This article was also published in Lawyer Monthly’s November 2021 digital edition here, on pages 66-68
Protecting Trade Secrets Amid Rapid Recruitment
Trade secrets are always among the most highly valued assets a company possesses. But how can companies with high employee turnover rates keep them safe? Flavia Stefura, senior associate at MPR Partners, answers our questions about trade secrets and security below.
Why are trade secrets especially vulnerable at the beginning and end of an employment relationship?
Trade secrets represent information that is not generally known or accessible to the normal circle of persons who deal with that kind of information. It is commercially valuable, or it gives a competitive advantage because it is generally not known and for it to be protected as trade secret, reasonable security solutions must be put in place by its holder. Therefore, an essential characteristic of trade secrets is that they must be protected from outsiders.
Both at the beginning and at the end of an employment relationship, trust between the employee and the employer is the main issue that puts trade secrets in jeopardy. And sometimes, when the employment relationship is ending, trust has been broken by at least one of the parties. Without trust, there is a near complete absence of loyalty between the parties, which may lead to leaks of an employer’s documents, objects, materials, etc. to third parties.
Looking in particular at the “gig economy”, what issues could a business encounter when it frequently hires new employees, from a standpoint of both protecting its own trade secrets and avoiding encroaching on others’?
According to a report released by cybersecurity company Deep-Secure following a survey in 2019, more than half of respondents (59%) reported that they had taken company information from a corporate network or device. The reasons vary, although personal gain and being paid by a third party seem to occupy a prominent place.
Frequent rotation of employees tends to prevent employee loyalty from developing. Employees who are disloyal to their employer are more likely to resort to leaking trade secrets to competitors.
Another factor that may be considered is that frequent changes of workplace give employees less time to internalise the company’s trade secret protection policies. Sometimes, a new employee is overloaded with information during the first days of work and then left to navigate the company’s rules and policies by themselves.
As an employer, one should avoid employees who are willing to bring the competition’s unlawfully acquired trade secrets. These persons will likely do the same with the new employer’s trade secrets when the next opportunity arises.
How can these challenges be foreseen and prevented ahead of time?
Employers can take appropriate steps to safeguard their trade secrets. Such steps include, for example:
However, aside from robust protection measures, such as the ones described above, employers should also use soft skills in relation to their employees so that relations do not become strained and employees have no incentives to harm their business.
What effect has the pandemic-induced spike in remote working had on the protection of trade secrets?
The pandemic has caught many companies off guard with respect to ensuring that the devices that employees work from at home maintain the same or a comparable security level of compared to the ones they use at work. Many employees had the chance to use their own unsecured and/or unmonitored devices.
This situation created more opportunities for trade secret leaks. On the one hand, employees have had less supervision and therefore could more easily misappropriate files and documents, and on the other hand, criminals have had a better chance to exploit vulnerabilities in the companies’ IT defences.
Do you expect these problems to grow more significant as hiring practices shift?
A 2018 study by the European Centre for International Political Economy estimated that currently 55 billion euros are lost annually to cyber espionage. Moreover, 289,000 jobs are at risk because of valuable information leaked to other states in emerging economies. The same report shows that by 2025, the equivalent of one million jobs will be at risk.
Remote work connects even more devices to the internet, and therefore the opportunities for exploiting IT services vulnerabilities will only increase in the following years. Exacerbating this is the decreasing global engagement of employees with their work.
The trade secret landscape, therefore, will remain challenging for both small and large firms to navigate in the years to come.
Are there any other notable challenges in the modern trade secrets landscape?
One of the most challenging issues with respect to the use of trade secrets by employees is the situation where such trade secrets become integral to the employee’s skill and experience.
The Directive (EU) 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure expressly provides that it will not be used as ground for limiting employee mobility, especially limiting employees’ use of experience and skills honestly acquired in the normal course of their employment. One such difficulty lies in that it is often difficult to separate trade secrets from skills of the employee.
Moreover, the Directive does not stipulate if and whether the former employees can use or disclose a previous employer’s trade secrets which said employee has acquired in a lawful manner. Therefore, this type of use and disclosure of trade secrets remains a matter for the national laws of the Member States. This in turn creates additional uncertainty and costs for employers.
This article was originally published in The Trademark Lawyer.
It is now 40 years since Princess Diana’s wedding dress, often dubbed the ‘most closely guarded secret in fashion history’, first made its appearance on the steps of St Paul’s Cathedral. The ivory silk-taffeta gown with puff sleeves and a 25-foot train, which has recently gone on display at Kensington Palace, was designed by a British couple, David and Elizabeth Emanuel. Once they had acquired the right to label themselves By Royal Appointment, everything changed. For a while, the Emanuel name became world famous.
In the early 1990s, Elizabeth divorced David. She then continued by herself and was asked to design all the Virgin Atlantic uniforms, luggage and accessories, as well as the wedding outfits for Sir Richard Branson, his wife and their children for the couple’s wedding.
But gradually, the business unravelled. She then assigned the business and all its assets to a new business, Elizabeth Emanuel (EE Plc), which went into administration. Shortly afterwards, the registered trade mark was sold to Oakridge Trading, owned by a Manchester businessman, Shami Ahmed. In July, after a 25-year battle, Elizabeth Emanuel successfully struck a deal to market her creations under her own name.
Emanuel’s problems have centred on her trade mark – a sign used in commerce to identify the source from which goods and services originate. Many types of sign can be registered as trade marks, not least the names of individuals. Registering eponymous trade marks is especially common in the fashion industry, where successful designers link their names to their products. In public perception, the name becomes synonymous with the brand. Several renowned fashion houses are named after their founders: Chanel, after Gabrielle (Coco) Chanel; Dior, after Christian Dior; Burberry, after Thomas Burberry; and so on.
However, there are pitfalls in registering and/or using one’s name as a trade mark, as numerous disputes over such trade marks demonstrate. Although some disputes arise from the availability of the name used, as was the case with Chanel versus Chanel’s Salon, where the famous French luxury brand barred Chanel Jones from commercially exploiting the word “Chanel” in relation to her services, others arise when a successful brand has been sold by its initial owner, who then tries to reuse it in other ventures.
Numerous designers have been involved in litigation over their eponymous brands. They include: Paolo Gucci, Karen Millen, Kate Spade, Joseph Abboud, and, of course, Elizabeth Emanuel. What they have in common is that they cannot use their names commercially because they have assigned the trade marks incorporating their names to other undertakings.
In Emanuel’s case, the European Court of Justice gave a preliminary ruling in 2006 in which the judges said that because she had voluntarily assigned the trade mark rights to Ahmed, founder of the Joe Bloggs label, she had no claim. The Court reasoned that “even if the average consumer might be influenced in his act of purchasing a garment bearing the trade mark ‘Elizabeth Emanuel’ by imagining that the appellant in the main proceedings was involved in the design of that garment, the characteristics and the qualities of that garment remain guaranteed by the undertaking which owns the trade mark.” The respective trade mark therefore could not be revoked because it would mislead the public when the goodwill associated with that mark has been assigned, together with the business making the goods to which the mark relates.
Fortunately for Emanuel, her story now has a happy ending. She recently reached a settlement with Boi Group, the current owner of the trade mark, that will initially allow her designs to be sold under her name in an exclusive one-year deal with the high street chain TK Maxx. Lawyers for Emanuel are now set to make a second court claim to regain the trade mark rights.
While registering one’s name as a trade mark has certain unchallenged advantages, such as the enormous publicity and value that accrue to the name if the products are successful, one should also consider what might happen in future ventures should the registered trade mark and goodwill be sold to a third party. Designers cannot simply sell their business for a large amount and then automatically expect to create new businesses using the same name.
This article was originally published in Lawyer Monthly.
There is power in names, or so the saying goes. That is most certainly true in the world of luxury fashion brands. Some of the most renowned fashion houses are named after their founders: Chanel, named after the famous Gabrielle (Coco) Chanel, Dior, after Christian Dior, Burberry, after Thomas Burberry, and the list goes on.
There is value and goodwill associated with famous names, and for such value to be protected from freeriders who would take advantage, designers resort to the legal protection of trademarks. Trademarks are signs that allow the holder to show that the products or services under that trademark are controlled by it and to distinguish them from the products or services of another undertaking. Registering a sign as trademark prevents other undertakings from using the same or a similar sign for goods and services whenever there may be confusion between the trademark holder and other undertakings with respect to the origin of goods and services.
However, while the advantages of wide recognition and increased value of a trademark registered by a successful designer cannot be denied, in the complex world of trademark protection there are also pitfalls of using your own name as a registered trademark.
First, there is the issue of clearance. If one wishes to register their name as a trademark or simply use it in commerce without registration, one must ensure the name is not already registered for the goods or services for which the registration is intended. Otherwise, there are risks of litigation and exclusion from the market under that name. A telling example was the case of Chanel Jones, an Indiana-based hair salon owner, who lost the right to use her first name for commercial purposes, in a dispute against the French fashion power house Chanel.
Another matter to be mindful of when registering one’s own name as a trademark is to be aware that the trademark achieves its own standing and becomes separate from the natural person. Therefore, the name can be sold together with the business that it represents. Once sold, the natural person who once registered the name is no longer able to use the same name in connection with a similar business, or, possibly, with any other businesses.
Judging from the case-law available on this topic, it seems that some designers have not been aware of this potential issue when selling their eponymous trademarks. Famous designer names who can no longer be used in trade by their original holders include Elizabeth Emanuel, the designer of Princess Diana’s wedding dress, Paolo Gucci, Karen Millen, Joseph Abboud (in his case, the designer can use his name in trade following a disclaimer that the products are not related to the ones of the assignee).
In the case of Elizabeth Emanuel, who had sold the trademark “Elizabeth Emanuel” and later tried to have said trademark revoked, the highest court of the European Union, the European Court of Justice, gave a preliminary ruling. The Court reasoned that “even if the average consumer might be influenced in his act of purchasing a garment bearing the trademark ‘Elizabeth Emanuel’ by imagining that the appellant in the main proceedings was involved in the design of that garment, the characteristics and the qualities of that garment remain guaranteed by the undertaking which owns the trade mark.”. As a result, the “Elizabeth Emanuel” trademark would not be revoked on the reason that it would mislead the public as to the origin of the goods when the goodwill associated with that mark has been assigned together with the business making the goods to which the mark relates.
Luckily for Elizabeth Emanuel, her story has a happy ending, as she reached a settlement with Boi Group, the current owner of the trademark, to sell her clothes under her name within the TK Maxx chain.
A cautionary tale can be taken out of these examples. When choosing an eponymous trademark, one should always consider what would happen in future ventures in case the registered trademark and goodwill are sold to a third party. Designers cannot simply sell their business for large amounts of money and then expect to create new businesses using the same name.
This article contains general information and should not be considered as legal advice.
Last year, Chanel’s worldwide brand was valued at $13.7bn, an increase of more than $2bn on the previous year and three times what it was worth in 2017, according to Statista. It is therefore no surprise that the company is extremely vigilant in pursuing infringement of its trade mark, which serves to undermine its brand. Indeed, Chanel is notorious for its efforts in defending it against misuse and infringement.
Alongside various ongoing legal battles with retailers who sell allegedly counterfeit Chanel goods, the company has also begun a legal action in London against an online retailer (Kensulate Corporation Ltd, which owns the Crepslocker online store) that sells authentic Chanel goods.
Chanel v Crepslocker: the arguments
The French based fashion house accuses Crepslocker of infringing the Chanel trade mark by tarnishing its positioning as a luxury fashion brand. Its principal arguments against Crepslocker fall under four main headings:
• Using the Chanel trade mark to describe the goods that it sells in the product captions, both in its online store and in a store on e-bay.
• Selling the ‘Chanel’ branded goods alongside goods from other (inferior) brands which do not share the same hallmark of luxury. The Crepslocker website hosts pages dedicated to various brands, where branded products are sold. There used to be a dedicated page for Chanel products, which is now disabled.
• Offering the trade marked goods online, which is not allowed under Chanel’s policies. The official Chanel website makes it clear that there are no authorised online sellers of Chanel leather goods, fashion items and watches. The only exceptions are fragrance, beauty and eyewear products.
• Not offering the luxury experience to customers. Chanel claims that in a test purchase, the item arrived in a crumpled condition and not in the original packaging.
In its defence, Crepslocker invokes the exhaustion of Chanel’s rights to the sold products. Under the trade mark exhaustion rule, after the first sale of a trade-marked product by the trade mark holder, or with their consent, the holder can no longer control the subsequent sale(s) of the product. The exception is that the trade mark owner can oppose subsequent sales for legitimate reasons, especially when the condition of the products has been materially changed or impaired.
Crepslocker further argues that the distinction which Chanel makes between the goods that it sells online and those it does not is artificial. According to Crepslocker, mixing Chanel products with sportswear does not tarnish its reputation, and Chanel has separately collaborated with sports apparel manufacturers for its products.
In prior cases where conflict existed between luxury brands and online resellers, British courts were bound by guidance from the Court of Justice of the European Union (‘CJEU’) – until Brexit took effect last year.
Now that the UK is no longer part of the EU, the dispute will be subject to English law. Post-Brexit, as of January 2021, the UK’s Supreme Court is no longer bound by decisions of the CJEU. However, British courts are free to take such decisions into account in their own rulings.
In terms of trademark rights exhaustion, the Trade Marks Act 1994 is fully harmonised with EU legislation: Directive (EU) 2015/2436. Both approximate to the laws of individual Member States relating to trade marks, stipulating the principle of trade mark exhaustion and providing the same exception.
What the CJEU says
There have been several notable CJEU cases which establish a fairly consistent precedent: they indicate that the EU’s main judicial body is protective of trade mark owners. Of these, three stand out.
From a competition law perspective, in the leading Case C 230/16 Coty Germany GmbH v Parfümerie Akzente GmbH, the CJEU ruled that luxury brand owners are entitled to implement selective distribution systems, i.e. sale systems where they controlled the distribution chain, in order to preserve the luxury image of their respective goods. This entitlement is on condition that the selection of resellers is undertaken based on ‘objective criteria of a qualitative nature that are laid down uniformly for all potential resellers and applied in a non-discriminatory fashion and that the criteria laid down do not go beyond what is necessary’. The ruling allowed brand owners to exclude the internet sale of their goods through contractual clauses.
In Case C 59/08 Copad SA v Christian Dior couture SA, the CJEU held that when a licensee of the trade mark owner sells goods in a discount store, in spite of the contractual provisions of the licence which do not allow the licensee to do this because of the trade mark’s prestige, the trade mark proprietor can invoke the rights conferred by that trade mark against the licensee. This can happen provided it has been established that that contravention damages the allure and prestigious image which confers an aura of luxury on those goods.
When it comes to packaging, the CJEU held, in Case C 324/09 L’Oréal versus eBay, that selling a product after removing its original packaging may be opposed by the trade mark holder, ‘where the consequence of that removal is that essential information, such as information relating to the identity of the manufacturer or the person responsible for marketing the cosmetic product, is missing. Where the removal of the packaging has not resulted in the absence of that information, the trade mark proprietor may nevertheless oppose the resale of an unboxed perfume or cosmetic product bearing his trade mark, if he establishes that the removal of the packaging has damaged the image of the product and, hence, the reputation of the trademark.’
These decisions show that controlling the sales channels and having respect for the integrity of the original packaging are acceptable exceptions to the trade mark exhaustion rule.
Although they are no longer obliged to follow CJEU rulings, it is unlikely that the higher courts in the UK will depart from established trade mark principles without well-grounded reasons.
Crepslocker used to sell both new and second-hand Chanel products. In the case of new goods, it may be possible that the UK courts will deem the situation similar to those already mentioned in the CJEU cases.
However, an element of novelty rests in the used products which Crepslocker kept in consignment from its customers. Here, the courts would probably consider balancing not only Chanel’s rights against those of Creplocker, but also consider the (natural persons) owner’s rights of the used products to have a platform to sell these goods.
Should the dispute end in a settlement or a win for Chanel, this may well have a chilling effect on online resellers of other luxury brands in the UK and elsewhere in Europe.
It can be argued that maintaining the prestige and value of luxury brands, by setting and keeping sales standards and specific outlets, protects both the brands and the consumers of luxury goods, because the large investment they make in purchasing them is not easily diminished.
However, part of Crepslocker’s business responds to a genuine consumer need to own luxury products, and the corresponding demand for them. Careful consideration should be given to determining whether the second-hand luxury goods market is different from the new luxury goods market and if the exception to the trade mark exhaustion principle still applies or not.
This article was originally published in World IP Review.
The French fashion power-house Chanel is not only notorious for its brand, but also for its efforts in defending it against misuse and infringement.
While Chanel’s legal battles with retailers who sell allegedly counterfeit Chanel goods are ongoing, in a recent development, Chanel has also started a law-suit in England against an online retailer (Kensulate Corporation Limited – owner of the Crepslocker online store) that sells authentic Chanel goods.
Ambit of the dispute
Chanel mainly accuses Crepslocker’s owner (‘Crepslocker’) of infringing Chanel’s trademark by tarnishing its positioning as a luxury fashion brand. Chanel’s main arguments consist in Crepslocker:
Crepslocker defends itself by invoking the exhaustion of Chanel’s rights to the sold products. The trademark exhaustion rule means that after the first sale of a trademarked product by the trademark holder or with the consent of the trademark holder, such holder can no longer control the subsequent sale(s) of the product. The exception is that the trademark owner can oppose subsequent sales for legitimate reasons, especially when the condition of the products has been materially changed or impaired.
Crepslocker adds that the division that Chanel makes between the goods it sells online and the ones it does not is artificial. Also, according to Crepslocker, mixing the Chanel products with sportswear is not tarnishing Chanel’s reputation, who has itself collaborated with sports apparel manufacturers for its products.
Until Brexit, courts in the UK have been bound on guidance from the Court of Justice of the European Union (‘CJEU’) in cases regarding tensions between luxury brands and online resellers.
Considering that the UK is no longer part of the EU, the dispute will be subject to national British legislation. Post-Brexit, the Supreme Court of England and Wales is no longer bound by decisions of the CJEU as of 1 January, 2021. However, courts in the UK are free to have regard to such decisions in their own rulings.
From the perspective of the applicable legal texts regarding trademark rights exhaustion, the UK’s Trade Marks Act of 1994 is harmonised with EU legislation. Both the Trade Marks Act and the Directive (EU) 2015/2436 to approximate the laws of the Member States relating to trade marks stipulate the principle of trade mark exhaustion in the same manner, providing the same exception.
The CJEU precedents so far seem to indicate that at least the EU main judicial body is protective of trademark owners. Analysing the matter from a competition law perspective, in the famous Case C 230/16 Coty Germany GmbH versus Parfümerie Akzente GmbH, the CJEU ruled that a luxury brand owners were entitled to implement selective distribution systems, i.e., sale systems where they controlled the distribution chain, in order to preserve the luxury image of their respective goods, on condition that the selection of the resellers was done based on ‘objective criteria of a qualitative nature that are laid down uniformly for all potential resellers and applied in a non-discriminatory fashion and that the criteria laid down do not go beyond what is necessary’. Moreover, the ruling allowed brand owners to exclude Internet sale of their goods through contractual clauses.
In Case C 59/08 Copad SA versus Christian Dior couture SA, the CJEU held that when a licensee of the trademark owner sells goods in a discount store in spite of the contractual provisions of the license which do not allow such licensee to sell the goods to discount stores on grounds of the trademark’s prestige, the proprietor of a trademark can invoke the rights conferred by that trademark against the licensee, provided it has been established that that contravention damages the allure and prestigious image which bestows on those goods an aura of luxury.
With regard to packaging, the CJEU held, in Case C 324/09 L’Oréal versus eBay, that selling a product after removing its original packaging may be opposed by the trademark holder, ‘where the consequence of that removal is that essential information, such as information relating to the identity of the manufacturer or the person responsible for marketing the cosmetic product, is missing. Where the removal of the packaging has not resulted in the absence of that information, the trademark proprietor may nevertheless oppose the resale of an unboxed perfume or cosmetic product bearing his trademark, if he establishes that the removal of the packaging has damaged the image of the product and, hence, the reputation of the trademark.’
The above-mentioned decisions show that controlling the sale channels and respect for the integrity of the original packaging are acceptable exceptions to the trademark exhaustion rule.
Even though the higher courts in the UK are no longer obliged to follow the rulings of the CJEU, it is unlikely that they will depart from established trademark principles without well-grounded reasons.
Crepslocker used to sell both new and second-hand Chanel products. In the case of new goods, it may be possible that the UK courts will deem the situation similar to the ones in the CJEU cases mentioned above.
However, an element of novelty rests in the used products which Crepslocker kept in consignment from its customers, where the courts would probably consider balancing not only Chanel’s rights against Creplocker’s, but also the (natural persons) owner’s rights of the used products to have a platform to sell these goods on the aftermarket.
In the event the dispute ends in settlement or a win for Chanel, this may have a chilling effect on online resellers of other luxury brands in the UK and elsewhere in Europe.
One can argue that maintaining the prestige and value of luxury brands by setting and keeping sales standards and specific outlets protects both the brands and the consumers of luxury goods, due to the fact that the large investment they make in purchasing them is not easily diminished.
However, part of Crepslocker’s business responds to a real need of consumers owning luxury products for a resale outlet, and the corresponding demand for such products. Careful consideration should then be made with reference to whether the second-hand luxury goods market is different from the new luxury goods market and whether the exception to the trademark exhaustion principle still applies.
Marilyn Monroe was once famously asked ‘what do you wear to bed?’ She replied ‘Why, Chanel Number 5 of course’. That is the kind of celebrity endorsement Chanel appreciates. What it finds less fragrant is any infringement of its trademark which tarnishes its luxury brand. That is what it accuses online store Cresplocker of doing in an English law suit. It argues the tarnishing comes from selling ‘Chanel’- branded goods alongside goods from other less luxurious brands; offering its trademarked goods online – which its policies do not allow; using the ‘Chanel’ trademark to describe the goods it sells in product captions in both its online store and in a store on e-bay; and not offering a luxury experience to customers. It claims a test item it purchased arrived crumpled and not in the original packaging.
Crepslocker argues it is protected by the ‘trademark exhaustion rule’ under which, following a first sale of a trademark product by Chanel, or subsequent sales with their consent, the fashion house cannot then control further sales. Crepslocker also says the division Chanel makes between online and offline sales is artificial, and that Chanel has collaborated with sports clothing manufacturers, so can’t claim mixing its products with sportswear tarnishes its brand.
What is a high-end fashionista, not to say IP lawyer, to make of it all?
Post Brexit the UK Supreme Court is no longer bound by decisions of the Court of Justice of the European Union, (CJEU). However, courts in the UK are free to have regard to CJEU decisions in their own rulings, and CJEU precedents tend to protect trademark owners. They support that controlling the sale channels and respect for the integrity of the original packaging are acceptable exceptions to the trademark exhaustion rule. It seems likely the UK courts will follow these established principles.
However, Crepslocker also kept used products in consignment from its customers, and here the courts would probably consider balancing Chanel’s rights, Creplocker’s, and the owner’s rights in the used products to have a platform to sell their goods on the aftermarket.
A win for Chanel may have a chilling effect on online resellers of other luxury brands. Maintaining the prestige and value of such brands by setting sales standards and determining sales outlets may protect the brands, its consumers and the large amounts they pay for the goods. However, those consumers also need a resale outlet, and there is a demand for the products they own. Careful consideration will have to be given to whether the second-hand luxury goods market is different from the new luxury goods market, and whether the exception to the trademark exhaustion principle still applies.
On September 10, 2020, Advocate General Maciej Szpunar delivered his Opinion in Case C‑392/19VG Bild-Kunstv Stiftung Preußischer Kulturbesitzrequest.
The case concerns a conflict between Verwertungsgesellschaft Bild-Kunst (‘VG Bild-Kunst’), a copyright collecting society for the visual arts in Germany and Stiftung Preußischer Kulturbesitz (‘SPK’), a foundation registered under German law.
In order for SPK to use VG Bild-Kunst’s catalogue of works in the form of thumbnails in its digital library, Deutsche Digitale Bibliothek (“DDB”), VG Bild-Kunst imposed in the license agreement the obligation for SPK to use technical measures in order to prevent third parties from framing the thumbnails of the protected works or subject matter displayed on the DDB website. SPK deemed these conditions to be burdensome, and a legal dispute was brought before the German courts.
The Bundesgerichtshof (Federal Court of Justice, Germany) decided, on May 21, 2019 to refer the question to the Court of Justice of the European Union (“CJEU”) for a preliminary ruling of whether the embedding of a work — which is available on a freely accessible website with the consent of the rightholder — in the website of a third party by way of framing constitutes communication to the public of that work within the meaning of Article3 paragraph (1) of Directive 2001/29/EC where it occurs through circumvention of protection measures against framing taken or instigated by the rightholder.
2. The technical background
Advocate General Szpunar begins his opinion with an analogy between the heroes of George Lucas’ Star Wars that were able to travel through “hyperspace” faster than the speed of light using a “hyperdrive” and the internet users, that, in a similar manner, can travel” through “cyberspace” using hyperlinks. He also stresses out that although those links do not defy the laws of physics, as did the hyperdrives of the spacecraft in Star Wars, they nonetheless present a number of challenges from the point of view of the law, in particular copyright law.
He then continues his opinion by explaining the state of the art in website framing. He describes in detail the notion of “inline framing”, that is the latest development in displaying the contents of a website on a different website. Unlike links, which uses URLs (i.e. “uniform resource locators”, which function as a kind of “web address”) of a third-party website which when activated (clicked-on) display the relevant resources on the respective third-party’s website, embedding allows a resource from an external website (image, text,video etc.) to be displayed on the web page in question in a frame freely chosen by the author of such web page.
From a user perspective, the main difference between clickable links using the framing technique, including inline frames and embedding is that, while in the former case the user knows that he or she is being redirected to a different website, in the latter, the user may have the impression that he or she is accessing only one website.
3. Legal analysis of the proposed question
3.1. Legal basis
According to Article 3 paragraphs (1) and (3) of Directive 2001/29 of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (“Directive 2001/29”) provides that authors have the exclusive right to authorise or prohibit any communication to the public of their works, by wire or wireless means, including making their works available to the public in such a way that members of the public may access such works from a place and at a time individually chosen by them. The right is not exhausted by any act of communication to the public or of making it available to the public.
In other word, each and every time there is a new (form) of communication to the public of his or her work, the author must give his or her consent for the same.
3.2. Status of the jurisprudence
In a judgement dated February 13, 2014, in the Case C‑466/12 Svensson and Others, the CJEU found that hyperlinking to a work found on a freely-accessible website is a communication to the same public as the one intended by the author of the hyperlinked page, namely all the users of the Internet. Therefore, the CJEU concluded that posting a hyperlink to the respective website does not require the authorisation of the holder of the copyright in that work.
In subsequent jurisprudence, the CJEU brought some nuances to its previous ruling, by stating that the work would have to be made available on the Internet with the consent of the copyright holder1.
At the same time, the CJEU2 ruled that downloading a protected work from a website on which it had been made available to the public with the authorisation of the copyright holder and posting the same on another website infringes the rights of that rightholder3.
3.3. The Advocate General’s analysis
Advocate General Szpunar proposes that the CJEU remains constant in its assessment that simple links (clickable links) to the home page or to the pages of the website that contain protected work remains outside the scope of the rights granted to right holders.
In his view, “in the case of works protected by copyright made freely available to the public on the internet with the authorisation of the copyright holder, the public accessing such works by means of clickable links using the framing technique, including inline frames, must be regarded as forming part of the public which was taken into account by that rightholder when those works were initially made available”.
However, the Advocate General deems that the situation is different in the case of embedding where the “works protected by copyright contained on other websites are embedded in a webpage in such a way that those works are automatically displayed on that webpage as soon as it is opened, without any further action on the part of the user (inline links)”. These inline links are referred to as “automatic links” in the Opinion.
In the Advocate General’s view, the main difference consists in the fact that from a user perspective, there is no difference between an image embedded in a webpage from the same server and one embedded from another website4.
The Advocate General states that in the case of an automatic link, the public which enjoys the work can under no circumstances be regarded as constituting the public of the original site of that work. Indeed, for the public, there is no longer any link with the original site: everything takes place on the site containing the link. It is therefore the public of the latter site which benefits from the work5.
The Advocate General further argues that, while the copyright holder is theoretically in control of removing the original work, which would invalidate the links embedded through automated links, this is an extreme position, in which the copyright holder would be forced to choose between tolerating the infringement or not using his or her own work, which runs counter to the idea of copyright.
Moreover, content embedded through automatic links facilitates user access to content pertaining to many websites from a single source or a small number of sources, controlled by a number of companies, which runs counter to the purpose of dissemination of information, noticed by the CJEU in previous jurisprudence.
With respect to circumvention of technological protection measures, the Advocate General deems that measures of protection against accessing works posted on a website through clickable links are outside the scope of protection of the Directive 2001/29, since the author of such works has given his or her consent for accessing by the public when the work was first published.
By contrast, the Advocate General is of the opinion that automatic links should require the copyright holder’s authorization. Therefore, technological measures to prevent circumvention of such authorization should fall within the protection of Directive 2001/29.
At the moment, the automatic links are very pervasive in the Internet landscape. Such an interpretation will have an important impact on the negotiation process regarding the conclusion of licence agreements, because it gives the copyright holder a new tool of negotiation when licensing his or her content.
However, the Advocate General’s Opinion is not binding on the CJEU.
In this sense, it will be interesting to see whether the CJEU will follow the reasoning of the Advocate General or if will stay faithful to the principles already established in its previous jurisprudence.
Senior Privacy & Technology Consultant
1 Case C‑160/15, EU:C:2016:644, GS Media, Judgment of September 8, 2016, paragraph 43.
2 Case C‑161/17, EU:C:2018:634, Judgment of August 7, 2018, Renckhoff.
3 Opinion of the Advocate General, paragraph 72.
4 Opinion of the Advocate General, paragraph 93.
5 Opinion of the Advocate General, paragraph 95.