Wright, Johnston & Mackenzie Solicitors

eBay sued for $11.4 billion for alleged trade secret theft and patent infringement

Online auction giant eBay is being sued in America for allegedly stealing confidential information and infringing software company XPRT Ventures’ (XPRT) patents.

XPRT held initial meetings with eBay to demonstrate their electronic payment system, which eBay was considering using on their website. Prior to the meetings eBay entered into confidentiality agreements with XPRT, agreeing to keep all information relating to the electronic payment system private. 

After the initial meetings and receiving further information on XPRT’s payment system, eBay submitted their own patent application in respect of an electronic payment system.

XPRT claim that the patent application was based on the information that they had shared in confidence with eBay, and also contained information from XPRT’s patents filed two years previously. 

The US Patent Office has thus far rejected eBay’s patent applications because of the similarities with those filed by XPRT Ventures.

XPRT are now suing eBay for patent infringement and “trade secret theft”.  XPRT are basing their claim on breach of the confidentiality agreements signed with eBay. They are seeking monetary damages of at least $3.8billion, representing a chunk of eBay’s $8.73 billion total revenue for 2009 and also damages for “wilful and malicious infringement”, punitive damages and other claims totalling $11.4 billion.

This case highlights the importance of having confidentiality agreements in place when entering into negotiations with third parties, for example with a view to selling your business or entering into an agreement for the third party to use your product or invention. Confidentiality agreements bind the other party to keep confidential all the information they learn in relation to your business or product during the course of negotiations and afterwards. 

It is also crucial to obtain patent protection for your inventions, to ensure that you are protected from third parties using your invention without your permission.

If you would like any further advice on or assistance drafting confidentiality agreements or obtaining patent protection, please contact a member of the iTech team.

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Orange told to pull ‘misleading’ 3G Advert

An advert in which mobile phone operator Orange claimed to have the best 3G network has been banned by the Advertising Standards Authority (ASA) for being ‘misleading’.

In a £4m advertising campaign Orange claimed that: “The Orange 3G network covers more people in the UK than any other operator.”

This claim was challenged by Hutchison 3G, owners of rival mobile network 3. Hutchison 3G claimed that in fact they had the largest 3G network in the UK.

Orange based their claim in the advert on population coverage (covering more people in the places where they live), rather than geographical coverage (more people in the UK, wherever they might be using their 3G mobile).

Orange currently has 93% population coverage compared to 91% for Hutchison 3G. However, Hutchison 3G has better geographical coverage.

The ASA held it was not clear in the advert whether Orange was referring to geographical coverage or population coverage. The advert was therefore ‘misleading’ under the CAP Code (which regulates advertising in the UK) and Orange has been ordered to withdraw the claim from its advert.

Although the ASA is not capable of producing binding decisions, this decision will undoubtedly make it more difficult for 3G providers to make such claims in the future.

The decision highlights the importance in comparative advertising, of carrying out appropriate research and ensuring that you have a concrete basis for making a claim.

If you wish any further advice on the rules regulating advertising and the obligations you must comply with, please contact a member of the iTech team.

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Anti-competitive behaviour – directors beware the red card

The Office of Fair Trading (OFT) has published new guidance on when it will disqualify directors because of competition law breaches.

Crucially, directors who ought to have known that their companies were breaching EU competition law are now equally likely to be disqualified as those actively committing anti-competition offences.

The OFT is seeking to ensure that directors are actively involved and not playing a purely passive role in ensuring their company’s compliance with EU competition law.

Directors must ask the right questions and review whether the company has the requisite training measures and procedures in place to comply with competition law. If directors do not do so, and the company breaches competition rules, then they could find themselves disqualified as a director for up to 15 years.

The new guidance follows a report suggesting that fines are not sufficient to encourage compliance with competition law. To combat this, the OFT have lowered the threshold at which they will consider disqualification. The new guidelines suggest that the OFT will now consider disqualification as a matter of course.

The OFT’s guidance can be found at:

http://www.oft.gov.uk/shared_oft/business_leaflets/enterprise_act/oft510.pdf

If you wish any further advice on directors’ duties under competition law or directors’ duties in general, please contact a member of the iTech team.

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ICO gives green light to behavioural advertising

The Information Commissioner’s Office (ICO) has given the green light to companies wanting to use behavioural advertising when it is conducted fairly.

Behavioural advertising occurs after online companies collect data from users on their website, for example what links they clicked on and what goods they viewed. The companies then use this information to advertise certain goods to that individual user.

To assist companies to ensure that they comply with their data protection obligations when collecting and processing such personal data, the ICO has issued a code of practice.

The new code offers guidance to companies on how to treat the information they gather when offering services on the Internet. Importantly the guidance sets out that individuals must be given the opportunity to opt-out of having their information recorded.

The code covers application and payment forms, social networking sites, cookies and other personally targeted marketing amongst other things.  The code turns established principles into specific recommendations.

The Information Commissioner, Christopher Graham, said “organisations must be transparent so that consumers can make online privacy choices and see how their information will be used”. Companies must make it clear to people why their personal information is being collected, how it will be used and who else may also end up seeing it.

The ICO said a guide for consumers, published alongside the code, will also enable people to make an informed choice about whether they sign up for a particular online service. The Information Commissioner said that this would allow individuals to take control by checking their privacy settings and being careful about the amount of personal information they post online.

The code also warns of the threat of enforcement action should businesses hold on to out-of-date information or fails to keep information safe. The ICO now has the power to fine those who break the rules in a way that causes damage to consumers up to £500,000.

Behavioural advertising has long come in for criticism from privacy campaigners who argue that collecting information from website users amounts to a breach of an individual’s privacy rights.

However the ICO hopes that privacy campaigners will be appeased by the protections given to individuals by the code and the ICO believes that the code will help organisations better comply with their obligations under the Data Protection Act.

The code can be found at:

http://www.ico.gov.uk/upload/documents/library/data_protection/detailed_specialist_guides/personal_information_online_cop.pdf

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‘Read and understood’ not enough to reject complaints

Companies cannot reject consumer complaints simply because the consumer ticked a box saying they had read and understood the terms and conditions.

The Financial Services Authority (FSA) has said that the practice of including a checkbox for consumers to confirm that they have read and understood terms and conditions is unfair and a breach of the Unfair Terms in Consumer Contracts Regulations.

This is because the majority of consumers are unlikely in fact to have read or understood the often very detailed terms and conditions.

The FSA’s statement supports guidance published by the Office of Fair Trading making it clear that it is unfair for companies to ask customers to declare they have read and understood their terms and conditions.

Instead, online retailers are advised to bring to their customer’s attention any terms that are unusual and use a checkbox with a brief statement positioned above the confirmation button. 

If you wish any assistance drafting terms and conditions for your website or wish any further advice to ensure your compliance with the Unfair Terms in Consumer Contracts Regulations, please contact a member of the iTech team.

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