3 Intellectual property |
Copyright and piracy
19. If creative people and businesses are to profit
from their labour, there must be in place a strong regime for
the protection of intellectual property including copyright.
The copyright system is not only crucial in recognising and rewarding
creative endeavour, but also in supporting the investment necessary
for success. Claire Enders of Enders Analysis and others told
us that the UK's enviable knowledge economy is indeed very
significantly underpinned by copyright protection.
The relationship between the strength of Britain's creative
industries and robust copyright laws is acknowledged by the Open
Rights Group which aims radically to liberalise the use and sharing
of copyrighted content.
While we share the Open Rights Group's attachment to freedom
of expression via the internet, we firmly repudiate their laissez-faire
attitudes towards copyright infringement. Changes to UK copyright
law should not be undertaken lightly: the value to the economy
of copyright and creativity runs to £36 billion a year, a
figure cited by both Viscount Younger of Leckie,
Parliamentary Under-Secretary of State for Intellectual Property
and Richard Mollet, Chair, Alliance for Intellectual Property.
20. Peter Jenner, Visiting Professor, University
of Hertfordshire and Consultant to the World Intellectual Property
Organisation, suggested that there was too much "fussing
around" with the copyright system at the expense of looking
at other ways in which creators can be paid for their work.
We hope his comments will trigger academic debate that, one day,
might lead to practical policy proposals for other ways to foster
and reward creativity in the internet age. In the meantime, we
start with the more practical proposition that we have an established
model based on copyright that has continued to adapt well to changing
technologies. Lavinia Carey, Director General, British Video
Association, pointed to the "proliferation of digital services"
as evidence that "copyright is not broken" in the online
world. This is not
to deny that tensions exist. The internet was described to us
by Jeremy Silver (an industry expert)
as a copying machine
and, by Richard Mollet, as a distribution machine;
necessarily this poses challenges to copyright enforcement
but not, in our view, to the principle of intellectual property
21. We heard, many times, of the tensions between
rights holders who create content and technology companies which
exploit it. Claire Enders referred to her defending "songwriters
and composers against the predations of Google and Apple"
and to Apple's "plan to destroy copyright".
Andy Heath, Chairman, UK Music, said:
The business community and the finance community
always say to me, "Yes, but Government hates copyright. They
are going to bring in all sorts of laws that are going to make
it easier for Google to steal your music that they already steal,
so why should we invest?" and that is a story I get every
month of every year.
22. Sarah Hunter, Head of UK Public Policy, Google,
did not agree that Google is a "bogeyman" for the creative
industries. She told us: "I think Google is the proxy for
everything the internet is bringing, but we are trying hard to
create business models and revenues for those creative industries."
23. The relationships between individual artists
and record companies can also give rise to friction, though much
of this is due to variations in individual contracts. The welcome
decision to extend
from 50 to 70 years the copyright term for sound recordings
will, we hope, ensure artists and performers continue to benefit
from sales of their performances or works; they deserve a fair
reward, not least for digital downloads of their work.
24. The greatest threat to recognition and just reward
for creativity is illegal copying, particularly online piracy.
Industry representatives put a figure of £400 million on
foregone revenue for film and music piracy in one year alone.
These figures take into account the fact that not every illegal
download could necessarily be converted into a legal one; in fact,
one estimate is that there are £1 billion worth of illegal
downloads in music alone.
It is estimated that 35% all films online are consumed illegally.
These industry figures were questioned by the Open Rights Group
and Viscount Younger of Leckie stated they were not based on
exact science. Such
quibbles in our view, however, should not detract from the existential
threat that online piracy clearly poses to the creative economy.
25. Evidently, the relative ease of breaching copyright
online instils a false sense of legitimacy in the eyes of some.
Peter Jenner outlined an illustration of one mindset: "One
of the things that has been clear with the whole issue of piracy
is a feeling that somehow or another it wasn't really quite fair
that if you were providing your own computer and your own broadband
service you should have to pay the same as if you were going to
a shop and buying a physical good."
Jeremy Silver attempted to get into the mind of a teenager downloading
content illegally: "They feel that it is not a property theft
because it does not produce scarcity. They know that if they take
it, it is still there for everybody else to take."
Viscount Younger of Leckie rightly alluded to the need to balance
the interests of consumers and rights holders.
26. There is within the music industry acknowledgment,
if not acceptance, that piracy is a feature of a successful industry.
Individuals who commit copyright infringing acts lay themselves
open to civil action in the courts. In practice, the music industry
now tends to target people who commit criminal offences by making
or dealing with infringing articles on a commercial scale.
Both Viscount Younger of Leckie and the Parliamentary Under-Secretary
of State for Culture, Communications and Creative Industries,
Edward Vaizey, outlined ongoing interventions to support the copyright
system and to enforce it.
Practical measures are being taken such as the involvement of
the City of London Police, including the new IP Crime Unit,
and the planned global enforcement conference.
Viscount Younger of Leckie provided us with more information
on the latter:
...we are planning, from the intellectual property
perspective, an enforcement conference, and we think this will
be a very important thing for the UK. We don't know quite when
it will be, but it is likely to be 2014. It will be a global conference
to bring players from across the world to London, to spend two
days discussing enforcement issues, airing views and a bit of
networking. This has never been done before, and we are taking
27. There are signs that courts are making it easier
to block illegal websites. The Motion Picture Association informed
us: "We also support improvements to the judicial system
to allow site blocking orders to be obtained more efficiently
under section 97A of the Copyright, Designs and Patents Act 1988,
especially taking on board the High Court decision requiring a
number of internet service providers (ISPs) to block access to
the pirate website Newzbin2."
28. We encourage businesses to use the current
law to bring claims wherever it is feasible for them to do so.
There nonetheless remains a systemic failure to enforce the existing
laws effectively against rife online piracy.
29. Sarah Hunter told us how Google responds when
rights-holders identify copyright infringing material online:
"When they do tell us about finding illegal content we remove
it straightaway. I think last month we removed 9 million URLs
from our web index."
When asked whether Google could block the worst offending domains
she pointed out that a lot of pages within such domains were hosting
30. We were told that changes to Google's search
algorithm have been made.
These aim to demote illegal sites in search results. However,
recent BPI work,
based on a cross-section of searches of the type [Artist] + [Title]
+ "mp3", has shown that 61% of the top 10 sites in the
Google rankings are infringing sites, compared to 63% in August
2012. This headline figure sums up the inadequacy of Google's
response in the context of illegal downloading, though we acknowledge
that is just one way in which music is now consumed online.
Google cannot claim ignorance over the scale of illegal activity
on the internet. At present, the BPI alone sends Google well
in excess of 2 million notices per month relating to individual
pages on sites which encourage and promote large scale copyright
infringement. One domain, filestube.com, has been the subject
of notices identifying 5,096,282 URLs
in the past year.
31. We strongly condemn the failure of Google,
notable among technology companies, to provide an adequate response
to creative industry requests to prevent its search engine directing
consumers to copyright-infringing websites. We are unimpressed
by their evident reluctance to block infringing websites on the
flimsy grounds that some operate under the cover of hosting some
legal content. The continuing promotion by search engines of
illegal content on the internet is unacceptable. So far, their
attempts to remedy this have been derisorily ineffective.
32. We do not believe it to be beyond the wit
of the engineers employed by Google and others to demote and,
ideally, remove copyright infringing material from search engine
results. Google co-operates with law enforcement agencies to
block child pornographic content from search results and it has
provided no coherent, responsible answer as to why it cannot do
the same for sites which blatantly, and illegally, offer pirated
33. The Intellectual Property Officewhich
currently resides in the Department for Business, Innovation and
Skillscan also certainly do more than it appears to have
done of late. The BPI told us:
The measures on enforcement of copyright need
to be backed up by an Intellectual Property Office that is properly
resourced and focused on defending the rights of UK creators.
The IPO has spent a lot of energy looking at how the rights of
UK companies can be reduced, the BPI would also ask the committee
to look at the energy the IPO puts into its role in enforcing
34. The IPO must champion the creative sector
which gives rise to intellectual property in the first place.
Given the importance of the creative sector to the UK economy
and the relative importance to that sector of strong IP protection,
strongly enforced, the Government must do more to protect and
promote UK IP as a system for growth. The Digital Economy Act
2010, legislation designed to support new legitimate online business
models, has still not been fully implemented, and much more needs
to be done to encourage copyright compliance and to discourage
infringement. There should be within Government a powerful
champion of IP with a duty to protect and promote the interests
of UK IP, to co-ordinate enforcement of IP rights in the UK and
overseas and to educate consumers on the value of IP and the importance
of respecting IP rights. Logically the IPO should take on this
role. Yet too often it is seen as wishing to dilute copyright
rather than defend and enforce it. It cannot have helped
that, since the 2010 General Election, three individuals have
held the post of Parliamentary Under Secretary of State for Intellectual
Property. Nor can
it be helpful that the copyright responsibilities of the IPO remain
under the aegis of the Department for Business, Innovation and
Skills when responsibility for the creative industries naturally
rests with the DCMS.
35. We recommend that the Intellectual Property
Office's annual reports include an assessment of the degree of
online copyright infringement and the extent to which identified
search engines and other internet services facilitate this. We
further recommend that the Government consider how it might incentivise
technology companies to hinder access via the internet to copyright
36. One particular anomaly in existing legislation
has been persuasively drawn to our attention.
Copyright theft in the offline world can attract penalties
of up to ten years' imprisonmentunder the Copyright,
etc. and Trade Marks (Offences and Enforcement) Act 2002. However,
the maximum penalty for digital copyright theft is two years'
imprisonment. This is because the relevant legislation is in
the form of regulations brought in under section 2(2) of the
European Communities Act 1972: Parliament limited the criminal
penalties that might be applied in implementing European Union
legislation in this way.
The relevant 2003 regulations make direct reference to the internet
and illustrate one way in which copyright law has shown itself
adaptable to the online world. However, if organised crime
involving online piracy on a commercial scale is to be tackled
and deterred, it is essential that this discrepancy between the
online and offline worlds be rectified. In the context of current
proposals to introduce copyright exceptions, the Government has
already shown signs that it accepts this point.
The Alliance for Intellectual Property gave us an example of how
the Federation Against Copyright Theft has responded to this anomaly:
The problem this has created for law enforcement
was seen recently in FACT's significant, landmark, private prosecution
of Anton Vickerman. Vickerman was making £50,000 each month
running a website which facilitated mass scale copyright infringement.
He was prosecuted and subsequently convicted on two counts of
Conspiracy to Defraud and sentenced to four years imprisonmenta
sentence that would not have been possible if prosecuted under
37. We recommend that the maximum penalty for
serious online copyright theft be extended to ten years' imprisonment.
Criminal offences in the online world should attract the same
penalties as those provided for the physical world by the Copyright,
etc. and Trade Marks (Offences and Enforcement) Act 2002.
Digital Economy Act
38. Although it contains a raft of measures across
media, communications and spectrum, the Digital Economy Act 2010
('DEA') is largely associated, in the public eye at least, with
copyright. Measures to tackle internet piracy survived the 'wash-up'
process at the end of the last Parliament: sections 3-18 of the
Act cover online infringement of copyright. However, almost none
of these provisions have yet been implemented in practice, including
those imposing penalties on people who persistently infringe copyright.
39. Following amendments made during the House of
Commons committee stage, any secondary legislation under section
10 (Obligations to limit internet access), would be subject to
a super-affirmative procedure: the relevant statutory instrument
would be available for consideration in draft by a Committee of
either House and a final draft (with or without modifications)
would then require approval by both Houses of Parliament.
Furthermore, no order may be made under this section for at least
a yearthis being the period during which "initial
obligations" (a warning system backed up with the potential
for court action) would first be given a chance to work.
40. On 28 May 2010, Ofcom launched a consultation
on how to give effect to measures introduced in the DEA that are
aimed at reducing online copyright infringement. Specifically,
views were sought on a code of practice called "the Online
Copyright Infringement Initial Obligations Code". This consultation
ended on 30 July 2010.
41. The draft code would require large internet service
providers to inform customers of allegations that their internet
connection had been used to infringe copyright. Persistent infringement
could lead to legal action initiated by the copyright owner. A
draft statutory instrumentthe "Costs Order"on
the costs of administering the scheme was laid in June 2012.
This was subsequently withdrawn following scrutiny by the House
of Lords Secondary Legislation Scrutiny Committee.
The Minister, Edward Vaizey, told us: "we now have a classic
Whitehall discussion about whether the statutory instrument is
appropriate; whether the Ofcom costs are regarded as a tax or
a fee. We are in discussions with the Treasury to ensure that
we get it absolutely right, but we intend to proceed as soon as
we can come to an agreement with the Treasury about the proper
way forward. I would reject any notion that we have delayed on
the Digital Economy Act."
While the practical implementation of the Digital Economy
Act continues to be delayed, millions of pounds are being lost
by the creative industries with serious consequences for the wider
economy. We urge the Government to resolve the current impasse
on implementing the Online Copyright Infringement Code without
further delay, and in response to this Report to set out a clear
timetable for doing so.
42. The copyright infringement notification system,
embodied by the above code, has already survived the challenge
of a Judicial Review instigated by BT and TalkTalk.
These two internet service providers had claimed that the measures
in the Act were not compliant with EU law and were not proportionate.
On 20 April 2011, the High Court rejected this challenge, though
it provided the ISPs with limited succour in releasing them from
paying Ofcom's costs in setting up, monitoring and enforcing the
system. As a result
of the judgment, ISPs would still have to share the cost of operating
the system and its associated appeals process.
43. The delays in implementing the DEA are thus by
no means all attributable to the Government: the legal action
by BT and TalkTalk certainly contributed. As, perhaps, did the
haste with which the presaging Bill was originally rushed through
Parliament with relatively little debate in the House of Commons.
We acknowledge that the DEA has its limitations; for example
it is not applicable to mobile devices
and there needs to be greater clarity over the situation of public
Wi-Fi. We recognise,
too, that effective enforcement of copyright is likely to focus
more on targeting illegal activities on a commercial scaleon
"following the money"than,
to quote Ian Hargreaves, Professor of Digital Economy, Cardiff
University, "writing letters to teenagers".
This is to miss the point that the DEA is primarily about education.
In America, there are signs that ISPs as well as rights-holders
are beginning to acknowledge the role of a graduated approach
as envisaged by the DEA. The Minister, Edward Vaizey, told us:
I also think it is very important that the industry
itself continues to work together. One of the things that I hope
will change and has changed is that you have ISPs like BTand
remember BT did not want this Act and tried to undermine it in
the courts or, to put it more objectively, sought a judicial review
of its implicationsthat have now made a massive investment
in content by buying Premier League rights. Now, I cannot believe
anyone in BT is going to sit idly by while pirate sites put up
live-streaming of a Premier League match that they are providing
for their customers. The Americans are pressing ahead with a voluntary
three-strikes process with the main cable companies and rights
holders, and they are certainly looking to implement something
like that in the UK.
I think that industry itself has to work together,
and one of the reasons I have brought both sides together is to
illustrate the point that ISPs have as much interest in protecting
IP as rights holders do.
44. The Minister stated that the first letters to
suspected copyright infringers were not expected until 2015, some
five years after the Digital Economy Act came into force.
Even this strikes us as being optimistic given that, when the
Government lays the revised "Costs Order" before Parliament,
Ofcom will need to consult on a revised draft initial obligations
code which will also need approval by the European Commission
under the Technical Standards Directive. An independent body
to hear subscriber appeals will have to be appointed and ISPs
will have to put in place systems for processing copyright infringement
45. In our
view, there has been an unjustified delay in the issuing of the
first warning letters resulting from Ofcom's Online Copyright
Infringement Code. The costs, and their attribution,
of issuing warning letters under the Digital Economy Act should
be seen less as a justification for ongoing delays than as an
incentive for better targeting the worst examples of copyright
46. We recommend that a copyright infringement
notification system envisaged by the Digital Economy Act be implemented
with far greater speed than the Government currently plans. By
targeting information letters to the worst infringers, early implementation
will, we believe, serve an important educative purpose which could
percolate more widely.
47. We are encouraged by the progress that has
been made towards instituting a voluntary system of warning letters
following discussions involving internet service providers and
If this can be achieved by mutual cooperation rather than legislation,
it will be a major step forward. However, should voluntary initiatives
such as this prove unsuccessful then the Government should ensure
that the equivalent measures in the Digital Economy Act are promptly
put into effect.
Proposals for change
48. In November 2010 the Prime Minister announced
an independent review of how the intellectual property framework
supports growth and innovation. The Review was chaired by Ian
Hargreaves and culminated with the publication in May 2011 of
Digital Opportunity. It made wide-ranging recommendations,
which the Government broadly accepted. The most contentious recommendations
relate to copyright exceptions, which we discuss further below.
A requirement that copyright collecting societies should be required
by law to adopt codes of practice has been met with some scepticism
by PPL though we
also heard criticism on behalf of individual artists it represents.
 There was
a subsequent public consultation on implementing the Hargreaves
proposals, to which the Government published a response in July
49. The first recommendation of the Hargreaves report
Government should ensure that development of
the IP System is driven as far as possible by objective evidence.
Policy should balance measurable economic objectives against social
goals and potential benefits for rights holders against impacts
on consumers and other interests. These concerns will be of particular
importance in assessing future claims to extend rights or in determining
desirable limits to rights.
50. A supporting document on the benefits of the
Hargreaves recommendations puts a total figure of between £5.5
billion and £7.9 billion for the economic growth impact per
annum. A private copying exceptionformat shifting for
said to contribute between £0.3 billion and £2 billion
towards this. Viscount Younger of Leckie did not instil great
confidence in the underlying calculations when he told us: "When
it comes to private copying, that figure of £2 billion, which
I think has been cited before, is meant at the upper end of the
spectrum. I don't particularly recognise that figure, by the way."
In evidence, indeed, the Minister pointed to the Government's
assessment being towards the bottom end of the cited range: "The
figure that we have is nearer £300 million, and that is the
impact assessment that we have produced, if that is a help."
51. Professor Hargreaves himself was unconvincing
when defending these calculations, and appeared unable to justify
them beyond a vague assertion that, for example, the £2 billion
benefit from a private copying exception might be generated by
ending "uncertainty" and consumer confusion. His evidence
suggested that in any event there could be no negative result
from introducing a series of measures designed to limit the application
of copyright law. "Would you seriously wish to counter-argue
that the number here would be a negative rather than a positive?
... I do not think it is possible to argue convincingly that you
would substitute a negative," he told us.
52. During this inquiry, however, we have received
plenty of views which do, indeed, challenge not only the figures
used by Hargreaves, but also the likely direction of travel. We
have also heard numerous complaints from across the creative spectrum
about the perceived power and influence of Google in the Government's
inner, policy-making sanctum. The minister Viscount Younger of
Leckie hardly dispelled this impression: "Google is one of
several search engines," he told us, "and I am very
aware of their power, put it that way. I am also very aware, I
think, that they have access, for whatever reason, to higher levels
than me in No. 10, I understand."
53. Antipathy towards Googleand other large
US exploiters of content, Apple and Amazonis undoubtedly
reinforced by their well-publicised corporate tax avoidance structures.
This not only means that they pay little or no corporation tax
on their sizeable activities here and major European markets,
but that those companies which do are not operating on a level,
competitive playing field.
54. Andy Heath, a director of independent music producer
Beggars Group, was reflective of those views: in corporation tax
last year, he said, his label paid "double what the tech
companies paid between them".
Google, pointed out John McVay of PACT, competes to take advertising
from ITV, Channel 4 and other commercial broadcasters, who invest
in British content while paying their tax dues as well.
As a result, Claire Enders, too, was sceptical about the wider
social benefit of UK copyright changes: "unless this organisation
... is prepared to contribute to the skills base, to the education
base, to the fabric of our society from which these creative works
are developed, then I just don't buy their argument at all because
they are the prime beneficiaries of America fair use provisions.
Therefore I mistrust their motives,' she said.
55. Following all the evidence we have received,
we think Hargreaves is wrong in the benefits his report claims
for his recommended changes to UK copyright law. We regret that
the Hargreaves report adopts a significantly low standard in relation
to the need for objective evidence in determining copyright policy.
We do not consider Professor Hargreaves has adequately assessed
the dangers of putting the established system of copyright at
risk for no obvious benefit. We are deeply concerned that
there is an underlying agenda driven at least partly by technology
companies (Google foremost among them) which, if pursued uncritically,
could cause irreversible damage to the creative sector on which
the United Kingdom's future prosperity will significantly depend.
56. We heard evidence which conflicts with Professor
Hargreaves' points, notably from representatives of the music
business such as Andy Heath and Martin Mills, Chairman, Beggars
Group, who spoke about the problems caused to their business not
only by high rates of piracy but also from the perception among
manyfrom pirates to providers of financethat the
Government is more interested in weakening copyright law than
enforcing it. Andy Heath said:
I think one of the biggest problems for the music
industry and the cultural industries generally is the bewildering
attitude that we seem to be getting from the Government about
its ambivalence towards the benefit of copyright. It seems to
me that Governments for some time, but especially this Government,
have bought the line that intellectual property is a barrier to
growth, and that simply is a lie. It is not true.
57. Martin Mills referred to delays in the DEA, proposed
copyright exceptions and the influence of technology companies:
When you look at how long it has taken to implement
the Digital Economy Act, when you look at what has been proposed
with the copyright exceptions at the moment, when you look at
the influence that technology companies have with Government against
the creative industries, you have to think that Government is
more swayed towards those industries than towards ours, and that
militates against investment, which I think is a real problem.
58. The Hargreaves report included a recommendation
that the UK should have a Digital Copyright Exchange (DCE): a
digital market place where licences in copyright content could
be readily bought and sold, a sort of online copyright shop.
Richard Hooper, Managing Partner, Hooper Communications, was subsequently
appointed by the Secretary of State for Business, Innovation and
Skills, Vince Cable, to lead an independent feasibility study
on creating the DCE, and his final report, entitled 'Copyright
Works' was published in July 2012. Hooper expanded the idea of
a digital copyright exchange to propose a copyright hub, an online
portal to which people would turn for three things: finding their
ways through the complexities of copyright, finding out who owns
what rights and, most importantly, making easier licensing arrangements.
The Copyright Hub was subsequently launched on 8 July 2013. It
is described in the following terms: "The Copyright Hub is
your gateway to information about copyright in the UK. It points
you in the right direction whether you want to learn about copyright,
get permission to use somebody else's work or find out about protecting
your work." 
The Copyright Hub is a welcome development which should prompt
the Government to redouble its efforts at working with industry
to develop overseas markets for British IP content.
59. During the course of our inquiry we made plain
to the Government our firmest support for the establishment of
a Global Repertoire Database (GRD) in London.
The GRD will serve as a centralised, authoritative source of
the metadata used to describe musical works. It is an industry-led
initiative on behalf of songwriters, composers and publishers.
The idea behind it is to provide a single authoritative database
of the owners of copyrighted musical works. Locating it in London
would be entirely consistent with making the UK a global centre
for copyright exchanges. We were delighted with the announcement,
on 13 May 2013, that the Global Repertoire Database would be setting
up its global headquarters in London. An operations centre will
be based in Berlin.
60. While we are persuaded of the merits of copyright
exchanges, we note the resistance of Pact, representing independent
audiovisual producers. Pact's chief executive, John McVay, told
us of his concerns that a digital copyright exchange could become
the "thin edge of a wedge to collective licensing"
which in turn might end up forcing producers to sell their intellectual
property rights on a non-commercial basis.
We believe participation in a copyright exchange or membership
of a collecting society should both be voluntary, though the former
will offer rights holders the advantage of visibility and the
latter can provide an administratively convenient way of obtaining
61. Much of the work of independent producers is
commissioned by the public service broadcasters: the BBC, ITV,
Channel 4 and Five. Public service broadcasters have long set
a bar to which others can aspire and it is refreshing to see that,
in terms of commissioning UK content, commercial broadcasters
are now capable of more than matching this.
We explored whether any further changes were necessary to support
this development. Adam Minns of the Commercial Broadcasters Association
emphasised to us the need for regulatory certaintya plea
for no changeand Adam Kinsley, Director of Policy, BSkyB,
added that he came with no 'wish list' for further policy interventions.
We remain alert to the need to protect and promote the ongoing
health of the mixed economy in broadcasting, recognising the competition
it faces from overseas producers, particularly in the USA.
62. For the public service broadcasters, Dan Brooke
of Channel 4 emphasised the need for a strong IP regime, and told
us he believed the current system "is strong and works well".
Magnus Brooke of ITV expressed strong support for the Digital
Both, together with John Tate of the BBC, expressed broad support
for the Hargreaves reformswith some reservations. The
most significant of these related to copyright exceptions and
the need to have any drawn sufficiently narrowly to prevent them
being commercially exploited at the expense of the originators
of content. This was particularly the case in the context of
any extension of a private copying exception to internet cloud
63. In December 2012, the Government published the
final part of its response to its copyright consultation, launched
a year earlier in the wake of the Hargreaves report, Digital
Opportunity. Hargreaves proposed the introduction of exceptions
in copyright "to realise all the opportunities within the
These exceptions would allow for what would otherwise be restricted
acts under copyright law in a variety of contexts including format
shifting, parody, non-commercial research, and library archiving.
Of these, the format shifting, or private copying, exception
has proved one of the most controversial.
64. The Government's response,
published on 20 December 2012, set out changes to the framework
for copyright exceptions to be brought in by secondary legislation.
The proposed changes are intended to "introduce greater
freedoms in copyright law to allow third parties to use copyright
works for a variety of economically and/or socially valuable purposes
without the need to seek permission from copyright owners."
Protections for the interests of copyright owners and creators
arethe Government claimsbuilt in to the revised
65. The Enterprise and Regulatory Reform Bill 2012-13
originally included clauses that provided for secondary legislation
(by the affirmative procedure) to add or remove copyright exceptions.
This was changed by amending what had by then become clause 67
(previously clause 66 and, before that, clause 57) of the Bill
during the Lords report stage. Lord Younger explained the amendment
in the context of pre-existing powers under section 2(2) of the
European Communities Act 1972:
The purpose of the government amendment is to
limit the clause so that when the Section 2(2) power is used to
amend copyright exceptions, the limitation on criminal penalties
does not apply. The new clause no longer operates a separate power.
It is now a way of removing the undesirable consequences which
flow when Section 2(2) is used.
66. The Enterprise and Regulatory Reform Act 2013
accordingly ensures limits on penalties will not apply when future
exceptions are brought in using the European Communities Act 1972.
What little remains of the explicit copyright exceptions provisions
is now section 75 of the 2013 Act.
67. In oral evidence to us, Adam Minns, executive
director of COBA
said: "What I would say on the exceptions is that, in principle,
we would prefer them to be unbundled so that we can look at them
individually and have individual impact assessments wherever possible."
On 7 June 2013, the Intellectual Property Office published, as
separate documents for technical review, draft legislation on
copyright exceptions for private copying, parody, quotation and
public administration. More have since followed, including amendments
to exceptions for education.
We note that rights holders are already expressing concerns about
the lack of clear definitions and the dangers that these may create
loopholes which will be exploited by the unscrupulous. Rights
holders will doubtless have more to say on these detailed proposals.
So should Parliament.
68. We are not persuaded that the introduction
of new copyright exceptions will bring the benefits claimed and
believe that generally the existing law works well. We recommend
that the introduction or amendment of copyright exceptions should
be contemplated only following detailed impact assessments and
after proper parliamentary scrutiny on an individual basis.
69. Throughout the course of our inquiry we heard
a wide variety of views concerning the Government's proposals
for new copyright exceptions in the wake of the Hargreaves review.
The Open Rights Group stated that "people will only reap
the benefits of the Internet as a tool that promotes freedom of
expression if there are sufficient exceptions that permit legitimate
engagement with cultural works. Such exceptions do not necessarily
undermine creators' rights, or unduly take away earning power
from them, but they do encourage people to reuse those works in
new and useful ways."
Without the Hargreaves reforms, the Open Rights Group believes
that "copyright will lose credibility by continuing to inhibit
society" and preventing "legitimate transformative reuses"
of copyright works.
"Legitimate transformative reuse" appears to mean parody.
70. A copyright exception for parody was supported
in oral evidence from Dan Brooke
of Channel 4 and in written evidence from UKTV.
Written evidence from Equity noted that parody is already widespread
"and part of the existing tradition of free speech in the
went on to suggest that the introduction of a parody exception
could have "unintended negative consequences for performers".
Richard Mollett, chair of the Alliance for Intellectual Property
said there was a lack of evidential backing for a parody exception.
71. The Design and Artists Copyright Society lamented
the sweeping nature of the proposed exceptions, including parody:
DACS also feels that in focussing on the larger
sectors of the industry, the Hargreaves team over-looked issues
specific the visual arts sector. This is reflected in the "one
size fits all approach" taken in the Review's recommendations
to extend copyright exceptions, without due consideration of how
the impact of widening such exceptions differs between sectors.
For example, exceptions for private copying and parody will impact
visual art in a very different way to music and films.
72. The proposed private copying exception attracted
the most persistent comment and, in many cases, hostility during
our inquiry. The precise wording of the Hargreaves report on format
shifting does bear closer examination:
The Review favours a limited private copying
exception which corresponds to what consumers are already doing.
As rights holders are well aware of consumers' behaviour in this
respect, our view is that the benefit of being able to do this
is already factored into the price that rights holders are charging.
A limited private copying exception which corresponds to the expectations
of buyers and sellers of copyright content, and is therefore already
priced into the purchase, will by definition not entail a loss
for right holders.
The Government should introduce an exception
to allow individuals to make copies for their own and immediate
family's use on different media. Rights holders will be free to
pursue whatever compensation the market will provide by taking
account of consumers' freedom to act in this way and by setting
73. We are not convinced by Hargreaves' implication
that a facility for private copying is factored into the purchase
either of music or devices that store, play or copy it. Andy
Heath saw no benefit to rights holders from private copying:
If you check the research and you go through
the consumer's value of their digital toolstheir phones,
their computersthe extent to which they attribute the value
of that product, sometimes a £400 or £500 product, is
30% or 40% of that value is so that they can have music. At this
moment in time, we have no benefit at allzerofor
the transfer of that value. All of that value goes to the manufacturer
of the device.
74. We think Hargreaves' 'one size fits all' arguments
will hold even less sway among film makers. The Government, in
its response, appears to have ruled out private copying for the
benefit of an individual's immediate family: Modernising Copyright
states the Government will "introduce a narrow private
copying exception, allowing copying of content lawfully owned
by an individual (such as a CD) to another medium or device owned
by that individual such as a mobile phone, MP3 player or private
online storage, strictly for their own personal use." This
left Professor Hargreaves wondering if he might play music to
his wife and the
rest of us wondering if the Government's proposals will simply
add regulatory confusionto the cost of the creative industries.
75. Alison Wenham, Chief Executive Officer, The Association
of Independent Music, told us that she did not mind about, or
at least had learned to live with, "copy and share"
and acknowledged that piracy is a feature of a successful industry.
Like other witnesses from the music industry she did, however,
have concerns over cloud storage.
Andy Heath provided the following elaboration:
What Alison is saying is that Apple and Google
are not creating Cloud storage lockers for fun. They are doing
it for immense profit. It is another brick in their moneymaking
machine, and it is completely immoral for the transfer of the
value to occur without any level of compensation.
76. A genuinely private cloud
might be acceptable (if such a thing were in practice possible)
but there is a danger this could mutate into a new mechanism for
illegal file-sharing, such as a cyber locker.
The Government's draft private copying exception would allow
an individual to copy a copyright work to a private cloud - "an
electronic storage facility accessed by means of the internet
or similar means, where that facility is provided for his sole
Legal subscription-based cloud services are already emerging
from business-to-business deals in which rights holders are properly
rewarded. We consider this to be a welcome development that should
be encouraged and we would not want it compromised by a hastily
drawn private copying exception that the Government might subsequently
77. There is naturally recognition within the film
industry that the introduction of a formal private copying exception
would be attractive to consumers. The industry is responding
to these interests by introducing a range of digital products.
One such product is UltraViolet, already in half a million UK
households; this stimulates digital purchase by allowing consumers
to stream content they own to any device as well as to make copies
on up to 12 owned devices and to share this with up to five family
members. A private
copying exception would clearly undermine new technologies and
business models being introduced, particularly by the audiovisual
sector. This point was put to us, forcefully and convincingly,
by Twentieth Century Fox.
78. During our visit to California, Fox argued persuasively,
on behalf of the industry, that the proposed exception would
be highly damaging for new services and business models. Hargreaves
had, indeed, been effectively overtaken by technology with the
development of cloud services and cyber lockers. The latter are
becoming "notorious hotbeds for pirated content", Fox
and "allowing the possibility of storage of 'private' copies
in the cloud gives pirate sites a ready-made defense against anti-piracy
We have great sympathy with this reasoning; it is a line of argument,
for example, already used by Google to defend against blocking
pirate websites. The USwith its strong content industrydoes
not, we note, have a private copy exception for audio-visual works.
79. Audiovisual content and its consumption are qualitatively
different compared to music. The file sizes are substantially
bigger for a start; this fact alone has given the audiovisual
world a little more breathing space to prepare for the challenges
that have beset music businesses. The British Video Association
also noted the audiovisual sector's greater tradition of in-built
copyright protection and once only viewing. We should not lightly
change the law to make it easier for pirates to assault the audio-visual
sector, as they have done with music. The Government's draft private
copying exception makes a cursory nod to the former by proscribing
the circumvention of effective technological measures.
80. Regarding the computer games industry, Dr Jo
Twist, chief executive officer of the Association for Interactive
Entertainment told us: "We are very supportive of the copyright
regime as it is. It supports our industry very well. We are classified
as software, and we welcome that, so any exceptions do not apply
to us as an industry, which we are keen to maintain under the
European copyright directive."
In evidence from Ian Livingstone, Life President, Eidos, we also
learned of ways in which video games can exploit technology to
combat piracy, for example by embedding advertising and apps in
the games themselves.
For these reasons, the computer games industry might be immune
to some of the worst consequences emerging from the currently
fluid copyright landscape.
81. Any introduction of a private copying exception
should be tightly constrained, and subjected to careful scrutiny,
and balanced by the putting in place of a robust copyright protection
regime designed to tackle abuses. We agree with Amanda Nevill,
Chief Executive of the British Film Institute, that any copyright
exceptions should move in parallel with implementation of the
Digital Economy Act.
82. We believe that there needs to be far more
detailed consideration before any private copying exception is
introduced. In particular, we recommend that any changes to copyright
law should take full account of the material differences between
the audiovisual and music sectors and indeed current and likely
future technological changes. We do not believe a case has been
made for applying a private copying exception to audiovisual content
and it should therefore be excluded.
38 Q 153 Back
Q 485 Back
Q 829 Back
Q 505 Back
Q 410 Back
Q 495 Back
Chairman of Semetric Limited and Lead Specialist on Creative Industries,
Technology Strategy Board Back
Q 454 Back
Q 503 Back
Q 393 Back
Q 153 Back
Q 158 Back
Q 219 Back
Q 363 Back
Directive 2011/77/EU; The Copyright and Duration of Rights
in Performances Regulations SI 2013/1782 (in force 1 November
Q 798; Ev w8 (Musicians' Union) Back
Qq 795-796 Back
Qq 501-502, Ev 297 Back
Qq 775, 832-833 Back
Q 327 Back
Q 453 Back
Q 832 Back
Q 420 Back
Q 464 Back
Q 852 Back
Q 222 Back
Section 107, Copyright, Designs and Patents Act 1988 Back
Qq 822, 865 Back
Q 864 Back
Q 864 Back
Ev w89 Back
Q 350 Back
Q 356 Back
Q 352 Back
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Qq 353-354 Back
A uniform resource locator is a specific web address Back
19 July 2013] Back
Ev 235-236 Back
Q 515 Back
Viscount Younger of Leckie (2013), The Rt Hon Lord Marland (2012
to 2013) and Baroness Wilcox (2010 to 2012) Back
Qq 892-893 Back
Copyright and Related Rights Regulations SI 2003/2498, which implement
Directive 2001/29/EC of the European Parliament and of the Council
on the harmonisation of certain aspects of copyright and related
rights in the information society. Back
HL Deb 11 March 2013 c18 Back
Ev 294 (Alliance for Intellectual Property) Back
Section 10, Digital Economy Act 2010 Back
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of Costs) Order 2012 (laid 26 June 2012). Back
Secondary Legislation Scrutiny Committee (HL Paper 32), Seventh
Report of Session 2012-13,12 July 2012 Back
Q 865 Back
Ev w154-157 (BT) Back
Q 801 Back
Q 488 Back
Qq 466, 508-509 Back
Qq 430-431 Back
Q 499 Back
Q 867 Back
Q 868 Back
'Families who pirate films or music face warning letters', Sunday
Times, 1 September 2013 Back
formerly known as Phonographic Performance Limited Back
Qq 767, 780 Back
HM Government, Government Policy Statement: Consultation on
Modernising Copyright, 2 July 2012 Back
An example of format shifting would be copying music from a CD
to an iPod Back
Q 871 Back
Q 874 Back
Q 395 Back
Q 848 Back
Q 247 Back
Q 211 Back
Q 153 Back
Q 219 Back
Q 317 Back
Q 414 Back
Ev w197-198 Back
Q 192 Back
Qq 186-187, 192, 194 Back
Ev 328, 335, 347, 349, 352 Back
Qq 677-678 Back
Q 643 Back
Q 643 Back
Qq 643-646 Back
Digital Opportunity, May 2011 Back
Modernising Copyright: a modern, robust and flexible framework,
HM Government, December 2012 Back
HL Deb 11 March 2013 c18 Back
Commercial Broadcasters Association Back
Q 715 Back
Ev 277 Back
Ev 276 Back
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Q 644 Back
Ev w67 Back
Ev w6 (Equity) Back
Q 516 Back
Ev w32 Back
Digital Opportunity, May 2011 Back
Q 233 Back
Q 407 Back
Q 222 Back
Qq 222, 225, 816 Back
Q 233 Back
i.e. a data storage facility on the internet accessible only by
an individual. Back
Q 236 Back
Ev w188 Back
Ev w186-197 Back
Ev w195 Back
Ev w195 Back
Q 590 Back
Q 592 Back
Q 538 Back