On each occasion that we debated these matters I have raised a number of issues, which I will repeat only briefly. First, there are the basic economics and commercial

29 July 2014 : Column 1564

realities. Why, in formulating the contract override provisions in the exceptions, have they taken little or no account of developments in licensing, both during and after the Hargreaves process, such as commercial offerings through new technology and the Copyright Hub? Exceptions should not apply where commercially available alternatives already exist. Sadly, the Government have not accepted that important principle or, let it be said, the flexibility contained within the information society directive.

The noble Lord, Lord Stevenson, mentioned developments in the music industry. Another example regarding the personal copying exception is in the audiovisual sector. Products such as iTunes and UltraViolet allow legal and secure access to that content through the cloud among six family members for up to 12 personal devices.

The Secondary Legislation Scrutiny Committee in its report in May remarked from the outset on the strength of opinion on the question of contract override, which I attempted to highlight in our December debate. It expressly said that it was not persuaded by the then Minister’s statement that the changes proposed are relatively minor, particularly as regards the personal copies for private use exception. Where does the figure of a total £500 million to the UK economy over 10 years come from? Can we have a complete breakdown?

In fact, there is likely to be a negative impact on rights holders given that under the personal copying exception they will have to give free licences for services such as cloud lockers, which are a potential source of valuable revenue. Photographers and photographic and news libraries make similar arguments in their evidence about potential loss of revenue under the quotation and parody exceptions. Minimal benefits are cited for those under the impact assessments, but it is clear that the risk of licensing revenue loss for them is considerable.

Furthermore, has any analysis of the impact of the exceptions on the UK’s competitive advantage been carried out, in particular on whether it will encourage content companies to contract in other jurisdictions? Rather than encouraging innovation, these provisions could encourage challenge and breach of licensing terms. Will investors now turn away from the UK and invest in content made in other jurisdictions where they can freely negotiate contracts?

In the light of all the above, can my noble friend say whether any new economic impact assessments have been conducted or are contemplated? The Secondary Legislation Scrutiny Committee, noting that the instruments are to be reviewed by the Intellectual Property Office no later than April 2019, said:

“We would urge the Government to monitor the impact of the changes from the point of implementation, and in particular to respond effectively if it becomes clear that any negative potential is being realised”.

How are the Government planning to monitor whether the expected benefits are being achieved?

There are, of course, multiple legal bones of contention. Will the exceptions meet the requirements of the Berne convention and of the three-step test set out in the 2001 information society directive? That states that an exception can be applied only: in certain cases; where

29 July 2014 : Column 1565

it does not conflict with a normal exploitation of a work; and when it does not unreasonably prejudice the legitimate interests of the copyright holder.

Many rights holders are strongly of the view that they do not meet these requirements. Exceptions create contract override provisions that would render unenforceable contracts that seek to restrict or prevent the relevant exception. As a new and untried concept in UK copyright law, this has not received nearly enough examination and consultation. Given their importance to these statutory instruments in particular, why have the proposed contract override provisions not been subject to their own separate consultation and discussion? This is particularly necessary for the enforceability of technical protection measures, as set out in Article 6 of the information society directive and Section 296ZA of the Copyright, Designs and Patents Act 1988.

Why are such fundamental changes to the application of UK contract law being made via secondary legislation? I entirely agree with the points made by the noble Lord, Lord Stevenson. All these exceptions could have been debated and introduced in the Intellectual Property Act. Indeed, if that had happened we would not be standing here now discussing these statutory instruments as the exceptions would have already been passed in the Act. Such fundamental amendments to sections of the CDPA would have been dealt with by discussions in a normal parliamentary process in both Houses, with amendments being debated in the ordinary way.

My noble friend Lord Younger, the previous Minister, referred to 50 exceptions having been introduced by regulations when he gave evidence before the Secondary Legislation Scrutiny Committee and when we debated the other exceptions. I am still not convinced: can we have chapter and verse about those 50 exceptions, please? Perhaps most important of all in terms of legal risk, how convinced are the Government that these exceptions comply with EU law?

As the JCSI pointed out in its report, the private copying exception as currently proposed would not provide any compensation to rights holders for the harm private copying might inflict on them. The JCSI quotes the Government as saying that no compensation scheme is required,

“where the private copying exception is narrow in scope and does not cause harm (or causes only minimal harm) to rightholders”.

That wording was repeated by my noble friend. However, this claim, and whether or not a personal copying exception will cause harm, is hotly contested by rights holders. For example, we have heard from the noble Lord, Lord Stevenson, the estimate from UK Music that there is a potential loss of revenue to the music industry of some £58 million.

Why have the Government chosen to ignore, for instance, the CJEU ruling in the Padawan case, which makes clear that member states must include a mechanism for calculating compensation when introducing a private copying exception? How confident are the Government that these exceptions will survive legal challenge? The JCSI reflects the views of many when it points out that the Government must, if challenged in court, show that “no compensation” is “fair compensation”. How confident too are they that the exceptions can legitimately

29 July 2014 : Column 1566

be introduced under Section 2(2) of the European Communities Act 1972? The Government have not answered my direct question as to whether they have taken independent legal advice on this. Have they?

Surely also the Oakley v Animal case should be interpreted to mean that Section 2(2) can be used only when the UK is obliged to bring in a particular measure. The exceptions being introduced through these regulations are entirely optional. Then again, the contract override effect of these new exceptions is to render unenforceable a contract made at an earlier time. Surely, the Government’s approach to contract override also falls foul of Schedule 2(1)(b) to the European Communities Act 1972. Then of course there have also been a number of significant CJEU opinions and judgments in a number of significant copyright cases from 2013 and 2014, all of which have implications for these copyright exceptions. Should not these cases at the very least give my noble friend pause for thought?

As anticipated, my noble friend prayed in aid the 12 professors of IP to allay some of these legal concerns. They, rather like the three tenors, spring up to sing in harmony on occasion. They did so on the then IP Bill and they have done so with these exceptions. However, there is a strong body of non-academic opinion that takes a contrary view on these matters and much of what they said in their evidence to the JCSI was opinion, not settled law. At the very least, the Government are taking a risk in proceeding with these exceptions.

On top of all this, there is the big new question of why we have to act alone on the personal copying exception in the context of simultaneous harmonisation discussions in the EU. Entirely as the noble Lord, Lord Stevenson, said, there are discussions and consultations taking place, and we are expecting a White Paper this September. This will set the direction for European copyright over the next five years. Surely it is unnecessary for the UK Government to take a risk now with this policy and proceed with implementing a measure which could prove costly, is unpopular in many quarters and may well have to be reversed.

There are also concerns about the specific wording of the personal copying SI, and in particular what is meant by lawful acquisition. To save time, I shall not go through all the detail of that; the noble Lord, Lord Stevenson, went through some of the individual aspects. On the technical protection measures in particular, there is doubt about how the wording of the current SI is set out.

As for the wording of the quotation exception, what is fair dealing? It is not defined in any detail; all types of work are treated the same—so, for example, a whole photograph, perhaps, could be reproduced without permission. The noble Lord, Lord Stevenson, referred to a number of organisations representing photographers, and they are numerous—the British Photographic Council, Getty Images, the British Copyright Council and the British Association of Picture Libraries and Agencies. They all have in common the fact that they are deeply worried about the quotation exception.

New wording has been added about when acknowledgement does not need to be given. How will,

“impossible for reasons of practicality”,

29 July 2014 : Column 1567

be interpreted? Is it right that there should be this relaxation of moral rights? Surely, as regards photographs and video, is not all this premature before we have dealt with metadata in a proper fashion? Should they not have been excluded from the quotation exceptions in the first place?

The noble Lord, Lord Stevenson, discussed the parody exception and I shall not go into detail on that—but many of the same issues apply. There are not definitions of “parody” “caricature” and “pastiche” in UK law, so we have no precedent as to how the concept of fair dealing might be applied to the use of a copyright work in the making of a parody. How is this going to be consistent with what is called the moral right of integrity, allowing a right holder to prevent reputational damage? Surely, in these circumstances, is not a duty of acknowledgement even more important?

On top of all these, the whole issue of explanation to the consumer is of great concern. The guidance notes are defective and the Explanatory Notes, although they have been amended, are also defective. It seems extraordinary that the Government are proceeding with these exceptions in these circumstances. I am afraid that the statutory instruments will pass today, but they are fairly friendless and fraught with the risk of legal challenge. They are badly worded and unnecessary, and they are poorly explained, and the consumer will remain confused. In the old phrase, when asked for directions, “I wouldn’t have started from here”—and I do not think that Professor Hargreaves should have done so either.

5.30 pm

Lord Berkeley of Knighton (CB): My Lords, I suppose I should declare an interest, being both a composer and a broadcaster. I am grateful to the Minister for underlining once again the Government’s support, commitment and gratitude to the creative industries. I am not surprised at that gratitude, since they bring in a huge amount of money to this country and, perhaps even more important, a huge amount of cultural kudos.

However, I am profoundly concerned by these copyright exceptions. I will not rehearse completely the words of the noble Lord, Lord Stevenson of Balmacara, or, indeed, the noble Lord, Lord Clement-Jones, since they could not have been more clear, but I want to stress one very important point. The Government have argued—again, this follows on from the speech of the noble Lord, Lord Clement-Jones—that there is no more than minimal harm arising out of the private copying exception. However, what empirical evidence do the Government possess to support what may otherwise appear to be just an assumption? If the Minister has not already done so, please could she ask her departmental research team to commission further evidence on damage, given the questionable evidential base they are currently relying on? How, precisely, do the Government intend to monitor harm arising out of the exception once it has come into force, given that in practice it is likely not to be the same as has been predicted in theory? Indeed, the level of harm can be expected to change over time as markets develop. Will

29 July 2014 : Column 1568

the Minister give the House an undertaking that if the Government find evidence of harm, the legislation will be promptly amended to provide for a compensation mechanism?

Many people working in the creative industries live on fairly modest means. Their royalties need to be protected—without them, they will find it very hard to survive. Not everyone has the kind of income generated by incredibly successful pop groups or commercial composers, yet those composers who are perhaps working at the sharp end—those artists and photographers—are precisely those who spread the word about the cultural life of this country. I fear that we may be bolting the stable door after the horse has disappeared; but I am hoping that we might be able to prevent more horses following suit. I strongly urge the Government to listen to the points that have been made by noble Lords thus far and which I am now emphasising.

Lord Scott of Foscote (CB): My Lords, I declare an interest in this debate. I was a member of the Select Committee that produced the report to which reference has been made. I agreed with the contents of that report wholeheartedly and recommended the forcefulness of the views expressed in it to your Lordships.

The importance of this is plain. There are a number of individuals who create copyright works on which they rely for their livelihood. They are entitled at the moment to the protection of the law of copyright so that the work they have brought into existence is not taken advantage of by others, without reward for them. The regulations now before the House will have a very serious effect indeed on people of that sort.

I agree with the noble Lord, Lord Stevenson, and others that this is a change in the law that would have been better brought about—if it was to be brought about at all—by primary legislation. The House could have gone into Committee and amendments could have been put forward and fully debated. To use regulations to bring about a change in the law of this extent seems to me a misuse of the legislative procedure that has been adopted.

I do not want to add to what the noble Lords, Lord Stevenson and Lord Clement-Jones, and my noble friend Lord Berkeley of Knighton said. I agree with what they said but want to draw attention to the aspect of contract override, which was discussed in the Select Committee. The Minister who gave evidence to the Select Committee was the noble Viscount, Lord Younger, accompanied by Ms Heyes. He defended the legislative proposals that your Lordships are now considering and raised the matter of contract override. He and Ms Heyes informed the Select Committee that the effect of the provisions in the regulations,

“would not be retrospective, but would apply only to new contracts; and that the provisions were precedented, inasmuch as an existing exception allowing material to be photocopied in schools could not be overridden by contractual terms”.

However, we are not talking now about education but about private use.

The text of the private use regulation does not confirm the assurance that we thought was given by the noble Viscount, Lord Younger, that the provisions,

“would not be retrospective, but would apply only to new contracts”.

29 July 2014 : Column 1569

However, in Regulation 3, new Section 28B(10) of the relevant Act states:

“To the extent that a term of a contract purports to prevent or restrict the making of a copy which, by virtue of this section, would not infringe copyright, that term is unenforceable”,

so it is retrospective. It would apply to negate the content of contracts that have been entered into, perhaps since the Minister appeared before the Select Committee in May and gave the assurance to which I have referred, which is set out in the report. That assurance may have been relied on but the proposition that this retrospection can now be incorporated in the regulations seems to me quite wrong. I hope that the Minister will comment on that when she replies to the debate.

The proposition that personal use copying should be permitted and should be free from any copyright infringement is obviously a very important one for all producers of copyright material. What does personal use mean? Does it mean that it would be a breach of copyright for the person who acquires a copyright work to copy it for the benefit of his children? Presumably, that would not be his personal use. How would the personal use limitation be enforced? How could the copyright proprietor possibly know what was being done with his copyright work by the person entitled to copy it for his personal use? Can you copy it and give it to friends as Christmas presents or give it to your children to take to school to show their school friends?

I respectfully suggest that it is not a satisfactory limitation at all. I suggest that this is precisely the sort of legislation that ought to have been referred to Committee to be gone over paragraph by paragraph, with amendments being put forward, discussed and voted on. I thoroughly support the Motion of the noble Lord, Lord Stevenson.

Baroness Morris of Yardley (Lab): My Lords, I am grateful to the Minister for presenting the statutory instruments but I agree with everyone else who has spoken. I have real doubts about what they will mean for the creative industries. I know that her predecessor noted how much consultation had taken place round the issue, and my noble friend Lord Stevenson made the same point. The history of this is very long, and we are left asking if after all those years of consultation and all those meetings, with everyone being opposed to it, what is it doing here in the House about to be passed? Consultation has an element of taking people with you, or persuading people and putting them in the position of seeing the strength of the argument. That has not happened in the sector, which is the sadness of today. As it is not primary legislation we know that it will go through at the end of this debate, and in terms of a responsible House and good-quality legislation that is to be very much regretted.

I have two points to make on a particular aspect of the statutory instrument, but before doing so I declare an interest as a director of the Performing Rights Society and, along with the noble and learned Lord, Lord Scott, as a member of the Secondary Legislation Scrutiny Committee, which considered this legislation. I agree with the Minister that we need to bring the position up to date. I can see that the legislation looks old fashioned and is not fit for purpose, but people are unwittingly breaking the law day after day. It is not an

29 July 2014 : Column 1570

argument against bringing legislation to the Houses of Parliament but an argument against the detail. If we take the example that we have to make it legal for somebody to download or transfer information from their CD to their iPod, I cannot disagree with that. It is what happens and it makes sense. It is allowing the user to take advantage of new technology and I do not think that many rights holders would complain about that.

I want to concentrate on the fact that the statutory instrument extends the right to private copying to the cloud service. This is new technology. A lot of the other private copying exceptions that have been given as examples are not about new technology; it is legislation catching up with the past. With the cloud service—locker service being new technology—this statutory instrument will set the framework for this technology for many years to come. It is a golden opportunity. New technology is not within the legal framework of protecting rights, so this is our chance to ensure that the signals we give do not repeat earlier errors of a creative sector that is not in line with the technology and the way in which people want to use it.

I know that the statutory instrument says what is not allowed—but ask anyone in the film industry about how it has suffered from what was not legally allowed but what was easy to happen. In introducing the debate the Minister said that it is quite clear in cloud technology that it is for personal use only and does not allow friends, family or anyone else to use it. However, it is easy to happen. We will see exactly what happened in the film and music industries. Half the world will say it is illegal and the other half will say that it is easy and everyone does it, so it will continue. To introduce that for new technology with cloud services is a wasted opportunity. I wonder whether the Minister realises the full range of services operated by the cloud locker services. With Dropbox, which many people access now, it is so easy to share information and data with other people. It is almost possible to do it inadvertently or by accident. It is almost that easy that people will assume that that is what the technology is for.

Now is the time to give a message, but is there education on this? Is there any good-quality information in the guidance that goes with the legislation about how this should be interpreted and what should happen? There is not. Why have the Government not put an obligation on the people who run cloud locker services to provide information to customers about what they can or cannot legally do? None of that happens but there is legislation, which includes in its title,

“Personal Copies for Private Use”,

and which by its lack of understanding of the cloud locker services gives the message that it is possible. We have missed the opportunity to give a message about what is and what is not legal. Moreover, we have given the opposite message that copying is possible with this new technology.

5.45 pm

Secondly, what makes this issue different is that these services are commercial. People are making money from them. They are monetised and revenue earning. Unlike many of the other new technologies, where the

29 July 2014 : Column 1571

creative sector was very slow to act and to make it possible to legally download for personal use, on this new technology—to its credit—it has tried to get ahead of the game. Many of the cloud services are being licensed at the moment, so it is possible legally to pay money, return to the copyright holder and make, if you like, a legal market.

With this legislation there is confusion for the user over what is legal in relation to cloud services; and the Government are interfering in a new market that is building up, into which a lot of people have put a lot of hard work. They have tried for the first time to ensure that it is easier for people to use this new technology, while still providing a return to the licence holder.

Finally, I have a great deal of sympathy with the argument that the lack of compensation to rights holders is what the Government have wanted to do, and that they have looked through every bit of case law and every word in every directive to justify their decision. Rather than looking at the evidence and weighing up the different cases—which I know are contradictory—the Government have sought a few phrases with which to justify a decision that they wanted to make. The cloud will stand to benefit financially from this legislation. It will make it financially a more attractive service because of personal copying. Because of that, the people who will lose are the rights holders and the creators. If nothing else in this statutory instrument makes the Government pause to revisit the issue of whether compensation should be paid, their action on cloud locker services should do so.

Lord Grade of Yarmouth (Con): My Lords, I find myself agreeing with so much of what the previous speakers have said. What I have not got at any time from the Government since the publication of the discredited Hargreaves report is any sense that there is a public interest in investment in content and that thereafter it becomes available in forms of which those who have invested are in control.

What has been unleashed is a global army of parasites who live off the investment that creative people have made in the UK and throughout the world. I publicly described Google as a parasite. I was picked up by one of its leaders, who asked: “Why did you describe us as parasites?”. I said, “Last week you used a clip of Susan Boyle on ‘Britain’s got Talent’ and had 300 million hits on YouTube. That piece of material cost us a great deal of money, you did not ask permission, and you put it out there to promote YouTube and Google’s fortunes”. He replied, “Well, if you had called us, we would have taken it down”. I replied, “If I go to Harrods and steal a Cartier watch; if they ring me up and say ‘Can we have it back?’, and I give it back it is not shoplifting”. What the Government have failed to understand throughout their deliberations on copyright since the Hargreaves report is that there is a direct correlation between investment and the investor’s ability to control and police its copyright, and to protect that investment to ensure that it gets value for it.

The Government seem to think in all the deliberations that I have heard, read and seen that there should be a free for all, that everything should be made free for the

29 July 2014 : Column 1572

public and that there is a public interest in everything being made available as easily and freely as possible. Yes, there is a public interest in that but it will last about five years because in the end there will be no more investment in original content.

Throughout the creative industries, particularly the film, television and games industries, people are struggling to avoid piracy, and struggling to get value for the risk investment that they have made in the content. Since that wretched Hargreaves report, I have heard nothing from the Government to suggest that they understand that there is a public interest in continued investment in the creative industries.

Today’s Motion is yet another step forward in liberalising the copyright laws and chipping away at one of the great success stories. On the one hand, this Government have been tremendous at supporting the creative industries. I myself, as chairman of Pinewood Studios, have been a beneficiary of that, so I should declare an interest. But at the same time the Government are demonstrating a complete ignorance of the economics of investment in the creative industries. Today’s Motion is yet another example. It is time they tore up the Hargreaves report and listened to the people who make the investments. Then we might get some serious deregulation and some serious thinking about how we can modernise the copyright laws. But if this continues, I have to tell the Government that they are putting the creative industries at risk.

The Earl of Erroll (CB): My Lords, I want to say a few things about this subject, because everyone seems to be so much against these regulations. I, and many other members of the technical community and the general public, welcome them, as they bring some common sense into an area in which the world has moved on from the days of the printing press. That was when copyright was first conceived. Those old laws managed to adapt to encompass the physical sale of performances that were recorded, such as music, films and so on. But now, in the internet age, they need some major modernising modifications.

One thing keeps coming up and causing confusion, and I want to talk about it up front, because I have great difficulty getting my head round it, and I think a lot of other people do too. The terms “creators” and “rights holders” keep getting put together as if they meant the same thing. They do not. There are the talented performers, who might actually have been put together by programme creators and producers. Then there are the rights holders, who buy rights to the performances, and the distributors, who also take a chunk or two. How many of the talented performers have gone bust? They often go broke quite early, because they have sold all their rights. Yet that is what the rest are all feeding off. When I hear all this great cry about how badly the poor rights holders are suffering, I sometimes look at some of those broken performers who at some point have performed brilliantly, but who at the end of the day have been milked dry. So I am sorry, but I do not always listen to those cries of woe.

The noble Lord, Lord Clement-Jones, asked why we do things differently from some other members of the EU. There is a clever idea—I think that this is what

29 July 2014 : Column 1573

they did with Philips cassette tapes—whereby people put a levy on every bit of hardware. That is all supposed to go into a big pot to reward the creative industries, which get the benefit of it. But that means the big boys again. The trouble is that this puts extra cost on to every bit of equipment—every iPhone, every iPad, every Microsoft Surface, and everything else that I buy. The trouble is that these things break down with monotonous regularity.

Let us say that I go and buy myself an MP4 player and download some music on to it, and then it breaks down. That causes problems, particularly if you are involved in one of those proprietary chains. If the device breaks down and you have to move on to another one, you often have to pay again—and if it is all wrapped up in the hardware levy, you are paying again and again. All that does is inflate the cost of the machines—the gadgets that we buy.

That is a brake on innovation, productivity and so on among the small people and the small businesses, who cannot afford to be shelling out the whole time. I have seen reports that had different statistics from those in all the others, and suggested that if the EU were to remove those levies, it would be better off by nearly €2 billion a year. I have no idea whether that is true—people may well be sitting in front of dartboards when they produce such figures—but it is probably just about as genuine as some of the others. Certainly, when you have a broken machine you suddenly find you have to pay out and buy the material again, because format-shifting is not allowed and the digital rights management is different. Some of that has now changed, and some of it is better.

Turning to the subject of parodies, I see satirical students taking clips from the internet and making mashups, which are wonderful and very interesting and bright. But all that is illegal. I can see that politicians want to protect themselves from that sort of stuff, but where would all those wonderful satirical programmes of the past be if we had not quietly permitted it? Now that we are trying to crack down on it, we have to be very careful. That is why I think exceptions for parody and artistic creativeness are essential.

If you copy a newspaper article or something like that, which is illegal, because you have some memorable, magical moments that you want to keep about your family, you will have to put it in a locker and store it, and you will have to keep format shifting and changing it to new media the whole time. But it will not last for ever as CDs will fall apart after a number of years. The original newspaper will fall apart in 50 to 100 years and will be unreadable. If you have it electronically, that will fall apart unless you keep moving it. If it becomes illegal to copy, you will lose those memories and everything like that. The trouble is that most people are getting around these things in practical ways but what they are doing is illegal and, in some cases, illegal under the Digital Economy Act. Under that Act, certain things that used to be a civil offence became a criminal offence and the waters were muddied even more.

The really important thing is that if the law creates rules and laws which diverge significantly from the way in which the general public behave, the rule of law falls into disrepute and people start to disregard it.

29 July 2014 : Column 1574

When that happens, they start to pick and choose which laws they will obey. I do not think that that is a good principle. There are moments when we have to admit that the world has moved on, although that means tough luck on some people. We see retrospectivity the whole time in a lot of areas. For example, as regards leases, rentals, landlords, tenants and all sorts of other arrangements, the Government have interfered with contracts that were set up and they have tampered with them in such a way that you no longer have protection of your own property, which you used to have. In general, they say that provisions apply only to new contracts but very often they tamper with existing ones. We have been tampering retrospectively for a very long time. I do not like it and I disapprove of it but sometimes we have to do it in order for the law to catch up with what is happening anyway.

Baroness Neville-Rolfe: I thank colleagues for the points raised in this debate and for the high level of technical expertise that they have shared with me, so new to the Dispatch Box. First, I will address some of the points made by the noble Lord, Lord Stevenson. As noble Lords know, the Government support growth of the creative industries in multiple ways. I am a new and passionate advocate for doing this broadly and through intellectual property. We recently announced £16 million of funding from the Employer Ownership of Skills pilot to boost skills in the creative industry sector. We have welcomed the launch of the Creative Content UK scheme and have provided £3.4 million to co-fund the Creative Content UK educational campaign. The campaign will help to reduce online copyright infringement and to promote the use of legal digital content, which is an important theme of this debate.

The Government have welcomed the industry-published creative industries strategy and will continue to work with industry to help to achieve the growth and export success outlined in the vision and strategy for 2020. The IPO, along with other government departments, is fully involved with this strategy. In thanking the noble Lord, Lord Stevenson, for his kind words about my potential role as the Minister for the IPO, I remind the House that my friend in the other place, Ed Vaizey, now is also a Minister of State in the business department as well as at DCMS. On arriving in the department, he gave me helpful suggestions about who I should see and talk to. Joined-up government can work and it is our determination that we will make it work.

The noble Lord, Lord Stevenson, expressed his regret, as did some others, as to why the Government were using secondary legislation rather than primary legislation for these measures. I repeat the point—that he indeed has made—that changes have been carefully developed with wide and extensive consultation. We have also published the draft regulations for technical review and have welcomed many debates in this House and the other place.

6 pm

The fact that these regulations are affirmative has afforded us the opportunity to have this debate today and I welcome that. The two regulations were indeed unbundled to allow the opportunity for this important

29 July 2014 : Column 1575

debate, which as a new Minister I very much welcome. I agree that copyright is valuable and sometimes misunderstood so it is right for us to debate it, to talk more about it and to emphasise its economic contribution to our country. You go right round the world and you find people’s admiration for our creative industries.

The measures in these SIs, in the SIs that have already passed and in the Intellectual Property Act, which my predecessor helped to facilitate through this House, have long been fought. Much time has been devoted to going, to some extent, this way and that way. I think we should now press ahead with the full package of measures. We need to bring our legislation in this area up to date, as the noble Baroness, Lady Morris, very helpfully said and to bring some common sense, as the noble Earl, Lord Erroll, said. Obviously we will continue to review the arrangements but it is important that this set of changes come in and together can be communicated to all the important stakeholders on 1 October.

The noble Lord chided me for not covering the question of contract override in my opening remarks but I wanted to hear what he was going to say on this important issue. The presence of the contract override clause gives users, consumers and businesses certainty and clarity that the exceptions apply in all circumstances regardless of the detail of a contract. Without such clauses restrictive contract terms could prevent the uses permitted by the exceptions, thus preventing benefits from being realised. This is not merely a hypothetical fear. Many responses to the various consultations have told us that contracts permitting access to copyright works frequently contain terms that prevent users from carrying out activity that otherwise would be permitted by law.

The noble and learned Lord, Lord Scott of Foscote, in an interesting intervention talked about retrospection. When we say a law is retrospective we mean that it takes effect in the past and therefore could affect the legality of an action that took place in the past. Obviously we are not allowed to do that with this legislation and we do not intend to. However, that does not mean that the new law will apply only to new contracts. The law will apply to contracts regardless of the date on which they were formed but will take effect only after the new law comes into force. The contract override provisions simply ensure that, where the law provides for an exception to copyright, people are able to rely on that law without having to work out whether there is a contract term to the contrary creating a whole patchwork of different legal situations.

Ensuring that the personal copying exception cannot be overridden by contract terms will mean that consumers are given clarity and certainty over what they can do with the media they buy. Most people assume that the law already allows them to make the type of personal copies covered by our legislation. Very few people read the detailed licensing terms that accompany digital downloads. We want the goods so we just tend to accept the terms. Ensuring that the new law on personal copying applies in all circumstances, regardless of contract and licensing terms, will bring much needed clarity to the law and fairness for consumers, which I welcome.

29 July 2014 : Column 1576

The noble Lord mentioned the cost to the industry of £58 million and asked me to comment. That report is based on assumptions that do not seem to take account of the status quo, where we know a large proportion of the public already copy music for personal use. The report also appeared to compare this to a situation where unlimited copies could be made, whereas the Government’s private copying exception is for personal use only and so does not permit unlimited copies. Therefore, the Government have a number of doubts about the robustness of the research report’s conclusions and that figure of £58 million per annum. The Government’s impact assessment was based on a number of sources, including independent economic research and consumer surveys.

While I am on the subject of impact assessments, perhaps I could turn to the points made about that by my noble friend Lord Clement-Jones. He raised a number of points and asked about the figures on the total benefit to the UK economy of £500 million over 10 years. My predecessor spoke in this place on 14 May on the other exceptions in the package and gave a detailed breakdown of the figures. I will not repeat those today, but the predicted impact of the regulations in the two statutory instruments is £260 million over 10 years, mainly from the personal copying exception. A small benefit of £3 million over 10 years is also predicted from the quotation exception. That is the net present value figure, discounted to today’s terms, in line with HM Treasury guidance.

My noble friend Lord Clement-Jones also asked why the impact assessments were not updated. When credible new evidence has been provided relating to any of the exceptions, the impact assessments have been updated. For example, the personal copying impact assessment was updated, as I have said, following the submission of new evidence by the music industry.

In his helpful and detailed speech, my noble friend Lord Clement-Jones addressed a number of other questions which I will try to answer. If I am not able to answer them all, perhaps I can follow up in writing. He referred to the Padawan case on private copying and questioned whether the outcome means that a compensation mechanism must be included. As my noble friend Lord Younger said in his letter at the time, the exception before us today is,

“different to the one considered in the Padawan case”.

As the letter says:

“The Padawan case confirmed that compensation is due when a private copying exception causes harm to copyright owners which is more than minimal”.

A payment obligation does not arise where harm is minimal, something which I will come back to in a minute.

The noble Lord, Lord Stevenson, and my noble friend Lord Clement-Jones asked whether the change would apply to existing contracts. From October 2014, if you undertake an act that is permitted by a copyright exemption, you will be able to do that without fear of copyright infringement, regardless of the contract terms. As the noble Lord, Lord Howarth, observed in the debate on 14 May, contract override clauses are not uncommon in other legislation and it is therefore

29 July 2014 : Column 1577

entirely reasonable that legislation, in the public interest, should modify the enforceability of existing contracts in the field of copyright.

My noble friend Lord Clement-Jones asked why there was no separate consultation on contract override and whether the impact on inward investment had been fully considered. Again, as my predecessor stated in the December debate, contract override has been fully consulted on and considered, including in respect of the impact on inward investment.

Lord Scott of Foscote: The noble Viscount, Lord Younger, gave evidence, in terms, that the new provisions would apply only to new contracts.

Baroness Neville-Rolfe: I thank the noble and learned Lord and will come back to him on that. I think that I addressed the issue—perhaps we could look at Hansard together and have a further word on this important point.

The noble Lord, Lord Stevenson, my noble friend Lord Clement-Jones and the noble Baroness, Lady Morris, were interested in compensation schemes and the EU law on this, which is set out in the EU copyright directive, also known as the information society directive, or infosoc. Article 5(2)(b) of the copyright directive permits member states to introduce exceptions for private copying, such as the one before us today. The article requires that any exception must include certain conditions, for example that the copy must be for ends which are neither directly nor indirectly commercial. The exact wording is on page 2 of the instrument before us. The article states that the right holder must receive fair compensation when copying takes place under the exception. It is what exactly is meant by “fair compensation” that is at the crux of this question. In interpreting this phrasing, the Government have been guided by recital 35 of the copyright directive. This states:

“In cases where rightholders have already received payment in some other form, for instance as part of a licence fee, no specific or separate payment may be due”.

Later it goes on to say:

“In certain situations where the prejudice to the rightholder would be minimal, no obligation for payment may arise”.

In other words, fair compensation can mean no compensation, as long as the exception causes no, or minimal, harm, or if an appropriate payment has been received. This is how the exception before us has been designed, and it therefore falls within the margin of discretion that the directive allows.

As I said earlier, this view is supported by many, including several eminent legal experts. The JCSI noted in its report that there are persuasive arguments in the Government’s favour. Furthermore, European case law to date, although not directly addressing the question as to what is meant by minimal harm, is consistent with the Government’s approach. I would add that there is no guarantee that the European Court ruling in the Copydan case will have any bearing on the UK’s exception for personal copying. The recently published Advocate-General’s opinion confirms once again the wide latitude that member states have in this area.

29 July 2014 : Column 1578

The Government do not deny that ultimately only the European Court of Justice can rule definitively on the definition of minimal harm, and it has not done so to date. However, uncertainty—for the reasons I have already articulated—is not a justification for inaction, particularly when the evidence and reasonableness of a change is clear. For all these reasons, the Government believe that the regulations are intra vires.

In response to the request from the noble Lord, Lord Stevenson of Balmacara, the Government do not routinely publish their legal advice, and I am not persuaded that an exception should be made in this case. The Government are confident in the advice they have received that the exception proposed is compatible with all the relevant EU case law and also with our international obligations, such as the Berne convention. On the question of EU law, it was right to mention that there are talks going on in Brussels in this important area. This is a new area that I will be looking at, and I have spent a lot of time in Brussels. But the fact that there may be new measures coming in at an EU level is no reason not to proceed with a package which is useful and important, both to copyright holders and to consumers. The personal copying exception before us today is narrowly drawn, and merely legitimises existing consumer behaviour. This policy is right and fair to both rights holders and consumers.

The noble Lord, Lord Clement-Jones, asked whether the changes will be evaluated, as did others. I reassure the House that the impact of these changes will be evaluated in line with evaluation best practice, and the results of this evaluation will be published within the five-year evaluation period. The Government believe that these changes will have a positive effect on the economy including the creative industries. Additionally, the strategy for carrying out the evaluation will be published. The evaluation will seek to study a range of impacts, including on the creative industries. The Government will obviously be keen to hear from experts and from noble Lords on the proposed evaluation.

The noble Lord, Lord Clement-Jones, asked whether there were really 50 exceptions to copyright law. There are around 50 exceptions in Chapter 3 of the Copyright, Designs and Patents Act 1988. They are found in Sections 28 to 76.

Lord Clement-Jones: I asked whether there are 50 exceptions that have been introduced by secondary legislation.

6.15 pm

Baroness Neville-Rolfe: I think that the answer is that some were in the original Act, and some were introduced via secondary legislation. Of those present in the original Act, some have since been modified by secondary legislation, but I will set out more detail in a letter if the noble Lord would find that helpful.

The noble Lord, Lord Clement-Jones, also asked about the use of the European Communities Act to make changes. I am aware that this has been discussed before, but to reiterate, the Government are confident that they can make these changes by means of Section 2(2). That section allows provisions to be made in relation to obligations arising from treaties entered into by

29 July 2014 : Column 1579

the EU. Use of this Act is therefore not limited to implementing provisions in the infosoc directive. Case law, like in the TV catch-up case, makes it clear that Section 2(2) can also cover matters arising out of or related to UK rights and obligations.

The noble Lord asked whether government had taken independent legal advice on the legality of the use of Section 2(2). Again, the Government are confident that they have a sound legal basis for the proposed changes. This analysis is presented in the Explanatory Memorandum accompanying the statutory instruments.

The noble Lord asked about what is meant by “lawfully acquired”.

Lord Berkeley of Knighton: I am sorry to interrupt. This may be a point that the Minister has covered; if it is one that she is about to come on to, I await the answer eagerly. If the research which she has said will be undertaken to see how the policy works finds that there has been harm, will a compensation scheme be brought about to compensate right holders who have been found to have lost out?

Baroness Neville-Rolfe: I thank the noble Lord for that question. I think that we will need to wait and see what the evaluation looks like—I urge him to make some input on the nature of evaluation. It is a bit of a hypothetical question. As a representative of the Government, I would be uneasy about making any promises, but I thank the noble Lord for the point made.

I should move on, as time is pressing, to say a little about fair dealing, which the noble Lord, Lord Clement-Jones, raised. Fair dealing is an established legal concept that has been part of copyright law for more than 100 years. It is a question of fact, degree and impression and will take into account a number of factors, the main ones being whether the alleged fair dealing is in commercial competition with the owner’s exploitation of the work; whether the work has already been published or otherwise exposed to the public; and the amount of work which has been undertaken and the importance of it. We did not intend to define it further in the legislation, because doing so would upset this well established case law and undermine its main benefit, its ability to adapt to the circumstances of any specific case.

The noble Lord, Lord Berkeley, asked what evidence the Government had relied on in developing their policy proposals. The Government have worked hard to ensure that the proposed changes are based on evidence. The impact assessments are based on the best evidence available and were reviewed and validated by the independent Regulatory Policy Committee.

The noble Baroness, Lady Morris, referred to cloud services. This is a difficult and very important area which was explored as part of the Government’s impact assessment. However, we were not provided with sufficient data to enable us to determine what the impact would be. The majority of evidence received related to licence services, which would not fall within the scope of the exception; for example, because they provided streamed content so were not relevant. The music industry has

29 July 2014 : Column 1580

accepted unlawful private copying for many years, so one might reasonably assume that the ability of the consumer to make copies of CDs is already taken into account when licensing deals are negotiated. Negotiation of contracts between businesses is a matter for those businesses. If, however, this is an issue of market abuse, it would obviously be a matter for the competition authorities.

The Government have published the changes through social media and website updates and through contacting interested stakeholders, such as those who responded to the technical review. They have published plain English guidance aimed at different user groups as well as an unofficial consolidated version of the copyright Act. We would expect wider education initiatives, such as the recently announced education campaign, to include educational messages—

Lord Clement-Jones: I alluded briefly to inaccuracies in the guidance. If those inaccuracies are clearly shown to the IPO, will the Minister undertake that those guidance notes will be changed? They are extremely important for consumers.

Baroness Neville-Rolfe: My Lords, I accept that the guidance notes are important and I will take the point away, if my noble friend is kind enough to give me the detail. I also say to the noble Baroness, Lady Morris, that I will keep an eye on the cloud aspect, which she rightly raised. I feel that it is important to include the cloud, because it is part of modern life, but clearly we need to look at how it is going.

My noble friend Lord Grade of Yarmouth felt that changes would harm rights holders. I would say that the exception legitimises what millions of people already do, something that the market has accepted for many years. This is aimed at consumers who have paid for content and support the creative industries by paying for music, films and books.

Many points have been made. I will study Hansard carefully and come back if there are points that I have not addressed in my summing up. As I said in my opening speech, this is a delicate balancing act. The Government believe that the copyright system has not kept pace with the digital revolution. As a result, a great many intuitively acceptable activities are illegal or uncertain. These changes relating to private copying, parody and use of quotations form part of a package that should make copyright works more valuable to all, give users clarity about their rights and build respect for copyright in the process. They will contribute to a more modern statute book that meets the challenges of an increasingly digital and changing world.

Lord Stevenson of Balmacara: My Lords, I thank all those who participated in this debate. It was wide-ranging and many noble Lords made helpful and informative speeches, even matching those points picked out by the noble Baroness when she referred to the noble Lord, Lord Clement-Jones. The point of having the debate was made in the range and diversity of the issues raised all round the House. I am glad that a number of noble Lords were able to pick up on the concerns which I raised in my speech.

29 July 2014 : Column 1581

I would make one point to the Minister. I regret that I did not welcome her to her first substantive position on the Front Bench in this Chamber, although she has appeared in the Moses Room. She is turning out to be a formidable performer and we are all impressed by her ability to grasp such a complex issue in such a short time. However, she was quite wrong to say that these two statutory instruments were unbundled simply to provide us with the opportunity for a further and more substantial debate. They were unbundled because they had a car crash on the way to being approved. As a result, they had to be brought back in a different Session, separated from the other statutory instruments. I do not think that the noble Baroness should gloss too much over that.

Would we have got to the same place we are in today had we proceeded down my recommended route of going primary in these matters? Probably, but I suspect that we would still face, as many noble Lords have said, the prospect of these rather imperfect instruments being brought into law. However, as the noble and learned Lord, Lord Scott, said, the advantage would have been that we would have had some sensible, mature discussion—in the right order and at the beginning of the process, not the end—about what was going on, what the purposes were of these exceptions and whether they fitted some overall narrative, as my friend the noble Lord, Lord Grade, said in his prescient point. It would also have presented the opportunity, as my noble friend Lady Morris said, of trying to raise the whole level of the debate in the country about this really important issue. If we cannot get people on board in terms of what IP is and what it can do for them, we have lost the battle.

In putting down this amendment to regret, my challenge was to raise the question of why the Government had gone for a secondary legislation route rather than a primary route and how it had come to be so badly handled, as we heard from the evidence of those who were consulted about this issue. Why did the Government not raise the questions asked during the debate about changes in the licensing regime, which have now caught up with—and in some cases overtaken—this set of SIs? Why was no real consideration given to the Copyright Hub, which is going great guns in solving a lot of problems in the copyright area; and why and how is this at variance with what we think will be the way that some developments take place with our EU colleagues?

I do not think that I have had satisfactory answers to those questions. I have had the detail, but not the overarching view. Perhaps in a subsequent letter that is

29 July 2014 : Column 1582

yet to come, some of these points might be picked up. In particular, I hope that the letters that come will recognise that the point made by the noble and learned Lord, Lord Scott, about contract override has not been resolved; that the question of whether the regulations —in particular, with respect to remuneration—are intra vires lies open to judgment; and that the question of whether the Government should legislate in an area where they are not yet fully certain still raises questions of propriety. I felt that my noble friend Lady Morris was right in her jibe that the way that the Government argued the case on intra vires was really a question of looking for appropriate fig leaves for their position. They may be right, but it is unfortunate that it has been left for the courts to decide.

The feeling in the industry is that the battle over these regulations is over and that those affected have been consulted to death but not listened to and, as a result, are simply exhausted. That, more than anything, suggests that the Government have got this completely wrong from beginning to end—although, in fact, I do not think that we have heard the last of these proposals.

Having listened to the debate and having been buoyed by the support of those around the Chamber who picked up on the points I made, I still think that we should accept the inevitability that the regulations will come into law, and therefore, with the leave of the House, I beg leave to withdraw my amendment to the Motion.

Amendment to the Motion withdrawn.

Motion agreed.

Copyright and Rights in Performances (Quotation and Parody) Regulations 2014

Copyright and Rights in Performances (Quotation and Parody) Regulations 20143rd Report from the Joint Committee on Statutory Instruments

Motion to Approve

6.28 pm

Moved by Baroness Neville-Rolfe

That the draft regulations laid before the House on 9 June be approved.

Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments

Motion agreed.

House adjourned at 6.28 pm.