The debate around the direction of Intellectual Property (IP) law has been in focus again recently with the publication of the Hargreaves Report (the Report). The Report was commissioned by the Government in November 2010 for a wide-ranging review into the value and challenges posed by IP in the modern world, as well as possible solutions. Professor Ian Hargreaves proposed 10 reforms to adapt and strengthen the role of IP. The Government intends to adopt the key findings of the Report, but will these solve the difficult issues on copyright that have vexed the creative industries for so long?

Although the recommendations cover the breadth of IP, the most focus has been on the potential reforms for copyright. Copyright, the primary IP right protecting music, software, games and audiovisual content, has been under the greatest scrutiny as companies in these industries have sought to tackle the joint problems of illegal copying and the barriers to digital and international distribution.

The Report proposes four key recommendations in relation to copyright reform:

  • Establishment of a Digital Copyright Exchange (DCE). The aim is to build a network of interoperable databases to provide a common platform for licensing the use of copyright-protected works in return for appropriate fees, supported by an agreed code of practice. The idea is to provide greater transparency over available content and standardise aspects of licensing through a single point to create a more efficient and adaptable system. The challenge is likely to be in the detail of implementation and getting sufficient buy-in from the various industry players. The Report recognises this by saying that a senior figure needs to lead this initiative. It also recognises that incentives and disincentives are necessary to encourage the relevant parties to participate. Whilst in principle this seems like the only possible solution to the management of digital copyright material, in reality the practicalities also seem somewhat insurmountable. Urgent action is required to maintain the positive response to this recommendation in the Report.
  • A new regime for orphan works. The Report specifically recommends legislation to tackle the issue of orphan works. It proposes a system of collective licensing to allow the use of orphan works as well as a clearance procedure for the use of individual works. This would open up a wealth of creative value currently untouchable, because digitising an orphan work could be considered an infringement of the copyright in it. The Report suggests using the various databases underlying the DCE to help identify whether a work really is “an orphan" or whether its owner can in fact be traced through the DCE. However, whether this will actually be effective will depend on how comprehensive the DCE’s collection of works is.
  • Supporting efforts for pan-European licensing. Recognising the significant problems that have arisen from the territorial boundaries for overseas licensing, the Report strongly supports efforts to promote cross-border licensing. Although the cross-EU nature of this issue means that it is better left to the European Commission to resolve, the Report does suggest measures that can be taken at UK level relating to collecting societies. It proposes that collecting societies be required by law to enter into a code of practice approved by the Intellectual Property Office and UK competition authorities to operate in a way that is “consistent with further development of efficient and open markets”. However, the success or otherwise of this recommendation will depend on whether such a code is just a high-level document setting out open market objectives or whether it contains concrete obligations with persuasive powers of enforcement backing it up.
  • Reviewing the copyright exceptions for the digital age. There have long been complaints that the limited exceptions to copyright in the UK are too narrow and in particular do not take into account new technologies and digital media. The Report recommends extending the exceptions, including for format shifting, parody, non-commercial research, and library archiving. It would also support an EU-wide exception for text and data analytics. This is clearly still following the limited exception basis, but adding new exceptions to cover specific issues, such as digitising library catalogues. Format shifting is significant because it represents the introduction of a limited private copying exception into the UK for the first time. Private copy rights, including payment of suitable compensation, are common in other European countries, but have not been adopted in the UK. Content owners are likely to scrutinise any additions to the UK copyright exceptions with care but they will mostly be relieved that the Report does not recommend having a wide “fair use” exception as in the US.

Will These Recommendations Lead to Action?

There have been a number of reports looking at reform of IP and copyright in particular, most notably the Gower Report in 2005. The Gower Report received much publicity but very few of its detailed proposals were actually implemented. Will the Hargreaves Report be similarly ignored? In its recent response to the review, the Government announced that it intended to adopt all of Hargreaves’ proposals. However, a wider look at history and the political and market landscape paints a mixed picture. All of the copyright recommendations above relate to long-standing issues, which have been difficult to resolve because of opposing interests that need to be reconciled. For example, the Government tried to introduce legislation on orphan works as part of the Digital Economy Bill, but it faced opposition from some content owners and the proposed Bill was eventually dropped before it became law. Similarly, with collective licensing: the European Commission has been looking at this issue for over six years, but has struggled to propose a workable alternative. However, there are signs that things are changing and there is a new political will to tackle these problems. Three trends suggest that this time, the recommendations could lead to action:

  • A growing recognition from all parties that these issues need to be addressed. With the rise of the digital market, it is simply costing the Government and industry parties from all sides too much money in lost revenue not to put in place mechanisms that will make it easier to access, license and distribute content, particularly online. The world has changed since 2005, and the problems have become far more acute.
  • The willingness of the Government to address online piracy, as shown by the Digital Economy Act. This is a separate but related area. The determination of the Government to legislate in a difficult area to protect the digital economy could be a blueprint for further action on some of the difficult areas requiring legislative action highlighted by the Hargreaves Report. However, the current uncertainties as to how and when certain remedies under the Digital Economy Act will actually be available for use by content owners will also act as a warning that even primary legislation may not be sufficient to resolve all the issues.
  • The influence of the European Commission. The Commission is very concerned about the barriers to free and efficient licensing and distribution of content. It forms a core part of its Digital Agenda, the Commission’s ambitious long-term project to promote the digital environment. In particular, it has proposed legislative action to address the issues of orphan works and pan-European licensing with draft Directives due later this year or next year. It remains to be seen how these fit in with any UK initiatives, but it is likely that determined activity at the European level will provide an added incentive, if not a requirement, for the Government to take action.

Conclusion

The Hargreaves Report represents an exciting opportunity to review and address some of the long-standing issues relating to IP and, in particular, copyright. Its review of the market, and of the benefits and disadvantages of various options, is thorough. However, its recommendations for action deliberately lack specific detail in order to encourage the market to resolve the issues with workable solutions rather than enforced ones. While many will welcome the recommendations in principle, the challenge will be agreeing the detail. The Government’s announcement to adopt the key proposals from the Report is encouraging. Some of the proposals, such as changes to the exceptions to copyright infringement, can be dealt with through legislation but others, particularly establishing the DCE and new procedures for orphan works, will require significant industry input. Any company involved in creating or distributing content should actively contribute to finding a way of taking these recommendations forward to ensure their interests are protected as much as possible.