Saturday, 14 September 2013

Microsoft Xbox One: Regulatory puzzles in a converging marketplace

On Thursday, 12 September 2013, the Royal Television Society's Cambridge Conference heard Nancy Tellem, Microsoft's Entertainment & Digital Media President, explain the thinking behind the Microsoft Xbox One console, due for release on 22 November 2013. Xbox One is a "state of the art gaming console, a new generation TV and movie system, and a whole lot more". Gaming, internet browsing, Skype telephony and watching films and television all take place through a single set-top box. Users can rapidly switch between uses or enjoy them simultaneously, using vocal or gestural controls. 

When I asked Nancy Tellem, who started her career as an attorney, where she expected Xbox One to be regulated, and whether as television or video game or both, she engagingly confessed that she "would have to get back to me". 

As the European Commission observed in its April 2013 Green Paper on convergence in audiovisual services, we are experiencing an "on-going transformation of the audiovisual media landscape, characterised by a steady increase in the convergence of media services and the way in which these services are consumed and delivered". Different set-top boxes and interfaces are vying to become the dominant gatekeeper to the digital household. Microsoft's new product seeks to do so by offering an immersive, highly interactive experience, breaking down the border between gaming and filmed entertainment. Microsoft proposes a truly interactive form of television. Understandably, they are beginning with a live action version of a popular game, Halo, created in partnership with Steven Spielberg.

Now, it is not clear precisely how interactivity will be integrated into these live action dramas, but it is obvious that elements of gaming will be part of the user experience. In the UK, the sale of computer games is regulated by the Video Recordings Act 1984 (as amended in 1994 and re-enacted in 2010). However, this does not cover streamed content, as there has to be a supply of a disc or other storage device before the Act bites. Similarly, the Video Recording (Labelling) Regulations 2012 apply only to physical carriers. While PEGI Online, a voluntary scheme for rating online games, is made available by the Interactive Software Federation of Europe, this important category of gaming is essentially unregulated (save by the law of obscenity). Xbox One will make the regulatory gap more troubling to policy-makers and parents alike.

However, the Audiovisual Media Services Directive 2010/13/EU, as implemented by Regulations in 2009 as part 4A of the Communications Act 2003 (further amended in2010), envisages that EU Member States will regulate on-demand services which are "television-like". As the Xbox One service will involve "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" (section 368(1)(a), 2003 Act), it seems likely (subject to the crucial jurisdictional question) that Microsoft will be subject to regulation by the Authority for Television on Demand and, in relation to advertising associated with its on-demand services, the Advertising Standards Association. Among the many requirements of the 2003 Act is this: "If an on-demand programme service contains material which might seriously impair the physical, mental or moral development of persons under the age of eighteen, the material must be made available in a manner which secures that such persons will not normally see or hear it" (s. 268E(2)). The Directive requires Member States not only to prevent advertising for tobacco products, control product placement, discourage discrimination and so forth, but also to require such services to promote "the production of and access to European works".

So the question is: in what circumstances would the UK have jurisdiction over Microsoft's Xbox One service? To (over)simplify a complex set of provisions, an EU Member State will regulate where the operator is substantially established in that state (either by having its head office there or, where the head office is in another Member State, maintaining a significant part of its relevant workforce there) or uplinks to a satellite from or uses satellite capacity appertaining to that Member State (unlikely to be relevant to Xbox One). 

Although Microsoft has staff working on this service in the UK, they might choose to deliver the service wholly from the US. Would that put them in the clear? Largely. However, the Xbox One service seems to be a "television licensable content service" within section 232 of the 2003 Act. Under section 329 of the 2003 Act, Ofcom can ask the Secretary of State to proscribe a foreign service that is "unacceptable" on grounds that it repeatedly contains matter which offends against taste or decency, or is likely to encourage or to incite the commission of crime, lead to disorder, or be offensive to public feeling. If an order is made, the service may not be included in a cable package - which might be a problem for Microsoft in sub-distributing their service, if that was what they hoped to do. So in practice in the event of concern on Ofcom's part as to the content of the Xbox one service, Microsoft would in fact find itself subject to regulatory pressure.

Be that as it may, the reality is that regulation of streamed services must surely come, even if they emanate from the US. As Professor Joel Reidenberg has argued for some years, it is clear that cyberspace will eventually be subject to regulation, even (or especially) in democratic countries. Recently the British Prime Minister, David Cameron, pushed ISPs to provide better protection for children. As technology and commercial innovation break down the borders between traditional product categories, the process of assimilation of the online to the offline world will accelerate. Xbox One seems to be a new challenge to those product definitions, and if it succeeds, regulatory change must be likely.
Thomas Dillon          
4-5 Gray's Inn Square

Thursday, 12 September 2013

Visit by Professor Louis Harms

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Jane Lambert

One of our most distinguished members is Professor Louis Harms. Professor Harms was until recently the Deputy President of the Supreme Court of Appeal of South Africa which is the highest court of that country for all but constitutional matters. He is a distinguished intellectual property lawyer and holds professorships at several universities. His career is summarized in "A Singular Colleague",  an article that appeared in the December 2011 edition of the Advocate published by the South African Bar Council.

Having retired from the South African Supreme Court, Professor Harms practises as an arbitrator and he heads a panel of specialist intellectual property arbitrators and mediators from these chambers which I shall discuss in a future article.  He will be in chambers on the 25 Sept and has kindly offered to give a special lecture entitled "The principle of self-interest rightly understood' to an invited audience.  I shall also review that talk in this blog.

Professor Harms will visit England in the same month as the publication by Dr. Rob Davies MP, the South African Minister of Trade and Industry, of a Draft National Policy on Intellectual Property.  As South Africa is one of the so-called CIVETS (a group of rapidly industrializing countries immediately behind Brazil, Russia, India and China) with a population of 53 million in a land area of 1.2 million square kilometres, highly developed industries and agriculture, enormous natural resources and a GDP of US$375 billion, any statement of policy by its government demands attention.

Although others appear to have welcomed the draft policy (see Linda Daniels "New Draft South African IP Policy Receives Initial Positive Reactions" IP Watch 9 Sept 2013) I have to say that I found it confusing.  It appears to suggest that the Companies and Intellectual Property Commission (the South African patent office) grants patents for inventions that do not merit such protection (so-called "weak patents") although it gives no evidence that that is the case.  Intrigued by that suggestion I looked at the South African Patents Act 1978 which seems remarkably similar to, and possibly modelled upon, our own. S.34 of that Act provides for examination and 61 for revocation of invalid patents. The Patent Regulations 1979 which implement the Act contain the same sort of provisions as our Patent Rules.  Appreciating that what appears on paper may not necessarily be the same as what happens in practice I visited the website of the South African Institute of Intellectual Property Law (the professional association of patent and trade mark attorneys who are lawyers in South Africa and patent and trade mark agents who are like patent attorneys here) and the sites of some of the Institute's member firms some of which were impressive. Unless I am very much mistaken there does not seem to be any lack of expertise in intellectual property law in South Africa.   So I have to confess that I really do not understand the Minister's point there.

I was similarly confused by the reference to "undisclosed information" as provided by art 39 of TRIPS as "data protection." In her talk to the IP Bar Association a few weeks ago Professor Aplin of King's College had equated undisclosed information with trade secrets and other confidential information ("IP Bar Association Garden Party" 24 July NIPC Law) which is what I had always considered it to be.  Data protection, at least in this country, is akin to privacy and the proper handling of information likely to identify living individuals.  The point that the Minister seems to make is that rules preventing disclosure of trade secrets and other confidential information should not be used by drugs companies to prohibit the release of the results of clinical trials to generic medicine manufacturers which is, of course, a fair one (see "The Bolar Exemption" on the IPO website).

Dr Davies is also against bilateral investment treaties which is understandable (see my article "Bilateral Investment Treaties: Claiming Compensation from Foreign Governments under Bilateral Investment Treaties for failing to provide adequate IP Protection" 27 July 2013 NIPC Law to understand why) and patent law harmonization which is not.   To co-ordinate IP policy across government departments is a laudable objective but I have to say that a great country like South Africa that has suffered so much from Apartheid deserves better than what is on offer.

Of course, Professor Harms cannot be held responsible for the policies of his government any more than we can for ours, but as he is South African and, more to the point, as he will be here I will therefore ask him some very searching questions on the protection of intellectual assets (particularly those of my British clients) in his country.

Patent attorney Barbara Cookson of Filemot Technology Law Ltd writes:
"On South Africa, the reason the policy says that they grant weak patents is that there is no examination system at present so they just rubberstamp them and it one of the countries where you can get a patent really fast. The agents try to make money by delaying grant for 12 months and trying to persuade applicants to accept a review of the specification or make amendments to conform to amendments agreed in countries where the patent has been examined. It is a good idea for them to introduce an examination system. I would expect the profession to welcome it. Some of the public health issues in the policy look a little more worrying and I am sure the generic and drugs businesses will have a lot to say about those."