HADOPI II – Danger internautes

It is not often that we resurrect our GCSE/O Level French (or bug our bi- or tri-lingual colleagues – thank you Elora and Emanuela) to read a French language statute, but HADOPI II is an exception. This is the French “three strikes” copyright protection law, nicknamed HADOPI II after the acronym for the Haute Autorité pour la Diffusion des Œuvres et la Protection des droits sur Internet, the new regulatory body created by the law.  The “three strikes” relates to suspending internet access to subscribers who are deemed to have breached copyright, e.g. filesharers, after two previous warnings.  HADOPI I was killed off by the Constitutional Court in June for the lack of any judicial intervention in the procedure to cut off internet access.  HADOPI II was passed by a narrow majority (285 v 225) in the French National Assembly yesterday.  Suspension can be for up to one year, and the subscriber can also be fined up to €5,000.

The only material difference in the new law is the introduction of a judicial step before the final “strike”, but this uses the l’ordannance pénale procedure.  Whilst this is obviously not our specialist area, we understand that this is a light touch criminal procedure.  It means that HADOPI will be able to draft a judicial order, including any penalties, for issue by a magistrate.  The order becomes final after a certain period, unless the defendant appeals the order, in which case there is a trial.

Why is this important in the UK?  Two reasons: the Government has announced that it is looking at similar legislation, and the possible inclusion of a three strikes provision is one of the outstanding matters holding up the passing of the reform of the Framework Directive and the other six-pack electronic communications directives. 

[We would welcome any informed comment on the l’ordannance pénale procedure – is our summary above accurate?]

2e's or not 2e's, that is the question

In our blog on Fitzroy Robinson Ltd -v- Mentmore Towers Ltd (Key personnel?), we noted that commercial lawyers have to keep an eye out for new case law in related areas.  Another important example is the recent Chancery Division insolvency case of Butters -v- BBC Worldwide, which addresses the common circumstances of a joint venture shareholder licensing IPR to a joint venture.

2 Entertain JV

The case involved the joint venture agreement (JVA) setting up 2 Entertain Limited, abbreviated in the judgement as “2e”.  2e had a subsidiary, BBC Video Limited, which was the licensee under a master licence agreement (MLA) that was conditional upon the JVA.  The MLA included a term that terminated the licence if, following an Insolvency Event within the Woolworths Group, BBC Worldwide served a notice in accordance with the JVA requiring the Woolworths’ shareholder in 2e (WW Realisations 8 Ltd) to sell its shares in 2e to BBC Worldwide.

As a result of this linking between licence termination and notice to sell shares, it was successfully claimed that the clause in the MLA   to terminate the licence offended the insolvency deprivation principle, being the common law principle set out in Ex p Jay; In re Harrison (1880) 14 Ch D 19.  This principle is the common law equivalent of s.107 of the Insolvency Act 1986 and r.4.181 of the Insolvency Rules 1986, which ensure that the assets of a company on insolvency are distributed in accordance with the shareholders’ and creditor’s share of their interests in the company.  It is against public policy to permit a company to contract out of this principle to favour one shareholder or creditor above all the others.

The key lesson for IT/IP and commercial lawyers is not that automatic termination of licences upon insolvency offends the principle, but that the termination cannot be linked to any mechanism that enables the licensor to benefit as a creditor/shareholder from the fall in value in the licensee as a result of the termination of the licence. 

It should be notes that a similar case, Perpetual Trustee Co Ltd -v- BNY Corporate Trustee Services, involved this principle and came to different conclusions.  As permission of this case to be appealed has already been given by the Chancellor, it is expected that both these cases will go to appeal.