Select Committee on Culture, Media and Sport Fifth Report


119. Despite the ability of creators to access new markets and develop new forms of creative content through new media, the importance of that content in helping to drive the development of new technology and sustain business models does not necessarily translate into economic value for content owners. The chief cause is piracy, and we examine various suggestions for preventing it or at least reducing its scale. We also consider in this section the development of online activities by the BBC and by Google, both of which have been accused of proposing or introducing services which eroded the ability of creative industries and dependent businesses to exploit material.

120. Intellectual property rights underpin the viability of our creative industries, and much of the remainder of this report is about the protection and exploitation of rights to creative content. We have not attempted, however, to undertake a comprehensive survey of copyright legislation. The subject has been addressed in much greater detail in the recent report commissioned by the Treasury from Andrew Gowers.[293] Nonetheless, we believe that it is useful, in order to set in relief the discussions which follow, to record here our preferred perspective on copyright: a means by which people can own what they create and earn a living from their creativity.[294] Whether creators choose to take advantage of intellectual property rights is a decision for them. The Arts Council noted that artists "can be quite pragmatic about copyright law, sometimes licensing the copyright in their works to other distributors; sometimes appropriating other people's work to generate something new; and sometimes giving their work away free for others to reuse".[295]

Piracy: scale and methods

121. As Ofcom said, the ability to copy has changed out of all recognition in the last 10 years.[296] Even the most expensively produced creative content can be cheaply and easily copied and distributed; but those benefits apply equally to licensed and unlicensed distribution.

122. The Alliance Against IP Theft described intellectual property theft as "the biggest threat to the prosperity and development of the creative industries", with illegal copying, filesharing and other illicit uses of copyright material "growing exponentially", and counterfeiting and piracy becoming increasingly attractive to organised criminal gangs.[297] Piracy can and does erode business models: Ingenious Media told us that, without copyright, it would be difficult to create a sustainable and consistent flow of investment into the sector.[298] The British Screen Advisory Council described piracy as "not just something which is a threat to current assets, balance sheets and current revenues but threatens innovation and ultimately UK competitiveness"; and it predicted that levels of piracy would increase in line with broadband usage levels and speeds.[299] ELSPA[300]—the trade body for the interactive games sector—drew attention to the loss to the Exchequer through lost sales;[301] and it noted an association with a variety of criminal activities including extortion and people trafficking, as well as benefit fraud.[302]

123. Unlicensed copying takes place either through bootleg piracy of physical product-sales of hard-format copies at car boot sales and markets-or through digital distribution via the Internet, often through file-sharing using peer-to-peer technology. Initially, in the absence of authorised services to provide audio and video content on-line, large-scale unauthorised providers sprung up, based upon the unlicensed exchange of files; some have been successfully challenged by the recording industry. The first widely-used peer-to-peer filesharing service, Napster, was closed by court order in the USA in 2001; but other services soon moved in to take its place.[303] One of these, Grokster, a manufacturer of file-sharing software, was found by the US Supreme Court in June 2005 to be liable for copyright infringements using its products. Grokster was ordered to pay $50 million to the music and recording industries in recompense. KaZaA, a, Australian-owned peer-to-peer file-sharing application, has similarly been the target of many copyright-related lawsuits, and has agreed to compensate the entertainment industries for revenues lost through file-sharing of unlicensed content.[304] British Music Rights described some peer-to-peer operators as operating a business model which was "blatantly selling advertising on the back of illegitimate music". It told us that such operators were protected by "safe harbours in the law" and that the only option open to organisations acting on behalf of rights holders was to sue consumers, who were the only people actually infringing the law.[305] Litigation by the music recording industry in the UK has generally been directed against people uploading large numbers of files rather than downloaders.[306] We note that peer-to-peer file-sharing technology can have beneficial uses as well as bad ones,[307] and the International Federation of Phonographic Industry (IFPI) noted the beginnings of a legitimate peer-to-peer file-sharing industry.[308]

124. The scale of piracy is so vast that there is a danger of becoming inured to such activity and treating it as routine. Andrew Gowers noted in his recent review of intellectual property that downloading of music and film from the Internet is now the most common offence committed by people aged between 10 and 25 in the UK.[309] British Music Rights cited research published in 2005 indicating that only 6% of all Internet consumers paid to download music.[310] The Alliance Against IP Theft claimed that a ten percentage point drop in software piracy would add nearly £11 billion to the UK economy, create nearly 34,000 jobs, increase local industry revenue by nearly £10 billion and generate an additional £2.8 billion in tax revenues.[311] The BPI estimated that 13 million or more unauthorised copies of CDs had been sold in 2004, often at car boot sales. Further research suggested that piracy of physical music products in the UK cost the industry approximately £165 million in lost sales in 2005, almost 10% of the UK's legal market in CD albums.[312] Illegal file-sharing was believed to have cost the music industry £414 million in lost sales in 2005.[313] The BPI argued that those using illegal file-sharing networks spent less on music as a result and that the industry had therefore been able to re-invest less in new recordings.[314] We were, however, warned by one witness against "bogus arithmetic" in quantifying the industry's losses, on the basis that people who copied music illegally would not necessarily have paid full price for it had they had no other option. Not all illegal copying of music therefore represents a loss of sale.[315]

125. Piracy of film and television programming is also becoming rife. The UK Film Council estimated that film piracy cost the industry over £800 million in 2005.[316] Shrek 2 and The Revenge of the Sith both became available through file-sharing networks before reaching cinematic release in the UK;[317] and Casino Royale was reported to have been freely available on file-sharing websites within hours of release.[318] Television is increasingly affected: for instance, we were told that the programme "24" was being downloaded on the US west coast within about half an hour of it being shown on TV on the east coast.[319] The first episode of the revived Doctor Who was downloaded by tens of thousands of fans in the UK from file-sharing websites even before it had been transmitted on terrestrial television.[320] Channel 4 noted very high numbers of illegal downloads of Lost in the UK during the "quite significant gap" between screening in the US and the UK.[321] PACT cited the UK as a leading offender in illegal distribution of TV programming and quoted research undertaken by Envisional[322] suggesting that the UK population contributed more than any other to unauthorised filesharing of copies of television programmes, accounting for 18% of the total.[323]

126. There is some, limited, evidence of a slowdown in the rate of illegal filesharing. Ofcom cited research from Austria and Germany showing distinct falls; and a comparison of the growth in numbers of files available on filesharing websites compared with the rate of increase in numbers of installed broadband lines indicates a decline in filesharing as a proportion of total Internet activity.[324]

Meeting the threat from piracy

127. Options for tackling piracy vary from increasing effort to enforce existing provisions, introducing new statutory provisions, encouraging a legitimate market, seeking to bring about a change in public attitudes through education about intellectual property, and the use of technology to restrict the transfer of digital content. We examine each in turn.

Enforcement of existing provisions

128. The Government told us that having the right legislative structure for protection of intellectual property was "only a start" and that any structure had to be enforced effectively on the ground. In 2004, the Patent Office, a DTI-sponsored public body, published an IP Crime Strategy, and it has since developed a National Enforcement Strategy "to build a co-ordinated and focussed multi agency partnership between Government, enforcement agencies, and rights holders".[325] Ministers pointed towards the establishment of the IP Crime Group in 2005 to take forward these aims, bringing together stakeholders including the police, trading standards agency and industry representatives to ensure that criminal activity was dealt with in a co-ordinated way.[326] The work of the Group was praised by the Alliance Against IP Theft.[327] The Gowers Review of Intellectual Property noted the initial work which had been done by the Group to bring together the relevant bodies, but it concluded that further work was needed in order to achieve the desired results.[328]

129. The major rights holders in the music industry have made strenuous efforts in recent years to combat illegal copying and file-sharing by taking legal action against those found responsible. The BPI described its policy of launching actions against uploaders in the civil courts as costly but as "far more cost-effective […] than anything else we have tried to do", comparing favourably, for instance, with the cost of taking out advertisements to convey a message.[329] The Music Managers Forum supported strong and effective enforcement of copyright to neutralise criminal activity undertaken for criminal gain, although it believed that recent actions against music lovers sharing files without permission for no commercial gain might have been counterproductive.[330] In theory, rights holders themselves would use legal remedies to enforce their rights, but the cost of bringing actions is perceived to be prohibitive.[331]

130. Section 165 of the Criminal Justice and Public Order Act 1994 inserted a new section—section 107A—into the Copyright, Designs and Patents Act 1988, requiring every local weights and measures authority (in practice, local authority trading standards offices) to enforce provisions elsewhere in the Act designating as an offence the making or dealing in any article which is "an infringing copy of a copyright work". These provisions have not, however, been brought into force. Witnesses from the creative industries and from anti-piracy organisations were unanimous that section 107A should be brought into force without delay and that the Government should make available the necessary resources to local authorities to enable trading standards officers to police it.[332]

131. When we asked Ministers whether they planned to bring section 107A of the 1988 Act into force, they indicated that to do so would place an additional burden on local authorities and that local government would need to be funded accordingly. The Minister of State at the DTI maintained that this was an issue for the Department for Communities and Local Government, and both she and her DCMS colleague suggested that alternative approaches (such as a technological solutions) could be more cost-effective.[333]

132. The Gowers Review noted that local authority trading standards services' powers and duties in relation to infringement of copyright were far more limited than those relating to the prevention of the sale of trade mark protected goods. The Review concluded that this was inconsistent and recommended that section 107A of the 1988 Act should be implemented to rectify the balance.[334] The Government, in response, announced that it was "endorsing the full Gowers enforcement package to tackle piracy and other IP infringement";[335] and it has since made it clear that Trading Standards officers "will be able to enforce copyright offences from this April [2007]" and that £5 million would be made available to local government to fund the first year of enforcement of section 107A.[336] We welcome the commitment made by the Government to bring into force section 107A of the Copyright, Designs and Patents Act 1988 and to provide £5 million to local government to fund enforcement. These steps are long overdue.

Possible new statutory provisions

133. The UK Film Council, in its report Film Theft in the UK, published in 2004, recommended the introduction of "exemplary" damages for infringement of copyright. The British Phonographic Industry (BPI) and the Alliance Against IP Theft set out in detail the underlying rationale, noting that an infringer normally only had to pay the cost of the licence which should have been secured, a penalty which had little deterrent effect, barely warranted the cost of legal representation, and made little impact upon profits made by piracy.[337] While there is provision under the Copyright, Designs and Patents Act 1988 for a court to award additional damages,[338] we were told that it had become "extremely difficult" to secure such awards.[339] The BPI also observed that calculating damages could often be "complex, time-consuming and costly—or even impossible".[340] Exemplary damages in the US range from $750 to $30,000 per infringed work and up to $150,000 per work for wilful infringement.[341]

134. The Department for Constitutional Affairs has indicated that it plans to publish a consultation paper on damages in the near future. The Gowers Review recommended that DCA should review the question of damages for infringement of intellectual property in its forthcoming consultation and that it should seek further evidence to ensure that an effective and dissuasive system of damages exists for civil IP cases, and that the system is operating effectively.[342] We agree. The Department for Constitutional Affairs should investigate reports that the award of additional damages for infringement of intellectual property is difficult to secure. The deterrent effect of the present law in this respect is near zero: it should be substantial, as are some of the illicit profits being made.

135. The UK Film Council and the Cinema Exhibitors' Association proposed that legislation should be introduced to enable the prosecution of people video-recording the picture on a cinema screen for commercial gain.[343] According to the British Video Association, in 9 cases out of 10, the origin of a pirate copy of a film on its first appearance in the market is a camcorded copy. They cited as examples the recent films The Number 23 and Hot Fuzz, pirate copies of which were available long before their legitimate DVD release and which were traced back to a UK cinema showing. Ministers questioned whether making camcording a criminal offence would be particularly effective in reducing the numbers of pirate copies in circulation unless action was taken to prevent the practice worldwide, and they urged a "realistic" approach.[344] However, we note that both the USA and Italy have passed specific legislation to ban camcording and we do not accept that because it may take place elsewhere, this is a reason for not legislating against it here. We therefore recommend that unauthorised copying and commercial distribution of audiovisual content projected onto a cinema screen should be made a criminal offence.

136. The arrival of affordable audio and video cassette recorders in the 1970s and 1980s enabled consumers to copy privately from LPs, CDs and television and radio broadcasts to audio and video cassette. The recent increase in household penetration of fast broadband services and of DVD and CD re-writers and recorders has extended home copying into new formats, including MP3 players.[345] The BPI told us that, in 2004, 227 million blank CD-Rs were used for home audio recording, almost equivalent to the number of pre-recorded CDs shipped the same year.[346] Figures for 2006 suggest that some 266 million blank CD-Rs were used for home recording, outstripping legitimate sales of pre-recorded CDs in the same year (154.1 million).[347]

137. In certain circumstances, copyright legislation permits unlicensed copying. Broadly speaking, these include fair dealing in works for the purposes of research, private study, criticism or review; copying in order to render material accessible to visually impaired persons; copying for educational use; copying by librarians for certain purposes; and copying for the purposes of parliamentary or judicial proceedings, or Royal Commissions or statutory inquiries.[348] Recording in domestic premises of a broadcast "solely for the purpose of enabling it to be viewed or listened to at a more convenient time"—the "time-shifting" exemption—is likewise not an infringement of copyright.[349]

138. Some of the statutory exemptions have been stretched to their limits and beyond. The vast majority of home copying of audio material is carried out for relistening again and again over the long term. When undertaken for private purposes and not for commercial gain, home copying has, however, been tolerated by the music industry. When asked whether an owner of a CD should have a right to burn that CD to their iPod, or to their car music system, the British Screen Advisory Council said that "the law says they should not; 100% of practice says they do"; and it added that rights owners had been "sensible" and had not taken people to court about it.[350] The BPI confirmed that the UK record industry had never taken action against an individual copying their CDs to their computer for the purpose of transferring those tracks to another device for their private and personal use only, and it added that the industry had no intention of doing so in the future.[351] Both the BPI and the British Screen Advisory Council distinguished clearly between home copying for private use, which was acceptable, and domestic copying in "industrial quantities", even when not undertaken for commercial gain, because of the damage done to the industry.[352]

139. Given the inconsistency between practice and law, we asked witnesses whether steps should now be taken to reconcile the two, for instance by drawing up a new statutory exemption. The British Screen Advisory Council told us that the problem of establishing a new right and doing it in a way which was acceptable and seen as fair and reasonable by the public was "not worth the candle".[353] The BPI was also opposed, arguing that to provide a new statutory authorisation "could lead to dangerous misunderstandings of what types of private copying are permitted" and that material legally copied under the proposed exception (including compilations acquired through "stream ripping"[354]) could be passed to others who would then make further copies.[355] The UK Association of Online Publishers agreed, telling us that it would be "very dangerous" to introduce a new broad "fair use" exception in law as "people do push the envelope a bit".[356] For general home copying, the BPI advocated instead a non-statutory solution, based upon a 'maxim' that "to buy it and copy it is OK - but to pass it on is not".[357] The BPI did, however, favour an amendment to legislation to make it clear that "stream ripping" was not covered by the exemption under section 70 of the 1988 Act.

140. The exemption for fair dealing for criticism or review has also been used in a dubious context. The Music Managers Forum described a practice used by one company of releasing DVDs of footage of Pink Floyd accompanied by a critique of that footage by what the Forum described as "an unknown musician off the street". The DVD had therefore become a work of review and criticism which satisfied the "fair use" exemption under the 1988 Act. The Forum called for a clarification of the exemption to prevent such practices.[358]

141. The National Consumer Council took a different view and suggested that the necessary balance of interests between creators and consumers in relation to intellectual property was not being achieved, and that consumers' "legitimate interests" had been eroded by the strident articulation (and advancement) of the interests of intellectual property rights holders.[359] It cited as an example the manner in which the European Directive on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society (often abbreviated to EUCD) had been transposed into UK law in 2003, arguing that implementation had been "minimalist" in areas which would be of benefit to consumers (for instance by failing to take advantage of exceptions and exclusions to copyright allowed under the EUCD) but had been "extensive and detailed" in areas which benefited commercial operators.[360]

142. There was a measure of agreement that the law on copyright exceptions was unclear. Ms Johnstone, speaking on behalf of the National Consumer Council, believed that the law needed to be clarified to tell consumers "what they can do rather than […] what they cannot do";[361] and the Alliance Against IP Theft made a very similar statement.[362] The Design and Artists Copyright Society told us that some of the existing provisions on fair dealing in the 1988 Act were "unclear" and left "both copyright users and owners uncertain about their rights and responsibilities".[363] Others saw not so much a lack of clarity but useful flexibility: the Digital Content Forum believed, for instance, that the statutory exceptions and limitations had provided a "flexible test" which had "worked well to enable and accommodate technological developments" and which it believed should continue to be recognised and observed.[364]

143. We do not believe that the present statutory exemptions from infringement of copyright are providing clarity or confidence for users or for the creative industries, particularly in relation to home copying. We do not believe that it is satisfactory that consumers should be advised by the industry that they can ignore certain provisions of the existing law and not others, and we believe that this must contribute towards a general lack of understanding and respect for copyright law. We note that the Gowers Review of Intellectual Property recommended a limited private copying exception from the offence of copyright infringement for format shifting.[365] We also note the recent proposal by the Institute for Public Policy Research (ippr) that a private right to copy should be introduced.[366] We recommend that the Government should draw up a new exemption permitting copying within domestic premises for domestic use (including portable devices such as MP3 players, and vehicles owned or used regularly by the household) but not onward transmission of copied material. We also recommend that the Government should consult representatives of the creative industries and of consumers on an ongoing basis to ensure that it can respond appropriately. This will allow it to act more effectively and to establish where the existing regime of exceptions is either vulnerable to abuse, failing to respond to advances in digital technology, or unduly restrictive.

144. The growth of home copying of audio and video content on a mass scale in the 1970s and 1980s diminished creators' and distributors' control over reproduction of content and led to calls for levies to be imposed on the sales of hardware to compensate the industry for potential loss of sales. The Music Managers' Forum argued that the failure to introduce levies in the UK had caused creators and copyright owners to lose "a very valuable income stream",[367] and it contrasted the UK with other EU partners and Canada, where it claimed that copying levies on hardware and on media had operated successfully for many years.[368] The British Equity Collecting Society described levies to us as a "manageable, efficient and fair solution for dealing with the reality of private copying",[369] and there was also support for the idea from Equity.[370] Claire Enders, Chief Executive of Enders Analysis, argued that levies on hardware in Canada had enabled music publishers and songwriters to enjoy whatever standard of living they liked but at minimal pain to consumers because of the small sums involved.[371]

145. With the trend towards distribution of music through downloading of digital files from the Internet, it may be that the concept of levies on copying hardware is declining in relevance. PPL, for instance, noted a division of opinion in the industry on the worth of levies, with some viewing DRM copy protection tools (discussed below) as a more effective solution for the future.[372] Mr Mark Oliver, Chief Executive of Oliver and Ohlbaum Associates[373] discounted levies on sales of equipment, noting that the idea was "not in fashion" and would discourage take-up of new technology. He saw more value in a levy on software which provided the capacity to consume on demand, collected in a fashion similar to that used by collection societies collecting royalties.[374] The Creators' Rights Alliance favoured some form of levy on Internet service providers and telecommunications companies.[375]

146. We accept that home copying can damage business models. We agree with the conclusion of the Gowers review, however, that levies are a blunt instrument for exacting recompense, and we do not recommend that they should be imposed on either hardware or software.

Encouraging a legitimate market

147. It was put to us repeatedly in evidence that piracy flourished when the market failed to provide a suitably priced legal alternative. We quote from the UK Film Council:

"The brutal truth is that if you do not give people the opportunity to buy something in an easy and convenient way on-line, then the evidence suggests that a large number of people will steal it. So the industry itself has to react and change the way it operates in order to be more consumer friendly. I think that is something the industry is doing and […] it is an evolution rather than a revolution and people are very keen in the film industry to learn from the mistakes of the music industry".[376]

Ofcom stated simply that piracy and file-sharing in breach of copyright developed in the absence of a legal means of access to music online, and that piracy was in part a consequence of market failure to meet demand.[377] Fred Perkins, Chief Executive of Information TV, took the same line, saying that "if technology allows consumers to get something, they will get it one way or another".[378] Others cited the experience of the music industry (which suffered severely from online piracy) as a salutary lesson. The British Screen Advisory Council said that the music industry had "had a terrible time" but that it had survived, and that others (particularly in the film industry) had learnt an enormous amount as a result.[379] PACT suggested that the music business "had learned the hard way the dangers of not giving consumers what they want", and it argued that there was now evidence to show that people would pay for a download service if the quality and price were "decent".[380] Andy Duncan, Chief Executive of Channel 4, said that it remained to be seen, however, whether there was a willingness to pay for shows which could be downloaded for free;[381] and the Managing Director of New Media at Channel 4 stressed the importance of setting a sensible price point and looking at ways of adding value, in order to make paid-for content attractive.[382]

148. The Satellite and Cable Broadcasters Group (SCBG) and Video Networks Ltd.[383] identified holdback periods as contributing to piracy by denying or restricting access to content which had been heavily promoted for initial release. An SCBG witness noted a general reaction "across the industry" to collapse traditional release windows and hasten the release sequence to extract as much commercial value as possible before pirated versions could be distributed.[384] Mr Highfield, Director of New Media and Technology at the BBC, also noted an emerging consensus that commercial exploitation had to happen "pretty much up front" in order to thwart attempts at piracy.[385]

149. The legal download market for music is now fairly well established, and film is following. Movielink, formed by MGM, Warner, Sony, Universal and Paramount, allows users pay-per-view access to downloadable films; DRM technology limits the time that material, once opened, can be watched. CinemaNow, Starz, Google, and offer film for download, some on a subscription model.[386] The BPI noted in evidence to us in early 2006 that there were more than 40 legitimate online music services available in the UK, using a variety of business models from single track downloads to "all you can eat" subscription services.[387] The Alliance Against IP Theft pointed to the growth of iTunes, MyCokeMusic, HMVDigital and as legitimate outlets. iTunes, which is estimated to hold 75%-80% of the music download market, offers approximately 3 million tracks in the UK. By January 2006, the number of people downloading music legally in the UK had overtaken the number obtaining music through illegal file-sharing.[388]

150. Bearing in mind Mr Duncan's uncertainty about whether the development of a legal download market would indeed reduce the creative industries' exposure to illegal file-sharing, we asked Ofcom for an opinion. Ofcom was optimistic that, as long as the demand was being met, and at an attractive price, young people would be prepared to use legal access routes. It pointed to evidence that the rate of growth of illegal downloading was "tailing off" and that it was in fact in decline in some areas.[389] It may be that consumers' concerns about possible adverse effects on the security of home computers through downloading unauthorised material could provide as much of a stimulus as the mere existence of a legal download market.[390]

151. We also explored with witnesses whether simultaneous release of movies in the cinema and on demand might help to combat illegal downloading by starving piracy of demand. Responses were mixed: such a strategy had been adopted with a number of recent films, and the Motion Picture Association has examined the possible impact;[391] but it was not seen as a universal solution. The Cinema Exhibitors' Association was confident that the majority of film producers would acknowledge that cinemas would need a period of exclusivity to remain viable and that, for marketing purposes, producers needed cinema.[392] However, they recognised that in time the number of windows may reduce to just two: theatrical exhibition and domestic consumption, and they pointed out that the period of theatrical exclusivity had been reduced in recent times to between three and just over four months. PACT pointed out that global synchronised release might work for blockbusters which were eagerly anticipated but that many independently-produced movies needed to make a mark in their home market in order to build any kind of success overseas.[393] The Deputy Chairman of the British Screen Advisory Council put forward a similar argument, reminding us that film distributors needed theatrical release as a marketing event "because that is how you get reviews and […] word of mouth and buzz".[394] He added that, "at the margin", people would stay at home if release windows were narrowed, and it would become "harder to get the older audience".[395] The UK Film Council warned that the film industry would have to be "smart and clever" about how it organised its release window structure, and its Chairman said that he would be "nervous" of simultaneous release of film in cinema and digitally, which he believed would be to the detriment of cinema-going.[396] Others maintained that it was too early to draw conclusions on the sustainability of cinema release as a window.[397]

152. We accept the argument, in principle, that delaying universal access to film through the use of release windows, and holding back rights to broadcast television programming via new media, contributes to a climate in which piracy flourishes. The film and television industries cannot ignore this. However, we recognise that cinema exhibitors have relied on a period of exclusivity of release to sustain their businesses. While this has declined, there will continue to be pressure for further reductions and we believe that in future cinemas will need to rely more and more upon providing a distinct experience and environment. The UK Film Council should support and publicise new approaches by cinemas to retaining and developing their audiences.

Education about copyright

153. Many witnesses described a lack of awareness among the public about counterfeiting and piracy, with theft of creative content not being viewed as seriously as theft of a physical product.[398] The Music Managers Forum said, correctly in our view, that children "had no idea" that unlicensed file-sharing was illegal.[399] Some people are just uncertain about what they can and cannot do legally.[400] Others have an idea of what is not permitted but do not accept the principle: Ofcom told us of research which had suggested that over 80% of consumers were aware that there was a distinction between legal and illegal downloads, but that over 50% of 16-24 year olds believed that unlicensed downloading should not be illegal.[401] The British Screen Advisory Council said that the fight against piracy had initially been seen as "just a battle"; now there was a recognition that it should be "an education process with the public";[402] and this call for some form of education was widespread in submissions to the inquiry.[403]

154. Music industry bodies have played an active role in campaigns to increase public awareness of the illegality of unlicensed distribution of music, for instance through using educational material and leaflets in public libraries and record stores.[404] British Music Rights saw a role for Internet service providers to employ advertising policies "designed to discourage rather than encourage copyright infringement", and it commended AOL for its "Play Legal" awareness campaign.[405] The UK Film Council hoped that its proposed Digital Film Club network, which would offer films to schools across the UK, would teach respect for intellectual property among young people.[406] Ofcom told us that it planned publicity campaigns in future, working with industry and others, to get information to people, to make sure that they understood "the borders of what is legal" and the reasons for the law itself.[407]

155. There were criticisms by witnesses of the BBC for appearing to encourage a cavalier approach to copyright through its message to users of the Creative Archive—"find it, rip it, mix it, share it, come and get it". BECTU pointed out that there was no suggestion of "Respect it" in the slogan and that users were quite likely to be unaware of the terms of the licence.[408] The Music Managers' Forum suggested that the underlying message "had the air of an organisation which seeks to undermine copyright rather than a publicly-owned authority which should emphasise best practice".[409] Many witnesses urged the BBC to use its position as a public service broadcaster with unparalleled access to audiences and experience in interpreting complex issues for public consumption to promote copyright education through its services.[410] The Creators Rights Alliance agreed and suggested that the BBC should inform users that they were paying for the right to view content rather than the right to own it.[411]

156. The BBC defended its slogan, saying that the terms used were "the common parlance of the Internet", used by Microsoft and iTunes, and were in no way the language of piracy.[412] While this may be true, the common parlance of the Internet should not be setting the standard for the BBC. We recommend that the BBC should amend the slogan for the Creative Archive, if it proceeds beyond the pilot phase, to convey the message to users that content should be respected. The BBC should examine whether more can be done to oblige users of the Creative Archive to read the terms of the licence governing use of the material before downloading and consider what other action it can take to educate consumers about the purpose and importance of copyright law.

157. It is clearly desirable to find a way of instilling an understanding of copyright in children's minds. Some valuable work has already been done. In 2004, British Music Rights prepared material for issue to secondary schools for inclusion in music lessons "to encourage young people to value the creativity involved in producing a piece of music": 80% of schools contacted expressed an interest, and British Music Rights claimed that teachers were "crying out for copyright materials to enable them to teach copyright in schools".[413] The Patent Office has also produced material to raise awareness in secondary schools.[414] PPL proposed that children should be encouraged to put copyright notices on their own work, from pictures to short stories and essays.[415]

158. Many witnesses suggested that copyright should feature in the core curriculum.[416] The Minister of State at the Department for Trade and Industry told us that intellectual property was already integrated into the curriculum with some GCSEs, but she had reservations about simply adding copyright to the core curriculum.[417] We share the Minister's reservations about adding copyright as a specific item to the core curriculum. However, we believe that a less formal approach would be better and that teachers should be encouraged to promote an understanding of copyright as it becomes relevant, whether in music, creative writing or information technology lessons.

Digital Rights Management

159. The Government defined Digital Rights Management (DRM) as "an umbrella term referring to any of several technical methods used to handle the description […] analysis, valuation, trading and monitoring of the rights held over a digital work".[418] DRM tools are widely used by distributors of creative content in digital formats both as a way of limiting or preventing the copying of content and as a market analysis tool, identifying works, providing market data and tracking purchasing trends. Digital Rights Management has, however, become synonymous in many people's minds with copy control or "Technological Protection Measures" (TPM), even though this is just one element.

160. Businesses reliant on the distribution of content were mostly keen supporters of DRM tools, and the British Screen Advisory Council saw copy control as "the way that industry is going at the moment".[419] The Business Software Alliance forecast that the value of the online music market using DRM tools would rise from 46.8 million euros in 2005 to 134.6 million euros in 2007 and 194.5 million euros in 2008.[420] The Mobile Broadband Group told us that copy protection for content distributed to mobiles was essential to the business model.[421] The Digital Content Forum, a network of trade associations and other organisations with a business interest in the creation and commercial exploitation of digital content, described technical protection measures and rights management information systems as being "central to enabling digital technology to provide increased choice and opportunity for both consumers and business".[422] DRM protection is used in online delivery of video games.[423] The Alliance Against IP Theft pointed out that DRM mechanisms enabled content providers to offer legal downloading or streaming of audio or visual content, and that without DRM technology, consumer choice would be "significantly restricted".[424] The Bridgeman Art Library noted that seeking out infringements of copyright, whether in the analogue or the digital world, was extremely onerous and time-consuming",[425] and we recognise the clear value of DRM tools in "tagging" work and reporting to rights owners on the use of tagged works.

161. The National Consumer Council and others were strongly critical of the way in which DRM tools were being used, [426] arguing that they placed unreasonable constraints on the use of digital products, had adverse impacts on the use and security of consumers' equipment, and infringed consumer rights under consumer protection and data protection law. The Council claimed that the regular absence of clear statements about the operation of, and effects of, using a product containing DRM software flouted European and UK consumer protection law.[427] Others pointed out that some DRM copy protection tools could prevent the use of statutory exemptions permitting unlicensed copying (for instance by visually impaired people) and made no provision for expiry of copyright term.[428]

162. The National Consumer Council also criticised DRM tools which affected consumers' ability to use their hardware, for instance by requiring software upgrades. In some cases, DRM software will use the consumer's Internet connection to communicate information to the seller of the product. The risks to consumers were exposed in 2005, when DRM software on a CD marketed by Sony BMG compromised the security of host computers.[429] The outcry which followed was widely recognised as a public relations disaster for Sony BMG, which subsequently announced its intention to rethink its anti-piracy policy.[430]

163. Further criticism was directed against DRM tools for diminishing inter-operability between different models of hardware, or for rendering content unreadable except by proprietary players, the most familiar example being Apple's iTunes digital music files, which can only be played using iTunes software on iPod portable devices. Apple estimated in 2005 that iTunes held an 80% market share of single-track downloads.[431] Likewise, the coding on certain DVDs manufactured in the US can prevent them from playing on hardware in Europe. DCMS warned that the public would "have little patience in the future if industry does not tackle inter-operability as an issue".[432] The BPI recognised the risk that a firm could deny inter-operability and thereby gain a dominant position in the market.[433] It saw such a development as "not particularly healthy" and said that it urged download retailers to adopt inter-operable standards allowing digital music formats to be played on other providers' platforms.[434] Recent research by Frontier Economics for DCMS concluded that, in the medium term, there is little evidence to suggest that the strong position achieved by Apple will not persist.[435] Ofcom appeared content to take a long-term view and to wait for competitors to emerge in a market which is still in its early stages of development.[436]

164. We note recent developments in Norway, where the Consumer Ombudsman has ruled that the iTunes online music store was in breach of Norwegian consumer protection laws because its tracks could not be played on rival companies' technology devices. The Ombudsman has instructed Apple to provide its protective codes to other technology companies by 1 October 2007.[437] We also note the recent decision of EMI to make available all of its catalogue for download in a format which can be copied and played on any digital device without restriction, and reports that other record companies may follow.[438]

165. Those who see potential in DRM technology recognise that an effort needs to be made by the creative industries and those dependent on DRM tools to broadcast their benefits to the public. British Music Rights proposed an initiative to promote a greater understanding of DRM as a way of enabling digital services to operate and of tracking music usage so that songwriters, artists and labels could be paid the correct royalties.[439] The Digital Content Forum envisaged a clear role for Government in improving awareness about intellectual property and about DRM in particular, so that consumers could be better informed about the ways in which such products could improve efficiency and provide consumer choice.[440] The UK Association of Online Publishers concurred and advocated better labelling and clearer advice to consumers on what they were buying.[441]

166. Copy control mechanisms are not insuperable. The software is vulnerable to determined "hackers", and "workaround" packages enabling DRM software to be sidestepped are available on the Internet.[442] Most forms of copy control tools are effective only for digital copying (for instance using CD recorders or MP3 players): recording to an analogue device automatically removes all restrictions.[443]

167. We note the useful contribution to the debate on Digital Rights Management made by the Parliamentary All Party Internet Group, which has published a substantial and detailed report on many aspects of DRM.[444]

168. We are in no doubt that Digital Rights Management copy control mechanisms have damaged consumer trust and have sometimes provided a very poor deal for consumers. They should not be allowed to operate in defiance of exemptions for unlicensed copying enshrined in UK copyright law. We do not, however, believe that a rush to regulate is the answer, particularly as the technology is still in an early stage of development. DRM systems have value and can, if constantly refined, play a major part in fighting piracy. We agree with evidence that they constitute a way ahead for protection of creative content. We believe that DRM tools could in future allow the sale of digital files at a range of prices to reflect the extent of reproduction permitted.

169. We believe that it is a matter for companies to decide the extent to which they wish to impose restrictions on the use of downloads and physical product. However, Digital Rights Management technology must be applied with care, and the impact of any DRM tools, whether designed for copy control or for other purposes, should be made clear to consumers at the time of purchase. It should also be borne in mind that any excessive restriction of consumers' ability to copy and share content, and unwelcome consequences for consumers' use of their own computer hardware, will only dissuade them from using the legitimate market. DRM could, if used carelessly, be an own goal. We welcome the recent evidence that record companies are now choosing to make available content free from DRM for commercial reasons.

Availability of unlicensed content on the Internet

170. It is not difficult to find Internet sites which enable users to download unlicensed creative content. User-generated content on websites frequently includes clips from music tracks, television or video footage still subject to copyright. If, as is often the case, copyright clearance has not been obtained, the use of such material is unlicensed. Although the initiator of the breach is the person uploading the content, it was put to us that owners of such sites and indeed businesses enabling access to them through navigational and search tools had a duty to take steps to restrict access to unauthorised content on websites and thereby safeguard the revenue streams of the creative sectors.

171. There have been significant developments in this area during the course of the inquiry. Viacom, owner of the MTV channel, has filed a suit against YouTube in the US courts for compensation for infringement of copyright by videos posted on the site.[445] It is also reported that one social networking site—MySpace—has agreed to screen uploaded content against a database of copyrighted material.[446]

172. The International Federation of Phonographic Industry (IFPI) argued strongly that internet service providers should do more to prevent copyright infringement through peer-to-peer file-sharing activity, by terminating the accounts of subscribers "abusing the network to engage in serious copyright infringement" and by providing rights holders with the information needed to identify such subscribers and enforce their rights, through legal action if necessary. The IFPI criticised internet service providers for "standing back and washing their hands of any role" in the knowledge that simply transmitting content between users' computers (as opposed to hosting or caching it) did not make them subject to any legal obligation in the EU as a condition of their immunity from damages—the so-called "safe harbour" provisions.[447] We note, however, the observation by the Gowers Review that if Internet service providers were to be made liable for content passing through their networks, they might limit lawful content, for fear of breaking the law.[448]

173. Google told us that it took complaints from copyright owners "very seriously" and acknowledged that content companies needed to feel comfortable in placing material on the Internet; and it said that it wanted to help such companies make money and fight piracy. Google does not see itself as a major engine for access to copyright material and described peer-to-peer file-sharing services as "vastly more important".[449] It stated that it would act to comply with US law to remove content that infringed copyright when it received a letter from counsel for the copyright owner; and it would take similar action in any country in order to comply with the laws of the land, for instance when prompted by a defamation or libel claim.[450] Material hosted on Google Video which is found to infringe copyright is simply removed;[451] internet service providers take the same action on receipt of a court order.[452] Google argued that it could not be assumed, however, that enabling users to find out about the existence of a site would necessarily lead them to download illegally from that site. It pointed out that a site based in another country and enabling downloading might be acting illegally under UK law but not necessarily under the law of the host country, and it maintained that it was "very difficult to try to shut off all access to something you do not like as long as it is legal somewhere else".[453]

174. The Internet Service Providers Association (ISPA) put forward similar arguments, saying that internet service providers were not in a position to decide whether or not a website was enabling infringement of copyright, that being a matter for a court. It argued that the approach to child pornography was different and observed that not only was it illegal for a website to display such content: it was also illegal for an internet service provider to "possess" it.[454] Internet service providers and mobile phone organisations have helped to establish the Internet Watch Foundation as a self-regulatory body, equipped to interpret the law and notify the industry of sites which are in breach of it. ISPA maintained that it was easier to assess whether child abuse imagery was illegal than to determine whether content constituted defamation or racism. We asked the ISPA whether it would consider setting up a body parallel to the Internet Watch Foundation, to monitor breach of copyright in material hosted on websites. The Association told us that such an approach had been tried but did not succeed because of the difficulty of interpreting the law and examining detail.[455]

175. We note that some deals have been concluded between owners of websites where creative content is commonly made available and major copyright owners to obtain blanket licences for content.[456] We also note that Google does remove some sites from its search index because they violate company policies, and it confirmed that in some cases the reason for removal was copyright-related.[457] Internet service providers and search-based businesses have already demonstrated that they accept the principle that access to unlicensed material on websites is undesirable and should be prevented if at all possible. It may be impractical for such businesses to be made legally liable for providing access to certain material, but we believe strongly that the industry should do more to discourage piracy. We are not persuaded that an industry-funded body with a remit to examine claims that unlicensed material is being made available on a website cannot be made to succeed, and we believe that the industry should establish such a body without delay.

Challenges to commercial exploitation

176. Not all threats from the use of new media to revenue from exploitation of content are attributable to unlicensed copying. Some arise simply from new ventures enabled by technology. We look briefly at three such enterprises: the use of internet-based news aggregation models, libraries' use of digitisation, and online activities by the BBC.

Internet-based news aggregation

177. Google and other companies based upon internet search tools are diversifying, offering (amongst other things) access to books, videos, news publications and satellite imagery. Google News, for instance, will aggregate news stories matching search terms, list one-line summaries of articles on the search results page, and provide links to the originating websites.

178. The Newspaper Society told us that the "monsters of the Internet" were "building a business model on the back of newspaper editorial and sales investments, with no direct financial recognition or recompense" for their publications.[458] Ms Mills Wade, speaking on behalf of the British Internet Publishers Alliance, described Google News as "helping itself to content generated by others and redisplaying it", and she questioned whether this was straightforward copyright theft.[459]

179. Google defended itself from these charges, maintaining that Google News was an indexing service which provided only headlines and snippets from relevant articles, and that to read the full story, users would need to follow links to the newspaper website.[460] Google added that content owners could opt out if they chose, thereby ensuring that references from their titles would not appear in response to search requests. For Google to operate exclusively on an opt-in basis would, it said, frustrate its aim to provide comprehensive search results; and it believed that content owners had an interest in their content being found, for instance through signposting via Google.[461]

180. Copiepresse, a copyright protection group based in Belgium, has recently brought an action against Google in Belgian courts, claiming that Google News had breached copyright legislation by reproducing and publishing newspaper content. A judgment in the Court of First Instance in Brussels in February 2007 confirmed an earlier ruling that Google News had indeed breached the law; but the court made it clear that copyright owners would in future be responsible for notifying Google News about unlicensed reproduction of content, at which point Google would have 24 hours to remove the content before becoming liable to fines. Google plans to appeal against the judgment.[462]

181. Unless and until an action similar to that brought by Copiepresse against Google in Belgium is brought in the UK, we cannot know what view the UK courts would take on reproduction of online newspaper content by third parties. In principle, however, we do not find the representations made by the publishing industry about Internet news portals to be convincing. Newspaper websites on the internet are part of a public arena; there is no legal bar to providing an indexing service; and we have yet to be persuaded that the establishment of internet news portals is causing damage to commercial publishing enterprises. We recommend that the onus should remain with firms to opt out of Internet search engine listings rather than opt in.

Digitised libraries and archives

182. In September 2005, the European Commission issued a Communication titled i2010 : Digital Libraries. The purpose of the document is to encourage the digitisation of collections, in order to increase accessibility and to enable long-term preservation.[463] Many libraries and archives have already begun digitisation programmes or are amassing or committing funds to do so.[464] The British Film Institute described it as "unfortunate" that the implementation in the UK of the EU Copyright Directive in 2003 had not taken advantage of the opportunity to introduce a statutory exemption to permit libraries to digitise their collections for archival purposes without infringing copyright by doing so.[465]

183. British Music Rights told us that it had urged the European Commission to consider, as part of its i2010 initiative, the potentially "very significant effect" that digitisation by libraries of their collections (and the availability of that content for digital distribution) might have on the commercial market.[466] PPL observed that libraries' activities in making material available online, and the formats of their consumer propositions (in terms of price charged—if any—and level of copy control) would set up expectations and influence consumer behaviour.[467] The Newspaper Society argued that digitisation and online accessibility should only be carried out in a way that was compatible with the commercial interests and sustainability of the publishing industry; and it appeared uneasy about the British Library's plans to secure the deposit of newspaper websites.[468] British Music Rights proposed that libraries' activities in digitising their collections and making them available online should be limited at first to works which were out of copyright.[469]

184. We have not examined this issue fully. However, we note the British Library's principle that "digital is not different" when considering the application of copyright to works held in collections.[470]

BBC ventures

185. The BBC's various ventures in the new media field were outlined in paragraphs 31 to 37 of this report. The press notice announcing this inquiry sought specific comment on "where the balance should lie between the rights of creators and the expectations of consumers in the context of the BBC's Creative Archive and other developments". From the responses, it became clear that there was a deep-seated apprehension in many quarters about the BBC's online activities (not just the Creative Archive), which were seen as bringing the BBC into direct competition with the commercial sector and in some cases undermining or threatening to undermine the viability of commercial business models. The common argument underlying these responses was that the BBC's increasing provision of free new media material was making it difficult, if not impossible, for commercial players to offer paid-for services, and that the BBC could alter consumer perceptions of how online content might be made available.[471] Ms Mills Wade, representing the British Internet Publishers Association, described the BBC's Creative Future paper and statements by the Director-General as "disturbing" and "expansionist" and added that any move by the BBC to fund part of their online service by advertising, even outside the UK, would depress advertising rates in the UK because of BBC's size in the market.[472] PPL described the BBC as "competing head-on with many sectors of the creative industries" and noted a risk that any major player with the benefit of public finance—such as the BBC—could "foreclose any market".[473] Mr Perkins, of Information TV, pronounced himself "absolutely horrified" at the BBC's plans.[474]

186. One flashpoint was the "Beethoven Experience" in June 2005, during which the BBC broadcast every work by Beethoven and offered free downloads of symphonies from the BBC website. The BPI was fiercely critical, arguing that the download offer had had "a huge commercial effect on the marketplace".[475] It accepted that, when making music available for download (as in the Creative Archive and in the Beethoven Experience), the BBC was acting within the terms of copyright legislation, as it owned the rights to the recordings.[476] The BBC, it said, had "taken the protest on board" and had not offered the same facility again. The BBC, for its part, acknowledged that the experiment had generated an unexpected level of demand and had been controversial. However, it noted feedback indicating that the experiment had stimulated interest in classical music among new audiences; and it observed that sales of CDs of Beethoven had risen dramatically.[477] Equity claimed that the Beethoven symphonies had been downloaded 1.4 million times and had been "the most popular download of all time".[478]

187. While the intention behind the BBC's Creative Archive was widely praised—PACT, for instance, recognised its "valuable public service role"[479]—creative industry bodies were anxious that it could encourage a general perception that online creative content was free.[480] PPL, PACT and others highlighted the difficulties caused for commercial players seeking to offer paid-for services when the BBC was making available through the Archive its own material, such as premium newsreels.[481] The UK Association of Online Publishers went so far as to say, in relation to the Creative Archive, that unless consumers were made aware of the intrinsic value of such information, publishing would decline as a viable industry.[482]

188. In January 2007, BSkyB described the BBC's plans for its i-Player (which includes a facility to view on demand BBC programming from the previous seven days) as "a major state intervention in a nascent but promising commercial marketplace" and "a project which reduced incentives for commercial investment and experimentation […] by creating consumer expectations that such services should allow audiences lengthy periods in which to watch the downloaded content and provide hundreds of hours of programming free of charge".[483] The BBC's proposals for highly local television services and for a broadband service aimed at the "teen" market were also seen as threats to the commercial sector. The Newspaper Society suggested that even the announcement of proposals by the BBC could deter commercial players from entering a market,[484] and the British Internet Publishers Alliance argued that the teen market was already plentifully served by commercial magazines, websites and newspapers.[485] Channel 4 saw the proposals for a teen brand on the web and for education services for older children as potentially encroaching upon Channel 4's provision of education support services.[486]

189. The BBC has not denied that it is seeking to expand its digital realm. The Director-General was widely reported in June 2006 as stating that the BBC was "the only European brand that could take on Google and AOL",[487] and it maintained that it had a duty to "adapt to the changing behaviour and preferences of its audience" if the relevance and impact of public service broadcasting was to be sustained.[488] It pointed out in evidence that the licence fee had allowed it to innovate (for instance in relation to local TV services), and it questioned whether the BBC local television service really was diverting revenue from the commercial sector.[489]

190. The new BBC Charter sets out a duty for the newly-established BBC Trust to have regard to the competitive impact of the BBC's activities on the wider market.[490] The Trust plays an essential part in the mechanism for measuring the impact of BBC activity upon the commercial sector—it administers the Public Value Test, based upon a public value assessment conducted by the BBC's Executive Board and a market impact assessment conducted by Ofcom. A Public Value Test must be applied before any decision to "make any significant change" to a UK public service, such as the introduction or discontinuation of a service. The Trust is required to judge whether any proposal constitutes a "significant change". Once a Public Value Test has been performed, the Trust is required first to consider the outcome and reach provisional conclusions and then to consult on those provisional conclusions before proceeding to a final conclusion.[491]

191. While Ofcom has responsibility for undertaking the market impact assessment that contributes to the Public Value Test, and while the findings remain a matter for the judgment of Ofcom, its activities are overseen (and terms of reference are set) by a Joint Steering Group composed of members drawn from the Trust, from Ofcom and from independent sources.

192. Witnesses from the Satellite and Cable Broadcasters' Group expressed scepticism about the ability of the BBC's new governance structure to regulate and rein in expenditure in areas where there was already a substantial commercial presence.[492] Impresario Media described the arrangement as "deeply unsatisfactory" and one "which cannot possibly deal properly with new services proposed by the BBC".[493] BSkyB issued a briefing note in January 2007 stating that there was "very limited confidence outside the BBC or the Government in the new BBC governance arrangements". Ofcom expressed great faith in its ownership of the market impact assessment procedure,[494] but there has certainly been some apprehension that the role of Ofcom is circumscribed and that its market impact assessments are ultimately only advisory, in that the decision on whether or not to proceed with a project rests with the Trust.

193. In January 2007, Ofcom announced the results of its first Market Impact Assessment, examining the BBC's proposed i-Player, which would provide an on-demand catch-up television service, an audio download service, and simulcasting of BBC television channels on the Internet. Ofcom found that the proposed services would be "likely to stimulate considerable interest in other new media services, to the benefit of all UK consumers and businesses"; but it raised concerns about potentially negative effects on DVD rentals and sales and on commercial sales of classical music recordings and audio books. Ofcom recommended that the proposals should be amended in various ways, for instance by excluding audio books, limiting or removing the availability of classical music recordings, reducing the length of the window within which downloaded television content could be stored, and removing (or at least reducing the scale of) scope for "series stacking".[495] The Trust has since announced final conclusions which authorise the BBC Executive to launch the i-Player but with restrictions broadly similar to those proposed by Ofcom.[496]

194. There was a significant development on 14 March 2007, when the BBC Trust announced that it had decided to suspend the online education service, BBC Jam, with effect from 20 March 2007. BBC Jam, which had offered a free interactive online learning service for 5-16-year-olds of all abilities, reflecting the school curricula in England, Scotland, Wales and Northern Ireland, had been launched in January 2006 and had been allocated a budget of £150 million. As the Acting BBC Chairman noted, BBC Jam had attracted criticism from the commercial sector about the extent of its activities, and complaints had been made to the European Commission alleging that the service had not complied with its conditions of consent.[497] The BBC management has been asked to prepare fresh proposals for meeting the BBC's public purpose of promoting formal education in the context of school age children.

195. We have yet to see whether the new arrangements for governance of the BBC will inspire any greater confidence in the commercial sector that the BBC will take account of its privileged position in the market when considering new projects. The onus is on the BBC Trust to acknowledge that there is potential for the BBC's activities to have a damaging impact on the commercial sector and that different elements of its plans have differing impacts, and we believe that the BBC must be scrupulous in addressing all the relevant markets and impacts in its Public Value Tests. It is recognised that the Trust will need to make fine judgements about conducting Public Value Tests from time to time (as well as Ofcom with respect to Market Impact Assessments), but a sensible approach would be, "When in doubt, test. " Public and commercial confidence in self-regulation by the BBC Trust will be boosted by evidence that the Trust will act, as it has done in the case of BBC Jam: we see this as an encouraging sign of real change.

293   Review of Intellectual Property, December 2006 Back

294   See Q 97 and Ms Pike, Q 60 Back

295   Ev 318 Back

296   Q 431 Back

297   Ev 45 Back

298   Q 500 Back

299   Q1 Back

300   The Entertainment and Leisure Software Providers Association Back

301   Also Mr Livingstone Q 496 Back

302   Ev 218 Back

303   Ev 189 Back

304   Guardian 28 July 2006 Back

305   Q 76 Back

306   Q 146 Back

307   Q 76 Back

308   Ev 377 Back

309   Gowers Review, page 27; figures from Fraud and technology crimes, Home Office. 2006, Back

310   Ev 33: see Back

311   Ev 45 Back

312 Back

313   Gowers Review of Intellectual Property, page 27 Back

314   Ev 71 Back

315   Mr Barrow Ev 331 Back

316   Q 595 Back

317   Equity Ev 367 Back

318   Guardian 22 November 2006 Back

319   Q 18 Back

320   Ev 136 Back

321  Between 2.2 million and 3.3 million illegal downloads of the second series: Q 383; but Channel 4 witnesses later qualified the figures, suggesting that they were "claimed" and possibly not a true picture of regular downloads. They suggested that figures of between a quarter of a million and three quarters of a million of potential viewers might be downloading the programme on an ongoing basis: Q 390  Back

322   An internet monitoring technology firm. Back

323   Ev 151 Back

324   Ev 189 Back

325   Patent Office National Enforcement Report 2005 Back

326   Ev 290 Back

327   Ev 48 Back

328   Gowers Review of Intellectual Property, paragraph 5.104 Back

329   Q 151 Back

330   Ev 27 Back

331   Gowers Review of Intellectual Property, para 3.34. See also British Association of Picture Libraries Ev 340; Creators Rights Alliance Ev 50 Back

332   For instance UKAOP Ev 108; PACT Ev 151; ELSPA Ev 218; MMF Ev 27; Alliance Against IP Theft Ev 47 Back

333   QQ 646-7 Back

334   Gowers Review page 105 Back

335   Pre-Budget Report, December 2006, Cm 6984, paragraph 3.81 Back

336   Budget 2007: paragraph 3.98, HC 342 (Session 2006-07) Back

337   Ev 47; also British Photographers Liaison Committee Ev 351 and Redeye Ev 425 Back

338   Section 97(2) Back

339   Ev 47 and Q 153 Back

340   Ev 72 Back

341   Ev 73 Back

342   Gowers Review of Intellectual Property, page 101 Back

343   Mr Woodward, Q 595, and Ev 359 Back

344   Q 638 Back

345   Ev 45 and 71 Back

346   Ev 71 Back

347   Figures provided to BPI by Understanding and SolutionsBack

348   Copyright. Designs and Patents Act 1988, sections 29, 30, 31A, 32 to 36, 38, 39, 41 to 46 Back

349   Copyright, Designs and Patents Act 1988, section 70 Back

350   Q 25 Back

351   Ev 73 Back

352   Ev 82 and Q 26 Back

353   Q 21 Back

354   "Stream ripping" allows users to record from a broadcast to a digital file. Tracks can then be extracted to form a library. The BPI identified this as a clear example of home copying which did not take place "solely for the purposes of listening to the broadcast at a more convenient time" as provided for in the exemption under section 70 of the 1988 Act. Back

355   Ev 73 Back

356   Q 257 Back

357   Ev 82 Back

358   QQ 80-1 Back

359   Ev 20 Back

360   Ev 24 Back

361   Q 90 Back

362   Q 96 Back

363   Ev 55 Back

364   Ev 126 Back

365   Gowers Review, page 63 Back

366   Public Innovation: Intellectual property in a digital age, ippr, October 2006 Back

367   Ev 30 Back

368   Music Managers Forum Ev 30 Back

369   Ev 343 Back

370   Ev 368  Back

371   Q 41. See also DACS Q 116 Back

372   Mr McGonigal Q 116 Back

373   A firm describing itself as a 'knowledge company' offering strategic advice to media, entertainment and sports industries, with a particular focus on new media. Back

374   QQ 40-1 Back

375   Q 116. See also Association of Independent Music, Ev 323. Back

376   Q 595 Back

377   Ev 188 Back

378   Q 291; see also PACT Ev 150 Back

379   Q 18 Back

380   Q 361 Back

381   Q 383 Back

382   Q 384 Back

383   At the time that evidence was sought, Video Networks Ltd. provided the Homechoice service, offering TV and radio channels via broadband. Back

384   Q 287; see also Ingenious Media Ev 228 and Video Networks Ltd Ev 450 Back

385   Q 312 Back

386   Ev 191 Back

387   Ev 71. The number of such services is now nearing 50: see Back

388   IFPI Digital Music Report 2006: see Ev 328 Back

389   QQ 434-5: see also para 126 above Back

390   QQ 434-5 Back

391   Q 359 Back

392   Ev 358 and 360. See also BSAC Q1 Back

393   Q 360 Back

394   Q 10 Back

395   Q7 Back

396   Q 597 Back

397   Ingenious Media Ev 228 Back

398   Alliance Against IP Theft Ev 46; BPI QQ 147-8. See also Mr Livingstone Q 496 Back

399   Q 92 Back

400   BPI Q 148 Back

401   Q 432 Back

402   Q 18 Back

403   For instance DACS Ev 55 Back

404   British Music Rights Ev 72; BPI Ev 46 Back

405   Ev 33; see also Q 190 Back

406   Q 595. The Digital Film Club project was outlined in Film in the digital age, a UK Film Council consultation document on policy and funding priorities issued in November 2006 Back

407   Q 432 Back

408   Q 334. See also Creators' Rights Alliance Ev 52 and British Photographers' Liaison Committee Ev 352 Back

409   Ev 30 Back

410   BMR Ev 34; BECTU Ev 334; BAPLA Ev 341 Back

411   Ev 51 Back

412   Q 319 Back

413   Ev 32 (footnote) and Q 89 Back

414   Q 251. One of The Patent Office's targets is to encourage 80% of UK secondary schools to adopt its educational resource: THINK kit (version II). See Patent Office Annual Report and Accounts for 2005-06, HC 1391, page 15 Back

415   Ev 59 and Mr McGonigal Q 108 Back

416   For example the Bridgeman Art Library Ev 337, British Photographers Liaison Committee Ev 351, PPL Ev 59, Music Managers Forum Ev 28, BPI Ev 72 Back

417   QQ 649-51 Back

418   Ev 299 Back

419   Q 22 Back

420   Business Software Alliance Ev 356 Back

421   Ev 87; see also H3G Ev 84 Back

422   Ev 125 Back

423   ELSPA Ev 218 Back

424   Ev 44 Back

425   Ev 336 Back

426   For instance Mr Ahlert, who described DRM tools as over-protective and limiting consumer choice: Q 61 Back

427   Ev 21 Back

428   Mr Barrow Ev 333; British Library Ev 350; Libraries and Archives Copyright Alliance Ev 389; RNIB Ev 430 and 432. Back

429   Ev 21 and 28 Back

430   See BSAC Q 32 and Ev 191  Back

431   See Apple press release, 7 September 2005 and Comparative analysis of the UK's creative industries, Frontier Economics, August 2006, page 88 Back

432   Ev 298 Back

433   See also Mr Oliver Q 43 Back

434   Ev 71 Back

435   Comparative analysis of the UK's creative industries, Frontier Economics, August 2006, page 88 Back

436   Q 437 Back

437   Financial Times, 25 January 2007 Back

438   Independent on Sunday, 8 April 2007 Back

439   Ev 33 Back

440   Ev 126 Back

441   Q 256 Back

442   See Musicians Union Ev 404 and Gowers Review of Intellectual Property para 2.19 Back

443   Motion Picture Association Ev 394 Back

444   See Back

445   The Times, 14 March 2007 Back

446   Daily Telegraph, 31 October 2006 Back

447   Ev 377-8 Back

448   Gowers Review of Intellectual Property, para 5.96 Back

449   Q 573 Back

450   Q 555 Back

451   Q 574 Back

452   Q 192 Back

453   Q 572 Back

454   Q 191. See also HC Deb 26 February 2007, cols. 1098-9W Back

455   Q 197 Back

456   Times, 14 March 2007 Back

457   Q 572 Back

458   Ev 110 Back

459   Q 265 Back

460   Q 546 Back

461   Ev 242-3 Back

462   UK Association of Online Publishers press release 14 February 2007 Back

463   See Back

464   See for instance British Library projects, Ev 348 Back

465   BFI Ev 347 Back

466   Ev 34 Back

467   Ev 59 Back

468   Ev 110 Back

469   Ev 34 Back

470   Ev 349 Back

471   See for example ITV Ev 385; Video Networks Ltd. Ev 451 Back

472   Q 231 Back

473   Ev 59 Back

474   Q 292 Back

475   Q 156 Back

476   Q 156 Back

477   The BBC reported to us an increase in CD sales of over 109%: Ev 137. See also Q 324 Back

478   Ev 369 Back

479   Ev 152 Back

480   For instance Creators Rights Alliance Ev 52 Back

481   PPL Ev 59 and Q 366 (PACT). See also memorandum from Ingenious Media Ev 231-2 Back

482   Ev 109 Back

483   BSkyB briefing note January 2007 Back

484   QQ 233 and 237-8 Back

485   Q 234 Back

486   Q 401 Back

487   Daily Telegraph, 1 June 2006 Back

488   Ev 136 Back

489   Q 308 Back

490   Cm 6925, paragraph 23(e) Back

491   Cm 6872, paragraphs 24-26 Back

492   QQ 292 and 294  Back

493   Ev 375 Back

494   Q 471 Back

495   Ofcom press release 23 January 2007. "Series stacking" could allow viewers to store and view an entire series of programmes.  Back

496   BBC Trust Press Release 30 April 2007 Back

497   The provision of financial aid from state resources needed to be authorised by the European Commission in line with Article 87(1) of the EC Treaty. The Commission gave its assent in 2003. Back

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