The Italian Competition Authority clarifies how to improve the internal market competitiveness. Focus on digital platforms.

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On 23 March, the Italian Competition Authority (ICA) published a 105 pages report providing the Italian Government with a number of pro-competitive reform proposals in view of the forthcoming annual Competition Act (full report in Italian here). This last can be read as the outcome of a constructive dialogue between the ICA and the Government, whereby the first clarifies how to unlock the Italian market competitiveness and the latter may turn these suggestions into binding law. It falls outside the scope of this summary to examine whether, since the entry into force of the Competition Act in 2009, the Government year by year in charge followed the advices of the ICA. In any event, the recent call of Prime Minister Draghi himself for the ICA opinion during the opening speech at the Italian Parliament, bodes well for an effective 2021 Competition Act.

Covering a wide range of topics, the report overall implies the ICA embraced the new EU wide zeitgeist of the coming years, namely, sustainability and digitalization.

The reform proposals focusing on the connection between competition law and sustainable development, indeed, echo and tailor to the Italian markets’ peculiarities the innovative studies released by the Dutch and Greek Competition Authorities (and the recent report of the CMA). As for the digital sector, two proposals for legislative amendments concerning, first of all, the economic dependence law and, secondly, an ex-ante regulatory framework for digital platforms, stand out for the radical impact on the ICA enforcement regime they could have.

With regard to the first point, the Italian Law 192/1998 (“Law on Subcontracting in Production Activities”) imposes companies with a strong bargaining power against customers and/or other companies to avoid any abuse of this situation and related economic dependence on the latter. The economic dependence is determined according to the following criteria:

  1. the possibility for the company to impose an “excessive imbalance of rights and obligations in the companies’ commercial relationships”, and
  2. the “effective possibility”for the alleged abused company in“finding satisfactory alternatives on the market.”

The available remedies against this abuse consist in declaration of nullity of the agreement concerned, injunctions and compensation for damages. Remarkably, within this assessment, it finds no room neither the (costly and time consuming) antitrust analysis of firms’ dominance in a given market nor the assessment of anticompetitive effects herein occurred. Conversely, it shares with the abuse of dominance legal institute the up to 10% fines of the turnover of the company concerned the ICA may impose and the penalty payments in case of non-compliance with the ICA’s decision.

Against this background, an emerging trend pioneered by new legislation adopted in Germany and Belgium and by a more aggressive enforcement by the France antitrust watchdog, is revitalizing the legal instrument at hand, sharpening its teeth.

The ICA is following this trend setting its sight on digital platforms. The core of the proposal rests upon the introduction of a rebuttable presumption of economic dependence  “in case a company make use of the intermediary services provided by a digital platform holding (…), a crucial role in reaching end users and suppliers” (also due to network effects and/or data availability it can leverage ). A list of non-exclusive forbidden conducts supplements this proposal, fattening this newly shaped notion of abuse of economic dependence and enhancing the legal certainty for digital platforms. These are:

  1. “directly or indirectly imposing unfair purchase or selling prices, other unfair conditions or retroactive non-contractual obligations;
  2. applying dissimilar conditions to equivalent transactions;
  3. refusing products or services’ interoperability or data portability, thereby harming competition;
  4. subordinating the conclusion and execution of contracts and/or the continuity and regularity of the resultingcommercial relations to the acceptance by other parties of supplementary obligations which, by their very nature and according to commercial usage, have no connection with the subject of such contracts;
  5. providing insufficient information or data on the scope or quality of the service provided;
  6. unduly benefitting from unilateral obligations that are not justified by the nature or the scope of the activity provided; in particular, by making the quality of the service provided conditional upon data transfer in an unnecessary or disproportionate amount”.

In sum, by overturning the economic dependence burden of proof on the platforms’ shoulders, if approved, this ambitious reform proposal will lead the enforcement toolkit under exam towards applications never tested before, opening a new chapter of the intriguing debate on the intertangles balance between “purely antitrust based” enforcement instruments and contract law grounded ones.

The second proposal sees the ICA willing to be armed with an ex-ante regulatory tool for digital platforms modelled on the recently implemented German one. Clarifying why an antitrust authority asks to be equipped such powers would need an ad hoc article (and probably a more competent author). Yet, for those brave enough desiring to learn more about the challenges competition law is facing in dealing with digital platforms, these reports are a good first step:

Herein it is merely underlined how it is widely accepted among antitrust scholars and practitioners the traditional ex-post antitrust enforcement rules are keeping pace with the challenges posed by global digital players. The abovementioned Commission report notably stressed the digitalization of the economy requires “a vigorous competition policy regime” that, nevertheless, “will require a rethinking of the tool of analysis and enforcement”. This rethinking is currently leading within the EU towards the development of a synergy between antitrust enforcement and regulatory legal instruments (this should not surprise, having Europe a long tradition of combining competition law and regulation in order to achieve similar policy objectives – e.g. the regulation of international roaming charges, Interchange Fee Regulation for the financial industry). The EU Commission draft Digital Market Act, being the last and most debated example of this policy choice, aims at monitoring certain anticompetitive behaviors carried out by the so-called Gatekeepers, those market actors that control the entry of new players into the digital market.

National Competition Authorities are pursuing the same path. In January 2021, the German Parliament adopted an amendment of the German Antitrust Act, introducing, among other things, a new weapon for the Bundeskartellamt to act against platforms and assess network effects. The reform proposal of the ICA mirrors this amendment.

This last introduces the legal notion of undertakings having “primary importance for competition in multiple markets“ (i.e. the Gatekeepers). The ICA shall declare this peculiar legal status following this non-exhaustive list of criteria:

  1. “the dominant position in one or more markets;
  2. the vertical integration and/or presence on otherwise related markets;
  3. the access to data relevant to competition;
  4. the importance of the activities for third parties’ access to supply and sales markets and the
  5. related influence on third parties’ business activities.”

Once approved the status of Gatekeeper, in addition to the general rules governing abuse of a dominant position contained in 3 of the Law n. 287/90, the undertaking concerned is subject – for five years since the ICA declaration – to seven black-listed conducts:

  1. “giving preferential treatment, in the supply and sales markets, to its own goods or services against other companies’ ones, in particular by giving preference to its own offers in the presentation or by pre-installing its own offers on devices or to integrate them in any other way into the companies’ offers;
  2. taking measures that hinder other companies in their business activities on procurement or sales markets, if the undertaking’s activities are important for access to these markets;
  3. hindering other companies on a market on which the undertaking can rapidly expand its position, even without being dominant, in particular through tying or bundling strategies;
  4. processing competitively sensitive data collected by the undertaking, to create or appreciably raise barriers to market entry;
  5. impeding the interoperability of products or services or the portability of data;
  6. providing other companies with insufficient information about the services provided or otherwise make it difficult for them to assess the value of this service;
  7. demanding advantages for the treatment of another company’s offers which are disproportionate to the reason for the demand, in particular by demanding for their presentation the transfer of data or rights which are not absolutely necessary for this purpose.”

The aforementioned prohibitions do not apply to the extent that the Gatekeeper demonstrates that its conduct is objectively justified. It is not yet clear whether this burden on companies is to be understood in the same way as the traditional discipline on abuse or whether in addition to reasons of efficiency, public interest reasons (e.g. safety) could also be included. In case of non-compliance, the ICA could fine the undertakings concerned and/or impose behavioral or structural remedies to put an end to the infringement and its effects or to prevent a repeat of the conduct.

In conclusion, while the above reported reports made the last years a period of reflection for competition law, the antitrust watchdogs are now making their moves to tackle a number of shortcomings the rise of platforms led to. Despite sharing a basic premise – the perceived inherent limits of ex-post antitrust enforcement – as far as it can be assessed at this preliminary stage, the regulatory models under discussion give rise to several questions.

It is still unclear, indeed, how the concurrent application of antitrust and regulatory powers (both at EU and national level) will work when a conduct simultaneously violates competition law and harms market contestability or P2B fairness. On the same vein, how the synergies between antitrust and regulatory powers can be maximized without harming legal certainty and predictability (without forgetting procedural safeguards, above all, the ne bis in idem principle)?

One could further pinpoint an apparent lack of awareness of the intersection between competition and other regulatory protections – such as, for instance, privacy – in the digital sector, and thus the need for forms of coordination and shared responsibility among all authorities with functions in the digital sector. Indeed, some of the above reported obligations on Gatekeeper, such as those relating to interoperability and data portability and to the prohibition to introduce or reinforce entry barriers based on data exploitation, could give rise to tensions with the legislation – and the Authority empowered to surveil – on the processing of personal data. In this sense, the absence of institutional cooperation let foresee a bumping road ahead for the governance of the digital economy. Yet, by providing for, as an example, rules on information exchanges between authorities or even co-responsibility between authorities in some areas, the Italian legislator could still anticipate these overlaps (not least giving the impression that taking the best from other countries should not set critical thinking aside).

Andrea Aguggia

“To Sample, Or Not To Sample, That Is The Question”

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On 16th September 2020 the United States District Court for the Central District of California had to decide if the use by an artist – known as Nicky Minaj – of the recording of lyrics and melodies of a musical work “Baby Can I Hold You” by the artist Tracy Chapman (hereinafter the “Work”) for artistic experimentation and for the purpose of securing a license from the copyright owner is fair use (full decision here). Nicky Minaj was aware that she needed to obtain a license to publish a remake of the Work as her remake incorporated many lyrics and vocal melodies from the Work. Minaj made several requests to Chapman to obtain a license, but Chapman denied each request. Minaj did not include her remake of Sorry in her album. She contacted DJ Aston George Taylor, professionally known as DJ Funk Master Flex, and asked if he would preview a record that was not on her album.

The Court recognized fair use based on the following assessments:

·       the purpose of Minaj’s new work was experimentation. Since Minaj “never intended to exploit the Work without a license” and excluded the new work from her album, Minaj’s use was not purely commercial. In addition, the Court noted that “artists usually experiment with works before seeking licenses, and rights holders usually ask to see a proposed work before approving a license” The Court expressed concern that “the eradication … [these] common practices would limit creativity and stifle innovation in the music industry“;

·       the nature of the copyrighted work, did not favor fair use because the composition is a musical work, which is “the type of work that is at the core of copyright’s protective purpose“;

·       the amount of the portion used in relation to the work as a whole, favored fair use. Although Minaj’s new work incorporated many of the composition’s lyrics and vocal melodies, the material used by Minaj “was no more than necessary to show Chapman how [Minaj] intended to use the composition in the new work“;

·       the effect of the use on the potential market or value of the copyrighted Work, favored fair use because “there is no evidence that the new work usurps any potential market for Chapman“.

Considering the factors together, the Court found that Minaj’s use was fair and granted partial summary judgment in favor of Minaj that her use did not infringe Chapman’s right to create derivative works. The Court determined that Chapman’s distribution claim has to be tried and resolved by a jury, but a settlement eliminates the need for a trial. Minaj has paid a significant sum (450.000,00 Us dollar) to settle and avoid the risk of trial. If on one hand, this case confirm that private sampling should be protected as fair use, on the other hand it sounds like a warning for artists on sampling matter. Obtaining a preliminary license – also in the land of fair use – is always the best practice, although creativity and experimentation needs – in the opinion of the writer – to be protected to empower the spread of different music genre and contribute on cultural renaissance, especially regarding hip hop music, that is historically based on sampling.

The decision offers an interesting comparison with the Pelham case (CJEU – C-476/17 Pelham GmbH and others) in order to analyze how the two different systems are evolving on sampling matter.  Actually, the agreement between these two decisions is only partial.

Indeed, in Pelham the CJEU recognized the admissibility of “unrecognizable sample“. According to the CJEU “where a user, in exercising the freedom of the arts, takes a sound sample from a phonogram in order to use it, in a modified form unrecognizable to the ear, in a new work, it must be held that such use does not constitute ‘reproduction’ within the meaning of Article 2(c) of Directive 2001/29.”

Furthermore, in Pelham CJEU argue that the reproduction of a sound sample, even if very short, constitutes a reproduction that falls within the exclusive rights granted to the producer of phonogram. Considering that the US Court stressed that “not only (…) the quantity of the materials used, but about their quality and importance, too” has to be considered, according to Campbell, 510 U.S. at 587, this is probably one of the main gaps between the two decisions.

Indeed, the logical-argumentative process of the US Judge moves from a deep context analysis that implies an interpretation of sampling based on the purpose and character of the uses, according to the common-law tradition of fair use adjudication that always preferes a case-by-case analysis rather than bright-line rules.

Instead, the CJEU chose a different approach, arguing that the “free use” is a derogation not provided by the Infosoc Directive, so any reproduction act is subject to the reproduction rights notion mentioned by art.2 of each Directive. This “static” approach also (and especially?) depends on the pending – and unsolved – harmonization process of the European system of exceptions and limitations provided by the Infosoc Directive.

The US Court, instead of being based on a parameter of appreciation such as the “recognizability of hearing”, comes to the balance through an analysis of context aimed at preserving the freedom of artists to experiment, demonstrating – even in the (apparent) identity of results – more courage, as opposed to the practical approach of the European Court of Justice. The CJEU has not – in the opinion of the writer – taken the opportunity to move more decisively towards a grater balance between exclusive rights and fundamental freedoms, which should be considered the freedom to experiment for artists.

Matteo Falcolini

Chapman v. Maraj No. 2:18-cv-09088-VAP-SS (C.D. Cal. Sept. 16, 2020)

What happens when copyright protection expires? Trade mark/copyright intersection and George Orwell’s ‘Animal farm’ and ‘1984’

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The 1st of January of each calendar year marks not only the days full of new years’ hope, resolutions, and promises, but also the public domain day. 1 January 2021, a moment full of hope with the anti-COVID vaccine rolling out, is no different for copyright law purposes. On the 1st of January, many copyright protected works fell in the public domain.

This year marked the falling into the public domain of the works of George Orwell. Born in 1903, under the real name of Eric Arthur Blair, he has authored masterpieces such as ‘1984’ and ‘Animal Farm’, which in recent years have become extremely topical and relevant. In early 2017, the sales of ‘1984’ went so high up that the book became a bestseller once again. Some have suggested this is a direct response to the US Presidency at the time in the face of Donald Trump.

Orwell passed away in 1950, which means that, following the life of the author plus seventy years rule as per Article 1 of the Term Directive, copyright in Orwell’s works expired on 1 January 2021. Despite this, in the last several years an interesting trend has prominently emerged. Once copyright in famous works, such as those at issue, has expired, the body managing the IPRs of the author has often sought to extend the IP protection in the titles by resorting to trade mark applications. At the EUIPO, this has been successful for ‘Le journal d’Anne Frank’ (31/08/2015, R 2401/2014-4, Le journal d’Anne Frank), but not for ‘The Jungle Book’ (18/03/2015, R 118/2014-1, THE JUNGLE BOOK) nor ‘Pinocchio’ (25/02/2015, R 1856/2013-2, PINOCCHIO).

This is the path that the ‘GEORGE ORWELL’, ‘ANIMAL FARM’ and ‘1984’ signs are now following. The question of their registrability as trade marks is currently pending before the EUIPO’s Grand Board of Appeal. This post will only focus on the literary work titles – ‘ANIMAL FARM’ and ‘1984’, as the trade mark protection of famous authors’ personal names is a minefield of its own, deserving a separate post.

The first instance refusal

In March 2018, the Estate of the Late Sonia Brownell Orwell sought to register ‘ANIMAL FARM’ and ‘1984’ as EU trade marks for various goods and services among which books, publications, digital media, recordings, games, board games, toys, as well as entertainment, cultural activities and educations services. The Estate of the Late Sonia Brownell Orwell manages the IPRs of George Orwell and is named after his second and late wife – Sonia Mary Brownwell.

The first instance refused the registration of the signs as each of these was considered a “famous title of an artistic work” and consequently “perceived by the public as such title and not as a mark indicating the origin of the goods and services at hand”. The grounds were Article 7(1)(b) and 7(2) EUTMR – lack of distinctive character.

The Boards of Appeal

The Estate was not satisfied with this result and filed an appeal. Having dealt with some preliminary issues relating to the potential link of ‘ANIMAL FARM’ to board games simulating a farm life, the Board turned to the thorny issue of registering titles of literary works as trade marks. The Board points out that while this is not the very first case of its kind, the practice in the Office and the Board of Appeal has been diverging. Some applications consisting of titles of books or of a well-known character are registered as marks since they may, even if they are well-known, still be perceived by the public also as an indicator of source for printed matter or education services. This was the case with ‘Le journal d’Anne Frank’. Other times, a famous title has been seen as information of the content or the subject matter of the goods and services being considered as non-distinctive and descriptive in the meaning of Article 7(1)(b) and (c) EUTMR. This was the case for ‘THE JUNGLE BOOK’, ‘PINOCCHIO’ and ‘WINNETOU’. The EUIPO guidelines on this matter are not entirely clear. With that mind, on 20 June 2020, the case has been referred to the Grand Board of Appeal at the EUIPO. Pursuant to Article 37(1) of Delegated Regulation 2017/1430, the Board can refer a case to the Grand Board if it observes that the Boards of Appeal have issued diverging decisions on a point of law which is liable to affect the outcome of the case. This seems to be precisely the situation here. The Grand Board has not yet taken its decision.

Comment

The EUIPO’s Grand Board is a bit like the CJEU’s Grand Chamber – cases with particular importance where no harmonised practice exists are referred to it (Article 60, Rules of Procedure, CJEU). The Grand Board has one specific feature which the other five ‘traditional’ Boards lack. Interested parties can submit written observations, the otherwise known ‘amicus curiae’ briefs (Article 23, Rules of Procedure of the EUIPO Boards of Appeal). In fact, in this specific instance, INTA has already expressed its position in support of the registration of the titles.

It must be observed here that when the trade marks were filed, back in March 2018, ‘Animal farm’ and ‘1984’ were still within copyright protection (but not for long). Indeed, the Estate underlines in one of its statements from July 2019 that “George Orwell’s work 1984 is still subject to copyright protection. The EUIPO Work Manual (ie, the EUIPO guidelines) specifically states that where copyright is still running there is a presumption of good faith and the mark should be registered”. While this is perfectly true, what is also important to mention here is that trade mark registration does not take place overnight, especially when it comes to controversial issues such as the question of registering book titles as trade marks.

The topic of extending the IP life of works in which copyright has expired has seen several other examples and often brings to the edge of their seat prominent IP professors, as well as trade mark examiners and Board members. Furthermore, several years ago, the EFTA court considered the registrability as trade marks of many visual works and sculptures of the Norwegian sculptor Gustav Vigeland (see the author’s photo below).

‘Angry Boy’ by Gustav Vigeland, Vigeland park, Oslo, photo by Alina Trapova

At stake here was a potential trade mark protection for an artistic work in which copyright had expired. One of these is the famous ‘Angry Boy’ sculpture shown here. The Municipality of the city of Oslo had sought trade mark registration of approximately 90 of Vigeland’s works. The applications were rejected. The grounds included not only the well-known descriptiveness and non-distinctiveness, but also an additional objection on the grounds of public policy and morality. Eventually, the case went all the way up to the EFTA court. The final decision concludes that “it may be contrary to public policy in certain circumstances, to proceed to register a trade mark in respect of a well-known copyright work of art, where the copyright protection in that work has expired or is about to expire. The status of that well known work of art including the cultural status in the perception of the general public for that work of art may be taken into account”. This approach does make good sense as it focuses on the specific peculiarities of copyright law (e.g., different to trade mark law, copyright protection cannot be renewed), but it also considers re-appropriation of cultural expression as aggressive techniques of artificially prolonging IP protection – something, Justice Scalia at US Supreme Court has labelled as “mutant copyright” in Dastar v. Twentieth Century Fox in 2003.

In the EU, the public policy/morality ground has been traditionally relied on to object to obscene expression. The focus has been on the whether the sign offends, thus tying morality to public policy (See also another Grand Board decision on public policy and morality: 30/01/2019, R958/2017-G, ‘BREXIT’). A notable example is the attempt to register the ‘Mona Lisa’ painting as a trade mark in Germany. The sign was eventually not registered, but not due to clash with public policy and potential artificial extension of copyright through the backdoor of trade marks, but because the sign lacked distinctiveness. Consequently, the EU understands the public policy and morality ground in a rather narrow and limited manner, namely linked only to offensive use.

Overlap of IPRs happens all the time: a patent turns into a copyright claim (C-310/17 – Levola Hengelo and C-833/18 – Brompton Bicycle), whereas design and copyright may be able to co-habit in the same item (C-683/17 – Cofemel). All would agree that an unequivocal law prohibiting overlaps of IPRs is not desirable from a policy perspective. Yet, you may feel somehow cheated when your favourite novel is finally in the public domain due to copyright expiring (which, by the way, already lasts the life of the author plus seventy years), but protection has been “revived” through a trade mark. Trade marks initially last for 10 years, but they can be renewed and thus protection lasts potentially forever (what a revival!). Therefore, there may be some very strong policy reasons against this specific type of IP overlap and extension of IPRs. Like the European Copyright Society has said in relation to Vigeland, “the registration of signs of cultural significance for products or services that are directly related to the cultural domain may seriously impede the free use of works which ought to be in the public domain. For example, the registration of the title of a book for the class of products including books, theatre plays and films, would render meaningless the freedom to use public domain works in new forms of exploitation”. To that end, Martin Senftleben’s new book turns to this tragic clash between culture and commerce. He vocally criticises the “corrosive effect of indefinitely renewable trademark rights” with regard to cultural creativity.

As for ‘Animal farm’ and ‘1984’, the EUIPO’s first instance did not go down the public policy grounds road. This is unfortunate as lack of distinctiveness for well-known titles such as ‘Animal Farm’ and ‘1984’ is difficult to articulate as the Board of Appeal itself underlines – the Office’s guidelines are confusing (some titles have been protected and others not). Besides, lack of inherent distinctiveness can be saved by virtue of acquired distinctiveness (something the Estate of the Late Sonia Brownell Orwell has explicitly mentioned they will be able to prove, should they need to). Considering that the rightholder here would be the Estate of the Orwell family, proving acquired distinctiveness of the titles for the requested goods and services would not be particularly difficult. On that note, a rejection on the ground of public policy/morality can never be remedied through acquired distinctiveness. Thus, it would perhaps have been more suitable to rely on public policy and establish that artificially extending the IP life of these cultural works is not desirable.

Well, the jury is out. One thing is for sure – the discussion at the Grand Board will be heated.

Alina Trapova

Chip patents infringement: Texas jury orders Intel to pay $2.18 billion

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On March 2, 2021, a Texas jury (US District Court for the Western District of Texas, Waco), has handed down a verdict ordering Intel Corporation to pay $2.18 billion as a result of the infringement of two patents held by the company VLSI Technology LLC. (full jury’s verdict form available here).

The jury’s verdict was given against Intel after losing a patent-infringement trial over technology related to computer microprocessors (chips).

The jury, through Questions 6, 7 and 8 of the verdict amounted a lump sum of $1.5 billion for the infringement of U.S. Patent No. 7,523,373 and $675 million for the infringement of U.S. patent No. 7,725,759.

VLSI Technology affirmed that Intel was “willfully blind” of the existence of the patents in the infringement. Interestingly, while the jury found Intel guilty of such violation, it denied the existence of a “willful” infringement from Intel (Question 4). In such case, District Judge Alan Albright would have been able to raise the amount up to three times of the amount set by the jury.

A compensation of $2.18 billion is a very considerable amount, given the fact that VLSI profits are not generated from the exploitation of the patent. If endorsed, such verdict will be one of the largest patent damages given in United States history.

Alessandro Gai

US District Court for the Western District of Texas, Waco Division, jury verdict of March 2, 2021, VLSI Technology LLC v. Intel Corp, Case No. 6:21-cv-00057-ADA.




CJEU Rules: Access to Data From Electronic Communications Is Permitted Only to Combat Serious Crime and Only With Adequate Procedural Safeguards.

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The Court of Justice of the European Union (“Court”) recently published a decision regarding article 15 of Directive 2002/58/EC, on privacy and electronic communications (“Directive”) stating the existence of a serious interference between data access and fundamental rights that implies the irrelevance of the amount of data accessed and the necessity for Member States to set safeguards in case such access must be nevertheless accorded to state authorities.

It must be said that the Grand Chamber substantially confirms its own case law making express reference to the judgments Tele2 Sverige (C‑203/15 and C‑698/15), La Quadrature du Net (C‑511/18, C‑512/18 and C‑520/18) but it also gives some clarifications.

The case at stake is based on a criminal conviction relying – among other things – on data generated in the context of the provision of electronic communications services. The Riigikohus (Supreme Court, Estonia), expressed doubts as to whether the conditions under which the investigating authority had access to those data were compatible with EU law – in particular article 15 of the Directive – and referred three different questions to the Court.

The first regards the relevance, in the proportionality test, of the period to which the retained data accessed by the authorities relate. The second regards the need to assess the proportionality between the amount of data to which the authorities may have access to, the seriousness of the criminal offence and the tolerated interference with fundamental rights. The third regards the quality of independence of the authority that can be competent for the prior review of the data access request. 

Regarding the first two questions, the Court holds that the Directive, read in the light of the Charter, precludes national legislation that allows public authorities to have access to traffic or location data without restrictions on the merit of the procedures, that should instead be limited to serious crimes or threats to public security. What is more, the length of the period in respect of which access to data is sought and the quantity or nature of the data available are irrelevant circumstances in the assessment of legality of the data access, being the interference with the fundamental rights in any event serious per se. 

With reference to the independence principle, the Court holds that that the Directive also precludes national legislation that recognises to the public prosecutor’s office the power to authorise access to data for the purpose of conducting a criminal investigation.

Indeed, even if it is for national law to determine the conditions under which access to data must be granted, the legislation must set minimum safeguards in order to avoid risk of abuse and to reconcile the various interests and rights at issue. It follows that the requirement of independence of the authority entrusted with carrying out the prior review of legitimacy of data access requests implies that the said authority must be a third party in relation to the one filing the request. This is not the case for the public prosecutor’s office when it directs the investigation and also performs the subsequent public prosecution. 

Andrea Giulia Monteleone

Case C‑746/18 – H. K. v Prokuratuur – Judgment of the Court (Grand Chamber), 2 March 2021

Guess Who’s in the Kitchen? (Vorwerk v. Lidl)

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The Commercial Court No. 5 of Barcelona, specializing in patent law, delivered a Judgement on January 19, 2021 (in Spanish) connected to proceedings 1231/2019 (Judgement), involving German company Vorwerk & Co. Interholding GmbH (Vorwerk), manufacturer of the kitchen machine known as Thermomix, against the Spanish subsidiary of Lidl supermarkets (Lidl), distributor of the kitchen machine known as Monsieur Cuisine Connect (MCC) under Silvercrest brand.

The case relates to the infringement of European Patent EP 1269 898, validated in Spain through Spanish Patent ES 201589. Lidl, which commercialized its kitchen robot MCC in Spain from June 2018 would have infringed the “Thermomix patent“, owned by Vorwerk. As a result, Vorwerk launched the relevant proceedings for patent infringement against Lidl, who counterclaimed patent invalidity as a defence, arguing that ES 201589 patent: (i) extended the protection conferred pursuant 123(3) European Patent Convention (EPC); (ii) lacked novelty pursuant Art. 54 EPC; and it was not susceptible of industrial application pursuant Art. 57 EPC – also, the relevant Spanish Patent Law provisions were invoked.

Albeit the decision involved many other aspects, the debate focused on the food weighing function protected under patent EP 1269 898. This function, having an independent circuit from the circuit that controls the movement of the mixing bowl, allows Thermomix weighing the food while the machine works, therefore having two different circuits for mixing and weighing.

The Court dismissed the invalidity counterclaim filed by Lidl and found there was an direct infringement of European Patent EP 1269898, validated in Spain as Spanish Patent ES 201589.

In the Judgement Lidl was ordered to, inter alia: (i) cease any import, storage, commercialization -even through its distributors-, or advertising of the kitchen machine MCC; and (ii) pay damages, to be calculated in the enforcement phase of the Judgement, once the decision becomes final.

However, the enforcement of the Judgement – including the withdrawal of allegedly infringing products- will have to wait, since Lidl recently filed an appeal to the above mentioned decision. Now, the Court of Appeals of Barcelona shall decide on the merits of a case that, without a doubt, may have a paramount impact on the ability to commercialize the MCC, not only within the Spanish territory, but in other member States of the European Patent Office where EP 1269898 patent was validated.

Rubén Cano

Commercial Court N. 5 of Barcelona, January 19, 2021 – Proceedings 1231/2019 (Vorwerk & Co. Interholding GmbH v. Lidl Supermercados S.A)

Hands off my database!

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What is wrong with a content aggregator harvesting content from third parties’ database and using it to provide its own service? This is – in a nutshell – the question that, on 14 January 2021, Advocate General Szpunar tried to answer with his opinion on Case C-762/19 (full text available here).

The case brought to the attention of the CJEU concerns the scope of the sui generis right established by Article 7 of Directive 96/9/EC, following the request for a preliminary ruling issued by the Regional Court in Riga, Latvia. The dispute was established between two Latvian companies active in the internet job-advertising market: SIA CV-Online Latvia (hereinafter, “CV-Online”) and SIA Melons (hereinafter, “Melons”).

CV-Online is an internet job-advertising company that operates through a website where employers post job offers upon payment of a fee. Once submitted, the offers are collected and organized in a database, which uses microdata meta tags (a sort of key words for search engines) in order to simplify searches and indexation. Melons, on the other hand, is a specialized search engine that accesses existing job advertising websites and gathers all relevant job posts for specific users searches. In doing so, Melons includes hyperlinks to the original ads on the website of first publication and also integrates the same meta tags used, so as to be able to take advantage of better positioning results on generalist search engines.

A.G. Szpunar suggests that the violation of the sui generis rights pertaining CV-Online is apparent, as the copying and indexing of databases fall within the definition of extraction and reutilization under Article 7(1) of Directive 96/9/EC. However, the question underlined by the A.G. is: how far can the right-holder go in preventing such extraction and re-utilization?

In order for a right-holder to lawfully exercise such rights, two elements should be met: one deriving from the protection afforded by the sui generis right, the other stemming from certain specific aspects of competition.

The first condition is due to the economic connotation of the sui generis right accorded by Article 7(1) of Directive 96/9/EC. Indeed, the protection afforded by the sui generis right may be granted only to those databases which can be proved to have required a substantial investment and only if the extraction or reutilization activities negatively affect such investment.

The second condition stems from the rationale of the sui generis right, that is closer to unfair competition, rather than to intellectual property rights. Indeed, its scope is not only to ensure the recovery of the investments made by the database creators, but it is also to protect them from commercial parasitism.

That said, A.G. Szpunar stresses the importance to consider that both the conduct of third parties (like Melons) as well as the very exercise of the sui generis right could amount to an unfair competition practice. Indeed, there could be a risk that database makers, rather than intending to prevent the creation of parasitical third parties products, may aim at establishing a dominant position in a relevant market.

Consequently, A.G. Szpunar suggests that the referring court should verify whether (i) the extraction or reutilization of the database has indeed taken place; (ii) it is proved that the database required a substantial investment; and (iii) such extraction or reutilization integrates a threat to the possibilities of recovering such investment. Should all the above conditions be met, the national court should also verify whether the exercise of these rights could result in an abuse of a dominant position under EU or national laws.

Giovanni Rindi

Advocate General Szpunar, opinion of 14 January 2021, Case C-762/19, SIA ‘CV-Online Latvia’ v SIA ‘Melons’

Unwanted Email Advertising: Trivial Damage or Significant Data Protection Violation?

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In a case concerning damages for unwanted email advertising as a data protection violation, the Federal Constitutional Court in Germany (BVerfG) recently ruled, that the European Court of Justice (ECJ) has to decide on the interpretation of the prerequisites and scope of Art. 82 (1) GDPR. It has to be clarified how Art. 82 (1) GDPR is to be interpreted against the background of Recital 146. In other words, under which conditions the article would grant a claim for monetary compensation.              

The plaintiff, a German lawyer, had received one (!) unintentional advertising email and sued for injunctive relief, access to the stored data and damages of at least 500 €. Whilst the District Court of Goslar (September 7, 2019 – Case No. 28 C 7/19) upheld the claim for injunctive relief and access, it refused to award immaterial damages. The judges claimed that these were not evident. Hence, the threshold for a monetary compensation for a violation of personality rights had not been exceeded. In response, the plaintiff decided to file a constitutional complaint, arguing that the decision of the District Court violated his right to the lawful judge of Article 101 (1) sentence 2 of the German Basic Law (GG). He claimed that the District Court had wrongly refrained from submitting the question of the threshold for GDPR damage claims to the ECJ for a preliminary ruling.            

In the ruling of the BVerfG, the judges now emphasized that the claim for damages under Art. 82 GDPR may not be denied just because of a minor or trivial loss. The Federal Constitutional Court underlined in fact, that the District Court would have had to make a preliminary reference to the ECJ beforehand. Hence, the plaintiff’s right to the lawful judge according to Article 101 (1) sentence 2 of the German Basic Law (GG) had been violated: the District Court did not comply with the obligation to refer the matter to the ECJ by way of preliminary ruling proceedings pursuant to Article 267 (3) of the Treaty on the Functioning of the European Union (TFEU). The District Court disregarded this obligation by interpreting European Union law itself.                

The court in Goslar must now decide anew and it can be assumed that the judges will refer the questions to the ECJ. It is to be hoped, that the European judges will define a de minimis threshold for damages due to data protection violations. At the same time, clarification of all underlying issues is not expected. However, general principles of high practical relevance can be laid down, already discussed in literature and case law.

Dario Haux

German Federal Constitutional Court, Decision of the 2nd Chamber of the First Senate, January 14th 2021, 1 BvR 2853/19 -, 1–24

“This article was automatically written by Tencent Dreamwriter robot”

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“This article was automatically written by Tencent Dreamwriter robot”

Nanshan’s Court got certainly worldwide noticed for a pivotal decision, namely “Shenzhen Tencent Computer System Co., Ltd. (“Tencent”) vs Shanghai Yingxu Technology Co., Ltd. (“Yingxu Technology”)” (full text available here).

With this judgement, the Chinese Court ruled in favor of recognizing protection to AI-generated content under Copyright Law.  

Specifically:

  • In August 2018, Tencent published an article on the Shangai stock exchange index on its website, which terminated with the following statement: “This article was automatically written by Tencent Dreamwriter robot”;
  • The article was written with the support of the software Dreamwriter;
  • Tencent claimed that Dreamwriter computer software was a data set and algorithm-based intelligent writing assistance system, independently developed by Tencent Technology (Beijing) Co., Ltd (an affiliate of Tencent), then licensed to Tencent (see claim here);
  • Yingxun Technology published the same article on the Shangai stock exchange index on its website;
  • Tencent claimed, inter alia, copyright infringement since, according to its point of view, the article on Shangai stock exchange was protectable under copyright law and the rights were attributable to it;
  • The Chinese Court (specifically, the Court of Nanshan) ruled in favor of recognizing protection to an article written with the support of an AI under Chinese Copyright Law, sustaining – in brief – that the article (a) could be included within the scope of protection being a literary work and that (b) “creative choices” were made by the team who selected the data to be included in the AI which then was involved in the making of the work.

The decision here addressed represents a pivotal decision with reference to AI-generated content protection.

Notwithstanding the above, please note that of course the discussion on protectability and ownership of AI-generated content is still open at a worldwide level.

Francesca Di Lazzaro and Maria Di Gravio

Court of Nanshan (District of Shenzhen) 24 December 2019 – Case No. (2019) Yue 0305 Min Chu No. 14010, Shenzen Tencent Computer System Co., Ltd. vs Shanghai Yingxu Technology Co., Ltd.

Marketing communications, food & beverage and children’s protection. IAP adopts a new regulation.

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On 9th February, the Italian Institute for Advertising Self-Regulation  published the new regulation for Marketing Communications relating to food and beverages, the protection of children and their proper nutrition (full text available here).

In particular, these rules aim at integrating the provisions of the Code of Marketing Communication Self-Regulation which, in art.11, pays particular attention to the protection of children, who can be identified as individuals under 12 years old.

The new regulation focuses on the presentation of food products and beverages, affirming that it must avoid statements that could mislead children, including through omissions, ambiguities or hyperbolical overstatements, especially as regards the nutritional characteristics of the product.

Furthermore, Article 5 of the Regulation states that marketing communication must not stress the positive qualities of the nutritional aspects of foods or beverages that are dependent on fat, trans-fatty acids, sugar, sodium or salt, the over-intake of which is not recommended.

The regulation is in addition and without prejudice to the provisions of the digital chart, which constitutes the rules that social media influencers and vloggers must observe in order to ensure the distinctiveness of the commercial message.

Matteo Falcolini