To be published as HC 1498-iii

House of COMMONS



Business, Innovation and Skills Committee

Hargreaves Review of Intellectual Property

Tuesday 1 November 2011

Ben White, Alexander Jackman, Chris Marcich, Richard Mollet and Paul Ellis

Pete Wishart MP, John McVay, Jim Killock and Robert Ashcroft

Evidence heard in Public Questions 155 - 216



This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.


Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.


Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.


Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the Business, Innovation and Skills Committee

on Tuesday 1 November 2011

Members present:

Mr Adrian Bailey (Chair)

Mr Brian Binley

Paul Blomfield

Katy Clark

Julie Elliott

Rebecca Harris

Margot James

Ann McKechin

Mr David Ward

Nadhim Zahawi


Examination of Witnesses

Witnesses: Ben White, Head of Intellectual Property, British Library, Alexander Jackman, Senior Policy Advisor, Forum of Private Business, Chris Marcich, President and Managing Director, Motion Picture Association, Richard Mollet, Chief Executive Officer, Publishers Association, and Paul Ellis, Co-founder, Stop43, gave evidence.

Q155 Chair: Good morning and thank you very much for agreeing to attend this session. I apologise for the slight delay in starting; we had some urgent private business that we needed to get out of the way, but we will bat on very quickly. Could you just introduce yourselves, starting with you, Alexander, for voicetranscription purposes?

Alexander Jackman: Sure. My name is Alexander Jackman. I am a Senior Policy Advisor at the Forum of Private Business.

Chris Marcich: My name is Chris Marcich. I am the Managing Director of the Motion Picture Association’s European office.

Ben White: Benjamin White, Head of Intellectual Property at the British Library.

Richard Mollet: Richard Mollet, the Chief Executive Officer of the Publishers Association.

Paul Ellis: Paul Ellis, Cofounder of Stop43, the photographers’ campaigning group.

Q156 Chair: Thanks very much. Could I just, before we start, say we will obviously be asking you questions; do not feel obliged, every one of you, to answer every question if somebody has covered the points that you would like to make, otherwise we could be here for a very long time? Brevity, from both questioners and responders, would be very welcome. Can I start off with a very general question? What is your overall view of Professor Hargreaves’ recommendations and the Government’s response? If you can put it in a very pithy way that would be helpful.

Alexander Jackman: Overall, the Forum welcomes the report. Our message to Government really is: it is the fourth report in six years, and we would like to see some of the recommendations implemented as soon as possible. A couple of brief comments, I guess: we felt there was a slight imbalance within the report towards issues surrounding copyright. Many of the issues our members have are predominantly around patents and designs. The second comment I make: we welcomed the presence of small business considerations throughout the report, rather than just in a specific chapter. That fact that it was threaded throughout the report is of immense benefit to our members.

Q157 Chair: Is there anybody who wishes to add to that or contradict it?

Richard Mollet: I would agree with some of that. Among the 21 recommendations, there were a number of good ideas to improve copyright; the Digital Copyright Exchange, the orphan works proposal and the idea not to go to fair use were welcome. However, throughout the review there is a negative view of copyright-one that sees it as obstructing growth, when actually it is the main driver for growth in the creative and knowledge industries in our economy. Also, I think Hargreaves takes a very economic perspective of copyright, when it ignores and never anywhere says that copyright is actually a fundamental property right to rights holders, recognised by British and European law. That is a big lacuna.

Also throughout the report, a lot of times we see "copyright is not there to regulate the digital economy". Of course, that is trivially true, but copyright is a technologically neutral framework, which is there to stop unauthorised copying, be it 18th century printing presses in London or indeed on computers. That very indifference to technology is absolutely the strength of copyright, its very flexibility. Hargreaves almost turns that on its head and uses it as a stick to beat copyright with, and says, "We have to change it." For that reason, as I am sure we will go on to, some of the recommendations that flow from that analysis seem to our members to be wrong.

Chris Marcich: I would just add that some interesting ideas are put forward by the Hargreaves report, including the Digital Copyright Exchange, which could be useful, depending on how it is developed. I would also add that, in some of the areas where there are recommendations advocating additional exceptions, there is an absence of evidence to support the need for the exceptions. I think that copyright has a proven track record of adapting and enabling change in areas such as nonconsumptive use. You have players that have emerged in the market that are doing quite well in the present environment. Before we go too much further in looking at exceptions, we should look at the achievements of the copyright legislation that you have put in place, as legislators, and its accomplishments in terms of job creation, and promoting creativity and innovation, in making this country one of the prime resources for inspiration and economic activity in our sector.

Ben White: Certainly the British Library would welcome many of the recommendations that, for the first time, seek to solve many of the issues that the research sector faces. Again, there is slight IP fatigue that there have in the last six years been four reviews, and we would very much like to see implementation of many of the recommendations. It is also very important to put this in an international context. Many of the recommendations around the flexibilities, limitations and exceptions already exist in America, Canada, the European Union and Japan, so actually are not that radical. It is entirely appropriate that, 33 years since the last legislation-which was before the first internet browser was even written-with new technology comes new opportunities. I think it is absolutely appropriate that the Intellectual Property Office looks at something that is 33 years old.

Q158 Chair: Did you wish to say anything, Paul?

Paul Ellis: I do have a slight dissenting opinion, I am afraid. We believe that the Hargreaves report is largely a digital land grab that will do little to stimulate the growth we actually need, which is that of tax receipts to reduce the public sector borrowing requirement. It is a classic example of attempted regulatory capture by vested interests. Copyright is an automatic right conferred upon creators by the Berne Convention, and consists of human rights, moral rights, property rights and economic rights. Hargreaves’ remit was limited to economics; consequently, it is not surprising that his recommendations involve breaches of human rights, moral rights and property rights. In detail, the recommendations breach Berne Article 9, fails Berne’s threestep test and breach the human right in copyright and moral rights conferred by the Universal Declaration of Human Rights Article 27, and the European Convention on Human Rights Article 1 first protocol, among others.

In our view-that is Stop43-to reduce the public sector borrowing requirement we need a growth of tax receipts from those who pay the most tax as a proportion of income. These are individuals and microbusinesses that make up 90% of the economy, not corporations. Hargreaves wishes to stimulate startups, which, according to a recent Demos report, pay little tax, enjoy tax holidays and, in general, eventually become bought out by US corporations that pay little tax here. Stop43 cannot see the sense in this. The final comment is that Hargreaves neglects to consider the fact that intellectual property is expressly excluded from fair contract law by Schedule 1 Clause 1(c) of the Unfair Contract Terms Act 1977.

Q159 Margot James: What are your views on Professor Hargreaves’ treatment of orphan works and how could that be made to function effectively?

Chair: Again, I would repeat my original strictures: you do not all have to respond if somebody has covered your view. Obviously if you wish to contradict, please do so. Who wants to lead on it?

Paul Ellis: I am perfectly happy to lead. A couple of weeks ago you had Sir Robin Jacob here, who stated his opinion that orphans have negligently been abandoned by their owners. Of course, you will find some that way but, in our experience, that is not the case. Most orphans are the result of illegal digital copies or scans of prints and postcards. Orphans are manufactured daily in their hundreds by websites such as the BBC and Facebook, among many others, in the process of stripping the metadata from digital photograph files. I think you will find that most rights holders have a pretty clear idea of where their property is; they do not know that illegal copies have been made. That is where I would dispute Sir Robin’s opinion of what orphans are.

Secondly, there is a problem of definition. Trying to prove an orphan or make a list of orphan works is, it appears to me, rather like trying to prove a negative. An orphan work is only characterised by the fact that, at the moment you are searching, you cannot find the rights holder, but tomorrow you may be able to. Therefore, the search is only as good as the tools available with which to carry out the search. I would note that, whereas the Government intends to legislate for commercial use of orphan works and extended collective licensing, which we will come on to later, I am told it does not intend to legislate for the Digital Copyright Exchange, which might prove to be the database necessary to finally carry out a diligent search to confirm that a work, for the time being, is orphan.

Q160 Chair: Could you keep your comments as brief as possible? We only have a limited time span.

Paul Ellis: I will; sorry. Of course.

Q161 Margot James: Mr White, might you have another view, coming from the British Library? There are a lot of orphan works there, aren’t there?

Ben White: I have a slightly different view, yes. We have been very much involved at a European level in discussions on orphan works since 2006, and there are a number of issues here. Whereas I sympathise with many of the issues that Paul has raised, I sometimes feel that the issue has been looked at through a slightly different lens. The economic benefits of mass digitisation are enormous. We have just published a study ourselves, where 43% of books from 1870 to 2010 were orphan works. In any largescale projects, orphan works will be an important part.

What the Government is suggesting in terms of a licensing solution is pragmatic, sensible and of course something that exists in Canada, Japan, Scandinavia and Hungary. There are many countries that are doing this. At the moment, I hear the concerns from the photographers, but I actually think it will put them on a stronger footing for two reasons. One is we are the UK lead for something called ARROW, which is essentially a federated database and processes in and around clearing rights. The European Visual Artists and also CEPIC, which are the European picture industries, are now part of ARROW, so they will be feeding their databases of visual photographs and artistic works into ARROW.

At the moment, the problem that Paul and has colleagues perhaps have with the BBC and Facebook is they need to take these organisations to court; there needs to be an injunction to stop the use. What we are talking about here is a licensed approach. Therefore, if they find that their work, after a diligent search, has been used, then they approach either the Government or the collecting society and have the right to remuneration. There will be diligent search up front, and nobody needs to be taken to court downstream. They can approach the collecting society or the Government and say, "My work has been used. I do not want it to be used," or actually, "I want fair remuneration." To me, that seems a very pragmatic solution that exists in many other countries already.

Chris Marcich: We are also involved in work on this issue at the European level and in other countries. It is fair to say that the situation varies from sector to sector in the content industry. A sectoral approach is warranted here. There may well be an orphan works issue for certain sectors. On the audiovisual side, diligent search will identify the authors and the rights holders of audiovisual work, so there is no problem and therefore there is no need to legislate for the audiovisual sector.

Q162 Margot James: Would anyone else like to comment on the effective functioning and the economic side, and also the EU Orphan Works Directive? Does that not already go far enough?

Richard Mollet: That is in the process of being done. I will not say this often, but I agree with Ben on the orphan works proposal that Hargreaves has. The Directive we agree with as well; it goes slightly less far than Hargreaves. It does not necessarily imply a licensing system and we would like to see that. Both the Directive and the British framework that will plug into it are the right way to go for rights holders. Paul’s issues are valid. I am sure they can be worked through, but publishers suffer from wanting to use works that are orphan as well. It is a position where rights holders themselves want to see a solution to this. Either the Directive and/or the Hargreaves proposal will solve it.

Q163 Margot James: When you come back, Paul, could you say why you think or do you think that photographic works require special treatment? If you do, could you give us your reasons?

Paul Ellis: By all means. Before I do that, to touch on the EU Directive briefly, Stop43 believes it is largely very sensible. It is conservative; it is cautious. To begin with, it does not include visual works such as photographs and graphic works, and there are good reasons. Its only real problem, as we see it, is that it intends to have a work declared orphan in one country therefore declared orphan across the EU. We wonder how it might be possible for us to question Albanian collecting societies or whatnot. There is a language problem there that needs to be dealt with.

Specifically the problems with photographs, which I have included examples of in the evidence we gave to you, are the privacy and exclusivity problems. You cannot tell, just by looking at a photograph, why it was taken and what the internal contractual structure might be. It might be a news photograph; it might be a PR shot; it might be a commercial photograph for exclusive use by the client. There is the market rate problem. Obviously a news photograph has a very different value from a commercial advertising photograph. The costs of the production of the photograph are brought to bear, as they are with any other kind of property, in terms of the licensing fee that you might charge for it. There is the problem of misrepresentation. Recently we have just seen a poster in Camden of Boris Johnson apparently endorsing a website that facilitates extramarital affairs. Now, Boris’s private reputation and, indeed, his public reputation notwithstanding, I am quite sure that Boris did not choose to endorse that website. He has been misrepresented. This will be a consequence of the commercial use of orphan works.

Foreign rights holders: inevitably the photographs of rights holders living in other countries will end up being declared orphan in this country, and will be licensed for commercial use in this country. We can quite easily see a circumstance in which one of those photographs might belong to a person who has registered it with, for example, the US Copyright Office. For a registered image, each breach can be worth up to $150,000 in damages, and we have heard no word from Hargreaves or anybody else about how people who license orphans here in good faith but who have US assets might be protected from action brought by foreign rights holders. For all of these problems, we feel that there could be no legal certainty over the use of orphan photographs. No matter how much people might like that legal certainty-I know that many people in this room dearly wish for the legal certainty-we fail to see how legal certainty can be provided.

Q164 Julie Elliott: The Government has said that commercial rates will apply to commercial use of content. What do you see as the issues around that?

Chair: Who wishes to lead on that one?

Paul Ellis: I do not wish to hog the proceedings here, but in the normal terms of negotiating a primary contract, the rate is negotiated between the vendor and the licensor. That negotiation is based on many factors. The normal way of licensing intellectual property, as I am sure the pharmaceutical industry will agree, is by its value to its user. This is why photographs are granulated in their usages and why each form of usage is charged for. There is a benefit from that for the user: they do not have to pay for more uses than they actually need. Of course, for this to happen there has to be a primary negotiation. The commercial use of an orphan in which the rights holder is not present of course cannot compensate for that lack of primary negotiation.

Let me also point out that a primary negotiation between vendor and rights holder will result in a licence fee that is equitable to both and a commensurate tax take from that licence fee. Right now, it strikes us that the Government needs as much tax as it can possibly raise.

Julie Elliott: Would anybody else like to comment?

Chair: I know Brian had a supplementary to this. Could I just bring him in before you ask your next question?

Q165 Mr Binley: It gives me the opportunity to bring it in earlier than I might have been able to. Hargreaves states that consumers are currently confused between legal and illegal music when they go online. Can I ask what you see? It particularly affects the cinema industry, I assume. I am not sure Hargreaves has an answer to this, and I wonder whether you think that is right. If that is right, what do you see as an answer?

Chris Marcich: I think that there is increased awareness of the distinction between legal and illegal. There are causes for confusion and I do not think the Hargreaves report goes to those issues. For example, you will find that, if you do a search for a particular audiovisual work, you will be referred, more often than not, to a long list of illegal sources for the content before you ever get to a legal source. That issue of how content is indexed goes both to the point that there is a lot of freedom in terms of indexing right now in socalled "nonconsumptive use", and also an absence of responsibility around how these services are provided to consumers. There is room for improvement there.

Richard Mollet: I would agree with Chris that part of the consumer confusion, and this goes for literary works as well, is that illegal sites look professional. One of the reasons they do is because they often have advertising down the sides of them. That is why we are asking online advertising providers like Google-and to be fair to them, they are acting on this-to take away the adverts from sites that they know to be infringing, so at least the consumer is not presented with what looks like a professional site. It is one of the ways in which we can get rid of some of that consumer confusion. There are so many great legal services for published works, but they are being infected, if you like, by the presence of illegal sites, which are very readily findable on search engines.

Q166 Julie Elliott: This is to Paul at Stop43: what solution would you propose for the treatment of amateur photographs?

Paul Ellis: Everyone is an amateur photographer in the modern world. Everyone sitting in this room is a photographer. All of us, I am sure, have cameras. Those of us who have blogs and Facebook pages are published photographers. Amateur work can match, in terms of aesthetic quality, the work of professionals. It is often argued that, because amateur work is not made for commercial gain, it should be free game for commercial exploitation. It strikes me that capitalism is based on the strong enforcement of property laws and property rights, and that, under capitalism, anything can be of potential commercial value. If one of you sat here took a photograph that ended up on the front page of a national daily newspaper, then I think you would understand that front page daily newspaper space is of great commercial value to its publisher. Why should you not participate in that value? I think we are going to come on to the Digital Copyright Exchange National Cultural Archive idea.

Chair: We are going to deal with that in a moment.

Paul Ellis: Of course. I simply say that, in the context of that idea, we can fairly deal with amateur photography in a similar way to professional photography, and protect all photographers, including everyone sitting in this room, from unfair exploitation and from the breach of their human and copy rights.

Ben White: I would like to make two points: one is again to stress that in Japan, Canada and Scandinavia, where they do have solutions for orphan works, photographs are not treated any differently from any other work. They found a solution in all those countries. In Scandinavia, this has been going on for 50 years; it has not really been an issue. Again with the licensing solution, if people find their work has been used, if they have not opted out, they can ask for fair compensation or for the work not to be used. There are mechanisms to ensure that we have a pragmatic solution.

The other important thing to understand is that, from the cultural sector, what we are talking about is putting up books, photographs or artistic works of about 500 kilobytes. I used to run the picture library at the British Library. Nobody approaches us for 500kilobyte web resolution photographs or artistic works; it is 50 megabytes. It is 100 times larger. We need to make a clear distinction between webready and commercially viable photographs. There is a huge difference. We need to look in the details of this.

Chair: Can we go on to the Digital Copyright Exchange? Nadhim is going to come in on this.

Q167 Nadhim Zahawi: Thank you very much, Chairman. I think Paul just touched on it, but what are your overall views on the proposals to create a Digital Copyright Exchange?

Chair: Again, I would be grateful if everybody did not repeat at length. Who is going to lead? Chris, you looked as if you were.

Chris Marcich: I am happy to. The answer is that it depends on what it is. If it is an answer to some of the issues that are out there now in the area of information to consumers and potential users, so that they know where to go to clear rights, there could be a contribution made by the Digital Copyright Exchange. We see the potential for a useful tool to evolve, so long as the involvement with that tool is voluntary and so long as those who are stakeholders in it have a chance to provide input, and so long as it does not become a system that effectively becomes one that facilitates mandatory collectivisation of rights management. Those would be our preliminary remarks on that.

Richard Mollet: I would agree with all of that and say that the Hargreaves review and the Government response both envisage this happening rather quickly. There is an indication in the Government response that they would have a convenor of this appointed by the end of 2011 to say how this is going to move forward. We want it to move forward; the Government has not yet appointed that convenor and I think that they need to get on with doing that. Otherwise, this is just going to be a Hargreaves pipedream.

Ben White: From our perspective, again we think the recommendation is extremely appropriate. We have been the UK lead on ARROW, which I referred to earlier on, and that was actually the result of EU funding and EU incentives to actually ensure that different stakeholders pool databases and information. I do think that there is some kind of room for incentives here. Again as an organisation that spends hundreds and hundreds of hours looking for rights holders trying to clear rights, anything that can unchill the chilling effect, i.e. facilitate rights clearance, is only going to be good for UK plc. One thing again we have to be very mindful of here is that there is a lot of demand for Englishlanguage material abroad. We have worked with Apple and have put on the iPad some 19th century books. It was the thirdmostdownloaded app in the UK in June, and now there are 250,000 subscribers globally. That is a huge print run. There are real strong economic reasons for why we need to facilitate things like the Digital Copyright Exchange, extended collective licensing and orphan works.

Q168 Nadhim Zahawi: Paul, Ben has told us about the ARROW project. How are Stop43 proposals for the National Cultural Archive different from that?

Paul Ellis: They are rather more ambitious, to be honest. Our proposal was gone into in detail in our submission to Hargreaves, and I have given you a précis of it in our submission to you, but it intends to do rather more than simply just be a digital market. In large part, it is based on the concept we came up with of cultural use. As I have said, we believe, in fact we are very sure, that the commercial use of orphan works and extended collective licence of works breach Berne, largely because they breach the Berne threestep test in Article 9 of Berne, in that they interfere with the normal exploitation of the work. We tried to find a way around that and we came up with the idea of cultural use, the idea being that, because photographers and all creators are also consumers of culture, and because copyright artefacts are almost all cultural artefacts, we do not want to see these things rot; we want to have access to them for our cultural edification ourselves.

Therefore, we came up with the idea that perhaps we could envisage an online gallery, in which orphans could be presented simply for people to look at, in the way that you go and have a look at a painting on a wall in an art gallery, or indeed that painting on the wall in this room. I can sit here and look at it, but I cannot copy it, take it away or scribble on it. That is our concept of cultural use. We move beyond that based on facilities that are becoming available-this is for photographs specifically with picture search-to use orphans as a lead to equivalent visual works that might be available for normal licensing, because the rights holders are available. This therefore then became the economic stimulus idea.

There are problems with digital infringement, which were very well described in the recent Newzbin2 judgment, in which Justice Arnold made very plain in case law now that online infringement is within the remit of human rights law. To overcome the problem of digital copyright infringement, which is of course a problem with machines, the solution must in large part rely on machines. That implies a rights registry. This is of course where we are all in agreement.

Q169 Nadhim Zahawi: I guess what you are saying is that you are against the Digital Copyright Exchange?

Paul Ellis: No, not in the slightest. We are for the Digital Copyright Exchange, so long as it works in a neutral way.

Q170 Nadhim Zahawi: How does it help photographic businesses over and above what Getty Images does?

Paul Ellis: You can go to Getty Images and you can put in keywords and you can search for a picture that suits your keywords. Alternatively, you can do what my daughter does. She goes on Google Images and looks at pictures of dolphins. She loves them; a screen full of dolphins comes up. There is the perfect picture for your photograph for your travel company organising swimmingwithdolphins trips. Would it not be nice if one could click on that Google Images picture and get a link straight through to the rights holder and license it with automated licensing facilities? In fact, you can right now. There is a Getty company called PicScout that offers software that does exactly that. That is the basis upon which we have rested our entire National Cultural Archive proposal. This is how we envisage licensing at this low level generating new licence transactions, bringing transactions in from the black economy to the white economy where they can be tracked, and from where tax receipts can therefore be generated.

Q171 Nadhim Zahawi: Can I just move on to the diligent search idea? How would you define a diligent search of orphan works?

Richard Mollet: Consensually, both rights holders and wouldbe users would have to preagree what counted, and it would depend on the different works. In our case, the ARROW database that Ben has referred to would be one place to look and the licensing societies that exist would be another. What is crucial, howsoever it is defined, is that both sides have to agree and, when the person has done the diligent search, they have to say to the collecting society, "I have had a good look and I could not find it." The detail of that would be worked out according to different works and different countries, indeed.

Q172 Nadhim Zahawi: Could the law require the use of automated technology, do you think?

Richard Mollet: I would be surprised if the law required it but, yes, if that technology existed, it would be hard to say you were being diligent if you did not use it, I suspect.

Ben White: Terms like "diligence" and "reasonable" are well-understood legal principles, so I would agree with Richard that diligent search is clearly needed. Actually, what constitutes diligent search would vary depending on what you are potentially digitising. I will give you a couple of examples of the kinds of things that we do. For example, for the 140 books, of which 43% were orphan works, there we did a Google search. We approached the author society; we approached the Publishers Licensing Society; we went through old trade directories; we wrote to the descendants; we have advertised in the past. About half of those were commercially produced books.

Another example is of sound recordings that we have digitalised en masse. One of the collections that we have done is traditional music from the British Isles. Something like 98% of that was unpublished sound recordings. In that instance, we essentially engaged with the community, so we spoke to people at the English Folk Dance and Song Society in Camden; we wrote to some of the people who we knew because they had deposited with us the sound recordings at the BL. This is not commercially produced material; this is stuff that just sits on reels. Therefore, a book you would do through ARROW. For unpublished sound recordings, you would have to find other mechanisms to do diligent search. I do not think there is a "one size fits all", but there is an understanding of what "diligent" and "reasonable" mean. What we are envisaging here is always thirdparty oversight of that process, whether that is by Government, of the library directly or, for example, the collecting society again being monitored by Government to see if they have actually done a diligent search.

Q173 Nadhim Zahawi: Paul, what do you suggest should happen legally if the author of an orphaned photograph were to come to light at a later stage? Could insurance play a role-i.e. the user can insure against such an action?

Paul Ellis: As far as insurance is concerned, I simply do not know, because the use of an orphan is a breach of Berne, as we say. It is also a breach of the rights holder’s human rights. In our proposal, we propose that all works, whether orphan or not, should where appropriate-because of course the content of some images is not appropriate for public viewing, for various reasons-be made available for the public to see. If the public can see them, the rights holders stand a chance of coming across their photographs or their works and being told that they exist, and therefore reclaiming them. We think that, as far as orphan works are concerned, for the public edification this is sufficient, especially when tied in with means whereby they can be used to switch commercial users to equivalent works for their uses.

Q174 Nadhim Zahawi: Can I just move on to extended collective licensing? The Government has said that extended collective licensing will apply to sectors that choose to adopt it. What are your respective positions on extended collective licensing?

Richard Mollet: I will be very brief. For the published sector in the UK, we would not want extended collective licensing other than in the orphan works scenarios we have already been discussing.

Ben White: Extended collective licensing started in the early 1960s in Scandinavia. Essentially it is that, for certain specific uses, a collecting society, which is deemed to be representative of a particular sector, can extend its mandate to not only those individuals who are registered with them but to all creators of that sector. It is used for certain specific uses, such as broadcast radio and certain educational purposes. What we have seen more recently is that extended collective licensing has been adapted to facilitate mass digitisation. Again going back, I have been part of stakeholder discussions all last year in Brussels. There is an MoU, which the publishers, the collection society sign, that essentially envisages extended collective licensing for what are known as "outofcommerce works", so again in our case millions of works across the 20th century.

France is currently preparing legislation to allow mass digitisation of Frenchlanguage material as an economic stimulus package. By definition, if you are digitising a large bulk of material, there will be orphans, there will be registered rights holders and there will be rights holders that do not register with collecting societies. I write on copyright issues; I am not registered with a collecting society. My brother is a doctor; he does not register with a collecting society. He is not an author in that sense. What it does is provide a legal basis for this extension effect, which has been in operation for over 50 years in Scandinavia.

Chris Marcich: I would just like to add that, for the audiovisual sector, including in Scandinavia, these systems operate on the basis of an optout clause, and so it is possible to opt out and preserve the commercial relations that exist. It is a fallback solution where other solutions do not pertain. That is extremely important to keep in mind in looking at extended collective licensing. It is a secondbest solution to the extent that you want to look at it at all as a solution. We do not think that, in the audiovisual sector, there is a need to go there.

Q175 Nadhim Zahawi: Ben looks slightly puzzled by that answer. Do you want to come back on that?

Ben White: Yes. Again, it is for specific uses only. In Denmark, for example, the Government has to agree that specific use is essentially an instance of market failure. It is often mass usage. How can you clear many rights in hundreds of hours of film for every single rights holder or every single rights holder in a book? It is very, very complex. What extended collective licensing does is, in the case where it is accepted by Government that individual right by right by right is not practical, make it acceptable for certain specific uses in cases of market failure.

Q176 Nadhim Zahawi: This is to both Ben and Paul. Just thinking about the photographic market, what effect would there be on the professional photographic market if an organisation such as yours, the British Library, was to massdigitise all photographs with an internet startup in a similar sort of way that deals were struck with Amazon and with Google? What would happen to the industry?

Ben White: Nothing. As Chris said, this is not an activity that goes on behind closed doors. The collecting societies have to advertise their activities. Government regulates what the usage is and rights holders can opt out. Again I go back to the point that you are not putting 50megabyte images up on the web; you are putting up things that are a hundred times smaller, which pixelate if blown up. This is wellregulated; there is intervention by Government. Essentially, it is very unlikely that we are going to approach each and every photographer, so their direct business, their day-to-day business being commissioned to do something for a magazine or a newspaper, is not of that ilk; it is a different kind of usage.

Paul Ellis: It is the thin end of the wedge. If you are going to legislate for orphans, you cannot just legislate for past orphans but you also have to legislate for current and future orphans. The legislation that Ben is proposing for dealing with past orphans will destroy the markets for professional photography, because of present and future orphaning. Extended collective licensing is illegal under Berne. It strikes us, and we have been well advised, that WIPO turned a blind eye to the Scandinavian and other systems of extended collective licensing because, in general, they do a great deal of good. As we said in our evidence, the Nordic extended collective licensing and also the DACS Payback scheme here, which is also illegal, appear to be tolerated because they have almost 100% professional uptake.

Earlier on I mentioned, in the context of orphan works, that we are all amateur photographers. How is an amateur expected to know that a collecting society exists, and either join it or opt out from it? Hargreaves’ view of orphan works usage and extended collective licensing is, in effect, enabling the commercial use of usergenerated content, socalled, including your photographs. Will you all know to opt out? Two weeks ago, Sir Robin Jacob here expressed his confusion at the meaning of moral rights, which I hope we will come on to.

Chair: We are dealing with that next.

Paul Ellis: The fact is this: I think a collective licensing scheme, such as Kopinor, which extends in certain ways to encompass the works of authors who are not members, as DACS Payback scheme does, is acceptable when it does a great deal of good, when what you might term its collateral damage to nonmembers is small and when most of the players in that market, in that industry, being professional, can be expected to understand the structure and the rules of their industry, be a member of the collecting society and know to claim. This is entirely reasonable. Hargreaves reverses this position and the ECL is intended, it seems to me, to facilitate the use of uncounted amateur works, the authors of which cannot be expected to know this structure and to act appropriately.

Richard Mollet: Just to come in on that, in a conversation about extended collective licensing, it is always blithely said, "Oh, well if you do not like it, you can opt out." This was the crux of the Google Books settlement in the United States. Even there, with a much looser copyright regime than ours, a US judge, Judge Chin, threw out that settlement. He said it is not good enough to say to an author you can opt out. "It inverses the normal operation of copyright," was the phrase he used in his judgment. We have to be very careful when we blithely say, ‘Oh, it’s okay; if you don’t like it, you can opt out after the fact." Not all rights holders, especially small rights holders, will know that they have been opted in.

Chair: Can I bring Katy Clark in now on moral rights?

Q177 Katy Clark: How would you like to see the law on moral rights adjusted to support the identification of orphan works? Also, do you think there should be a residual right to identify a work on the Digital Copyright Exchange that has been proposed, even if other rights have been waived? How do you see that working?

Richard Mollet: I think it would be good to have good recognition of moral rights. There is a line in Hargreaves where he says in terms, "Well, you know, concepts of justice, fair reward and moral rights have weighed too heavily in this debate, and I want to talk more about the economics." I think that is wrong. Yes, of course you have to have the economic debate, but you cannot jettison the moral right. The right to attribution and the right to object to use of the work absolutely have to be apparent. It is part of copyright being a property right that you can say, "No, I am sorry; I wrote that. You have to notice that I wrote it and I do not like you using it." It could be a picture of Boris Johnson on a poster or whatever it is. The ability of the owner of the copyright to say no is absolutely fundamental.

Paul Ellis: Again, bringing it back to the idea that all of us are amateur photographers, you take your photographs: how do you feel about your photographs? Do any of you enter your photographs into photographic competitions? If so, why do you do it? If they win or if they are published, do you not feel a certain amount of pride that you, as a photographer and creator, have been validated? Your work has been found to be good enough to be used in this way. I certainly do as a photographer. I therefore propose that authors and creators do feel that their creations are an expression of their personality. I was having this exact discussion in a pub last night with a barman, who agreed with me, which was very nice of him.

Chair: We will not ask after how many pints.

Paul Ellis: It was mild. Therefore, when people see their work misused, as rather amusingly happened to the wife of an anticopyright campaigner called Cory Doctorow, whose work was used by the Daily Mail without permission, we have a valiant anticopyright campaigner suddenly reaching for the CDPA in order to try to get his rights. This is the point about a moral right: how can you trade your property if you do not have the right to assert your ownership of it? The CDPA at the moment includes two clauses that are very problematic for us. The first is Chapter 4, the exceptions to moral rights, in which newspapers, magazines and some books are exempt from moral rights provisions. It is well recognised, and I am sure that Ben will agree with me because he has done the research, that this is a major conduit through which photographs are orphaned. It may have been justified on economic grounds in 1988, but digital networking, all the logging and use of metadata that goes along with that in the modern world mean that these rights are obsolete and should be repealed, in our view.

Secondly, under the CDPA, our moral rights are not automatic; they must be asserted. This gives rise to the situation in which someone wishing to use an orphaned work can assume that the author did not assert their moral rights. We need the law changed so that moral rights are automatic and unwaivable. Such rights are automatic and unwaivable in Germany and, notably, Germany has a thriving publishing sector. It seems not to be suffering from this.

Q178 Katy Clark: What about the Digital Copyright Exchange? Do you think it has got a role?

Paul Ellis: Most certainly it has a role. It has a role not only in being a register of metadata, of authorship and rights; in fact, there are various models around the world that I think I have alerted the Committee to and which I would be very happy to discuss in greater detail.

Chair: We are just coming on to tmetadata.

Paul Ellis: Of course it has a role and, furthermore, it has a role insomuch as, if an orphan work is exhibited in the socalled National Cultural Archive for cultural purposes and a rights holder therefore discovers it, they should be able to readopt it. That again brings moral rights into play. Lastly, of course, there is the right to object to derogatory treatment, which is a vital right and one that cannot be exercised if the rights holder does not know that their work is being used in ways with which they may not agree. I think we can all envisage circumstances, just as those I have described for Cory Doctorow’s wife.

Q179 Chair: Before Katy comes back, you use "CDPA". Forgive our ignorance on this, I have just been prompted by what it is, but perhaps you would like the Committee records to say so.

Paul Ellis: I am sorry about the acronym. It is the Copyright, Designs and Patents Act 1988.

Q180 Katy Clark: What sanctions would you like to see against those who do strip metadata from photographs to remove traces of ownership, and how would you enforce them?

Paul Ellis: There are two problems here. First of all, certainly as far as photographs are concerned, all of the digital photographic file formats in widespread use-all of them-have no means of maintaining their metadata. It can very easily be stripped and there are billions of these things floating around, with many millions of devices that make many millions more photographic files every day. That horse has bolted. I think it is necessary to have sanctions whereby organisations that deliberately and knowingly strip metadata on a regular basis can be brought to heel. The BBC and Facebook are two of these. Ben suggested we should take them to court. We are private individuals; we cannot afford to take the BBC to court, unfortunately. No one supports our campaign financially; this is all voluntary work.

Having said that, there are ways of reuniting an orphaned digital file with its missing metadata. This is a vital role that the Digital Copyright Exchange National Cultural Archive should play. I mentioned the PicScout system before. There are other systems, but the PicScout system very elegantly manages to reattach missing metadata to an otherwise orphaned image and, therefore, bring it back into play and potentially make it commercially viable with concomitant tax receipts.

Q181 Katy Clark: So what sanctions would you have?

Paul Ellis: Sanctions? I will confess I have not specifically thought this question through, so I am on the hop here, but I see no reason why deliberate removal of metadata should not be treated as flagrant copyright infringement, because it is, and that properly effective, proportionate and dissuasive remedies should be available for this. I should stress that, under the current copyright regime in this country, it is our belief that the remedies available are not effective, proportionate or dissuasive, as is required by the EU Copyright Directive.

Katy Clark: If a member of the panel wanted to get back on that, please do so in writing.

Chair: I always conclude my session by saying if, in retrospect, you feel that there is additional information that you would like to give the Committee that you did not think of when you were actually responding to our question, then please feel free to do so. Equally of course, we may suddenly think of a question we did not ask that we should have, and we will write to you. Can I bring in Ann now, please?

Q182 Ann McKechin: Can I move the panel on to the issues around formatshifting and contentmining? Chris, perhaps I could ask you first of all: in your written evidence to the Committee you said that formatshifting exceptions should only apply to music. Why do you think that music and not audiovisual is distinct?

Chris Marcich: The concept of formatshifting in our sector is being accommodated by market solutions basically. Technology is now being made available that will enable consumers to legally acquire content, to store it on the cloud and to move it around on platforms of their choosing in their home environment. You have the marketplace delivering technologybased solutions to the issue of formatshifting to meet consumer demand. Beyond that-it is for other sectors to speak about whether they think it is a solution for them or not-there is also the issue of how far you can go in stretching the private copy exception without really triggering the need for levies. Here in the UK, we are in that grey area now where it is still possible to say that the levies are not necessary but, if the exception were extended beyond the current situation, I believe that levies would be required. That is a decision that policymakers have to take of course but, to us, it does not seem like a necessary step to take.

Q183 Ann McKechin: How do you respond to the criticism in some parts that digital rights management prevents legitimate activities such as research and new product development? Are you really saying that the development of cloud technology will be a solution to that type of restriction?

Chris Marcich: Cloud technology will enable consumers to do certain things that they have not been able to do to date, and will enable them to do them more easily. In terms of research, there are exceptions now that allow for certain types of research. We are perfectly willing to look at the exceptions that are noncommercial and that might be needed for a film archive or film research purposes, if there is a need to expand in that area but, broadly, anything that starts to get into the area of commercial activities, where the market is dealing with needs, we would argue does not require an additional or wider exception.

Q184 Ann McKechin: You argued against permitting nonconsumptive use, but you said just a few minutes ago that there is a grey area around this issue about domestic consumption. If people use it within their house, among their family members or give it to their neighbour, is that a legitimate use without requiring levies or licences?

Chris Marcich: The way the technology is evolving now, yes, it will be a legitimate use of legally acquired content to move it around platforms in the household. The nonconsumptiveuse issue goes beyond that; it is really about how far you go beyond private copy exceptions and so forth in creating a whole new exception that really amounts to a much wider fair use exception, which would enable certain types of activities that are unforeseen in terms of their consequences right now. It is perfectly possible that an exception of that sort would provide a new subterfuge for rogue sites to be able to justify their activities. They could argue that they are nonconsumptive and that they simply are a facilitator, an enabler, and that is a problem. We have seen those sorts of arguments used already today and, if we were to widen the exceptions in this area, without really looking at the need for it, we would run the risk of creating new and unintended problems, and solving a problem that does not exist.

Q185 Ann McKechin: If I could just move on to Ben and Richard, could you outline your views on contentmining, which is arguably a type of this nonconsumptive use that we have just mentioned?

Richard Mollet: Sure. Contentmining is something that publishers wholeheartedly and fully support, and indeed we are fundamental to the development of the technology. It is still a very nascent technology, and 88% of large publishers across Europe take only about 10 mining requests a year. This is still something that is in its infancy. What is vital to acknowledge here is the investment that goes on from publishers in the development of infrastructure and ongoing support to allow mining to happen. It is not just the case of having the data out there and letting a crawler go and look at it; it has to be prepared in a way that crawling tools can understand.

In the same way that you could not walk into Ben’s library and just see a room full of books that had not been sorted according to languages or subject areas, so too online, publishers have to invest in making sure that the works are ordered in a way that technology can understand. That only comes with investment and with working in partnership with the wouldbe miner. Again, it is not a case of just saying, "Come on in and look for what you want." It has to be provided for the searcher in a way that they want. For instance, what subject area are they looking at? In what format do they want the work? That requires the investment of the publisher.

To build on Chris’s point, there are a number of risks if one were to take away the management of that access, as Hargreaves suggests, and say, "Well, let us just have an exception." In other words, you never have to ask; you can just go on in. There are three very big risks. One is the technical risk that such untrammelled mining would, to the publishers’ platforms, look like a denialofservice attack. All of the technologists who work in the publishing companies will tell you their systems would fall over; they just would not be able to cope, rather like a broadband connection being overwhelmed or the degradation of use by overuse. There is a technical risk, which means that access needs to be managed, but there is a commercial risk too. Publishers have to know that the person who says they want to come mining are who they say they are, and that they are going to use it for noncompeting use. Of course, there is no way of managing that if you have taken away any need for managing access.

Finally, there is a competitive risk to the UK because if, as Hargreaves suggests, we were the only country in Europe and, indeed, the world that did not have any management of access, you are basically saying to anybody, "Come on in and get our data. Get our text. You can do what you want," there will be no revenues going to anybody at all. Of course, in every other country in the world there will be. If you are a publisher, why would you want to come to a country where you are exposing yourself to technical and commercial risks; you would go to a country that did not have an exception. That is why we support mining but think that access needs to be managed.

Q186 Ann McKechin: Ben, do you have an alternative viewpoint on this?

Ben White: I do. Richard raised quite a few issues. First of all, it is important to say that, again, it is very right that the Government is looking at this. New technologies provide new opportunities. Copyright law was really framed around piracy of books-Charles Dickens’ work being pirated in the States-i.e. a work being substitutable for another work. What we are talking about here is the extraction of information and nuggets of knowledge. In the States, search engines as well as organisations like IBM and HewlettPackard assert fair use-that fair use allows text and data mining.

In Japan in 2009, they introduced a raft of copyright law amendments, because they felt that they were really losing out in terms of the internet economy. One of the exceptions that they introduced was for text and datamining, because they argued that copyright covers the creative expression. There are many statements in international instruments that make it very clear that copyright is around creative expression, not facts. We are talking about words like malaria and mosquito being extracted. We have an issue that, in terms of international competitiveness, very large countries with very strong tech industries have introduced an exception or already had one, in terms of the US.

What we are talking about are two things. One is facilitating innovation for technology companies. Particularly what we are interested in is facilitating medical research. What we are talking about is an act for material for which you have licensed access. The National Health Service and universities spend hundreds of millions of pounds a year on scientific information. A scientist could make notes from a book and extract the facts; that is not a copyrightable act. It is simply because technology copies that we are having this discussion.

Q187 Ann McKechin: Obviously the UK has a proven world record in terms of scientific and medical research, so it is in a particularly special position. Richard is talking about some degree of control. If universities and researchers-bioscience has expressed an interest in this-come from an authoritative source, clearly for reasons of research, that is a way in which you could potentially control the data management. You do agree that there needs to be some control of people’s access.

Ben White: What we are talking about here is legal access to the material that you mine. In terms of scientific material, that is material you have bought that you licence, which as a country we spend hundreds of millions of pounds a year on, in order to extract a protein that appears to be linked to this particular cancer. It is extracting the nuggets of knowledge. This is surely a very good thing that we as a country, given our strong research sector and also our strong pharmaceutical sector, need to support. What it will do is speed up medical discovery and scientific innovation.

Chair: We are running over time and I have another panel to interview, so can you make your contributions as brief as possible? I want to bring David Ward in on SMEs in a moment. Richard did just indicate, but make it very brief.

Richard Mollet: Thank you, Chair. As Ben was saying, this is as if we were trying to copyright facts. No, we are not. Of course copyright does not protect facts. Machine reading involves a reproduction and copyright allows for publishers to manage reproduction of their works. I cannot say strongly enough: we support content mining. It can only work well if we are involved in the process and managing the access.

Q188 Mr Ward: I do not think it is betraying a secret to say this has proved a difficult area for some Members of this Committee. It is quite a technical area for many of us, but it has been very useful to listen. At a personal level, we are all photographers; we are all authors in many ways as well. There was a criticism that the panel did not represent and therefore possibly did not take into account enough the views of small businesses. Really it is that particular question: do you think that the overall review took sufficient account of the views of interests other than the big business corporations and so on?

Alexander Jackman: From the Forum’s point of view, we came across the review, we believed it to be of significant interest to our members and we responded. I certainly do not recall being specifically invited to contribute our views. If you look at the list of submissions on the review website, you may find one from the CBI, but otherwise there is a bit of a lack of contributions coming from business rep bodies although, conversely, there are a number of contributions from small businesses directly themselves. Whether or not these have been invited or whether it is just by chance that they have come across this review because they have an interest in IP, I am not sure, but certainly I think more could have been done to garner SME views.

Chair: Can I move on, because we have a couple of questions now from Paul Blomfield on IP and SMEs? Yes, Brian, just make it quick.

Q189 Mr Binley: Does not the view of the British Library, which seems to be really very liberal on this issue, help SMEs? Does it not give them more information than they might otherwise have to use in building their businesses?

Alexander Jackman: The British Library as an example is an extremely good source of IP for small businesses. I was saying before I came into the Committee, I spend quite a lot of time in the IP research centre in the Library itself. It is almost a home from home, so it is a very valid point, yes.

Chair: Would members, on this issue, if they feel they have anything to add, just submit it to the Committee in writing afterwards, please? I will just bring in Paul on IP and commercial advice to SMEs.

Q190 Paul Blomfield: When we met Robin Jacob, he certainly gave us the impression that this is an area of very specialist law. I wonder whether you feel that patent attorney and specialist IP legal providers are really set up to deal with the need to help SMEs to innovate and grow.

Alexander Jackman: I will be as brief as possible. Of course our members would value the opportunity of a onestop shop, if you will, where they can get financial, legal, commercial and regulatory advice on IP, but I think that is going to be much more useful to the startups or businesses that are new to IP, rather than those that have been in the market for a while, which might require slightly more specialised services. From our point of view, we would quite like to see the IPO establish a few more sectoral specialists for those more established IP businesses to go to for information.

Ben White: We run courses on intellectual property-so trademarks, copyrights, registered rights, etc-and we are in the process of joining up with Newcastle City Library for them to run similar courses in Newcastle. I have been on some of these courses. Probably what Robin Jacob is talking about is the cutting edge-very large companies with large budgets. IP is, as we know, a very complex area, and certainly the organisations that we work with tell us it needs to be simple. Before we even speak to a lawyer, we need to know what the questions are, because they are going to charge us whether we ask the wrong questions or the right ones. Actually, pretty simple targeted SME training goes an awfully long way to make companies feel solid and able to navigate this complex area.

Q191 Paul Blomfield: I can see the value in that, but I wonder if there is any intermediate level between training and supporting the new setups, and then the higherlevel legal support. Is there a role for lowercost providers to offer more integrated IP legal and commercial advice?

Richard Mollet: It is certainly something trade bodies do up to a point. We have 117 member companies and most of them are small businesses. We do run legal helplines and provide copyright advice for those companies. That is one way in which you can get this halfway house. What those businesses want is certainty; they want to be able to trade on their property rights and not to be told that, because Google wants to do something with them, sorry, you have to give them up.

Chris Marcich: It is also important to recall that, for copyright, there are no formalities and requirements for registration. The task is different for small- and mediumsized enterprises in copyright from what it would be in other areas of intellectual property, there being no mandatory registration requirement for copyright.

Alexander Jackman: I guess I can give you a very brief example from one of our members-a tool manufacturer that employs around 40 people and has, I think, 10 active patents in the UK and across Europe at the moment. The big problem they face is with an importer. The importer has had the product made abroad and shipped it in a lot quicker. The member is taking them to court. They are facing in the region of £250,000-plus costs already, and the importer will not give in. It should be an openandshut case. There is certainly a role for trying to stop these processes going down the road as far as they do and costing the companies the kinds of sums they currently are.

Q192 Paul Blomfield: That leads me into my next question, which was: what disadvantages do SMEs have specifically in enforcing intellectual property overseas?

Alexander Jackman: I will give you a very specific example again: a company that specialises in creating conference call and voicemail facilities had a Russian contractor that took over the service and provided it to 10 carriers across Russia. It was a yearly subscription. One year, the subscription did not come in. They looked into it. The Russian body had hacked into the system and found out how to work it, so it had clearly breached the copyright. The company had to take a number of factors into account-a complex Russian legal system, the size of the company that had hacked into the system-and they decided against pursuing it, because it would simply be a Pyrrhic victory. From their point of view, and there are many other examples, some kind of strengthened legal advice, either within the embassies or without, but certainly to support SMEs abroad, would be of immense help.

Chair: If any other members have got any specific other examples or solutions and they would like to write to the Committee on that, that would be very helpful. On that, can I thank you and welcome the next panel. I shall just repeat that we have had to move things along a little quicker than I would have liked, but do feel free to submit any supplementary evidence to us. Thanks very much.

Examination of Witnesses

Witnesses: Pete Wishart MP, John McVay, Creative Coalition Campaign, Chief Executive of Producers Alliance for Cinema and Television, Jim Killock, Executive Director, Open Rights Group, and Robert Ashcroft, Chief Executive Officer, PRS for Music, gave evidence.

Q193 Chair: It is still just morning. Good morning and welcome. Thanks very much for agreeing to speak to us. Again, for voicetranscription purposes, could you just introduce yourselves, going from Robert to my left?

Robert Ashcroft: Good morning, Chairman. I am Robert Ashcroft. I am the Chief Executive of PRS for Music.

Pete Wishart: Pete Wishart MP.

John McVay: John McVay, Chief Executive of PACT but here speaking for the Creative Coalition Campaign.

Jim Killock: Jim Killock from the Open Rights Group.

Q194 Chair: Again, a fairly general question: what are your observations about the Hargreaves report and the Government response to it? Again, I would say, perhaps somebody could lead on it and then others just express either an addition or a contradiction, if they feel inclined to. Who is going to lead? John?

John McVay: Yes. I represent the Creative Coalition Campaign. It is a sector that is in growth. The CBI predicts that the creative industries will be growing by 4% per annum, which, depending on what the Treasury reports, might be eight times the growth in the general economy. While we welcome the Hargreaves review, I think it is important to look at copyright, its role in society and its role economically. There are a number of things that were discussed in the previous session that we do think need to be resolved, particularly around orphan works and strengthening IP enforcement, but critically, and this goes to the heart of Hargreaves, coming up with a real evidenceled approach to issues around use of copyright and the creative industries. We welcome it overall. I would caution that, even in the best of times, copyright is a very sensitive thing to mess around with but, in the worst of times, it is something that Parliament should consider very carefully.

Q195 Chair: Thank you very much. Any additions or contradictions, Pete?

Pete Wishart: As you know, Chair, I led the debate on this in Westminster Hall a few months ago and, since then, I have had a very good look at the review and the Government response. It is a bit of a curate’s egg, with some really almost nutty economic assumptions that I hope this Committee will have an opportunity to challenge, particularly issues to do with the Copyright Exchange and formatshifting. I looked through the review and there are probably about four or five mentions of the word "artist" or "creator". There is no mention in the Government response of the words "artist" or "creator" at all. It is as if artists, creators, musicians and inventors are a grudging afterthought. They should be central to the process. This is the second review that we have had on intellectual property copyright where the artist’s rights are almost completely disregarded. I hope this Committee will have a proper look at the role of the artist when it comes to the creative industries.

Q196 Mr Binley: I want to pose the question I posed to the first panel and remind you that the Hargreaves review states that consumers are currently confused between legal and illegal music when they go online. I have always felt there are easier solutions than the techies suggest actually, and very often the techies never see the wood for the trees. Do you think that there are ways of doing this that are simpler and could be more effective?

Robert Ashcroft: Yes, I do. Thank you very much. It is very clear that, if you put a search term in the Google search engine, you will get, first and foremost, a list of unlicensed sources, and we think that they should be marked as such. We have, as PRS for Music, been working with some of the intermediaries, notably the antivirus companies, to see whether it would be possible to identify sites as being unlicensed in a similar way to their being identified as carrying viruses or other malware. It is technically possible. We think that it would be helpful. We have had some consumer research conducted that suggests that 75%1 of internet users would welcome it and so we think that it should be done.

Jim Killock: I did mean to just start by saying that we welcome Hargreaves. We thought it was a really interesting report and we also thought that it took exactly the right approach in stating, to start with, that this all needs to be based on evidence. However, I think that message has not permeated through the whole of policymaking yet. For instance, we put in a freedom of information request a few months ago asking whether the DCMS had asked for any evidence on precisely this question of website blocking or what to do about illegal content on the web. We asked them if they had a full idea of the range of options, and whether they had any studies or evidence from industry. They came back and the precise line was: "We can confirm we do not hold the information you requested." I think the idea of evidence being at the root of Government thinking is yet to permeate through the Department, but it was absolutely the right place to start.

On this question of consumers, legal and illegal, I do not think there is a huge problem for end users really understanding whether things are licit and illicit at all times. There are times when they might find that difficult, but there are other times when it is more transparent. It is a mixed picture. What is very clear generally is when a legal service is promoting itself; it clearly is legitimate and clearly is a good option. What we have seen around the world in the last couple of years is, when legal services launch, promote themselves and advertise themselves-we can think of services like Spotify, and Netflix in the United States-we see legal consumption rise dramatically and infringement reduce. That is to say, whatever else we think about enforcement, the basic question of marketled solutions driving demand really does seem to work; it seems to be exactly the right way to go, independently of what might be thought of with enforcement.

John McVay: I would agree with legal services. In fact, the UK is one of the leading countries in the world in terms of legitimate videoondemand services, which we started both with PACT and the broadcasters in 2006. Indeed, the BBC iPlayer is one of the most successful VOD services globally, and we should be proud of that. However, the iPlayer has a particular window for how long content remains on it for, for very good licensing purposes for the BBC and BBC Worldwide. You can see Doctor Who for the window it is in, which is 30 days, which I would say is plenty of time to catch up on the episode you missed. In fact, the series will be stacked so you can watch the whole series.

The problem comes when you actually do a Google search for Doctor Who. You cannot find Doctor Who on the iPlayer, and you find an episode on The Pirate Bay two months after it was transmitted. That is the problem, because there are legitimate services. Those services are free: the iPlayer is free; 4 on Demand is free; ITV is free. Those are all free services for content in the UK. The problem comes when, out of the legitimate free window, people want to take the content and own it themselves. That is where the issue about Google listing is a problem, but I would agree with Jim that the UK does lead the world in terms of legitimate services and we have to have the space to do that.

Chair: We have a lot of other questions and I do not want to open up a large debate. Pete, and then come back if you wish, Jim, but make it very brief, will you?

Pete Wishart: We have to resolve this. This is something we really have to fix. We cannot continue to give away recorded works, the works of the film industry, for nothing. That is unsustainable and we have to go forward. The one good thing about Hargreaves is that he suggested we should get on with implementing parts 5 to 15 of the Digital Economy Act. That is the one thing that we could do to address this to ensure that there is a sanction for those who continue to illegally download. Send notifications-nice letters to the ISP account holder telling them, "There is something going in your internet service account. Do something about it. Get it resolved and fixed." We have to end this. If we do not, we can forget about growing our businesses.

Chair: That is nice and decisive, yes.

Jim Killock: As I say, I think that is an entirely relevant approach and that has been shown many times. I just wanted to highlight that we did a quick study of what film was available in the UK, and we found something like half the UK’s top films over the last 20 or 30 years are not available online. We found that most of the content, where it was available for download or streaming, cost more online than it did to buy the physical product. I would remind everyone as well that Netflix, which has decided on countries to expand into, chose not to expand into the UK because of the difficulties in licensing, and instead opted to sell into Latin America and Spain, so our digital market in film is falling behind Colombia.

Q197 Chair: Can I come back to a more general question? Some of you may have seen the contribution that Sir Robin Jacob made when he came before the Committee. He said the failure to address copyright issues destroyed the music industry 10 years ago. Do you agree with that assertion and, if so, what should be done or what can be done about it? Please briefly, Robert and then left.

Robert Ashcroft: I can certainly agree that, 10 years ago, the music industry received a massive shock. I cannot agree that it has been destroyed, and we remain optimistic about the future, but we do need to create a better climate for copyright on the internet, so that these new digital services can thrive.

Pete Wishart: Just to say briefly, the UK music industry is in great health just now. It is probably the most successful period that we have had in UK music for about 1020 years. The issue with the music industry was that it was at the forefront of digital innovation and technology so, of course, it was always going to be first there and first to suffer the issues and problems. What the music industry has done is come up with some very sustainable working models in the past few years, and all credit to them: they have tried to build a legitimate market, even though the market for illegal downloads is still absolutely massive.

Jim Killock: I would just observe a few things about the music industry. Obviously it is doing a lot now to rectify the problems. As the first, it was very slow in trying to adapt and it did a number of things that really worked against it. Particularly it tried to build markets on top of digital rights management, which put off a lot of the people who wanted to invest in digital music, because they were having to buy protected copies that they had no guarantee would work in a number of years’ time. A number of people who invested in those sorts of music formats have got their fingers terribly burnt. We also see that the companies that did most of the innovation were companies like Apple. They were not from within the music industry; they were from outside of it. The music industry itself has found it very difficult to get itself together and to innovate. In the UK, we have seen internet service providers like Virgin repeatedly trying to make deals with music companies to license and provide material. Two or three years after Virgin has announced that sort of deal, they still have not actually managed to implement it. There are some really big structural problems.

Maybe one of the biggest structural problems the music industry has is actually the way they portray themselves and lobby. They come to Committees like this saying, "The only way they we can solve our problems is to get people to legislate." Now, any business that tells you that legislation is the answer to their problems has a serious problem in the way that it is thinking about itself. I have no proof of this but it is my suspicion that the way that they present themselves as being decimated by online piracy is actually having an impact on venture capitalists’ attitude to them and dissuading people with the money to actually get involved with them. I would contrast that sort of approach to the approach we have seen from industries like the book industry particularly. Books are small files; they are easily distributed. Why is the book industry doing really well and managing to create markets where the music industry has had so many problems? I do not think it is about end users’ attitudes. I think it is about the way that the marketing and the development of that industry has pushed itself forward.

Chair: Books may be unhurt. Bookshops, not so much. I do want to get on actually. Yes, Brian, you are indicating.

Q198 Mr Binley: I was slightly taken aback by the ferocity of that particular contribution, quite frankly, because all the evidence I have received is in the opposite direction. I think we need just to note that, because I do feel that our music industry especially is of massive importance to Britain, both culturally and economically. They are being hampered. I repeat: there are simple ways of dealing with the issue of piracy, which none of us want. I just wondered if we might hear one or two of those to get them on record, because that sort of attitude is harmful and it needs correcting.

Robert Ashcroft: Brian, thank you for raising that. The UK music industry is an incredibly successful exporter. We know from looking back at Government statistics that it is quite hard to get a handle exactly on what it is worth. The DCMS itself used to publish an estimate of the value of the music and audiovisual arts combined. They published a figure in 2005, which said it was worth £180 million. This year we will raise £185 million from international copyright value alone. Just to put that into perspective, if you were to ask what the value is of the author’s copyright in the total value chain, it might average somewhere around 6% across the different usages. That would mean that our music export industry is worth about £3 billion to this economy every year, and I think we should be very cautious about abandoning that.

John McVay: The point about investors is investors find it hard to invest in something if they do not think they will get a return. You will not get a return if your assets are being taken from you for free. It is a simple economic truth for all investment.

Q199 Margot James: Leaving aside the law for a minute, should creators and innovators be able to build on the work of others, provided they are paying an appropriate fee to do so? Has no one got any problem with that?

Robert Ashcroft: There are two rights that we are talking about. There is the economic right and the moral right. One of our board members quipped the other day at a board meeting, "I will take the money every time." Others might feel differently. It depends upon the association. I think there should be a moral right; on the other hand, it is quite easy to obtain the rights if you but ask the publisher. There is a healthy market in clearing those rights.

John McVay: In television, we do have a familiar term called "fair dealing", where I am allowed to make a programme that critiques other people’s programmes. I can make the top50 best singles, the top50 Google clips, and you are allowed to use that; that is legitimate, but the rights owners still retain a right to take you to court if you defame them or use their work inappropriately. It is not a barrier to innovation.

Q200 Margot James: How do you respond to the argument that some copying, like music sampling, can actually generate more interest in the original version, which would have a value?

Robert Ashcroft: Once again, there is a market for music samples. I know that the record labels are involved in that market. There is another interesting one, particularly a case that was cited by the Open Rights Group in their submission, where a rapper said that he owed his success to a parody that had been made of his work. As it happens, that parody had received clearance, so it was more of an example of a functioning market than a dysfunctional one.

Pete Wishart: I think there is nothing wrong at all with building on the works of others. I remember sitting with my old S500 Akai sampler doing that very same thing a number of years ago. Hargreaves has very little to say about sampling. The big issue in this is the parody issue, which is quite relevant and important. Again, there are some wild economic assumptions made that, if the parody exception were to be accepted by the Government, it would bring something like £0.2 billion economic activity. I actually looked up myself for parody in Google today and I found, as an MP, I was a poodle dressed as a cowboy asking a question of the Prime Minister. The only parody of one of my former bands was an attempt to speed up some Runrig tracks in an obvious attempt to make us look foolish. If the exception were to go through, there would be no redress to that. The moral rights of me as an artist would have absolutely no place whatsoever. When we come to something as casually dismissed as parody, moral rights of artists, we get into some pretty dangerous territory. I would really caution going ahead with this, especially when it is based on such little and flimsy economic assumptions.

Chair: I am very tempted to explore that further.

Mr Binley: So am I. Can we know the site it is on?

Chair: John McVay has indicated.

John McVay: I agree with Pete about the economics this is based on. It seems to be an assumption in Hargreaves that parody will lead to growth in a huge comedy explosion in the comedy market. The UK is the secondlargest exporter of TV programmes in the world. One of the things that does not travel very well is comedy, because comedy is very culturally specific. I do not see the assumption. I do not think there has been the work done about that. Comedy is one of the few things that does not travel very well. With the case that was cited about the Newport single, it probably works in the UK; it probably does not work in Germany.

Chair: Hargreaves laid great stress on policy being driven by evidence. I want to bring Nadhim Zahawi in.

Q201 Nadhim Zahawi: Chair, that is exactly right. Hargreaves and the Government, as John quite rightly pointed out, are agreed that evidence should drive policy to a greater extent than has been the case previously. What do you see as the principal challenges to that?

John McVay: We have a very good evidencebased regulator called Ofcom, which produces a number of very critical reports about our communications industries every year, which is taken as leading the world in many respects-one of the world’s leading regulators in terms of data and statistics, which informs Government, industry and investors’ views. If there was a commitment from Government for the IPO to produce regular research that is open in its methodology, which people contribute to, then clearly as an industry we must welcome that. That is a good thing for everyone concerned. If it helps investment, if it helps politicians come up with sensible informed policies, that has to be good for everyone.

Q202 Nadhim Zahawi: You mentioned the IPO. Does the panel have any other comments on the IPO’s Crime Strategy analysis of what needs to be done to improve the evidence base?

John McVay: Only to agree with it-I think it is fine.

Pete Wishart: The evidence base is absolutely critical and I think Hargreaves is pretty cavalier when it comes to issues to do with evidence. He has rejected all the evidence that was provided to him by the industry, even though the industry was charged by Government to go away and tell us what is exactly going on. That is rejected in Hargreaves as what he calls lobbynomics. When it comes to evidence for the creation of the Digital Copyright Exchange with £2.2 billion of value, based on a report by Copenhagen Economics, he makes fantastic assumptions about harmonisation of European law and about investment into resources and infrastructure. Formatshifting is to be worth something like £2 billion for allowing the transfer of private copy in your home. The evidence base that Hargreaves has used to support some of his recommendations is, at best, flimsy, while he has rejected the evidence from elsewhere.

Jim Killock: The problem we have here is that the industry tends to be the people who produce the evidence. They have a particular view of the way that their industries function. They have a particular desire to monetise as much activity as possible. In a digital age, that actually becomes a lot easier than in a predigital age. If you were reading a book, for instance, and you wanted to resell that book, there was no chance that a copyright owner would start to say, "Right, secondhand book market. Every secondhand bookshop is now going to have to pay me when you resell those books." They would not be able to do that.

In a digital age, every single copy can potentially be monitored. You can certainly license and say, "You cannot relend. You cannot leave these things in your will. You cannot transfer them to a third party." You can even make claims about the acts of datamining, which, to my mind, are rather like saying, in certain circumstances, people are not really allowed to analyse and read the text that they have paid for.

You have a range of activities that are quite marginal to the core business of copyright owners, but potentially they can charge for them if legally allowed. The Committee has to think about that balance, and ask: with these sorts of activity, do they challenge the copyright owner’s business of providing the material and is it more to the benefit of the public for these activities to take place? Whether it is formatshifting, which frankly everybody does and nobody would ever pay for, is it better to just say, "Right, okay, that is a legitimate activity. People, as part of their digital works, the things that they pay for, of course they are going to put them on a number of machines. Of course that is going to be legal. Of course they should be able to back them up. That is actually part of the value of digital goods, so we should make that legal." That is the sort of approach that we have to think about.

The alternative is to say, any time a copyright work is used, no matter what the circumstance, a copyright owner should be able to charge for it. That is quite an extreme position, but it is the default legal position without copyright exceptions and flexibility. I would just say: think about the public interest and where the copyright owner’s real interest lies. If they are producing music, their real interest is being paid for producing music. It is the same with film. It is not around these relatively benign activities like formatshifting or textmining.

The parody debate is a very interesting one, because for our thinking it is a question of free speech. If you say to somebody, "You have to get permission before you can make fun of them," they are not going to get permission. They are very frequently not going to get permission.

John McVay: Spitting Image.

Chair: Well, as politicians, we thought you may be inclined to support that.

John McVay: I do not think they ever sought permission from anyone for that.

Jim Killock: Absolutely, but with copyright works, if you are taking part of that copyright work in order to make fun of it, then you are potentially breaching copyright. Without an exception to allow you to do that, you are effectively restricting people’s ability to make fun of certain people.

This becomes particularly important when you are talking about corporations. We spoke to a number of campaign groups, from ActionAid, through Greenpeace and Church Action on Poverty, and they come across this problem time and time again. They want to make fun of a company like Volkswagen, for instance, or Apple or something like that. They want to say, "These people are doing a bad thing and we are going to parody them." That is what they do: they parody them in order to show the brand up for not living up to the values it espouses. In doing that, they are going to breach the copyright ownerships of those corporations and that puts them in legal jeopardy. The result is that lots of these campaign organisations have to take legal risks in order to challenge those brands, and that is a serious impediment, to my mind, to their freedom of expression and on political dialogue. That is ultimately why parody exception is extremely important.

Q203 Nadhim Zahawi: John, you were shaking your head but, before you answer that, I was going to ask my supplementary, which Pete has already responded to. Do you agree with Hargreaves that the intellectual property policy has been susceptible to the socalled lobbynomics? Hargreaves described it as "some of the most skilful and influential lobbyists in the UK political scene". I think we already know where Pete is at on that one, but I would love to hear the view of the rest of the panel.

John McVay: I think it is quite right and proper for Parliament and Government to call on a range of different sources to provide evidence to invest their own money. I do it on a regular basis to inform Government policy and, indeed, regulators’ policy on various issues. We do that in good faith; we do it with a rigorous and transparent methodology. We publish everything. It is then your job, and indeed that of Parliament and Government, to analyse that evidence and decide what you make of it. I do not think that all the reports that were submitted to the Hargreaves review were totally onesided, open and transparent. I just do not accept that. From my own position, we produce a regular census of the independent film and TV sector in the UK, every year, which Ofcom incorporates into its annual Communications Market Report, so I would not say that lobbynomics is always somehow venal or onesided. That is not my experience.

Robert Ashcroft: One of the things we welcome in Hargreaves’ suggestions was that that sort of evidence should be peerreviewable. We work pretty hard ourselves to try to do objective research. There is no such thing as an objective choice of words; humans always come from a point of view. If it is peerreviewable, then at least it can stand scrutiny. We have certainly been working with others to try to improve the quality of information around this industry. We are working with the Imperial College IP Research Centre; we are working with the copyright expert advisory panel; we are working with the IPO itself. I am talking about our chief economist, who is working with those other bodies to try to get a handle on the size of the music industry as part of our GDP. We just do not have the data. Yes, it is in our interests to get a handle on the size of it, but that does not make it lobbynomics.

Jim Killock: I would just draw attention to the evidence that was submitted and used to produce the Digital Economy Act. There was an underlying assumption in that Act that the cost of infringement to the economy was around £400 million. It is a figure we regularly hear quoted today to justify continuing with that process. Those figures were quoted in the impact assessment presented to Parliament, and they were based on industry research, the methodologies of which we were not entitled or legally able to examine. The industry said, "Here is our research. Here is how we came up with the figures." Rather, they did not to the public. They said, "The research methods are proprietary. We are not going to publish them; we will show them to Government privately, but they are commercially confidential and we will not allow anybody else to see how we came up with those figures."

In doing that, the previous Government accepted those figures and allowed those to be used in the impact assessment to justify that Act and that Bill, but we, the public, cannot actually challenge those figures, because we are not entitled or able to see the methodologies. I completely agree that we need more evidence. I certainly think we need to see more independent evidence. I would also note that, in most of these debates, there is a lot of academic study globally around questions about copyright infringement. Generally, it is ignored in these debates. The academics have some very subtle and interesting arguments around exactly how these things interact. They show very different sorts of pictures often than the copyright owners show. The current approach that the IPO and Hargreaves have pushed forward for both more independent evidence and better evidence is exactly right. I would just really caution against assuming that industry evidence has always been clear and transparent. It just simply, as a matter of record, has not been.

Q204 Rebecca Harris: I was also going to ask about the potential implementation of the EU Information Society Directive on parody, but I think we have covered that quite well. If there is anything that has not been covered, perhaps you can write in. We are going to talk now about the Digital Copyright Exchange, your views on it and the idea that different legal remedies could be available, depending on whether work is registered. Could you just flesh out your views on how workable you think this idea is?

John McVay: With a digital copyright information exchange, the public can find the databases where works are held, and particularly for audiovisual works it is relatively easy to find who owns the work and where you might be able to license it. There is certainly some scope in creating a probably public portal that might link you to various other databases that are privately run. The collecting societies have been doing a lot of work on this, and I am sure my colleagues from music will talk about that. From where I sit, it is relatively easy to find who owns Have I Got News for You. The name of the company is at the end of the programme. If you put that in Google, it will take you to the website and it will tell you if you can buy it or not. In fact, it might even link you straight to Amazon, where you can download it. I think bringing it all together in one place for the public, with a common standard of information so that the public can get that information easily, means you can then link to the rights owners. If the rights owners do want to sell it or not-it may be that, because they are under other licences, they cannot-you would be able to find that out.

Q205 Mr Binley: I am concerned about replicating information that already exists. It just seems to me to be loading another potential cost at the end of the day on to Government, if we are not careful. I just wonder whether, in certain areas, picking up on what John McVay said, I can be assured that information does exist out there that we could use in this respect with just a little more thought.

Pete Wishart: Mr Binley is quite right to be concerned about that very issue. I think it is right that we do have a look at what is going on, in terms of what already exists. If the Digital Copyright Exchange is to be successful, a) it has to be voluntary, b) it has to be businessled or interestled, and c) we have to see what is going on already. The first step going towards creating that Digital Copyright Exchange is to have a proper audit of all the databases that exist across all sectors to see what is actually required in order to try to deliver a proper Digital Copyright Exchange.

This was the big issue; this was the big idea in the Hargreaves report. I think it was the thing that most people got exercised and excited about. It seems to have dropped off the Government’s agenda just a little in the course of the past few months. I think there are issues to do with leadership. I do not know if there was a candidate who was perhaps approached to take over the Digital Copyright Exchange and, for whatever reason, this did not materialise. The Government has to be a bit clearer about what they intend for a DCE. They have to tell us a little bit more about what they envisage as a proper Digital Copyright Exchange as we go forward with this. As long as we take it easily and as long as we take it sensibly, and do not try to upset too many apple carts, a Digital Copyright Exchange could be delivered.

Jim Killock: I would just make a couple of observations. We do not have a view about how the Digital Copyright Exchange may or may not function because we are not an industry body, but I would just say: why has this idea come up? Why has Hargreaves said, "We need a Digital Copyright Exchange"? He has not done it because it is just a good idea plucked out of the blue as a potential thing that maybe it would be nice to have. He has done it because he thinks that the resale of copyright licensing in the UK is not functional and that economic opportunities are being lost because businesses are not able to get the licences they require for the sorts of businesses that they want to put online. He has proposed it as a solution because he wants to ease that situation up and to make that happen. That is a really crucial point for this Committee to look at.

John McVay: I get approached every day by tech companies and IPTV channel startups that would like to license my members’ works. We work with them. In fact, we worked recently with Microsoft Networks when they launched their own videoondemand service. It was not about licensing. What they wanted to do was come up with a pro forma standard licence to reduce transaction costs, which we did with them and that was made available to every single independent production company in the UK to sell their works at minimal transaction cost to MSN. I do not accept that this is not fixable; it is fixable and there are plenty of organisations in the creative industries that are wide open to approaches from technology companies that would like to acquire their members’ rights.

Robert Ashcroft: PRS for Music is in the business of licensing. This is what we do. The first online licence that we signed was in September 2001. The most recent one was with Apple for their very innovative iCloud service. They approached us in July of this year, and by the first week of October, had a licence for what is an absolutely groundbreaking fork in the road. I would absolutely dispute that you cannot get licences for internet music services.

Jim Killock: That is not what I said. What I said is the market is not entirely functional and that is why the Digital Copyright Exchange has been suggested. There is absolutely no question but that content is being licensed; the question is whether it is being licensed sufficiently and quickly enough, whether the conditions are reasonable and whether the sorts of business that we might expect to be being created are actually being created. I do not think the Competition Commission would be investigating the film industry and I do not think that Netflix would have decided not to come to the UK if everything was completely rosy.

Q206 Rebecca Harris: It is quite an interesting debate. Hargreaves himself said he made the claim, and I know Pete Wishart said that some of the claims made by Hargreaves were perhaps not based on full evidence, that the Digital Copyright Exchange could be comparable in importance to the UK’s position in the European financial services sector. Clearly there is a dispute about the potential benefits of that.

Robert Ashcroft: Certainly we need the infrastructure if we are going to develop a healthy online market. One of the things that we are very concerned to do is develop a panEuropean market, because we need scale in this business. That necessarily involves working with other countries and partners. We are involved in a very, very complex project to merge the copyright databases of European collecting societies. It takes time; it takes money; it takes a lot of working with others. It is not something that I feel the UK could just go it alone on. Picking up the point about the possible waste of Government money, we should build on existing initiatives rather than trying to create a competing initiative.

Pete Wishart: It is a very good point, because some of the economic assumptions are totally and utterly bizarre and spurious when it comes to what has been suggested if everything was accepted in full. I think Hargreaves said it could add something like 0.3% to 0.6% to GDP if all the 10 recommendations were implemented. Some of the evidence to back this up I think this Committee seriously has to challenge, particularly when it comes to the Digital Copyright Exchange and formatshifting. If you go through, it unravels immediately. The Digital Copyright Exchange is based on the Copenhagen Economics review, and I think the assumption about formatshifting was based on Apple being allowed to be manufactured in the UK. Somehow this would add up to £2 billion of economic activity, because formatshifting seemingly stopped Apple coming to the UK and developing the iPod. It is nonsense. If this Committee were to do any reasonable job, it would be to look at some of these spurious economic assumptions and debunk them. Get Professor Hargreaves back here. I note in his evidence that he got too light a ride when he was sitting here about some of these economic assumptions. Bring him back and challenge him on some of these things, because they would fall apart immediately.

Chair: We will be questioning the Minister on this.

John McVay: One final point: Netflix is coming to the UK. I worked for three years to try to get Hulu, the American VOD service, to launch in the UK, which failed because of shareholding issues. The reason why all these companies do come to the UK is not because of copyright. In fact, Google’s own report said that only 7% of the respondents thought copyright was a barrier to delivering services in the UK. The reason why they do come is we are one of the most important audiovisual entertainment markets in the world. Our consumers like lots of content. This is where everyone launches. This is why we have Warner here, why we have Universal here. The UK is a very important creative industry economy and, going back to my opening statement, copyright lies at the heart of that. People will invest here because of our copyright laws.

Robert Ashcroft: May I just add to that? 170 million downloads year to date in Europe and 47% of them were here in the UK.

Q207 Paul Blomfield: I just wanted to ask a couple of questions of Robert on collecting societies. Hargreaves, the Government and Sir Robin Jacob, when we met him, all agreed that collecting society practices need reform. Do you?

Robert Ashcroft: I think that what we need is a common code. Just to explain, we are really in two businesses. In all our businesses, we represent our members; there are other collecting societies representing theirs. We represent the authors, the composers and the music publishers, and they live by copyright. We have 83,000 members ourselves; we represent 1.5 million in societies around the world. We have 337,000 premises that are licensed so, in that very manytomany complex market, the efficient way of making sure you clear rights is through a monopoly. We are deeply concerned and respectful of the fact that, in that part of our business, we are a monopoly. We are very concerned to be efficient, fair and transparent and, frankly, we welcome the oversight by the Copyright Tribunal.

There is another part of our business and this is the business that is the concern of growth in digital services, and that is highly competitive. It is panEuropean. We are competing in a number of different ways on a number of different fronts. That falls outside the scope, if I have understood your question. The most important thing we could do is not so much to reform; we certainly welcome scrutiny and we would welcome a voluntary code that was common across other collecting societies.

Jim Killock: We were talking earlier about the rights of artists and the importance of artists to this debate. A lot of artists feel they do not get enough information about how their royalties are calculated, what percentage of the fees that they get has been deducted for administration and so on. From those points of view, it would be very helpful for the centrality of artists in the copyright debate to have the sort of information that Hargreaves was talking about. There is also a case for more information from an economic point of view. If the collecting societies are publishing information very fully about what licences are commanding what sort of royalties, what sort of negotiated licences are commanding what sort of revenues, then you as a Committee and the Government in general have more evidence to actually say what is working in the copyright market. Collecting society transparency or improved collecting transparency has benefits, both for your analysis and understanding of what is going on and the power of individual artists to know how the royalties they are getting are properly calculated.

Q208 Paul Blomfield: Do you want an opportunity to respond to that point?

Robert Ashcroft: I would appreciate that. I certainly understand the point. Many of our members, and particularly the major writer members, will come to me and say, "Robert, I need to know what I am getting from Spotify." I will say, "I am sorry; I cannot tell you, member that you are. There is a commercially confidential negotiation and we do not represent all the rights in it." It is well known that the major publishers have actually withdrawn their mechanical rights from the collecting societies and negotiate those separately. That creates the need for commercial confidentiality. I do not want to bore the Committee with some of the arcane details of it. We are not an agency; we are not an administrative department. We are a business and a lot of our negotiations are commercially confidential. Within the scope that we have, we are as transparent as we possibly can be. We publish our accounts; we publish our distribution rules. We obviously have published tariffs where they apply and where they are governed by the Copyright Tribunal. There is a mix of things. I would certainly share your aim of being as transparent as we possibly can. We have absolutely nothing to hide in that regard.

Pete Wishart: I should have declared this interest; I do receive royalty payments from PRS for Music on a quarterly basis. I have to say that I have never had one issue when it has come to understanding and appreciating where these royalty payments come from. If I ever have any difficulty, it is very easy to get in touch with PRS for Music. Not only do they have the offices in London but they have an office in Scotland that we can get in touch with. It is one of the little things. One of the most powerful contributions I saw in the written report to Hargreaves was from the Musicians’ Union, which restated this fact that the average musician earns less than £20,000 per year. The little scraps that they get from collective licensing, through PPL and things that they may get from PRS if they are registered are immensely important to that individual musician, because they do add to their income over the course of the year.

What I detect in Hargreaves is, once again, a begrudging attitude towards the collection societies, as if they act as a monopoly, as if they act not in the interests of their members: they definitely do not act in the interests of trying to develop and grow this economy; they must be curtailed; they must be tamed-something must be done about them. I think it would have been good if he had turned round and recognised the value and contribution that the collection societies do make to the income of musicians. Unfortunately, it is not really there and there is, once again, this grudging attitude that goes through it all. Effectively, a lot of Hargreaves is not in the interests of the musician and the creator; it is all about economic growth, and he has forgotten about the central component in all this, which is the artist, the creator, the inventor-the people who bring the content to the content industries, the people who bring the creativity to the creative industries. That should be at the heart of the process.

Q209 Paul Blomfield: As somebody who certainly has a number of small bands in his constituency, I very much accept that point, Pete, so thanks for that. If I can just ask one further question to Robert, perhaps leading on from that, what is your view, as a society, on extended collective licensing, where licensing extends to the work of unknown rights holders?

Robert Ashcroft: I was listening carefully to the British Library earlier on and obviously we have a lot of sympathy for that. It is obviously a technical area, and there is definitely scope for an extended collective licence that is focused on orphan works. You need to be very careful in drafting it. The combination of extended collective licensing and some panEuropean aspects of online licensing could cause some unintended consequences but, subject to careful drafting and review, we would be very supportive of the concept.

Q210 Chair: Earlier we had considerable discussion on formatshifting, downloading, etc. One issue that I want to take up that I do not think was adequately covered is the Information Society Directive exception on formatshifting. Do you think we should implement it and, if so, do you think a levy is needed? Who would like to run with that one?

Jim Killock: Yes, we should implement it. It is probably one of the biggest anomalies in the UK’s copyright law at the moment. People buy iPods; they buy iPads; they have computers where their digital music and other files are stored. Backing up copies and putting copies of the things that you have paid for on multiple devices is just a fact of life. It is part of the value of buying digital rather than physical. If you make that illegal or allow it to remain illegal, what we are basically saying to every consumer in the UK is copyright law may be there, but you are going to break it. You are going to break it at some point just through your normal everyday behaviour that you would expect to do. That makes a mockery of copyright. For that reason alone, formatshifting needs to be brought into UK law.

The question of levies is a simple one: is there economic harm in individual consumers formatshifting for their own purposes? I cannot see any economic loss being made that needs to be compensated for by a levy. What I see is people buying stuff, thinking that part of the value is putting it on multiple devices and simply paying a price that reflects the value that they get. Putting levies on to devices in order supposedly to compensate for that can only reduce consumption of devices, and all that can do is reduce consumption of content. It is a bad way to go. It will have innovation impacts and impacts on consumer products, and therefore should be avoided. But the copyright situation absolutely does need to be resolved.

Chair: John, you were shaking your head, so I will take you first.

John McVay: Particularly for audiovisual works, Chris Marcich spoke eloquently about what the industry is doing, in terms of giving multiple use for legal formatshifting through the price of the product, through things like ultraviolet and other technologies that will be arriving. The point here is not about the loss per se. The point is that the UK opted out of the Directive in 1988. Other European territories do have levies on blank tapes and formatshifting so, if you are going to go down an exception, you should apply a levy to make sure that UK rights owners and investors are not put at a disadvantage to the rest of Europe. You cannot have one without the other would be my view.

Robert Ashcroft: I actually would like to go on the record as saying I agree with much of what Jim said. The first thing that I would have to agree with is that you can barely go into an electronics shop and buy a portable CD player these days. You cannot make it illegal for people to go and buy a CD and then get it on to the only device that they have that plays music. Where you draw the line is the question. It has been said by some that the only difference between storing on a hard drive to have a backup copy and storing it in the cloud is the length of the wire, but you soon get into a situation where you are missing licensable opportunities. We would much rather license than levy. Where you can reasonably license, we would like to license. Where you have a commercial entity that is providing a service, then we license them. As I said a little while ago, we recently licensed Apple for their iCloud service. That is something we would like to preserve. If there is to be an exception, then we think it should be drawn narrowly. There in the boundary lies the question of whether or not a levy should apply, and I think that European law is clear on the matter: where there is a formatshifting exception, there needs to be fair compensation. I think it is for debate to determine what is fair.

Pete Wishart: Everybody can agree that there is an anomaly here when it comes to the private copying of CDs or whatever you have already bought, but it is a bit more complicated than that. We heard from the previous session about issues for the film industry when it comes to all of this. Should there be a levy? Of course there should be a levy. In 22 out of 27 European states we do have an exception for formatshifting, often a levy on the hardware, for the musicians. Again, it is the musicians that this levy goes to. What is going to happen when this exception goes through is there may be the arrival of all these new hardware devices, which are going to be playing this music, which are going to be playing this content. What would be wrong, if there is going to be a growth in this type of equipment, with some of that money going back to musicians? Other European nations recognise that should be the case. If we are going to go down the road of having an exception on this, the UK should similarly give a reward to the musicians whose content is being played on these devices, remember. These devices are not created for their own use; they are created to play the works of people who made this music-for the creators. It is absolutely right that they should get something back if this exception were to go through.

Jim Killock: Of course they are getting something back in the payment for the original music. I would just like to make a particular comment on the film industry. The film industry actually has two rights that it is using to restrict formatshifting. The first is a lack of a formatshifting exception, so you are not legally allowed to format shift. The second is about digital rights management. It is illegal in the UK to break the encryption used for digital rights management. They already have that protection. Because the film industry, ultraviolet and all of these technologies are based around digital rights management, there is a legal protection stopping people from breaking it, so a formatshifting exception, even if it applied to film, would not currently apply to the film industry, given the technologies that they use.

Q211 Chair: How would you suggest that rights owners protect their content from illegal copying?

John McVay: You will never end all illegal copying. Anyone who suggests that is not living in the real world. The best way to do is to get legitimate services to the market at a broad range of price points for a broad range of uses, and that is what we are seeing emerging across all the content industries. You can get free television; you can get paid download to own; you can get free music. There is a whole range of different business models for the consumers that are delivering highquality, verifiable legitimate content, without any viruses or problems, under an appropriate licence. The big problem we have, in investing in those services and trying to develop those services, is if we are always competing against free illicit services, which can use advertising. Indeed, there was a service that was closed recently by the BBC and Channel 4, which, for the pricey sum of £12 a month, allowed anyone living outside the UK to access BBC, Channel 4, ITV and Five through a VPN. You paid a subscription. The guys who set it up pocketed all the money, did not give any money back to the BBC or the rights owners and were making very good money out of it. That is clearly not a legal service. We should be looking at those sorts of things. I think cloud technology will give users a great variety of uses from the type of content, depending on what they pay for, whether it is a rental, an own or a stream. All those business models will be available.

Q212 Margot James: I wonder what the panel thought of tactics like Apple’s decision to ban users of the iPad from being able to use Flash, which means that you cannot download lots of films.

Jim Killock: That is a really interesting question for this panel, because a lot of the members on this panel, or at least the organisations behind some of them, will be using exactly those restrictive technologies in the background to control their content in different circumstances. They are all labelled as a whole "digital rights management", and those technologies are then used essentially to stop users from doing what they would like and to put the power over how that content is used into the hands of the company. With Apple that has happened with music; it happens with their devices. What you can do with your devices is not up to you; it is up to Apple. The reason they do that, in our view, is not about stopping people from copying, which is the alleged reason. The alleged reason is that Apple does not want people ripping off its software, so it is going to protect its software in its machines to the maximum degree, which is going to prevent you from doing things like installing Flash.

The real reason they do it, of course, is to control the market. What they want to do is to control the device market, to decide what can and cannot go on to their device, and then give rights holders and publishers the markups that Apple chooses to charge their customers. Essentially the technology digital rights management is being used to carve up markets; it is being used in anticompetitive ways. To be honest, I cannot think of a single instance of digital rights management when that has not been the purpose of that technology’s use. The film industry will tell you it is to stop copying. The music industry in the 1990s or 2000s would have told you that it is to stop consumers from copying. I say it is always used to price fix, to control the market and to lock consumers into particular technologies and devices. Then the competitive and market distortions that follow are completely obvious.

Chair: Any addition or disagreement? John and then Robert.

John McVay: One brief point: I do not understand the technical issues around Flash and Apple, but you cannot blame Apple for coming up with products that people want to buy. Other people should come up with products that will compete against them.

Robert Ashcroft: I would suggest that Jim is not going to be one of those people. He might want to buy a Samsung Galaxy tab and get his Flash that way.

Jim Killock: The point is, if I want to hack my Apple that I have paid for, I should be able to and that should not be a problem.

John McVay: Why?

Jim Killock: Because I have bought it.

John McVay: You say you are allowed to hack the underlying software, which is copyrighted. Is that the point?

Mr Binley: Chairman, can you tell me what Flash is later?

Chair: I think we might be, shall we say, straying off the subject slightly. Just finish off, Ann, quickly.

Q213 Ann McKechin: Thank you very much, Chair, before we go in to Flash and Flickr. We have obviously touched on this question about intellectual property enforcement in the advancement of technology, which is proceeding at an incredibly quick rate. Perhaps the comments you have made, Jim, is that technology in fact overtakes and people are trying simply to preserve what copyright they can during that short period of time when they can try to get a market advantage. What are your views on the way that intellectual property rights should be enforced in the current environment, given that the technology is changing very rapidly?

Pete Wishart: There is always going to be a tension, and that is the difficulty with intellectual property rights. We have got a culture just now that thinks and believes they can access any amount of content for nothing. That culture has grown up with the digital environment and the way that people now access and download. What intellectual property law and copyright law continually have to do is reinvent themselves almost yearly to try to ensure that we are on top of it.

The one thing that Hargreaves says that I agree with wholeheartedly is the need for further education and enforcement. Now education is critical in all this. If people can understand and appreciate that copyrighted material is the work of somebody else-somebody has put effort and time into creating this piece of work that is original and unique-we can get this message through that it is valuable. I think Jim is a little bit guilty of this from some of the things he has been saying-that somehow it is all right for all this wonderful work to be given away for nothing, to be almost labelled as valueless, which defeats that educational exercise that we need to try to get through. One of the big challenges that we have is how that is communicated: how we try to encourage people to value intellectual property and copyright. I do not think we have been fantastically successful in that in the course of the past 10 years. We have to move forward with that, but we have to make sure that people, when they do access this wonderful material, understand that it is the works of others, it has value and it is something that should be respected.

John McVay: I think the tools are there. The Digital Economy noticesending is in the legislation. HADOPI, just to contrast, sent out 580,000 firstwarning letters to copyright infringers and only 35,000 second letters. I understand they are only progressing with 60 cases to court. That is an education programme. When people get a letter saying, "Could you please not do this," it is a massive education programme. We should get on with it in the UK. We should implement those duties in the Digital Economy Act as soon as possible, begin the process and address the points that Pete has raised. I have three teenage boys. They will not touch anything pirated in my house, but I know lots of other people where that is a problem. It is because they do not know it is a problem. A parent getting a letter saying, "Someone in your household is doing something that they really should not be doing," at least brings that to the fore for a discussion in the family about "What are you doing on the computer?" Actually I think all parents should be asking that question generally. The tools are there. You pass legislation; let us get on and implement it.

Robert Ashcroft: We certainly welcome the Digital Economy Act, particularly because it makes certain other technology partners party to the whole business, the ISPs in particular, but, if you think about the roundtable discussions that the Minister Ed Vaizey has organised trying to find solutions and trying to get voluntary action, what has emerged is a suite of measures. We have talked about the credit card companies not taking money for unlicensed sites; site reranking, site delisting, site blocking, traffic lights, the role of the antivirus companies and many different things that could and perhaps should be done, which can be done on a voluntary basis, to improve the climate for copyright on the internet. It is not a question of one single measure in my view; it is a question of a series of actions. The Secretary of State mentioned this at his speech at the Royal Television Society back in September, and this is the way that we need to go, with the concerned parties sitting around the table and working out what can reasonably be done to make it better for the creative industries.

Q214 Ann McKechin: Jim, do you think there should be any copyright enforcement?

Jim Killock: Absolutely. The question is where you place it. There may be three places where copyright enforcement duties and so on can go. The first is around private enforcement. A number of people today have spoken about some problems. The fact that there is no copyright small claims court or equivalent, although hopefully that is coming, is a problem because it means smaller individuals cannot get their copyright enforced. Generally, because copyright is a private right, the expectation is that the people who own those rights make that enforcement, and that is the most efficient way to do it generally. Somebody whose copyright is affected is the one who can make the judgment about whether to enforce that or not. The problem we have now is that the copyright enforcement agenda is moving towards being pushed on intermediaries, whether they are internet service providers, Google, BT or whoever, or it is being pushed towards Government. When these are civil actions and civil offences, that does not seem to me an appropriate and good way of doing it. What you do and what happens in that is that costs and burdens get placed on those intermediaries, and then you start getting spillover effects that are very unwanted. The Digital Economy Act will, for instance, impose enough costs on everybody’s broadband connection to probably put off around 40,000 families from taking up broadband. That is the Government’s economic impact assessment talking, not me.

Q215 Ann McKechin: What enforcement policy are you talking about? I do not think the Committee knows what level you are talking about.

Jim Killock: The letterwriting scheme and the monitoring of customers come at a cost.

Ann McKechin: It must be pretty minimal.

Jim Killock: No, because there are software and databases that have to be put in. There are a number of things. The Government’s figures, as I say, were looking at putting costs on to broadband sufficient to knock 40,000 families out of the market. We are not talking about insignificant amounts of money. The second thing that it does, because of the legal framework, is place great legal uncertainty on many people, particularly small businesses operating independent WiFi. What Ofcom has been telling small businesses and what they are telling us is that, when the Digital Economy Act is operational, if you are a small café and you operate open WiFi for your customers, and if you receive letters from BT saying, "Somebody at your café has infringed copyright, please tell them to stop it," you will have to write back. In fact, you will have to assert that your café is operating as an internet service provider, not as a customer of an internet service provider and, because you are an internet service provider with a relationship with your customers, you do not need to receive these warnings. You are going to have to defend the position to a court potentially, if you have been taken to court, that you, a café, are in-

Q216 Ann McKechin: Have any of these cases gone to court?

Jim Killock: The whole scheme is not operational yet. Basically the Digital Economy Act allows people to be either a customer or an internet service provider. If you are an internet service provider, you do not have to worry about warnings, as long as you do not have too many customers-around 600,000 or something like that. These poor cafés, hotels, bed and breakfasts, landlords, are going to have to argue to courts that they are internet service providers in order to make the Digital Economy Act workable. That is the problem with placing these sorts of enforcement burdens in the wrong place.

Chair: Thank you very much. I would stress, as I stressed to the previous panel, that if you feel that there is anything that you have not said that you would wish to say in response to any questions that we have asked, please feel free to do so. Indeed, if you feel you wish to say anything about any questions that we did not ask but you think we should have asked, then also feel free to do so. Thanks very much. We could have had quite a long debate about some of the issues, but thank you for being suitably disciplined.

[1] Note by witness: Correction: the figure is actually 91% (based on Harris Interactive Research, conducted Sept 2011)

Prepared 16th February 2012