Supporting the creative economy - Culture, Media and Sport Committee Contents

3  Intellectual property

Copyright and piracy

19. If creative people and businesses are to profit from their labour, there must be in place a strong regime for the protection of intellectual property including copyright. The copyright system is not only crucial in recognising and rewarding creative endeavour, but also in supporting the investment necessary for success. Claire Enders of Enders Analysis and others told us that the UK's enviable knowledge economy is indeed very significantly underpinned by copyright protection.[38] The relationship between the strength of Britain's creative industries and robust copyright laws is acknowledged by the Open Rights Group which aims radically to liberalise the use and sharing of copyrighted content.[39] While we share the Open Rights Group's attachment to freedom of expression via the internet, we firmly repudiate their laissez-faire attitudes towards copyright infringement. Changes to UK copyright law should not be undertaken lightly: the value to the economy of copyright and creativity runs to £36 billion a year, a figure cited by both Viscount Younger of Leckie,[40] Parliamentary Under-Secretary of State for Intellectual Property and Richard Mollet, Chair, Alliance for Intellectual Property.[41]

20. Peter Jenner, Visiting Professor, University of Hertfordshire and Consultant to the World Intellectual Property Organisation, suggested that there was too much "fussing around" with the copyright system at the expense of looking at other ways in which creators can be paid for their work.[42] We hope his comments will trigger academic debate that, one day, might lead to practical policy proposals for other ways to foster and reward creativity in the internet age. In the meantime, we start with the more practical proposition that we have an established model based on copyright that has continued to adapt well to changing technologies. Lavinia Carey, Director General, British Video Association, pointed to the "proliferation of digital services" as evidence that "copyright is not broken" in the online world.[43] This is not to deny that tensions exist. The internet was described to us by Jeremy Silver (an industry expert)[44] as a copying machine[45] and, by Richard Mollet, as a distribution machine;[46] necessarily this poses challenges to copyright enforcement[47] but not, in our view, to the principle of intellectual property rights.

21. We heard, many times, of the tensions between rights holders who create content and technology companies which exploit it. Claire Enders referred to her defending "songwriters and composers against the predations of Google and Apple"[48] and to Apple's "plan to destroy copyright".[49] Andy Heath, Chairman, UK Music, said:

    The business community and the finance community always say to me, "Yes, but Government hates copyright. They are going to bring in all sorts of laws that are going to make it easier for Google to steal your music that they already steal, so why should we invest?" and that is a story I get every month of every year.[50]

22. Sarah Hunter, Head of UK Public Policy, Google, did not agree that Google is a "bogeyman" for the creative industries. She told us: "I think Google is the proxy for everything the internet is bringing, but we are trying hard to create business models and revenues for those creative industries."[51]

23. The relationships between individual artists and record companies can also give rise to friction, though much of this is due to variations in individual contracts. The welcome decision[52] to extend from 50 to 70 years the copyright term for sound recordings[53] will, we hope, ensure artists and performers continue to benefit from sales of their performances or works; they deserve a fair reward, not least for digital downloads of their work.[54]

24. The greatest threat to recognition and just reward for creativity is illegal copying, particularly online piracy. Industry representatives put a figure of £400 million on foregone revenue for film and music piracy in one year alone.[55] These figures take into account the fact that not every illegal download could necessarily be converted into a legal one; in fact, one estimate is that there are £1 billion worth of illegal downloads in music alone.[56] It is estimated that 35% all films online are consumed illegally.[57] These industry figures were questioned by the Open Rights Group[58] and Viscount Younger of Leckie stated they were not based on exact science.[59] Such quibbles in our view, however, should not detract from the existential threat that online piracy clearly poses to the creative economy.

25. Evidently, the relative ease of breaching copyright online instils a false sense of legitimacy in the eyes of some. Peter Jenner outlined an illustration of one mindset: "One of the things that has been clear with the whole issue of piracy is a feeling that somehow or another it wasn't really quite fair that if you were providing your own computer and your own broadband service you should have to pay the same as if you were going to a shop and buying a physical good."[60] Jeremy Silver attempted to get into the mind of a teenager downloading content illegally: "They feel that it is not a property theft because it does not produce scarcity. They know that if they take it, it is still there for everybody else to take."[61] Viscount Younger of Leckie rightly alluded to the need to balance the interests of consumers and rights holders.[62]

26. There is within the music industry acknowledgment, if not acceptance, that piracy is a feature of a successful industry.[63] Individuals who commit copyright infringing acts lay themselves open to civil action in the courts. In practice, the music industry now tends to target people who commit criminal offences by making or dealing with infringing articles on a commercial scale.[64] Both Viscount Younger of Leckie and the Parliamentary Under-Secretary of State for Culture, Communications and Creative Industries, Edward Vaizey, outlined ongoing interventions to support the copyright system and to enforce it.[65] Practical measures are being taken such as the involvement of the City of London Police, including the new IP Crime Unit,[66] and the planned global enforcement conference.[67] Viscount Younger of Leckie provided us with more information on the latter:

    ...we are planning, from the intellectual property perspective, an enforcement conference, and we think this will be a very important thing for the UK. We don't know quite when it will be, but it is likely to be 2014. It will be a global conference to bring players from across the world to London, to spend two days discussing enforcement issues, airing views and a bit of networking. This has never been done before, and we are taking the initiative.[68]

27. There are signs that courts are making it easier to block illegal websites. The Motion Picture Association informed us: "We also support improvements to the judicial system to allow site blocking orders to be obtained more efficiently under section 97A of the Copyright, Designs and Patents Act 1988, especially taking on board the High Court decision requiring a number of internet service providers (ISPs) to block access to the pirate website Newzbin2."[69]

28. We encourage businesses to use the current law to bring claims wherever it is feasible for them to do so. There nonetheless remains a systemic failure to enforce the existing laws effectively against rife online piracy.

29. Sarah Hunter told us how Google responds when rights-holders identify copyright infringing material online: "When they do tell us about finding illegal content we remove it straightaway. I think last month we removed 9 million URLs from our web index."[70] When asked whether Google could block the worst offending domains she pointed out that a lot of pages within such domains were hosting legal content.[71]

30. We were told that changes to Google's search algorithm have been made.[72] These aim to demote illegal sites in search results. However, recent BPI work,[73] based on a cross-section of searches of the type [Artist] + [Title] + "mp3", has shown that 61% of the top 10 sites in the Google rankings are infringing sites, compared to 63% in August 2012. This headline figure sums up the inadequacy of Google's response in the context of illegal downloading, though we acknowledge that is just one way in which music is now consumed online.[74] Google cannot claim ignorance over the scale of illegal activity on the internet. At present, the BPI alone sends Google well in excess of 2 million notices per month relating to individual pages on sites which encourage and promote large scale copyright infringement. One domain,, has been the subject of notices identifying 5,096,282 URLs[75] in the past year.[76]

31. We strongly condemn the failure of Google, notable among technology companies, to provide an adequate response to creative industry requests to prevent its search engine directing consumers to copyright-infringing websites. We are unimpressed by their evident reluctance to block infringing websites on the flimsy grounds that some operate under the cover of hosting some legal content. The continuing promotion by search engines of illegal content on the internet is unacceptable. So far, their attempts to remedy this have been derisorily ineffective.

32. We do not believe it to be beyond the wit of the engineers employed by Google and others to demote and, ideally, remove copyright infringing material from search engine results. Google co-operates with law enforcement agencies to block child pornographic content from search results and it has provided no coherent, responsible answer as to why it cannot do the same for sites which blatantly, and illegally, offer pirated content.

33. The Intellectual Property Office—which currently resides in the Department for Business, Innovation and Skills—can also certainly do more than it appears to have done of late. The BPI told us:

    The measures on enforcement of copyright need to be backed up by an Intellectual Property Office that is properly resourced and focused on defending the rights of UK creators. The IPO has spent a lot of energy looking at how the rights of UK companies can be reduced, the BPI would also ask the committee to look at the energy the IPO puts into its role in enforcing copyright.[77]

34. The IPO must champion the creative sector which gives rise to intellectual property in the first place.[78] Given the importance of the creative sector to the UK economy and the relative importance to that sector of strong IP protection, strongly enforced, the Government must do more to protect and promote UK IP as a system for growth. The Digital Economy Act 2010, legislation designed to support new legitimate online business models, has still not been fully implemented, and much more needs to be done to encourage copyright compliance and to discourage infringement. There should be within Government a powerful champion of IP with a duty to protect and promote the interests of UK IP, to co-ordinate enforcement of IP rights in the UK and overseas and to educate consumers on the value of IP and the importance of respecting IP rights. Logically the IPO should take on this role. Yet too often it is seen as wishing to dilute copyright rather than defend and enforce it. It cannot have helped that, since the 2010 General Election, three individuals have held the post of Parliamentary Under Secretary of State for Intellectual Property.[79] Nor can it be helpful that the copyright responsibilities of the IPO remain under the aegis of the Department for Business, Innovation and Skills when responsibility for the creative industries naturally rests with the DCMS.

35. We recommend that the Intellectual Property Office's annual reports include an assessment of the degree of online copyright infringement and the extent to which identified search engines and other internet services facilitate this. We further recommend that the Government consider how it might incentivise technology companies to hinder access via the internet to copyright infringing material.

36. One particular anomaly in existing legislation has been persuasively drawn to our attention.[80] Copyright theft in the offline world can attract penalties of up to ten years' imprisonment—under the Copyright, etc. and Trade Marks (Offences and Enforcement) Act 2002. However, the maximum penalty for digital copyright theft is two years' imprisonment. This is because the relevant legislation is in the form of regulations brought in under section 2(2) of the European Communities Act 1972: Parliament limited the criminal penalties that might be applied in implementing European Union legislation in this way.[81] The relevant 2003 regulations make direct reference to the internet and illustrate one way in which copyright law has shown itself adaptable to the online world. However, if organised crime involving online piracy on a commercial scale is to be tackled and deterred, it is essential that this discrepancy between the online and offline worlds be rectified. In the context of current proposals to introduce copyright exceptions, the Government has already shown signs that it accepts this point.[82] The Alliance for Intellectual Property gave us an example of how the Federation Against Copyright Theft has responded to this anomaly:

    The problem this has created for law enforcement was seen recently in FACT's significant, landmark, private prosecution of Anton Vickerman. Vickerman was making £50,000 each month running a website which facilitated mass scale copyright infringement. He was prosecuted and subsequently convicted on two counts of Conspiracy to Defraud and sentenced to four years imprisonment—a sentence that would not have been possible if prosecuted under copyright law.[83]

37. We recommend that the maximum penalty for serious online copyright theft be extended to ten years' imprisonment. Criminal offences in the online world should attract the same penalties as those provided for the physical world by the Copyright, etc. and Trade Marks (Offences and Enforcement) Act 2002.

Digital Economy Act

38. Although it contains a raft of measures across media, communications and spectrum, the Digital Economy Act 2010 ('DEA') is largely associated, in the public eye at least, with copyright. Measures to tackle internet piracy survived the 'wash-up' process at the end of the last Parliament: sections 3-18 of the Act cover online infringement of copyright. However, almost none of these provisions have yet been implemented in practice, including those imposing penalties on people who persistently infringe copyright.

39. Following amendments made during the House of Commons committee stage, any secondary legislation under section 10 (Obligations to limit internet access), would be subject to a super-affirmative procedure: the relevant statutory instrument would be available for consideration in draft by a Committee of either House and a final draft (with or without modifications) would then require approval by both Houses of Parliament.[84] Furthermore, no order may be made under this section for at least a year—this being the period during which "initial obligations" (a warning system backed up with the potential for court action) would first be given a chance to work.

40. On 28 May 2010, Ofcom launched a consultation on how to give effect to measures introduced in the DEA that are aimed at reducing online copyright infringement. Specifically, views were sought on a code of practice called "the Online Copyright Infringement Initial Obligations Code". This consultation ended on 30 July 2010.

41. The draft code would require large internet service providers to inform customers of allegations that their internet connection had been used to infringe copyright. Persistent infringement could lead to legal action initiated by the copyright owner. A draft statutory instrument—the "Costs Order"—on the costs of administering the scheme was laid in June 2012.[85] This was subsequently withdrawn following scrutiny by the House of Lords Secondary Legislation Scrutiny Committee.[86] The Minister, Edward Vaizey, told us: "we now have a classic Whitehall discussion about whether the statutory instrument is appropriate; whether the Ofcom costs are regarded as a tax or a fee. We are in discussions with the Treasury to ensure that we get it absolutely right, but we intend to proceed as soon as we can come to an agreement with the Treasury about the proper way forward. I would reject any notion that we have delayed on the Digital Economy Act."[87] While the practical implementation of the Digital Economy Act continues to be delayed, millions of pounds are being lost by the creative industries with serious consequences for the wider economy. We urge the Government to resolve the current impasse on implementing the Online Copyright Infringement Code without further delay, and in response to this Report to set out a clear timetable for doing so.

42. The copyright infringement notification system, embodied by the above code, has already survived the challenge of a Judicial Review instigated by BT and TalkTalk.[88] These two internet service providers had claimed that the measures in the Act were not compliant with EU law and were not proportionate. On 20 April 2011, the High Court rejected this challenge, though it provided the ISPs with limited succour in releasing them from paying Ofcom's costs in setting up, monitoring and enforcing the system.[89] As a result of the judgment, ISPs would still have to share the cost of operating the system and its associated appeals process.

43. The delays in implementing the DEA are thus by no means all attributable to the Government: the legal action by BT and TalkTalk certainly contributed. As, perhaps, did the haste with which the presaging Bill was originally rushed through Parliament with relatively little debate in the House of Commons. We acknowledge that the DEA has its limitations; for example it is not applicable to mobile devices[90] and there needs to be greater clarity over the situation of public Wi-Fi.[91] We recognise, too, that effective enforcement of copyright is likely to focus more on targeting illegal activities on a commercial scale—on "following the money"[92]—than, to quote Ian Hargreaves, Professor of Digital Economy, Cardiff University, "writing letters to teenagers".[93] This is to miss the point that the DEA is primarily about education.[94] In America, there are signs that ISPs as well as rights-holders are beginning to acknowledge the role of a graduated approach as envisaged by the DEA. The Minister, Edward Vaizey, told us:

    I also think it is very important that the industry itself continues to work together. One of the things that I hope will change and has changed is that you have ISPs like BT—and remember BT did not want this Act and tried to undermine it in the courts or, to put it more objectively, sought a judicial review of its implications—that have now made a massive investment in content by buying Premier League rights. Now, I cannot believe anyone in BT is going to sit idly by while pirate sites put up live-streaming of a Premier League match that they are providing for their customers. The Americans are pressing ahead with a voluntary three-strikes process with the main cable companies and rights holders, and they are certainly looking to implement something like that in the UK.

    I think that industry itself has to work together, and one of the reasons I have brought both sides together is to illustrate the point that ISPs have as much interest in protecting IP as rights holders do.[95]

44. The Minister stated that the first letters to suspected copyright infringers were not expected until 2015, some five years after the Digital Economy Act came into force.[96] Even this strikes us as being optimistic given that, when the Government lays the revised "Costs Order" before Parliament, Ofcom will need to consult on a revised draft initial obligations code which will also need approval by the European Commission under the Technical Standards Directive. An independent body to hear subscriber appeals will have to be appointed and ISPs will have to put in place systems for processing copyright infringement reports.

45. In our view, there has been an unjustified delay in the issuing of the first warning letters resulting from Ofcom's Online Copyright Infringement Code. The costs, and their attribution, of issuing warning letters under the Digital Economy Act should be seen less as a justification for ongoing delays than as an incentive for better targeting the worst examples of copyright infringement.

46. We recommend that a copyright infringement notification system envisaged by the Digital Economy Act be implemented with far greater speed than the Government currently plans. By targeting information letters to the worst infringers, early implementation will, we believe, serve an important educative purpose which could percolate more widely.

47. We are encouraged by the progress that has been made towards instituting a voluntary system of warning letters following discussions involving internet service providers and rights owners.[97] If this can be achieved by mutual cooperation rather than legislation, it will be a major step forward. However, should voluntary initiatives such as this prove unsuccessful then the Government should ensure that the equivalent measures in the Digital Economy Act are promptly put into effect.

Proposals for change

48. In November 2010 the Prime Minister announced an independent review of how the intellectual property framework supports growth and innovation. The Review was chaired by Ian Hargreaves and culminated with the publication in May 2011 of Digital Opportunity. It made wide-ranging recommendations, which the Government broadly accepted. The most contentious recommendations relate to copyright exceptions, which we discuss further below. A requirement that copyright collecting societies should be required by law to adopt codes of practice has been met with some scepticism by PPL[98] though we also heard criticism on behalf of individual artists it represents. [99] There was a subsequent public consultation on implementing the Hargreaves proposals, to which the Government published a response in July 2012.[100]

49. The first recommendation of the Hargreaves report is that:

    Government should ensure that development of the IP System is driven as far as possible by objective evidence. Policy should balance measurable economic objectives against social goals and potential benefits for rights holders against impacts on consumers and other interests. These concerns will be of particular importance in assessing future claims to extend rights or in determining desirable limits to rights.

50. A supporting document on the benefits of the Hargreaves recommendations puts a total figure of between £5.5 billion and £7.9 billion for the economic growth impact per annum. A private copying exception—format shifting for private use[101]—is said to contribute between £0.3 billion and £2 billion towards this. Viscount Younger of Leckie did not instil great confidence in the underlying calculations when he told us: "When it comes to private copying, that figure of £2 billion, which I think has been cited before, is meant at the upper end of the spectrum. I don't particularly recognise that figure, by the way."[102] In evidence, indeed, the Minister pointed to the Government's assessment being towards the bottom end of the cited range: "The figure that we have is nearer £300 million, and that is the impact assessment that we have produced, if that is a help."[103]

51. Professor Hargreaves himself was unconvincing when defending these calculations, and appeared unable to justify them beyond a vague assertion that, for example, the £2 billion benefit from a private copying exception might be generated by ending "uncertainty" and consumer confusion. His evidence suggested that in any event there could be no negative result from introducing a series of measures designed to limit the application of copyright law. "Would you seriously wish to counter-argue that the number here would be a negative rather than a positive? ... I do not think it is possible to argue convincingly that you would substitute a negative," he told us.[104]

52. During this inquiry, however, we have received plenty of views which do, indeed, challenge not only the figures used by Hargreaves, but also the likely direction of travel. We have also heard numerous complaints from across the creative spectrum about the perceived power and influence of Google in the Government's inner, policy-making sanctum. The minister Viscount Younger of Leckie hardly dispelled this impression: "Google is one of several search engines," he told us, "and I am very aware of their power, put it that way. I am also very aware, I think, that they have access, for whatever reason, to higher levels than me in No. 10, I understand."[105]

53. Antipathy towards Google—and other large US exploiters of content, Apple and Amazon—is undoubtedly reinforced by their well-publicised corporate tax avoidance structures. This not only means that they pay little or no corporation tax on their sizeable activities here and major European markets, but that those companies which do are not operating on a level, competitive playing field.

54. Andy Heath, a director of independent music producer Beggars Group, was reflective of those views: in corporation tax last year, he said, his label paid "double what the tech companies paid between them".[106] Google, pointed out John McVay of PACT, competes to take advertising from ITV, Channel 4 and other commercial broadcasters, who invest in British content while paying their tax dues as well.[107] As a result, Claire Enders, too, was sceptical about the wider social benefit of UK copyright changes: "unless this organisation ... is prepared to contribute to the skills base, to the education base, to the fabric of our society from which these creative works are developed, then I just don't buy their argument at all because they are the prime beneficiaries of America fair use provisions. Therefore I mistrust their motives,' she said.[108]

55. Following all the evidence we have received, we think Hargreaves is wrong in the benefits his report claims for his recommended changes to UK copyright law. We regret that the Hargreaves report adopts a significantly low standard in relation to the need for objective evidence in determining copyright policy. We do not consider Professor Hargreaves has adequately assessed the dangers of putting the established system of copyright at risk for no obvious benefit. We are deeply concerned that there is an underlying agenda driven at least partly by technology companies (Google foremost among them) which, if pursued uncritically, could cause irreversible damage to the creative sector on which the United Kingdom's future prosperity will significantly depend.

56. We heard evidence which conflicts with Professor Hargreaves' points, notably from representatives of the music business such as Andy Heath and Martin Mills, Chairman, Beggars Group, who spoke about the problems caused to their business not only by high rates of piracy but also from the perception among many—from pirates to providers of finance—that the Government is more interested in weakening copyright law than enforcing it. Andy Heath said:

    I think one of the biggest problems for the music industry and the cultural industries generally is the bewildering attitude that we seem to be getting from the Government about its ambivalence towards the benefit of copyright. It seems to me that Governments for some time, but especially this Government, have bought the line that intellectual property is a barrier to growth, and that simply is a lie. It is not true.[109]

57. Martin Mills referred to delays in the DEA, proposed copyright exceptions and the influence of technology companies:

    When you look at how long it has taken to implement the Digital Economy Act, when you look at what has been proposed with the copyright exceptions at the moment, when you look at the influence that technology companies have with Government against the creative industries, you have to think that Government is more swayed towards those industries than towards ours, and that militates against investment, which I think is a real problem.[110]

58. The Hargreaves report included a recommendation that the UK should have a Digital Copyright Exchange (DCE): a digital market place where licences in copyright content could be readily bought and sold, a sort of online copyright shop. Richard Hooper, Managing Partner, Hooper Communications, was subsequently appointed by the Secretary of State for Business, Innovation and Skills, Vince Cable, to lead an independent feasibility study on creating the DCE, and his final report, entitled 'Copyright Works' was published in July 2012. Hooper expanded the idea of a digital copyright exchange to propose a copyright hub, an online portal to which people would turn for three things: finding their ways through the complexities of copyright, finding out who owns what rights and, most importantly, making easier licensing arrangements.[111] The Copyright Hub was subsequently launched on 8 July 2013. It is described in the following terms: "The Copyright Hub is your gateway to information about copyright in the UK. It points you in the right direction whether you want to learn about copyright, get permission to use somebody else's work or find out about protecting your work." [112] The Copyright Hub is a welcome development which should prompt the Government to redouble its efforts at working with industry to develop overseas markets for British IP content.

59. During the course of our inquiry we made plain to the Government our firmest support for the establishment of a Global Repertoire Database (GRD) in London.[113] The GRD will serve as a centralised, authoritative source of the metadata used to describe musical works. It is an industry-led initiative on behalf of songwriters, composers and publishers. The idea behind it is to provide a single authoritative database of the owners of copyrighted musical works. Locating it in London would be entirely consistent with making the UK a global centre for copyright exchanges. We were delighted with the announcement, on 13 May 2013, that the Global Repertoire Database would be setting up its global headquarters in London. An operations centre will be based in Berlin.[114]

60. While we are persuaded of the merits of copyright exchanges, we note the resistance of Pact, representing independent audiovisual producers. Pact's chief executive, John McVay, told us of his concerns that a digital copyright exchange could become the "thin edge of a wedge to collective licensing"[115] which in turn might end up forcing producers to sell their intellectual property rights on a non-commercial basis.[116] We believe participation in a copyright exchange or membership of a collecting society should both be voluntary, though the former will offer rights holders the advantage of visibility and the latter can provide an administratively convenient way of obtaining royalties.

61. Much of the work of independent producers is commissioned by the public service broadcasters: the BBC, ITV, Channel 4 and Five. Public service broadcasters have long set a bar to which others can aspire and it is refreshing to see that, in terms of commissioning UK content, commercial broadcasters are now capable of more than matching this.[117] We explored whether any further changes were necessary to support this development. Adam Minns of the Commercial Broadcasters Association emphasised to us the need for regulatory certainty—a plea for no change—and Adam Kinsley, Director of Policy, BSkyB, added that he came with no 'wish list' for further policy interventions. We remain alert to the need to protect and promote the ongoing health of the mixed economy in broadcasting, recognising the competition it faces from overseas producers, particularly in the USA.[118]

62. For the public service broadcasters, Dan Brooke of Channel 4 emphasised the need for a strong IP regime, and told us he believed the current system "is strong and works well".[119] Magnus Brooke of ITV expressed strong support for the Digital Economy Act.[120] Both, together with John Tate of the BBC, expressed broad support for the Hargreaves reforms—with some reservations. The most significant of these related to copyright exceptions and the need to have any drawn sufficiently narrowly to prevent them being commercially exploited at the expense of the originators of content. This was particularly the case in the context of any extension of a private copying exception to internet cloud services.[121]

Copyright exceptions

63. In December 2012, the Government published the final part of its response to its copyright consultation, launched a year earlier in the wake of the Hargreaves report, Digital Opportunity. Hargreaves proposed the introduction of exceptions in copyright "to realise all the opportunities within the EU framework".[122] These exceptions would allow for what would otherwise be restricted acts under copyright law in a variety of contexts including format shifting, parody, non-commercial research, and library archiving. Of these, the format shifting, or private copying, exception has proved one of the most controversial.

64. The Government's response,[123] published on 20 December 2012, set out changes to the framework for copyright exceptions to be brought in by secondary legislation. The proposed changes are intended to "introduce greater freedoms in copyright law to allow third parties to use copyright works for a variety of economically and/or socially valuable purposes without the need to seek permission from copyright owners."[124] Protections for the interests of copyright owners and creators are—the Government claims—built in to the revised framework.

65. The Enterprise and Regulatory Reform Bill 2012-13 originally included clauses that provided for secondary legislation (by the affirmative procedure) to add or remove copyright exceptions. This was changed by amending what had by then become clause 67 (previously clause 66 and, before that, clause 57) of the Bill during the Lords report stage. Lord Younger explained the amendment in the context of pre-existing powers under section 2(2) of the European Communities Act 1972:

    The purpose of the government amendment is to limit the clause so that when the Section 2(2) power is used to amend copyright exceptions, the limitation on criminal penalties does not apply. The new clause no longer operates a separate power. It is now a way of removing the undesirable consequences which flow when Section 2(2) is used.[125]

66. The Enterprise and Regulatory Reform Act 2013 accordingly ensures limits on penalties will not apply when future exceptions are brought in using the European Communities Act 1972. What little remains of the explicit copyright exceptions provisions is now section 75 of the 2013 Act.

67. In oral evidence to us, Adam Minns, executive director of COBA[126] said: "What I would say on the exceptions is that, in principle, we would prefer them to be unbundled so that we can look at them individually and have individual impact assessments wherever possible."[127] On 7 June 2013, the Intellectual Property Office published, as separate documents for technical review, draft legislation on copyright exceptions for private copying, parody, quotation and public administration. More have since followed, including amendments to exceptions for education.[128] We note that rights holders are already expressing concerns about the lack of clear definitions and the dangers that these may create loopholes which will be exploited by the unscrupulous. Rights holders will doubtless have more to say on these detailed proposals. So should Parliament.

68. We are not persuaded that the introduction of new copyright exceptions will bring the benefits claimed and believe that generally the existing law works well. We recommend that the introduction or amendment of copyright exceptions should be contemplated only following detailed impact assessments and after proper parliamentary scrutiny on an individual basis.

69. Throughout the course of our inquiry we heard a wide variety of views concerning the Government's proposals for new copyright exceptions in the wake of the Hargreaves review. The Open Rights Group stated that "people will only reap the benefits of the Internet as a tool that promotes freedom of expression if there are sufficient exceptions that permit legitimate engagement with cultural works. Such exceptions do not necessarily undermine creators' rights, or unduly take away earning power from them, but they do encourage people to reuse those works in new and useful ways."[129] Without the Hargreaves reforms, the Open Rights Group believes that "copyright will lose credibility by continuing to inhibit society" and preventing "legitimate transformative reuses" of copyright works.[130] "Legitimate transformative reuse" appears to mean parody.[131]

70. A copyright exception for parody was supported in oral evidence from Dan Brooke[132] of Channel 4 and in written evidence from UKTV.[133] Written evidence from Equity noted that parody is already widespread "and part of the existing tradition of free speech in the UK."[134] Equity went on to suggest that the introduction of a parody exception could have "unintended negative consequences for performers". Richard Mollett, chair of the Alliance for Intellectual Property said there was a lack of evidential backing for a parody exception.[135]

71. The Design and Artists Copyright Society lamented the sweeping nature of the proposed exceptions, including parody:

    DACS also feels that in focussing on the larger sectors of the industry, the Hargreaves team over-looked issues specific the visual arts sector. This is reflected in the "one size fits all approach" taken in the Review's recommendations to extend copyright exceptions, without due consideration of how the impact of widening such exceptions differs between sectors. For example, exceptions for private copying and parody will impact visual art in a very different way to music and films.[136]

72. The proposed private copying exception attracted the most persistent comment and, in many cases, hostility during our inquiry. The precise wording of the Hargreaves report on format shifting does bear closer examination:

    The Review favours a limited private copying exception which corresponds to what consumers are already doing. As rights holders are well aware of consumers' behaviour in this respect, our view is that the benefit of being able to do this is already factored into the price that rights holders are charging. A limited private copying exception which corresponds to the expectations of buyers and sellers of copyright content, and is therefore already priced into the purchase, will by definition not entail a loss for right holders.

    The Government should introduce an exception to allow individuals to make copies for their own and immediate family's use on different media. Rights holders will be free to pursue whatever compensation the market will provide by taking account of consumers' freedom to act in this way and by setting prices accordingly.[137]

73. We are not convinced by Hargreaves' implication that a facility for private copying is factored into the purchase either of music or devices that store, play or copy it. Andy Heath saw no benefit to rights holders from private copying:

    If you check the research and you go through the consumer's value of their digital tools—their phones, their computers—the extent to which they attribute the value of that product, sometimes a £400 or £500 product, is 30% or 40% of that value is so that they can have music. At this moment in time, we have no benefit at all—zero—for the transfer of that value. All of that value goes to the manufacturer of the device.[138]

74. We think Hargreaves' 'one size fits all' arguments will hold even less sway among film makers. The Government, in its response, appears to have ruled out private copying for the benefit of an individual's immediate family: Modernising Copyright states the Government will "introduce a narrow private copying exception, allowing copying of content lawfully owned by an individual (such as a CD) to another medium or device owned by that individual such as a mobile phone, MP3 player or private online storage, strictly for their own personal use." This left Professor Hargreaves wondering if he might play music to his wife[139] and the rest of us wondering if the Government's proposals will simply add regulatory confusion—to the cost of the creative industries.

75. Alison Wenham, Chief Executive Officer, The Association of Independent Music, told us that she did not mind about, or at least had learned to live with, "copy and share" and acknowledged that piracy is a feature of a successful industry.[140] Like other witnesses from the music industry she did, however, have concerns over cloud storage.[141] Andy Heath provided the following elaboration:

    What Alison is saying is that Apple and Google are not creating Cloud storage lockers for fun. They are doing it for immense profit. It is another brick in their moneymaking machine, and it is completely immoral for the transfer of the value to occur without any level of compensation.[142]

76. A genuinely private cloud[143] might be acceptable (if such a thing were in practice possible) but there is a danger this could mutate into a new mechanism for illegal file-sharing, such as a cyber locker.[144] The Government's draft private copying exception would allow an individual to copy a copyright work to a private cloud - "an electronic storage facility accessed by means of the internet or similar means, where that facility is provided for his sole private use."[145] Legal subscription-based cloud services are already emerging from business-to-business deals in which rights holders are properly rewarded. We consider this to be a welcome development that should be encouraged and we would not want it compromised by a hastily drawn private copying exception that the Government might subsequently regret.

77. There is naturally recognition within the film industry that the introduction of a formal private copying exception would be attractive to consumers. The industry is responding to these interests by introducing a range of digital products. One such product is UltraViolet, already in half a million UK households; this stimulates digital purchase by allowing consumers to stream content they own to any device as well as to make copies on up to 12 owned devices and to share this with up to five family members.[146] A private copying exception would clearly undermine new technologies and business models being introduced, particularly by the audiovisual sector. This point was put to us, forcefully and convincingly, by Twentieth Century Fox.[147]

78. During our visit to California, Fox argued persuasively, on behalf of the industry, that the proposed exception would be highly damaging for new services and business models. Hargreaves had, indeed, been effectively overtaken by technology with the development of cloud services and cyber lockers. The latter are becoming "notorious hotbeds for pirated content", Fox executives stated,[148] and "allowing the possibility of storage of 'private' copies in the cloud gives pirate sites a ready-made defense against anti-piracy enforcement actions."[149] We have great sympathy with this reasoning; it is a line of argument, for example, already used by Google to defend against blocking pirate websites. The US—with its strong content industry—does not, we note, have a private copy exception for audio-visual works.

79. Audiovisual content and its consumption are qualitatively different compared to music. The file sizes are substantially bigger for a start; this fact alone has given the audiovisual world a little more breathing space to prepare for the challenges that have beset music businesses. The British Video Association also noted the audiovisual sector's greater tradition of in-built copyright protection and once only viewing. We should not lightly change the law to make it easier for pirates to assault the audio-visual sector, as they have done with music. The Government's draft private copying exception makes a cursory nod to the former by proscribing the circumvention of effective technological measures.[150]

80. Regarding the computer games industry, Dr Jo Twist, chief executive officer of the Association for Interactive Entertainment told us: "We are very supportive of the copyright regime as it is. It supports our industry very well. We are classified as software, and we welcome that, so any exceptions do not apply to us as an industry, which we are keen to maintain under the European copyright directive."[151] In evidence from Ian Livingstone, Life President, Eidos, we also learned of ways in which video games can exploit technology to combat piracy, for example by embedding advertising and apps in the games themselves.[152] For these reasons, the computer games industry might be immune to some of the worst consequences emerging from the currently fluid copyright landscape.

81. Any introduction of a private copying exception should be tightly constrained, and subjected to careful scrutiny, and balanced by the putting in place of a robust copyright protection regime designed to tackle abuses. We agree with Amanda Nevill, Chief Executive of the British Film Institute, that any copyright exceptions should move in parallel with implementation of the Digital Economy Act.[153]

82. We believe that there needs to be far more detailed consideration before any private copying exception is introduced. In particular, we recommend that any changes to copyright law should take full account of the material differences between the audiovisual and music sectors and indeed current and likely future technological changes. We do not believe a case has been made for applying a private copying exception to audiovisual content and it should therefore be excluded.

38   Q 153 Back

39   Q 485 Back

40   Q 829 Back

41   Q 505 Back

42   Q 410 Back

43   Q 495 Back

44   Chairman of Semetric Limited and Lead Specialist on Creative Industries, Technology Strategy Board Back

45   Q 454 Back

46   Q 503 Back

47   Q 393 Back

48   Q 153 Back

49   Q 158 Back

50   Q 219 Back

51   Q 363 Back

52   Directive 2011/77/EU; The Copyright and Duration of Rights in Performances Regulations SI 2013/1782 (in force 1 November 2013) Back

53   Q 798; Ev w8 (Musicians' Union) Back

54   Qq 795-796 Back

55   Qq 501-502, Ev 297 Back

56   Qq 775, 832-833 Back

57   Q 327 Back

58   Q 453 Back

59   Q 832 Back

60   Q 420 Back

61   Q 464 Back

62   Q 852 Back

63   Q 222 Back

64   Section 107, Copyright, Designs and Patents Act 1988 Back

65   Qq 822, 865 Back

66  Back

67   Q 864 Back

68   Q 864 Back

69   Ev w89 Back

70   Q 350 Back

71   Q 356 Back

72   Q 352 Back

73   Q 881 Back

74   Qq 353-354 Back

75   A uniform resource locator is a specific web address Back

76[accessed 19 July 2013] Back

77   Ev 235-236 Back

78   Q 515 Back

79   Viscount Younger of Leckie (2013), The Rt Hon Lord Marland (2012 to 2013) and Baroness Wilcox (2010 to 2012) Back

80   Qq 892-893 Back

81   Copyright and Related Rights Regulations SI 2003/2498, which implement Directive 2001/29/EC of the European Parliament and of the Council on the harmonisation of certain aspects of copyright and related rights in the information society. Back

82   HL Deb 11 March 2013 c18 Back

83   Ev 294 (Alliance for Intellectual Property) Back

84   Section 10, Digital Economy Act 2010 Back

85   Online Infringement of Copyright (Initial Obligations) (Sharing of Costs) Order 2012 (laid 26 June 2012). Back

86   Secondary Legislation Scrutiny Committee (HL Paper 32), Seventh Report of Session 2012-13,12 July 2012 Back

87   Q 865 Back

88   Ev w154-157 (BT) Back

89  Back

90   Q 801 Back

91   Q 488 Back

92   Qq 466, 508-509 Back

93   Qq 430-431 Back

94   Q 499 Back

95   Q 867 Back

96   Q 868 Back

97   'Families who pirate films or music face warning letters', Sunday Times, 1 September 2013 Back

98   formerly known as Phonographic Performance Limited Back

99   Qq 767, 780 Back

100   HM Government, Government Policy Statement: Consultation on Modernising Copyright, 2 July 2012 Back

101   An example of format shifting would be copying music from a CD to an iPod  Back

102   Q 871 Back

103   Q 874 Back

104   Q 395 Back

105   Q 848 Back

106   Q 247 Back

107   Q 211 Back

108   Q 153 Back

109   Q 219 Back

110   Q 317 Back

111   Q 414 Back

112  Back

113   Ev w197-198 Back

114  Back

115   Q 192 Back

116   Qq 186-187, 192, 194 Back

117   Ev 328, 335, 347, 349, 352 Back

118   Qq 677-678 Back

119   Q 643 Back

120   Q 643 Back

121   Qq 643-646 Back

122   Digital Opportunity, May 2011 Back

123   Modernising Copyright: a modern, robust and flexible framework, HM Government, December 2012 Back

124  Back

125   HL Deb 11 March 2013 c18 Back

126   Commercial Broadcasters Association Back

127   Q 715 Back

128  Back

129   Ev 277 Back

130   Ev 276 Back

131   Q 469 Back

132   Q 644 Back

133   Ev w67 Back

134   Ev w6 (Equity) Back

135   Q 516 Back

136   Ev w32 Back

137   Digital Opportunity, May 2011 Back

138   Q 233 Back

139   Q 407 Back

140   Q 222 Back

141   Qq 222, 225, 816 Back

142   Q 233 Back

143   i.e. a data storage facility on the internet accessible only by an individual. Back

144   Q 236 Back

145  Back

146   Ev w188 Back

147   Ev w186-197 Back

148   Ev w195 Back

149   Ev w195 Back

150 Back

151   Q 590 Back

152   Q 592 Back

153   Q 538 Back

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© Parliamentary copyright 2013
Prepared 26 September 2013