Swedish court applies C-762/19 CV-Online Latvia in parking app battle

The IPKat is delighted to host the guest post below, penned by Katfriend Hans Eriksson (Westerberg and Partners), on a recent Swedish decision which has applied the recent ruling of the Court of Justice of the European Union (CJEU) in C-762/19 CV-Online Latvia.

Here’s what Hans writes:

Thankfully Kitty found a place
where to park her car

Content and service aggregation is big business in 2022. Why having seven different newspapers clogging up your mailbox, when you can have that content carefully selected and curated for you according to your interests and taste? Why having seven different apps for ordering takeout if you can aggregate all that sushi into one app? This dynamic is not lost on entrepreneurs and innovators around the world, sensing and opportunity to create value for users and perhaps birthing a unicorn in the process.

But digital aggregation often involves the use of different data sets, including the use of data protected as databases, and the makers of databases often want to protect their own investment against aggregators that are perceived as free riders. Since one person’s entrepreneurial aggregator is often another person’s parasitical competitor, balancing these interests is no easy task for national courts.

Last year, the CJEU offered guidance on how to balance these interest in C-762/19 CV-Online Latvia. Advocate General Szpunar described the competing interests at stake in his opinion in the case (para 40) as follows:

“While the sui generis right provided for in Article 7 of Directive 96/9 has as its objective to protect database makers against the creation of parasitical competing products, it must not at the same time have the effect of preventing the creation of innovative products which have added value. However, it may prove difficult to distinguish those two categories of products. What may seem to be parasitical to the maker of a database will represent considerable added value for users.”

According to the CJEU, the key to fairly balancing these interest lies in ensuring that the makers of databases can redeem their investment. Content aggregators should be free to create and market new products and services based on the information in publicly available databases, as long as the database maker can still redeem the investment.

On the one hand, this enables innovation to flourish while reigning in the cowboy tendencies of some content aggregators (smash things first, ask for permission later).

On the other hand, the CJEU’s decision emphasizes that there can be circumstances in which content aggregators may extract or re-utilise all or substantial parts of a database, without adversely affecting the database maker’s investment, which is a development likely not welcomed by database makers (for a similar take, see Toby Bond here).

The CJEU’s recognition of the added value for customers that content aggregators can create, and the refined and subtle (while perhaps not totally clear) balancing act suggested by the decision, makes CV-Online Latvia an important addition to the CJEU’s database right jurisprudence. For more content aggregated on the topic of CV-Online Latvia, see here.

The Swedish Patent and Market Court recently applied these principles in in case PMT 11815-20 Parkster AB ./. Parkamo GmbH.

The claimant, Parkster, operates the most widely used mobile parking app in Sweden. The information available through the app consists of geographical data about parking spaces, parking zones, rates etc. This information is collected, coded, stored and continuously updated in a database. The claimant was able to show that it had made substantial investments in obtaining, verifying and presenting the content of the database, which was found to qualify for database protection under Chapter 5 Section 49 of the Swedish Copyright Act (implementing Article 7 of the Database Directive).

The defendant, Parkamo, operates a “parking app aggregator”, the innovative solution to your phone’s cluttered home screen replete with different parking apps (all of which confusingly to this author have “Park” in the name). The aggregator is a free-to-use mobile application that in essence shows users which parking apps supply parking spots in a particular geographical location, enables users to compare the different parking apps offer and uses the parking app to pay for the parking chosen by the user. The business idea is apparently that the aggregator gets paid a small sum per parking payment facilitated through the aggregator app.

As is sometimes the case when developing innovative new digital solutions, challenging established business models and taking them to market, the defendant had not yet entered into an agreement with the claimant at the time the aggregator app was launched. Companies related to the defendant had discussed such a collaboration previously, but the idea had been shot down by the claimant. After a couple of rounds of cease-and-desist letters, off to court the parties went.

In the litigation, a main issue was the parties’ disagreement over whether the use of the aggregator app involved any relevant uses of the claimant’s database (i.e. any extraction and/or re-utilisation of the whole or a substantial part of the contents of the database).

The defendant claimed that the aggregator app worked based on crowdsourced information, that is information supplied by the user through the use of the parking apps, which was communicated to the aggregator app.

The claimant argued instead that the aggregator app included all or significant parts of the claimant’s database, resulting from a prohibited extraction and re-utilisation of virtually the whole database, and did not rely on crowdsourced information to work.

How could the claimant show that the aggregator app included all or significant parts of the database? In a moment of inspired lawyering, the claimant had the idea of constructing a dummy version of its parking app (a version of the software without any information about parking rates, zones etc. in it). If the aggregator app worked solely based on information from the user’s parking app, then using the empty dummy app with the aggregator app would lead the aggregator app not to work. By showing that the aggregator app worked even with only the dummy app installed on the user’s phone, the claimant was able to make a persuasive argument that the aggregator app must have access to the information in the claimant’s database in some other way than by crowdsourcing.

How could the claimant show that the company behind the aggregator app had extracted and re-utilised all or significant parts of the database? The claimant showed how the defendant had previously scraped data from the database at the time of developing the aggregator app. The data scraping concerned virtually all of defendant's database, had been carried out systematically over months and could be traced back to IP addresses belonging to companies and persons related to the defendant. Additionally, the defendant had not been able to explain why it carried out such a significant data scraping of claimant’s database, just before the launch of the aggregator app. If the aggregator app worked solely based on the user’s crowdsourced information, such data scraping would seem unnecessary.

Based on these circumstances, the court found that the defendant had extracted and re-utilised substantial parts of the claimant’s database, in order to acquire and use the information in the database in the operation of the aggregator app.

As to the balancing of interest between the maker of the database and the content aggregator, taking the service’s added value to the user into account, the court found that the defendant’s actions had negatively affected the claimant’s ability to redeem its investments in the database and thus constituted infringement under the principles set out in CV-Online Latvia.

The court found that:

• When the parking app’s users used the aggregator app to park and pay, they interacted with the claimant only through the aggregator app. This meant that the claimant “lost direct contact with the customers” which it would have had if the users had interacted with the parking app directly. Put another way, the operation of the aggregator app created an additional layer between the claimant and its customers, and this additional layer was considered to damage the claimant’s ability to redeem its investment.
  
  
• The operation of the aggregator app made it more difficult for claimant to sell additional services to its customers through the parking app, since the customers only viewed the aggregator app, which was considered to further damage the claimant’s ability to redeem its investment.

• The defendant’s actions could not be excused by the added value the aggregator app gave its users, by simplifying its use of many competing parking apps.

The argument that the aggregator app created an additional layer between the claimant and its customers seems in principle to be applicable to most situations when a database maker battles a content or service aggregator, whether it is a parking app, an online CV database (CV-Online Latvia) or a meta search engine (C-202/12 Innoweb). To this author, it is not clear how a litigant could quantify the adverse effect of this “additional layer” on the database maker’s ability to recoup its investment, and it is therefore not obvious that this circumstance by itself motivates a finding of infringement under the principles set out in CV-Online Latvia. The court’s conclusion that the aggregator app resulted in the claimant selling less additional services to its customers through its parking app on the other hand seems to be a stronger argument in this regard, and one that can in practice more easily be substantiated by evidence. It will be interesting to see whether this balancing of interests between makers of databases and content and service aggregators is confirmed on appeal or by other national courts in future litigation.