Data - to repeat a heavily-used soundbite - is "the new oil". But it's not just data which can be valuable, but how data is captured, classified, analysed, structured, repackaged and leveraged. It's the tools which achieve this which can give business credibility to data, and drive competitive advantage.
Needless to say, innovative businesses in this space will strive to protect the smart tools which they develop. Which is why legal protection for commercial databases has high significance.
In August 2017, in the case of Technomed Telemedicine v Bluecrest Health Screening, the English High Court ruled on these issues, resoundingly supporting the legal rights of the innovator1.
Curiously, the case has slipped 'under the radar screen', attracting only a handful of blogposts and legal bulletins, and no business coverage. It's ironic, as Technomed may come to be regarded as a milestone for database protection. And while the dispute arose in digital health, its lessons (I suggest three below) are applicable across industry sectors.
Technomed's heart screening services, and the contract with Bluecrest
Some years ago, British-based Technomed rolled out a heart screening service developed around its own Electrocardiogram (ECG) analysis and reporting system. The system was called ECG Cloud. It was developed by Technomed's managing director, with external input and guidance from consultant cardiologists. ECG Cloud enabled patient ECGs to be remotely analysed, and the results were then assigned a level of risk using Technomed's classification and risk assessment system. ECG Cloud would then generate standard form written reports (with accompanying diagrams and images) explaining the findings to patients in user-friendly terms.
In 2013, Technomed began delivering services to a customer called Bluecrest. Under their two-year contract, Technomed provided reports using ECG Cloud, which Bluecrest then incorporated into wider health reports for Bluecrest's own customers.
Unfortunately, the commercial relationship deteriorated. Half-way through the contract Bluecrest, citing financial difficulties, asked Technomed for a significant reduction in the agreed price for each ECG report which Technomed generated. And while the parties moved towards agreement on the price reduction, Bluecrest (without Technomed's knowledge) lined up another service provider, called Express Diagnostics, to step-in and replace Technomed's ECG services. Within weeks, Bluecrest terminated its contract with Technomed, and engaged Express instead.
Technomed's victory in the English High Court
Technomed started legal action claiming that the service provided by Express to Bluecrest basically copied core features of ECG Cloud and violated legally enforceable intellectual property rights in Technomed's system.
Technomed did not claim IP violations in relation to individual ECG reports, but in the tools and techniques which Technomed used to manage its database, such as a menu of 'drop-down' options linked to a 'traffic light' system, and a data classification system, as well as some standardised visual tools used by Technomed in the presentation of ECG reports.
The legal proceedings took well over two years, and generated complex claims and counterclaims. When the matter finally came to a High Court trial in summer 2017, Deputy Judge David Stone ruled in favour of Technomed. Bluecrest and Express were each held to have violated elements of Technomed's IP.
The evidence of copying, scrutinised in court
Early on during the contract, Bluecrest had asked Technomed for soft copies of the proprietary tools which were utilised in ECG Cloud. Technomed supplied them, in PDF format. Very damagingly for Bluecrest, evidence showed that Bluecrest later provided copies of these tools to Express. In the words of the judge, Bluecrest copied elements of ECG Cloud "almost verbatim", including spelling mistakes which had appeared in Technomed's original materials.
In certain respects the activities of Bluecrest and Express were found to have been 'flagrant' within the meaning of relevant laws, resulting in the prospect of an additional award of damages being made against them in due course.
Three take-away lessons
Several bulletins from law firms describe in detail each of the ten findings of the Court on IP violation (you can access these bulletins via a Google search).
Personally, I think it's more important to focus on 'big picture' take-away lessons. Here are three:
1. Several distinct IP rights can come together in a database innovator's armoury:
The High Court found that core parts of the database 'engine' of ECG Cloud were protectable under database law. Strikingly, English law provides not one but three possible and distinct types of database protection, depending on the nature of the data and/or tools involved (see lesson 2 below). Furthermore, ancillary parts of ECG Cloud, like explanatory materials and images included in end-user reports, were found to also be protectable, either as literary or as artistic copyright works. Technomed thus ended up with a panoply of legal protections for ECG Cloud. The lessons are (i) to take account of the diverse nature of the legal rights which could be available to the innovator - IP law is not monolithic or one-dimensional, (ii) to break down the service, product or facility into its separate real-world elements, and (iii) to establish what types of enforceable IP rights reside in each element. These steps help greatly to maximise IP protection for complex data-driven services.
2. The threshold for legal protection is not very high:
Understandably, many innovators worry that intellectual property rights are expensive to obtain and maintain, involving tasks like lengthy registration processes, sizeable professional and filing fees, difficult trade-offs to be made about territorial IP coverage etc. In fact, no registration or other formalities are required for database or copyright protection to arise under English law. Furthermore, the threshold for protection is not very high, and protection is attainable in many situations. The following three types of database protection were found to be applicable to ECG Cloud:
- 'Free-standing database right' - this right (which is called the 'sui generis' database right in the legal jargon) arises if there has been a "substantial investment in either the obtaining, verification or presentation of the contents of a database", whether measured "qualitatively or quantitatively". Technomed satisfied this test (though in different, earlier cases, database operators have not always fulfilled this test);
- 'Database copyright' - this right arises if, because of the "selection or arrangement" of the contents of the database, it constitutes "the author's own intellectual creation". The Court observed that it was not necessary to establish that Technomed's MD had spent "hundreds of hours" of work in creating the definitions used in ECG Cloud reports. The test was whether "sufficient, non-negligible work" was expended. On the facts, this test was satisfied, and Technomed therefore fulfilled the requirement for "intellectual creation";
- 'Copyright in the database as a literary work' - this right arises if the work is not protectable as a 'database' but can instead be protected via the traditional copyright which attaches to 'literary works'. In short, it is an alternative to database copyright protection. The Court held that the PDF format of the ECG Cloud database was protectable by copyright as a literary work;
These three forms of legal protection overlap, are built on different concepts, and use different terminology and standards. Most importantly, the threshold to achieve protection varies. The lesson is to examine the prospects for protection objectively and dispassionately, and not to be fazed by the prospect that protection is somehow beyond reach. Technomed shows that it is most certainly not.
3. Agreeing and documenting IP arrangements on termination of a contract:
A third lesson is this. At the outset of a commercial relationship, it can be difficult for businesses to focus on arrangements which would apply on termination. But this case is a reminder of the value of doing so, certainly in relation to intellectual property.
There is no mention in the case of any specific contractual obligations which bound Bluecrest on termination. If Technomed had been able to rely on such provisions, its case could have been strengthened still further. (Ironically, it was Bluecrest that attempted to run contractual arguments in its favour. Before the trial began, Bluecrest argued that it enjoyed an 'implied' permission to use any IP in ECG Cloud for a period following contract termination. For reasons which are not explained, Bluecrest dropped this argument during the trial).
The optimal position for any IP owner is to be able to rely both on IP protection and on written contractual obligations to secure its IP rights upon termination. Those obligations can involve a range of post-termination tasks for the customer to fulfil concerning the IP which it has accessed and used during the contract. Such IP arrangements can certainly reinforce IP value, help to prevent dilution, and provide an additional legal basis for enforcing rights against a customer if it proves necessary to do so when, for whatever reason and in whatever circumstances, the contract comes to an end.
Fast forward to 2018: the need for digital clarity...
The dispute which triggered the Technomed case arose in 2013. We need to 'fast forward' to 2018. While the database laws which apply in the UK are the same, the business context in which they apply has evolved. Many more data-driven digital solutions are being rolled out across public health services in the UK, coupled with a proliferation of creative grassroots activity among health professionals, solution providers, regional health authorities and innovation hubs, and others engaged in the field.
In addition, there is a rapidly growing awareness of the regulatory constraints to which data-rich services will often be subject, such as data protection law (These constraints were not relevant in the Technomed dispute because of the nature of ECG Cloud and the IP rights which Technomed set out to assert).
At a recent conference in London, Professor Daniel Ray, who is the Director of Data Science at National Health Service (NHS) Digital, a central government agency, reminded an audience from the healthcare and IT industries that intellectual property ownership and use are "crucial building blocks" along the journey to a digitally-powerer, AI-enable National Health Service2. That's the context for Technomed. The case illustrates how IP law can serve as the building block which Professor Ray refers to. The long-term prospects for innovation in the health sector, and indeed in all other sectors experiencing data-driven disruption, will be bolstered if innovators feel confident that the legal protection which they enjoy in their data solutions is clear. The Technomed case has helped to deliver.