The Hargreaves review, billed as “an independent review of how the Intellectual Property framework supports growth and innovation in the UK”, was commissioned amongst some fanfare by Prime Minister David Cameron in November 2010 as an attempt to keep the UK on a level playing field with the US in terms of digital rights and to assist fledgling web 2.0 companies (including those clustered in a part of East London sometimes referred to as the “Digital Roundabout”) compete on an international basis. The report was published on 18 May 2011. Just how far has the report gone to rewrite the digital rights landscape?
The context
In announcing the review, David Cameron remarked “The founders of Google have said they could never have started their company in Britain. The service they provide depends on taking a snapshot of all the content on the internet at any one time and they feel our copyright system is not as friendly to this sort of innovation as it is in the United States. Over there, they have what are called “fair use” provisions, which some people believe gives companies more breathing space to create new products and services.
So, the key question appeared to be whether the laws of copyright should be subject to new limits which would permit copying in circumstances where it is currently unlawful in order to give a boost to the digital economy. But was “fair use” the answer? This is said to be a more flexible approach to the question of copyright exceptions, being a defence in the US copyright framework which builds on certain general principles through case law to develop permitted uses of copyright works. In essence, and on a case-by-case basis, US courts decide whether particular unlicensed uses of someone else’s copyright material is “fair” and should therefore not be stopped.
Many of Google’s early activities were indeed based on findings of “fair use” in its favour. It has been suggested that this is one of the factors creating a positive environment in the US for innovation and investment in innovation. However, Hargreaves concludes that the success of high technology companies in Silicon Valley owes more to attitudes to business risk and investor culture than it does to the shape of IP law.
However, even if “fair use” had been a decisive factor allowing US technology companies achieving heights which UK companies can only dream about, a second-year law student could have told Cameron that the idea of importing the US concept of “fair use” into UK law is a complete nonstarter; in the way there is the small matter of European law, which takes precedence over UK law. It seems it took Hargreaves six months to discover that Cameron’s quick fix to our apparent digital woes (i.e., we haven’t got our own Google) was not going to fly, and the report acknowledges that European law will simply not allow this. However, in the report’s view all hope is not lost; there are some changes to IP law that the UK can make on its own (that is, without the permission of the EU), primarily because they’re already allowed under European law.
The Review makes 10 recommendations “designed to ensure that the UK has an IP framework best suited to supporting innovation and promoting economic growth in the digital age”. In my view three of those recommendations are worth looking at in some detail.
1. Limits to copyright – specific exceptions in the absence of a “fair use” doctrine
Hargreaves complains that EU law confines copyright exceptions to a closed list of categories, such as criticism, news reporting, research, and archiving. Almost all are restricted to non-commercial uses. Individual EU countries may implement exceptions within these categories to a greater or lesser degree, but there is no flexibility to create exceptions in new areas. The UK does not currently exploit all the exceptions available; there are no exceptions for private copying or for parody, and Hargreaves criticises the current UK exception for archiving as falling “well short of current needs”.
Hargreaves therefore proposes what he calls “a twin track approach”: pursuing specific exceptions where these are feasible within the current EU framework, and, at the same time, trying to persuade our EU partners to adopt a new mechanism in copyright law to create “a built-in adaptability to future technologies”. Hargreaves refers to this as “an exception allowing uses of a work enabled by technology which do not directly trade on the underlying creative and expressive purpose of the work”. He mentions data mining and search engine indexing in particular.
In the meantime the specific exemptions under the current EU framework which the UK should be exploiting are:
Enabling New Research Tools
The Government should introduce a UK exception under the non-commercial research heading to allow use of data mining and analytics for non-commercial use.
Private Copying / Format Shifting
The Government should introduce an exception to allow individuals to make copies for their own and immediate family’s use on different media. In other EU countries private copying exceptions are supported by levies on copying equipment, but Hargreaves prefers to see rights holders 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.
Extension of archiving
Libraries should benefit from an extension of the archiving exception so that this includes fully audio visual works and sound recordings. Hargreaves argues that supporting the potential of new technologies for archiving will prevent the loss of works, and could open the way to new services based on digital use of those archives. This public digital archive may turn out to have considerable economic as well as social and cultural value.
Exception for parody and pastiche
Hargreaves suggests that this is more a matter of freedom of expression (and therefore outside his review’s terms of reference), but he argues that there is also an economic link. “Video parody is today becoming part and parcel of the interactions of private citizens, often via social networking sites, and encourages literacy in multimedia expression in ways that are increasingly essential to the skills base of the economy. Comedy is big business.”
Hargreaves cites with approval the “Newport State of Mind” parody (based upon Empire State of Mind, a hit song by the American rapper Jay-Z) which at once achieved great success when posted on YouTube last year but at the same time resulted in action by the right owners to exercise their legitimate authority under UK copyright law to have it removed from the internet. In the US, many previous parodies of the same original song have not attracted such action, perhaps because US Fair Use can protect parodies. In practice, the offending video has remained both visible and popular, giving rise to further parodies in response.
2. Copyright licensing: the “Digital Copyright Exchange”
Hargreaves cites examples of inefficiency in copyright licensing such as the BBC finding that it took nearly five years to assemble the rights necessary to launch its popular iPlayer service. He acknowledges, however, that many of the problems come down to the fact that many SMEs are not willing or able to pay prices acceptable to the licensors and/or that their new business models are not viable. Hargreaves concedes that these are the judgments that licensors in a free market are entitled to make, but he argues that they also indicate the difficulties which arise when a market fails to deliver clear signals about price and other terms of trade as a matter of routine.
Hargreaves therefore advocates the creation of a “Digital Copyright Exchange” (DCE) as a mechanism to streamline the licensing of copyright material. He quickly makes it clear that he is not advocating that Government should itself create the DCE, but it should seek to persuade other to do so. Participation should be voluntary but the Government should also ensure that participation in the Digital Copyright Exchange confers clear benefits and that there are costs of voluntary exclusion. Hargreaves is silent on what these costs may be, but incentives might include:
• providing that remedies, for example damages, are greater for infringement of rights to works available through the licensing exchange than for other works;
• making sanctions under the Digital Economy Act apply only to infringements involving works available through the exchange;
• requiring that an orphan works search requires checking of the licensing exchange as part of a diligent search (see the orphan works discussion below);
• giving creators the right to withdraw from future publisher/record companies contracts where the latter are not marketing a creator’s works through the exchange;
• putting publicly owned copyright material on the Copyright Exchange at day one and exerting its influence on other public bodies to do likewise;
• providing funding for the costs of establishing the exchange (including development of IT) – possibly from the reserves of the Intellectual Property Office (IPO);
• working with Internet search providers to ensure that sites that are part of the exchange are flagged and highlighted to enable users readily to find them before they encounter less legitimate sites.
Whilst not run by the government, the DCE would be regulated either by the IPO or by Ofcom. The UK should also support the European Commission’s proposals to establish a framework for cross-border licensing, which might increase the DCE’s remit.
3. Orphan Works
According to Hargreaves, the problem of orphan works – works to which access is effectively barred because the copyright holder cannot be traced – represents the starkest failure of the copyright framework to adapt.
In the case of mass licensing there should be a scheme involving a diligent search of rights registries (to ensure the supposed orphans are not in fact owned and opted out of the collective licensing scheme). Hargreaves argues that such searches would be made much easier once the DCE is functioning. Following diligent search, a licence would be issued. Any fees paid should be held by the collecting society running the scheme until the owner is identified, or a reasonable period of time elapses, in which case the monies should be used for social or cultural purposes, or as a contribution to the running costs of the DCE.
For licensing of individual works, a similar system is envisaged, involving Government granting an authorisation to deal in a specific work where the copyright owner has not been found or identified after a diligent search. Should an owner later come forward, future use of the work from that point would be subject to negotiation, but there would be no liability for past use beyond any licence fee set by Government or its appointed agent.
Hargreaves claims that in most cases the fee for use of orphan works would be nominal, “recognising that the works involved represent a national treasure trove”.
The seven dwarves
The other seven recommendations seem to fall into the “motherhood and apple pie” category:
4. “Government should ensure that development of the IP system is driven as far as possible by objective evidence”. A sentiment that is as worthy as it is unrealistic, this amounts to asking politicians to stop being politicians (listening to any lobbyist who can promise them money, votes or both). Good luck with that one.
5. “The UK should resolutely pursue its international interests in IP… It should attach the highest immediate priority to achieving a unified EU patent court and EU patent system…” That a European unified patent (a single patent covering all 27 members of the EU) is a “good idea” has been accepted for most of the past four decades in which the EU has been working on it. The difficulty has been its implementation, which several member states continue to wrestle over. The review does not make any recommendations on how the impasse should be resolved.
6. The Government should take a leading role in cutting patent office backlogs internationally, try to prevent an extension of patent rights to software and business methods (which is the position in the US), and investigate ways of limiting so-called “patent thickets” (“an overlapping set of patent rights” which require innovators to reach licensing deals for multiple patents from multiple sources). Easier said than done, and some of this may cost government money which is unlikely to be a popular idea just now.
7. “The design industry… the IPO should conduct an evidence-based assessment of the relationship between design rights and innovation, with a view to establishing a firm basis for evaluating policy at the UK and European level.” Design rights have indeed been something of a Cinderella in terms of IP rights, and more should be done given their importance to the UK economy, but merely calling for another review doesn’t take matters much further.
8. Better, and cheaper, enforcement of IP rights. Often called for, and the Review calls for a new small-claims track in the Patents County Court to be created for low-value IP claims. But that’s not new.
9. Small firms to have better access to IP advice. Also not a new idea, and the Review is light on how this might be achieved.
10. “An IP system responsive to change”. The IPO should be given the necessary powers and mandate to ensure that it focuses on its central task of ensuring that the UK’s IP system promotes innovation and growth through efficient, contestable markets, and it should also be empowered to issue statutory opinions where these will help clarify copyright law. This sounds as if it will cost the government money, and as indicated above this is unlikely to be popular at the moment.
Conclusions
“Fair use” was always a nonstarter, and the idea that there be an EU exception which does not “directly trade on the underlying creative and expressive purpose of the work” is so vague that it seems doomed to remain in the long grass of European lawmaking for possibly decades to come.
As noted above, the context behind the review was to find ways for the intellectual property framework in the UK to promote innovation and growth. In that context, finding some areas in which specific exceptions to copyright could be extended under current EU law is a rather strange direction in which to travel, given that, as Hargreaves himself acknowledges, most of these areas relate to non-commercial use only. Hence a UK exception enabling the use of new research tools will only help universities carrying out non-commercial work; copying as part of any research with a commercial flavour (including work funded by a commercial partner) will still be prevented. Similarly, the removal of restrictions on parodies such as “Newport State of Mind” are hardly likely to boost the U.K.’s flagging economy, even if they might lift our spirits. The proposed extension of archiving will cause many publishers considerable concern, faced with the prospect of expensive multimedia publications being freely available via public libraries, and they will argue that this is in fact damaging to the U.K.’s economy.
The orphan works proposal, however, does appear to be sensible, and although there are plenty of details to work out here there do not appear to be strong arguments against the principle. The radical idea of the Digital Copyright Exchange appears useful if it enables licensors and licensees to come together more quickly and efficiently, but without government funding it is hard to see this getting off the ground.
Cynics may say that we’ve been here before, and recently. Hargreaves acknowledges this when he refers to “the pile of IP reviews on the Government’s doorstep – four in the last six years”. Government has indicated that it aims to publish its substantive response to the review by the end of July. It remains to be seen whether, in the absence of Cameron’s “quick fix”, the government will have the appetite to spend any money or precious legislative time in making tweaks to the IP system that are unlikely to make the Digital Roundabout spin appreciably faster.
© Taveners 2011