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Will the Hargreaves Review Meet the Same Fate as its Predecessors? Copyright Recommendations and Government Response

Wednesday, October 19, 2011

Contributed by Francis Torrence and Amanpreet Kaur, Wilson Elser

In November 2010, British Prime Minister David Cameron announced an independent review of how the intellectual property framework supports growth and innovation.1 This review was completed by Professor Ian Hargreaves, and his report, titled "Digital Opportunity: A Review of Intellectual Property and Growth" ("the Review")2 was released in May 2011. The Review sets forth 10 recommendations for specific changes to the current intellectual property framework in the United Kingdom in order to best support growth and innovation. Three of these recommendations have to do specifically with copyright, one with patents and another with designs. The remaining five recommendations are general, and offer suggestions on policy changes, enforcement, and the role of the Intellectual Property Office in promoting innovation in the United Kingdom. What follows is a brief description of the recommendations specific to copyright, and those suggesting policy changes, enforcement mechanisms and the role of the Intellectual Property Office. This description of the recommendations is followed by a summary of the main points in the government's initial response to the recommendations and possible implications if such recommendations are implemented.

The Recommendations

THE RECOMMENDATIONS

—  EVIDENCE DRIVEN DEVELOPMENT

The Review’s first recommendation, similar to at least two previous reviews, is that objective data and evidence guide the government’s decisions on developing IP systems. This not only is an opposition to legislation created as a result of lobbying efforts, but it also highlights the need for government to stay proactive and to respond to new research and data on the effectiveness of any given IP system or IP right, such that demonstrably ineffective systems and/or rights are replaced. 

This recommendation simply demonstrates the author’s approach to developing the rest of his recommendations.

— DEVELOPING A GLOBAL PERSPECTIVE

Although more applicable to patents and the development of a unified E.U. patent system, the second recommendation is a push to think in a global context when developing IP regimes. For example, “the network of international IP treaties limits the ability of individual countries to go their own way.” More importantly, the Review suggests that the harmonization of rights within the European Union will enable U.K. companies to expand into other markets without worry over their IP rights. In addition, negotiating international enforcement efforts, particularly with China and India, will serve to promote trade with such rapidly growing economies.

— EVOLVING THE COPYRIGHT LICENSING SYSTEM FOR THE DIGITAL WORLD

This recommendation provides a copyright licensing scheme that would purportedly create a more effective and efficient system of bringing licensees and licensors together and minimizing their transaction costs. Specifically, the Review proposes the establishment of a cross-sectoral Digital Copyright Exchange (“DCE” or “Exchange”). The Exchange would “provide a common platform for licensing transactions.” The Review provides only a general concept of the Exchange and its possibilities, including the following: attach copyright conditions and rights information directly to digital content in a uniform fashion; license across delivery technologies; adapt to emerging technologies; meet the specific needs of different sectors while remaining governed by common standards and principles; and bring in licensing for other rights such as design. 

The Review calls for participation in the Exchange to be “genuinely voluntary” but to provide incentives and disincentives to gain participation. Some proposed incentives include: providing greater remedies for infringement of rights to works available through the licensing exchange than for other works; making Digital Economy Act sanctions apply only to infringements involving works available through the Exchange; and providing funding for the costs of establishing the Exchange.

As to governance, the Review provides little more than the prediction that the Exchange would need light regulatory supervision once established and a suggestion that the Exchange be led by a highly respected figure in its formative stage. 

The Review proposes that such an Exchange also would permit extended collective licensing (“ECL”), which is licensing and mass digitization of whole collections (i.e., libraries, archives, etc.), if authorizing legislation is passed. ECL could permit a copyright licensing body such as a “collecting society”3 to assume the ability to represent every rights holder in a specific class. This would include even those who have not explicitly joined the organization, as long as “most” in the class have done so. The Review provides the example of literary authors as a class: if the licensing body is representing “most” literary authors, then it can assume responsibility for all literary authors who have not taken the initiative to opt-out of the system.

ECL is also presented as a solution to the issue of orphan works as a distinct recommendation. Orphan works, which are works to which rights holders cannot be found, present an obstacle for the mass digitization proposal. In response, the Review suggests that after undertaking a “diligent search,” the process of which is narrowed to simply searching the rights registry (i.e., the DCE) and still not locating the owner, a license should be issued to the works. “Any fees paid for licensing the works would be held by the collecting agency running the ECL scheme until the owner is identified, or a reasonable period of time elapses, in which case the monies should be used for social or cultural purposes, or perhaps as a contribution to the running costs of the Digital Copyright Exchange.”

The Review further suggests that such an Exchange could promote, and eventually support, a “flexible framework for cross border licensing” and thereby “lift barriers to the development of new products and services” by creating a single E.U. market for content.

— COPYRIGHT EXCEPTIONS

As quoted in the Review, Prime Minister David Cameron made the following comment in November 2010, as part of the announcement of the Review of Intellectual Property and Growth:

The founders of Google have said they could never have started their company in Britain. The service they provide depends on taking a snapshot of all the content on the Internet at any one time and they feel our copyright system is not as friendly to this sort of innovation as it is in the United States. Over there, they have what are called ‘fair use’ provisions, which some people believe gives companies more breathing space to create new products and services.

Despite this, the Review decided against the adoption of a U.S.-style “fair use” exception to copyright. The Review cited the responses by “established U.K. businesses” as one of the reasons for not recommending such an exception for the United Kingdom. The businesses’ input was that a “fair use” exception would create massive legal uncertainty because of its roots in American case law.

Instead, the Review proposed the following exceptions: an interim U.K. exception for the use of analytics for non-commercial purposes, while the government promotes an exception to support text mining and data analytics for commercial use at the E.U. level; an exception for limited private copying, which would allow individuals to make copies for their own and immediate family’s use on different media (i.e., format shifting); an exception for parodies; the extension of the non-commercial research exception to all forms of copyright work; the extension for digitizing archives and libraries for preservation; a recommendation for the United Kingdom to provide a lead to develop a further copyright exception designed to build into the E.U. framework adaptability to new technologies at the E.U. level; and a call for a change in the law such that the foregoing exceptions could not be contractually overridden.

— ENFORCEMENT OF IP RIGHTS

The Review’s recommendations on enforcement are provided in general terms, signifying a lack of any clear mechanisms to deal with infringement, especially cyber piracy. The Review advises that “the government should pursue an integrated approach based upon enforcement, education, and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields.” The Review instructs that the government closely monitor the impact of the so-called “HADOPI” law in France, the strict enforcement measures imposed in South Korea, and the effects of the U.K.’s Digital Economy Act (DEA) once fully implemented. The Review likely was referring specifically to the controversial three-strikes (or graduated response) laws, which permit a consumer’s Internet connection to be disconnected after a number (usually three) of notifications/warnings that their connection has been implicated in infringing activity. These laws are still only about a year old, and not enough data exits to determine their deterrence effects.

The Review did, however, provide one concrete recommendation with regard to enforcement, which was for the government to introduce a small claims track for low monetary value IP claims in the Patents County Court. This type of forum also may be appropriate for those who are more interested in injunctions (i.e., putting an end to the infringing activity) rather than monetary damages.

— EMPOWERING THE INTELLECTUAL PROPERTY OFFICE

The Review focuses two recommendations on the role of the Intellectual Property Office (IPO):

The Review advocates for the IPO to be the source of low-cost and integrated advice that combines “commercial and technical insight with legal expertise” for small and medium enterprises, specifically, to manage and protect their IP.

Furthermore, the IPO should be empowered to “issue statutory opinions where these will help clarify copyright law” and to focus on its task of promoting innovation and growth. Finally, the government should “ensure that by the end of 2013, the IPO publishes an assessment of the impact of those measures advocated in this Review which have been accepted by Government.”

IMPLEMENTATION AND GOVERNMENT RESPONSE

The Review itself was pessimistic about the likelihood of the recommendations being implemented. The influence of the United Kingdom has “to some degree been undermined by an absence of strategic consistency. An example is the failure to follow through on key recommendations of the Gowers review, initially welcomed by Ministers but then contradicted by U.K. positions in international negotiations.”

Although it is still unclear how committed the government is to implementing the changes advocated in the Review, the government did formally respond to the Review in August 2011 with a broad acceptance of all the recommendations, and by specifically addressing each recommendation.4 The following is a summary of some key responses to each recommendation discussed above:

Evidence Should Drive Policy: The government asserts that it has strengthened the IPO’s economics team and begun a program of economic research with partners. However, it was noted that the fundamental issue is that key data is held by business and other organizations.

Digital Copyright Exchange: The government has asserted that it wants to see a DCE, “or something like it . . .” As such, the government proposes to “ensure that Crown copyright materials are available via the exchange from day one, or as soon as possible thereafter, and will encourage public bodies to do likewise” in order to gain an initial “critical mass” of material. The government further provided the following guidance: prices should be allowed to be set or negotiated by the rights holders; the exchange should serve as a genuine marketplace independent of sellers and purchasers; it should be open to access by individuals and businesses such that firms can use automated systems to access and gather information or purchase licenses rapidly; and it should be run on a self-funding basis. The government will announce at a later date how the project will be implemented and by whom. The government also will draw up proposals for a backstop power that allows a statutory code to be put in place for a collecting society that evidence shows has failed to introduce or adhere to a voluntary code incorporating the minimum standards, which the government also proposes to develop by early 2012.

Copyright Exceptions: By autumn of 2011, the government expects to present a proposal for “a wide non-commercial research exception covering text and data mining, limited private copying exception, parody and library archiving.” The government will further attempt to “secure . . . flexibilities at EU level that enable greater adaptability to new technologies.”

Cross-border Licensing: The government claims to welcome both the Review’s and the European Commission’s initiative “in proposing a cross-border licensing framework, and will work with U.K. interests and the Commission to develop proposals that are compatible with current effective licensing models in the diverse industries affected.”

Orphan Works: The government proposes to bring forward this autumn “proposals for an orphan works scheme that allows for both commercial and cultural uses of orphan works, subject to satisfactory safeguards for the interests of both owners of ‘orphan rights’ and rights holders who could suffer from unfair competition from an orphan works scheme. These would include diligent search for rights owners, licensing at market rates for commercial use and respect for the rights of ‘revenant’ owners that come forward. The government will look to the DCE and other searchable sources of information on copyright works to deal with problems of misattribution or loss of ownership data from works.”

Extended Collective Licensing: The government will propose ECL schemes this autumn to benefit sectors that voluntarily choose to adopt it.

Enforcement: “The Government agrees that Ofcom should begin establishing its benchmarks and data on trends in online infringement of copyright. The Government will work with Ofcom to agree how this might best be achieved. The Government will provide annual progress reports on the cross-government IP Crime Strategy that commits the government to better-coordinated action.”

The government plans to move forward with implementation of the Digital Economy Act following a successful defense of the Act’s provisions in judicial review. Notably, “site blocking will not be brought forward at this time” as an enforcement mechanism under DEA.

“The Government will, subject to establishing the value for money case, introduce a small claims track in the Patents County Court for cases with £5000 or less at issue.”

IPO: “IPO will set out its plans to improve accessibility of the IP system to smaller companies, including access to lower cost providers of integrated IP legal and commercial advice” by late 2011. In addition, the “government will explore options for a future role for IPO that involve a strengthened focus on innovation and growth.” Finally, “IPO will set out plans for a copyright opinions service.”

The government’s response ended with the following “next steps”: The government will consult on the detail of how it will proceed over the next few months and will set out its plans in a white paper in spring of 2012 with a view to legislating in this Parliament where necessary. IPO will use its annual reports to illustrate progress in implementing the Hargreaves Review.

CRITICISM OF THE RECOMMENDATIONS

The group Action on Authors’ Rights notes a critical impact of the ECL proposal, which is that the opt-out requirement would “introduce a de facto system of copyright registration.”5 This is because if a rights holder does not know to opt-out under ECL and his or her work comes within the class that the licensing body is permitted to collectively license, his or her work gets registered with the licensing body without actual permission.

In addition, the same group objects to the classification of orphan works. It asserts that the definition of orphan works will be extended by the fact that a “diligent search” will be narrowed to include only the search of the rights registry, and if the owner has failed to either register or to opt-out, his or her work is free to be licensed.6

The group further notes that the mass-digitization programs would necessarily be operated by for-profit commercial entities.7 Although the Review noted that the fees to license orphan works should be minimal, there seems to be a lot of room for abuse nevertheless. The report also fails to provide, or even consider, safeguards against abuse of the ECL and DCE.

CONCLUSION

Overall, it appears that the government is receptive to the recommendations of the Review. This may be because the recommendations are timely in that they align with the European Commission’s plans for IP reform. For instance, the European Union’s Internal Markets Commissioner Michel Barnier set out plans to reform intellectual property rules across the European Union just days after the Review was published. “Among the proposals [were] plans to introduce common rules for collecting societies, in theory making it easier for organizations that want to license digital rights on a pan-European basis.”8 As such, the Hargreaves Review may have more success than its predecessors.

Francis Torrence is of counsel in Wilson Elser’s San Francisco office, and is a member of the firm’s Intellectual Property practice. He has represented clients in intellectual property disputes, including trade secret, trademark, copyright and patent litigation. Mr. Torrence practices throughout California in both the state and federal courts and is an experienced trial attorney. He has also successfully argued cases before the California Courts of Appeal and the Ninth Circuit Court of Appeals.  

Amanpreet Kaur is an associate in Wilson Elser’s San Francisco office and a member of the firm’s Intellectual Property practice. She graduated from law school in 2010 with a specialization in intellectual property law. Prior to joining the firm, Ms. Kaur spent her final summer of law school at the International Trade Commission, working for an administrative law judge on patent, copyright and trade secret matters. She is also on the board of the South Asian Bar Association of Northern California Foundation, which provides fellowships to law students doing public interest work.  

© Wilson Elser Moskowitz Edelman & Dicker LLP

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