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Thursday, 1 August 2013

Volkswagen Aktiengesellschaft v Garcia & Ors [2013] EWHC 1832 (Ch) (25 June 2013)

Car security isn't what it was when I was young. Leaving aside the fact that my old Frogeye didn't even have door locks (although there was a lock on the bonnet, so that might have foiled a thief, who'd have had to be pretty mad to go for a bright orange car in the first place)  let alone an immobiliser, even the locks on cars of that era left a lot to be desired. On a camping holiday with a schoolfriend and his family, he locked the keys to his Cortina GT in the boot, but his father (who ran a Ford dealership, although he himself drove a very exotic BMW 3.0CSi) opened it with the key to his caravan.

Nowadays, although there are still mechanical aspects to vehicle security, it's an area which has a great deal more to do with electronics. It was to protect the algorithm that lies at the heart of the security system it uses (along with several other manufacturers), the Magamos Crytpo chip, that Volkswagen found itself in court last week (Volkswagen Aktiengesellschaft v Garcia & Ors [2013] EWHC 1832 (Ch) (25 June 2013)).

The facts were quite simple. A handful of academics had "attacked" (as they say in the field) that security system, and discovered some flaws. The vehicle manufacturers who stood to be embarrassed by those flaws might, you'd think, be grateful, but the academics proposed to deliver a paper at a conference, and in doing so would reveal the key algorithm to the world. In the name of "responsible disclosure" they had not simply gone ahead and done this: they had talked to the proprietor of the confidential information concerned. But they hadn't talked to VW, not until much nearer the date of the conference (which was last week, hence VW's need to seek an interim injunction).

To do this, the academics used a program called Tango Programmer, produced by an organisation called Scorpio, which is based in Bulgaria, and purchased by the academics for €1,000. There is some discussion in the judgment of how the program was devised, and where its authors found the Megamos Algorithm, which they might have arrived at by "chip-slicing" - cutting open the chip and examining the gates under a microscope. The important question was whether the software was legitimate or not. As the judge observed, "Just because it comes from Bulgaria does not mean it is illegitimate." And the fact that the website (not available when I went looking for it the other day, but back on line now) was written in "broken English" did not persuade him. In fact the website looks plausible, and the products shown on suggest that this is a business of some substance; it appears to be a limited company, and the strangest thing about it is its location bang in the middle of Bulgaria.

There was an issue about VW's right to sue. The algorithm was devised by Thales, who were not initially a party to the action, but the judge added them as a "proper and necessary" party, saying that it was likely within the meaning of Cream Holdings Ltd & Ors v. Banerjee & Ors [2004] UKHL 44 (14 October 2004) that "the confidentiality in the Megamos Crypto algorithm belongs to them", which is an interesting way to express it. This point did not stand in the way of an injunction being granted: Thales had standing to sue, but the judge held that VW did too, as they had a legitimate interest in being a co-claimant.

There is an old Jacob J case, Mars UK Ltd v Teknowledge Ltd [1999] EWHC 226 (Pat) (11 June 1999), [1999] 2 Costs LR 44, [1999] EWHC 226 (Pat), [2000] FSR 138, on reverse engineering, in which he held that it was not a misuse of confidential information to reverse engineer a product you had bought even to obtain information encrypted for security. The present case was argued on the basis that that case had been correctly decided, though that is in dispute, and (of course) it was the claimants' submission that it did not apply because the Scorpio Programmer software was not legitimate. The judge ended up relying on the "murky" origins of the program and the lack of effort on the part of the defendants to ascertain whether it had been produced by legitimate reverse-engineering or otherwise, and on that basis he held that there would be a breach of confidence. Should an injunction be granted to prevent publication? Not merely to save VW's blushes, said Mr Justice Birss, considering Article 10 of the European Convention, section 12(3) of the Human Rights Act, and the Cream Holdings judgment (but not American Cyanamid, which he said was clearly not the right test in the circumstances), which gave the guidance that the standard for not allowing publication is a flexible one, and that the court should be "exceedingly slow" to make interim orders if it is not satisfied that the claimant will probably succeed at trial.

Thales or VW would, he thought, probably succeed at trial, so that hurdle was cleared. Then the balance of public interest and the public interest defence fell to be considered. Freedom of expression and academic freedom were very important, but the epidemic of car crime that would be unleashed if the algorithm were published was more important. The software is sold by someone who understands that it can facilitate crime: there's a disclaimer that says (sic)
All devices and software developed by Scorpio-LK Ltd. are designed and sold with legal purpose to enchance and help people working in the sphere of car repairs and maintenance. The company doesn't take responsibility for any misuse of our products for illegal purpuses. Hence persons misusing our products for illegal purpuses bear their own responsebility for such acts.
And elsewhere:
Scorpio-lk Ltd accepts no responsibility for misuse of software for illegal purposes. The purchased softawre can only be used to repair vehicle immobilisers. On purchase of software client accepts responsibility for software use rendering Scorpio-lk Ltd unaccountable for illegal use.
The English, incidentally, seems no more broken than that of many native speakers. But the judge concluded that the claimants would probably be able to show that the software was not legitimate, and the defendants should have appreciated that.

The judge granted the injunction sought by VW, requiring "redaction" (the trendy alternative to "editing") of the paper they had written. They could still impress their peers by showing that they had derived the algorithm, and the claimants could remedy the problem identified with it: win win. The judge clearly came to the view that the defendants' protestations about "reasonable disclosure"  were nothing more than self-justification, and not the actions of responsible academics - a harsh view, but consistent with their reluctance to take even a few simple steps to ascertain where Scorpio-Lk Ltd had found the algorithm.

The judgment has been criticised by Prof Ross Anderson at Cambridge University, who is quoted in Automotive News Europe. He makes the valid point that the bad guys will not be prevented from doing what they have been doing all along - and the good guys won't know what the problem is. I'm not sure I understand his point: the important thing is that VW and Thales know, and can fix the weakness.


Thursday, 11 July 2013

Antitrust: Commission consults on review of safe harbour for minor agreements ("De Minimis" Notice)

The Notice on Agreements of Minor Importance has always been a key document in EU competition law (and EC competition law before it). It defines what agreements (and other arrangements) are too small to be worth bothering with, because they can safely be assumed not to affect competition, or at least not appreciably. Specialised car manufacturers can rely on the Notice to save them from having to comply with the block exemption. Now the Commission is consulting on a new Notice: here's what its press release says.
The European Commission invites comments on a proposal to revise its guidance notice for assessing when minor agreements between companies are not caught by the general prohibition of anticompetitive agreements under EU competition law. The proposal aims at updating the present Notice, in particular taking into account recent developments in the case law of the European Court of Justice (ECJ*). Comments can be submitted until 3 October 2013. In light of these comments, the Commission will then adopt a new notice in
2014.
Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements that are aimed at or result in appreciable restrictions of competition. The current De Minimis Notice (adopted in 2001) defines, with the help of market share thresholds, what the Commission considers not to be an appreciable restriction of competition (see IP/02/13 ). It creates a safe harbour for companies whose market shares do not exceed 10% for agreements between competitors or 15% for agreements between non-competitors. If an agreement contains a hardcore restriction, that is, a very serious restriction for which there is a presumption of anti-competitiveness, the companies cannot benefit from the safe harbour.
The Commission's proposal is aimed at ensuring consistency with other recently amended competition rules, in particular the 2010 Vertical and Horizontal Block Exemption Regulations (see IP/10/445, MEMO/10/138, IP/10/1702, MEMO/10/676) and with an ECJ ruling of December 2012 (case C-226/11 Expedia). 
Questions from a French court in the Expedia case raised the issue of whether agreements aimed at restricting competition (restrictions having an anti-competitive "object") can be considered as "de minimis" and therefore fall outside the scope of Article 101(1). The Expedia judgment has established that a restriction with an anticompetitive object constitutes, by its very nature, an appreciable restriction of competition. The proposal therefore clarifies that agreements containing a restriction by object are always seen as an appreciable restriction of competition.

The consultation documents are available at: http://ec.europa.eu/competition/consultations/2013_de_minimis_notice/index_en.html

* It annoys me when lawyers lazily give the Court of Justice the adjective "European". It annoys me a great deal more when another European Union institution does so. The Court is properly called the Court of Justice of the European Union, but that title refers to the institution which consists of two courts, the General Court (which we used to call the Court of First Instance, which made it a bit easier to understand what it was for) and the Court of Justice - just that, which is utterly confusing but must be respected as best we can. Valentine Korah always used to call the Court of Justice "the Community Court", so I wonder whether she'd now call it the "Union Court"? I shall try to find out.

Friday, 21 June 2013

Trading Stadards assumes responsibility for approving Codes

With the OFT being shuffled out of the consumer protection area, responsibility for codes of practice has passed to the Trading Standards institute, whose new Consumer Codes Approval Scheme was launched on 21 June. It takes over the nine approved codes of practice, including of course the biggest (and oldest, and best), Motor Codes.

There's a piece about it on the Guardian's website here, too, and probably many others too.

Tuesday, 11 June 2013

Commission proposes legislation to facilitate damage claims by victims of antitrust violations

The Commission has adopted a proposal for a directive on compensation for victims of antitrust violations, such as cartels. The press release, and links to further information, is here.

Thursday, 30 May 2013

U.S. Department of Transportation Releases Policy on Automated Vehicle Development

The legal treatment of driverless or autonomous cars remains a fascinating area - so this press release from NHTSA will be of interest, even if it does not directly affect our law. And you can view NHTSA's statement of policy on automated vehicles.

Tuesday, 14 May 2013

US: Volvo opposition to LOVOL trade mark rejected

My friend John Welch reports in his TTAB Blog that Volvo's opposition to LOVOL, for vehicles, was dismissed by the TTAB. And, I think, quite right too. Likelihood of confusion? I think not. The Board seem to have been impressed by the fact that the junior mark is a palindrome, not something I have seen feature in trade mark cases anywhere else, and that the word "volvo" comes from a dead language. As John asks,
qui cogitat?

Thursday, 18 April 2013

IBC's annual conference on competition law challenges in the motor vehicle sector (25 June)

For several years now, IBC Legal Conferences' annual event in Brussels has been almost compulsory for block exemption aficionados (or should that be aficionadi? Evidently not, according to the Bloomsbury Concise English Dictionary, which came most easily to hand when I reached towards my shelf of reference books, as it comes from Spanish rather than Italian. I am however disturbed to find that its original Spanish meaning was a devotee of bull-fighting, so notwithstanding the broader sense it has acquired in English I will use it carefully in future). I have been to the conference several times - once even to speak at it, and last year to blog extensively (here, et seq) - and it is invariably excellent. Not uniformly excellent: the conference organiser who assembles a programme with no duff session is lucky indeed, but IBC maintain a generally high standard across the whole day. Details of this year's edition can be found here.

The cast is pretty consistent, too. Looking over the list of speakers for this year's event, much of it is exactly the same as last year's - and why not? If it works, don't change it. The regular speakers are all excellent, and well-informed about the subject (which is why, apart from the fact that he's a friend, I invited one of them, Joseph Vogel, to speak at this year's Motor Law conference).

This year, the programme ranges a little wider than just the block exemption (as it did last year, too). There will be a session on the global parts cartel (which Alex Haffner of SNR Denton covered at our conference in February), another on information exchanges, and one on telematics, a subject which raises some fascinating competition problems.

I will preview the conference in more detail over the coming weeks, during which the block exemption will be very much in my mind. Of course, the date of this event is close to the long-awaited day on which the new regime comes fully into operation, although dealing with implementation of the legislation isn't a key area for discussion - everyone will have that sorted out by then, one hopes. We'll be presenting our own block exemption seminar in September, but the events will be complementary - no reason not to take in both. In previous years, we have been able to offer Motor Law subscribers a 10 per cent discount, and I hope we can do so again this year.
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