The world wide web is forcing lawyers to rewrite media law for a virtual world without international boundaries. Abigail Townsend reports
In legal terms, no industry has been hit as hard by the booming dotcom revolution as the media. The internet is not only shifting the goal posts, it is rewriting the rule book.
The world wide web offers new methods of publishing and in doing so, challenges the definition of who and what a publisher is.
The global nature of the medium has added to the confusion as different jurisdictions come to quite different conclusions when thrashing out issues such as liability. And there are no global agreements on libel law, with different approaches and methods in the US, UK and European Union.
Two recent cases illustrate the different definitions on either side of the Atlantic. Last month, Lawrence Godfrey and the internet service provider (ISP) Demon Internet settled out of court after the ISP was deemed to be the publisher of defamatory material about Godfrey and was therefore responsible.
But the Demon result would have been very different if the case had been heard in the US.
One senior media lawyer says: “[Godfrey] was lucky to get a settlement. The US experience is different. A recent case made it clear that the internet providers are the equivalent of telephone companies and are not liable for the content.”
The case in question revolved around US ISP Prodigy. Earlier this month, the New York court of appeal ruled that Prodigy could not be expected to screen all communications passing through its systems. Therefore it could not be held liable for postings on its service.
This means that both private practice and in-house media lawyers are facing two separate legal opinions on ISPs. In the UK, they are publishers, in the US, message carriers. One can be held accountable, one cannot.
This contradictory situation is the latest in a long line of judgments and counter judgments on both sides of the Atlantic that form the legal context in which media companies have to operate when publishing new media.
Therefore in-house lawyers first and foremost need external advisers who can handle these changing and often inconsistent positions.
As one media practitioner says: “The speed with which the changes are happening is fantastic. Existing clients are having to change the ways they work and are expecting their lawyers to keep up and know how to deal with the changes.”
The head of legal at a major international publishing house tends to rely primarily on her in-house team.
She says that intellectual property work (IP), for instance, is done entirely in-house because, put simply, her teams know more than many external firms.
“In terms of what is going on we would be the first to know and the firms would learn from us. It is our livelihood,” she says.
But she says firms can play an important role. “That does not mean we do not go to counsel for specific points, an objective interpretation and second opinions.”
Her major concern is the e-commerce industries and the impact they are having on what she terms a “traditionally slow and gentlemanly debate” about IP.
She says: “The telecoms companies have always had a strong voice in regulatory affairs because they are so highly regulated. They are still very close to the workings of government and are used to lobbying and making their voices heard.
“Publishers have never really needed to engage government and are therefore less well-positioned. They do not work as a group and they do not really lobby.
“This is a new development that the publishing community is getting to grips with.”
This, she adds, means in-house lawyers have to use new skills as well as traditional legal knowledge.
“We have not had to learn the subject, we have just had to learn the process of government and the process of lobbying. We are learning to speak with one voice.”
But while the sector learns to get to grips with the influx of new media, the traditional work still needs to be done.
A senior in-house lawyer at one of the UK's national newspaper groups says the bulk of his work revolves around maintaining the “cutting edge” of publications.
He adds: “From our point of view the most important thing is getting material into our products.
“It is about ensuring that our papers live up to their reputations for being accurate and always making sure our editors get the things they want into the paper.”
Much of this is done in-house. The company has a core team of five but employs another 18 people on a shift basis. When work is passed out, it is imperative that external firms are able to understand the company's core values.
“If you give two lawyers the same story, one will say it can never be published, the other will try and get it safely in. I believe the second strategy is more effective than the first.
“Of every 100 complaints we get, 95 will be dealt with in-house. I use a very small range of firms.” He selects these by reputation and past experience alone.
Few in the sector choose firms by formal methods. Instead they rely on established relationships and word of mouth.
Colin Campbell, director of legal and business affairs at Channel 5, says: “Beauty parades are fading away somewhat. Costs are important. But our preferred external lawyers are involved by way of history, relationship and providing the service. So if they carry on doing that I see no reason to revolutionise it.”
Despite the competitive nature of the industry, Campbell does not have any serious concerns about using rivals' firms. “It could become an issue, particularly if you become involved in litigation, but everyone is very professional,” he says.
He cites DJ Freeman, which is used not only by Channel 5 but by rival Channel 4 as well.
But again Campbell is quick to point out the importance of the in-house team: “We are media lawyers working in the media so therefore the vast bulk of what we need to do we can do ourselves.”
External media lawyers often have well-known reputations and this can be an influence when selecting firms.
One in-house lawyer in publishing says: “We do not get many cases where the name of the protagonist matters but it is a comfort to us.”
This standing often leads to further work for the external firms. The lawyer says: “One firm did acquisition work for us. They therefore understood our business and as they have an excellent reputation in libel it would have been daft not to use them.”
So while in-house media lawyers utilise internal expertise far more than many other sectors, there is still always a role for the external adviser.
The selection methods here boil down to knowledge, expertise, reputation and established relationships. No company lawyer would deny the importance of costs but panel reviews and beauty parades cannot replace these key elements.
And as the legislation affecting the sector continues to develop, change and present ever new threats to the status quo, there has never been more need for lawyers who not only understand the business but are able to adapt.
As one leading practitioner says: “Media is mainly about names and personalities and I suspect that the lawyers that are involved are far more important to the business than anything else.
“But the cult of the personality has built up. The reason people bring these cases is for something else other than money. No one is making money other than the lawyers.”
Another senior in-house lawyer also believes the sector will eventually adapt and survive the newly formed e-commerce culture. After all, it has so far. “For hundreds of years the means of communication was the book and then along comes the telephone and TV.
“But it did not actually stop the book, people did not stop reading. It just provided another outlet.”
AMERICA ON-LINE AND TIME WARNER
The year got off to a flying start for the international media sector. US giants America On-Line (AOL) and Time Warner announced they were merging to create AOL Time Warner. The $160bn (£100bn) merger is the world's largest and the new venture will be worth $327bn (£204.3bn).
The marriage of two of the world's leading internet and media companies will provide strengths across all media platforms. It will provide branded information, entertainment and communications services.
The US firms working on the deal, which is expected to be completed by the end of this year, are Simpson Thacher & Bartlett for AOL and Cravath Swaine & Moore for Time Warner.
Cravaths is working on a contingency fee basis where, should the deal be successful, the firm will earn $35m (£21.9m). The main threats to the deal come from anti-trust laws and the regulators.
FTSE 100 MEDIA COMPANIES
British Sky Broadcasting Group (BSkyB)
FTSE 100 Ranking: 11
Market capitalisation: £28bn
Rupert Murdoch's satellite empire employs 5,000 people globally. Sky was bought in 1989 and swallowed British Satellite Broadcasting to form BSkyB. The 17-strong in-house legal team is based at its UK headquarters in west London and is led by head of legal and business affairs Deanna Bates. External advisers include Herbert Smith, Clyde & Co, DJ Freeman and Olswang.
Market capitalisation: £18bn
The news and financial data provider employs 17,000 people. Its legal function, which is headed by general counsel and company secretary Stephen Mitchell, includes 40 lawyers out of a staff of 80. The group has in-house teams in London, New York, Geneva, Palo Alto, Hong Kong, Singapore and Tokyo. Firms used include Slaughter and May, Clifford Chance, Linklaters & Alliance, Rowe & Maw, Ashurst Morris Crisp and Simmons & Simmons.
Market capitalisation: £13bn
Pearson is the UK's largest media and leisure group. It owns Pearson Education, Penguin, The Financial Times and FT.com and Pearson Television, which makes Baywatch. Former group legal counsel and company secretary Paul Vickers left for internet incubator Antfactory in the summer last year. The group is still searching for someone to take over as head of legal. In the meantime it is relying on its core firms Freshfields and Herbert Smith for corporate and media advice.
Reed International Group
Market capitalisation: £5.2bn
London-based Reed International, along with Dutch company Elsevier, owns business and academic publisher Reed Elsevier. Reed Elsevier spent most of last year looking for a chief executive although former Aegis chief Crispin Davis has now taken on the role. The group employs 26,500 people with lawyers based in London, the US and Holland. Firms used include Freshfields, Linklaters, DJ Freeman, Fox Williams and Manches. Legal director Anne Joseph heads the UK provision.
Market capitalisation: £4.8bn
One of the country's leading broadcasters, Carlton also produces and distributes its own programmes and has a 50 per cent stake in ONdigital. The group has agreed to be purchased by United News & Media for $12.6bn (£7.5bn). Company secretary David Abdoo heads the legal division and external firms include Macfarlanes, Slaughter and May, Clifford Chance, Freshfields and Bird & Bird.
Daily Mail and General Trust
Market capitalisation: £4.5bn
The group owns Associated Newspapers which publishes The Daily Mail, The Mail on Sunday, The Evening Standard and Metro. It also runs new media sites, including www.thisislondon.com, and is a player in regional newspapers. Legal director Harvey Kass runs an in-house team of five. Based in London, its external advisers include Reynolds Porter Chamberlain, Freshfields and Denton Wilde Sapte.
United News and Media
Market capitalisation: £4.1bn
The London-based group owns Miller Freeman as well as CMP Media, one of the world's largest publishers of high-tech trade magazines. It also has a stake in Channel 5 as well as publishing The Express and Daily Star. It has also agreed to buy Carlton Communications. Group legal and personnel director Jane Stables heads the in-house function. Its panel consists of Allen & Overy, Ashurst Morris Crisp, Berwin Leighton and Macfarlanes.
Market capitalisation: £2.8bn
The consumer magazine giant publishes a range of titles including FHM, Red and Smash Hits. It is also a major player in business-to-business titles, owning Broadcast and Construction News among others. The company does not have an in-house team but relies on a panel that includes Wragge & Co, Farrer & Co, Eversheds, Greenwoods and Bird & Bird.