The Hargreaves Report  (published 18 May 2011) and the EU Commission’s blueprint for intellectual property rights  (published 24 May 2011) propose a number of reforms to the respective intellectual property rights regimes (UK and EU) that are designed to encourage innovation and creativity in a world where digital content is playing an increasingly large role in financial terms. Copyright, in particular, takes centre stage in both reports, as it is intrinsic to the development and exploitation of digital content and this note is a high-level summary of the recommendations made in each report that are specific to copyright.

Technological Development Drives Copyright Issues

The widespread use of digital technology (coupled with an almost exponential increase in computational power and memory space in average computer hardware) has created a very large pool of creative effort. Anyone with a computer and a broadband connection has access to a large amount of copyright material and is able to modify such material and/or create new works.

Consequently, there has been an ‘explosion’ of creative effort as well as of infringement. Not all infringement is the same.  Format-shifting  for private use is a widely accepted practice recognised by copyright owners and creative industries (and some European countries even have a specific ‘private copying levy’ which is imposed on hardware that enables such copying for private use).  On the other hand, the widespread copying of music and audio-visual works (whether using peer-to-peer networks or not) without the copyright owner’s consent is clearly illegal.

The comparatively low cost of high-performance hardware and the power of creative software products have resulted in significant changes to traditional business models. It is much easier for smaller businesses to set themselves up as content creators and distributors. Many new software-enabled services have been developed which use existing content (data, music or audio-visual content) to provide secondary services (such as application development for smart phones or data analysis). In order for such new services to come to the market quickly and at competitive prices, it is essential that the service provider is able to acquire the necessary rights to the underlying content (if any) as quickly as possible and at a predictable cost.

Licensing Problems

Both reports have identified the problems that can be encountered in trying to clear the underlying copyright works:

  • a lack of information as to the relevant rights owner; 
  • inconsistent (and often uneconomic) pricing;
  • the need to deal separately with all rights owners of a copyright work; and
  • (in the context of the EU single market) the difficulty of obtaining consent for cross-border use).

In a free market, a copyright owner has the right to set whatever price he or she deems acceptable. However, some of the other problems are process-based and are addressed accordingly. The Hargreaves Report advocates the establishment of a Digital Copyright Exchange, which would essentially serve as a collecting society for digital exploitation. All copyright works that are registered with this new body would derive a number of legal and commercial benefits, such as an easier enforcement of rights (along with, perhaps, more remedies available) and the use of standardised licence terms.

A Digital Copyright Exchange fits in well with the recommendations made by the EU, which call for the establishment of a European “rights broker” which would facilitate the licensing of copyright across borders. From the European point of view, the difficulty is not just in clearing all the underlying rights in a proposed new service or work but also removing any artificial borders to the single market.

Both reports touch upon the problem of ‘orphan works’, which are works known to be protected by copyright but with rights owners who can not be traced.  The Hargreaves Report suggests that the new Digital Copyright Exchange could serve as a useful registry of “known copyright” and that any copyright works whose owners are not listed on the exchange would be able to be used in return for a nominal fee. The EU’s report mentions a new “European legislative framework to identify and make available…” orphan works, but does not go into any detail.

Exceptions to Copyright Infringement

Both reports deal with new types of copying which are facilitated by digital technology, e.g. format shifting for personal use.

The Hargreaves Report considers the “fair use” exceptions which are part of the US legislative framework and concludes that this system is not the most suitable for the UK.  It goes on to recommend a number of new, specific exemptions to copyright law in the UK:

  • a private copying/format shifting exception (permitted under EU laws);
  • one which applies in circumstances where a proposed use of copyright work would not require consent of the copyright owner if the use does not trade directly on the “underlying creative and expressive purpose” of the copyright work; 
  • the extension of the non-commercial research and archiving exceptions to all forms of copyright; and
  • an exception for parody and pastiche.

The EU’s suggests that the answer may lie in the creation of a European Copyright Code, which would codify all entitlements, related rights (such as moral rights, e.g.) as well as exceptions and limitations.

Conclusions

Both reports identify similar problems with copyright and suggest robust measures that streamline rights clearance processes.  However, many recommendations are made at a high level and need a substantial amount of additional detail before they can be implemented. If there is to be a new clearing house or exchange for copyright works, it needs to attract a substantial amount of interest from copyright owners in order to be credible and therefore effective and this may mean that substantial incentives will need to be offered, over and above a theoretical access to a broader market.