Business, Innovation & SkillsWritten evidence submitted by Creative Coalition Campaign

1. The Creative Coalition Campaign (CCC) welcomes the opportunity to make a submission to the BIS Select Committee inquiry into the Hargreaves Review of Intellectual Property and the Government’s response to that Review.

2. The CCC is a partnership comprising trade unions representing workers in the creative industries and organisations in the music, video, film, TV, publishing and sports sectors. We have come together to articulate our shared view of the threat that online copyright infringement poses to jobs and growth in the UK creative industries.

3. We campaign to highlight the impact that piracy has on small and independent rights holders and the threat this poses to jobs and growth in the creative sector. As such we have focused our response primarily on the issues surrounding implementation of the Digital Economy Act (DEA) and the need for effective enforcement of intellectual property (IP) online.

IP Enforcement and DEA Implementation

4. We welcome Professor Hargreaves’ confirmation of the value of intellectual property to the UK economy. In particular we welcome the review’s reinforcement of the High Court’s judgment in favour of the Digital Economy Act (DEA) which will be critical in successfully tackling the problem of digital piracy.

5. The CCC supports Hargreaves’ statement that “Government should pursue an integrated approach based upon enforcement, education and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields”.1 The DEA’s notice sending regime will provide an opportunity to educate consumers engaged in online copyright infringement, and is the first step in changing attitudes and behaviour.

6. The industry has made great strides in recent years in making legitimate content available online using various business models (including free advertising funded services). However, the industry is in a transition phase, moving from traditional business models to online business models. Widespread copyright infringement means that these new economic models have to compete with illegal free content and are therefore very fragile. In this respect, the sector needs the support of an appropriate regulatory framework to ensure a fair and level playing field in the online environment.

7. We are now at a stage where the development of new business models needs to be combined with an effective enforcement regime to ensure a fair and level playing field in the online environment. It is not fair or sustainable to expect legitimate business models to compete with illegal material.

8. We welcome the Government’s commitment to press on with the implementation of the notice sending elements of the DEA and will continue to work with the Government, Ofcom and other stakeholders to ensure that a workable and proportionate system can be established as soon as possible.

9. We believe that the Government’s decision to introduce a modest refundable fee for the appeals process of the DEA will help to mitigate against the risk of an organised campaign of vexatious appeals and will help to make the system financially viable. However, we urge the Government to continue apace with implementation and we look forward to the publication of the Initial Obligations Code which will outline how the system will work in practice.

Existing Evidence on Copyright and Designs

10. We welcome the Report’s recommendation that “Government should ensure that development of the IP system is driven as far as possible by objective evidence”.2 However, we are deeply concerned by Professor Hargreaves’ assertion that “much of the data needed to develop empirical evidence on copyright and designs is privately held. It enters the public domain chiefly in the form of “evidence” supporting the arguments of lobbyists (“lobbynomics”) rather than as independently verified research conclusions.”3

11. In particular we are concerned at the manner in which the Report dismisses4 evidence showing the impact of copyright infringement on the UK Creative Industries that was produced by TERA Consulting in 2009. This evidence has since been validated by both the High Court and European Commission and it is disappointing that the Hargreaves Report does not recognise this fact. According to TERA’s report, the creative industries alone account for 2.7 Million jobs in the UK and contribute £160 Billion to the UK’s GDP, the highest in Europe. TERA Consulting also estimated that in 2008 the UK lost £1.3 Billion and 39,000 jobs in the film, TV, music and software industries due to digital copyright infringement.

12. The Hargreaves Report’s economic impact assessment does not recognise the substantial economic benefit to the creative industries of effectively addressing online copyright infringement. This is a major flaw in the Report’s evidence. In order to realise these significant economic benefits we believe that the Government should adopt a consolidated approach which includes a comprehensive suite of measures to secure growth in the creative sector including effective anti-piracy measures.

Digital Copyright Exchange

13. In essence, the Digital Copyright Exchange (DCE) appears to be a sensible suggestion, although not necessarily in the form proposed by Professor Hargreaves. We recognise that the details on how the DCE would actually function in practice are not yet clear, and we look forward to the outcome of the Government’s feasibility study on this issue. As a result, we support the notion that the development of any DCE should be handled by the private sector. Certain business models within the creative industries are already tailored to consumer and market demand, and a one-size-fits-all model may not work for all sectors. We are clear however that it must function in compliance with international and EU law and not interfere with the normal exploitation of copyright works.

14. Any DCE must also be truly voluntary and accommodate an evolutionary approach to its adoption and implementation. There should be no exclusion from availing yourself of the measures of the Digital Economy Act if you choose not to be involved in the DCE.

15. The CCC represents a broad range of rights holders, including those who produce a large number of small registerable works such as photographers. We also represent collecting societies who already have successful business models tackling this very issue. Other sectors rely on direct licensing. The answer to these business issues is not, as Professor Hargreaves suggested, a regulation penalising rights holders who do not subscribe to a Government-sponsored database. That would lead to a bureaucratic approach and a two-tiered system to the particular disadvantage of small, independent rights holders (and may also run contrary to international law, including the Berne Convention). This recommendation is therefore best defined and delivered by industry so that it can take on an international dimension.

16. Speedy licensing, contractual freedom and effective protection are necessary to “UK firms” access to transparent, contestable and global digital markets’ (see for example Hargreaves’ own study on the VOD sector which is attached to the IP Review).5 Indeed this is already happening across the industry where we are developing business solutions in the form of databases. We believe strongly that the Government should back business-led solutions to business issues.

Exceptions to Copyright

17. In response to the Hargreaves Review, the Government has announced that it agrees with the Review’s conclusions on limits to copyright, that: “Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving.”6

18. However, under the “EU framework” most other EU countries have chosen to use the flexibility in approach permitted by the EC Copyright Directive in ways that recognise varying cultural approaches in different Member States.

19. In the case of format shifting there is also a difference in economic approach.

20. As compensation for private copying most Members States have introduced some form of copyright levy system (only the UK, Ireland, Malta, Cyprus and Luxembourg do not). Copyright levies are charged on blank discs, MP3 players and other electronic products to compensate for the sharing and editing of copyrighted material. These levies are paid into a fund which pays out to rights owners whose material has been copied.

21. The UK Government response to Hargreaves indicates that any “new” format shifting exception would only be allowed where a rights holder would not be entitled to a payment from a similar copyright levy fund under EU law.7 Therefore they do not feel it is necessary to introduce such a copyright levy compensation scheme in the UK.

22. It is understandable that the Government is keen to avoid introducing a copyright levy which it feels is “inconsistent with its wider policy on tax”.8 But it can surely not be conducive to growth if the right to receive fair compensation for use of work, recognised at EU level, is conveniently “ignored” within the UK?

23. Instead the approach represents a clear threat to the rights and incomes of copyright owners and performers. It will put the UK even further out of step with most other EU countries.

24. This issue is not new, and has been debated extensively in the EU in recent years.9 A further review of private copying issues is shortly to be undertaken by the European Commission. It therefore appears hasty for the UK Government to make such a fundamental change to rights when the Commission review has not yet been completed.10

25. The CCC therefore believes that the Government’s work must now be linked with the wider review of private copying issues to be undertaken by the European Commission, in order to put in place the right regulatory framework for the UK creative industries to flourish and grow.

26. Furthermore, a blanket copyright exception as proposed by the Review does not take account of the differences in creative industries. There are very different financing systems used throughout the creative industries and a blanket exception is likely to have differing impacts on different sectors which rely on different funding streams.

27. In addition to this, the Hargreaves proposal to widen exceptions to allow data and text mining, both within the current European framework and eventually through amending European law, is an unnecessary, blunt instrument. Licensing models which are highly sensitive to the needs of users are already in place and publishers strongly support those seeking to access data for research purposes. An exception to allow untrammelled copying would expose works to copyright abuse.

5 September 2011

1 p. 85 Hargreaves Review of Intellectual Property

2 p. 20 Hargreaves Review of Intellectual Property

3 p.18 Hargreaves Review of Intellectual Property

4 p. 6 – 11 Supporting Document CC: Data on the Prevalence and Impact of Piracy and Counterfeiting

5 PACEC, 2011, The VoD Sector. Copyright Issues. Research on Business Impacts, Innovation and Competition, Report for the Review of IP and Growth

6 p. 7-8, Government Response to the Hargreaves Review

7 “ […] exceptions to copyright within the existing EU framework are likely to be beneficial to the UK, [provided that] 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 […]” p. 7-8 Government response to Hargreaves Review of Intellectual Policy

8 p.8 Government response to the Hargreaves Review of Intellectual Property

9 See http://ec.europa.eu/internal_market/copyright/levy_reform/index_en.htm

10 Prof Martin Kretschmer has produced a report on the legal basis, rationale and economic effects of copyright levies for the IPO, due for publication in September 2011; http://tinyurl.com/kretschmer-IPO

Prepared 26th June 2012