Havel & Partners has advised Moravia Containers on its acquisition of 100% of shares in Contimade. Rakovsky & Partners advised the sellers on the deal.
Moravia Containers, with more than 20 years of experience, is a manufacturer of containers and modular constructions. Contimade is a modular systems producer.
The Havel & Partners team included Partner Vaclav Audes and Associate Josef Bouchal.
Electronic surveillance is regulated by Article 158d of the Rules of Criminal Procedure (hereinafter the “RoCP”), in the marginal section called “Surveillance of Persons and Items”. However, the term “electronic surveillance” itself is foreign to the RoCP, and this area is not regulated in sufficient detail on a legal level. At the same time, electronic surveillance is being used increasingly in practice and undoubtedly represents a significant intrusion into the privacy of the persons under surveillance.
Recently, the High Court of Prague dealt with this problem in the case of a defendant who had intentionally divulged classified information, which was captured by means of electronic surveillance in another person’s dwelling. However, what was crucial in this case was that surveillance was permitted by the judge in compliance with Article 158d Par. 3 of the RoCP and was carried out in the dwelling for the purposes of other criminal proceedings. Consequently, criminal proceedings were initiated against the defendant, and the same recording that was initially made and permitted for the purposes of other criminal proceedings served as evidence in this case.
The gist of the issue discussed by the High Court was whether Article 158d Par. 10 of the RoCP, which establishes the applicability of gathered electronic surveillance materials to other criminal proceedings (specifically, when the other criminal proceedings are conducted for an intentional criminal offence or if the person whom surveillance concerns gives consent to it), relates only to Article 158d Par. 2 of the RoCP, as the law explicitly stipulates (and therefore impacts only cases involving electronic surveillance carried out outside of specially protected areas and conducted only with the state attorney’s consent), or whether it also relates analogically to the situations anticipated in Article 158d Par. 3 of the RoCP (i.e. whether the applicability of electronic surveillance can be established in relation to other proceedings even in cases where the inviolability of a dwelling is breached, and therefore the judge’s permission is required).
The state attorney was convinced that electronic surveillance materials gathered by these means are admissible evidence, for they fulfil all the legal requirements and were presented in proceedings conducted for an intentional criminal offence, so the applicability of surveillance materials is established exactly by Article 158d Par. 10 of the RoCP. The state attorney also added that establishing a rule that the records of surveillance of persons and items permitted by the judge could not be used in other criminal proceedings would lead to the inability to utilize a piece of evidence that could be used not only to the defendant’s disadvantage, but also to his/her benefit. According to the state attorney, the inability to utilize such evidence would ultimately imply an unreasonable denial of the right to a fair trial.
The High Court of Prague disagreed with the state attorney’s argument and as regards the ability to utilize surveillance materials in other criminal cases stated that “following a grammatical interpretation, it can be conclusively concluded that surveillance must be permitted by the rules alone (by the conditions stated in) Art. 158d Par. 2 of the RoCP, whereas the permission arising from Art. 158d Par. 3 of the RoCP cannot be used either in this case or analogically.”
The High Court concluded that the application of Art. 158d Par. 10 of the RoCP to Art. 158d Par. 3 of the RoCP is not possible, because Art. 158d Par. 10 contains an exhaustive list and applies to the violation of rights guaranteed by the Constitution. Furthermore, the Court said that “in each case, the rule of due legal procedure (Art. 2 Par. 1 RoCP) that also has a constitutional dimension (Art. 8 Par. 2 of the Charter, cf. Art. 36 Par. 1 of the Charter and Art. 6 Par. 1 of the Convention) must be given priority over the rule for determining the facts of a case without reasonable doubt (Art. 2 Par. 5 RoCP). Efforts to find the truth at all costs, that is, even at the cost of exceeding the limits of law, would lead to illegality and unacceptable arbitrariness. The rule of due legal procedure must not be sacrificed to the expediency and effectiveness of criminal prosecution, or to the use of “invasive” means, to which co-called electronic surveillance certainly belongs. Thus, according to the Appellate Court, Article 158d Par. 10 RoCP can only be read in conformity to the constitution as having no impact on the rule of permission in Article 158d Par. 3 RoCP, and its possible use implies serious irreparable procedural error and in this case leads to the absolute ineffectiveness of the evidence.”
The judgment of the case and the expressed legal opinion that before carrying out electronic surveillance in strictly protected areas it is necessary to receive separate permission from the judge in every single case can undoubtably be considered highly valuable from a practical standpoint, for electronic surveillance is not regulated well enough by law, and a great number of questions rest on decision-making practice itself. At the same time, it can be acknowledged that the principles of due legal procedure and the rejection of analogical law to the disadvantage of the offender have a higher priority to the rule of determining the facts of a case beyond reasonable doubt.
By Lukas Duffek, Partner, Petr Zabransky, Senior Associate, and Linda Coufalova, Junior Lawyer, Rowan Legal
Kinstellar’s Prague office, working with Linklaters, has successfully advised the Carlyle Group on the sale of the majority stake in Logoplaste to the Ontario Teachers’ Pension Plan Board. Weil, Gotshal & Manges and Uria Menendez reportedly advised the buyer.
The Carlyle Group is a global investment company with USD 246 billion of assets under management. The company was founded in 1987 in Washington DC, and currently employs more than 1,800 people.
The Ontario Teachers’ Pension Plan Board is a provider of defined-benefit pensions for school teachers in Ontario, Canada. The fund is also a private equity investor, with reported USD 207.4 billion in assets under management.
Logoplaste is a manufacturer of rigid plastic packaging. The company, which was founded in 1976, currently operates more than 59 manufacturing plants across 16 locations in the Americas, Europe, and Asia.
The Kinstellar team consisted of Partner Jan Juroska, Counsel Jan Lehky, Senior Associate Michal Kniz, Associate Anna Veselska, and Junior Associate Tereza Maskova.
The coronavirus pandemic has had a negative impact on employment in a number of sectors. At some point, an employer may decide to dismiss some or all its employees.
Such a situation often meets the parameters for collective redundancy, and it is necessary to comply with the special provisions of the Labour Code regulating this issue. Below we present a few points which can help you navigate the process and make it significantly easier.
1. The correct dismissal reason
In order to terminate the employment relationship with the employee, the employer must have a statutory reason. In other words, the employer cannot terminate the employment relationship without a reason; the termination by dismissal must always be based on a specific statutory provision. In the case of collective redundancies, two of those reasons are used in practice:
dissolution of the employer or a part thereof; and
redundancy of the employee due to an organisational change.
The choice of the correct dismissal reason is crucial. If the employer chooses an incorrect one, then regardless of the situation the notice may be invalid and the employee can successfully invoke the invalidity of the notice before the court. This applies even if the restriction on production is real and the employee truly has no need to further employ the employee.
How to distinguish both dismissal reasons?
When dismissing an employee due to the dissolution of the employer or a part thereof, the number of employees is limited precisely because of the dissolution of the employer, i.e. the employer leaves the business or generally ceases to perform the activities for which it employed the employees either fully or in relation to a specific part thereof. Part of the employer is to be understood as a relatively independent division (e.g. a subsidiary or branch), which usually has its own production facilities and premises, is defined in internal regulations and led by a managerial employee. The dismissal reason of dissolution of part of the employer applies, for example, if the employer ceases the production of one of its products. Then the employees assigned to the production of this product will be dismissed due to the dissolution of part of the employer.
On the other hand, the dismissal reason of redundancy applies when the employer has made a decision causing the work of some of its employees to no longer be necessary, even though the employer can objectively continue to further employ the employee and its business activity is not limited. This is the case, for example, when the employer does not have enough work for all its employees due to a lack of customers and therefore dismisses some of its employees and continues its (unchanged) business activities with a reduced number of employees.
Tip: In some cases, a combination of both of these dismissal reasons can occur. For instance, if an employer ceases production of one of its products and dismisses the employees working on that production line due to dissolution of part of the employer, the dissolution of part of the employer and the related restriction of its business activities will affect some of the employer’s other departments, typically HR and accounting. Some of these employees therefore may be dismissed due to redundancy. Thus, a combination of dismissal reasons occurs as one group of employees is dismissed due to dissolution of the employer and the second group (in other departments) is dismissed due to redundancy.
Risks: As stated above, it is essential to correctly determine the dismissal reason. There is a wide choice of case law on collective redundancies, which distinguishes individual dismissal reasons case-by-case. If the correct dismissal reason is not chosen, the employee can invoke invalidity before the court. If successful, the employer is obliged to re-employ the employee, reimburse the costs of the proceedings and pay the employee salary for the entire duration of the court proceedings. Unlike other neighbouring states, Czech law does not regulate the capping of salary compensation and therefore, depending on the length of the court proceedings, this can reach significant amounts.
In relation to dismissals it is necessary to draw attention to another danger associated with the transfer of rights and obligations (sometimes in practice referred to as a TUPE transfer). If the employer terminates part of its production and this part will continue to be provided by another entity (typically as its supplier), statutory conditions for the transfer of rights and obligations from employment may apply and the employer is not entitled to terminate the employees concerned. On the contrary, the employer must ensure the proper transfer of these employees to the new employer (its new supplier), and especially comply with its duty of information. If the employer fails to comply with these obligations, apart from lawsuits from the dismissed employees, it may face sanctions by the labour inspectorate.
Protection period
When applying individual dismissal reasons, a so-called protection period must be taken into account. It is a regulation under which an employee cannot be dismissed in certain situations, even if the preconditions for termination of employment by dismissal are objectively given. Typically, this may be a case of prohibition of dismissal due to redundancy if the employee is on sick leave.
2. When will the rules on collective redundancies apply?
The rules on collective redundancies apply only if, within 30 consecutive days, the employment relationship is terminated by dismissal with a certain number of employees stipulated by law. The Labour Code stipulates the following parameters:
a) for an employer with 20 to 100 employees, at least 10 employees must be redundant;
b) for an employer with between 101 and 300 employees, at least 10 % of the employees must be dismissed; and
c) for an employer with more than 300 employees, the decisive number is 30 employees.
Only employees whose employment was terminated by dismissal are taken into account. However, if five notices had been given, employees whose employment has been terminated by agreement for the same reasons are also included.
Tip: The employer can prevent the application of the statutory regime of collective redundancies if it concludes agreements on termination of employment with all employees (or with a substantial majority). In such a case, the employer does not have to comply with its duty of information towards the state authorities; however, out of consideration for good relationships, previous notification is advisable. Even in this case the employer is obliged to comply with its duty of information towards the employees or their representatives. However, the main advantage of this procedure is speed. The employer may proceed to termination of employment immediately and agree on an earlier date of termination than in the case of dismissal (e.g. the date of signing of the agreement). Another significant advantage is legal certainty: the possibility of successfully invoking the invalidity of an agreement of termination of employment before the court is significantly lower compared to dismissal.
3. How to proceed with collective redundancies
a. Preparation
The basic precondition for the implementation of collective redundancies is thorough preparation of the whole process. It is necessary to check if there are any documents which could cause a deviation from the statutory regime and prolong the redundancy process or lead to higher costs for the employer.
Tip: As a part of the preparation for the collective redundancy, it is appropriate to become acquainted with the content of collective agreements. These often contain agreements on longer deadlines for negotiations or on increase of the statutory severance payments.
It should also be borne in mind that the employer may be employing employees who, for various reasons, have other than standard individual agreements. Key employees or senior managers often have special agreements for a non-compete clause or a different length of notice period.
It is also a good idea to check among the employees if there is no one who performs the function of a so-called responsible representative according to special law (applies to quite many trade licences) or is otherwise difficult for the employer to replace.
b. Implementation
Negotiation
The collective redundancy procedure differs depending on whether employee representatives operate at the employer or not. If yes, before proceeding to collective redundancy, the employer must discuss its intention with the trade union and the employee council, and provide them with written information about the basic parameters of the collective redundancy, particularly the dismissal reasons, the number and professional composition of the employees to be dismissed as well as the time at which the redundancy is set to take place.
This negotiation must occur at least 30 days before the employer proceeds with the dismissal. The purpose is to consider options for decrease of negative effects of collective redundancies on employees, such as the possibility of employment at other workplaces of the employer or the possibility of limiting the collective redundancies (e.g. by an agreement on salary reductions).
If no employee representatives operate at the employer, the employer is obliged to comply with the negotiation obligation within the meaning of the previous provisions towards each employee concerned.
Information obligations towards the state
The employer is obliged to inform the branch of the Labour Office twice in the regime of collective redundancies. The purpose of this information obligation is to enable the competent authorities to prepare for the influx of unemployed persons and to find a suitable job according to their professional composition.
The first written information should be provided right at the start as soon as the employer intends to proceed with collective redundancies (at least 30 day before dismissal). It contains basically identical information that the employer should also discuss with the employee representatives (i.e. the reason for the dismissal, the number of employees affected, their positions, etc.).
The employer will submit the second written notification to the Labour Office after the end of negotiations with the employee representatives containing information about the result of these negotiations (i.e. whether the number of dismissed employees was reduced while salaries were reduced, etc.). This information contains the final figures on the released persons.
Risk: Compliance with the information obligation towards the Labour Office is crucial. In case of non-compliance the employer may be fined up to CZK 200,000. More importantly, however, is that if this information obligation is not met, the employment of collectively dismissed employees will not end (regardless of whether the notice period would otherwise expire). The Labour Code contains a special provision according to which the employment relationship ends no earlier than 30 days after the delivery of the second information notification to the Labour Office. Without this second notification, the employment relationship will never end and the employee can claim compensation from the employer.
Delivery of notices
The last stage of collective redundancies is the delivery of notice. The notice must be given to the employee in writing in the original copy and delivered in person. The employer should primarily deliver it to the employee at the workplace. If this is not possible, it can be delivered wherever the employee is reached. If the notice is delivered by post, it must be delivered to the address communicated in writing by the employee.
Tip: For the purposes of delivery of documents, it is appropriate to have a form prepared for each employee as a part of the admission package where the employee confirms their address for delivery in writing.
4. Costs
Upon termination of employment due to dissolution of the employer or a part thereof, as well as termination due to redundancy, the employee is entitled by law to severance pay, the amount of which is graduated according to the duration of the employment as follows:
if the employment lasted less than one year, the employee is entitled to one times the average monthly earnings;
if the employment lasted from one year to less than two years, the employee is entitled to two times the average monthly earnings; and
if the employment lasted two years or more, the employee is entitled to three monthly average earnings.
In order to determine the amount of severance pay the length of the employment relationship must be calculated, including the notice period. Therefore, the decisive factor is not the moment of the delivery of the notice, but the date of the actual termination of employment.
Tip: The severance pay provided to employees due to the above-mentioned dismissal reasons is taxed more favourably, as it is a subject only to income tax and no longer to social and health insurance contributions. This also applies if the employer voluntarily provides a higher severance pay than stipulated by law.
In practice, the employer often provides the employee with increased severance pay if the employee concludes an agreement with the employer on termination of employment and at the same time agrees to terminate the employment on a certain (usually earlier) date. Such a procedure is beneficial to both parties, reduces the risk of litigation for the employer (as mentioned above, disputing the agreement is disproportionately more difficult for employees than challenging dismissal), while allowing the employer to tailor the whole process to its needs (e.g. termination of key employees at a later date to help the employer cease its operations). In general, this regime is also more advantageous for the employees. The increased severance pay paid by the employer is not subject to all levies and therefore the employee will usually receive a higher net amount than if they had continued to work during the notice period. At the same time, when agreeing to an earlier termination date the employee may start another job earlier without affecting the severance pay already paid.
Collective redundancies bring a number of dangers that should be prepared for in advance. Should you need any support in this difficult process, the experienced team at Schoenherr is at your disposal.
By Helena Hangler, Attorney at Law, Schoenherr
CMS has advised Partech, the EBRD, Quadrille Capital, and the J&T Bank on a EUR 190 million Series B investment in the Rohlik Group. Index Ventures, R2G, and Enern also participated in the investment round. Pierstone advised Index Ventures and White & Case advised the Rohlik Group.
Founded in 2014, Rohlik is a Czech online grocery service offering customers delivery of over 17,000 items. According to CMS, Rohlik intends to use the funds raised by this investment to accelerate growth in its current markets and to enter the German online grocery market in 2021.
The CMS team included, in Prague, Managing Partner Helen Rodwell, Partner Libor Prokes, and Associates Tristan O’Connor and Stepan Havranek; in Bucharest, Consultant David Cranfield; in London, Senior Associate Lucie Halloova; in Munich, Partner Oliver Thurn; in Sofia, Senior Associate Veliko Savov; in Budapest, Senior Associate Eszter Csapo and Associate Szabina Marsi; and in Vienna, Partner Alexander Rakosi and Attorney-at-Law Marie-Christine Lidl.
Pierstone’s team consisted of Partner Iva Zothova and Associate Klara Kocarova.
The White & Case team included Prague-based Partners Jan Andrusko, Local Partners Jan Stejskal, Jan Jakoubek, and Petr Hudec, and Associates Iva Cechrakova and Lukas Pavlik, and London-based Partners Ian Bagshaw and Mike Weir and Associates Ben von Maur and Irina Kozlova.
A New York court has recently ruled that the depiction of Humvee vehicles manufactured by AMG in Activision games is not an infringement of intellectual property and falls under the First Amendment of the US Constitution. This may signify a radical change in game studios’ approach to content licensing.
The relationship between video games, or their content, and registered intellectual property is complicated from a historical point of view. Most players have frequently encountered differences in approaches to products from the real world. While some games use faithful depictions of existing guns or vehicles with their exact real names, others use fictitious names, even though the actual depiction of the guns and vehicles is so close to the original that it is quite clear to the average person what real object is being referenced in the game.
The reason for such division is apparent: some developers or publishers have the means to pay for licenses for depicting real products and their names, whereas others do not. At least this is how it was for many years before several incidents, lawsuits and statements involving gaming companies shook things up.
Electronic Arts: No More Licensing for Us
Gun manufacturers had long been working in symbiosis with game developers, which was evident from the consistent licensing of the entire game content that embodied real products. A single game could have hundreds of such licenses, but the cooperation was mutually beneficial: the games had content known from the real world, and gun manufacturers had a platform that de facto promoted their products.
However, when an armed attack was launched on Sandy Hook Elementary School on 14 December 2012, the functioning paradigms were disrupted and altered. The violence depicted in games, as well as the relationship with gun manufacturers, provoked a controversy that motivated game companies to distance themselves from gun manufacturers to a certain extent.
Electronic Arts (“EA“), one of the largest game companies, announced publicly in May 2013 that they would no longer be licensing guns. However, it was also announced that EA would continue to show real-world weapons in their games without licenses, since they claimed this was allowed under the First Amendment to the US Constitution, which guarantees the freedom of speech. As the then President of Labels at EA Frank Gibeau stated, “A book doesn’t pay for saying the word Colt, for example.”
What is interesting about this situation is not only that it occurred, but also what made it possible. A few years earlier, in June 2011, the U.S. Supreme Court had dealt with banning the sale of violent video games in California. The Supreme Court repealed the Californian law that banned the sale of violent video games to minors, providing video games similar protection on the basis of the First Amendment as other media such as books and films. That was crucial for the development of the relationship between video games and third-party intellectual property.
AMG vs. Activision, or Humvees and games
Since 2013, EA’s example of gun licensing has been followed by other companies such as Activision, Take-Two Interactive, Bethesda Studios, PUBG Corporation and Epic Games. At the same time gun manufacturers have not seemed to oppose the move in any way. Yet the situation is different with other products.
While releasing its big statement about dropping the licensing of guns, EA was also involved in a dispute with Textron conglomerate as the parent company of Bell Helicopter over the depiction of several Bell helicopters in Battlefield 3. EA referred to the First Amendment in this case and stressed that the helicopters in question were just a few of many elements that make up its creative work – a military combat simulation.The dispute was eventually settled out of court, the terms of the agreement remaining unpublished.
A dispute of a similar kind is currently being resolved between AM General LLC (“AMG“), which has sued Activision Blizzard, Inc. and Activision Publishing, Inc. (together “Activision“), and also Major League Gaming Corporation – the company that holds a number of different video game tournaments. The crux of the dispute is the infringement of trademark rights due to the use of Humvees in the Call of Duty video game series. In brief, the first instance judgment held that Activision had not infringed AMG’s rights, because the way in which it used Humvees in its games is under the protection of the First Amendment and does not satisfy the factors indicating the infringement of rights. The court’s sophisticated reasoning provides interesting hints for predicting how the intellectual property of third parties may be used in the future.
The factors of trademark infringement in US law
The settling of the AMG v. Activision dispute is based on a comparison of two significant legal principles: the protection of intellectual property under the Lanham (Trademark) Act and the protection of freedom of (artistic) expression pursuant to the First Amendment. The procedure for such comparison is grounded in the Rogers v. Grimaldi case, which the so-called Rogers test was named after.
In Rogers v. Grimaldi, the court held that in relations between trademarks and the protection of freedom of expression, trademarks should not be afforded higher priority, if their use is of artistic relevance to the work, unless this confuses the consumer. In other words, if a trademark is used for some artistic purposes and does not imply that the proprietor of the trademark is somehow engaged in the work, it does not infringe any of the proprietor’s rights.This is assessed with the help of the so-called Polaroid factors.
Artistic relevance to the work
The first factor of freedom of expression having priority over a trademark is the trademark’s artistic relevance. The New York Court has concluded that the use of Humvee vehicles in Call of Duty definitely has artistic relevance. It argued that in a game that simulates a modern military conflict, the use or real-life vehicles used in military operations around the world definitely evokes a sense of realism.
The court used the argumentation presented in other cases and found that the use of the AMG trademark meets the first standard of the Rogers test, since it enables the player to feel like part of a special elite forces operation and increases realism in the game. The court also concluded that any reasonable juror would conclude that the presence of Humvees in Call of Duty possesses an artistic value that is at least above zero.
Polaroid factors
The second part of the assessment of the conflict between freedom of speech and trademark is assessment through an 8-factor test which emerged from the Polaroid Corp. v. Polarad Electronics Corp. case – the so-called Polaroid factors. This test assesses:
Below are the essential elements of the court’s reasoning in assessing the Polaroid factors.
The degree of similarity between the marks was assessed by the court in the context of the argument that “if the marks are used for different purposes and are presented to the public differently, despite presenting the same item, they are dissimilar and do not pose a problem.” Put concisely, the court found that AMG’s purpose was to sell vehicles to militaries, while Activision’s purpose was to create video games that simulate a military environment for consumers.
The proximity of products, that is, whether the products may enter into market competition, is an interesting point. AMG argued that it also licenses the rights to the depiction of Humvees as a part of its business. However, the court did not accept this argument, for the proximity of products should rest on “the key purpose of the activity, not on a marginal one.”
Good faith is an essential point of the assessment. In brief, it is an assessment of “whether the defendant used the mark for the purpose of exploiting plaintiff’s reputation and good name and possible confusion of products.” The aspects necessary for the assessment of this point are complex – what was crucial for the case was the finding, i.e. that according to the court, AMG failed to prove Activision’s absence of good faith in using Humvees in Call of Duty.
On the consumer sophistication point, the court found that AMG runs into a problem that their purchasers – militaries from around the world – are not buying Call of Duty and the players of Call of Duty are not buying Humvees. It also offered a comparison that just as “moviegoers are sophisticated enough to know that the mere presence of a brand in the film, especially if it is shown briefly and intermittently, does not imply that the brand sponsored the movie”, there is also no reason for assuming that video game players are less astute.
Rogers test assessment
The court relied on facts that were not disputed by the parties, which were that the vehicles depicted in Call of Duty correspond to those that the real-life soldier would expect to see in the place and time depicted, and that Humvees are widely used in military operations around the world. Thus, if realism is an artistic goal of the game, the depiction of real-life vehicles undoubtedly pursues that goal. The depiction of Humvees is considered an integral part of the game, because those vehicles contribute to the artistic purpose of game developers through techniques typical for video games such as the player’s interaction with the virtual world.
The court therefore concluded that Activision succeeded in rebutting AMG’s accusations that “the use of Humvees is a blatant and ill-conceived attempt to misuse the reputation associated with Humvees rather than an integral element of the game and the artistic expression of its creators”. Nor was the court convinced that the use of Humvees was motivated by economic, and in no way artistic factors. Consequently, there was no infringement of trademark.
Consequences of the judgment and comparison with continental law
The extensiveness and comprehensiveness of the court’s reasoning points to the fact that the situation surrounding intellectual property of third parties used in games is not entirely simple. It may generally be concluded that as long as such artistic use of intellectual property is compliant with the Rogers test, it is under the protection of the First Amendment, so the proprietor of the trademark concerned must tolerate its use. However, it is also necessary to take into account the extent of such use, as can be seen from the reasoning presented by EA in the dispute with Textron, where it emphasized that “the Bell-manufactured helicopters are not highlighted or given greater prominence than any of the other vehicles within the game”. Thus, it can be assumed that there is a difference between using the intellectual property of a third party as one of the many elements of a game and the situation where it is a central element of the game, as for instance in the case of cars in racing games.
However, in the context of continental law, the use of intellectual property can be based neither on the First Amendment, nor on the concept of fair use, which is also often referred to in this respect. Being based on international treaties, community law and, finally, on the national law of individual countries, the protection of intellectual property is more complicated in this environment. In the European framework, one good source for comparison with the above-described case is Directive of the European Parliament and of the Council (EU) 2015/2436 of 16 December 2015, whereby the legal regulations of member states on trademarks are connected (amended wording) and which has also been integrated into the Czech Act on Trademarks. (“AT“), which may be used as an illustration.
The content of trademark law covers the usage of the mark in connection with the goods or services in respect of which it is registered. Yet it is not in connection with the designation of goods, but in the context of video games that the interpretation of the use of trademarks becomes ambiguous. The New York Court in its assessment of the Polaroid factors pointed to the difference that while AMG produces vehicles, Activision produces games, so the aims of use are different and the products do not enter into market competition. The game producer does not offer goods for which a trademark may be registered, and it does not use the mark for its own goods or services, but it is used as an element of a virtual setting within the framework of some artistic goal.
In the Czech law milieu, this reasoning might be paralleled by an option permitted by the Act to use a trademark of a third party in certain situations where the trademark is used to particularly credit the third party for producing goods or providing services. This limitation on the effect of trademarks is primarily intended for cases where the use of a third-party trademark is necessary for the presentation of particular goods or services, for example spare parts, that is, “in particular, when the use of that trademark is necessary to indicate the intended purpose of a product or service.
The question arises whether the use of a trademark in a video game can be that necessary. If the purpose of the video game is, for instance, the realistic depiction of a military environment in a particular period, as in Call of Duty, it may be assumed that this would be impossible to do without the real-life products and their names. However, it must be added in the same breath that there can be no certain conclusions until these cases are judged in the context of continental law.
To license or not to license
The situation with third-party trademark usage in video games is complicated. The fragmentation of legal regulations across the many jurisdictions in which the games are distributed together with the unclear legal definition of such use and a critical lack of case law does not offer many clues for decision-making.
It is difficult to form any general conclusions, but having considered the available information, some possible reasonings may be outlined. The purpose and context of using a mark in a video game is crucial. It is of great difference whether it is a racing game in which the player exclusively drives, say, Mercedes or whether in a depiction of a realistic modern street, among various other cars, a Mercedes just drives by. Yet this does not guarantee that the proprietor of the trademark will take the same view, at least because in some countries intellectual property must be protected in order not to be lost.
The decision of the New York Court is so far the only first-instance harbinger, but in the broader sense it is a very significant one. It builds on the earlier establishment of video games as an artistic medium, to which certain privileges apply, and on the idea that the protection of intellectual property has its limits. Thus, when developing games, it may be recommended to seek professional help in assessing the risks arising from the use of third-party intellectual property, especially in view of the changing legal milieu.
By Josef Donat, Partner, Pavel Hejl, Senior Associate, and David Slama, Junior Lawyer, Rowan Legal
Kinstellar has advised EAG on its acquisition of Cebia. Simkova & Partneri advised the unnamed seller on the deal.
Kinstellar describes EAG as an “international investment group focused on the digital transformation of the automotive market.”
Cebia is a Czech provider of used vehicle origin and authenticity verification services.
The Kinstellar team consisted of Prague-based Partner Jan Juroska, Counsel Zdenek Kucera, and Junior Associates Matej Vecera, Jakub Stastny, Stepanka Havlikova, and Tereza Maskova.
Simkova & Partneri’s team included Partner Petra Simkova, Attorney-at-Law Jakub Valenta, and Junior Lawyers Jan Svehla and Daniel Neustadt.
The Office for Personal Data Protection has released an inspection plan for the year 2020, which announces that this year they aim at intensively focusing on cookie use and plan to start 8 inspections at once that are intended to check cookie use. Yet, cookies are also the subject of interest for some other inspection offices that have made numerous statements about the use of cookies. While in the rest of the EU, users’ consent is required before storing cookies (the opt-in principle), according to the current Czech legislation embedded in Act N. 127/2005 Coll., on Electronic Communications, cookies can be used until the user says something (opt-out principle).
Still, even in the Czech Republic the statements of inspection offices from other EU countries cannot be completely ignored, because cookies and other tracking technologies in most cases lead to personal data processing, and the data obtained concerns persons that, in combination with other collected data (e.g. IP addresses), can be identified. In this case, the Electronic Communications Act is used alongside the GDPR.
Even though the statements of inspection bodies do not completely agree with each other in some cases, we can deduce from them what approaches to the use of cookies and related processing of personal are not permitted. No-go zones, which one often comes across and that will be discussed further below, also apply in the Czech Republic. In this article, we will go through the three most common ones: cookie walls, obtaining consent from the user’s behavior, and classifying cookies as essential even when they are not.
Cookie walls
Some websites exact the user’s consent to the use of cookies and subsequent personal data processing through so-called cookie walls. A typical cookie wall looks like a banner that pops up over the whole webpage and prevents the user from browsing the content of the website.
In the Czech Republic, this is problematic particularly where consent is needed for the related processing of personal data, for instance if the data collected by cookies and tracking are used for personalized advertising.
According to the European Data Protection Board’s updated statement No. 5/2020 on Consent, consent like this is not given freely, for the user is not given an actual option to not consent. Personal data processing that is based on this consent thus contravenes the GDPR. Therefore, cookie walls are not advisable even in the Czech Republic.
Deriving consent from the user’s behavior
Many webpages contain a notice that by browsing a webpage the user agrees to the use of cookies. However, if the use of cookies is related to personal data processing, which should be based on the user’s consent (e.g. for personalized advertising), such consent is not given by a clear expression of will.
Thus, consent cannot be obtained indirectly based merely on the fact that users browse a page, spend a particular amount of time on the page, or that they have scrolled down half of the page. Such user interaction with a page does not directly imply users’ intention to give consent, as users might have some other motives (e.g. they might be trying to find contact details, which are usually located at the bottom of a webpage).
Classifying cookies as essential even if they are not
There are certain types of cookies that do not need the user’s consent for their use, and even Czech legislation does not set out an obligation to provide an option to refuse them. These are so-called essential cookies that serve the purpose of technical storage, or exclusively for the transmission of communications, or they are essential for information companies to provide the online service which the user has explicitly requested.
This no-go zone is relevant for the Czech Republic when the operator of a website incorrectly classifies cookies in such a way that an opt-out option is denied, does not provide information about personal data processing, or does not obtain consent to personal data processing (if it is needed).
But neither opt-in nor opt-out apply to essential cookies. Therefore, website operators could be tempted to include in this category as many cookies as possible. As the Irish inspection office has found, in practice non-essential cookies are sometimes also included in this category. This is mainly because the classification of cookies is subject purely to the website operator’s discretion.
Cookies that are used for improving users’ experience, for instance those that remember search histories, are among those that are often mistakenly categorized as essential. We also cannot classify as essential cookies that are used for chatbots – such cookies become essential only after the user starts using a chatbot actively, which according to law, means that the user explicitly requests the service. On the contrary, cookies that are needed in particular for adding goods to a cart and for placing an order are genuinely essential.
Conclusion
As businesses have shifted online, inspection offices have begun to pay more attention to this area, and as we have seen recently, the use of cookies and tracking technologies on websites is a thorny topic. Nevertheless, these small and seemingly innocuous files and technologies often appear on the websites of companies without the legal and compliance officers’ knowledge. Yet, we advise against such approach in light of the stricter attention from inspection offices and planned regulations.
By Michal Nulicek, Partner, Bohuslav Lichnovsky, Senior Associate, and Filip Benes, Junior Lawyer, Rowan Legal
Glatzova & Co has helped Winstor Investicni Spolecnost, a manager and administrator of investment funds, get its investment operating license extended by the Central Bank of the Czech Republic.
According to Glatzova & Co, Winstor can now exceed the so-called decisive limit and to manage and administer special funds, including foreign ones.
Glatzova & Co’s team was led by Partner Libor Nemec and included Lawyers Andrea Pisvejcova and Filip Murar.
Why is a whistleblowing system necessary and how can it help you save your good reputation, organization, investments, and even your freedom?
It is common especially in larger organizations that the interests of ordinary workers, management and the owners are different. Often even diametrically opposed. For instance, an ordinary worker might be motivated to make his job easier, or even to make money “on the side.” The management could set up a scheme for the payment of bonuses or the functioning of an organization in such a way that they make profit over the short term, or they might benefit from closing shops that are unprofitable for the organization as a whole. This is not very widely discussed, but is in fact a sad reality to which we should not turn a blind eye. As you know from our previous post, such management cost the company Wirecard (and therefore its investors) billions of euros, the organization as a whole is facing an investigation on suspicion of money laundering, and some management executives have been arrested on suspicion of fraud and other criminal offences. How can this be avoided?
One of the ways is to establish an internal reporting system, thanks to which the management and owners of an organization can quickly learn about activities that are illegal or harming the organization. Such conduct could then be nipped in the bud and not dealt with at the stage when the state authorities have already started a formal investigation, or when the entire case is already in the media. A timely solution can save not only the organization and its assets, but also the good reputation of the organization and its employees. A functional reporting system can also exempt the organization from criminal liability for the conduct of its employees or the members of its statutory bodies. The system is also a positive sign to potential investors that their nest egg will not turn into a write off from one day to the next. And last but not least, it will soon be mandatory for some organizations to introduce such a reporting system.
So is it enough just to download model reporting instructions from the Internet and hang them on the notice board? Unfortunately not. In order for the system to work, in the first place employees must know about it, and they must know how to use it. Also, there must be clearly established rules for dealing with reports so that employees can rest assured their report will be properly investigated. And finally, it is necessary to build up an organization culture in which workers are not deterred from reporting and on the contrary are encouraged to report important well-founded information. Of course, any negative sanctions against workers that submit reports in good faith are unacceptable.
So how should one go about setting up such an internal system correctly and what should be avoided? We will tell you this in just a few days.
By Michal Nulicek, Partner, Bohuslav Lichnovsky, Senior Associate, and Anna Cervanova, Associate, Rowan Legal