Ofcom ruling on on-demand programme services

Posted on November 6th, 2015 by

Telecommunications regulator Ofcom has just published its determination on a recent appeal as to whether certain audio-visual materials are “on-demand programme services” under Part 4A of the Communications Act 2003, considering whether or not they are comparable to the form and content of linear television programme services. This decision is particularly interesting, as the approach taken by Ofcom in some respects appears inconsistent with the logic applied in the CJEUs recent decision in RE New Media Online (Case C-347/14).

The materials in this case (the “Mistress R’eal” decision) were in the context of a dominatrix website providing adult content. Ofcom decided that these were not comparable to the form and content of linear television, and were therefore not subject to regulation under Part 4A of the Communications Act 2003.


In the Mistress R’eal decision, features such as: (i) the short duration of the videos; (ii) the lack of opening and closing credits; (iii) the lack of narrative structure; and (iv) the low production values of the videos, combined to prevent the video service from being ‘television-like’. The low subscriber numbers were not a factor in the determination of the service not being ‘television-like’, because the videos were capable of being accessed by a larger audience. The service was economic in nature as the videos were paid-for content.

Part 4A of the Communications Act 2003 regulates a subset of video-on-demand content defined as “on-demand programme services”. Among other things, a service is an on-demand programme service if “its principal purpose is the provision of programmes, the form and content of which are comparable to the form and content of programmes normally included in television programme services.” The Audiovisual Media Services Directive, upon which Part 4A is derived, states that such regulation should only apply to ‘television-like’ services and not those that are non-mass media, primarily non-economic, or do not compete with television broadcasting, such as private websites.


In April 2015, ATVOD determined that the dominatrix video service was an on-demand programme service. Mistress R’eal appealed this decision to Ofcom which overturned the ATVOD determination, based upon a distinction of the service from linear television programme services, by following its own test established in the Sun Video decision relating to newspaper video content. Broadly, the test provides that Ofcom should

  1. identify the principal purpose of what is provided;
  2. identify whether the principal purpose is to provide audio-visual material; and
  3. ask whether the service is ‘television-like’.

Ofcom concluded that the principle purpose was to provide audio-visual material. This is unsurprising, as the website contained predominantly images and text describing the material, and was dedicated to the ordering, formatting, refund and purchase of videos and still images, with such content being significant in volume, and regularly refreshed and updated.

Ofcom distinguished the service on the third element of its test however, considering:

  1. the brevity of the content, even in the adult content genre;
  2. the absence of opening and closing credits, making it less comparable with television (although this was not determinative on its own as this occurs in some linear television adult productions);
  3. the lack of narrative structure, as the content featured disjointed sections of adult content, with some videos including the provider of the services speaking directly to camera in a way more typical of user-generated content; and
  4. the low production values of the content.

These elements combined resulted in a conclusion that the services were insufficiently comparable in form to be ‘television-like’. The service was found not to be competing with adult content on television.


John and I recently commented on the CJEU ruling on the meaning of audio-visual media service which held that the short length of videos will not rule them out of being ‘television-like’, however Ofcom has assessed this case using its Sun Video test, which uses a test and assesses characteristics in a way that might not always fit seamlessly with the CJEU’s judgment in RE New Media Online (Case C-347/14).

Ofcom did not refer in its decision to any consideration of the CJEU’s ruling (and have not recast its test in light of the ruling). To the contrary, the videos being short in length was used to lend credence to the services not being ‘television-like’. It should be noted however that this was not the only (or in fact the principal) consideration that the regulator took into account, and in fact Ofcom appears to have given most weight to the lack of narrative structure and the low production values, arriving at what appears to be a sensible result.


Given the differences in approach taken by regulators across the EU it seems highly likely that more cases like this will fall to be considered, especially in light of the fast paced and changing landscape of on-demand programme services.


Regular readers might also recall that Ofcom will soon take control of all video on-demand regulation in the UK.


The full text of the Ofcom determination in Mistress R’eal can be found here.



Supreme Court upholds rule against penalties and provides new test

Posted on November 4th, 2015 by

After much speculation that the Supreme Court would either abolish the rule against penalties or narrow its scope to exclude commercial bargains, today the Supreme Court has unanimously upheld the validity of the rule while reformulating it.

Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.

The rule against penalties is a longstanding rule under English law, based on public policy, that a contractual provision is invalid and unenforceable if it seeks to punish a party for failing to comply with the contract, i.e. if it is penal in nature.

Until recently, the courts have rarely had to apply the rule to anything other than straightforward liquidated damages clauses. As more complex cases have come before the courts, the test for determining whether a contract provision is penal or not has evolved. The approach of the courts, before today’s judgment was broadly:

1. Decide whether the provision is “unconscionable and extravagant”, designed to deter a party from breach, or a genuine pre-estimate of loss (by applying the four-part “test” from Dunlop Pneumatic Tyre Company Ltd. v New Garage and Motor Company Ltd. [1915] AC 79)

2. If the clause is unconscionable or extravagant, or not a genuine pre-estimate of loss, assess whether it is nonetheless commercially justifiable.

The Supreme Court today:

1. Said that, in the past, the courts have taken an over-literal reading of the test in Dunlop. The courts have tended to treat the test as definitive; and that is unfortunate, as it was never intended to be applied in that way.

2. Criticised the often-drawn distinction between a penalty and a genuine pre-estimate of loss, and between a genuine pre-estimate of loss and a deterrent.

3. Expressed misgivings about the concept of “commercial justification”. A clause could be commercially justified but nonetheless have the purpose of a deterrent.

4. Refused to abolish the rule against penalties. Instead the Supreme Court set out the correct approach. The courts should identify what legitimate interest the innocent party has in enforcing the other party’s primary obligation (i.e., the obligation that, if breached, will trigger the alleged “penalty”). The question then is whether the alleged penalty “imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation..

5. Recognised that the innocent party’s “legitimate interest” could be to obtain compensation for the default, but that the innocent party might have other legitimate interests, for example, maintaining a system of trade between a group of trading partners.

6. Said that in negotiated contracts between properly advised parties of comparable bargaining power, there is a strong presumption that the parties themselves are the best judges of what is legitimate in a provision dealing with consequences of a breach.

7. Confirmed that the rule against penalties applies only where the alleged “penalty” is a consequence of a breach of contract. The Supreme Court recognised that this means that it is possible to draft around the rule.

Commercial parties use liquidated damages provisions to provide certainty and to incentivise proper performance, so it’s important to get the formulation right to prevent the clause being invalidated as a penalty. The lowest risk approach to drafting a liquidated damages clause is to ensure that any obligation to pay a specified sum is not activated on breach of a contractual obligation, but rather it is expressed as payable on the contingency of a specific event (which isn’t breach).

For example, if a customer wants to provide for liquidated damages for delay, one option would be to prescribe an amount payable by a supplier for each day the delivery of goods is delayed, without including a contractual obligation to deliver by a certain date. This means that the primary obligation would be to pay the liquidated damages, and the liquidated damages wouldn’t be a punishment for breach of a contractual obligation (and therefore potentially construed as a penalty). However, we would suggest that this approach is only suited to low-risk areas of performance, or aspects of performance where the innocent party is willing to limit its recovery rights to the amount of liquidated damages, and does not require the full quota of contractual rights and remedies (e.g. damages, contractual termination rights and/or common law rights on the other party’s repudiatory breach).

Keep an eye out for a more detailed analysis and what this means for your business.


Public Sector Spectrum Release Announced

Posted on November 3rd, 2015 by

Last week, telecommunications regulator Ofcom announced that it would be making spectrum in the 2.3 and 3.4 GHz bands, previously used by the Ministry of Defence, available for other uses through the public sector spectrum release programme – the intent is to make 500MHz of bandwidth available by 2020 to help cope with demand generated by mobile data services.

On 26th October, Ofcom published details of how the spectrum will be auctioned, and will be setting a total reserve price of £70 million for the 190MHz of spectrum, which is ideal for mobile broadband. The auction is expected to take place in 2016 and potential bidders are already gearing up to participate.

The spectrum is anticipated to be auctioned in four lots of 10 MHz between 2350 MHz and 2390 MHz and thirty lots of 5 MHz between 3410 MHz and 3480 MHz, with no limit on the amount of spectrum any bidder can purchase.  Further lots may be available between 3410 MHz and 3600 MHz subject to the actions of incumbent licensees.  Reserve prices for the lots are set at £1 million per MHz in the 2.3 GHz band, and £200k per MHz in the 3.4 GHz band.

Ofcom is currently seeking responses on its proposed regulations to cover the auction process, the deadline for which is 27th November 2015.  The consultation document is available at http://stakeholders.ofcom.org.uk/consultations/notice-2.3-3.4-ghz-spectrum/



CJEU rules on the meaning of ‘audiovisual media service’

Posted on October 26th, 2015 by

Last week, the European Court of Justice issued its ruling in case C-347/14, which concerned the interpretation of the Audiovisual Media Services Directive (2010/13/EU) (the “AVMS Directive“) and in particular whether videos contained in an online newspaper constitute an ‘audiovisual media service’.

The judgment will come as a reminder to online newspapers that they are not completely exempt from the AVMS Directive, and has the potential for further reaching implications on the regulation of online video content more generally.



New Media Online GmbH operates the Tiroler Tageszeitung website – a newspaper website containing text-based news reporting, as well as video content ranging in length from a few seconds to a few minutes (including edited reports on various subjects such as local news and events, vox-pop interviews on current affairs, sports events, film trailers, etc). In a separate section of the website, around 300 of these videos were collected in one place.

On 9th October 2014, the Austrian telecommunications regulator determined that this was an on-demand audiovisual media service for the purposes of the AVMS Directive, and was therefore covered by reporting obligations under Austrian law. New Media Online appealed the determination, and the matter ended up being heard by the Austrian Supreme Administrative Court, the ‘Verwaltungsgerichthof’.

Article 1(1)(a) of the AVMS Directive defines an “audiovisual media service” as a service (in the nature of economic activity) which is under the editorial responsibility of a media service provider and the principal purpose of which is the provision of programmes, in order to inform, educate, or entertain, to the general public by electronic communications networks. Article 1(1)(b) defines a “programme” as a set of moving images with or without sound, constituting an individual item within a schedule or catalogue established by a media service provider, the form and content of which are comparable to the form and content of television broadcasting. (Emphasis added).

On 18th July 2014, the Austrian national court referred two questions to the European Court of Justice – essentially:

  1. Can the service be considered as being comparable with television broadcasting (in terms of form and content) if the content of the services is also of the type offered in television broadcasting and are intended for reception by a significant proportion of the general public.
  2. Can the assessment of the principal purpose of a service offered in the electronic version of a newspaper be based on a subsection of a website (providing a collection of mainly short videos which in other sections of the website are used to supplement text articles)?


Opinion of the Advocate General:

Advocate General Szpunar delivered his statement to the CJEU on 1st July this year, opining that the case actually concerns much wider issues that those referred by the national court and that, given that this is the first time the CJEU has had the opportunity to rule on the interpretation of the concept of audiovisual media services, a more general approach should therefore be taken as follows.

It is becoming increasingly difficult to find any internet site which does not offer audiovisual elements to some extent associated with the other content of the site, whether forming an integral part with the written word, or segregated into separate areas of the site. The question must therefore arise as to where to draw the line when it comes to defining the scope of the audiovisual media services definition. The different approaches currently taken by national regulators are – according to the Attorney General – contrary to the requirement to apply the directive uniformly. This is something that legal practitioners in this subject area will already have noticed.

The legislative intent behind the AVMS Directive was to ensure that competition between similar types of economic activity that have the distribution of programming at their core remains undistorted. A broad interpretation of audiovisual media service would extend the scope of the rules applicable to linear and on-demand television beyond this sphere, to services that do not directly compete with broadcasting. The Attorney General argued that “excessively broad regulation might render the directive ineffective” as national regulators simply do not have the resources to monitor and enforce the rules against websites more generally.

The Advocate General contends that the decision of the Austrian regulatory authority turns on whether the provision of audiovisual media is provided separately to or as part of other elements of the service, and therefore depends on the technical architecture of the service in question. Given the huge spectrum of possible technical setups, and that this directive was intended to be technology agnostic and future-proof (as much as any legislation can be), the scope of the definition ought to be determined by the nature of the service, rather than the architecture of the technology involved.

The Attorney General went on to give his formal opinion that the application of the AVMS Directive will require an assessment of the character of the particular services for the purposes of classification, and that no precision of language in legislation will replace that assessment. In the case of New Media Online, his view was that the services did not fall within the scope of the definition.


Judgment of the Court of Justice of the European Union (CJEU):

On 21 October 2015, the CJEU delivered its judgment on this matter. In doing so, the CJEU chose to respond on the specific questions raised by the Austrian national court and not issue broader guidance on the interpretation of the AVMS Directive as suggested by the Attorney General. That said, certain elements of similarity can be drawn between the two approaches.

In its response to the first question, the CJEU concluded that the definition of a ‘programme’ under Article 1(1)(b) of the AVMS Directive must be interpreted as including, under the subdomain of a newspaper website, the provision of short videos of local news bulletins, sports and entertainment clips. In doing so the CJEU took into account that short videos of local news, cultural or sporting events or recreational reports compete with regional radio broadcasters, music channels, sports channels and entertainment programmes.

It also held that the definition requires that videos can be compared to the form and content of television broadcasting, not that a compilation of videos can be compared with the schedule established by a television producer. The fact that the videos are short does not rule them out of the definition of a programme.

In respect to the second question, the CJEU found that it was irrelevant whether the videos were contained within the principal domain of the broader news site or in a separate sub-domain of that site. In other words, it agreed with the Attorney General that the precise architecture of the service should not be determinative when applying the AVMS Directive definitions. The principal purpose must instead be assessed by considering whether the videos are independent from the journalistic activity of the site – where the audiovisual elements within the site are incidental and serve only to complement the provision of written press articles, the principal purpose will not be the provision of programmes. The CJEU also highlighted in particular that the principal purpose test does not depend on whether the website (taken as a whole) is related to the principal activity of the site operator, or is ancillary to it.

While the CJEU stated that it was for the referring court to determine whether the case in hand met the principal purpose test, it suggested that, as there were few articles linked to video clips and the majority of the videos could be watched independently from the articles, the service was of the sort which was independent of journalistic activity.



For newspapers, the CJEU’s judgment is pretty clear. Where video content is included on a newspaper’s website, they must be primarily linked and relevant to the text-based journalistic content in order to fall outside the principal purpose test and hence the AVMS Directive. It does not matter how the video content is organised (whether imbedded within articles or collated on a separate sub-domain) or whether the videos are part of a wider news service. This strikes us as a sensible approach, in that the AVMS Directive should not be capable of circumvention merely by the service architecture and the way content is presented.

It is also interesting to compare the CJEU’s judgment on the principal purpose test with an earlier decision of Ofcom in the Sun Video case (http://www.fieldfisher.com/publications/2012/02/regulation-of-video-on-demand-services-following-the-sun-video-appeal). In that case, Ofcom found in favour of the Sun (as there was significant linking between the videos and the articles) and also laid out some examples of characteristics of a service which did meet the principal purpose test. These included the length of the content, whether the service was styled like a television channel and whether the videos were catalogued on a separate section. Interestingly, these examples don’t chime well with the CJEU’s recent judgment, so we might expect to see some recasting by Ofcom and any other EU regulators who have taken a similar view.

Looking at the judgment in a wider context, it suggests the beginnings of a move to a broader interpretation for the definition of ‘programme’ and a widening of the scope of the AVMS Directive. If short videos of local news, cultural or sporting events or recreational reports can compete with traditional television broadcast (albeit in the context of reportage), what is to prevent a similar interpretation being applied to (for example) vbloggers who upload video content to YouTube on current events? As the Attorney General suggests, such an expansive approach is likely to be detrimental to the effectiveness of the AVMS Directive and would be a move away from the underlying intent of the AVMS Directive – to regulate TV-like services.

Whether this case will be limited to its facts remains to be seen, but don’t be surprised if we see more of these sorts of cases coming before the courts in the future.


Change to Regulation of Video-on-Demand

Posted on October 16th, 2015 by

Ofcom is to take over the regulation of video-on-demand (“VOD“) programme services alongside its current regulation of broadcast content with effect from 1 January 2016.  This follows Ofcom’s recent review of regulation to ensure broadcast and on-demand content regulation is as effective and efficient as possible for audiences and the industry.

Ofcom delegated its powers to regulate video-on-demand content in 2010 to the current co-regulator – the Authority for Television On Demand (“ATVOD“) – but has since decided that a single regulator for video-on-demand is likely to be more effective than a co-regulation model.  It believes that operational efficiencies will be created by regulating on-demand content alongside traditional broadcast content.  In light of the increasing convergence of traditional and on-demand services, and given the complexity of the regulatory framework engaged, having a single regulator may prove to be a more effective way of delivering effective regulation in the sector.

VOD is becoming increasingly popular amongst viewers, with an increase of 27% in 2010 to 57% in 2014 of those aged 15+ consuming VOD services.  The figures are higher among younger audiences – 70% for 15-24s (second half of 2014) and 71% among 25-34s (second half of 2014) – up from 35% for both demographics since 2010.

ATVOD and Ofcom have committed to a smooth transfer of responsibilities to ensure that regulation will remain consistent and that audiences remain protected.  The Advertising Standards Agency will continue to act as co-regulator for advertising on VOD services.


In other news, at the request of the Secretary of State for Culture, Media and Sport, Ofcom is conducting a review of TV production and will be considering the changing market, effectiveness of current regulations, the impact of production sector regulation on Public Service Broadcasters (“PSBs“) and the options for reform of regulation.  The UK’s television production sector has grown significantly in recent years, now generating revenues of around £3bn a year, establishing the UK’s position as a major global content creator and exporter.  There is growing uncertainty for PSBs due to the consolidation of the independent production sector and the acquisition of major UK producers by large foreign media corporations.  With increased vertical integration and consolidation in the market, the Secretary of State is concerned that the current system may disadvantage PSBs in the supply of a range of high quality original content.

Options for reform to be considered include adjusting the terms of trade, quotas, definitions of independent productions.  Ofcom will therefore need to review the potential impact of reform on PSBs, independent producers and other stakeholders, as well as looking at how regulation can promote content production for at-risk genres such as children’s TV and religious programming.

Ofcom invites comments from stakeholders throughout the review of the report (to be submitted by the end of October 2015) with a view to Ofcom publishing the final report before Christmas.




ICO issues record fine for nuisance marketing calls

Posted on October 13th, 2015 by

A breach of the rules relating to unsolicited marketing has resulted in the Information Commissioner’s Office issuing its highest fine ever against a company.

Home Energy & Lifestyle Management Ltd (HELM) was fined £200,000 after it ‘recklessly’ broke marketing call regulations.  The largest fine previously issued (in July 2013) for similar nuisance home energy marketing calls was £45,000.  HELM made 6 million automated calls relating to a solar panel marketing campaign.  The calls were often repeated and it was not always possible to connect to a person or to stop the calls, leading the recipients to feel powerless against the calls (or calls rapidly filled up answering machines).

The ICO has the authority, under section 55A(1) of the Data Protection Act 1998, to issue fines of up to £500,000 for serious contraventions of the Privacy and Electronic Communications (EC Directive) Regulations 2003, as amended. The conditions are:
1. there has been a “serious contravention” of PECR;
2. the contravention is likely to cause “substantial damage or substantial distress”; and
3. the contravention was deliberate, or the person knew or ought to have known that there was a risk the contravention would occur and that it would cause substantial damage or substantial distress but failed to take reasonable steps to prevent it.

In this case the ICO found that:
1. the contravention was “serious” given the volume and misleading nature of the calls;
2. it was likely to cause substantial damage or substantial distress taking into account the number and nature of complaints that the ICO received; and
3. HELM’s actions were deliberate (whether or not HELM did intend to contravene Regulation 19 of PECR).

The level of fine is notable as being the highest ever fine issued by the ICO in relation to a breach of the ICO marketing rules, and it seems clear from the enforcement notice that it would have been higher had HELM not: (i) co-operated with the ICOs investigation; and (ii) made it clear it would not be running a similar marketing campaign in the future.

The ICO warned that other companies must think before they launch into a campaign of a similar nature, and HELM’s behaviour was severely criticised as unacceptable, the ICO going so far as to describe the situation as “beyond belief”.


Digital Single Market: Making Value-Added Tax less taxing across the EU

Posted on October 2nd, 2015 by


Recent legislation, which came into force at the start of the year, is under scrutiny as it has impacted smaller businesses trading across EU borders. Many such businesses have had to stop trading outside the UK (and other ‘home’ states), due to the financial and administrative complexity involved in compliance with the new laws; which now mean that VAT is charged where products are bought as opposed to where the seller is located.

The intention of the new laws was to prevent large companies avoiding higher VAT rates, by basing themselves in countries with lower VAT rates – such as Luxembourg. However, the adverse consequences on smaller businesses have led to the European Commission launching a consultation and promising measures such as an EU wide VAT threshold for start-up e-commerce businesses.

What’s happening?

The public consultation, which runs until 18 December 2015, is aimed at:

  1.  simplifying VAT treatment on all cross-border e-commerce transactions in the EU; and
  2.  reviewing the success of the new rules that apply to telecommunications, broadcasting and electronic services.

Changes to the treatment of VAT were implemented in relation to telecommunications, broadcasting and electronic services transactions from 1 January 2015. In addition to the new “place of supply” rules, that have been applied to VAT on e-commerce transactions (meaning VAT is charged where the customer is located, as opposed to where the supplier is based), an electronic payment system called the “Mini One Stop Shop” (MOSS) has been implemented. MOSS has the aim of reducing costs and administrative burdens for businesses having to comply with the new legislation.

Together, the changes were intended to mean a fairer distribution of VAT revenues occurring across Member States and to prevent multi-national companies exploiting lower VAT rates in certain EU tax havens.

Current issues

The reality is that the current VAT system for e-commerce activities within the EU has a number of key issues, including:

High complexity: businesses that trade internationally face different VAT treatment depending on the Member State they are supplying to, they now have to comply with different national legislation in each state. In addition, they can face audits from tax administrators in each state they supply to.

High costs: given the complexity of VAT rules, the cost of compliance is high; businesses must factor in registration costs (in each state), appointing fiscal representatives, professional advice, VAT returns and so on.

Unlevel playing field between EU and non-EU businesses: the same goods purchased in an EU country can have different tax treatments depending on the location of the supplier. The current rules actually put EU businesses at a disadvantage against non-EU suppliers as non-EU suppliers benefit from a VAT exemption that does not apply to EU suppliers.

Compliance challenges: different rules in different states lead to uncertainty about the correct tax treatment, which inevitably leads to mis-declaration and even abuse of the current VAT structure.

These issues represent a significant barrier to entry to the e-commerce market, particularly for smaller businesses.

Possible improvements

Following the consultation, possible improvements to the EU VAT regime for e-commerce should include:

  • Fair and even distribution of VAT revenues from the digital economy.
  • Making it easier to comply with the rules, especially for smaller businesses trading across EU borders.
  • Allowing audits only by the home country of a business and not by other Member States
  • Making the VAT regime reflect the reality of business across the EU now and in the future.


Unless and until the European Commission simplifies the VAT regime for smaller businesses, the current legislation represents a significant barrier to entry and smaller EU businesses are at a disadvantage against non-EU competition. Urgent change is required to reduce the complexity (and subsequent cost) of compliance: the European Commission should, in the first instance, level the playing field for EU-based businesses by implementing a VAT threshold, meaning the new legislation wouldn’t apply to smaller and start-up e-commerce businesses.


Open Source Software – A Double-edged Sword

Posted on August 26th, 2015 by

As a lawyer with experience in software licensing, I am often asked to advise on issues arising out of ‘open source’ licences. Over the last few years, it has become clear that the software development community are generally aware of the benefits of open source software, but not always the risks. On the other hand, business leaders are often very conscious of the risks, which can lead to a fear of using open source software at all – missing out on the substantial benefits it can offer. By striking the correct balance, businesses can obtain the benefits that open source software has to offer, without unduly increasing their exposure to risk.

Open source licensing was born out of ethics and politics in the 1970s but has since become a part of the establishment, and is based on a number of criteria establishing the principle that anyone should be free to use, modify, and share open source software. Open source software licences are therefore designed to protect the freedom:

–  to run the software for any purpose;

–  to study how the software works and adapt it;

–  to redistribute copies of the software; and

–  to improve the software and allow others to use those improvements.

Whilst ensuring that anyone can use the open source code, the way these criteria are implemented can sometimes be a limiting factor in what can ultimately be done with products containing or derived from such code. Recognising those limitations is important if the software is to be used in a compliant way. When the implications of non-compliance can include costly court battles, it is certainly worth getting it right from the outset.


Open source software has many benefits associated with its use. Ready access to the source code means that open source software is often highly adaptable and customisable. Because it can be adapted to work on new hardware as and when it becomes available, it will not generally become obsolete merely because the hardware for which it was originally designed becomes outdated – as can happen with proprietary software when the developer decides that support is no longer commercially viable. Open source products can also be customised as necessary to further meet the users’ own particular needs, and the software tools needed to do this tend to be freely available online.

Many open source projects are peer-reviewed, which can result in products of equal standard to commercially-produced software. As the source code is made available to the public, bug-fixes and enhancements can readily be made by the end user community and shared with all users.

The use of freely-available tools and pre-written code elements can significantly shorten the development phase for new software, allowing the developer to make resources available to focus on enhancing its product’s functionality or aesthetics, adding value to its commercial offering. The resulting software can therefore often be made at lower cost to the end user whilst still growing profitability for the commercial developer. For those corporate end users that develop software for their own internal use a substantial benefit is the ability to eliminate scale-costs, as open source software doesn’t require additional licences for a greater number of users.


Conversely, open source software products are often made available without any warranties or guarantees, and some instances may infringe upon third party intellectual property rights. This can be a major issue, although there are often legal solutions available.

Lack of knowledge within software development and procurement functions can sometimes mean that businesses will use open source software without full awareness of the consequences, saving up potentially serious issues for later. For example, if a developer wishes to create software containing or derived from code distributed under open source terms, care must be taken as to the precise licence terms upon which the open source code is obtained. Under certain licences, a ‘copyleft’ effect may mean that the distribution of the resulting product may require the developer’s own source code to be made public – often known as ‘contamination’, ‘tainting’, or ‘freeing’. Even where this effect does not occur, businesses may accidentally breach the terms of the open source licence if they are not fully aware of its terms.


Before using open source software products, organisations should conduct a legal review of the relevant licence in conjunction with a technical review of the product and its proposed use to determine:

– how the open source code will interact with any closed source code;

– whether the open source licence requires redistribution of any closed source code that is to interact with the open source code; and therefore

– whether the organisation can comply with the licence terms imposed by the open source licence and still do what it needs to do with the software.

It is still the case that many businesses do not have processes in place to monitor and govern their use of open source software, and clients are increasingly asking us to recommend appropriate safeguards. Just because software is available for free or gratis, doesn’t mean it has no cost or can be used without restriction. We generally recommend that organisations maintain a policy for procuring and using open source software, deciding which applications will be supported by open source software, and identifying the intellectual property or supportability risk associated with using open source software.

The purpose of effective open source software governance should be to establish a practical mechanism which enables an organisation to make sensible decisions on the use of open source software within its operations, provides answers to common open source related questions that arise, and allows the business to reap the significant rewards that open source software can offer, whilst minimising legal risk.

For further information on how you can safeguard your business against open source risks, feel free to get in touch.



Supply Chain Transparency – New Legal Obligations

Posted on August 18th, 2015 by

Over the past few years there has been an increased focus by enterprises large and small on corporate social responsibility, and there has been a substantial growth in social enterprise. It is clear that the impact of business on human society (at the macro level) and community (on a smaller scale) is becoming increasingly important to businesses which need to be seen as ethical to satisfy their customers, as well as to satisfy their own ‘corporate consciences’.

This shift towards ethical commercial practices has also been reflected in legislation. It is now just over five years since the introduction of the Bribery Act 2010, which required businesses to put in place adequate procedures to prevent themselves and their suppliers from acting in an improper manner. This is not just a point of interest for compliance functions, but for anyone dealing with contract negotiations. The impact of this legislation will not have escaped your notice as customers seek contractual assurances from suppliers (and vice versa) that they act in accordance with the law, and ethical business practices more generally.

Earlier this year, the government passed the Modern Slavery Act 2015, which makes provision regarding slavery, servitude and forced/compulsory labour, as well as human trafficking. Whilst at first glance many organisations may be tempted to assume that the new law will have no real relevance to their business, this may prove to be an unsafe assumption.

Section 54 of the new Act will apply to any commercial organisation that supplies goods or services and has a total turnover meeting the threshold set by government, and will require such organisations to prepare a ‘slavery and human trafficking statement’ for each financial year. ‘Commercial organisation’ in this context refers to any corporate body or partnership which carries out business in the United Kingdom, whether or not it is registered there. There is no requirement for a minimum footprint, so any commercial organisations doing business in the UK will be affected if they meet the threshold.

On 29th July, the government published its response to consultation stating its intent to set the threshold at £36m, and to bring the provision into force in October this year. The government determined that businesses with this level of turnover would have the influence (e.g., purchasing power) to drive change in supply chains, and it is also the figure used in the Companies Act 2006 to define large businesses. There is no requirement for this turnover to derive from the UK element of the business, and it can therefore be taken to refer to global turnover of the commercial organisation.

Therefore, from October 2015, it will be a requirement on all commercial organisations doing business in the United Kingdom and having a turnover of not less than £36m to prepare an annual report describing what steps they have taken to eliminate modern slavery from their supply chains and their own businesses. It is worth noting that it remains open for the Secretary of State to adjust this threshold, and it may be reduced in the future.

According to the new Act, a slavery and human trafficking statement may (and arguably should) include information about the organisation’s:

(a) structure, business and supply chains;

(b) policies in relation to slavery and human trafficking;

(c) due diligence processes in relation to slavery and human trafficking in its business and supply chains; and

(d) effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate.

The statement may also include information about the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps the business has taken to assess and manage that risk. The training available to its staff may also be described.

If your business falls within the scope of Section 54, you must publish your slavery and human trafficking statement on your website and include a link to the statement in a prominent place on your homepage.

Given that the statements must be approved by the board and signed by a director (or designated member for LLPs), it would not now be surprising to see obligations appearing on suppliers in supply and service contracts to enable customers falling within the scope of Section 54 to be able to demonstrate that they are taking steps to ensure that their supply chains are free from slavery and human trafficking.


For information on how Fieldfisher can help, this link contains further information.



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First published at: http://www.fieldfisher.com/publications/2015/08/supply-chain-transparency-new-legal-obligations#sthash.WMBwiLxl.dpuf


Copyright Done Right? The Copyright Hub Goes Live

Posted on August 4th, 2015 by

The Copyright Hub was officially launched at an event in London last week. Intellectual Property Minister, Baroness Neville-Rolfe, became the first public user of the hub.

The Copyright Hub is a web platform, developed and supported by the Digital Catapult, which is designed to make it as simple as possible for people to track down and license content over the web.

The Copyright Hub can be accessed by downloading a plug-in to your web browser. If you right-click on an image on the web, and it’s an image that The Copyright Hub knows about, you’ll be instantly connected to the copyright owner.

The Copyright Hub also gives copyright owners an opportunity to control how their content is used by others. This is done by allowing copyright owners to select options for licensing content (e.g. no licence, licence for a fee or licence for an acknowledgement only).

By simplifying and reducing the costs associated with licensing, The Copyright Hub should lead to more content licensing and, as a result, higher revenue for copyright owners.

The Copyright Hub will continue to evolve over the coming months, with nearly 100 Hub Applications planned. Hub Applications are proposals by individuals and organisations on ways to use The Copyright Hub’s technology. There are 10 Hub Applications under active development, including the Mary Evans picture library and Pixelrights’ image protection.

The Copyright Hub is open source and is designed for easy use by anyone, anywhere, at no cost.

The creation of a digital licensing platform, such as The Copyright Hub, was a key recommendation of the Hargreaves Review in 2011.

The Copyright Hub’s press release is available at www.copyrighthub.co.uk/Documents/Hub-Launch-Press-Release-300715.pdf.