UK proposal would lead to creation of "digital copyright exchange" to facilitate licensing.

On 18 May 2011 Professor Hargreaves published his Review on Intellectual Property and Growth. The aim of the Review, commissioned by Prime Minister David Cameron in November 2010, is to assess whether the current intellectual property framework sufficiently promotes innovation and growth in the UK economy. The conclusion is that the UK's intellectual property law, in particular copyright, is outdated in this digital age. A few days later, on 24 May, the European Commission also published its new strategy for IP rights in order to encourage innovation and help develop the e-commerce and digital industries.

Hargreaves' recommendations on copyright include:

  1. creating a cross-sectoral UK Digital Copyright Exchange (ie a network of interoperable databases to provide a common platform for licensing transactions);
  2. introducing legislation to enable licensing of orphan works;
  3. introducing UK copyright exceptions for format shifting and parody; and
  4. introducing an exception into the EU framework which would allow uses of copyright works which do not compete with the normal exploitation of the work

Digital copyright exchange

Hargreaves proposes that the Government encourages industry to create a Digital Rights Exchange which would facilitate licensing of a variety of different copyright works (music, film, e-books etc) across all sectors. Participation would be voluntary but there should be a range of incentives and disincentives to encourage rights holders to take part e.g. providing that damages are greater for infringement of works that are available through the Exchange.

The proposal has clear advantages for rights holders and for users of copyright works. It would facilitate copyright licensing; users would be clear about what works are available, who owns the rights in the works and the terms on which the works may be used. Although it would start as a UK specific project, such an Exchange would also create the foundation for a multi-territorial scheme which would enable cross-border licensing and pan-European licensing of digital copyright works, which is the aim of the Commission.

However, Hargreaves has provided little detail on how such a Digital Rights Exchange will work. The Review mentions that running costs would be covered by a small user charge but this may be an underestimation of the cost of creating a system which allows for interoperability between a large number of databases to provide a one-stop-shop for licensing. Issues of cost and how to incentivise rights holders to participate in the exchange will need to be worked out by industry. The suggestion of a two-tier copyright framework where rights holders who have not taken part in the Exchange lose their rights to damages will be strongly resisted by rights holders.

Orphan works

The issue of orphan works has plagued institutions such as the British Library and the BBC, who hold a rich archive of material which cannot be digitised without any scheme to enable licensing of works which cannot be traced. On the other hand, rights holders such as photographers are concerned that any licensing scheme may be open to abuse by publishers not carrying out proper searches for authors before relying on the provisions.

Hargreaves has proposed a scheme that would involve collecting societies running an extended collective licensing model, such that users (after carrying out sufficient searches) may obtain a licence to use collections of works from a collecting society in return for a nominal fee. If the author surfaces in the future the collecting society will pay them compensation and if no author is identified after a certain period the money may be used for social or cultural purposes. In relation to individual works, if an author surfaces, any future use of the work will be subject to negotiation but there would be no liability for past use beyond the licence fee set by the Government.

This proposal is not new and was a controversial part of the Digital Economy Bill, which Parliament dropped at the 11th hour. Given that the Commission's IP strategy includes a proposal for a directive on orphan works which would permit only organisations such as publicly accessible libraries, educational establishments or museums and public service broadcasters, such as the BBC, to digitise and make available orphan works for the purposes of preservation and cultural access to such works, it may be that the present Government will decide to adopt the more limited approach proposed by the Commission rather than introducing a full licensing scheme for all orphan works by any person.

Copyright exceptions

Hargreaves' proposals for introducing an exception into UK law for both format shifting and parody are also not new and formed part of Mr Gowers' recommendations to the previous Government in 2006.

In relation to format shifting, there has long been a recognition that the UK is out of step with the rest of Europe by prohibiting format shifting and that many users flout the law in this area due to ignorance of the law or because there is little disincentive. However, the difficulty has always been how to adequately compensate rights holders for such use. Hargreaves' view is that rights holders expect users to format shift and reflect this in the price they charge for the CD or DVD product. Therefore no levy or additional compensation is required. This will be disappointing for rights holders, although they will be free to increase their prices, which may be preferable to a levy on the devices.

In relation to parody, it will be interesting to see whether the new Government is persuaded that an exception is necessary where the previous Government was not. Many rights holders will be nervous about what a specific exception for parody will permit users to do without licence that they cannot already do within the framework of the current exceptions.

Finally, Hargreaves has not recommended that the UK introduce a broad 'fair use' exception equivalent to the exception under US copyright law, which will be of great relief to many rights holders. However, Hargreaves has suggested that the UK should press, at the European level, to change the EU framework of exceptions so the law can adapt to new technologies without Government having to introduce a specific new exception every time a new technology gives rise to a possible new way of infringing works that should be excluded. Hargreaves says 'this would be designed to allow uses enabled by technology of works in ways which do not directly trade on the underlying creative and expressive purpose of the work'. The idea of introducing some flexibility into the EU framework so that it can quickly adapt to new technologies will be attractive to both rights holders and businesses which are developing new technologies. There is a strong argument that any use of a work which is purely the consequence of the way in which a technology works and which does not have any impact on the value of the copyright work and its normal exploitation should be exempted from infringing copyright in the work. Although not called a "fair use" exception, this flexible approach resembles the U.S. fair use exception in certain respects.

Conclusion

In conclusion, the Review does not propose a radical overhaul of UK copyright law. The Government is to a large extent restrained by the European framework of copyright law, in particular in relation to the exceptions to infringement. Many of the proposals are not new (exceptions for format shifting and parody and licensing orphan works) but the current Government may take a different approach to the previous Government in taking these proposals forward. Certainly David Cameron's remarks suggest that he will be open to proposals which introduce further exceptions to infringement and facilitate the licensing of copyright works in any way, such as the scheme for orphan works and the Digital Copyright Exchange. This would also be in line with the European Commission's IP strategy for providing economic growth in Europe.