Written evidence submitted by Consumer Focus

1 About Consumer Focus

1.1 Consumer Focus is the statutory independent watchdog for consumers across England, Wales, Scotland and for postal consumers in Northern Ireland. Our role is to represent the interests of consumers, particularly those who are disadvantaged. We have worked on UK and EU copyright policy since late 2008, building on the work of our predecessor organisation the National Consumer Council (NCC). We work on copyright exceptions, licensing and enforcement to build competitive markets where consumer demand is effectively met through innovative products and services. We want to see a copyright system that supports this by balancing the interest of consumers, copyright owners, investors and creators. Copyright enforcement has to be proportionate and address the causes, not just the symptoms of copyright infringement by focusing on increasing the legal market in copyrighted content.

1.2 Consumer Focus has made a detailed submission on copyright exceptions, licensing and enforcement to the Hargreaves Review call for evidence, which the Business, Innovation and Skills Committee has reviewed:

Consumer Focus response to independent review of IP and Growth Part 1 the institutional foundations for competition innovation and growth

Consumer Focus response to independent review of IP and Growth Part 2 fair use, licensing solutions and appropriate enforcement 1

1.3 We welcome the opportunity to submit additional evidence to the Committee on the recommendations to update the copyright system made in the Hargreaves Review on Intellectual Property and Growth, and the Government’s plans for implementation. We would welcome the opportunity to provide oral evidence to the Committee.

2 Summary

2.1 Consumer Focus welcomes the Hargreaves Review and the Government’s support for implementing its recommendations. We recommend that:

– The Committee inquiry should support the transparent and evidence based implementation of Hargreaves’ recommendations

– The InfoSoc Directive should be fully implemented, especially with regards to copyright exceptions which are currently narrower than required by EU law

– A limited private copying exception should be implemented, covering format-shifting, back-up and place-shifting, and no levy should be imposed unless economic harm from private copying by consumers can be demonstrated in line with the ‘fair compensation’ principle in EU law

– Extended collective licensing should be enabled to facilitate the cost effective licensing for the mass use of copyrighted works, especially in broadcasting

– Consideration should be given to further simplifying copyright law in relation to moral rights and clarification of the interaction between copyright and contract law

3 Succeeding where the Gowers Review failed

3.1 The Hargreaves Review follows a string of Intellectual Property (IP) reviews which were not fully implemented. Many of the copyright recommendations of the Hargreaves Review, such as the recommendation to introduce a format-shifting exception, a parody exception and widen the non-commercial research and archiving exception to recorded music and films, were previously made by the Gowers Review of Intellectual Property in 2006. Gowers failed not only because of lack of political will, but principally because of lack of objective evidence and an ill-equipped Intellectual Property Office (IPO). The vacuum was filled by a handful of well-funded trade associations representing incumbents who actively lobbied against implementing Gowers’ recommendations and are now lobbying against the implementation of Hargreaves’ recommendations.

3.2 Copyright law and licensing effectively regulates the production, distribution and consumption of creative works, it affects a multitude of industries and public sectors. It is therefore inappropriate that copyright policy and law should be dominated by the narrow interests of lobbyists on the basis of what Prof Hargreaves termed ‘lobbynomics’. The Digital Economy Act 2010 exemplifies the way copyright law and policy has been made; no proper economic impact assessment was ever established and to date section 3 to 18 of the Act have created zero value for the UK economy.

3.3 Neither the Gowers Review nor its implementation was subject to an inquiry by the Committee or its predecessor. We believe that this inquiry could make a valuable contribution to the much needed sea change in copyright policy. This inquiry could facilitate the transparent and evidence based implementation of Prof Hargreaves’ recommendations with fair consideration of all stakeholders.

4 Ensuring that copyright law remains relevant as technology develops

4.1 We agree with the Government that the acceleration of technological development creates a need to update and future proof copyright law by building sufficient flexibility into the system. The British parliament passed the first copyright statute into law in 1709, now known as the Statute of Anne, under the long title An Act for the Encouragement of Learning, by vesting the Copies of Printed Books in the Authors or purchasers of such Copies, during the Times therein mentioned. Parliament intended to encourage ‘learned men to compose and write useful books’ as well as harness the power of the printing press by establishing a competitive and regulated trade in books. In its 300 year history copyright has been continuously updated and needs to be updated again to remain effective in the digital age.

4.2 Technological developments have driven three total overhauls of copyright law by Parliament in the past century. The Copyright Act 1911 introduced copyright protection for sound recordings and codified case law on fair dealing for ‘private study, research, criticism, review, or newspaper summary’ and other permitted acts in statute law.2 The Copyright Act 1956 introduced copyright protection for films and broadcast, as well as typographical arrangements of published editions.3 The last comprehensive update established the Copyright, Designs and Patents Act 1988 (CDPA), which recognised new ways of creating, copying and disseminating works, such as computer programs (or software), photocopying, home taping, cable and satellite broadcast.

4.3 Following the CDPA, copyright received little attention in UK policy circles while the European Commission started the harmonisation of copyright law and licensing in order to facilitate a single market in copyrighted works. A number of Directives were passed by the European Parliament to harmonise copyright in computer programmes and databases, rental rights, satellite broadcasting, copyright term and resale rights in works of art.4 Most significant for the implementation of the Hargreaves Review is the missed opportunity to implement Directive 2001/29/EC, the so called Information Society Directive (InfoSoc Directive), to the full extent possible in UK copyright law.

4.4 The InfoSoc Directive aimed to bring the copyright law in member states up to date with changes in digital technology and implement two 1996 World Intellectual Property Organization (WIPO) Treaties5 on the same subject. The Directive introduced a ‘making available right’, which includes ‘communication to the public’, to account for online distribution of copyrighted works, it established provisions on technological protection measures (TPMs), or Digital Rights Management (DRM), harmonised reproduction and distribution rights, and in Article 5 provides for 21 copyright exceptions member states may implement in national law.

4.5 The UK implemented the Directive in 2003,6 but adopted a bolt-on approach focused on making as few changes to the CDPA as possible. The CDPA’s existing exceptions were matched against the InfoSoc Directive exceptions. By merely bolting-on any additional limitations the Directive required, the UK failed to widen existing exceptions to the full extent possible. As a result the UK did not properly update the CDPA and existing exceptions became even narrower than required by the Directive.

4.6 Consumer Focus welcomes Prof Hargreaves’ and the Government’s recognition that exceptions have key role to play in establishing a copyright system that supports commercial, scientific and social innovation. Copyright exceptions allow certain uses without permission or licence from the copyright owner and are established as fair dealing or permitted acts in Chapter III of the CDPA. We agree with the Government ‘that the widest possible exceptions to copyright within the existing EU framework are likely to be beneficial to the UK’7 and that the UK should implement exceptions to the full extent possible under the InfoSoc Directive. More information on how copyright exceptions support social and commercial innovation can be found in Part 2 pg.6-24 of our submission to the Hargreaves Review.

5 The need to update and future proof copyright law with a private copying exception

5.1 We fully agree with Prof Hargreaves that, as a matter of principle, ‘copying should be lawful where it is for private purposes, or does not damage the underlying aims of copyright’ and that ‘Government should firmly resist over regulation of activities which do not prejudice the central objective of copyright, namely the provision of incentives to creators.’ However, while Prof Hargreaves devoted attention to the issue of format-shifting, eg the copying of music, films and e-books into different file formats for personal use, the Hargreaves Review neglects to mention other private copying by consumers which is illegal under UK copyright law, especially back-up and what is known as ‘place-shifting’. Currently the only exception in UK law under the private use provision in EU law is the time-shifting exception for radio and TV broadcast introduced in 1988,8 all other private copying of music, films or e-books by consumers for their own personal use is copyright infringement.

5.2 We therefore welcome the Government’s commitment to implement a ‘limited private copying exception’9 under Article 5(2)(b) of the InfoSoc Directive. The boundaries of this exception are to be determined in a consultation in the autumn and we believe it should cover format-shifting, back-up and space-shifting by consumers of products they have legally acquired, for personal and non-commercial purposes. This would be in line with the Directive, which emphasises that private copying by consumers does not compete with the commercial interest of copyright owners and allows the UK to introduce exceptions for reproduction ‘by a natural person... for private use and for ends that are neither directly nor indirectly commercial’.10
It would also comply with the so called Berne three-step test11, according to which the UK may only introduce exceptions to the copyright owners exclusive right to reproduction in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the rights owner.

5.3 Private copying exceptions have existed in national copyright laws of civil law European countries since the late 19th Century.12 Generally these exceptions have provided sufficient flexibility to accommodate technological developments, particularly in home-entertainment, and have therefore stud the test of time. Problems have only arisen in rare cases, such as where the private copying exception does not specify that consumers may only make a copy for private purposes of content they have legally acquired.13 Therefore the UK should draft a limited private copying exception which is sufficiently flexible to remain relevant over time, but is specific enough so as to provide legal certainty and not result in lengthy litigation. More information on the appropriate boundaries of a private copying exception can be found in Part 2 pg.6-18 of our submission to the Hargreaves Review.

6 Updating and future proofing copyright law – place-shifting

6.1 While it has received little attention so far, it is critical that place-shifting, also called ‘space-shifting’, is legalised to provide legal certainty to UK based technology companies who want to innovate. Place-shifting is the process of accessing media stored on one device in another place through another device. In the past decade wireless technology for home entertainment has become affordable with the proliferation of Bluetooth. Bluetooth enables the wireless transmission of data over short distances, between five and 10 meters, using short wavelength radio transmissions. Bluetooth enabled speakers and headphones allow consumers to transmit music and sound within a room from Bluetooth enabled computers, mobile phones, TVs or home entertainment systems. More recently home WiFi networks are used to place-shift music, with Apple’s AirPort Express device allowing consumers to stream the iTunes collection on their computer over their WiFi connection to any room in the house.

6.2 Unless place-shifting is legalised through a private copying exception, as it is in civil law European countries, the temporary copies made when place-shifting copyrighted content are copyright infringement. Place-shifting infringes copyright because when consumers are transmitting the media file between devices temporary copies are made. This infringes the copyright owners right ‘to authorise or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form, in whole or in part’, provided for in Article 2 of the InfoSoc Directive,14 unless the ‘temporary acts of reproduction referred to in Article 2... are transient or incidental and an integral and essential part of a technological process and whose sole purpose is to enable... a lawful use’.15

7 Updating and future proofing copyright law – back-up

7.1 As consumers purchase more and more of their content in digital formats the need for backing-up their music, film and e-book collections has increased. Today computers, laptops and smart-phones function as media hubs and a variety of companies, such as Clickfree, have developed back-up solutions for the convenient back-up of media files. It is recommended that consumers regularly back-up their computer, but the lack of a private copying exception means that in the UK the back-up of copyrighted content is illegal, even if purchased legally. We believe that the limited private copying exceptions the Government intends to introduce ought to correct this anomaly.

7.2 We also believe that the Government should clarify the back-up exception for computer software16 that was introduced in 1992 with the implementation of the 1991 Computer Programs Directive (Directive 91/250/EEC), which was replaced in 2009 by the Software Directive (Directive 2009/24/EC). Both Directives provide that the ‘making of a back-up copy by a person having a right to use the computer program may not be prevented by contract insofar as it is necessary for that use’.17 However, when the UK implemented the back-up expectation into UK law it provided that a lawful user may only make a back-up copy of a computer programme if it ‘is necessary for him to have for the purposes of his lawful use ’ . In 2004 the High Court, in a case about games consoles, ruled that it is not ‘ necessary ’ for lawful use of computer programs sold on CDs or DVDs to make back-up copies because the storage medium was ‘ robust ’ . 18

7.3 We are not aware that any other EU country has implemented and interpreted the back-up exception for computer programs so narrowly. While compact discs are certainly more durable than floppy disks, vinyl or cassette tapes, they are vulnerable to heat, cold, light, dust, fingerprints and scratches, and compact disks manufactured in the late 1980s are subject to a deterioration process known as ‘bronzing’. The Government should therefore make it legal to make back-up copies of computer programs, music, films and e-books consumers have purchased , regardless of the medium on which they are stored .

8 Levies and the fair compensation principle – the question of harm from private copying

8.1 Prof Hargreaves recommends that the UK should legalise format-shifting by consumers without a levy. In turn, the Government agrees ‘with the Review’s central thesis that the widest possible exceptions to copyright within the existing EU framework are likely to be beneficial to the UK, subject to... the amount of harm to rights holders that would result in "fair compensation" under EU law is minimal, and hence the amount of fair compensation provided would be zero’.19 This statement implies that EU law requires ‘fair compensation’ for all copyright exceptions and since the Hargreaves Review has been published some lobbyists have suggested that a levy is required under EU law for any private copying.

8.2 Neither is correct. Levies are not mandated by EU law and Article 5(2)(b) of the InfoSoc Directive only establishing the need for ‘fair compensation’ to copyright owners for private use in the event of economic harm. According to recital 35 ‘rightholders should receive fair compensation to compensate them adequately for the use made of their protected works or other subject-matter... When evaluating these circumstances, a valuable criterion would be the possible harm to the rightholders resulting from the act in question. In cases where rightholders have already received payment in some other form, for instance as part of a license fee, no specific or separate payment may be due.’20 According to a recent ruling by the European Court of Justice ‘Article 5(2)(b) of Directive 2001/29 must be interpreted as meaning that the "fair balance" between the persons concerned means that fair compensation must be calculated on the basis of the criterion of the harm caused to authors of protected works by the introduction of the private copying exception.’21

8.3 A literature review Consumer Focus commissioned on the economic impact of consumer copyright exceptions found that there is no existing evidence to support the argument that activities such as format-shifting or back-up harm copyright owners. Assertions that it does are based on flawed economic analysis such as the incorrect equation of economic damage to copyright owners with the value consumers derive from an exception.22 The Government should reject arguments by the music industry that hardware and software manufacturers should compensate the music industry for ‘the value that the ability of being able to transfer music adds to devices such as the iPhone’.23 This reasoning is not in line with the requirement of fair compensation in EU law. It also fails to recognise the mutually beneficial relationship of the music and hardware industries in which the technological innovation by the latter has nurtured the rise of recorded music in the 20th Century.

8.4 The Italian consumer organisation Altroconsumo has calculated that an Italian family pays more than €100 per year in levies on a range of hardware and blank media. While we are sympathetic to the desire of the Musicians Union to secure additional income for musicians, we object to suggestions that this should be achieved by making consumers pay for private use of what they have already paid for. In 2010 the UK recorded music industry generated £823.8 million in revenues,24 to ensure musicians get a fair share of what consumers pay for recorded music the contracts by which musicians licence and assign recordings to record companies and collecting societies need to be re-considered.25

8.5 Beyond the requirement for ‘fair compensation’ introduced by the InfoSoc Directive, levies are not harmonised at EU level and remain subject to considerable controversy and legal action. The Spanish parliament has recently voted to abolish the private copying levy on digital media for being an ‘arbitrary and indiscriminate system’.26 Similarly the Dutch Government has announced its intention to abolish levies because it ‘considers new levies on devices such as MP3 players, laptops, DVD recorders and USB sticks undesirable’ and ‘obsolete’. According to the Dutch Government ‘levies only lead to unnecessary or double payments by consumers. Instead copyright owners can include a reimbursement for copying in the price of the product...’.27 More information on the cost levies impose on consumers and the way in which they distort the market can be found in Part 2, pg.16-17 of our submission to the Hargreaves Review.

9 Facilitating the cost effective mass use of copyrighted works – Extended collective licensing

9.1 We welcome the Government’s commitment to introduce enabling legislation which would allow industries or sectors to establish extended collective licensing (ECL) for particular types of work and for particular uses.28 Such licensing schemes have operated successfully in Scandinavia for more than 50 years, and Part 2 pg.28-31 of our submission to the Hargreaves Review provides more detail on the benefits of ECL for broadcasting. ECL was designed to reduce the transaction costs of licensing the mass use of copyrighted content, particularly in broadcast, and in turn gives consumers cost effective access to a wider variety of content.

9.2 ECL schemes are run by collecting societies, who negotiate licensing rates and distribute payment to members and non-members. Proposals for ECL have caused particular concerns among photographers in the past. However, photographers are not represented by a collecting society in the UK, so it would be impossible to establish an ECL scheme for photographers anyway. In the past ECL has frequently been mentioned in relation to orphan works, that is works for which the copyright owner cannot be located or contacted after diligent search, but Consumer Focus is not convinced that ECL is appropriate for orphan works. ECL is based on the principle that creators get paid for the licensed uses of their work; it is not designed to cope with copyright owners that cannot be identified or contacted. Denmark has recently established ECL for orphan works, a first, and we believe it would be prudent to wait until the Danish scheme can be evaluated before reopening the discussion on ECL for orphan works.

10 Future proofing copyright law – Rewarding creativity through moral rights

10.1 The Government should consider strengthening the moral rights of creators, particularly the right to attribution. Moral rights were first enshrined in UK copyright law in 1988 and the CDPA provides that creators need to assert their moral right to attribution.29 In civil law countries the moral right to attribution is automatic and removing the need for assertion would simplify copyright law. Standard contracts frequently force creators to sign away their right to assert their right to attribution, though it should be a matter of principle that creators are credited for their work even if they no longer own the copyright in their work. Prof Hargreaves considered moral rights outside the remit of the review, but moral rights need to be considered in relation to establishing a Digital Copyright Exchange (DCE). Information on asserted attribution rights need to be integrated into the DCE to enable the lawful use of copyrighted works.

11 Future proofing copyright law – the challenges ahead

11.1 Since the Hargreaves Review was published a dispute between the Newspaper Licensing Agency (NLA), a collecting society for newspaper publishers, and Meltwater, a commercial news aggregator, about whether users of Meltwater service need a licence from the NLA has thrown up significant questions about the interaction between copyright law and contract law. The High Court and Court of Appeal ruled that ‘the copies made by the end-user's computer of Meltwater News on receipt of the email from Meltwater, opening that email, accessing the Meltwater website by clicking on the link to the article and of the article itself when clicking on the link indicated by Meltwater News are and each of them is, prima facie, an infringement of the Publishers' copyright’ because the terms and conditions of newspaper websites commonly state that they may only be used ‘for personal and/or non-commercial use.’30

11.2 The repercussions of users being regarded to be bound by terms and conditions they have not been made aware of, or accepted, before accessing a website is significant. Moreover, the ruling establishes the principle that if an email contains an infringing copy, the recipient infringes copyright by virtue of making a temporary copy when receiving an email, even before opening the email. By contrast, anyone receiving an infringing newspaper clipping by post is not regarded to be infringing copyright, as they do not make a temporary copy on receipt. As part of implementing the Hargreaves Review the Government should therefore consider how the law can clarify the relationship between contract and copyright law, and whether recipients of unsolicited infringing copies are regarded to infringe copyright by virtue of their computer making a temporary copy.

5 September 2011