Clause 44: Increase of penalties relating to infringing articles or illicit recordings

211.     The Gowers Review of intellectual property ¹² recommended that the penalties under section 107 of the 1988 Act for online copyright infringement should be matched with those that apply for physical infringement, by increasing the maximum prison sentence. Section 107 of the 1988 Act currently restricts fines awarded on summary conviction for criminal infringement of copyright under section 107(4)(a) and 107(4A)(a) to the statutory maximum, which is £5,000 in England and Wales and £10,000 in Scotland. The clause increases the maximum fine that may be imposed for these offences to £50,000. It also increases the maximum fine on summary conviction for making, importing, distributing or making available an illicit recording under section 198(5) or 198(5A) from the statutory maximum to £50,000.

Schedule 2: Licensing of copyright and performers’ property rights

212.     The Schedule makes supplementary amendments to the Copyright, Designs and Patents Act 1988 (“the 1988 Act”) in connection with clause 43.

213.     Part 1 of Schedule 2 inserts new Schedule A1 into the 1988 Act. Paragraph 1 of the Schedule A1 requires the Secretary of State to make regulations requiring a licensing body or other person authorised under Section 116A or a licensing body authorised under section 116B to adopt a code of practice. It also enables the Secretary of State make regulations requiring any other licensing body to adopt a code of practice where it appears to him that the body does not have a system of self regulation that protects the interests of copyright owners, licensees, prospective licensees or the public. Paragraph 2 of Schedule A1 enables provision to be made for the procedures to be followed before regulation is applied or ceases to apply.

214.     Paragraph 3 of Schedule A1 sets out provision that must be included in any code of practice imposed under regulations made under paragraph 1.

215.     Paragraph 4 of Schedule A1 enables the Secretary of State to make regulations to provide for the consequences of non-compliance with a code of practice, an authorisation under section 116A or 116B, an orphan works registration requirement under section 116D or a requirement of Schedule A1 itself. The possible consequences include financial penalties up to a limit of £50,000 and a right of appeal to the Copyright Tribunal.

216.     Paragraph 5 makes provision for fees to be charged to licensing bodies for regulation.

217.     Part 2 of Schedule 2 inserts paragraphs 1A to 1F into Schedule 2A to the 1988 Act. These paragraphs contain provisions equivalent to sections 116A to 116F for performers’ property rights and apply Schedule A1 in relation to those rights.

Topic 11: Public Lending Right

Background

218.     Clause 45 amends the Public Lending Right Act 1979 (“the 1979 Act”) and the Copyright, Designs and Patents Act 1988 (“the 1988 Act”) to reflect the changing nature of book publishing and the increasing demand for the loan of books from public libraries in formats other than print. It does this by:

• Extending eligibility for public lending right (“PLR”) payments to the authors of audio-books and e-books;

• Extending PLR to producers and narrators of books that are recorded as sound recordings; and

• Protecting public libraries who lend the books from liability for breach of copyright or breach of rights in performances.

219.     The clause does not extend PLR to works that are available for loan from public libraries but that do not consist mainly of written or spoken words or still pictures. For example, films, music recordings and computer games are not covered. Neither does the clause extend PLR to digital files downloaded outside library premises.

220.     Since its introduction in 1979, PLR has compensated authors for the potential loss in sales resulting from their works being freely available to borrow from public libraries. Under the current PLR scheme established by virtue of the 1979 Act translators, editors, compilers and illustrators are included (along with writers) in the definition of ‘author’ and so are eligible for PLR payments. PLR is now recognised by European legislation (Directive 2006/115/EC on rental right and lending right) as reflecting and protecting the exclusive lending and rental rights of holders of rights in print books.

221.     Authors, performers and producers of non-print books, such as audio-books and e-books, have rights conferred on them under the 1988 Act allowing them (or anyone to whom they have assigned their rights) to authorise or prohibit the lending of their work by public libraries. The law currently requires libraries to enter into individual contractual and financial arrangements with those rights holders for the lending of non-print books.

222.     It is the view of government that this requirement could be having an impact on the willingness of libraries to lend audio and e-books. It could also be resulting in libraries lending works in breach of the rights of authors and other rights holders. Clause 45 is designed to help simplify the current system of payment to rights holders, give a wider range of rights holders’ protection under the PLR scheme, and support innovation in publishing and the creative industries. The government hopes that it will also increase non-print lending by encouraging authors to enter the non-print market.

Clause 45: Public lending right

223.     This clause amends the definition of “book” in the Public Lending Right Act 1979. The 1979 Act pre-dated the advent of most audio and e-books and consequently use of the word “books” within it is interpreted as being limited to books in printed format. This clause extends the definition to works that are recorded as sound recordings, and works recorded electronically, so long as they consist mainly of written or spoken words or still pictures. As is already the case for printed books, it is intended that the PLR payment scheme established under the 1979 Act will not cover audio and e-books whose author is described as other than a natural person, or that are musical scores, Crown Copyright publications, newspapers, journals or periodicals, or that are not offered for sale to the public or do not have an international standard book number (“ISBN”).

224.     The clause also amends the definitions of “lending”, “loan” and “borrowed” in the 1979 Act with the aim of capturing almost all cases in which a public library makes a book (whether in print or audio or e-book form) available to a member of the public for use away from the library for a limited period of time. The exception is where the book is communicated by means of electronic transmission to a place other than the library, for example where the library makes digital files available for remote downloading. In practice this exception is likely to apply to e-books for which a licensing agreement exists between the library and author or publisher under which incremental payment is made based on usage, rather than on individual units purchased on a once-and-for-all basis. The clause will not limit a library’s ability to make concurrent loans of an electronic work, but only where they have the appropriate permission to do so.

225.     The clause amends the definition of “author” in the 1979 Act. Producers and narrators of audio-books and of e-books recorded as sound recordings play a role in making works in audio formats new and unique creations, not just different formats of the same printed volume. Like authors, producers and narrators are conferred with lending rights under the 1988 Act: copyright in the case of producers and performers’ rights in the case of narrators. This clause extends eligibility for PLR to those additional categories of rights holder.

226.     PLR as extended by the clause continues to be available to all rights holders primarily resident within the European Economic Area (EEA). The clause also preserves the lending rights of non-EEA rights holders under the 1988 Act so that they remain able to license or assign their rights to public libraries (and other persons) independently.

227.     The clause makes consequential amendments of the 1988 Act to reflect the extended definitions of “book”, “author” and “lending” in the 1979 Act. The amendments reduce the scope of copyright and rights in performances under the 1988 Act. This is to protect public libraries from liability under that Act when they lend works that are eligible for PLR. As a result of the changes, libraries will generally no longer need to make agreements with authors before lending out their e-books and audio-books.

General clauses

Clause 46: Power to make consequential provision etc.

228.     This clause gives the Secretary of State the power to make incidental, supplementary, consequential, transitional, transitory or saving provision in connection with the amendments to various enactments made by the Bill. Certain necessary consequential amendments have already been identified and are included in the Bill. This power allows any further amendments to be made, where necessary, in order to give proper effect to the provisions made by the Bill.

Clause 47: Repeals

229.     This clause introduces Schedule 3 which contains repeals of provisions of the Public Lending Right Act 1979 (c.10), Video Recordings Act 1984 (c.39), Broadcasting Act 1990 (c.42) and Communications Act 2003 (c.21).

Clause 48: Extent

230.     This clause provides that the Bill extends to England and Wales, Scotland and Northern Ireland. Subsections (2) and (3) provide that any amendments made by this Bill to the Acts listed in subsection (2) may be extended to any of the Channel Islands or the Isle of Man under relevant extending powers in those Acts. Subsection (4) permits amendments made by this Bill to Part 1 of the Copyright, Designs and Patents Act 1988 to be extended to any British overseas territory under section 157(2) of that Act.

FINANCIAL EFFECTS AND PUBLIC SECTOR MANPOWER

231.     There are two areas where there are potential effects on public expenditure and public service manpower: public lending right and effects on OFCOM.

232.     The Public Lending Right Registrar distributes DCMS grant in aid (“GiA”) to authors as PLR payments. Expanding PLR to cover books in non-print formats will require an ongoing commitment to provide additional GiA of an estimated £0.3 million per year.

233.     The Bill also includes a number of provisions which make changes to OFCOM's activities and duties. It is expected that the additional duties the Bill places on OFCOM, and any associated increase in staffing, can be carried out within OFCOM's existing expenditure cap. The new local and regional news activity (clause 29) will be financed through a new source of funding additional to the existing funding cap. Further information about long-term funding can be found in The Government’s response to the consultation on “Sustainable independent and impartial news in the Nations, locally and in the regions” ¹³

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3   http://www.culture.gov.uk/reference_library/publications/6431.aspx

SUMMARY OF IMPACT ASSESSMENT

234.     A package of impact assessments has been published. This includes:

• An overarching impact assessment which summarises the overall monetised and non-monetised costs and benefits for the Bill as a whole;

• An equalities impact assessment for the Bill as a whole; and

• Specific impact assessments for each of the policy areas the Bill covers, including specific impact tests and equalities assessments.

235.     Copies have been placed in the Vote Office of the House of Commons and the Printed Paper Office of the House of Lords. In addition, the full impact assessment is available on the BIS website:

236.     The Bill brings forward a number of specific policy proposals, decisions and recommendations across several substantive policy areas. The rationale for these different proposals, and the respective costs and benefits of these measures, are summarised in the overarching impact assessment, and discussed in detail in the individual impact assessments. There is not an aggregated cost/benefit analysis.

237.     Key monetised and non-monetised costs include:

• Possible costs to consumers and businesses if the changes to OFCOM’s general duties were to result in reduced clarity about OFCOM’s remit;

• Costs of implementation of the online copyright infringement provisions, estimated to be in the region of £290 to £500 million, with the possibility of higher costs to broadband consumers. Additional costs to copyright owners, ISPs, website and other web service providers and consumers as a result of clause 18 which inserts a new provision into the Copyright, Designs and Patents Act 1988 giving the High Court power to grant an injunction against an information society service provider, requiring it to block access to specific websites for the prevention of online copyright infringement;

• Potential compliance costs to members of internet domain registries if the Secretary of State appoints a manager to run the registry on a temporary basis or applies to the court to alter the registry’s constitution;

• The total annual cost of television news broadcast to nations and regions which is provided by the Channel 3 licensees is estimated to rise to £68m by 2010. This offers a guideline of the maximum potential total annual cost of regional and local news provision if it were necessary to extend it to all nations and regions. Consortia models may draw greater efficiencies together with commercial revenues. This will be tested during the pilot phase.

• A small loss to producers of Gaelic programming; and

• Due to the extension of the radio licence renewal regime, a loss to government of around £10 million where it might have raised funds via the “blind auction”. The regime will also reduce opportunities to enter the analogue commercial industry, therefore potentially reducing competition.

• Exchequer funding of approximately £300,000 may be required as additional grant for payments to rights holders of non-print books.

238.     Key monetised and non-monetised benefits are likely to arise as follows:

• Changes to OFCOM’s general duties may promote greater and accelerated investment by network operators and in UK public service content;

• The online copyright infringement provisions are expected to bring benefits to rights-holders by recovering displaced sales (estimated benefit £1700 million);

• The provisions on internet domain names have the potential to benefit consumers as a result of the behaviour of registries being positively influenced by the existence of the government’s reserve powers. For example, greater consumer protection in terms of reduced exposure to risk of financial loss and less distress associated with mistakenly accessing a (fake) site similar to the one they were intending to access, and the availability of better delineated disputes procedure;

• By allowing flexibility around licence obligations, the provisions on public service broadcasting should ensure that the costs of television licences reflect their true market value. This should allow licence holders to make cost savings based on short term variations to public service obligations;

• The arrangements for the appointment of regional and local news providers are expected to secure more choice of news on television. Relief from the cost of providing regional and local news could benefit commercial Channel 3 public service broadcasters;

• Co-location changes introduced by the provisions on independent radio services are expected to result in cost savings and economies of scale. Large stations could see profits before interest and tax rise from six per cent to 24 per cent assuming a ten per cent fall in advertising revenue or from six per cent to seven per cent assuming a 20 per cent fall in revenue;

• New arrangements for the video games classification will extend the protection afforded to children and help to ensure that they are not exposed to unsuitable material in video games;

• Provisions on increased financial penalties on summary conviction for online or offline criminal infringement of copyright under clause 44 may bring indirect benefits to business through a reduction in pirated goods and an increase in legal sales of their products;

• Provisions on public lending right could bring benefits to rights holders in non-print books of up to £300,000 in additional payments.

CARBON ASSESSMENT

239.     The Bill will not have a significant impact on the environment or carbon emissions.

COMPATIBILITY WITH THE EUROPEAN CONVENTION ON HUMAN RIGHTS

240.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act).

241.     The Secretary of State for Culture, Media and Sport, Ben Bradshaw MP, has made the following statement: “In my view the provisions of the Digital Economy Bill [HL] are compatible with the Convention rights.”

242.     All of the provisions of the Bill have been considered in relation to compatibility with the European Convention on Human Rights and other international human rights obligations. Only those clauses which raise potential compatibility issues are discussed below. In relation to the remainder of the clauses, there are no rights potentially engaged.

Topic 1: General duties of OFCOM

Power for OFCOM to require information from network providers (clause 2)

243.     Article 8 of the Convention is potentially engaged but that would depend on the circumstances and use of the power. It is possible that some of the information which will be required to be provided may constitute commercially confidential information. Such information supplied by network providers is capable of being information which would engage Article 8.

244.     However, OFCOM are a public authority for the purposes of section 6 of the Human Rights Act 1998 and must therefore exercise any power compatibly with Convention rights. In addition, section 137 of the Communications Act 2003 provides that any request for information must be proportionate to the use to which the information is to be put. The information to be provided by network providers is necessary to enable OFCOM to fulfil their new reporting duties under this clause in relation to the capability and resilience of the communications infrastructure and internet domain names. Section 393 of the Communications Act 2003 places restrictions on the disclosure of information obtained under powers conferred by that Act. It is therefore considered that conferring this power on OFCOM does not constitute a breach of Article 8 rights.

Topic 2: Online infringement of copyright (clauses 4-18)

Notification provisions

245.     Article 8 of the Convention and Article 1 of the First Protocol to the Convention are potentially engaged by these measures. The Bill will place requirements on internet service providers (“ISPs”) to comply with two initial obligations; to send notifications to subscribers who have been identified by copyright owners in relation to alleged infringements of copyright; and to maintain internal lists of the number of times an individual subscriber has been identified and provide certain (non-identifying) information from those lists to affected copyright owners on request.

Additional technical measures

246.     The Secretary of State will have the power by order to impose obligations on ISPs to take technical measures against internet subscribers. Such measures may include temporary suspension, bandwidth capping and bandwidth shaping. They may only be introduced in relation to those subscribers who have had sufficient copyright infringement reports made in relation to them to be eligible for inclusion in a copyright infringement list under section 124B of the 2003 Act (as inserted by clause 5). Technical obligations may not be introduced until at least 12 months after the initial obligations have come into effect and the Secretary of State must take account of OFCOM’s assessment of whether technical obligations should be imposed and of any progress reports produced by OFCOM about online infringement of copyright before imposing them. OFCOM will adopt a code of practice setting out procedures to enable ISPs to give effect to these measures.

247.     When following any rules specified by the Secretary of State or OFCOM for giving effect to the technical measures, ISPs will potentially be hindering subscribers from accessing the internet (and hence their e-correspondence), or from having the broadband connection speed and content they contracted for. These measures may amount to interferences with the right to respect for private life, the right to freedom of expression and the right to peaceful possession of property. The rights are engaged because affecting the ability of a subscriber to access the internet at a given speed or, potentially, at all will tend to affect their ability to communicate with others by on-line methods (by email, and through instant messaging and contributions to internet discussions). This would tend to affect their private and family life in the widest sense, but also Article 10 rights to freedom of expression and freedom of information.

248.     However, such interference does not render the provisions incompatible with the Convention. The provision represents an acceptable balance between subscribers’ rights and the public interest in the protection of the copyright of third parties. Copyright owners have limited methods of protecting their copyright, which may be less effective across national boundaries than within a single jurisdiction. Infringement over the internet is likely to cross national boundaries. Moreover, subscribers may be infringing the rights of more than one copyright owner at a time, and these provisions permit action benefiting many copyright owners. The measures are necessary and proportionate to a legitimate aim, namely the protection of the rights of copyright owners. By providing for a warning to subscribers that they are infringing the rights of others and providing that technical measures are not taken against them until the appeals process is exhausted, these provisions strike the appropriate balance between the rights of subscribers and the rights of copyright owners.

249.     Determinations made by ISPs when applying the rules made by the Secretary of State for the imposition of technical measures are likely to amount to determinations of a civil right or obligation within the meaning of Article 6 of the Convention. The legislation provides for appropriate review mechanisms by an independent and impartial tribunal, and these mechanisms render the provisions compatible with the Convention. In particular, the new section 124K introduced by clause 14 makes provision for grounds of appeal, what is expected of copyright owners and ISPs by way of proving the existence of an infringement and its connection with a particular subscriber account, defences available to a subscriber and the powers of the persons hearing appeals. It also provides for the costs of a successful appeal to be recoverable by the subscriber.

Preventing access to specified online locations

250.     Clause 18 inserts a new section 97B into the Copyright Designs and Patents Act 1988. This confers jurisdiction on the High Court or Court of Session to grant an injunction against a service provider requiring it to block access to online locations specified in the order of the court. In determining whether to grant an injunction the court has to have regard to the level of copyright infringement, the steps taken to prevent copyright infringement, national security issues raised by the Secretary of State, attempts by the copyright owner to facilitate legal access to content, human rights considerations and any other matters that appear to the court to be relevant. Notice of an application must be given to the service provider and the operator of each specified online location in relation to which an injunction is sought. Provision is made for the court to order costs against service providers who fail to prevent access. Provision is also made for the coming into force of the section after notification of the section to the European Commission under the provisions of Directive 98/34 EC (the Technical Standards Directive).

251.     It appears that as the court is a public authority for the purposes of the Human Rights Act 1998 the powers conferred by this section must be exercised in a manner that is compatible with the Convention Rights set out in Schedule 1 to that Act.