Support for the creative economy

 Written evidence submitted by ITV/Channel 4/Channel Five [SCE 096]

S.73 of the Copyright Designs and Patents Act

What is S.73 of the Copyright Designs and Patents Act 1988?

Section 73 is a provision in UK copyright law which permits the immediate retransmission of the main PSB free to air services by "cable" in the area where the original PSB channel was broadcast. Crucially, Section 73 provides that the copyright in the broadcast (and in any work included in the broadcast) is not infringed by such retransmission. The effect of this section therefore is to permit "cable" operators to retransmit the PSB services without agreement or consent.

What was the original purpose of the provision?

The policy justification for Section 73 in its current form was to encourage cable roll out in the 1980s and 1990s as a competing platform to terrestrial television.

How have the courts interpreted the provision today?

In the recent TVCatchup litigation in the UK and CJEU, TVCatchup (an online TV "service" provider) argued that its retransmission and commercial exploitation of the PSB services via the internet was lawful under S.73 on the basis that "cable’ ought to be given its natural meaning. The judge in the High Court litigation agreed saying:

"I see no reason why the cabling system inherent in the internet should not be regarded as "cable" for the purposes of the Section 73 defence" [1]

This is not an interpretation that can realistically ever have been intended by Parliament, nor is it one that the Government believes is correct (on the basis of our pre-litigation correspondence with the IPO). In that correspondence (in 2008/9) the IPO said the following:

‘"cable" in section 73 as amended must mean the same thing as "cable" in the Information Society Directive, the relevant requirements of which were implemented by the section 73 amendments in question. In the Information Society Directive "cable" is not synonymous with "wire" and is confined (as therefore, is section 73 CDPA) to the retransmission of broadcasts by conventional cable programme providers. The foregoing supports this Office’s view that the activities of IPTV providers such as "Zattoo" who purport to rely on section 73, are in fact wholly outside the scope of that provision and that there are grounds for challenging them on that basis.’

The IPO also stated in the correspondence that the interpretation of section 73 by the IPTV providers (and confirmed by the UK court in the TVCatchup case) "cannot have been Parliament’s intention" [2]

What are the problems with Section 73 now?

1. Economic loss for PSBs and the UK creative economy

Section 73 is now being relied on by a series of "service" providers, most notably TVCatchup and and FilmOn, to make money from the PSB channels, retransmitting them via their own online services and placing advertising in and around the channels (including the BBC’s channels). Not only are the PSB services being exploited without agreement or payment to anyone (including contributors) but, perversely, Section 73 effectively permits these online services to stream a small amount of content on the PSB channels (such as some old series for which online rights were not obtained or certain sports coverage) that the PSBs services themselves can’t stream online for rights reasons. This perverse consequence of S.73 has attracted significant attention from underlying rights holders including UK producers and foreign providers such as the US studios as well as other industry bodies.

"Services" such as TVCatchup undermine the legitimate online streaming services and on-demand ‘catch-up’ services provided by the PSBs which, in the case of the commercial PSBs, are a core part of on-going efforts to make a financial return on the PSB investment in original UK content.

It is increasingly clear that TVCatchup in particular is operating at scale in the UK and has many millions of users (TVCatchup claims close to 12m registered users on its site). The key losses from this exploitation for the PSBs are as follows:

· Loss of audience from legitimate PSB online streaming services, linear broadcast viewing and on demand services;

· For the commercial PSBs, loss of advertising and sponsorship revenue from their own channels. In particular, TVCatchup is pitching the commercial PSBs own channels as vehicles for its advertising and is generating material sums from blue chip advertisers in direct competition with the commercial PSBs own commercial exploitation online of the same channels. We are trying, via the UK court proceedings, to get visibility as to the sums that TVCatchup is making from the exploitation of the PSB services.

By contrast with PSB exploitation of channels and content online, none of the TVCatchup revenue flows back into original UK content production, or to underlying talent and rights holders. The scale and problem of this free riding is likely to increase substantially over the coming years as more and more households adopt connected TV.

2. The original policy rationale for Section 73 has gone

Significant cable roll out is now a thing of the past and the TV distribution market is now highly competitive. Cable is a highly effective and well resourced competitor to Sky and Freeview/DTT. There is no reason to continue to grant a primary legislative advantage from the 1980s to one particular platform operator in the current competitive market. Moreover, the Communications act 2003 introduced a "must offer" obligation on the PSBs, requiring us to offer the main PSB services for carriage on the cable (as well as satellite) platform. In addition, Virgin Media contract with the PSBs for the supply of all of the other channels offered by the PSBs that are not covered by S.73.

What should the Government do?

In our meetings with the Government to date it has been hard to understand the remaining policy rationale for Section 73 particularly given the "must offer" obligation that applies to the PSB channels. We believe that repeal of Section 73 would be a sensible de-regulatory measure that would end the unjustifiable damage which is being suffered by the PSBs, and would also ensure that the UK continues to meet its Community law obligations.

We believe the forthcoming legislative programme relating to the reform of intellectual property rules provides the Government with an opportunity to urgently consider repealing Section 73 assuming this cannot be achieved by secondary legislation after the passage of the Enterprise and Regulatory Reform Bill. Repeal of Section 73 would not only assist broadcasters in their fight against parasitic websites (which has already consumed a great deal of time and costs in order to attempt to clarify the legal position in the courts) but would also ensure that UK legislation complies with the EU acquis and therefore reduce the risk of any potential infringement proceedings against the UK.

The negative commercial impact of retaining Section 73 is significant for UK PSBs, and ultimately as a result the producers of the audio visual content they broadcast. This impact will continue to increase if no action is taken by the government to repeal these provisions.

April 2013

[1] Para 139 of the High Court judgment of Mr Justice Floyd, ITV Broadcasting and others vs TVCatchup (18 July 2011).

[2] Letter from the IPO to the BBC, Channel 4, Channel 5 and ITV on section 73 dated 2 March 2009

Prepared 17th May 2013