House of Commons - Innovation, Universities and Skills

Select Committee on Innovation, Universities and Skills Second Report

2 Role of the Copyright Tribunal

Importance of intellectual property to UK economy

10. The Intellectual Property Office explained in its memorandum that as the global economy developed, with centres of manufacturing shifting to countries with low cost economies, the UK needed to find new ways to compete successfully. The Government envisaged an economy built on innovation, with effective protection of intellectual property to provide creative individuals and businesses with the means to recoup their investment in bringing their creativity and inventiveness to the public.[22] The Intellectual Property Office pointed out that the "creative industries" in the UK's in 2005:

accounted for 7.3% of Gross Value Added (GVA) of the economy, making them comparable to the financial services industry. They grew by an average of 6% per annum between 1997 and 2005, compared with an average of 3% for the whole of the economy over this period. In terms of employment, they accounted for over 1.1 million jobs in the summer quarter of 2006, with almost 800,000 further creative jobs within businesses outside these industries. Exports of services totalled £14.6 billion in 2005, about 4.5% of all goods and services exported.[23]

With the creative industries playing such an important role in the UK's economy, as well as their pivotal function in supporting and developing the UK's culture, the Government considered that it was important that the underpinning protections should function properly, especially given the rapid rate of technological and digital developments.[24] The Government had for this reason commissioned the Gowers Review to examine how the UK's intellectual property framework functioned in the digital age. Since the Review was published in 2006 the Intellectual Property Office has been "taking forward the many recommendations".[25] Although this work did not impact directly on the Copyright Tribunal, the Intellectual Property Office considered that it set in context "the Government's intention of delivering a copyright framework appropriate for the digital age".[26]

ECONOMIC ANALYSIS

11. Given the economic importance of the creative industries, we were concerned to be told by the Intellectual Property Office that neither it nor the Government more generally had access to the "quality of economic analysis" that it needed for its work.[27] However, in line with a recommendation in the Gowers Review, the Intellectual Property Office was setting up the Strategic Advisory Board for Intellectual Property, an advisory NDPB which will have a £500,000 research budget.[28] In addition, the Intellectual Property Office itself was in the process of setting up an economics and evaluation unit to ensure that:

a) the services it provides were subject to an appropriate level of evaluation from the point of view of the economic beneficiaries;

b) ensure that policy development, particularly in areas like copyright, was appropriately underpinned by economic evaluation; and

c) its policies were in line with the DIUS.[29]

12. Given the value of the creative industries and the importance of intellectual property to the UK, we welcome the setting up of the Strategic Advisory Board for Intellectual Property and of an economics and evaluation unit within the Intellectual Property Office.

EFFECT OF DIGITAL TECHNOLOGY ON THE LICENSING OF COPYRIGHTED MATERIAL

13. The 2007 IPO Review of the Copyright Tribunal found that as the means to copy and diffuse copyright material grew and such material became easier to obtain, the collecting societies became more important in obtaining appropriate recompense for their members. The explosion of digital technology has had enormous effects not just in relation to such obvious areas as the downloading of music from the Internet. The Review noted that RAJAR (Radio Joint Audience Research Limited) radio listening figures for the final quarter of 2006 were at a record high and that these showed that radio listening was now effected through digital television, the mobile telephone and the computer as well as traditional radio apparatus.[30] The Government's policy was that creators should be appropriately remunerated and as the Intellectual Property Office acknowledged in oral evidence, the challenge was to ensure that the framework of rules kept up to date with behaviour and technology.[31] ALCS told us that the move from analogue to digital was not taking place in a copyright policy vacuum and it too pointed to the Gowers Review, the thrust of which was to develop "the existing structures rather than saying that technology has overtaken us and there is nothing we can do about it".[32]

14. Mr Warburton, an author from ALCS, told us that most creators are not "concerned about what is in the black box as long as it delivers adequate incentive for us to carry on creating".[33] He did not want to see the existing licensing system abandoned as it "seems to be working" and delivering "incentives to creative artists".[34] The Libraries and Archives Copyright Alliance said that collecting societies had "been reluctant or perhaps their members have been reluctant to allow digital licensing because they are nervous [and] they are scared of what the consequences are".[35] But the Alliance too agreed that licensing via digital technology was inevitable.[36]

15. From the evidence we received all parties—the Intellectual Property Office, the rightsholders and users—agree broadly that the existing licensing system can, and needs to, be adapted and developed to meet the challenges of the use of copyright material by digital processes. The question is what changes need to be made?

Impact of technological changes on the Copyright Tribunal

16. We received evidence that both the growth in creative industries and the change in technology was affecting the role and operation of the Copyright Tribunal. The collecting societies pointed out that the Copyright Tribunal's "Rulings can impact [on] licensing arrangements worth hundreds of millions of pounds"[37] and "any delay in the process and mounting costs are effectively taking money which might otherwise go to creative artists".[38] The Society of College, National and University Libraries (SCONUL) considered that the changes were having serious effects. The Copyright Tribunal was established by the Copyright, Design and Patents Act 1988 and, as we have noted, it is the successor to the Performing Right Tribunal, which was established by the Copyright Act 1956.[39] SCONUL pointed out that the "current legislative and administrative structures are built around a long tradition that copyright disputes occur between businesses".[40] It considered that this tradition going back to the 1950's had been shaken by the electronic age. It noted that, as well as businesses, educational and cultural institutions and private individuals "are increasingly engaged in the distribution of creative works".[41]

Is the Copyright Tribunal restraining the rightsholders' monopoly?

17. We considered whether, faced with the growth of the creative industries and changes in technology, the Copyright Tribunal was satisfactorily carrying out its primary function—restraining the collecting societies from using their monopoly unfairly. The answer to this question turns, we believe, on two issues.

Is the Copyright Tribunal fair and perceived to be fair?

Does the Copyright Tribunal deal with disputes effectively? (We address this question in the next chapter.)

FAIRNESS

18. Views on the fairness of the Copyright Tribunal varied. SCONUL, representing users, considered that "whether the complainant or the rightholder is correct in their view of the price, the Tribunal has no presumption either way".[42] PPL, a collecting society, took a different view:

The Copyright Tribunal has often appeared to make a number of presumptions that mitigate against a fair hearing. Collective licensing societies are often perceived as large and powerful, while users are portrayed as small organisations with little bargaining power. The reality is usually the reverse.[43]

Judge Fysh rejected "completely the notion that there is bias".[44]

19. What we found were allegations that the procedures of the Copyright Tribunal were not fair to all the parties. The British Copyright Council, representing creators, submitted in its written evidence:

the Copyright Tribunal does not deal even-handedly with collecting societies and users. The Review of the Copyright Tribunal identified a number of areas where the two sides in a dispute are treated differently and made Recommendations to address these. For example, a user may refer a proposed licence to the Tribunal whereas a collecting society may not.[45]

The collecting societies giving oral evidence echoed this view. ALCS told us that many of the recommendations in the 2007 IPO Review were "aimed at rebalancing the function provided by the Tribunal" and it cited the same recommendation that collecting societies should be able to make references to the Copyright Tribunal.[46] PPL considered that the unfairness

goes back to when the Tribunal was set up. The mere fact that it is called a Tribunal implies there was a feeling that collecting societies were monopolies, they needed to be controlled in some way and the […] user needed somebody to look after them. In fact the cases that come before the Tribunal are between large parties, between a licensing society […] and a big organisation be it a broadcaster or [association representing an] industry. They are major parties that are in a commercial dispute.[47]

The Libraries and Archives Copyright Alliance, representing users, while expressing qualifications, agreed that a body to which one side could appeal but not the other did seem unfair.[48]

20. The British Copyright Council pressed for the implementation of the Review's recommendation to allow the collecting societies to make references to the Copyright Tribunal without further delay "as there is increasing reluctance by users to take out a licence in the online environment".[49] The Design and Artists' Copyright Society explained a change was needed because:

When negotiating licensing schemes or licences, collecting societies are often confronted with the situation to either redraft a proposal according to the stipulations of the licensee or to risk a referral to the Tribunal, which results in costly and lengthy proceedings or that member's rights will be infringed without a real possibility of legally enforcing the member's rights when the licensee is simply refusing to accept the proposal.

The possibility for collecting societies to refer proposed licensing schemes or licenses will therefore adjust this imbalance and introduce a more fair and even-handedly procedure which will support the collecting societies to avoid delays and uncertainties for their members.[50]

21. We conclude that the nub of the allegations concerning unfairness in the operation of the Copyright Tribunal is the imbalance in the rights of collecting societies and users to make reference to the Copyright Tribunal. The 2007 IPO Review of the Copyright Tribunal recommended that collecting societies as well as users have the right to make reference. We support this recommendation. In addition, we recommend that the Government implement this recommendation ahead of the others in the 2007 IPO Review.

22 Ev 34, para 13 Back

23 Ev 34, para 14 Back

24 Ev 34, para 15 Back

25 Ibid. Back

26 Ibid. Back

27 Q 91 Back

28 Qq 91-2 Back

29 Q 92 Back

30 2007 IPO Review, para 4.6 Back

31 Q 88 [Mr Fletcher] Back

32 Q 20 Back

33 Q 16 [Mr Warburton] Back