The UK Government on its Digital Opportunity

August 26, 2011

By Sarah Lux 

Earlier this year, the Fortnightly Review reported on the Hargreaves Review and its recommendations for the reform of UK intellectual property law. The UK Government has now released its official response, announcing that it accepts all of the Review’s recommendations and aims to implement measures by the end of this Parliament to ‘realise the Review’s vision and deliver real value to the UK economy, and to the creators and users of Intellectual Property’.

Importance of Evidence

The Review emphasised the need for IP policy to be grounded in clear economic evidence of the impact of regulatory mechanisms on competition and innovation. Professor Hargreaves identified two main areas of concern: the lack of high-quality evidence to support some intellectual property measures and an overabundance of lobbying by private interest groups.

The Response begins with a set of promises geared towards ensuring that UK IP policy is informed by better evidence. In relation to the first concern, the Response notes that the Government has ‘begun an ambitious programme of economic research with partners’, referring readers to an outline of its proposed research. The outline includes plans to:

  • assess possible economic effects of congestion in the trade mark register;
  • study the economic value of public domain works;
  • develop an approach for measuring IP enforcement costs against the effects on rights owners, consumers and the wider economy;
  • link all IP rights to business performance measures;
  • assess the economic cost of invalid patents;
  • assess the volume of orphan works and their impact on creators and users; and
  • develop a methodology for research into economic and social impacts of copyright exceptions.

In relation to the second concern, the Response states that the Government will give limited weight in IP policy-making to evidence that is insufficiently open and transparent, and will make it clear when it is doing so.

However, the Response also states that perfect evidence is an ideal, and that in making IP policy it is sometimes necessary to ‘guess and get on with it’. Accordingly, while the Government will aim to be guided by ‘emerging evidence’, it will continue to prioritise ‘rapid progress’ towards an improved IP system.

Digital Copyright Exchange

The response to Professor Hargreaves’ proposed Digital Copyright Exchange (DCE) is that a DCE ‘has the potential to offer a more efficient marketplace for owners and purchasers of rights’ and that it could contribute up to £2.2 billion per year to the UK economy by 2020. The Government will therefore commission a ‘champion’ of the DCE to undertake preliminary steps towards its creation.  The DCE champion will report back on progress at the end of 2011.

However, the Response implies that the Government will give less weight to the DCE than was envisaged by Professor Hargreaves. Hargreaves recommended that a work which cannot be found after a diligent search of the DCE should be regarded as an orphan work and automatically licensed for use. The Government, on the other hand, regards DCE searches as only ‘a valuable first step’ in searching for the owner of a work, and notes the need for other diligent searches before a work can properly be treated as an orphan. The Government takes the view that compulsory participation in the DCE would be contrary to the Berne Convention.

Orphan Works

The Government intends to make proposals at the end of the year for an orphan works scheme incorporating the safeguards discussed above.

Copyright Exceptions

The Response agrees that greater exceptions to copyright are required in theUK. The Government intends to make proposals at the end of the year for ‘a substantial opening up of theUK’s copyright exceptions regime’.  This will include proposals for:

  • a limited private copying exception;
  • a widened non-commercial research exception (which should cover text and data-mining to the extent permissible under EU law);
  • a widened library archiving exception; and
  • a new exception for parody.

The Response adds that there is a need for wider exceptions at the EU level, since theUK’s scope for action on exceptions is limited. The Government will therefore ‘aim to secure further flexibilities’ at EU level.

Enforcement

Among other measures to improve enforcement, the Government intends to introduce a small claims track in the Patents County Court for cases with £5,000 or less at issue, for use in copyright, design and possibly trade mark cases, to increase access to enforcement by small and medium enterprises.

Patents, Designs and Trade Marks

These areas of intellectual property law received little focus in the Review, which dealt mainly with theUKcopyright regime. However, the Review did make some recommendations on patents and designs.

On patents, the Government undertakes to:

  • resist extensions of patents into sectors which are currently excluded, in the absence of clear evidence that this is necessary;
  • provide for work-sharing with other patent offices in order to address backlogs; and
  • investigate the scale and prevalence of issues with patent thickets as well as potential solutions.

On designs, the Response notes that the IPO has commissioned research on the relative levels of design registration in theUKcompared toFranceandGermanyand on whether theUK’s lower level of registration has impacts on the competitiveness of theUK. It also noted that designs might be included in the DCE or its equivalent.

International Policy and Crime Strategy

Alongside the Response, the Government has released The UK’s International Strategy for Intellectual Property, which outlines the role the UK envisages for itself in working towards an efficient, well-functioning international IP system, and The UK IP Crime Strategy 2011, which discusses the ways in which the UK will continue to enforce IP law domestically.

Conclusion

The Government’s response to the Hargreaves Review was one of resounding acceptance, at least at the level of principle. Despite the long road towards implementation that no doubt lies ahead of these Recommendations, the Government’s positive response increases the likelihood that the principles underpinning the Review, and its key findings, will be considered closely in the upcoming review of Australian copyright.

Sarah Lux is an intellectual property lawyer at Allens Arthur Robinson and an Adjunct Lecturer at the University of New South Wales.

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Digital Opportunity: the Hargreaves Review of UK Intellectual Property and Growth

June 16, 2011

By Sarah Lux

Last month, Professor Ian Hargreaves of Cardiff University released the much-anticipated Hargreaves Review, officially entitled Digital Opportunity, A Review of Intellectual Property and Growth. This independent report on the state of the UK’s intellectual property regime and its impact on economic development was commissioned in November 2010 by Prime Minister David Cameron. It was a response to the perceived risk that the UK intellectual property framework may not be succeeding in promoting innovation and growth in the national economy. Professor Hargreaves was tasked with answering what he calls the “exam question” set by the Prime Minister: “Could it be true that laws designed more than three centuries ago with the express purpose of creating economic incentives for innovation by protecting creators’ rights are today obstructing innovation and economic growth?” The short answer, Hargreaves says, is resoundingly yes.

Copyright to adapt to the digital environment

UK copyright law does not fare especially well in the report card given by Professor Hargreaves. The Review finds that the copyright framework in the UK is failing to keep up with the emergence of digital communications technologies that involve routine copying of text, images and data. In particular, Hargreaves is concerned by the possibility that copyright law hurts the growing online services economy. He warns that legal rules designed to deal with the needs and rights of artists and authors should not be allowed to unduly restrict emerging business sectors completely removed from the creative industries.

Hargreaves’ predominant suggestion for bringing UK copyright law into the 21st century is the creation of the world’s first Digital Copyright Exchange (DCE), a central platform for copyright licensing. Participation in this national clearinghouse should, according to Hargreaves, be “genuinely voluntary”, but motivated by “a range of incentives and disincentives” provided by the government. The Review does not suggest that the UK government should itself create the DCE, due to Hargreaves’ view that this would cause “a nightmare of IT procurement followed by the birth of a white elephant.” Rather, Hargreaves’ recommendation is that government put its weight behind assisting parties interested in creating the exchange, and strongly encouraging rightsholder participation. The Review suggests that a central platform for automatic licensing is inevitable even if the issue is left entirely to the market to resolve, and recommends that the UK government take the opportunity to get involved in a leadership capacity rather than waiting for a strong market player or group of players to “impose their own rules.”

Orphan works

The Review describes the problem of orphan works as “the starkest failure of the copyright framework.” Under Hargreaves’ recommended model for dealing with the issue, works would be automatically licensed for use if no author was found after a “diligent search” of the DCE (prompting some scepticism as to the “genuinely voluntary” nature of participation). Any fees paid would be held by the relevant collecting society until the owner was identified or a reasonable period of time passed, at which point the money would be used “for social or cultural purposes, or perhaps as a contribution to the running costs of the Digital Copyright Exchange.”

Exceptions to copyright infringement

In his announcement of the Review in 2010, Prime Minister Cameron stated that the founders of Google felt they could never have started their company in Britain because the copyright laws are “not as friendly” to innovation. In particular, Google praised the “breathing space” provided by the fair use provisions in the US and suggested that this facilitated their entrepreneurial activity. The Review notes that most submissions from UK business were “implacably hostile” to the idea of adopting a fair use exception in the UK on the basis that this would cause disruptive legal uncertainty, cause increases in costly litigation and create confusion for buyers and sellers of copyright goods. The Review rejects the idea of a wholesale adoption of US-style fair use doctrines, arguing this would not be legally viable. However, Hargreaves takes the view that the UK can enjoy many of the benefits of the American exception by adopting other exceptions already permitted under EU law (such as those for format-shifting, parody, non-commercial research and library archiving).  In addition, the Review recommends that the UK government should lobby at EU level for a new exception for “non-consumptive” use, being use enabled by technology that does not directly trade on the creative and expressive purpose of the work in question (for example certain uses in data mining and search engine indexing).

Importance of evidence

A recurring motif throughout the report is the need for IP policy to be grounded in economic evidence of the impact of regulatory mechanisms on competition and innovation. Hargreaves notes that to date, empirical data on the impact of IP (particularly with regard to the relationship between copyright and creative innovation) has come predominantly from private parties and lobbyists, and has not been subjected to independent analysis. The Review emphasises at several points the importance of grounding law and policy in fact rather than spin.  Hargreaves does, however, note the practical difficulties associated with collecting such empirical data. This is especially the case in the context of unregistered copyright and designs and in areas such as biosciences and computing, which involve new markets and technologies with characteristics that can be hard to measure.

Clarification of copyright law

Another theme in the Review is the need to clarify copyright law for those affected by it, particularly small companies.  Recommended measures include provision of greater access to low cost legal and commercial IP advice and the empowerment of the UK Intellectual Property Office to publish formal opinions clarifying copyright law.

Enforcement

The Review notes the importance of enforcement but warns against reliance on ever-tougher enforcement mechanisms to solve the problem of copyright infringement. Rather, Hargreaves recommends a multi-faceted approach to infringement, which involves the modernisation of copyright law, better education about copyright issues and the creation of open and competitive markets in licensed digital content.

Patents, designs and trade marks

Although the Review focuses heavily on copyright law, Hargreaves strongly recommends, as a matter of “highest immediate priority,” that the UK should increase its focus on its international IP interests by pressing for a unified EU patent court and EU patent system. The Review identifies patent office backlogs and the emergence of patent thickets as potential barriers to innovation, particularly for small enterprises. To clear and prevent backlogs, the review recommends increased international collaboration between patent offices. To deal with the problem of thickets, Hargreaves recommends the UK work with its international partners to create disincentives for the maintenance of lower value patents.

Designs were not included in the Terms of Reference for the Review, a fact about which Hargreaves expresses surprise. The Review states that designs are an important branch of the creative economy that have been neglected in the UK, recommending an evidence-based assessment of the relationship between designs and innovation. No specific recommendations are made in respect of trade marks, which are largely absent from the Review.

Relevance to Australia

The Review is, in essence, an exposition of principle rather than a detailed roadmap for reform. Professor Hargreaves acknowledges from the outset that he has “focused upon the main issues, at the risk of ignoring important points of detail.” Major recommendations, such as the creation of the DCE, will require substantial legal, governmental and commercial analysis and consideration before they have a real shot at faring better than those Gowers recommendations that have remained in the “too hard” basket since 2006.

However, the Review provides a useful high-level analysis of IP law, policy and industry attitudes in the UK, particularly in the copyright context.  It emphasises decisions that need to be made by governments as to how intellectual property frameworks might be utilised to promote economic development in an increasingly networked world. The increasing necessity for international cooperation, while not a new concept, is nicely underlined in the Review and is as relevant in Australia as it is in the UK. And Hargreaves’ emphasis on the importance of economic evidence comes at a time when Australian consumers, like their overseas counterparts, are feeling restless under the restrictions of copyright law and are demanding better evidence of the economic impacts of music and film piracy, among other types of infringement.

This report on the UK intellectual property landscape does not directly touch on Australian law or policy. However, at the level of principle, there can be no doubt that Hargreaves’ findings will be considered closely by those charged with the review of Australian copyright.

Sarah Lux is a lawyer at Allens Arthur Robinson and a sessional lecturer at the University of New South Wales.

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