Memorandum submitted by Alliance against
IP Theft
INTRODUCTION
The Alliance Against IP Theft welcomes the Select
Committee's inquiry into New Media and the Creative Industries
and believes the inquiry has raised some important areas for discussion.
The Alliance members are drawn from all aspects
of the creative and manufacturing industries, along with representatives
from the world of publishing and copyright licensing[9].
Further information regarding the organisation can be found at
www.allianceagainstiptheft.co.uk.
All of our members are employing new technologies
to develop new services and indeed many are already licensing
their works to a wide range of new media platforms.
VALUE OF
THE CREATIVE
INDUSTRIES
The creative industries contribute a large amount
to the UK, not merely in terms of financial contributions to the
country's economy but also by providing an environment whereby
innovation, creativity and enterprise can flourish.
To put it in stark terms, the creative industries
contribute over 8% of the UK's GDP[10]
and are responsible for nearly two million jobs[11].
This contribution is possible because the creative industries
are working with government to ensure that creativity is properly
rewarded and protected.
We have a hugely successful creative sector
of which the country can be proud, demonstrated by the success
of movies such as Harry Potter, artists like Coldplay and games
such as Tomb Raider (Lara Croft). In fact, in the Great British
Design Quest, organised by the Design Museum and BBC's Culture
Show, two British computer games—Tomb Raider and Grand Theft
Auto—have been voted into the Top 10, alongside such iconic
British designs as the red phone box and the Mini. The UK creative
industries are innovative and dynamic, but require the right regulatory
environment for them to remain so.
OPPORTUNITIES FROM
DEVELOPMENTS IN
NEW MEDIA
Technological advances are opening up new opportunities
for the creative industries and consumers alike. The variety of
platforms available for people to access creative content such
as films, television programmes, music and games, offer consumers
a wide range of options as to how and when content is watched,
listened to or played. This expansion of choice also provides
distributors of content the ability to reach a wider audience
with their products. In this, the British creative industries
both react to consumer demand and lead the way in developing new
technologies to benefit those consumers.
However, at present both consumers and the creative
industries are operating in a transitional environment. Whilst
opportunities to access creative content through digital means
are already widespread and rapidly expanding, consumers and business
alike are still adapting to the diverse range of digital platforms,
be they Video-on-Demand (VoD), Internet downloading or delivery
of content to the mobile telephone and other devices. During this
period of transition and convergence, industry and government
must ensure that consumers are protected from scams and the sale
of inferior, illegal products no matter where or how purchases
are made; and that the rights of IP rights holders are similarly
protected.
Digital Rights Management
Increased access to creative content in the
digital age has been made possible because of technological advances
such as Digital Rights Management. Digital Rights Management (DRM)
benefits consumers and industry alike, allowing content providers
to adapt their business models and leading, as a result, to an
unprecedented expansion of consumer choice in content delivery.
With the ever growing array of electronic hardware, content providers
can now offer consumers a menu of options to choose from at different
price points, together with the possibility of using and enjoying
content in a variety of ways. Examples of such use include: the
purchase and download of individual works for single or multiple
use; subscription services; rental services; video on demand (VoD)
and pay per view (PPV); previews; evaluation and trial use; and
real time distribution of content.
It is important to remember that a number of
such services, such as BskyB's satellite broadcasting, has been
in existence for a long time, thanks to DRM technology. In fact
such existing and new services could not operate without DRM.
Without DRM consumer choice would be significantly restricted.
For example, DRM allows for the legal streaming and downloading
of a movie, or a single online purchase of a music track to be
transferred legally onto an iPod or other MP3 player. DRM allows
the rights holder to be paid for such access. With increasing
public demand for alternatives to physical carriers of content
such as CDs, DVDs and games, owners of intellectual property want
to be able to offer new ways for their content to be accessed
legally. Online purchasing needs to be viewed in the same way
as traditional shopping. Just as someone would walk into a record
shop and buy a CD, similar payment needs to be made for music
downloaded from a website. This is crucial in order for record
companies, authors and artists to be assured of remuneration for
their work and investment. Most people agree that is a crime to
help oneself to the property of another without payment or permission,
and accessing illegal content online must be viewed the same.
This scenario can be replicated across the creative industries,
making it crucial to their survival for a robust IPR regime as
we go further into the digital age.
In addition, there is also concern about the
problem of piracy and underage access. While the film and games
industries operate under a statutory classification system to
protect minors from unsuitable material, which is enforced in
the sales and rental market and punishable by criminal penalties,
pirates do not adhere to labelling and classification regulations.
Traders in pirated material not only supply work that has not
been examined by the British Board of Film Classification, but
the same traders also supply content that would not be passed
as suitable for home viewing at all, such as pornographic and
paedophilic content.
There is now a host of new online services offered
by both the music and film industries. These allow consumers to
purchase and download legally films and music via the internet.
Such services for music include:
Industry is still severely threatened by illegal
filesharing services such as Limewire, BitTorrent and KaZaa, but
with these new legal alternatives there are now over 1 million
music tracks available to download legally, with legal download
sales surpassing 600,000 a week[12].
Crucially, these offer consumers a legal alternative to the purchasing
of music online.
The film industry is also launching online services.
Examples include:
— Home Choice Video-on-Demand (VoD)
packages, a TV-over-DSL service based in London and SE England.
— Kingston Interactive Television in
Hull.
— Lovefilm.com, which launched in December
2005. This service has about 150,000 subscribers in the UK who
are downloading movies on a rental basis, ie they have 24 hours
to view; films are also available via AOL.
Factors that will transform the market prospects
include the continuing rapid expansion of broadband availability,
technological advances and price reductions in the key areas of
bandwidth capacity, functionality and interconnectivity between
devices in the home, along with the successful resolution of security
issues, and also competition between broadband suppliers. BT,
Wanadoo and Bulldog are all planning to offer TV, SVoD (subscription)
and true VoD services in the near future.
Digital rights management also assists consumers
in their role as creators. DRM tools allow people to turn their
own intellectual property into marketable and saleable content,
enabling cottage industries to develop whereby individuals can
make a living from their creations, while being afforded proper
protection.
EFFECTS ON
CREATIVE INDUSTRIES
OF UNAUTHORISED
REPRODUCTION AND
DISSEMINATION OF
CREATIVE CONTENT
The Committee has asked for views on the effects
of unauthorised reproduction. While there is no doubt that new
media advancements bring opportunities for consumers and businesses
alike, industry and government needs to be mindful of existing
and potential dangers. The increased household penetration of
fast broadband services, DVD re-writers and recorders, mobile
devices such as the video-iPod, PSPs and mobile telephony all
offer tempting prospects for illicit copying.
Without exception, and something which crosses
the new and old technology divide, the biggest threat to the prosperity
and development of the creative industries is intellectual property
theft. Illegal copying, filesharing and other illicit uses of
copyright material are growing exponentially, while counterfeiting
and piracy is becoming increasingly attractive to organised criminal
gangs.
Evidence from Alliance members shows that:
— The market in pirated DVDs increased
20% in 2005.
— Typically a major release of a new
film on DVD loses 20-30% of sales through counterfeiting and piracy,
amounting to an average of £4 million lost per "blockbuster"
title and up to £1.5 million in lost box office sales.
— British film, Harry Potter and
the Prisoner of Azkaban, saw 21% (£9 million worth) of
DVD sales and a further £2.8 million of box office receipts
lost through counterfeiting and piracy.
— The audio-visual industry annually
loses over £800 million through copyright theft.[13]
— The music industry lost £654
million during 2003 and 2004 through illegal downloading[14].
— Piracy in the UK is now so endemic
that a ten-point drop in software piracy in the UK would:
— Add nearly £11 billion to the
UK economy.
— Create nearly 34,000 new jobs.
— Increase local industry revenues
by £9.6 billion.
— Generate an additional £2.8
billion in tax revenues[15].
The increasing digital environment is also impacting
on creators of physical goods. UK brand owners estimate that there
are more than 80 million websites selling fake goods globally.
One brand owner's internet enforcer took down three websites recently
which carried over 15,000 pieces of fake sportswear in one hour.
The video industry has a similar and growing problem
with the sale of counterfeit and pirated goods over the internet.
The BPI removed 57,463 infringing items from internet auction
sites in 2005 and have removed 28,728 so far in the first two
months of 2006.
Last year the Federation Against Copyright Theft
(FACT) served 114 cease and desist notices on infringing websites.
This was an increase of 50% on 2004. The organisation also removed
over 26,000 infringing auction listings pages, from sites such
as eBay. The number of actual fake items for sale, however, is
considerably higher as each page may have multiple items for sale
but totals are not recorded.
While this is an issue for industry to tackle,
research does show a worrying lack of awareness by the public
about counterfeiting and piracy and its links to other criminal
activity. In recent research carried out for the film industry
by OTX, film piracy was seen as a less severe crime than shoplifting
and credit card fraud[16].
This demonstrates two things—first, that theft of content
is still not being viewed as seriously as theft of a physical
product, and second, that despite communications campaigns mounted
by industry, there remains a lack of understanding amongst the
general public of the many organised and associated crime units
behind counterfeiting and piracy.
A raid conducted by Alliance members FACT and
the BPI in December 2005 highlighted the exploitation of young
people in the sale of counterfeit DVDs. As part of a co-ordinated
strategy to target illegal trade at Barras Market in Glasgow,
a nearby house that was being used as a factory supplying the
market sellers was raided. Approximately 8,000 DVDs, computer
games and CDs were found at the property, along with master copies
of pornographic films, computers and burners. The Police arrested
12 individuals, four of whom were under 16, with one as young
as 13 years old. Children are increasingly becoming involved in
the sale of counterfeit DVDs and CDs. What appears to be a harmless
weekend job is a route into crime and the wider dangers this brings.
The Government has also recognised the increasing
links between IP theft and other criminal activity. The Department
of Work and Pensions (DWP) formed part of a national multi-agency
investigation into persons involved in the production and sale
of counterfeit goods, predominately CDs, DVDs and computer games
while claiming benefits from the DWP. The DWP Counter Fraud Investigation
Service (CFIS), industry Anti Piracy Units, Trading Standards
and the Police all came together for Operation Zouk to uncover
this criminal activity and was an excellent example of multi-agency
working. The Operation saw raids that netted over half a million
pounds' worth of DVDs and CDs, with 123 people arrested—96
of whom were in receipt of state benefits. The total value of
the goods seized was over £3 billion[17].
STEPS THAT
NEED TO
BE TAKEN
TO PROTECT
CREATORS
Technology is becoming more mobile and consumers'
desire to transfer content between different platforms is growing.
Government and industry need to work together to ensure creators
are protected in this new environment and the correct balance
is maintained between consumer access and creators' rights.
Industry acknowledges that it has a role to
play in encouraging people to respect copyright. It is already
making headway to ensure intellectual property is respected and
protected through such initiatives as British Music Right's Respect
the Value of Music and the Industry Trust for IP Awareness's
communications campaign from the video industry, targeting different
types of users and audiences. In addition, "Digital File
Check", software created for IFPI, is a simple consumer facing
tool developed by industry that enables computer users to identify
and remove file-sharing software and illicit files and provides
guidance on how to enjoy copyright works legally. Also, in June
2005, the record industry teamed up with Child Net to launch a
campaign aimed at educating parents about the dangers of peer2peer
filesharing.[18]
Industry does understand consumers' misunderstanding
of the use and function of copy protection measures. The issue
needing to be tackled, however, is how to protect content on existing
technology, once revolutionary but now vulnerable, in the digital/Internet
environment.
This is not a matter which industry can tackle
alone. If DRM technologies were not afforded appropriate levels
of legal protection, this expansion in consumer choice would not
have been possible. Under the WIPO Copyright Treaty and the EU
Copyright Directive (now implemented into UK law), an international
framework for the protection of such technology has been created.
This has ensured that the technology used to distribute and access
content is afforded similar protection to the content itself.
Such a move was vital to ensure that the opportunities which increased
use of DRM bring are not cancelled out by those seeking to bypass
the technology, to the disadvantage of content providers and consumers
alike.
However, while the digital environment brings
such regulatory and legislative challenges, there also remain
inconsistencies within current intellectual property law, which
is hampering the creative industries' ability to protect its IP.
The Alliance strongly believes that these need to be addressed.
Outstanding legislative issues
Law on damages
A consultation is expected from the Department
for Constitutional Affairs reviewing the damages regime in UK.
This is important as the amended system that came into effect
with the Copyright Designs and Patents Act 1988 (CDPA) has had
the effect of making the awarding of additional damages in copyright
cases extremely difficult, with it being impossible in trade mark
cases as no such legislation exists. Criminals are making huge
profits through counterfeiting and piracy. For example, the video
industry calculate the criminal gain in video and film piracy
at £278 million, at street prices, while criminals are making
£540 million annual through games software piracy. The compensatory
damages awarded against them at present impact little on these
profits. The ability to use damages as a deterrent would be a
valuable tool to those fighting this criminal activity and assist
creators in protecting their creative content, particularly given
the ease with which illegal copies can now been produced.
Directors' Liability
With the majority of people having access to
the internet at work, the control which directors exercise over
the business is becoming increasingly important. Over 60% of software
piracy takes place in the workplace and investigations conducted
by Alliance members have found evidence of illegal file sharing
and downloading. Current legislation limits directors' liability
to their actual knowledge (consent or connivance) in connection
with copyright offences committed by the company. Directors may
escape personal risk through denying knowledge, which ultimately
means that there is little real incentive to make sure the company
does not commit copyright offences and maintain compliance. Alliance
members are also concerned about directors of companies who allow
illegal trade on their premises through such activities as outside
traders being allowed on the company premises and illegal trade
at car boot sales on their property, and would like to see measures
introduced which place a legal responsibility on directors to
stop such illegal activity.
Illegal imitation
Whilst not "new media", this is an
issue which is nonetheless affecting a section of the creative
industries. Creators and innovators of packaging of branded goods
are constantly having their material copied by others operating
in the same market. This copying of packaging design not only
misleads the consumer by making shoppers purchase goods they did
not intend to buy, but it "free-rides" on the quality,
heritage, innovation and investment of the original branded packaging.
More effective statutory protection is needed for this area of
the creative industries to ensure consumers are not confused,
and importantly, to protect creators' designs.
Burden of proof
In cases of copyright theft, the law at present
places the burden of proof on the copyright holder to prove that
no permission has been given for the product/design/image to be
copied. The growth in illegal copying enabled by the development
of new technologies makes this an ever more costly burden to the
creative industries. The Alliance believes that this burden of
proof should be reversed, with those accused of illegal copying
having to prove they had agreement from the copyright holder.
Resources
Effective enforcement of intellectual property
rights (along with protection of consumers and legitimate businesses)
is being hampered by a lack of resources and powers for trading
standards. The most robust set of legislative measures may be
put in place to protect IP both in the digital and non-digital
environments, but if accompanying resources are not made available
to those charged with the enforcement of such measures, the system
falls down. The enactment of section 107A of the CPDA, which gives
trading standards the duty to enforce copyright law, is crucial,
as is the proposed incentivisation scheme whereby trading standards
can recoup a percentage of the costs of prosecutions from assets
seized under the 2002 Proceeds of Crime Act.
Intellectual property theft continues to be
the perceived low risk, high profit criminal activity it has become,
with little value placed on the production of ideas and creativity.
The Government has made some movement on this front, but investigating
IP crime by Trading Standards and mounting subsequent prosecutions
still imposes huge burdens on already tight budgets. With the
proliferation of digital theft of IP rights, this burden can only
be set to grow. The Government must ensure adequate funding is
made available.
In addition, the Alliance remains concerned
over the implementation of the EU Enforcement Directive into UK
law. Following the consultation last year and the Government's
subsequent response, there remain a number of outstanding issues
of concern to our members. Attached in the annex is the Alliance's
recent submission to the Patent Office, which outlines these concerns.
IP CRIME GROUP
However, great strides have been made within
government and key advancements made to ensure IP theft is properly
addressed. The Alliance is very supportive of, and a key player
in, the Patent Office's IP Crime Group. This Group performs the
important and crucial function of bringing together all those
involved in IP protection and enforcement, from the individual
industries to the police, HMRC and trading standards. This allows,
for the first time, a central point for intelligence gathering
and information dissemination.
The success of the IP Crime Group can be seen
in the hugely successful Operation Dawn, which took place just
before Christmas. This cross industry, cross agency operation
in Wembley saw the seizure of counterfeit goods worth more than
£1.5 million. Co-ordinated by the IP Crime Group, this operation
also led to the arrest of two people, the detention of a number
of suspected illegal immigrants and the identification of a number
of benefit fraudsters.
The Group's work is being taken forward with
regional intelligence on IP crime to be disseminated via the Patent
Office to Trading Standards Services and police forces. It is
of utmost importance that the work of the IP Crime Group is fully
supported across parliament and government, as it is providing
real results in the fight against IP crime and affording the creative
industries some real protection.
CONCLUSION
The growth in new media and the accompanying
new technologies is changing how consumers access and pay for
creative content and how content providers distribute such material.
This means the protection of intellectual property will also need
to change.
The Alliance believes that as the UK makes the
transition from accessing creative content through hardware such
as CDs and DVDs, to a market where content is accessed and consumed
via a wide range of platforms it is important that the intellectual
property rights which accompany such access are properly protected.
Intellectual property theft is already too endemic
in the UK. As this submission demonstrates, it costs industry
financially, and has unsavoury connections to many other forms
of criminal activity. For the creative industries and consumers
to be able to make the most of the opportunities new media offers,
intellectual property needs to be respected and protected.
9 Members of the Alliance Against IP Theft are: Anti
Counterfeiting Group; British Association of Record Dealers; British
Brands Group; British Jewellery Giftware and Finishing Federation;
British Music Rights; British Phonographic Industry; British Video
Association; Business Software Alliance; Cinema Exhibitors Association;
Copyright Licensing Agency; Entertainment Leisure Software Publishers
Association; Federation Against Copyright Theft; Federation Against
Software Theft; Film Distributors Association; Institute of Trade
Mark Attorneys; Publishers Licensing Society; Video Standards
Council. Back
10
EU Study "The Contribution of Copyright and Related Rights
to the European Economy, Europe". Back
11
Figure from the Department for Culture, Media and Sport. Back
12
Sales data from the Official UK Charts Company (OCC) 2005. Back
13
Research conducted by IPSOS in November 2005 into Digital and
Physical Piracy in Great Britain. Back
14
TNS two year study April 2005 that tracked purchasing habits
of downloaders against non-downloaders. Back
15
Business Software Alliance/IDC Global Software Piracy Study 2005. Back
16
OTX research into Digital Piracy in the UK conducted between
March 2004 and September 2005. Back
17
Patent Office Annual Enforcement Report 2004. Back
18
See www.childnet-int.org/music Back
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