Commercial/IP/IT - March 2010

Competition Law

European Commission investigates allegations that Google acted 'anti-competitively' in ranking of rivals' sites on its natural search results...

The European Commission is investigating allegations that Google has acted anti-competitively over the way it has been ranking search results. Three businesses have complained to the Commission that their rankings have been demoted because they are commercial rivals of Google. They therefore claim that the search engine giant – which is responsible for about 90% of Internet searches across the world – has been abusing its dominant position in the market, contrary to European Union competition law. The complainants are UK search engine Foundem; French search engine ejustice.fr; and Ciao, the price comparison site which has been owned by Microsoft since 2008 and which prior to that had had a good relationship with Google. Google denies any wrong-doing and says that penalties to filter out unwanted traffic and rankings are reserved for spam or sites seeking to cheat Google's algorithms. For example, Google removed BMW's site from its search results four years ago because the search engine did not like the car manufacturer's search engine optimisation techniques.

Contracts

Liability cap in contract includes contractual interest but excludes statutory interest – Markerstudy v Endsleigh, High Court...

Endsleigh provided certain administration and claims handling services to Markerstudy. Markerstudy claimed for losses resulting from Endsleigh's alleged overpayment in relation to the claims. There was a liability cap in the contract. This preliminary hearing concerned how much was covered within the cap.

The High Court ruled that the total liability in contract included liability for contractual interest. However, any interest applied by statute was a discrete statutory liability arising from the exercise of the court's discretion and was therefore not covered by the contractual cap on liability.

The High Court also ruled on other matters that emphasised the need to draft exclusions or limits on liability absolutely clearly beyond doubt. Failure to do so could result in the liability clause being interpreted against the person looking to rely on it.

One clause said: 'Neither party shall be liable to the other for any indirect or consequential loss (including but not limited to loss of goodwill, loss business[...]) arising out of or in connection with this Agreement.' Endsleigh argued that the specific types of losses in brackets could apply to direct or indirect losses, but the court rightly disagreed. The phrase 'including but not limited to' gave a clear indication that those losses were a type of indirect or consequential loss.

More surprising, perhaps, was the court's interpretation of the following clause: 'Endsleigh will not be liable to Markerstudy for any indirect or consequential loss or loss of profit or loss of business arising out of...' The court ruled that only indirect loss of profit or business was covered by the exclusion. Endsleigh argued that the specified types of loss were free-standing from the phrase 'any indirect or consequential loss' and could therefore be direct or indirect loss of profit or loss of business, but the court rejected that argument too.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: 'Some of the court's findings here are surprising. However, what is not surprising is that if someone wants to exclude or limit its liability, the clause has to be drafted very clearly – more so, perhaps, than many people realise. Failure to do this could result in not having liability limited or excluded in the way intended. Since the liability clause nearly always crop up in the event of a dispute, it is arguably the most important clause in the contract, but the one drafted incorrectly most often.'

Economic duress to change the agreed contract price won't work – Kolmar v Traxpo, High Court...

You've secured an important deal to sell some products to a major customer. You've got an agreement with a supplier to buy the product. Everything's in place...that is until your supplier suddenly decides to put pressure on you to buy at a higher price than otherwise agreed. You're caught between a rock and a hard place. You don't want to pay any more money but you need to do so in order to fulfil that important customer deal. What should you do? Should you pay extra, supply the customer and then seek to claim later that your supplier broke an agree deal? Would that work?

That was the situation faced by Kolmar in this case. It did agree to pay the extra amount and then sought a recovery of the overpaid sums in restitution. The High Court awarded victory to Kolmar. It was important that Kolmar had clearly agreed to purchase at an agreed price and that it had only agreed to the revised price based on illegitimate pressure that left it with no practical choice. The Court decided that it had no real alternative but to agree to the supplier's demands and get its redress later.

European Commission proposes the 28th regime as alternative to national laws...

The European Commission has proposed a new law spanning the European Union which would aim to increase cross-border trade. In 2008, only 7% of web site transaction were made cross-borders. Viviane Reding, the Justice, Fundamental Rights and Citizenship Commissioner, has blamed the lack of uniformity for that. Giving her assessment, she said, 'The EU must do better.' She would like business-to-consumer relationships to be made simpler by offering an alternative to the 27 different national regimes. Under the 28th regime, a business would simply need to comply with the new EU-wide set of rules. She compared the situation to the US and said Europe could have a uniform commercial code in order to become a truly globally competitive economy.

European Commission wants to push ahead with Consumer Rights Directive...

The European Commission has signalled its intent to push forward with its proposed Consumer Rights Directive. Viviane Reding, the Justice, Fundamental Rights and Citizenship Commissioner, would like to have a single set of rules that relate to consumer rights. This is all part of her plan to make the EU more harmonised and reduce barriers to trade. However, the position has been criticised by certain consumer rights groups, as the effect of the law would be to give a set of maximum standards, thus lowering the current protection offered to consumers. Based on statements so far, a standardised set of consumer laws across the EU would remove the rights that consumers currently have to reject faulty goods. The proposals are still a considerable way away from becoming law, but the developments are worth monitoring.

Copyright and Database Rights

Australian case says ISP not liable for peer-to-peer copying of users...

An Australian court has ruled that an Internet service provider was not liable for the unauthorised peer-to-peer file-sharing habits of users to whom the ISP merely provided access. Roadshow Films claimed that iiNet had authorised copyright infringement by its users, but the Australian Federal Court disagreed. The judge said that the fact that copyright infringement was occurring on a wide scale across the ISP's network did not mean that the ISP had authorised the wrong-doing as it was not compelled to stop the infringements. Mere knowledge that infringement was taking place was not enough.

As with English law, Australian copyright law forbids the doing or authorise of doing anything which infringes someone else's copyright. The two legal systems have common roots, and the decision may therefore be persuasive (although not binding) on similar English court cases.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.upload-it.com, comments: 'It's understandable that the music and entertainment industries want to take action against people who allow their people to lose royalty monies.

However, that's not fair on the ISPs. It would be the equivalent of taking action against the Post Office because they don't intercept pirated material sent in the post and stop it being delivered.'

Change of stance from...