to
keep his email under wraps, it
seems, because it was relevant
to t he I C C d i s c ipl i na r y
process. The ICC would have
had difficulty disclosing the
email if he had simply added
the words “without prejudice”.
For that, there would need to
have been a dispute between
Hair and the ICC. It has never
been suggested that there was
such a dispute. The other thing
that Hair could have done is
confined his offer to oral discussions. Strictly speaking, the
admissibility of oral and written communications is the
same, but in practice written
evidence tends to be more persuasive than one person’s
account of a conversation.
In any event , next time
you’re about to say something
‘off the record’, or even ‘in
confidence’, just be sure
you know what
you’re saying. ■
DAVID.BARKER@
PINSENTMASONS.COM
On t
rope
If someone tells
d a ma g i n g l ie s
about you or your
bu s i ne s s on t he
internet, suing is an
option. Defamation
ROB McCALLOUGH
ac tions are ver y
expensive, so receiving an apology
and having the lies erased will satisfy
most people. Suing is usually the last
resor t . Extrac ting an apolog y
depends on the author; but erasing
the offending words from the web is
usually straightforward – except in
America.
In America, you can sue a person
who writes offensive comments
about you because US law acknowledges defamation as a necessary
control on free speech; but whether
you do or not, you can’t get the comments taken off-line under US law.
In contrast, you can require a US
host to take down an article, a song,
a video or a photograph that
infringes your copyright, otherwise the US host becomes liable
for the ongoing infringement.
The same is true in European
law, but where Europe extends this
principle to all information, the US
draws a distinction between copyright-protected material and almost
everything else. I don’t know why.
The Communications Decency
Act (CDA), a federal law passed
in 1996, granted wide immunity
to those hosting the content
of others. Yet the Digital
Millennium Copyright
Act (DMCA), passed
© CHRIS YOUNG/PA/EMPICS
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© ABACA ABACA PRESS/ABACA/EMPICS
the
pes
A loophole in libel
law calls for a
technical knockout
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ROUGH DIAMOND
two years later, said a host becomes
liable upon being made aware of
copyright-infringing material if he
fails ‘expeditiously’ to remove or
disable access to it. Europe applies
the DMCA’s approach far beyond
copyright.
We contacted the Electronic
Frontier Foundation, a staunch
defender of free speech, for its
view on the inconsistency in US
law. Staff attorney Kurt Opsahl
replied, “Without the protections
of 230 [the relevant provision of
the CDA], things like online message boards, blogs and other
forums for free expression would
need to be far more cautious in
what is allowed, presenting the
prospect of squelching valuable
expression out of concern for liability.”
Opsahl is right that free speech
needs protecting; but it would not
suffer if the CDA were qualified
by an obligation to deal diligently
with complaints. All it needs is a
mechanism to remove defamatory
expression – which is rarely valuable expression.
“It may be inconsistent,” concluded Opsahl of the difference
between the CDA and DMCA,
“but that is the legal landscape at
the moment.” I hope it changes:
Don King: a
quiet night in
the CDA goes too far.
Unless and until it does change,
how do you remove damaging lies
hosted in the US? The first thing is
to appeal to the host’s discretion.
Hosts typically forbid defamatory comments in their terms of
service and reserve a right to censor. But you’re not a customer of
the host, so you’ll struggle to exert
any pressure; you’re just asking for
a favour.
So if that fails, the next step is
dramatic: threaten to sue the host
in England, whether you’re based
here or not. We have a reputation
for welcoming forum shoppers
with a smile. For example, two
years ago, boxing promoter Don
K ing , an Amer ic an living in
BOXING PROMOTER
DON KING, AN
AMERICAN LIVING IN
AMERICA, WAS
ALLOWED TO USE
ENGLISH LAW IN
ENGLISH COURTS
TO SUE OTHER
AMERICANS, ALSO
LIVING IN AMERICA
Amer ica , was allowed to use
English law in English courts to
sue other Americans, also living
in America, over comments posted to American websites.
That may seem as crazy as the
great man’s hair, but there are
some visa restrictions on libel
tourism: you have to show that
you have a reputation in England;
and you have to show that the
comments found an audience in
the country. Libel claims have
been thrown out where the British
readership could be counted on
the fingers of one hand (although
the House of Lords will rule shortly in a case that challenges this).
A letter that threatens to sue can
win co-operation. But if you have
no real intention to sue, you’re
bluffing. Such tactics give the legal
system a bad reputation. Yet that
seems to be the inevitable conseq u e n c e of w h a t i s s u r el y a n
illogical loophole in US law. ■
[email protected]
5
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COVER STORY ~ IS GOOGLE LEGAL?
Newspapers don't want the world to see their
stories in Google News unless Google pays.
Struan Robertson explores a court victory
that leaves Google shaken and stirred
6
For your eyes
© 2006 SONY PICTURES. CASINO ROYALE GOES ON GENERAL RELEASE ON 16TH NOVEMBER
A Belgian court ruled against Google’s use
of newspaper stories in early September. If
you believe Google, it did nothing wrong and
failed to defend itself because it was unaware
of the publishers’ lawsuit. If you believe the
publishers, Google is lying and infringes copyright on a colossal scale. The parties return to
court on 23rd November in a case that finds
legal uncertainty looming over the world’s
leading search engines.
The case focused on Google’s news aggregation service, which automatically scans the
websites of newspapers, extracting headlines
and snippets of text from each story. These
are displayed at Google News and the headlines link users to the full stories on the source
sites. Newspaper group Copiepresse, which
represents leading Belgian, French and
German publications, said this amounted to
copyright infringement and a breach of database rules because its members had not been
asked for permission.
Copiepresse could have stopped Google
without going to court but chose not to.
Instead, it wants Google to continue directing
traffic to its sites – and it wants Google to pay
for the privilege.
The court also ruled that Google’s cache,
which is not part of Google News, infringed
copyright.
When a person performs a search at
Google, results are displayed with a link to the
page on the third party site and also a link to a
‘cached’ copy of the same page stored at
Google’s own site. The newspapers say this
copy undermines their sale of archive stories.
Why buy an archived story if you can find it in
Google’s cache? Again, newspapers could have
stopped their pages being cached.
Margaret Boribon, Secretary General of
Copiepresse, told OUT-LAW that Google’s
behaviour is “totally illegal” because it does
not seek permission before extracting content for Google News or copying pages to its
cache. Google disagrees.
Understanding Google’s position within
the law means understanding how the search
engine works.
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Google uses an automated program to
crawl across the internet, known as its
Googlebot. It locates billions of pages and
copies each one to its index. In doing so it
breaks the page into tiny pieces, analysing and
cross-referencing every element. That index is
what Google interrogates to return search
results for users. When the Googlebot visits a
page, it also takes a snapshot that is stored in
Google’s cache, a separate archive that lets
users see how a page looked the last time the
Googlebot visited.
It is easy for a website to keep Googlebot or
other search engine robots away from all or
particular pages. A standard has existed since
1994 called the robots exclusion standard.
WWW.OUT-LAW.COM
Add ‘/robots.txt’ to the end of any site’s web
address and you’ll find that site’s instructions
for search engines. Google also offers a simple
way to prevent a page being cached: just write
the word ‘NOARCHIVE’ in the code of
a page.
When asked why her members’ news sites
didn’t follow these steps to exclude Google,
Boribon replied, “then you admit that their
reasoning is correct.” She said all search
engines should obtain permission before
indexing pages that carry copyright notices.
But the real reason for not opting-out with
a robots.txt file or mandating against caching
is that Belgium’s newspapers want to be
indexed by Google. “Yes, we have a problem
with Google, but we don’t want to be out of
Google,” Boribon said. “We want Google to
respect the rules. If Google wanted to index
us, they need to ask.”
Copiepresse also wants Google to pay for
indexing sites. Boribon declined to discuss
how or how much. “That has to be negotiated,” she said.
The argument is not unique. The World
Association of Newspapers (WAN), which
represents 18,000 newspapers in 102 countries, said in January it would “explore ways to
challenge the exploitation of content by search
engines without fair compensation to copyright owners.”
At that time, WAN did not have a strategy
COVER STORY ~ IS GOOGLE LEGAL?
s only...
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COVER STORY ~ IS GOOGLE LEGAL?
© 2006 DANJAQ, LLC AND UNITED ARTISTS CORPORATION. CASINO ROYALE GOES ON GENERAL RELEASE ON 16TH NOVEMBER
8
for challenge. Copiepresse did. It took direct
action and convinced the Brussels Court of First
Instance to order Google to withdraw from its
sites all the articles and photographs of
Copiepresse member sites. Google was given
10 days to comply with the threat of a €1 million
fine for each day of delay.
Since the ruling, Google has pulled the plug
on the news sites in the lawsuit. They are not
just missing from Google News Belgium, they
have disappeared from Google’s main index and
cache too.
“They have done it to punish us,” said
Boribon, who didn’t want Google to go that far.
“They have a bad attitude.” Yet Boribon went
on to complain that some of her members’ content can still be accessed via Google News
France. “They don’t apply the judgment fully so
we will ask for the fine,” she said.
Boribon does not seem to think she is cutting
off her nose to spite her face. “What I’m achieving now is getting all the information to my
European colleagues so we will have other publishers taking part in the court case. Then maybe
Google will change its mind. If they see this is
not a Belgian case but a concern for all publishers
all over the world, they will have to review their
business model.”
Her hope is that if enough publishers withdraw their content, Google will have significantly
less content to index – and that will force it to the
negotiating table.
Copiepresse is using the law as leverage in a
commercial argument: its content contributes
to Google’s $10 billion-a-year in revenue and
newspapers want a cut. That argument should
not focus on Google News because Google
News does not display ads. It is only when newspapers’ pages appear in the results of the main
search engine that Google serves the ads that
fuel the $125 billion company.
Copiepresse told the court that Google damages the publishers’ ad revenue by bypassing
their homepages. “We want search engines to
send people to our homepage,” she said, explaining that only the homepage always carries ads.
Google says its practices are lawful. It acts as
an intermediary that connects users to sites.
Europe’s Copyright Directive and E-commerce
Directive recognise the role of intermediaries
and afford them special legal protection, including a special right for intermediaries to cache
material. Confusingly, however, Google’s cache
may not be what the lawmakers had in mind.
Internet service providers use caches to save
bandwidth on delivering frequently-accessed
web pages. Rather than deliver a live page, it is
What was it now, two Singapore slings, a
black Russian, three vodka martinis
WHAT I’M ACHIEVING NOW
IS GETTING ALL THE INFORMATION TO MY EUROPEAN
COLLEAGUES SO WE WILL
HAVE OTHER PUBLISHERS
TAKING PART IN THE COURT
CASE. THEN MAYBE GOOGLE
WILL CHANGE ITS MIND
more efficient to deliver a cached copy to customers. The customer will never know the
difference because the cached copy is updated
when the live page changes. The E-commerce
Directive doesn’t distinguish internet service
providers from search engine service providers.
Instead it says “a service provider is not liable
for the automatic, intermediate and temporary
storage of that information, performed for the
sole purpose of making more efficient the information’s onward transmission to other recipients
of the service”. There are other conditions,
including that “the provider does not modify
the information” and that “the provider complie s with cond itions on access to the
information”.
Google has explained the purpose of its cache
before, when the function was challenged in a
US court in January. Google listed three purposes for the Nevada District Court: it allows
users to view pages that the user cannot access
directly, perhaps because the destination site has
gone down; it allows users to make comparisons
between a live and cached web page; and it allows
users to identify search query terms (which are
highlighted wherever they appear in the cached
page). Copiepresse might argue that these purposes go too far beyond the Directive’s “sole
purpose of making more efficient the information’s onward transmission to other recipients of
the service”.
Even the legality of the primary search function of a search engine is open to question. The
Directive’s condition that a provider “does not
modify the information” is arguably breached
as soon as a search engine breaks a page into
tiny elements for analysis and cross-referencing
in its gigantic index. That argument was not
raised in court but would cut to the heart of
almost any search engine’s operation.
Google won the Nevada case. Its opponent, a
lawyer called Blake Field, had “decided to manufacture a claim for copyright infringement
against Google in the hopes of making money
from Google’s standard practice,” according to
Judge Robert Jones. Field knew how the system
worked and he placed copyrighted articles on
his site, waiting for Google to find and cache
his work. When it did, he sued.
T he court endorsed Google’s opt-out
approach: because Field knew about the robots
protocol and the NOARCHIVE command,
Field’s conduct was interpreted by Judge Jones
“as the grant of a licence to Google for that use.”
Google could use the implied licence arguWWW.OUT-LAW.COM
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THE EU’S DATABASE
DIRECTIVE SAYS THAT THE
REPEATED AND SYSTEMATIC
EXTRACTION OF
INSUBSTANTIAL PARTS OF
A DATABASE CAN AMOUNT
TO INFRINGEMENT OF A
DATABASE RIGHT
© 2006 DANJAQ, LLC AND UNITED ARTISTS CORPORATION. CASINO ROYALE GOES ON GENERAL RELEASE ON 16TH NOVEMBER
single database; it is systematic extraction from
lots of databases. But publishers could argue
that news stories are not the same as raw facts
such as when two football teams will play each
other; and that their websites are not a mere byproduct of investment, unlike the databases in
the fixtures cases.
WAN and other publisher groups will watch
the rematch between Copiepresse and Google
with interest. A week after the September ruling
they identified the strategy that they had been
seeking since January: the Automated Content
Access Protocol, or ACAP.
A briefing paper was sent to OUT-LAW. It
describes a system very similar to the robots
exclusion standard: “a standardised way of
describing the permissions which apply to a
website or webpage so that it can be decoded
by a dumb machine without the help of an
expensive lawyer.”
Angela Mills, executive director of the
European Publishers’ Council, told OUT-LAW:
“This isn’t about blocking content, it’s about
enabling it but with more sophisticated rules
than are currently possible. Right now we can
say ‘don’t index’ – but that’s not sophisticated
enough. It’s very boring to have the choice of
yes or no.”
ACAP might say that text can be taken but
not images; or that images can be taken on condition that the photographer’s name appears.
Demanding payment for indexing might also
be part of the protocol, said Mills.
The plan is for ACAP to be a voluntary system. “If people wanted to ignore the rights
expression they could,” Mills said, “but that obviously puts them in a much weaker position if
challenged in court.”
When asked what it thought of ACAP,
Google’s Collins told OUT-LAW, “We welcome
any initiative that enables search engines and
publishers to work together more closely. We
look forward to discussing this proposal with
the WAN and in particular how it can build on
robots.txt”. But asked if Google would pay publishers to index their content, Collins replied,
“That’s not something we do.” ■
COVER STORY ~ IS GOOGLE LEGAL?
ment when the Copiepresse case returns to
court. The robot exclusion standard has been
around for 12 years; Google could argue acquiescence.
Field also argued that Google’s cache was not
“intermediate and temporary storage”, as
required by a US law. Judge Jones said that
Google’s caching for approximately 14–20 days
at a time is temporary. That may or may not
influence a European court if it has to decide
the same issue: the wording is common to laws
on both sides of the Atlantic.
If the legality of the cache is uncertain, the
legality of Google News is no clearer. The
Belgian court heard that it is an information port al , not a search engine . It u ses 4,500
English-language news sources and a few hundred Belgian sources, in many cases without
prior permission. Google says that’s okay.
“Copyright law allows for snippets to be published from results,” Google spokesman D-J
Collins told OUT-LAW. “That’s why we have
argued that the court order was flawed. Google
News does not break copyright law.”
Copiepresse disagrees with Google’s view
that snippets of text are unprotected. Copyright
only protects against substantial copying; but
publishers would argue that a snippet can be
substantial in a qualitative sense, just as courts
will protect short samples from songs. Google
takes each story’s headline – the craft of a subeditor; and sometimes the entire first sentence or
more from the intro – the most labour-intensive
part of a journalist’s writing. The legality has
never been fully resolved.
The publishers might also argue that thousands of snippets in aggregate amount to
substantial copying in a quantitative sense.
Google might counter that it is taking only one
snippet of each copyright work – i.e. its thousands of snippets are from thousands of works,
not one work.
The Belgian court found that Google had also
infringed database laws. The EU’s Database
Directive says that the repeated and systematic
extraction of insubstantial parts of a database
can amount to infringement of a database right.
Some courts have characterised websites as databases and ruled against sites that aggregate
content. But that was before controversial rulings
by the European Court of Justice in 2004 over
the use of horseracing and football fixtures data.
The upshot: many databases are only protected if the owners do not ‘create’ their own data
but obtain the data from others.
Google told OUT-LAW that it does not
believe that Google News breaks this database
law. It did not elaborate, but might argue that a
newspaper’s site is not a protected database
because the database right does not cover the
investment in creating the news; it would only
cover the obtaining of news from others. It might
say that there is no systematic extraction of a
[email protected]
Mr Ed: stunned
into silence
WWW.OUT-LAW.COM
IF PEOPLE WANTED TO
IGNORE THE RIGHTS EXPRESSION THEY COULD BUT THAT
OBVIOUSLY PUTS THEM IN A
MUCH WEAKER POSITION IF
CHALLENGED IN COURT.
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IMAGES COURTESY OF VISITGUERNSEY
FEATURE ~ CHANNEL ISLANDS
Channels
tomarket
10
THE CHANNEL ISLANDS
WHAT YOU NEED TO KNOW ABOUT
RELOCATING OFF THE COAST OF
NORMANDY:
Businesses on the Channel Islands are
able to take advantage of VAT-less selling
because of their extremely unusual legal
position. They are, in a sense, half in and
half out of the UK. While the UK is
responsible for the islands' defence,
citizenship and diplomacy, the islands are
not part of the UK, rather they are part of
the Duchy of Normandy.
Britain's Queen is the head of state, but
can be called the Duke of Normandy there;
islanders are British citizens but not
European citizens, since the islands are
outside the EU. They receive British
passports but modified ones which say
which island they are from.
Jersey and Guernsey are governed by
their own parliaments, the States, which
can pass their own laws or pass UK laws
as their own.
The VAT exemption is possible because,
though part of the Customs Territory of the
European Community, the islands are not
in the European Union, and are able to
trade goods into the EU from outside it.
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Matthew Magee finds internet business booming in
the sunny Channel Islands, all thanks to an unusual
tax loophole that has the blessing of Gordon Brown
charging VAT: someone has to track goods,
fill in forms, collect the revenue and pass it on
to the tax man.
To collect VAT of a few pence by a process
that costs considerably more than that makes
little sense, so the EU introduced the Low
Value Consignment Relief (LVCR), an exemption from VAT for all goods valued under £18
imported from outside the EU.
Eventually, web retailers realised that they
could make a virtue out of the Channel Islands’
complicated constitutional set up. The Islands
are outside the EU but loosely connected to the
UK. They are a protectorate of the monarchy
and islanders are offered qualified UK citizenship, affording them the best of both
worlds when it comes to trading advantages.
It turns out that that discovery came about
fortuitously when discount CD and DVD
retailer Play.com started trading. “Play.com is
owned by Jersey residents and they realised
almost by accident that they had a VAT advantage,” says Frank Gee. Gee is a director of
Basel Trust, a company which helps other
firms to navigate the complicated strictures
EVENTUALLY, WEB RETAILERS REALISED THAT THEY
COULD MAKE A VIRTUE OUT OF THE CHANNEL ISLANDS’
COMPLICATED CONSTITUTIONAL SET UP, THE ISLANDS ARE
OUTSIDE THE EU BUT LOOSELY CONNECTED TO THE UK
WWW.OUT-LAW.COM
placed on anyone trying to take advantage of
the anomaly.
The business advantages can be significant.
In competitive, price-sensitive markets, such as
CD retailing, being able to pass on a discount
of 17.5% can make a serious difference to a
company’s prospects. Other firms might
choose not to pass on the discount but to boost
their own profits by the 17.5%. That, again,
will make an enormous difference to any company.
Jersey has tightened up its rules on who can
and who cannot take advantage of the tax benefit. Some retailers have tried to establish a
minimal presence, simply sending goods via
the Jersey postal system in an attempt to win
VAT exemption.
Now, the Jersey authorities are thought to be
imposing restrictions on trade in order to
encourage more employment there. Gee said
that, ideally, the entire buying process must
take place in the Channel Islands, including
the order acceptance, contract ratification and
the conclusion of the order.
The best way to do that, he says, is to establish a separate company in the Islands to carry
out this activity. The setting up and management of those companies is his business. “We
find directors and manage the companies for
clients,” he says.
The most visible success story so far has
been Play.com, but companies are now entering the market selling golf equipment, herbal
remedies and iPod accessories free of VAT.
Anthony Moxon runs Bentham Ltd. The
business began in Somerton, Somerset, selling
printer supplies and stationery to businesses by
mail order. Then Moxon saw an opportunity
in the consumer market. “With the explosion
in digital photography and use of the web and
the growth of broadband, the amount of printing from home has increased substantially,”
FEATURE ~ CHANNEL ISLANDS
It would be hard to imagine somewhere less
likely to be touched by the slick metropolitan
fingers of the web economy than the Channel
Islands.
Ruled by medieval-sounding bailiwicks
according to self-written laws in an ancientsounding francified English, Jersey and
Guernsey are famous as the sunny, well-to-do
tax havens of retired generals and yacht-owning magnates.
Yet some of internet retail’s biggest names
are setting up to do business there and e-commerce is fast becoming a mainstay of the
Channel Islands’ economies. Tesco, Sainsbury
and Play.com are all reported to have operations on one of the Islands and many smaller
businesses conduct e-tailing from there.
Behind the seemingly incongruous boom
in web trade is a quirk in European VAT law
that means that the leanest competitors in the
market for small goods make sure they ship
from the Islands.
Anyone shipping goods to the EU would
normally ensure that VAT is paid when those
goods are sold on. There is, of course, a cost to
11
FEATURE ~ CHANNEL ISLANDS
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said Moxon. “We determined to get involved in
that business.” They launched IJT Direct, selling inkjet and laser toner cartridges online,
and based their sales, fulfilment and customer
support operations in Jersey. “We went to
Jersey for the VAT advantage,” he said. The
vast majority of the products IJT sells are
under £18. “We have a substantial number of
products priced at £17.99,” he said.
The B2C brand currently takes over 1,400
orders a day, turns over £975,000 a month
and, in Moxon’s words, is “jolly profitable.”
Where would Moxon be without the VAT
benefit? “We would grow considerably more
slowly and be considerably less profitable,” he
said.
Moxon credits Basel Trust with getting his
company started on Jersey and Basel Trust
reports more and more retailers taking an
interest in the tax breaks that attracted
Moxon’s company.
“Business is growing exponentially,” says
Gee. “It has really happened here in the last
three years. The competitors of companies
who do this are realising that they have to do
this to compete.”
TAX EXEMPTIONS CAN
HAVE A SHORT LIFE ONCE
PUBLICISED, BUT THE
TREASURY TOLD OUT-LAW
THAT IT HAS NO PLANS TO
LOBBY THE EU FOR A
CHANGE TO THE SYSTEM
Tax exemptions can have a short life once
publicised, but the Treasury told OUT-LAW
that it has no plans to lobby the EU for a
change to the system. “Using that relief to sell
goods to customers free of VAT is completely
legal and falls within the tax code. We are keeping a close eye on it but we have no plans to
change it,” said a Treasury spokesman.
“People are free to use the tax system how
they see fit as long as it is within the law and
revenue and customers have no problem with
it. The tax code is a huge document and where
some people see loopholes other people see
opportunities,” he said.
Small music retailers lobby the Treasury to
abolish the exemption, and large retailers lobby
it to increase the ceiling from £18 to anywhere
up to £100, but the Treasury sees no reason at
present to lobby for change, since such a
change would have to apply to trade with the
US, Japan and the rest of the world.
In the meantime, the Channel Islands’ reputation as a tax haven continues, but this time
the savings are available to ordinary consumers
when they buy golf balls, CDs or printer
refills.■
[email protected]
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OUT-LAWBAG
MAIL
EMAIL: [email protected] COMMENTS ONLY PUBLISHED WITH EXPRESS PERMISSION OF AUTHORS
Listen to your
customers
Its website might be accessible
(“Tesco.com shames rivals on
accessibility,” OUT-LAW News) but
contacting Tesco about late
deliveries is not accessible if you
are deaf. I emailed them and just
kept getting a standard email
advising me to phone despite me
telling them I have hearing
problems. I had to wait five hours
after the delivery slot ended for an
order and didn’t know what was
going on.
Tesco told OUT-LAW: “We are very
sorry about this and we'll be
looking into how we can prevent it
happening again in the future.”
Upsetting the
Apple cart
France’s culture minister, Renaud
Donnedieu de Vabres, said in
parliament: “This text affirms a
new principle, interoperability,
which makes France a pioneer
country in Europe.” (“France
passes disputed iTunes law,” OUTLAW News). This shows why the
new France has become a pioneer
in Europe in political unrest, poverty
and destruction. If de Vabres didn’t
like the student riots before, wait
until Apple pulls the plug on iTunes
in France.
Ronald J Riley, President
Professional Inventors Alliance,
Washington, DC
Red tape
overload
As a business advisor,
and also chairman of the
Leicester City FSB, I’ve seen
the rise in legislative
changes have a damaging
effect on some of my
colleagues’ businesses when
things go wrong with staff (“Fast
Forward,” Issue 14 of OUT-LAW
Magazine).
I also know two employers in
Leicestershire who have an
unwritten policy of not
hiring women
of child-
Bob Forsberg, CEO
RF Labs, Lake Forest, California
Editor’s note: This law was passed
by Parliament but then rejected by
the French Constitutional Council.
Armchair inventors
Inventors
typically
expend
hundreds of thousands of dollars in
developmental
costs
and
$15,000–$30,000 in fees to get a
patent (“Blockbuster escalates
row over online rental patent,”
OUT-LAW News, about Netflix
suing for patent infringement
and Blockbuster countering
that Netflix used deceptive
practices to obtain its
WWW.OUT-LAW.COM
bearing age. However, they’re
willing to risk a (hard to prove) age
and/or sex discrimination claim to
avoid the cost and hassle
associated with maternity leave.
I know equality and fair
treatment are the aims of the
Government but business owners
are profit-driven and will often find
ways to work around the
regulations in an effort to get things
done.
In my view, which echoes the
view of many business owners I
know, the long-term effects of
overbearing and over-complicated
employment
law
will
be
less flexibility and
competitiveness
in the UK
workforce.
I
think
t h e
German and French Governments
are beginning to wake up to this
problem.
Karl Craig-West
Business Skills Trainer & Professional
Speaker
TV licensing
TV licensing would have a hard job
convincing a court that watching TV
over the internet is the same as
watching TV via cable, satellite or
terrestrial transmission (“TV
licence now needed for internet,”
OUT-LAW News, 08/06/2006). For it
to succeed they would have to
convince the court that every PC
requires a TV licence, since a PC is
just as capable of receiving internet
broadcasts as a TV with the tuner
attached is. Then every CCTV would
similarly require it as any monitor
could should output from a PC. It
would also mean that you could no
longer remove a TV tuner and not
require a licence. This would fly in
the face of case law.
MAIL BAG
Marianne Smith, London
patents). Disclosure of such is
done in exchange for the 20-year
period of exclusivity. In earlier
statements Blockbuster was
stating that Netflix was afraid of
competition. The whole point of a
patent is to give the inventive
company an edge in the market and
they do not have to compete with a
parasitic organization.
Every company who pirates
another’s inventions claims that
the inventor did not disclose
information and that the invention
is obvious. Inventors create jobs
and tax base and need to be
protected from those who pirate
other’s inventions.
John Airey, RNIB
OUT-LAW’s sexism
You write: “The customer inserts his card to a
reader (which is not connected to his PC).”
(“Barclays to launch two-factor authentication
for online banking,” OUT-LAW News).
His card? His PC? So this feature is only
available to males? Maybe the author
was using the “gender-neutral
he” but if you like I could
find a whole lot
of research that
shows that people
do not read the
“gender-neutral
he” as genderneutral.
Alastair Galloway,
Coventry
Borat on
sexual equality:
In Kazakhstan we
say: “God, man,
horse, dog, then
woman, then rat”
© TWENTIETH
CENTURY FOX. BORAT
GOES ON GENERAL
RELEASE ON 3RD
NOVEMBER
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There will
be hell to pay
COLUMN
Huge awards in harassment cases will force employers to be wary
Employers who
do not take an
active interest
in their workplace culture
c ou l d
f i nd
JONATHAN COLEY
themselves
compensating staff who suffer
bullying or harassment from
other staff – and payouts have
reached levels that were previously unthinkable.
The new legal landscape was
brought into focus by a recent ruling against Deutsche Bank .
Employee Helen Green complained of childish, hostile and
inappropriate behaviour, not by
her superiors, but by her work colleagues, including her own PA.
The High Court accepted that the
hostile environment caused her
nervous breakdown and awarded
damages totalling over £800,000.
T his included £640,000 for
future loss of earnings. When
legal costs are added to this
amount it will no doubt exceed
£1 million.
Green told The Sunday Times
that her compensation figure was
not particularly high in the circumstances. Its writer noted that
even the most seriously maimed
victims of the 7/7 London bombings received a maximum payout
of only £500,000.
Unlike previous cases, Green
was not a highly-paid city trader
but a member of the backroom
team and she was not bullied by
her superiors.
H istorically, employees in
Green’s position would have had
to bring a personal injury claim.
Case law in recent years has
favoured the employer in that
area, making these claims often
difficult to bring as not only
would the employee have to show
© TWENTIETH CENTURY FOX. DEVIL WEARS PRADA GOES ON GENERAL RELEASE ON 5TH OCTOBER
14
THE HIGH COURT
ACCEPTED THAT
THE HOSTILE ENVIRONMENT CAUSED
HER NERVOUS
BREAKDOWN AND
AWARDED DAMAGES
TOTALLING OVER
£800,000
they have suffered an actual injury
but also that this was caused and
was reasonably foreseeable as a
result of the employer’s actions at
work. Green’s case was helped
because her employer should have
been on alert: she had already suffered one breakdown whilst at
work.
Alternatively, an employee
would have had to bring a claim
under one of the discrimination
laws. T hese have widened in
recent years to include not only
the familiar grounds of sex, race
and disability but also sexual orie nt a t ion , rel i g ion , gender
re-assignment and age.
All this has now changed. In
recent cases employees have relied
on a piece of legislation which was
introduced to protect against the
menace of stalkers. I doubt it was
in the contemplation of the legisla tor a t t he t i me t ha t t he
legislation would add to an already
well-stocked armoury for employees. T his legislation was the
Protection from Harassment Act.
The problem arises due to the fact
that the Act is intended to prevent
a person from pursuing a course
of conduct which amounts to
harassment of another and which
he k new or ou g h t to k now
amounts to harassment of the
other. The courts have ruled that
this should not be limited to
harassment outside of the workplace. They have gone one stage
further and said that employers
will be vicariously liable.
T he impact of that for the
employer is potentially widespread as harassment no longer
needs to relate to a discrimination
claim. Further, the limitation period is as long as six years and the
damages available are greater as
all the employee has to show is
anxiety and not actual psychiatric
damage.
For employers, therefore, this
should all come as a wake up call.
Whilst there is a tension between
having a sterile working environment and one with acceptable
banter, employers clearly now
need to pay attention to their
workplace culture and the values
of their organisation. There is a
line that should not be crossed.
There is a need to ensure that line
managers are aware of the issues
so that they can spot and deal with
any acts of harassment or bullying which may occur within their
te ams . Fai ling to do so c an
become very expensive. ■
[email protected]
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OUT-LAWLITE
A MISCELLANY OF THE ABSURD AND IMPLAUSIBLY ACCURATE
Double take
While on trial for stealing
computers, Jon Houston Eipp
astounded police in California with
his nerve when he attempted to
steal more computers from the
court building.
Already facing five years in jail
for burglary, Eipp, 39, was caught.
Speaking from jail, Eipp told
Associated Press that he stole the
computers "for personal reasons."
Sergeant’s
peepers
You press here for
silent, and right here
for vibrate
Hello Moto
Conference callers may soon have
the chance to stop sounding like
themselves. In an attempt to clear
up confusion when two people on a
call sound alike, Motorola has filed
a patent for technology that would
change one person’s voice to make
it distinct.
Using the same technology that
shifts the pitch of singers who stray
out of tune, the system will alter
someone’s voice so that they sound
like a stranger. Callers may find
themselves negotiating crossborder deals with the gravitas of a
movie-trailer voiceover man or the
fluffiness of Mickey Mouse.
Intelinside?
Criminals in El Salvador
showed unprecedented
dedication to their work when
the bosses of a street gang
were holed up in Zacatecoluca
prison near San Salvador.
Police became suspicious when
murders
and
robberies
continued unabated and spent
six weeks conducting an
investigation into the crime
We-ah-ell… you
know you make
me want to
shout
bosses’ movements to find out
how they could be still running
their networks from their
prison cells.
One investigator had the
bright idea of x-raying the men.
They were found to have
phones, chips and even phone
chargers lodged inside them,
far enough to reach their
intestines, according to reports.
Sing when
you’re ringing
A patent which will excite the world’s karaoke fans
and strike terror and fear into the heart of everyone
else has been filed in the US for a mobile phone
karaoke system. It stores a backing track and a
recorded sound file of a person singing and plays
both as a ringtone whenever the phone is called.
“A growing issue concerning wireless
communications devices is the user’s inability to
personalize these ring tones,” says the patent
application, which was obviously written by
someone unfamiliar with public transport.
A group of Liverpool burglars got a
shock when the Merseyside Police
appeared at the sports goods shop
they were burgling recently. It turns
out the boys in blue were acting on
a tip-off – from Texas.
The burglars had made the
mistake of breaking into a shop
near where the Cavern Club used
to be, a site with its own webcam
for nostalgic mop-top fanatics to
gaze at from across the globe. One
Texan was doing just that when he
spotted
the
ne’er-do-wells
breaking into the sports shop.
He was straight on the phone to
Merseyside Police who were able
to make possibly the first Beatlesassisted robbery arrest.
Rehoned bores, turbo
kit, Recaro booster
seat, sorted
Barbie boy
A three-year-old boy has bought a
Barbie-pink Nissan Figaro for
£9,000 on eBay. Jack Neal of
Lincolnshire was able to buy the
car because his mum had left eBay
open with her password already
typed in. Jack’s dad phoned the
seller to explain the toddler’s costly
click. The seller did not press for
payment. The Pure Pedantry blog
notes that Jack’s parents should
have honoured the hot pink
purchase and made Jake drive it
when he turns 17 as punishment.
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legal advice for technology businesses from out-law,
part of international law firm pinsent masons
www.out-law.com/compliance