NEWS AND COMMENT ON RECENT DEVELOPMENTS FROM AROUND THE WORLD1

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CLSR BRIEFING NEWS AND COMMENT ON RECENT DEVELOPMENTS FROM AROUND THE WORLD Compiled by Stephen Saxby, Editor

UNITED KINGDOM Government E-commerce legislation still on track Two measures designed to facilitate the safe development of E-commerce within the UK would appear to be on track for completion of their parliamentary stages later this year. Originally the Government intended that the Electronic Communications Bill would deal with not only the legal recognition of electronic signatures and statutory schemes for cryptography service providers but also with the policing of encrypted communication. Subsequently it was decided to introduce the investigatory provisions in a new Bill — the Regulation of Investigatory Powers Bill (RIP) — which repeals the Interception of Communications Act 1985 and was, in any case, necessary so as to ensure that interception of communications does not fall foul of the UK Human Rights Act bringing the European Convention of Human Rights into English law.The RIP Bill will establish a new statutory power permitting law enforcement, security and intelligence agencies to serve written notices requiring access to encrypted material and to have that material provided in an intelligible form. The new offences include failure to comply with the terms of a written notice and, in certain circumstances,‘tipping off’ another person that a notice has been served or giving details of its content. The Government maintains that oversight procedures will protect the security and privacy of material obtained, but it has yet to convince businesses and their representative organizations that commercially sensitive data will not be

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leaked. The RIP measure received its Second Reading on 25 May and continues its progress at this time. The Electronic Communications Bill has now completed its Parliamentary stages and received the Royal Assent at the end of May.The Act implements a crucial element of the EU Electronic Signatures Directive concerning the legal admissibility of electronic signatures and is regarded as an important contribution to creating a single market in secure electronic commerce. The RIP Bill can be found at: . The Electronic Communications Act 2000 can be found at: .

National campaign addresses public concern over personal data processing The Data Protection Commissioner and the National Consumer Council have announced a joint initiative to improve public awareness of data protection issues relating to the collection and processing of individuals’ personal data. Central to the campaign is a new graphic signpost called the ‘Information Padlock’.The signpost has been devised for use by organizations requesting personal information and must only be used in conjunction with an explanation of why the information is being requested and for what purpose(s) it will be used. Commenting, the Data Protection Commissioner, Elizabeth France, said:“This is another important step towards ensuring people have the information they need about how their personal information is being processed by both the public and the private sector.The move is in line with

Computer Law & Security Report Vol. 16 no. 4 2000 ISSN 0267 3649/00/$20.00 © 2000 Elsevier Science Ltd. All rights reserved

the new Data Protection Act 1998 which came into effect on 1 March 2000 introducing tighter controls over the use of individuals’ records, requiring organizations to be more open about the intended use of information, following the ‘Eight Principles of Good Information Handling’.” All organizations whose activities involve the collection of personal data are being asked to use the new signpost at any point where information is requested. This includes application forms, advertising coupons, Web sites, etc. Posters and a leaflet explaining how the signpost should be used are available from the Office of the Data Protection Commissioner and electronic copies can be downloaded at: . Editor’s Note: Results of a survey commissioned by the Data Protection Commissioner in 1999 show that the British public place increasing importance on their personal privacy. Seventy three percent indicated that personal privacy was very important, while 77% were concerned about the amount of information held. Seventy two percent were concerned about the lack of openness from organizations on the information they process.

Data Protection Act 1998 — encouraging codes of practice Under the Data Protection Act 1998 (‘the Act’), there is a power for the Data Protection Commissioner to issue codes of practice.The first such code has been produced, in draft, and is aimed at users of Closed Circuit Television (‘CCTV’) and similar surveillance equipment used to monitor/record images in areas

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where the public have largely unrestricted access — such as shopping centres and streets in towns, as well as railway stations and airports. The code is only intended for users of CCTV who are not police forces or security services. The code is divided into two: the first part sets standards to be met generally for compliance with the code and the second part gives a more detailed interpretation of the Act on which the standards are based. The first part of the code even goes into a level of detail such as how cameras are to be sited — so that they only monitor those spaces to which the public have access so that cameras cannot, if they can be manually manipulated, be manipulated to overlook spaces to which the public do not have access, such as private residences. The code recommends signs should be placed in the proximity of the cameras so that the public are aware that they may be entering a zone where they could be filmed.The signs must be clearly visible, at least A3 size and contain the following information: (i) the identity of the person responsible for the location of the cameras; (ii) the purpose of the cameras; (iii) the details of who to contact regarding the cameras (and presumably subject access). The first half also contains recommended wording for such a sign. The first section also looks at issues such as the quality of the images obtained, so that they are effective for the purpose for which they are obtained; how long images should be held for; access to and disclosure of images to third parties such as law enforcement agencies; access by data subjects to any tapes or films; and other rights of individuals. Part Two of the Act looks at the more general principles underlying the code. In particular, it looks at how the Eighth Data Protection Principles apply in the context of CCTV and, also, the individual’s right of subject access. In relation to subject access, the paper looks at the particular problem that arises when a data controller cannot disclose information relating to one individual without also disclosing information relating to others. This will clearly be the case with tapes that

could have photographs of a number of different individuals on them. Part 2 also looks at the limited exemptions from the individual’s right of subject access, including section 29 of the Act which provides an exemption to the subject access rights where personal data are held for the purposes of: (i) prevention and detection of crime; (ii) apprehension and prosecution of offenders. The Commissioner confirms that exemptions would be looked at on a case by case basis. Heather Rowe, Report Cor respondent, Lovells

Government consults on Brussels Convention The Government has launched a consultation on jurisdiction in contractual disputes between a consumer and a trader in another EU Member State.The Brussels Convention allows a consumer to take legal action on certain cases in the country where he or she lives. Patricia Hewitt, the E-commerce and Small Business Minister, said: “E-commerce is bringing the benefits of the Single Market to more and more European citizens. Overall, few transactions end in disputes. But when they do, consumers and businesses want to see disputes settled quickly and cheaply. And consumer and business confidence is vital if E-commerce is to flourish in Europe. The real answer for many E-consumer and businesses lies in efficient, low-cost alternative dispute resolution (ADR) — like arbitration or the ombudsman.We need to ensure that European initiatives to improve crossborder ADR, for example through online hearings, succeed. And naturally we need to look beyond Europe too.” The consultation document will seek views on the circumstances in which consumers should be able to sue at home, including how Web site purchases should be treated, as well as the costs and benefits of alternative approaches and the likely impact on E-commerce take-up by businesses and consumers. The European Parliament’s own opinion on the Brussels Convention is expected shortly. The Commission will then decide whether to amend its proposal, after which discussions between Member States will resume.

Editor’s Note: The consultation paper and the draft Regulatory Impact Assessment are available on the DTI Web site at: .

New report on developments in telecoms standards The Department of Trade and Industry (DTI) has published a report dealing with some of the major developments that are taking place in standardization and technology within the telecoms sector. Its aim is to focus on these developments and to provide an overview of current working standards so as to assist those players not actively involved in the process but who will be affected by the results. Its second objective is to assist both the DTI and industry participants to assess whether the current work in standards bodies is moving in the right direction so as to underpin development of both networks and service provision. The report notes that there are many different events beginning to have an impact on the traditional role of the telecoms sector.These include the gravitation towards the Internet protocol, enabling information to be transmitted between computers on the Internet, as well as the steady drift towards convergence and the never-ending drive towards greater mobility. The first section of the report looks at some of the key changes that are shaping the direction of the market and this is followed by a review of Internet protocol and convergence developments. The final two sections look at current and future services and the key role of network architectures in shaping the competitive service environment. The report is at: .

Information Security Breaches Survey 2000 The Department of Trade and Industry (DTI) has published its fifth survey examining information security breaches. The first survey was published in 1991 and, since then, it has been managed by Reed Elsevier in partnership with Axent Technologies, BT and Nokia. The market research was undertaken by Taylor Nelson Sofres.The survey looked at a range of issues, including attitudes

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towards the protection of business information, corporate approaches towards staff access to the Internet, the use of Email for external communication, and buying and selling over the Internet. It also reports on breaches in security and the impact of those breaches, and the cost involved. It found, for example, that 60% of organizations suffered a security breach in the last two years and 40% of these indicated that this was due to operator or user error — reinforcing the fact that information security cannot simply be solved by technology. Nearly three quarters of organizations that suffered a breach regarded it ‘serious’ but had no contingency plan in place to deal with it. Only one in seven organizations had a formal information management security policy in place. Details of the survey can be found at: . Editor’s Note : A report entitled Fraud: Risk and Prevention has been published by the Confederation of British Industry in association with Ernst & Young. The business guide is designed to promote understanding about the risk of fraud, the warning signs that may exist, and the measures that can be taken when fraud is suspected or discovered. Further information at: .

IT suppliers fear contracts impose unlimited liability Three quarters of IT suppliers doubt whether their contracts protect them from unlimited damages in customer disputes. This potentially uncapped exposure creates uncertainty for both suppliers and customers and means that suppliers risk insolvency over uninsured claims. This is the conclusion of a combined survey by the Computing Services & Software Association (CSSA) and technology law firm Masons. They surveyed CSSA members on their use of standard clauses to limitation clauses. These clauses are designed to cap the amount of compensation payable if a dispute arises over the supply of products and services. The survey was prompted by a series of recent court decisions which have undermined the effectiveness of limitation clauses traditionally relied

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upon by suppliers. The survey shows that the law does not reflect business practice in the IT sector. The relevant Act (the Unfair Contract Terms Act — UCTA) presumes that suppliers can limit their liability at any time. Because of the way that UCTA is drafted and interpreted limitation clauses are often held by the court to be ‘unreasonable’ and therefore ineffective. The survey finds the reverse is true. In the vast majority of cases customers negotiate all contract terms (including the limitation clause). Even when the limitation clause used is the supplier’s standard term, its inclusion usually represents a negotiated position. The CSSA and Masons are set to lobby the Government with a view to amending UCTA. Rob McCallough, partner at Masons, said: “The aim is not to seek an exclusion of liability but, for the benefit of both the customer and the supplier, create a certainty as to what the liability will be should a problem arise.” Further information from Rob McCallough, Tel: +44 (0)20-7490-4000, E-mail: [email protected].

Government launches quinquennial review of the Patent Office A review of the Patent Office looking at the services it provides, its status, and whether there is any scope for improved performance has been announced by Alan Johnson, DTI Minister for Competitiveness. The review will consider the organizational status of the Patent Office and consider whether any changes should be made in the way in which it operates. This will include its aims and objectives, targets and financial controls, as well as the scope of activities undertaken and whether these activities could be done more effectively. The review is being carried out as part of the Government’s programme to modernize and improve public services.The review will be carried out by officials within the Department of Trade and Industry. For further information, contact the Patent Office Review Team, Tel: +44 (0)20 7215 1097, E-mail: cca.com [email protected].

Oftel orders BT to pay half the cost of connecting customers to rivals’ networks Oftel has determined that BT shall bear 50% of the costs of Interim Carrier Preselection (ICPS) and has set the levels of payment which BT must make to ICPS operators in respect of ICPS autodialler installations. The determination has been made following Oftel’s analysis of the costs of ICPS taking account of the requirements of the Interconnection Directive (as amended) and the application of the principles of cost recovery to the costs of ICPS. Carrier pre-selection is a European Commission mandated process through which customers can select their carrier of choice before calling. Currently, customers on BT’s network are able to select alternative carriers by dialling four-digit access codes which route calls to the carrier of their choice.This system is known as indirect access. Unless they have special dialling equipment (e.g. autodiallers) installed, customers wishing to choose an alternative carrier have to dial the extra digits for every call that they wish to route via that carrier. CPS is required by EC Directive 98/6IIEC (the Amending Interconnection Directive) to be made available throughout the European Community from 1 January 2000. Under the Directive, National Regulatory Authorities (in the UK, OFTEL) have to require operators with at least Significant Market Power (SMP) in fixed public telephony to provide Carrier PreSelection. To fulfil this requirement, a new condition has been added to the licences of all fixed PTOs in the UK.This condition will be activated in licences if the Director General determines that the licensee has SMP in fixed telephony. In the UK, BT (and Kingston Communications Ltd (KCL)) have been determined by the Director General of Telecommunications as having SMP in fixed telephony. CPS was made available from KCL’s network on 1 January 2000. In October 1998, the UK submitted a request to the European Commission for a deferment in the implementation by BT (but not KCL) of CPS.The UK requested a delay of up to 12 months from 1 January 2000 for

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implementation of CPS national and international calls, and until December 2001 for all calls. This request was made on technical grounds. For historical reasons, BT’s switches, unlike those made by the same manufacturers and used in other Member States, have no inherent capacity for CPS and therefore major software development has to be undertaken by the switch manufacturers. In December 1999, the Commission granted a deferment of three months, meaning that CPS must be available on BT’s network from 1 April 2000. Nevertheless, it is not possible for BT’s switches to be upgraded to allow CPS ahead of the dates set out in the request.The UK is therefore now committed to the provision of CPS on BT’s network from 1 April 2000 using autodiallers. This solution is known as ‘Interim CPS’ (ICPS) and Oftel has determined that BT must pay the alternative operator 50% of the cost of installing each autodialler. Heather Rowe, Report Cor respondent, Lovells

Oftel and BT state timetable for unbundling the local loop will remain unchanged despite Blair’s wishes On Friday 24 March 2000 Prime Minister Tony Blair signed an agreement with other European Heads of State to have the local loop unbundled six months ahead of the schedule agreed by Oftel and BT. Unbundling is regarded as essential to opening up competition and reducing the cost of Internet access.The original agreement, which had unbundling scheduled for July 2001 was wisely criticized by industry and government alike for being too late. The new agreement between European leaders gathered in Lisbon for a two-day conference saw heads of state agree to a raft of new measures including a new timetable with unbundling to be completed by the end of 2000. On Monday 27 March 2000 BT and Oftel announced that they would press ahead with the July 2001 final deadline despite Tony Blair’s commitment. Heather Rowe, Report Cor respondent, Lovells

Oftel has new powers to ensure that telecom service contracts are fair The Director General of Telecommunications has published a statement Telecom Service Contracts. This sets out the new powers of the Director General of Telecommunications to protect consumers from unfair or inappropriate telecom contract terms derived from the implementation of the Unfair Terms in Consumer Contracts Regulations 1999 and the Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998.These regulations set out a basic framework of standards that entitle consumers to: • a written contract for their telephony service; • receive written variations to any existing telephony service contracts; • have certain standard terms or conditions of service provisions in their contracts; • know that certain other terms or conditions which may be in their contract are appropriately worded; and • expect that all standard terms are fair. These Regulations are intended to help consumers by protecting them and improving the quality of the information available to them. This is to be achieved by informing those who provide telecommunication services of their obligations to their consumers. In addition the Regulations allow OFTEL and others to step in and amend standard contract terms that undermine the bargaining powers and general rights of consumers. OFTEL believes that the Regulations will enable companies who provide telecommunications services to anticipate inappropriate terms and thus avoid using them when drafting consumer contracts. This document gives further details of the type of contract terms that could be contrary to either or both of the Regulations and sets out the different enforcement methods that apply. The possibility of an overlap between the Regulations, and how OFTEL would decide which regulation was most appropriate, is also explained. It goes on to guide potential complainants through the process of making a complaint, examines how the Regulations

will be enforced, and gives an indication of how long an investigation could take. It sets out OFTEL’s conclusions and invites views on the planned new policy and practice in relation to the investigation of allegedly unfair or inappropriate contract terms. Heather Rowe, Report Cor respondent, Lovells Editor’s Note: It should be noted that there is a difference in the definition of ‘consumer’ used by these Regulations. The Unfair Terms in Consumer Contracts Regulations define a consumer as a ‘natural’ person who uses a publicly available telecommunications service for purposes that are outside his trade, business or profession. The Telecommunications (Open Network Provision) (Voice Telephony) Regulations have a different definition of a consumer which includes any residential or business customer.

Publication of strategy for the future use of the radio spectrum in the UK 2000 The Radiocommunications Agency has published the 2000 edition of the UK’s Spectrum Strategy document. The Radiocommunications Agency’s Strategy for the Future Use of the Radio Spectrum was first published in 1995. This is the fifth edition. The Spectrum Strategy sets out a comprehensive picture of how spectrum is currently used in the UK and how it is expected to develop in the years ahead. Its purpose is to inform and consult users about the anticipated changes in the spectrum management. The Strategy outlines the current national and international arrangements for management of the radio spectrum and outlines anticipated future changes, including the continued roll-out of spectrum pricing, using the powers under the Wireless Telegraphy Act 1998, and the possible introduction of spectrum trading, subject to the necessary changes in EU and UK law. This year’s edition also highlights some of the ways in which convergence will affect the future management of the radio spectrum and outlines the major study on this theme that the Agency has commissioned. The Strategy also outlines major developments and anticipated future

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changes in all major areas of spectrum use, service by service.This information is supplemented by a detailed annotated frequency order table which highlights the key spectrum management issues across the whole of the spectrum and by detailed spectrum management objectives for each of the Agency’s licence classes. This edition of the Strategy also contains a chapter on military spectrum strategy.This provides a comprehensive overview of military use across the whole of the radio spectrum and outlines major anticipated developments. This is the first time such comprehensive information on military radio use has been made available in a public document. Further information from the Radiocommunications Agency Web site at: . Lorna Montgomerie, Lovells

Major consultation launched to improve availability, affordability and accessibility of digital television A joint consultation document issued today by the Independent Television Commission, the Office of Fair Trading and the Office of Telecommunications, looking at how consumers will be able to get the best deal and widest choice of access to new digital television services. The consultation will establish what factors could determine the rate at which the Government’s preconditions of affordability and availability for switchover from analogue to digital can be met. Digital TV provides a substantial expansion of the types of services accessible by television such as more information, new interactive services and access to the Internet as well as a greater range of choice of programmes and channels for the consumer. Consumers with differing requirements may face different obstacles — from those who just want to view the existing free-to-air broadcast channels digitally to those who want to take advantage of multi-channel TV, Internet access and interactive services such as home shopping or banking, and switch from one platform to another.

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The document, prepared at the Government’s request, considers how the digital television market can develop in a way which will “not inhibit competition or set unnecessary barriers for consumers to access new services”. The regulators will use the results of the consultation to give practical advice to Government on what regulatory or Government action might be necessary to improve the affordability, accessibility and availability of digital TV to consumers in the UK. The aims of the consultation are to identify and propose solutions to the barriers to: • the take-up of digital television for those consumers interested in receiving a wider choice of channels including pay TV; • the take-up of digital television for those consumers interested primarily in receiving the existing free-toair public service broadcast channels (BBC1, BBC2, ITV, Channel 41S4C and Channel 5); and • consumer access to new services, and in particular to the internet, from digital TV receiving equipment. A number of key questions are identified, based around these issues which ITC, OFTEL and OFT seek views. The consultation document is available at: and .

Hewitt to auction airwaves for multimedia access Patricia Hewitt, the Small Business and E-commerce Minister, has announced another online auction of the nation’s airwaves this September.The next auction will be for broadband fixed wireless access (BFWA) services. BFWA allows users to take advantage of cheap, fast Internet and multimedia access by radio links rather than down a telephone line. Proposals include an auction to be held in September for the spectrum available at 28 GHz for broadband fixed wireless access; three licences to be awarded in each coverage area containing a forward and return channel to send and receive data.The licences will be awarded on a regional bases. The Minister said: “There is an increasing demand for broadband services in all sectors of the economy, including small

businesses. I want these services to be developed as quickly as possible.” Editor’s Note: All documents on broadband fixed wireless access published by the Radiocommunications Agency are available on its Web site at: .

The Post Office welcomes decision on domain names ownership The Post Office has said it is pleased that its case against Pegasus Communications Ltd, which registered Internet domain names similar to trademarks owned by The Post Office, was settled just before a hearing in the High Court at which The Post Office was to apply for an injunction against Pegasus Communications. In March Pegasus agreed to the terms of a court order under which they will transfer the domain names, , and to The Post Office. In fact these names are not currently in use by The Post Office; the official Web site addresses are: , and .A Post Office spokesman said:“We are committed to safeguarding the interests of our customers, and will always take action to remove the source of confusion for our millions of customers who are generally interested in looking for information about Post Office products and services.The Post Office is very serious about protecting its intellectual property. We have invested a great deal in encouraging business and domestic customers to use our Web sites as a convenient way to obtain information on our services quickly and accurately, and we will not compromise access to this important channel in any way.”

Chief fishery officer dealing counterfeit Microsoft software caught on the Net Stephen Holman, chief fishery officer for the Sussex Sea Fisheries District Committee, has been caught leading a double life as an illegal software trader, calling himself ‘The Software Man’. Holman, charged with enforcing fishing laws and quotas, has admitted to dealing in thousands of pounds worth of

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counterfeit computer software, which he acquired after seeing an advert for cheap software on the Internet. Holman was conditionally discharged for 12 months and has promised that he has no plans for illegal trading in computer software in the future. As chief fishery officer, Holman is in charge of a vessel that patrols up to six miles out from the Sussex coast.A central part of his job is to make vital recommendations for action taken against those in breach of the tough fishing laws. However, this responsibility did not deter him from ordering nearly 1000 fake Microsoft Office Pro97 computer CDs from the US with the intention of selling these on through his business,‘The Software Man’. Julia Phillpot, Anti-Piracy Manager for Microsoft comments: “Mr Holman has been very lucky, considering he was caught red-handed with counterfeit software. Microsoft is committed to protecting our customers and business partners from being conned by illegal traders. Microsoft will not tolerate the illegal distribution of our software. Those that attempt to do so are breaking the law and must expect to face the consequences.” For more information about software theft, see: . Editor’s Note :According to an IDC report there are 840 000 Internet sites selling illegal software and passing this off to consumers as genuine products. According to a 1998 PricewaterhouseCoopers survey, over 31 000 new jobs could be created and over £610 million tax revenue could be achieved if piracy levels were reduced by four percentage points in the UK. According to the BSA the current piracy rate is 29%.

UK moves to protect UK infrastructures A new organization — the Information Assurance Advisory Council (IAAC) — has been established as the first independent membership forum focusing on the provision of ‘best practice’ electronic security measures. The IAAC is supported by central government and industry and will seek to influence government policy in this vital area. The organization is now open for member-

ship from UK-based companies and central and local government departments. Members will receive the latest information on Information Assurance, as well as benefiting from IAAC research. Leading UK companies, including BT, The Post Office and BAE Systems, along with the Cabinet Office and Communications-Electronic Security Group (CESG) and Kings College, London, have come together to form the organization for the benefit of secure E-business. Further information at: or E-mail: [email protected].

Change credit card law to protect Web customers The law on credit cards should be changed to protect customers, says a new report. The E-commerce boom means that credit card issuers should safeguard their customers for all orders over £25 when goods do not arrive or are in breach of contract. “Credit card issuers have become the police force supervising millions of Web transactions”, says Roger Loosley, Chairman of the Technology Lawyers’ Consortium and Partner at Fladgate Fielder Solicitors, in the study by the European Media Forum. Under existing European and British law customers only have legal rights against card companies, in addition to suppliers, when there is a minimum purchase of £100. The report says:“Many Web transactions are for less than £100. Online sales during the 1999 Christmas period hit over £4 billion but more than half of the customers spent £125 or less. In consequence customers may end up writing off losses where, for example, goods ordered over the Web do not arrive.” The report proposes that the £100 limit in the Consumer Credit Act 1974 and the 200 Euro limit in the EU Directive from which this Act is derived be reduced to £25 and 50 Euro respectively. “This would enable the many transactions within the £25 to £100 bracket to be covered”, says Mr Loosley. “For Web traders the ability to accept card orders is vital. The prospect that this facility might be withdrawn is a powerful incentive to adopt best practice and to provide

prompt redress when there are proper customer concerns.” “Making use of this tried and tested system could reduce the pressure on governments to legislate. Best practice terms and conditions coupled with rights of redress against card issuers could handle a high proportion of consumers’ E-commerce problems without the need for government intervention.” The study also proposes that standard sets of terms and conditions should be adopted voluntarily by Internet service providers and insisted upon by credit card issuers as a condition of use of their portals and cards. It also urges the establishment of a Web arbitration system available to both sellers and buyers whether they are consumers or businesses. The report entitled Protecting Sellers and Buyers Through the Web is priced at £10 and can be obtained from European Media Forum, 125 Pall Mall, London, SW1Y 5EA; Tel: +44 (0)207 839 7896; Internet: .

Product news in brief * Government launches Internet community legal service with ICL. The Law Chancellor’s Department ICL, the IT services company, have joined forces to launch a new community legal Web service. Just Ask! () is a free service, designed to help people find the legal information and advice they need quickly and easily. ICL developed the site, providing the design, consultancy, installation and integration services, and is also hosting the site. Just Ask! lets people search for advice on legal issues ranging from child custody and divorce to housing, immigration and education. Its advice search facility links several hundred selected legal Web sites and features an electronic directory of more than 15 000 approved sources of legal advice. This includes solicitors and advice agencies, such as the Citizens Advice Bureau. * Digital rights management from SealedMedia. SealedMedia — a UKbased IT start-up company is pioneering the developing of digital rights management software and solutions. The company has just signed a major pilot deal with a global record label and a market research company to help the company offer valuable content to the

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public over the Internet. The company is offering its services at a time when leading record labels, such as Sony Music, are proposing to charge for media content downloaded from the Web. Until now, publishers have been cautious about making their content online for fear of piracy and loss of revenue. However, there now exists a growing marketplace for digital rights management products that can protect the copyright of the publisher and artists while content, whether it be MP3 files, text, pictures or video, is consumed online. For further information, see: . * Top 10 Internet security tips for law firms. NTA Monitor Ltd, the Internet security company, has published its top 10 Internet security tips for law firms. The company, which specializes in the provision of testing firewalling and consultancy services, seeks to prevent unauthorized access to private company networks and data. The company argues that seven of the UK’s top 10 firms use NTA Monitor to mount external security tests on their Web site. For law firms, securing confidentiality of client information is vital. Whereas some of the larger firms now hire security test professionals to undertake regular security tests to their systems, many of the smaller firms do not have firm security policy in place. The company notes that 80% of law firms do not have Web site publishing policy. Further information from NTA Monitor, Tel: +44 (0)1634 721855, E-mail: [email protected], Internet: . * New hotline to fight counterfeiters and illegal use of Microsoft software. Microsoft has announced a new antipiracy freephone hotline number 0800 013 2222 designed to provide a confidential service for callers to report the illegal use of Microsoft software. The line will be operated by specialist antipiracy consultants based in the UK. Microsoft expects the centre to receive more than 500 calls per month from the UK in addition to other European countries. Most callers will probably either be individuals blowing the whistle on their former employers or resellers who suspect their competitors of selling illegal software.Any leads received about alleged piracy will be

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investigated by a special team at Microsoft and may be passed on to local trading standard officers or other anti-piracy enforcement agencies. Callers will also receive information on software piracy, including how to tell genuine products from fakes, the dangers of fraud on the Internet, and how crime organizations are profiting from software theft. * New hacking threat to companies. The campaign of hacking, targeted at business computer users, has taken a new twist in recent months with DDS — Distributed Denial of Service — another problem for company directors and IT professional alike to worry about. In the latest attack, one of the best know banks,at least two other financial institutions and three other major companies fell victim. The implications are more serious than the simple loss of revenue and customer service associated with the company’s Web sites and E-mails being out of action for a few hours or days; the latest threat is about loss of business and potential law suits worth large sums of money.In a DDS attack,the hacker sets up a Denial of Service routine targeted at a particular company’s Internet connection. This is then wrapped inside a harmless utility, such as an office circular, and posted randomly.This simple act will put the DDS tool into action from hundreds of different businesses all targeting the same particular corporate victim at the same time. There may be no intention on the sender’s part to any damage whatsoever, but the effect will be the same — the victim’s Web or E-commerce site rendered completely useless for hours or possibly longer. Therein lies the risk of legal action. The software company Concentric are now offering assistance with this with their Cybersight antihacking software. To obtain further information about the product, contact Concentric on Tel: +44 (0)1604 679393 or Internet: . * New standard in secure legal E-mail. Prodamus, the Internet business service provider, is offering Ecourier, which it claims to be the UK’s first secure document and message delivery service for law firms. Unlike traditional E-mail, it is designed to give solicitor’s piece of mind that documents sent over the

Internet have actually reached their intended recipient and, more importantly perhaps, to introduce an element of ‘non-repudiation’ to E-mail as a medium of document transfer. Ecourier also offers secure delivery of documents from sender to recipient without the need for proprietary technology. This makes it more flexible and cost effective. Prodamus has recently been joined by Lord Tim Rassall, the former chief executive of city law firm Frere Cholmeley Bischoff. Further informa tion from Prodamus, Tel: +44 (0)207 534 8532 or Internet: . * Royal Mail ViaCode launches secure E-mail package for lawyers. The Royal Mail’s digital security operation, ViaCode, has launched a simple-to-use security for E-mail — a key element of trusted E-commerce for legal firms. ViaCode secure messaging guarantees the origins of E-mails and their attachments. It scrambles their contents to prevent alteration and eavesdropping. Attached instructions, contract and other business-critical information can also be electronically signed making them non-deniable and legal admissible. A concise overview of the technology, security policies and procedures underpinning ViaCode are available from Royal Mail, Tel: 0207 250 2468 or Internet: . * ICL wins £27 million with Northern Ireland courts. The Northern Ireland court service will soon be online following a £27 million contract awarded to ICL, the E-business services company. In the largest IT public/private partnership awarded to date in Northern Ireland, ICL will design, implement and manage a new, secure IT desktop infrastructure, which will enable communication between all courts across the province and give the public access to information through a new Internet Web site. By September 2000 E-mail, Internet, Intranet and other desktop services will be available to the 650 court service staff and members of the judiciary across 28 sites in Northern Ireland. In addition, ICL will design and implement software to support improvement in the administration of the criminal, civil and family justice processes in magistrate, county and high courts.The new software will also

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facilitate communication with other criminal justice organizations in the province. Further information from ICL’s corporate Web site: or in Ireland: . Editor’s Note : ICL has recently announced the acceleration of its strategy to focus exclusively on E-business services.The company predicts that the market for Internet services in Western Europe will grow at 67% per annum and that E-business services will be driven by companies and governments integrating Internet technologies into every part of their enterprise. ICL is increasingly focusing on developing Internet-related services and has now taken the final plunge to commit the company’s focus on this strategy. * ‘Timestamping’ technology to digitally record online transactions. iD2 Technologies — provider of public key infrastructure (PKI) solutions — has partnered with German timestamping specialist timeproof. The partnership will allow organizations using iD2’s user authentication solutions to stamp every online transaction with the official time. By ‘timestamping’ Internet users transactions, companies can eliminate the hazard of contracts and other online documents being manipulated to show fraudulent dates and times.A number of European countries are looking at timestamping as a means of allowing Internet users to assign a legally recognized date and time to an online communication. iD2 is working alongside several technology partners to provide solutions that consider such regulatory frameworks and legal obligations. iD2 Technologies has more than 10 years’ experience in PKI solutions that enable users to be securely identified across the Internet.The company is owned by Cisco Ericsson Reuters SAP and Schroder Ventures. It is teaming up with timeproof Time Signature System GmbH that develops time signature systems for certification authorities, service providers and companies. More information on iD2 can be found at Internet: and on time proof at Internet: . * ArmorGroup announces joint marketing agreement with IB Net . ArmorGroup, the global risk manage-

ment services company, has announced a joint marketing agreement with IBNet plc, the Internet surveillance and competitive intelligence gathering service, to provide a new Internet security package for businesses, designed to detect and prevent Internet-based fraud, brand piracy and corporate reputation attacks. IBNet has developed Internet Surveillance and Monitoring Services solutions, designed to detect, deter and help resolve abuses of corporate intellectual property on the Internet. Such abuses, including dummy Web sites, pose serious threats to corporations’ reputations and often involve fraud or brand piracy. With IBNet,ArmorGroup will be able to monitor in a thorough way Internet content on behalf of its clients. Commenting, Mike Stannard, Executive Director of Fraud Investigations at ArmorGroup, said: “With cyber security becoming a rising priority within all business organizations, we are very excited about this partnership with IBNet. We are ready to offer our clients the most sophisticated form of real-time global Internet protection in the world. We plan to offer specially tailored versions of IBNet’s ISMS solutions to our clients to help them to understand, anticipate and combat the threat to their brands and corporate reputations from online attacks.” Further information from ArmorGroup at Internet: . * Love virus highlights need for infor mation security training. The recent attack of the Love virus, which has brought down corporate E-mail systems across the world, highlights the need to make sure all staff are aware of and act on the company information security policy. Andy Breakwell, Marketing Director of security awareness and communications specialists Easy i, believes that awareness has a vital part to play in the defence against virus attacks: “These viruses show just how important it is to have an information security policy which warns of the dangers of unsolicited E-mails and which is effectively communicated to all staff.” Easy i has been working with major corporates for several years to help them communicate information security policies and procedures to all employees. The company has just published its latest version of its ‘For Your

Eyes Only’ computer-based training program which is designed to ensure that staff are fully trained to understand, recognize and avoid damaging information security breaches. Topics covered include clear desk policy, secure disposal, passwords, systems integrity, virus control, E-mail, Internet security, faxing information and mobile working. Further information from Easy i at Internet: , Tel: +44 (0)1926 854111. * Entreprecision business consultancy launched. A new business development consultancy — Entreprecision — has been launched to provide leading edge business services for E-commerce based on strategic planning, financial modelling, certification and insurance. Commenting on the launch, Roger Woods, Entreprecision Director of Training and Development, said: “We are experiencing a massive explosion in E-business. More and more people want to buy or look for information online. So companies are looking for a successful route to E-commerce — unfortunately some are completely unaware of the real opportunities and risks they run when their E-business strategy consists of little more than just designing a Web site.” The consultancy will offer business development tools to enable companies to reach their strategic potential. Further information from Entreprecision Ltd, Tel: +44 (0)20 8755 2999, E-mail: info@entrepreci sion.com, Internet: . * Smart-Electrics technology break through for home security. British Telecom has announced a new technology — Smart-Electrics — which is set to revolutionize the protection of people and property in home and business settings. It will make stolen TVs, videos and high-fi equipment useless to burglars and provide an economical platform to monitor homes or workplaces for break-ins,fire,smoke and environmental factors.The technology, patented by BT, could be available globally in a number of developed commercial forms in two years. It has powerful potential benefits for a number of industries, including all forms of electrical and electronic goods, insurance of property, contents, and health, energy utilities, and residential and commercial property letting

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and management. The technology is based on a simple intelligent ‘home control centre’ in the home or workplace to which nearby electrical appliances are registered through an appropriate lowbit rate communications protocol. Subsequently, any Smart-Electrics electrical item that is stolen will refuse to operate when plugged into the mains in an unauthorized location, making TVs, videos and hi-fi equipment with SmartElectric circuitry useless to burglars. A series of monitored sensors for various factors, ranging from life threatening conditions, such as smoke or high carbon monoxide levels, can be connected to the platform. Further information from BT’s Web site at: .

UNITED STATES Microsoft guilty of Sherman Act violations United States v Microsoft Corporation, No.98-1232/33 U.S.D.C. D.C., April 2000 The District Court for the District of Colombia has ruled that Microsoft Corporation was guilty of anti-competitive practices in its unsuccessful attempt to maintain its monopoly power in the Web browser market in contravention of the Sherman Act.The company was also guilty of states’ antitrust law infringements. Under Section 2 of the Sherman Act it is unlawful for a person or firm to “monopolize…any part of the trade or commerce among the several states, or with foreign nations…” (15 U.S.C. 2, Section 2).This limited the means by which a firm could lawfully either acquire or perpetuate monopoly power. Two elements were required: the possession of monopoly power in the relevant market and, secondly, the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen or historic accident. Monopolization doctrines were directed to: “discrete situations in which a defendant’s possession of substantial market power, combined with his exclusionary or anti-competitive behaviour, threatens to defeat or forestall the corrective forces of competition and thereby sustain or extend

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the defendant’s agglomeration of power” (Eastman Kodak Co. v Image Technical Services Inc. 504 U.S. 451, 488 (1992)).

Monopoly power The threshold element of a Section 2 monopolization offence was the possession of monopoly power in the relevant market. It was proved at trial by the plaintiffs that Microsoft did possess a dominant, persistent and increasing share of the relevant market. The company’s share of the worldwide market for Intel-compatible PC operating systems was in excess of 95%. At trial Microsoft attempted to rebut the presumption of monopoly power with evidence of constraints on its ability to exercise such power. None of these purported constraints, however, actually deprived Microsoft of the ability to prize substantially above the competitive level or persists in doing so for a significant period without erosion by new entry or expansion. The court, therefore, found as fact that Microsoft enjoyed a monopoly power in the relevant market.

Maintenance by anti-competitive means Once the latter is established, liability from monopolization depended on showing that the defendant used anticompetitive methods to achieve or maintain its position. Early on, Microsoft had recognized that ‘middleware’ (‘middleware’ means software that operates, directly or through other software, between an operating system and another type of software such as an application, a server operating system or database management system) was its Trojan horse and that, once such products had infiltrated the applications barrier, rival operating systems could enter the market for Intel-compatible PC operating systems unimpeded. In the court’s words: “Middleware threatened to demolish Microsoft’s coveted monopoly power. Alerted to the threat, Microsoft strove over a period of approximately four years to prevent middleware technologies from fostering the development of enough full-featured, cross-platform applications to erode the applications barrier.” The

court found that Microsoft had sought to convince developers to concentrate on Windows-specific interfaces and ignore interfaces exposed by the “two incarnations of middleware that posed the greatest threat, namely, Netscape’s Navigator Web browser and Sun’s implementation of the Java technology”. The court found that Microsoft’s campaign succeeded in preventing,“for several years and perhaps permanently”, Navigator and Java from fulfilling their potential to open the market for Intel-compatible PC operating systems to competition on the merits.

Combating the browser threat In 1995, Microsoft tried to persuade Netscape to abstain from releasing browsing software for 32-bit versions of Windows. When Netscape refused, Microsoft focused its efforts on minimizing the extent to which developers could avail themselves of interfaces exposed by that nascent platform. Microsoft had calculated that the extent of developers’ reliance on Netscape’s browser platform would depend largely on the size and trajectory of Navigator’s share of browser usage. The core of this strategy was to ensure that firms comprising the most effective channels for the generation of browser usage would devote their distributional and promotional efforts to Internet Explorer rather than Navigator. Recognizing that pre-installation by original equipment manufacturers and bundling with the proprietary software of Internet access providers would lead more directly and efficiently to browser usage than any other practices in the industry, Microsoft therefore devoted major efforts “to usurping those two channels”. With regard to OEMs, Microsoft bound Internet Explorer to Windows for the contractual and, later, technological shackles. It also imposed “stringent limits on the freedom of OEMs to reconfigure or modify Windows 95 and Windows 98 in ways that might enable OEMs to generate usage for Navigator in spite of contractual and technological devices that Microsoft had employed to bind Internet Explorer to Windows”. Microsoft also used incentives and threats to induce especially important OEMs to design their distributional, promotional and technical

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efforts to favour Internet Explorer to the exclusion of Navigator. The court found no substance in the defences offered by Microsoft to these charges. With regard to the IAP channel, the court found that Microsoft had adopted similarly aggressive measures to ensure that this would generate browser usage share for Internet Explorer rather than Navigator. Microsoft licenced Internet Explorer and its access kit to hundreds of IAPs for no charge. It also extended promotional treatment to the 10 most important IAPs in exchange for their commitment to promote and distribute Internet Explorer and to exile Navigator from the desktop. These actions could only be explained by the desire to hinder competition on the merits in an anti-competitive manner. What Microsoft had done in directing its efforts at OEMs and IAPs was to successfully ostracize Navigator as a practical matter from the two channels that led most efficiently to browser usage.

Combating the Java threat As part of its ‘grand strategy’ to protect the application barrier, Microsoft employed an “array of tactics designed to maximize the difficulty with which applications written in Java could be ported from Windows to other platforms, and via versa”.The court indicated that the first of these measures was the creation of a Java implementation for Windows that undermined portability and was incompatible with other implementations. Microsoft then induced developers to use its implementation of Java rather then Sun-compliant ones. It pursued this tactic directly “by means of subterfuge and barter, and indirectly, through its campaign to minimize Navigator’s usage share”. Microsoft also sought to use its monopoly power to prevent firms, such as Intel, from aiding in the creation of cross-platform interfaces. The result was that many Java developers wrote their applications using Microsoft’s developer tools while refraining from distributing Sun-compliant versions to Windows users. The court concluded that Microsoft’s actions with respect to Java had significantly restricted the ability of other firms to compete on the merits in the market for Intel-compatible PC operating systems.

Microsoft’s conduct taken as a whole The court concluded that, in essence, Microsoft had mounted a deliberate assault upon entrepreneurial efforts that, left to their own devices, could well have enabled the introduction of competition into the market for Intel-compatible PC operating systems. Microsoft had placed an “oppressive thumb on the scale of competitive fortune”, effectively guaranteeing its continued dominance in the relevant markets. Vast sums of money were paid by Microsoft and millions lost in revenue to induce firms to take actions that would help enhance Internet Explorer’s share of the browser usage market. This was clearly at Navigator’s expense.

Obtaining monopoly power in a second market The court found that Microsoft had employed anti-competitive practices in an illegal attempt to amass monopoly power in a secondary market — for browsers.After its unsuccessful attempt to persuade Netscape to abandon development of browsing software for 32-bit versions of Windows, Microsoft’s strategy for protecting the applications barrier became one of expanding Internet Explorer’s share of browser usage. The aim was simultaneously to depress Navigator’s share to an extent sufficient to demonstrate to developers that Navigator would never emerge as the standard software employed to browse the Web. While Microsoft’s top executives had never expressly declared acquisition of monopoly power in the browser market to be the objective, the court found that they knew or should have known that the tactics they actually employed were likely to push Internet Explorer’s share to those extreme heights. Navigator’s slow demise would leave a competitive vacuum for only Internet Explorer to fill. Of itself, the 1995 discussions, designed to persuade Netscape to limit its market operations would, of itself, have resulted in Microsoft’s attainment of monopoly power in a second market. That rejection and the predatory course of conduct Microsoft pursued since that date had revived, in the court’s view,“the dangerous probability that Microsoft will attain Monopoly

power in a second market”. The court noted that Internet Explorer’s share of the browser usage market had already risen above 50% and would exceed 60% by 2001 if the trend continued unabated.

Section 1 of the Sherman Act In applying the law, Section 1 of the Sherman Act prohibited “every contract combination…or conspiracy in restraint of trade or commerce…” (15 U.S.C. s1). Pursuant to this statute, courts had condemned commercial strategems that constituted unreasonable restraints on competition. For example, tying arrangements were found to be unlawful where sellers exploited their market power over one product to force unwilling buyers to acquire another. Courts had also condemned contractual arrangements that substantially foreclosed competition in a relevant market by significantly reducing the number of outlets available to a competitor to reach perspective consumers.

Tying Liability for tying under Section 1 existed where (1) two separate ‘products’ were involved; (2) the defendant afforded its customers no choice but to take the tied product in order to obtain the tying product; (3) the arrangement affected a substantial volume of interstate commerce; and (4) the defendant had ‘market power’ in the tying product market (JJefferson Parish, 466 U.S. 12–18). This test had since been reaffirmed in Eastman Kodak Co. v Image Technical Services Inc. 504 U.S. 451, 461–62 (1992). The plaintiffs’ alleged that Microsoft’s combination of Windows and Internet Explorer, by contractual and technological artifices, did constitute unlawful tying to the extent that those actions forced Microsoft’s customers and consumers to take Internet Explorer as a condition of obtaining Windows.The court agreed with the plaintiffs and held that Microsoft was liable for illegal tying under Section 1. It felt mindful, however, to explain its position, since this ran counter to an earlier decision of the US Court of Appeals for the DC Circuit in a closely related case — United States v Microsoft Corp. 147 F.3d 935 (D.C. Cir.

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1988) (‘Microsoft II’).This itself related to an earlier decision of the same circuit — United States v Microsoft Corp. 56 F.3d 1448 (D.C. Cir. 1995) (‘Microsoft I’). The present court did not believe the DC circuit intended the Microsoft II decision to state a controlling rule of law for purposes in this case. In that decision, it was the construction to be placed upon a single provision of a consent decree that, although animated by anti-trust considerations, was nevertheless still primarily a matter of determining contractual intent. Its comments on the extent to which software product design decisions might be subject to judicial scrutiny in the course of a Section 1 tying case were in the strictest sense, therefore, obiter dicta and were thus not formally binding. Reading the DC circuit’s opinion, the court conclude that it effectively immunized any product design (or, at least, software product design) from anti-trust scrutiny irrespective of its effect on competition if the software developer could postulate any ‘plausible claim’ of advantage to its arrangements of code. This undemanding test appeared to the present court to be inconsistent with pertinent Supreme Court precedents in at least three respects. First it viewed the market from the defendant’s perspective or, more precisely, as the defendant would like to have the market viewed. Secondly, it ignored reality: the claim of advantage need only be plausible; it need not be proved. Third, it dispensed with any balancing of the hypothetical advantages against any anti-competitive effects.The significance of the decisions in Jefferson Parish and Eastman Kodak was that resolution of product market definitional problems must depend upon proof of commercial reality, as opposed to what might appear to be reasonable. In both cases the Supreme Court instructed that product and market definitions were to be ascertained by reference to evidence of consumers’ perception of the nature of the products and the markets for them, rather than to abstract metaphysical assumptions as to the configuration of the ‘product’ and the ‘market’. Applying these rules, the court then concluded that Microsoft possessed “appreciable economic power in the tying market”. The evidence also supported a conclusion that a ‘not insubstantial’ amount of

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commerce was foreclosed to competitors as a result of Microsoft’s decision to bundle Internet Explorer with Windows. Moreover, consumers were also effectively compelled to purchase Internet Explorer along with Windows 98 by Microsoft’s decision to stop including Internet Explorer on the list of programs subject to the ‘add/remove function’ and by its decision not to respect their selection of another browser as their default.The fact that Microsoft ostensibly priced Internet Explorer at zero did not detract from the conclusion that consumers were forced to pay, one way or another, for the browser along with Windows.As for the crucial requirement that Windows and Internet Explorer be deemed ‘separate products’ for a finding of technological tying liability, this court’s findings mandated such a conclusion.

effectively to the acquisition of browser usage share.They thus rendered Netscape harmless as a platform threat and preserved Microsoft’s operating system monopoly in violation of Section 2.With regard to Section 1, virtually all the leading case authority dictated that liability under that section must hinge upon whether Netscape was actually shut out of the Web browser market, or at least whether it was forced to reduce output below a subsistence level. The fact that Netscape was not allowed access to the most direct, efficient ways to cause the greatest number of consumers to use Navigator was irrelevant to a final determination of plaintiffs’ Section 1 claims. The court then went on to consider the state law claims, finding liability under analogous provision to Sections 1 and 2.The case continues.

Exclusive dealing arrangements

MP3 technology infringes copyright

Microsoft’s various contractual agreements with Internet content providers, independent software vendors and others were also called into question by the plaintiffs as exclusive dealing arrangements under the language of Section 1 which prohibited contracts in restraints of trade or commerce. Each of these agreements with Microsoft required the other party to promote and distribute Internet Explorer to the partial or complete exclusion of Navigator.In exchange, Microsoft offered, to some or all of these parties, promotional patronage, substantial financial subsidies, technical support and other valuable consideration. On this point, notwithstanding the extent to which these ‘exclusive’distribution agreements pre-empted the most efficient channels for Navigator to achieve browser usage share, the court concluded that Microsoft’s multiple agreements with distributors did not ultimately deprive Netscape of the ability to have access to every PC user worldwide to offer an opportunity to install Navigator. However,the fact the Microsoft’s arrangements with various firms did not foreclose enough of the relevant market to constitute a Section 1 violation in no way detracted from the court’s assignment of liability for the same arrangements under Section 2. All of Microsoft’s agreements, including the non-exclusive ones, severely restricted Netscape’s access to those distribution channels leading most

UMG Recordings Inc. et al v MP3.com Inc., No.00 Civ. 472 (JSR)((S.D.N.Y.), 4 May, 2000) The US District Court for the Southern District of New York has ruled that defendant MP3.com infringed the copyright of recording industry plaintiffs when it used ‘MP3’ technology to convert compact disk recordings (‘CDs’) to computer files that could be easily accessed over the Internet. The complaint arose when MP3 launched its ‘My.MP3.com Service’, which it advertized as permitting subscribers to store, customize and listen to the recordings contained on their CDs from any place where they had an Internet connection. To make good on this offer, the defendant purchased tens of thousands of popular CDs in which plaintiffs held the copyrights and, without authorization, copied their recordings onto its computer servers so as to be able to replay the recordings for its subscribers. To first access such a recording, a subscriber to MP3.com would first have to ‘prove’ that he already owned the CD version of the recording by inserting his copy of the commercial CD into his computer’s CD-ROM for a few seconds (the ‘Beam-it Service’). Alternatively, he would purchase the CD from one of the defendants

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co-operating online retailers (the ‘Instant Listening Service’). Thereafter, the subscriber could access, via the Internet, from a computer anywhere in the world the copy of the plaintiffs’ recording made by the defendant. Whereas the defendant sought to portray its service as the ‘functional equivalent’ of storing its subscribers’ CDs, in actuality the defendant was replaying for the subscribers converted versions of the recordings it copied, without authorization, from the plaintiffs’ copyrighted CDs. On its face, this made out a presumptive case for infringement under the 1976 Copyright Act (17 U.S.C. Section 101 et seq). The defendant argued that such copying was protected under the fair use defence found in Section 107. Four factors had to be considered. These were: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. With regard to point one — ‘the purpose and character of the use’ — the defendant did not dispute that his purpose was commercial. While subscribers to My.MP3.com were not currently charged a fee, the defendant did seek to attract a sufficiently large subscription base to draw advertising and otherwise make a profit.The first factor also required consideration whether the new use essentially repeated the old or whether, instead, it ‘transforms’ it by infusing it with new meaning, new understandings or the like. Although the defendant argued that My.MP3.com provided a transformative ‘space shift’ by which subscribers could enjoy the sound recordings contained on their CDs without lugging around the physical disks themselves, this was simply another way of saying that the unauthorized copies were being retransmitted in another medium — an insufficient basis for any legitimate claim of transformation. With regard to the second factor — ‘the nature of the copyrighted work’ — the creative recordings being copied were close to the core of intended

copyright protection and, therefore, were far removed from the more factual or descriptive work more amenable to ‘fair use’. Regarding the third factor — ‘the amount and substantiality of the portion [of the copyrighted work] used [by the copier] in relation to the copyrighted work as a whole’ — it was undisputed that the defendant copied and replayed the entirety of the copyrighted works here in issue. This negated any claim of fair use, for it was clear that, the more a copyrighted work was taken, the less likely it was that its use was fair. Regarding the fourth factor — ‘the effect of the use upon the potential market for or value of the copyrighted work’ — the defendant’s activities on their face invaded the plaintiffs’ statutory right to licence their copyrighted sound recordings to others for reproduction. (See 17 U.S.C. Section 106).The defendant argued that, so far as the derivative market here involved was concerned, the plaintiffs had not shown that such licensing was “traditional, reasonable or likely to be developed” American Geophysical, 60 F.3d at 930 (A & n.17).The defendant also argued that its activities could only enhance the plaintiffs’ sales since subscribers could not gain access to particular recordings made available by MP3.com unless they had already ‘purchased’ or agreed to purchase their own CD copies of those recordings. The court found these arguments unpersuasive. Any allegedly positive impact of the defendant’s activities on the plaintiffs’ prior market in no way freed the defendant to usurp the further market that directly derived from reproduction of the plaintiffs’ copyrighted work (see Infinity Broadcast, 150 F.3d at 111). This would be so even if the copyright holder had not yet entered the new market in issue, for a copyright holder’s ‘exclusive’ rights derived from the constitution and the Copyright Act, including the right, within broad limits, to curb the development of such a derivative market by refusing to licence a copyrighted work or by doing so only on terms the copyright owner found acceptable. Finally, regarding the defendant’s purported reliance on other factors, this was essentially reduced to the claim that My.MP3.com provided a useful service to consumers that, in its absence, would

be served by ‘pirates’. In the court’s view, copyright was not designed to afford consumer protection or convenience but, rather, to protect the copyright holders’ property interests. As a practical matter, the plaintiffs had indicated no objection in principle to licensing their recordings to companies like MP3.com; they simply wanted to make sure that they received remuneration that the law reserved for them as holders of copyrights on creative works. Stripped to its essence, the defendant’s ‘consumer protection’ argument amounted to nothing more than a “broad claim that the defendant should be able to misappropriate plaintiffs’ property simply because there is a consumer demand for it.This hardly appeals to the conscience of equity.” For these reasons, the court determined that the plaintiffs were entitled to partial summary judgement, holding the defendant to have infringed the plaintiffs’ copyright.

Yahoo! lawsuit strikes an important blow for Internet privacy and free speech A federal lawsuit filed during May in California could establish important protections for Internet privacy and anonymity, according to the Electronic Privacy Information Center (EPIC) and the American Civil Liberties Union (ACLU).The suit, filed against Yahoo! by a user of the service’s popular financial message boards, challenges the company’s practice of disclosing a user’s personal information to third parties without prior notice to the user. Over the past year, Yahoo! has been inundated with subpoenas issued by companies seeking the identities of individuals anonymously posting information critical of the firms and their executives. Without notifying the targeted users, and without assessing the validity of the legal claims underlying the subpoenas,Yahoo! systematically disclosed identifying information such as users’ names, E-mail addresses and Internet protocol addresses.Yahoo! is unique among major online companies in its refusal to notify its users of such subpoenas and provide them with an opportunity to challenge the information requests. Privacy and free speech advocates, including EPIC and the ACLU, have criticized Yahoo!’s policy on the ground

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that Internet users have a right to communicate anonymously and usually do so for valid reasons.According to David L. Sobel, EPIC’s General Counsel, “online anonymity plays a critical role in fostering free expression on the Internet, and has clearly contributed to the popularity of the medium.” He said: “The US Supreme Court has ruled that anonymity is a constitutional right, but practices such as those of Yahoo! may make that right illusory online.” Chris Hansen, a lawyer with the American Civil Liberties Union who specializes in Internet speech, said that his organization favours at least two protections for anonymous chatters. “Any complaint filed in court against an unknown Internet defendant should include specifics of the allegedly objectionable postings”, he said. “Also, a judge should not allow a lawyer to issue subpoenas in these cases without requiring that the Internet service provider notify the potential defendant that someone is seeking information about him and giving him an opportunity to enter court to protect his anonymity.” “The right to anonymous speech should not be breached so easily”, Hansen said. The lawsuit was filed in United States District Court in Los Angeles by ‘Aquacool_2000’, a pseudonymous Yahoo! user whose personal information was disclosed to AnswerThink Consulting Group, Inc., a publicly held company. A copy of the lawsuit (in PDF) is available at: .

Moratorium on Internet access charges extended The US House of Representatives has endorsed conclusions of the Advisory Commission on Electronic Commerce by voting to pass HR 3709 — the Internet Non-Discrimination Act of 2000 — which extends for five years the moratorium enacted by the Internet Tax Freedom Act 1998, prohibiting multiple or discriminatory taxes on electronic commerce and eliminating taxes on Internet access fees. The Advisory Commission was established under the 1998 Act to study “federal, state, and local and international, taxation and tariff treat-

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ment of transactions using the Internet, and Internet access and other comparative intrastate, interstate or international sales activities”. The Act required the Commission to complete its study within 18 months and transmit its findings, including legislative recommendations, to Congress. The report indicates that: “E-commerce raises new tax compliance and administrative issues for national income tax and consumption tax systems. An international perspective is necessary to address this subject since E-commerce potentially crosses national borders to a greater extent than other, traditional forms of doing business. Therefore, it is important for every nation to give serious consideration to any impact on its trading partners of any new or amended rules for taxation of E-commerce.” The report is avail able at: .

EUROPEAN UNION E-commerce Directive adopted The European Commission has welcomed the European Parliament’s approval on 4 May 2000 of the Electronic Commerce Directive, which should become law within the Member States within the next 18 months. The aim of the Directive is to ensure that Information Society services benefit from the Internal Market principles of free movement of services and freedom of establishment. It establishes specific harmonized rules where this is necessary to ensure that businesses and citizens can supply and receive Information Society Services throughout the EU, irrespective of frontiers. These areas include definition of where operators are established, transparency obligations for operators, transparency requirements for commercial communications, conclusion and validity of electronic contracts, liability of Internet intermediaries, online dispute settlement and the role of national authorities. In other areas the Directive builds on existing EC instruments which provide for harmonization or mutual recognition of national laws. Commenting, Internal Market Commissioner Frits Bolkestein said:“I am delighted that, as a

result of today’s vote in the European Parliament, the Parliament and the Council of Ministers have now adopted definitively this crucial Directive, as requested by the Lisbon Summit. The speed with which Parliament has worked will, I hope, serve as a model for future decision-making concerning the Internal Market, where legislative change must keep pace with technological development and innovation in order to be timely and effective. This landmark decision will foster the growth of electronic commerce in jobs, choice of goods and services, and access to markets. In order for business and consumers alike to benefit fully from the Directive as soon as possible, I will pay particular attention to ensuring that Member States implement the Directive in national legislation correctly and on time.” Editor’s Note: The latest version of the Directive can be found at: .

Data protection: agreement with the United States edges closer The European Commission has given Internal Market Commissioner Frits Bolkestein the go-ahead to seek the support of EU Member States for accepting the United States’ proposed ‘safe harbour’ arrangement as providing adequate protection for personal data transferred from the EU to safe harbour participants. Under the EU’s Data Protection Directive, Member States must ensure personal data transferred to non-EU countries is ‘adequately’ protected. The same directive provides that the Commission may make a positive finding when the protection offered by a particular country meets this adequacy requirement. Following two years of discussion, the United States is now ready to put in place an arrangement that the Commission considers offer ‘adequate’ protection. Before adopting a formal decision to this effect, the Commission must seek the support of a qualified majority of Member States. It must also consult their Data Protection Commissioners and the European Parliament. Once adopted, the decision will be binding on all

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Member States and so constitute a strong guarantee against the interruption of data flows from the EU to ‘safe harbour’ participants in the US. Approval procedures will take some time, but the arrangement is likely to be finalized by the Summer and operational in the Autumn.

Future regulatory framework for electronic communications infrastructure and associated services In April 2000, the Commission adopted a Communication giving the result of the public consultation on the 1999 Communications Review and Orientations for the proposed new Regulatory Framework. This new regulatory framework should be the cornerstone for maintaining and improving Europe’s competitive position in the Information Society. It is outlined in a set of five Working Documents presented to a public hearing, organized by the Commission during May, which took place in Brussels. S e e f u r t h e r : .

Initiative to cut Internet cost Cheaper Internet access and other telecoms services should result from a Commission Recommendation adopted on 26 April. Incumbent telecoms operators should allow others to use their local loops — the circuits between customers’ premises and the local switching system — by the end of 2000. Requiring this ‘unbundled access’ would help to open the market further to competing services for high-speed Internet access and encourage the development of broadband multimedia services. The Commission calls on Member States to enact appropriate measures to provide full unbundled access by 31 December 2000. The Communication explains the relationship of the Recommendation to all other Directives and clarifies how competition rules apply to access to incumbents’ local loops.

Electronic newsletter for the information society

ITU gives final approval for radio interface specifications

A new newsletter entitled ‘the l.i.n.k.’ — legal InfoSoc news kiosk — has been launched, free of charge with expert contributions from IT, telecom and media law firms, in more than 30 countries around the world. The l.i.n.k newsletter replaces the newsletter of the Legal Advisory Board of the Information Society Directorate of the European Commission and aims to examine issues relating to the Information Society from an international legal perspective. To subscribe to the newsletter, Email: [email protected].

Another milestone in the history of third-generation mobile systems has been reached with the formal adoption of the IMT-2000 radio interface specification.The agreement came on the last day of the ITU Radiocommunication Assembly meeting in Istanbul from 1 to 5 May. The decision which was taken unanimously was hailed by all participants. The approval of the technical specifications of IMT-2000 opens the way to a whole new world of multimedia mobile communications. With speeds nearly three times faster than today’s basic rate ISDN for fast-moving mobile terminals and even higher speeds for users who are stationary or moving at walking speed, IMT-2000 systems will definitely change the way we communicate, access information, work or even carry out social or personal activities. “This decision is the result of over 10 years of considerable intellectual and engineering efforts by an entire industry determined to leapfrog the fragmentation which prevailed until now in the wireless world”, said Yoshio Utsumi, Secretary-General of the ITU. “ITU leadership, supported by an unprecedented level of co-operation not only from governments and the industry but also national and regional standards-setting organizations, led to this historic decision. I am particularly gratified to have been associated with the process”, he said. Mr Utsumi was echoed by John Gilsenan of the US Department of State. “The process used to develop the detailed specifications of the radio interfaces for IMT-2000 is an example of the strengths of the ITU consensusbased, open, transparent and sometimes painful but practical process. He went on saying that the approval of this standard moved the world into the new millennium of wireless communications and demonstrated that ITU could develop standards before the market requires them.” Mr G.O. Ajayi, Director at the Ministry of Science and Technology of Nigeria agreed. “It is a landmark and a unique and wonderful achievement and underscores the role of ITU in propelling the global community into this

OTHER NEWS IN BRIEF Negotiators meet to finalize patent law treaty Negotiators from Member States of the World Intellectual Property Organizations (WIPO) have opened a round of talks to finalize a treaty that will result in an international agreement to harmonize, on a worldwide basis, formal patent procedures relating to national and regional patent applications and maintenance of patents. Opening the conference, WIPO Director General Dr Cami Idris said that the patent law treaty “will simplify and streamline procedures for obtaining and maintaining protection and will result in reduction of costs when filing for patent protection”. The Director General also referred to the efficiency gains generated by the simplification of procedures under the draft Treaty. He pointed out that the conclusion of the Treaty will achieve a major goal of international simplification by incorporating the requirements for international applications under the WIPO-administered Patent Co-operation Treaty (PCT) into national and regional laws. This means that the requirements and procedures for national and regional patent applications, and those for PCT international applications, will be harmonized and streamlined, eventually leading to standardized formal requirements and procedures for all patent applications worldwide.

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new knowledge-driven millennium where information and communication technology will be a driving force.” The promise that consumers all over the world should soon be able to access on a single handset a range of high bandwidth wireless services providing personal or business information is therefore nearing. By offering high speed Internet access and other forms of data transmission, users will be able to receive customized pre-defined news, look up bulletins containing realtime video or audio, access video and audio E-mail or set up video conferences while on the move. Further information from ITU at: .

ITU joins MoU on electronic business in support of E-commerce The International Telecommunication Union has signed a Memorandum of Understanding on electronic business, joining three leading international standards-setting organizations already party to the MoU, namely the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), the United Nations Economic Commission for Europe (UN/ECE). In addition to the four signatories, “the purpose of the MoU is to minimize the risk of divergent and competitive approaches to standardization, avoid

duplication of efforts and avoid confusion amongst users”, said Houlin Zhao, Director of ITU Telecommunication Standardization Bureau when signing the agreement on behalf of the ITU.“The MoU will also provide greater intersectoral coherence in the field of electronic business, an important step considering the uptake of E-commerce”,Zhao added. Mr. Yves Berthelot, Executive Secretary to UN/ECE, stressed that the participation of ITU is essential to secure the interoperability required by the network economy. He further added, “When countries adopt international standards and harmonize their technical regulations worldwide, everybody stands to gain. Moreover, the development of technical instruments shared by all countries facilitates and strengthens their involvement in harmonious economic relations. This vital role of international standards as the technical foundation for the global market is explicitly recognized by the World Trade Organization.” The MoU establishes a co-ordination mechanism under a unique cooperative model to produce mutually supportive standards required in business transactions (data interchange and interoperability) as well as products design and manufacturing to meet the urgent needs of both the industry and the end-users. Electronic business covers the information definition and exchange requirements within and between enterprises, including customers. Given that it provides the vital framework for E-com-

merce, it is intended that this MoU will support this rapidly changing and fast growing business sector. ISO Secretary-General, Dr. Lawrence D. Eicher, commented:“This MoU is an excellent practical example of greater partnership between the governmental and private sectors. It lays the foundation for a healthy future development of E-commerce to the benefit of all stakeholders.” Under the MoU, the four organizations undertake to review their standardization activities and develop a joint, coordinated programme for standards development and publication that will benefit the marketplace. The MoU is open to other international, regional, governmental, industry and consumer organizations whose core mission involves standards-setting.

DIARY * Negotiating IT Contracts 2000: 5-6 July and 25-26 October 2000; London; IBC Global Conference Ltd; Tel: +44 (0)20 7453 5492; Web site: . * EC Competition Law Summer School:13-18 August 2000;Clare College, Cambridge; IBC Global Conference Ltd; Tel: +44 (0)20 7453 5492: Web site: . * IT Law — Summer School 2000: 14-18 August 2000; Downing College, Cambridge; IBC UK Conference Ltd;Tel: +44 (0)20 7453 5492; Web site: .

NEW REPORT CORRESPONDENT CLSR is pleased to welcome Ulrich Wuermeling to the Correspondents Panel of the Journal: Dr. Ulrich Wuermeling LL.M. worked for three years as a freelance software developer before he began to study law.At the University of Bayreuth he worked in the research field of legal computer science and subsequently for the first German Professor in Information Law, Prof. Dr. Ulrich Sieber. During his studies he visited the University of Southampton for a research project on English labour law and new technologies. Following the First Legal State Exam Wuermeling graduated as Master of International Business Law (LL.M.) at the University of London. During his practical legal training he worked as a research assistant at the University of Wuerzburg.After training seats at the Higher Regional Court of Bamberg as well as in Frankfurt and New York he finalized his Second Legal State Exam in Munich. Since then he has worked as an attorney in Frankfurt and in 1998 he obtained his Doctorate at the University of Wuerzburg. Ulrich Wuermeling is Partner at Wessing, one of the largest German law firms. Since 1999 he heads up the Multimedia Law Department at the Frankfurt office and has extensive experience in advising IT-companies as well traditional companies in the area of telecom, IT and E-business. Several articles and conference speeches of Ulrich Wuermeling deal with multimedia law issues. He has been co-editor of the journal Datenschutz-Berater (Fachverlag Handelsblatt) since 1991.

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