The Government has published its response to Professor Ian Hargreaves' independent review of IP and growth, Digital Opportunity.  Our newsflash on the original review can be found here.

The Government has accepted most of the recommendations made by the review and has outlined how it will move to implement them. 

Key points

  • The Government has backed the creation of a Digital Copyright Exchange, to make it easier for rights owners and licensees to buy and sell licences.
  • There are plans to implement exceptions to copyright infringement in relation to private copying (e.g. format shifting), data mining, library archiving and parodies.
  • ISPs will not have to contribute towards the costs of setting up and administering the new notification regime under the Digital Economy Act.
  • The site blocking provisions in the Digital Economy Act that would have forced ISPs to block access to particular websites have been put on hold, but may largely have been superseded by the recent judgment of Arnold J in the Newzbin case.
  • The Government will publish minimum standards for voluntary codes to regulate collecting societies.
  • The Government will publish proposals for an orphan works scheme, allowing both commercial and cultural uses of orphan works.
  • The IPO will publish plans for a copyright opinions service.
  • The IPO will publish an assessment of whether the design right system should be simplified.
  • The IPO is to investigate and publish findings on the scale and prevalence of patent thickets.
  • The Patents County Court may be renamed the "Intellectual Property County Court", with the introduction of a small claims track for cases valued at £5,000 or less.

Background Professor Ian Hargreaves' independent review of IP and growth, Digital Opportunity (the "Review"), was published on 18 May 2011. The Government has now published its response in which it has accepted most of the Review's recommendations.  The Government has also published its International IP Strategy, a cross-government IP Crime Strategy, and its next steps for implementation of the Digital Economy Act.

Recommendations accepted by the Government

A "Digital Copyright Exchange" to facilitate the cross-sectoral licensing of rights: The Government has fully endorsed the proposal for a mechanism that would go beyond the role played by collecting societies and make it "easier for rights owners, small and large, to sell licences for their work and for others to buy them, with quicker, less burdensome (and increasingly automated) transactions...." The Government acknowledges the Review's prediction that this could add up to £2.2 billion p.a. to the UK economy.

The Government envisages that the Digital Copyright Exchange ("DCE") would act as a genuine marketplace, independent of licensors and licensees (akin, for example, to the Amazon Marketplace for on-line traders).  Licences and royalties would be negotiated by the licensor and the licensee via the DCE, but would be subject to controls on unfair competition.  The DCE itself would be funded by deriving revenue from charges on licensing transactions, rather than for searches of the database or uploads of ownership information for copyrighted works.

A subsidiary role of the DCE would be to provide a public register of title to copyright, as a means of reducing the problem of "orphan works" (where the owner of a copyright cannot be identified or located), but also as a "powerful tool against infringement".  The suggestion appears to be that those who infringe copyright in works that that are on the DCE's register might be treated differently from other infringers, for example by having constructive knowledge of the existence and ownership of the copyright (as they would have "no excuse for not checking").

The DCE would need to attract "a 'critical mass' of material that is available, and readily licensable" to be viable. The Government would help by ensuring that Crown copyright materials would be available on the DCE from the outset and by encouraging other public bodies to do the same.

The Government has yet to announce who it will commission to report on the implementation of the DCE, but it has adhered to Professor Ian Hargreaves' goal of having the DCE in place by the end of 2012.  

Private copying and other copying that does not damage the underlying aims of copyright:   The Government's response contemplates introducing exemptions for limited private copying, text- and data-mining, library archiving and parody.  These exemptions would override any contradicting terms in licence agreements.  However, the Government recognises that any new exemptions would need to work within the framework of existing EU law and should be implemented in a way that does not prejudice the incentives for rights-owners to create the works in the first place.

Private copying: In its press release, the Government refers to format shifting of copyright works for private use, such as copying a CD to an portable music player, and suggests that introducing an exemption for limited private copying "will bring copyright law into line with the real world, and with consumers’ reasonable expectations."  The Government agrees with the Review that the current "widespread flouting" of copyright "brings the law into disrepute".

It remains to be seen what the scope of the exemption will be and, in particular, whether it will extend to video (DVDs, Blu-ray etc) as well as audio.  Many forms of digital media are commonly copy-protected to hinder piracy. To implement the format shifting exemption for these types of media,  there may also need to be an exemption to the existing rules on circumvention of technological protection measures (ss. 296 et seq CDPA 1988).

Text- and data-mining and library archiving:  Text and data mining are electronic techniques used to identify patterns within large volumes of documents or other information.  An example use in the medical field might be to analyse and consolidate information from an electronic library of existing medical research, academic papers and other sources to assist in further research and development.  As the law stands, this type of activity can be prohibited, even though access to each individual paper was obtained lawfully.

The Government's Response suggests that once a report (or other document protected by copyright) is obtained legally, no further licence should be required for text- or data-mining, putting to one side the view that licensing of such mining techniques is a "legitimate commercial opportunity".

Similarly, the Government intends to widen the existing exemption for library archiving.

Parody: The Government also plans to introduce an exception for parody, for example to enable copyright works to be parodied for comedic effect without the consent of the rights-owner.

The Digital Economy Act:  Under the Digital Economy Act, where letters are sent to internet users whose connection has been identified as being linked to unlawfully shared material, the Government will introduce a £20 fee for subscribers who wish to appeal (which will be refundable if the appeal succeeds). This is to deter appeals that are vexatious or not made in good faith.

Following the judicial review by BT and TalkTalk of the passing of the Digital Economy Act, ISPs will not now have to pay a share of the costs incurred by Ofcom and the independent appeals body in setting up and administering the new regime.

The Government is also dropping the site blocking provisions that would have compelled ISPs to block particular websites identified as containing allegedly infringing material.  However, the recent judgment of Arnold J in Twentieth Century Fox Film Corporation and Ors v BT plc, where the film studios were successful in requiring BT to use its Cleanfeed system to block access to the Newzbin pirate site, appears to afford rights-owners with an alternative means to achieve this.

Collecting Societies:  The Government sees collecting societies as continuing to play a major role in copyright licensing going forward, but that their status could be reinforced through adherence to good practice.  This is in response to concerns voiced to the Government about transparency and governance of such societies, as well as "heavy-handed, misleading or unfair practice in charging".

The Government will publish minimum standards for voluntary codes in early 2012, before consulting with collecting societies on their implementation.  The Government has also suggested that it should have a "backstop power" to implement a statutory code if, in the future, there is evidence that a particular collecting society has failed to introduce or adhere to a voluntary code that implements these minimum standards.

Orphan Works: The government will publish proposals for an orphan works scheme, allowing both commercial and cultural uses of orphan works. Safeguards for owners of such works would include diligent searches for the rights owners (see also the DCE proposals above) and licensing at market rates for commercial uses.

Copyright opinions service:  The Government recognises that businesses, schools and other educational institutions are often required to make difficult judgments on the scope and applicability of copyright law.  As recommended by the Review, the IPO will therefore publish plans for a copyright opinions service at the end of 2011, which would provide opinions that can be taken into account by businesses, public bodies and the courts.

Designs: By the end of 2012, the IPO will publish an assessment of whether the design right system should be simplified, and in particular whether there is a need for UK unregistered design right in light of the existence of the unregistered Community Design Right.   The Government also contemplates that designs (particularly unregistered designs) could be included in the DCE.

Patents:  The IPO is to investigate and publish findings on the scale and prevalence of patent thickets with a particular emphasis on their effects on small and medium enterprises seeking to enter technology sectors.

Patents County Court: Subject to a value for money assessment, the Government is likely (a) to introduce a small claims track in the Patents County Court for copyright, design and possibly trade mark cases valued at £5,000 or less; and (b) to rename the Patents County Court the Intellectual Property County Court.