Jeremy Morton, partner at Harbottle & Lewis LLP, talks us through the new issues raised by high tech toys.

Tech toys and the law

The ‘Tech versus Traditional’ debate has never been hotter, with many retailers uncertain how best to please the market and maintain margins. Ultra low-tech loom bands may have been the surprise hit of the year, but even they had their share of bad press.

Meanwhile, LeapBand, an activity tracker for children, was launched. And GP Flair, home of Plasticine and Etch a Sketch, offered their new, interactive hi-tech pet, Xeno. Back in July, Wow! Labs raised around £70,000 in a Kickstarter campaign to fund their Real FX Racing innovation: it’s a slotless racing car system that uses artificial intelligence, and promises “enriched interaction with smart devices”.

Lawyers that work with the toy industry are used to dealing with issues like product safety and counterfeiting. But what are the new issues raised by hi-tech toys? And what unfamiliar requirements will be on toy industry boardroom agendas of the future?

Let’s look first at intellectual property rights. Copyright and design rights in the toy sector are traditionally concerned with aesthetic matters. But with software increasingly to the fore, toy makers will need to make sure they understand how to engage developers, and acquire all necessary rights in the code. And there are other rights to be considered: notably, patents. These protect inventions, so (unlike copyright) they protect ideas. A patent is powerful, because it offers a monopoly on a technical idea, for twenty years – with no requirement for active copying. Patents can cover mechanical engineering, electronics, or software-based innovations, for example.

You only have to look at the recent successful patent claim in the English High Court by Philips against Nintendo, concerning the Wii console, to see that patents can’t be ignored in the toys and games sector. With Philips demanding substantial damages for the past, and an injunction against future use, the dispute has recently been settled.

But hang on a minute, is Philips actually known for its games consoles? I think not. Yet it does have a huge stockpile of patents, and it is adept at what’s called ‘monetising’ those rights. So hi-tech innovation creates opportunities, but also risks: do you know if your technology infringes others’ patents?

Turning next to advertising regulations, difficulties can arise when products are promoted via apps and social media. Whether it’s gameplay videos that fail to disclose that they’ve been sponsored, or the nuances of ‘free to play’ claims and in-app purchasing, this can be a tricky area.

Gameloft developed a Littlest Pet Shop game app under licence from Hasbro, and in December the Advertising Standards Authority (ASA) ruled on a complaint from a parent: the game was accused of containing direct exhortations to children to buy products, contrary to the advertising code. It was advertised as ‘free to download and play’, but although it was possible to play the game for free, certain activities required spending in-game currency, bought with real money. The ASA nevertheless rejected the complaint, because there were sufficient notices within the game, and sufficient options for playing without purchasing. But this can be a hazardous area, and the ASA has reprimanded other companies for ads misleadingly offering free gameplay within apps.

With intrusive flying drones in the news for surreptitious invasions of privacy, I suppose the last of my ‘big three’ tech toy legal issues would be data protection compliance. Increasingly, toys and games have an online component that collects personal data, and this will be where issues arise. When it comes to children and data, rules apply under the Data Protection Act as well as the ASA code, and it will often be necessary to obtain parental consent. Perhaps more worrying is what happens when someone hacks the data.

So: a brave new world of intellectual property, app advertising rules and data protection. Now where did I put my loom bands?

Jeremy Morton is a solicitor who advises in the specialist area of intellectual property law, which includes copyright, brands and patents.

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