Commercial Awareness Update – W/C 24th June 2024

IS AI AN ENEMY TO THE PUBLISHING INDUSTRY?

While the rise of AI in recent years has introduced new business opportunities and led to the success of companies like OpenAI and Nvidia, it has also generated concerns over the publishing industry’s looming future.

Concerns

Chatbots like ChatGPT and Claude have become go-to platforms for some people to find information and answers to their queries. This shift in user behaviour from traditional search engines to generative AI could potentially reduce the use of search engines like Google, which currently dominates the market.

Recent research by Gartner suggests that traditional search engine volumes could fall by 25% by 2026, significantly impacting publishers who rely on search engine traffic for revenue generation.

Tech companies like Google also deploy generative AI to be integrated into search engines, creating generative summaries above the list of links. AI Overviews, a new Google feature, was rolled out last month but has recently been retracted for further improvement, as the company claimed. Although these AI-generated summaries include links to websites, they often provide complete information to users upfront and will likely reduce traffic to media sites.

Another concern for media companies is the extraction of copyrighted materials from their public websites by technology companies to train AI models. This practice, reportedly done without consent, raises serious ethical questions about the ownership and use of digital content.

The abovementioned underscores the urgent need for regulations to protect the rights of content creators in the face of advancing AI technology.

Addressing the challenges

Regarding reduced search traffic, publishing companies can’t afford to be passive. They must explore ways to increase direct traffic and become less dependent on search engines.

This could involve leveraging their current strengths, expanding their offerings to the public, or innovating new ways to engage existing readers and attract new ones. For instance, The New York Post has taken a proactive approach by using text messaging to connect with subscribers, allowing them to exchange messages with sports reporters.

Some leading news organisations, including the Financial Times, have struck licensing deals with OpenAI regarding copyright issues. Others have also resorted to lawsuits to address these concerns: the New York Times filed suit against OpenAI over copyright infringement this April, followed by other US newspaper publishers.

One might question whether licensing deals would be enough to keep publishing companies running, especially for smaller publishers who may lack the bargaining power to secure a ‘fair’ licensing deal.

The future

Generative AI can transform our information-seeking behaviour, where chatbots replace search engines or a user journey starts and finishes on Google without clicking links. This necessitates a fair profit-sharing model between technology and media organisations to ensure that media companies are fairly compensated for the work and value they produce and are incentivised to continue creating original content.

Licensing deals should be struck with AI-focused companies like OpenAI and tech companies like Google, which are integrating generative AI capabilities into their search engines.

Additionally, publishers can leverage AI to their advantage, such as using it for ‘the instantaneous translation of stories into multiple languages, turning text articles into audio’, appealing to a broader audience.

Technology companies and publishers must take action to address the challenges posed by AI. This collaboration is essential for original content to continue informing the public and prevent job losses in media organisations.

• By Trinh Nguyen

ASSOCIATED PARTY TRANSACTIONS UNDER SCRUTINY: THE LEGAL IMPLICATIONS FOR ENGLISH FOOTBALL

Manchester City FC has recently challenged the Premier League’s regulations around ‘Associated Party Transactions’ (or ATP for short). ATPs refer to any commercial deals between a club and an entity deemed to have links to the club’s ownership.

Independent auditors monitor these deals to ensure they are held at a fair market value. This ensures sustainability and fairness within the Premier League, preventing teams with wealthy owners from essentially ‘buying the league’ through revenue created via sponsorship deals. The laws surrounding ATP came into force following the controversial Saudi-backed takeover of Newcastle United FC in 2021.

Manchester City’s majority owner is Sheikh Mansour, a multi-billionaire who is also the deputy prime minister of Abu Dhabi. The club boasts a range of sponsorship deals that fall within the ATP definition. For example, one of their main sponsors is the Abu Dhabi-based Etihad Airlines (which features on the front of all the club’s kits and is the stadium’s name).

The airline is also state-owned, similar to Manchester City’s ownership.

The issue

Manchester City’s representatives have recently referred to the rules surrounding ATP as ‘restrictive’ and ‘discriminatory’, preventing clubs from expanding their business endeavours. They wish for the rules surrounding ATP’s to be abolished.

They are not the only club with concerns. Another Premier League club, Aston Villa FC, chairman Nassif Sawiris, has recently expressed concern with the financial regulations (including ATP) surrounding business sponsorships for clubs. Mr Sawiris echoes the concerns of Manchester City, referring to the regulations as ‘anti-competitive’ and is also considering lodging a formal complaint against the Premier League.

The hearing for Manchester City’s case against the Premier League’s ATP rules is expected to commence soon. The outcome could have a range of implications for the future of commercial dealings between Premier League clubs and their sponsors and the future of Competition and Sports Law in the UK.

Implications for Premier League clubs

If Manchester City’s challenge is successful, Premier League clubs will enjoy greater freedom in securing and maintaining sponsorship deals with entities associated with their owners. This could lead to clubs utilising this flexibility to gain a ‘competitive edge’ by using their ownership wealth to increase revenue funds into the club.

However, such flexibility could exacerbate the competitive imbalance in the Premier League as smaller clubs with less wealthy owners would not enjoy the flexibility clubs such as Manchester City or Aston Villa would have.

Furthermore, a successful claim by Manchester City could also prompt other clubs to challenge similar regulations they deem restrictive or anti-competitive. This could lead to suggestions for overhauling the general rules surrounding PSR (Profit and Sustainability Rules).

However, if City’s complaint were unsuccessful, it could reinforce the current regulations on ATP and call into question the compliance of these commercial deals with said regulations. It could also hinder Man City’s legal challenge against the 115 outstanding Premier League charges for various financial irregularity issues spanning several years.

Broader implications on competition and sports law

On broader terms, Man City’s challenge against the Premier League’s ATP regulations could have numerous consequences for sports law in the UK. The outcome of this ongoing hearing could set a precedent for how commercial relationships between Premier League clubs and their owners are regulated.

The legal frameworks governing PSR and FFP (Financial Fair Play) may have to be reevaluated to reflect the current economic climate of sports. Such reevaluation may occur on a domestic level with the Premier League and on a global scale within international sports organisations such as UEFA.

Sports law firms would play a crucial role in any proposed re-evaluation due to their expertise in navigating the complexities of sporting financial regulations. Alongside this, sports law firms could also experience a sharp increase in demand for their expertise.

Other clubs might be inclined to follow Manchester City’s lead in filing formal complaints against various financial regulations imposed by the Premier League. Such complaints and subsequent hearings would require firms/individuals with expertise in this area to litigate successfully.

There could also be implications for applying competition law within the UK Sports sector. A decision, despite not being legally binding, that views ATP regulations as anti-competitive could influence how competition law is applied within the context of sports.

More specifically, it could lead to re-evaluating what constitutes ‘Fair Market Value’ in the context of sponsorship deals between football clubs and their owners.

• By Liam Ridgley

SUPERMAC V MCDONALD’S: A DAVID AND GOLIATH TRADEMARK BATTLE

*T-58/23 Supermac’s v EUIPO – McDonald’s International Property

McDonald’s lost its ‘Big Mac’ trademark for its poultry products following the June 5th judgement of the EU General Court (EGC). The defeat of the US-formed multinational giant is significant. It also reminds us of the importance of protecting a trademark through genuine use.

Background

McDonald’s has been engaged in a trademark battle with the Galway-based fast-food chain Supermac for nearly a decade. In 1996, McDonald’s registered ‘Big Mac’ as a trademark in the EU for its restaurants’ poultry, meat, and services.

In 2017, the multinational corporation objected to the attempt by Supermac’s founder, Pat McDonagh, to register the title Supermac as a trademark in the EU. This action would have revoked McDonald’s ownership of the term. At this time, Pat McDonagh intended to expand the Supermac chain into Europe.

In 2019, the European Union Intellectual Property Office (EUIPO) dismissed Supermac’s application for revocation, upholding McDonald’s trademark rights to the ‘Big Mac’ name. In June, Supermac challenged this verdict before the EGC.

The verdict

The EGC judges held that McDonald’s had not put the contested trademark to genuine use for poultry products or services associated with restaurant operations.

Directive (EU) 2015/2436 stipulates that the proprietor of a trademark must make ‘genuine use’ of the ‘trademark’ within five years of its registration or an uninterrupted 5-year period. McDonald’s failed to prove to the Luxembourg-based court that they had made continuous and genuine use of the moniker for poultry products over five years.

The EGC altered the EUIPO’s 2019 decision, manifesting McDonald’s loss of exclusive trademark rights. Ultimately, their decision permits Supermac, McDonald’s, and other companies to use the trademark name for their poultry products.

Key takeaways

Insufficient evidence

The court was not convinced by McDonald’s evidence of their advertisement in 2016 of their ‘Grand Big Mac Chicken.’ The court held that the evidence amounting to advertising posters and television advertisements was insufficient as it did not ‘provide any indication of the extent of the use of the mark in connection with the goods.’ It demonstrates that evidence of sale records or financial turnover in relation to the goods or services under a contested mark is paramount to establishing commercial use.

Supermac also has a case pending in the UK courts regarding using the contested mark. Revocation of a trademark for non-use operates similarly in the UK, and it would need to be evident that the mark has not been used for five years (since the mark was registered or any uninterrupted period).

The requirements for evidence of commercial use are also similar in the UK. Consequently, without proper evidence of commercial use, another trademark defeat may be looming for the McDonald’s brand.

Wider implications

The judgement paves the way for the expansion of the Supermac chain into Europe. To Pat McDonagh, the judgement was a ‘vindication of small businesses everywhere that stand up to powerful global entitles.’ He stated that he was aware from the start that this would be a ‘David versus Goliath scenario’ and accused the fast-food giant of ‘using trademark bullying’.

Law professor Willajeanne McLean observed that McDonald’s has always been ‘extremely litigious’ in trademark matters and rarely loses. In 2016, the company won an EU trademark case against a Singaporean competitor, claiming exclusive rights to use ‘Mc’ and ‘Mac’ in beverages.

However, this recent victory signifies that challenges against McDonald’s are not entirely impossible, even for a smaller competitor. Whilst EGC judgements may be appealed to the Court of Justice, a win against the corporate giant is undeniably significant.

The case highlights the importance of making genuine use of a trademark to prevent revocation. Whilst the future of the trademark battle between McDonald’s and Supermac is unclear, it would seem this judgement is only their first bite of the ‘Big Mac’ name.

• By Katie Rowlands

SHIELDING MISCONDUCT: THE CONTROVERSY SURROUNDING NDAs

Non-disclosure agreements (NDAs), also known as confidentiality agreements (CAs) or proprietary information agreements (PIAs), are legally binding contracts aimed at safeguarding confidential information from disclosing specified information to unauthorised individuals. There are two primary types of NDAs: unilateral and bilateral.

In a unilateral NDA, only one party possesses confidential information that needs protection (the disclosing party), and the other party commits to preserving confidentiality (the receiving party). In a bilateral NDA, all parties possess confidential information and agree to keep it confidential.

The cruciality of NDAs

NDAs are vital legal instruments that protect sensitive business information from exposure to unauthorised parties. They provide clear guidelines on which information is confidential, ensuring employees understand their obligations and the consequences of breaching confidentiality. They also safeguard trade secrets by legally binding external parties to confidentiality agreements, preventing misappropriation or unauthorised use.

Additionally, NDAs safeguard individuals from illegal discrimination or harassment in sensitive situations. Maintaining confidentiality, NDAs allow victims to address these issues privately, preserving their privacy and reputation. This confidentiality empowers victims to seek justice while minimising potential harm from public disclosure of their experiences.

The underlying issues behind NDAs

The case of Zelda Perkins, who broke her NDA to expose Harvey Weinstein’s sexual harassment, exemplifies how these agreements can obscure serious wrongdoing, highlighting a broader misuse that undermines transparency and accountability. This underscores the critical examination needed regarding the role of NDAs in silencing victims of workplace discrimination and harassment.

A significant concern raised by the Maternity Action’s report is how NDAs shield repeat offenders, particularly employers accused of discriminating against women due to pregnancy and maternity. These agreements not only prevent victims from discussing their experiences but also perpetuate unchecked misconduct due to a lack of public scrutiny or legal accountability.

In 2022, the organisation Pregnant Then Screwed conducted research on 696 women who signed an NDA, which showed that 90% of them who signed an NDA after encountering maternity discrimination said that the signing was their only option. Furthermore, a total of 78.5% of the women believe their employer had used NDAs to hide wrongdoing multiple times.

Moreover, reports question the effectiveness of NDAs, revealing that individuals pressured into signing NDAs often receive insufficient legal counsel that fails to fully explain the agreements’ implications. This may further perpetuate systemic power imbalances, particularly in scenarios where the individual being asked to sign is made to feel that they do not have an alternative.

Potential solutions

The government’s proactive approach to regulating NDAs, announced by Lord Chancellor Alex Chalk MP on 28 March 2024, aims to prevent these agreements from silencing victims reporting crimes. The proposed legislation will allow victims to disclose information about alleged criminal conduct to essential services such as the police and medical professionals without legal repercussions, ensuring access to legal support and enhancing their ability to seek justice.

This initiative is supported by legal bodies like the Law Society and Bar Council, with Law Society president Nick Emmerson advocating for clear limitations on confidentiality clauses in employment contracts. Zelda Perkins has even welcomed the government’s announcement after campaigning for NDA reform in 2017, stating that ‘the time of confidentiality clauses being used as weapons of threat to protect perpetrators’ reputations is coming to an end.’ Integrating these initiatives with a robust regulatory framework will safeguard victim rights and promote transparency, ensuring NDAs serve their intended purposes without compromising justice or impeding legitimate disclosures.

However, addressing the broader issues surrounding NDAs requires a multifaceted approach. One proposed solution advocates for the recording and reporting of the use of NDAs to prevent their abusive overuse, particularly in cases of discrimination or harassment. This measure serves as a deterrent and provides visibility into how NDAs are utilised across different protected characteristics.

Furthermore, there is a call to limit the scope of NDAs, focusing them strictly on protecting sensitive information necessary under trade secret laws. This regulatory adjustment balances employer privacy concerns with the public interest in transparency and accountability.

The government’s proactive stance on regulating NDAs in serious situations underscores a commitment to preventing misuse. By considering potential regulations that could render NDAs unlawful in cases of severe misconduct or illegal activities, regulators seek to ensure these agreements do not shield wrongdoers from accountability or hinder victims from speaking out. Crafting effective NDAs also involves specifying the scope of confidential information, defining permissible uses, and ensuring these agreements do not unreasonably restrict individuals’ rights.

While NDAs are essential for protecting trade secrets, their misuse in silencing whistleblowers and suppressing accountability calls for robust legislative safeguards. The government’s proactive measures to regulate NDAs, including proposed legislation and ethical standards, aim to uphold transparency, protect victim rights, and ensure these agreements serve their intended purposes without hindering justice or legitimate disclosures.

• By Misha Madinah

THE CHALLENGE OF FRENCH FOOTBALL TV RIGHTS

The football broadcasting rights market has expanded dramatically over the past 30 years. In December 2023, Sky and TNT paid a record £6.7 billion for Premier League rights, representing a staggering 2000% increase compared to the fee in 1992, when the Premier League began. Clearly, it is a highly lucrative market.

However, the situation is starkly different across the Channel (pun unapologetically intended). The Ligue de Football Professionnel (LFP) has struggled to secure its next TV deal since October. Weak demand has diminished its hopes of raising as much as €1 billion from the sale.

This article delves into the structure of these deals and the specific challenges hindering the agreement in France. To streamline your reading, three key commercial awareness points are summarised at the end.

Structure of the broadcasting deals

Broadcasting rights are the media rights of intellectual property sold to a specific broadcasting company. Essentially, if a company wishes to obtain media rights for a sports organisation, it must negotiate with the distribution organisation. The resulting contract grants the company either limited or exclusive broadcasting rights.

Domestic broadcast revenue in the Premier League is distributed among member clubs based on performance. After these payments, funds are allocated to support clubs in the English Football League.

This revenue-sharing model is crucial for the financial health of football ecosystems and is similarly applied across Europe’s top five leagues.

Historical overview of LFP broadcasting deals

In 2018, the LFP sold broadcasting rights to Mediapro for a record £800 million, sidelining long-time partner Canal+. This decision backfired when Mediapro stopped payments during the pandemic-hit 2020 season, forcing the LFP to strike a lower-priced deal with Amazon.

By 2023, the LFP sought €1 billion for a five-year cycle starting in 2024, but with no significant bids from Canal Plus, beIN Sport, or DAZN, they were forced into one-on-one negotiations.

During that period, the league sold a 13% stake in a newly formed entity tasked with overseeing all commercial operations of the LFP to the private equity group CVC Capital for €1.5 billion.

The cause of the delays

Negotiations are at a standstill, mainly due to differing views on pricing. The LFP is reluctant to lower prices, and broadcasters are unwilling to increase them. With the new season approaching (less than 10 weeks away), broadcasters hold the upper hand and show no signs of budging. CVC Capital’s substantial investment adds to the complexity, driving their urgency to see a quick return.

What comes next

Faced with limited alternatives, the LFP is contemplating the risky venture of launching its channel and promoting a subscription model to fans nationwide. The primary concern revolves around the timing, with insufficient time to market the new venture effectively, raising doubts about its financial viability.

Alternatively, the LFP could accept a lower offer from one of the broadcasters. This dilemma boils down to a risk-versus-reward scenario: opt for the safer, albeit less profitable, offer or gamble on an uncharted course.

Commercial awareness takeaways

1. Legal Risks in Contractual Disputes: The Mediapro incident underscores the legal risks and financial consequences of contractual breaches in high-value broadcasting agreements.
2. Emerging Business Models in Sports: LFP’s exploration of launching its channel reflects evolving trends in direct-to-consumer models.
3. Legal Sector Expertise: Deals like these highlight the importance for lawyers to specialise beyond just ‘commercial’ or ‘corporate’ law. Expertise in sectors like sports, media, and entertainment enables lawyers to anticipate and mitigate risks effectively for the parties they represent.

• By Avishai Marcus