April 27, 2012

 

Professor Hargreaves’ short answer to the question posed is that the UK’s IP framework, especially copyright, is
“falling behind what is needed”. Professor Hargreaves finds that the system is currently built around the needs of
the creator or innovator and is having the effect of preventing further research and development in industrial
processes and in the internet-based service economy.

Professor Hargreaves is however mindful that a balance needs to be struck. He notes that the creative industries
need not be put at risk but rather that change is needed to ensure more “open, contestable and effective global
markets in digital content”, but all within an environment where copyright enforcement is effective.

The Review sets out ten recommendations aimed at promoting greater innovation and economic growth.
Recommendation 1: Evidence must drive policy. The Review contains general criticism of the lack of robust
economic evidence, particularly in relation to copyright (so echoing the 1970’s Banks Review). The essence of its
first recommendation is that Government IP policy should be driven as far as possible by objective evidence.
Hargreaves is, however, mindful that economic evidence should be considered alongside legitimate questions of
culture, fairness and “just reward” and this is to be welcomed. Hargreaves does not prescribe how the balance
should be struck by Government and so, as with all the recommendations, much rests on how Government
ultimately uses the Review. It will be important for Government to ensure that a move towards greater evidential
rigour is applied to all, including those who presently adopt a posture of alarm at any proposal that is directed at
the role that Internet technology might play in enabling protection as well as exploitation.

Recommendation 2: Pursuance of the UK’s international interests in IP. Hargreaves recognises that UK firms
should be able to enforce their IP rights overseas, particularly in emerging economies such as China and India. A
unified EU patent court and EU patent system is identified as the immediate priority.

Recommendation 3: Copyright licensing and the Digital Copyright Exchange. A key element of Hargreaves’ vision
for an improved UK copyright licensing regime is the establishment of a cross-sectoral Digital Copyright Exchange.
This emanates from a desire to establish a simplified mechanism for the clearance and licensing of rights.
Hargreaves considers that the exchange would have the dual benefits of making it easier for rights owners to sell
licences in their works (thereby protecting their rights) and for others to buy them (thereby encouraging
innovation).

Hargreaves correctly recognises that such an exchange (based on “genuinely voluntary” participation and
underpinned by a code of practice) is contingent on rights holder “buy in”. However, potential incentives identified
by Hargreaves appear problematic. These include that remedies (e.g., damages) should be greater where the
infringed work is available through the exchange and that sanctions under the Digital Economy Act 2010 (“DEA”)
(relating to peer-2-peer copyright infringement) should only apply to infringements of works available through the
exchange. The latter proposal, in particular, sits uncomfortably with Article 5(2) of the Berne Convention which
expressly states that copyright “shall not be subject to any formality.”

The timetable is ambitious, with the goal being to establish the exchange by the end of 2012. Whilst simplification
of the current licensing regime would be beneficial, the implementation of a copyright exchange is likely to be extremely difficult in practice. It would also seem that any such exchange would need to be pan-European as a
minimum.

Recommendation 4: Orphan works. The recommendation that Government should legislate to enable the
licensing of orphan works has been broadly welcomed. The purpose of the new licensing regime would be to
establish extended collective licensing for mass licensing and a clearance procedure for use of individual works.
Hargreaves indicates that orphan works are to be identified by reference to the Digital Copyright Exchange (those
not on the exchange potentially being regarded as orphan works). The seeming consequence of this is that rights
holders who might fail (or not wish) to register their work on the exchange may run the risk that such works will be
regarded as orphan works.

Recommendation 5: Extending copyright exceptions. The recommendation to extend copyright exceptions, in
particular to cover format shifting and parody, is founded on exceptions already contained in EU law. Format
shifting is, in large part, a legacy issue and it is difficult to see how this promotes innovation.

There are further recommendations that scientific and other researchers should be allowed to use modern text and
data mining techniques, which the law of copyright currently prohibits, and that the UK Government should lead at
EU level to develop a further copyright exception directed at new technologies. The latter, the Review states,
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. How such an exception would apply in practice, where the
boundaries would be drawn and how it would interrelate with the current safe harbour provisions present difficult
questions which are not fully addressed in the Review.

Whilst the Review examined whether a “fair use” exception to copyright infringement based on the American
system would be beneficial to the UK, it concluded that it was unlikely to be legally feasible. The Review in any case
considers that the UK can achieve many of its benefits through extension of the current copyright exceptions. This
appears to be both a common sense and proportionate response.

Recommendation 6: Patent thickets and other obstructions to innovation. This recommendation is directed at
obtaining efficiencies in the patent system, including by reducing the strain on patent offices, tackling the backlog
of patent applications, restricting the sectors to which patents may extend and addressing patent “thickets” of
overlapping claims, which the Review finds to be an impediment to genuine innovators.

Recommendation 7: Assessment of the design industry. Hargreaves recognises the design industry as an
important, but neglected, branch of the creative economy. The Review recommends that the Intellectual Property
Office (“IPO”) conduct an evidence-based assessment of the relationship between design rights and innovation
with a view to establishing a firmer basis for evaluating policy at UK and European level.

Recommendation 8: Enforcement of IP rights. The Review recognises the problem of online copyright piracy but
levels criticism at the lack of reliable data on scale and trends.

The Review recommends that Government does need to respond by (i) modernising copyright law; (ii) educating
consumers; (iii) enforcement action; and (iv) encouraging open and competitive markets in licensed digital content.
This should result, it concludes, in more legitimate digital content at prices that appeal to consumers. Whilst
emphasis is placed on the provision of compelling business models and the availability of sensibly priced content,
little in the way of evidence is cited in support of the likely effectiveness of these suggestions.

The DEA is referenced, with recommendations that, once operational, its impact should be carefully monitored by
Ofcom as a matter of urgency “to provide the insight needed to adjust enforcement mechanisms as market
conditions evolve”. Recommendation 9: IP Advice for Small Firms. The importance of young and innovative firms to the UK’s economic prospects is recognised, both in terms of innovation and job creation. The Review recommends that small companies should have access to lower cost providers of IP legal and commercial advice.

Recommendation 10: An adaptable IP System. Hargreaves is clearly mindful of the lack of implemented changes
in response to previous reviews of the UK’s IP framework. With this in mind, Hargreaves recommends giving
further powers to the IPO to enable it to ensure that the UK’s IP framework promotes innovation and growth,
including powers to clarify copyright law. Whilst clarification of copyright law is to be welcomed, it should be borne
in mind that the IPO’s ability in this regard can only go so far. Judicial precedent will remain crucial for the many
complex issues governing the application of IP law, and in particular, copyright.

For further information please contact our IP/Rights Protection team.