10.1 In the course of this review we have repeatedly noted how important it is for the IP framework to adapt to change, and the dif culty the UK framework has experienced in doing so. Here we explore the causes of this problem and set out some thoughts about how the system’s design can be changed. The aim is to improve the IP framework’s ability to focus on strategic priorities and respond to changes in technology and markets.
10.2 Copyright illustrates this inability to adapt at its most serious. Licensing markets are congested and opaque. Millions of orphan works cannot be licensed at all. There is widespread unauthorised consumption of content. Countless people are in breach of copyright in performing every day acts such as transferring music from computer to MP3 player. From undergraduate music fans and their vice chancellors to schoolteachers we have encountered perplexity about the legal status of day to day activities in education. New technologies such as text mining are regulated in unforeseen ways by copyright.
10.3 Even where IP law is clear it is too infrequently grounded in evidence or directed to take account of economic priorities. This represents a failure of public policy. We cannot say that we have an IP framework optimised for growth when investors must factor expectations of protracted copyright clearance or large scale piracy into their risk evaluations, or when the framework de es understanding. We are in danger of trying to run a modern highways system with a Highway Code last revised in Edwardian England.
10.4 Digital technology has not affected patents, or other forms of IP, to the same extent as copyright. We have noted the strain which the patents system is experiencing as numbers of patents increase, especially with regard to computer programs. Our recommendation embodies a broader recognition that a growth centred perspective requires greater weight to be given to the interests
of innovators wishing to enter patent intensive elds than has been usual in a system built around the needs of established patentees. This is consistent with the direction of change we advocate on copyright. In Chapter 7, we explore brie y the unconsidered nature of the rights protection regime as it applies to design.
10.3 Even where IP law is clear it is too infrequently grounded in evidence or directed to take account of economic priorities. This represents a failure of public policy. We cannot say that we have an IP framework optimised for growth when investors must factor expectations of protracted copyright clearance or large scale piracy into their risk evaluations, or when the framework de es understanding. We are in danger of trying to run a modern highways system with a Highway Code last revised in Edwardian England.
10.4 Digital technology has not affected patents, or other forms of IP, to the same extent as copyright. We have noted the strain which the patents system is experiencing as numbers of patents increase, especially with regard to computer programs. Our recommendation embodies a broader recognition that a growth centred perspective requires greater weight to be given to the interestsof innovators wishing to enter patent intensive elds than has been usual in a system built around the needs of established patentees. This is consistent with the direction of change we advocate on copyright. In Chapter 7, we explore brie y the unconsidered nature of the rights protection regime as it applies to design.
10.4 Digital technology has not affected patents, or other forms of IP, to the same extent as copyright. We have noted the strain which the patents system is experiencing as numbers of patents increase, especially with regard to computer programs. Our recommendation embodies a broader recognition that a growth centred perspective requires greater weight to be given to the interestsof innovators wishing to enter patent intensive elds than has been usual in a system built around the needs of established patentees. This is consistent with the direction of change we advocate on copyright. In Chapter 7, we explore brie y the unconsidered nature of the rights protection regime as it applies to design.
Review of Intellectual Property and Growth 91
Adapting the IP Framework
10.5 History shows that our track record of implementing change in the UK IP framework is patchy at best. The Banks Review in the 1970s deplored the lack of evidence to support policy judgments. Thirty years later, the Gowers Review in 2006 made the same point. Our institutional framework appears to have failed to equip itself to conduct evidence-based policy effectively. As technological pressures on the copyright framework have intensi ed, this incapacity for organic adaptation expressed itself in a frenetic frequency of reviews: the Creative Economy Programme in 2007, the Digital Britain Review in 2008-09, and the Government’s Copyright Strategy in 2009. Now this review. In spite of all this activity, many if not most of the recommendations for change remain locked in the “too dif cult” le.
10.5 History shows that our track record of implementing change in the UK IP framework is patchy at best. The Banks Review in the 1970s deplored the lack of evidence to support policy judgments. Thirty years later, the Gowers Review in 2006 made the same point. Our institutional framework appears to have failed to equip itself to conduct evidence-based policy effectively. As technological pressures on the copyright framework have intensi ed, this incapacity for organic adaptation expressed itself in a frenetic frequency of reviews: the Creative Economy Programme in 2007, the Digital Britain Review in 2008-09, and the Government’s Copyright Strategy in 2009. Now this review. In spite of all this activity, many if not most of the recommendations for change remain locked in the “too dif cult” le.
Gowers Recommendations on Copyright Exceptions
The Gowers Review made 54 recommendations, of which only 25 have been implemented wholly or in part.1 In copyright, Gowers made nine recommendations aimed at allowing speci c activities to be performed with a copyrighted work without the need for a licence. These included allowing libraries to make archival copies, including on new media and permission for individuals to format shift (for example, a musical-track from CD to hard drive). After two consultations the only concrete action has been the abandonment of efforts to bring in a private copying exception or an exception to cover parody. Other exceptions were not ruled out by the previous Government, but nor have they actually been taken forward.2 The Gowers deadline for implementation of its ndings was 2008.
The Gowers Review made 54 recommendations, of which only 25 have been implemented wholly or in part.1 In copyright, Gowers made nine recommendations aimed at allowing speci c activities to be performed with a copyrighted work without the need for a licence. These included allowing libraries to make archival copies, including on new media and permission for individuals to format shift (for example, a musical-track from CD to hard drive). After two consultations the only concrete action has been the abandonment of efforts to bring in a private copying exception or an exception to cover parody. Other exceptions were not ruled out by the previous Government, but nor have they actually been taken forward.2 The Gowers deadline for implementation of its ndings was 2008.
10.6 Many responses to the Call for Evidence suggested or implied shortcomings in the institutional arrangements. These include alleged abuses of monopoly powers by collecting societies, inadequacy of regulation of copyright contracts and licensing, ineffectiveness and un tness for purpose ofthe Copyright Tribunal, absence of effective arbitration arrangements to support low cost dispute resolution, and a low opinion of the Strategic Advisory Board for Intellectual Property Policy (SABIP), set up following the Gowers Review and subsequently abolished.3 Consumer Focus in particular argued in detail that copyright policy and regulation needs to be formally directed to the promotion
of innovation and growth, with a stronger emphasis on supporting competition and collaboration with competition authorities. There can be no doubt that the perspective of consumers has played too small a part in the work of the UK’s IP policy makers.
of innovation and growth, with a stronger emphasis on supporting competition and collaboration with competition authorities. There can be no doubt that the perspective of consumers has played too small a part in the work of the UK’s IP policy makers.
The Strategic Advisory Board for Intellectual Property Policy
The Gowers Review recommended the creation of an independent advisory board with its own budget for research “to provide a strategic overview of policy and to challenge Government policy-making”.4 SABIP came into being in the spring of 2008. It oversaw a number of research projects on IP policy topics, but did not become part of the mainstream IP policy process in any area. In May 2010 an independent review found that “while SABIP was set up with the best of intentions and has generated a considerable volume of activity, it has for a variety of reasons not met the expectations of most of
its stakeholders... its present relationship with the IPO is not satisfactory from any perspective. The Board complains that it has not been practically well served, the IPO seems to have derived only limited value from its work and external stakeholders nd the relationship confusing and potentially duplicative”.5 It was disbanded in the summer of 2010.
The Gowers Review recommended the creation of an independent advisory board with its own budget for research “to provide a strategic overview of policy and to challenge Government policy-making”.4 SABIP came into being in the spring of 2008. It oversaw a number of research projects on IP policy topics, but did not become part of the mainstream IP policy process in any area. In May 2010 an independent review found that “while SABIP was set up with the best of intentions and has generated a considerable volume of activity, it has for a variety of reasons not met the expectations of most of
its stakeholders... its present relationship with the IPO is not satisfactory from any perspective. The Board complains that it has not been practically well served, the IPO seems to have derived only limited value from its work and external stakeholders nd the relationship confusing and potentially duplicative”.5 It was disbanded in the summer of 2010.
Review of Intellectual Property and Growth 92
10.7 It is impossible to avoid the conclusion that there is something deeply and persistently amiss in the way that policy towards IP issues in the UK is determined and/or administered. The fact that problems are most striking in the area of copyright law needs to be taken into account: that may, in part, re ect the origins of the Intellectual Property Of ce, so named in 2007 following Gowers, having been the Patent Of ce since 1852. No one can be surprised that in the face of signi cant structural aws, a decision to graft on to the IPO an independent committee with a research budget failed to resolve the dif culties.
10.8 We outline below some thoughts on how the UK’s IP machinery can be strengthened to achieve better focus on the issues that matter most.
10.9 First, however, it is important to note the need for any machinery in this area of policy and public administration to be robust. This matters because there are strong and divergent interests in play and with some of the most skilful and in uential lobbyists on the UK political scene.
10.10 Lobbying is a feature of all political systems and as a way of informing and organising debate it brings many bene ts. In the case of IP policy and speci cally copyright policy, however, thereis no doubt that the persuasive powers of celebrities and important UK creative companies have distorted policy outcomes. Further distortion arises from the fact (not unique to this sector) that there is a striking asymmetry of interest between rights holders, for whom IP issues are of paramount importance, and consumers for whom they have been of passing interest only until the emergence of the internet as a focus for competing technological, economic, business and cultural concerns.
10.11 The passage of the Digital Economy Act 2010 exempli es the environment in which copyright policy is made. Very signi cant parts of the Digital Economy Bill, which was introduced to Parliament towards the end of the previous Government’s term, were lost or amended during its passage into law. This was partly a matter of unfortunate timing: a Government facing an imminent general election is ill placed to withstand pressures to amend legislation to get it through. The fact that the DEA’s legality was subsequently contested in court by two large UK companies, BT and TalkTalk, indicates the absence of business consensus. Lord Puttnam, a major gure in the UK creative industries, commented at the time: “We have been subjected to an extraordinary degree of lobbying... The lobbying process that has gone into this Bill has been quite destructive and has done none of us very much help at all”.6
10.12 A prominent and persistent example of the lobbying problem concerns the duration of copyright protection, which has been periodically extended in recent decades. In spite of clear evidence that this cannot be justi ed in terms of the core IP argument that copyright exists to provide economic incentives to creators to produce new works. As has been noted by a number of commentators,7 no one has yet discovered a mechanism for incentivising the deceased.
10.8 We outline below some thoughts on how the UK’s IP machinery can be strengthened to achieve better focus on the issues that matter most.
10.9 First, however, it is important to note the need for any machinery in this area of policy and public administration to be robust. This matters because there are strong and divergent interests in play and with some of the most skilful and in uential lobbyists on the UK political scene.
10.10 Lobbying is a feature of all political systems and as a way of informing and organising debate it brings many bene ts. In the case of IP policy and speci cally copyright policy, however, thereis no doubt that the persuasive powers of celebrities and important UK creative companies have distorted policy outcomes. Further distortion arises from the fact (not unique to this sector) that there is a striking asymmetry of interest between rights holders, for whom IP issues are of paramount importance, and consumers for whom they have been of passing interest only until the emergence of the internet as a focus for competing technological, economic, business and cultural concerns.
10.11 The passage of the Digital Economy Act 2010 exempli es the environment in which copyright policy is made. Very signi cant parts of the Digital Economy Bill, which was introduced to Parliament towards the end of the previous Government’s term, were lost or amended during its passage into law. This was partly a matter of unfortunate timing: a Government facing an imminent general election is ill placed to withstand pressures to amend legislation to get it through. The fact that the DEA’s legality was subsequently contested in court by two large UK companies, BT and TalkTalk, indicates the absence of business consensus. Lord Puttnam, a major gure in the UK creative industries, commented at the time: “We have been subjected to an extraordinary degree of lobbying... The lobbying process that has gone into this Bill has been quite destructive and has done none of us very much help at all”.6
10.12 A prominent and persistent example of the lobbying problem concerns the duration of copyright protection, which has been periodically extended in recent decades. In spite of clear evidence that this cannot be justi ed in terms of the core IP argument that copyright exists to provide economic incentives to creators to produce new works. As has been noted by a number of commentators,7 no one has yet discovered a mechanism for incentivising the deceased.
Review of Intellectual Property and Growth 93
10.13 The most recent example of such extensions involved a UK decision to support a still incomplete EU process to extend the rights of owners of sound recordings from 50 years to 70 years. Such an extension was opposed by the Gowers Review and by published studies commissioned
by the European Commission.8 A decision in favour of the change was, nonetheless, announcedby the Secretary of State for Culture, Andy Burnham, in December 2008. The Government’s own economic impact assessment subsequently estimated that extension would cost the UK economyup to £100m over the extended term. One justi cation for extension might be that Ministers wished to afford extended copyright as a mark of respect and gratitude to artists and their families – a perfectly legitimate argument, though one that ignores the fact that very often artists’ rights are owned by corporations. Independent research commissioned for the Gowers Review suggested that the bene ts to individual artists would be highly skewed to a relatively small number of performers.9
Policy Development
10.14 The IPO is the principal IP framework institution, and its CEO has statutory duties concerned with providing services in support of registered rights (i.e. patents, trade marks, and designs). It is nancially self suf cient through application and renewal fees for these rights with a Trading Fund Order that essentially con nes its activities to the IP eld. It has no other underpinning duties or functions, and policy on IP is currently developed by civil servants working in the IPO and reporting to Government ministers. The IPO currently employs 900 people and has an annual budget of £70m.
10.15 The IPO’s service delivery function is technical, subject to requirements of legal process, and delivered through decisions which apply the law and seek to achieve consistency with Government policy goals, such as promoting innovation. This activity takes place in Newport, South Wales, and directly or indirectly occupies a large majority of staff. The policy function is split between London and Newport. Although the policy work demands technical IP knowledge in some elds it does not require professional specialism of the sort required by an experienced examiner of patent rights. It does demand general policy competences such as strategic thinking, political awareness and breadth of vision.
10.16 The independent review of SABIP mentioned above found considerable improvement within the IPO since the Gowers Review, for example in building research capability. There are other signs that the IPO is moving in the right direction. The Gowers push led to the appointment of the IPO’s rst economist (in 2008) and this has played a signi cant part in focusing the IPO’s attention upon the economic aspects of IP. Internationally, the IPO’s reputation is good.
10.17 There is nonetheless other recent evidence10 that the IPO’s culture and character is still not suf ciently outward looking and strategically focused. A management review of the IPO completed in January 2010 identi ed many positive features, but called for action in a number of areas, including the development of the of ce’s strategic and corporate planning skills. It concluded that the IPO “is not a hospital case, but it does need to go the gym for a serious tone up if it is to be t enough to handle the challenges it faces in the future.”11 The IPO has a major change programme underway in response. It is beyond the scope of this review to comment further on the management of the IPO, which is governed with the assistance of an advisory board recently placed under new leadership.
by the European Commission.8 A decision in favour of the change was, nonetheless, announcedby the Secretary of State for Culture, Andy Burnham, in December 2008. The Government’s own economic impact assessment subsequently estimated that extension would cost the UK economyup to £100m over the extended term. One justi cation for extension might be that Ministers wished to afford extended copyright as a mark of respect and gratitude to artists and their families – a perfectly legitimate argument, though one that ignores the fact that very often artists’ rights are owned by corporations. Independent research commissioned for the Gowers Review suggested that the bene ts to individual artists would be highly skewed to a relatively small number of performers.9
Policy Development
10.14 The IPO is the principal IP framework institution, and its CEO has statutory duties concerned with providing services in support of registered rights (i.e. patents, trade marks, and designs). It is nancially self suf cient through application and renewal fees for these rights with a Trading Fund Order that essentially con nes its activities to the IP eld. It has no other underpinning duties or functions, and policy on IP is currently developed by civil servants working in the IPO and reporting to Government ministers. The IPO currently employs 900 people and has an annual budget of £70m.
10.15 The IPO’s service delivery function is technical, subject to requirements of legal process, and delivered through decisions which apply the law and seek to achieve consistency with Government policy goals, such as promoting innovation. This activity takes place in Newport, South Wales, and directly or indirectly occupies a large majority of staff. The policy function is split between London and Newport. Although the policy work demands technical IP knowledge in some elds it does not require professional specialism of the sort required by an experienced examiner of patent rights. It does demand general policy competences such as strategic thinking, political awareness and breadth of vision.
10.16 The independent review of SABIP mentioned above found considerable improvement within the IPO since the Gowers Review, for example in building research capability. There are other signs that the IPO is moving in the right direction. The Gowers push led to the appointment of the IPO’s rst economist (in 2008) and this has played a signi cant part in focusing the IPO’s attention upon the economic aspects of IP. Internationally, the IPO’s reputation is good.
10.17 There is nonetheless other recent evidence10 that the IPO’s culture and character is still not suf ciently outward looking and strategically focused. A management review of the IPO completed in January 2010 identi ed many positive features, but called for action in a number of areas, including the development of the of ce’s strategic and corporate planning skills. It concluded that the IPO “is not a hospital case, but it does need to go the gym for a serious tone up if it is to be t enough to handle the challenges it faces in the future.”11 The IPO has a major change programme underway in response. It is beyond the scope of this review to comment further on the management of the IPO, which is governed with the assistance of an advisory board recently placed under new leadership.
Review of Intellectual Property and Growth 94
Here we will focus upon the legal framework within which the IPO sits and ask whether it might be
bene cially adjusted, in order to enable the IPO to develop as a more effective body.
10.18 If the current Government wishes to ensure that the IPO is focused on promoting innovation and growth, subordinating other IP issues to that objective, it will be necessary to equip the IPO with an overarching legal mandate. This should state that IPO decisions will be based in evidence and take due account of the impact of the IP system on innovation and growth. The aim would be to rebalance the interests at play in the IP system so that potential new entrants and consumers are better served, along with existing rights holders. These new functions would need to comprise:
of the IP system to growth. It would also support a more forward looking outlook, identifying and understanding developments in technology and markets which might require further adaptation of the framework. To be robust in a highly contentious area like IP, these changes would need to be embodied in legislation. This could be achieved at the same time as the legislative implementation required to enact our proposals below for copyright opinions.
10.20 These functions would be exercised within a framework of public accountability, including statutory provision for Parliamentary scrutiny of reports. We would expect this accountability to sharpen the evidence gathering performance of the IPO.
Copyright Opinions
10.21 We noted in Chapter 5 that there is no obvious means to clarify the boundaries of copyright infringement in the new circumstances which digital technology creates. Nor has the IPO any means to clarify the law where it is causing misunderstanding or confusion – as it manifestly is for many people – in a way which carries formal authority, although it has equivalent functions in patents and trade marks.
bene cially adjusted, in order to enable the IPO to develop as a more effective body.
10.18 If the current Government wishes to ensure that the IPO is focused on promoting innovation and growth, subordinating other IP issues to that objective, it will be necessary to equip the IPO with an overarching legal mandate. This should state that IPO decisions will be based in evidence and take due account of the impact of the IP system on innovation and growth. The aim would be to rebalance the interests at play in the IP system so that potential new entrants and consumers are better served, along with existing rights holders. These new functions would need to comprise:
- a) A duty to keep under review the impact of IP and IPRs, and market positions founded on IPRs, on innovation and growth, including adverse impacts on competition and the competitive spur to growth, and to report annually;
- b) Powers to prepare one off reports on speci c areas or cases where there appears to be
detriment to competition and consumer welfare; - c) Powers to require information to support the exercise of these reporting functions;
- d) Powers to make recommendations to the competition authorities, and to fund investigations that competition authorities may make as a result, thereby recycling income from fees paid by rights holders in the interests of maintaining healthy and ef cient markets, as well as servicing the needs of rights holders and applicants.
of the IP system to growth. It would also support a more forward looking outlook, identifying and understanding developments in technology and markets which might require further adaptation of the framework. To be robust in a highly contentious area like IP, these changes would need to be embodied in legislation. This could be achieved at the same time as the legislative implementation required to enact our proposals below for copyright opinions.
10.20 These functions would be exercised within a framework of public accountability, including statutory provision for Parliamentary scrutiny of reports. We would expect this accountability to sharpen the evidence gathering performance of the IPO.
Copyright Opinions
10.21 We noted in Chapter 5 that there is no obvious means to clarify the boundaries of copyright infringement in the new circumstances which digital technology creates. Nor has the IPO any means to clarify the law where it is causing misunderstanding or confusion – as it manifestly is for many people – in a way which carries formal authority, although it has equivalent functions in patents and trade marks.
Review of Intellectual Property and Growth 95
10.22 The Review therefore proposes an additional statutory function for the IPO in this area:
• A power to publish formal opinions in order to clarify the application of copyright law, and speci cally the application of copyright exceptions, where new circumstances have arisen, or where there is evidence of confusion as to what is allowed under copyright law.
10.23 These opinions would not be binding but the courts should have a duty to take account of them in considering cases to which they are relevant.
10.24 The aim is to increase clarity and predictability in relation to copyright infringement. This opinions function would enable the IPO to issue formal notices setting out its interpretation of, for example, the application of copyright exceptions to particular circumstances and applications of technology.
• A power to publish formal opinions in order to clarify the application of copyright law, and speci cally the application of copyright exceptions, where new circumstances have arisen, or where there is evidence of confusion as to what is allowed under copyright law.
10.23 These opinions would not be binding but the courts should have a duty to take account of them in considering cases to which they are relevant.
10.24 The aim is to increase clarity and predictability in relation to copyright infringement. This opinions function would enable the IPO to issue formal notices setting out its interpretation of, for example, the application of copyright exceptions to particular circumstances and applications of technology.
Adapting the IP Framework
10.5 History shows that our track record of implementing change in the UK IP framework is patchy at best. The Banks Review in the 1970s deplored the lack of evidence to support policy judgments. Thirty years later, the Gowers Review in 2006 made the same point. Our institutional framework appears to have failed to equip itself to conduct evidence-based policy effectively. As technological pressures on the copyright framework have intensi ed, this incapacity for organic adaptation expressed itself in a frenetic frequency of reviews: the Creative Economy Programme in 2007, the Digital Britain Review in 2008-09, and the Government’s Copyright Strategy in 2009. Now this review. In spite of all this activity, many if not most of the recommendations for change remain locked in the “too dif cult” le.
10.5 History shows that our track record of implementing change in the UK IP framework is patchy at best. The Banks Review in the 1970s deplored the lack of evidence to support policy judgments. Thirty years later, the Gowers Review in 2006 made the same point. Our institutional framework appears to have failed to equip itself to conduct evidence-based policy effectively. As technological pressures on the copyright framework have intensi ed, this incapacity for organic adaptation expressed itself in a frenetic frequency of reviews: the Creative Economy Programme in 2007, the Digital Britain Review in 2008-09, and the Government’s Copyright Strategy in 2009. Now this review. In spite of all this activity, many if not most of the recommendations for change remain locked in the “too dif cult” le.
Gowers Recommendations on Copyright Exceptions
The Gowers Review made 54 recommendations, of which only 25 have been implemented wholly or in part.1 In copyright, Gowers made nine recommendations aimed at allowing speci c activities to be performed with a copyrighted work without the need for a licence. These included allowing libraries to make archival copies, including on new media and permission for individuals to format shift (for example, a musical-track from CD to hard drive). After two consultations the only concrete action has been the abandonment of efforts to bring in a private copying exception or an exception to cover parody. Other exceptions were not ruled out by the previous Government, but nor have they actually been taken forward.2 The Gowers deadline for implementation of its ndings was 2008.
The Gowers Review made 54 recommendations, of which only 25 have been implemented wholly or in part.1 In copyright, Gowers made nine recommendations aimed at allowing speci c activities to be performed with a copyrighted work without the need for a licence. These included allowing libraries to make archival copies, including on new media and permission for individuals to format shift (for example, a musical-track from CD to hard drive). After two consultations the only concrete action has been the abandonment of efforts to bring in a private copying exception or an exception to cover parody. Other exceptions were not ruled out by the previous Government, but nor have they actually been taken forward.2 The Gowers deadline for implementation of its ndings was 2008.
10.6 Many responses to the Call for Evidence suggested or implied shortcomings in the institutional
arrangements. These include alleged abuses of monopoly powers by collecting societies, inadequacy
of regulation of copyright contracts and licensing, ineffectiveness and un tness for purpose of
the Copyright Tribunal, absence of effective arbitration arrangements to support low cost dispute resolution, and a low opinion of the Strategic Advisory Board for Intellectual Property Policy (SABIP), set up following the Gowers Review and subsequently abolished.3 Consumer Focus in particular argued in detail that copyright policy and regulation needs to be formally directed to the promotion
of innovation and growth, with a stronger emphasis on supporting competition and collaboration with competition authorities. There can be no doubt that the perspective of consumers has played too small a part in the work of the UK’s IP policy makers.
the Copyright Tribunal, absence of effective arbitration arrangements to support low cost dispute resolution, and a low opinion of the Strategic Advisory Board for Intellectual Property Policy (SABIP), set up following the Gowers Review and subsequently abolished.3 Consumer Focus in particular argued in detail that copyright policy and regulation needs to be formally directed to the promotion
of innovation and growth, with a stronger emphasis on supporting competition and collaboration with competition authorities. There can be no doubt that the perspective of consumers has played too small a part in the work of the UK’s IP policy makers.
The Strategic Advisory Board for Intellectual Property Policy
The Gowers Review recommended the creation of an independent advisory board with its own budget for research “to provide a strategic overview of policy and to challenge Government policy-making”.4 SABIP came into being in the spring of 2008. It oversaw a number of research projects on IP policy topics, but did not become part of the mainstream IP policy process in any area. In May 2010 an independent review found that “while SABIP was set up with the best of intentions and has generated a considerable volume of activity, it has for a variety of reasons not met the expectations of most of
its stakeholders... its present relationship with the IPO is not satisfactory from any perspective. The Board complains that it has not been practically well served, the IPO seems to have derived only limited value from its work and external stakeholders nd the relationship confusing and potentially duplicative”.5 It was disbanded in the summer of 2010.
The Gowers Review recommended the creation of an independent advisory board with its own budget for research “to provide a strategic overview of policy and to challenge Government policy-making”.4 SABIP came into being in the spring of 2008. It oversaw a number of research projects on IP policy topics, but did not become part of the mainstream IP policy process in any area. In May 2010 an independent review found that “while SABIP was set up with the best of intentions and has generated a considerable volume of activity, it has for a variety of reasons not met the expectations of most of
its stakeholders... its present relationship with the IPO is not satisfactory from any perspective. The Board complains that it has not been practically well served, the IPO seems to have derived only limited value from its work and external stakeholders nd the relationship confusing and potentially duplicative”.5 It was disbanded in the summer of 2010.
Review of Intellectual Property and Growth 92
10.7 It is impossible to avoid the conclusion that there is something deeply and persistently amiss
in the way that policy towards IP issues in the UK is determined and/or administered. The fact that
problems are most striking in the area of copyright law needs to be taken into account: that may, in
part, re ect the origins of the Intellectual Property Of ce, so named in 2007 following Gowers, having
been the Patent Of ce since 1852. No one can be surprised that in the face of signi cant structural
aws, a decision to graft on to the IPO an independent committee with a research budget failed to
resolve the dif culties.
10.8 We outline below some thoughts on how the UK’s IP machinery can be strengthened to achieve better focus on the issues that matter most.
10.9 First, however, it is important to note the need for any machinery in this area of policy and public administration to be robust. This matters because there are strong and divergent interests in play and with some of the most skilful and in uential lobbyists on the UK political scene.
10.10 Lobbying is a feature of all political systems and as a way of informing and organising debate it brings many bene ts. In the case of IP policy and speci cally copyright policy, however, there
is no doubt that the persuasive powers of celebrities and important UK creative companies have distorted policy outcomes. Further distortion arises from the fact (not unique to this sector) that there is a striking asymmetry of interest between rights holders, for whom IP issues are of paramount importance, and consumers for whom they have been of passing interest only until the emergence of the internet as a focus for competing technological, economic, business and cultural concerns.
10.11 The passage of the Digital Economy Act 2010 exempli es the environment in which copyright policy is made. Very signi cant parts of the Digital Economy Bill, which was introduced to Parliament towards the end of the previous Government’s term, were lost or amended during its passage into law. This was partly a matter of unfortunate timing: a Government facing an imminent general election is ill placed to withstand pressures to amend legislation to get it through. The fact that the DEA’s legality was subsequently contested in court by two large UK companies, BT and TalkTalk, indicates the absence of business consensus. Lord Puttnam, a major gure in the UK creative industries, commented at the time: “We have been subjected to an extraordinary degree of lobbying... The lobbying process that has gone into this Bill has been quite destructive and has done none of us very much help at all”.6
10.12 A prominent and persistent example of the lobbying problem concerns the duration of copyright protection, which has been periodically extended in recent decades. In spite of clear evidence that this cannot be justi ed in terms of the core IP argument that copyright exists to provide economic incentives to creators to produce new works. As has been noted by a number of commentators,7 no one has yet discovered a mechanism for incentivising the deceased.
10.8 We outline below some thoughts on how the UK’s IP machinery can be strengthened to achieve better focus on the issues that matter most.
10.9 First, however, it is important to note the need for any machinery in this area of policy and public administration to be robust. This matters because there are strong and divergent interests in play and with some of the most skilful and in uential lobbyists on the UK political scene.
10.10 Lobbying is a feature of all political systems and as a way of informing and organising debate it brings many bene ts. In the case of IP policy and speci cally copyright policy, however, there
is no doubt that the persuasive powers of celebrities and important UK creative companies have distorted policy outcomes. Further distortion arises from the fact (not unique to this sector) that there is a striking asymmetry of interest between rights holders, for whom IP issues are of paramount importance, and consumers for whom they have been of passing interest only until the emergence of the internet as a focus for competing technological, economic, business and cultural concerns.
10.11 The passage of the Digital Economy Act 2010 exempli es the environment in which copyright policy is made. Very signi cant parts of the Digital Economy Bill, which was introduced to Parliament towards the end of the previous Government’s term, were lost or amended during its passage into law. This was partly a matter of unfortunate timing: a Government facing an imminent general election is ill placed to withstand pressures to amend legislation to get it through. The fact that the DEA’s legality was subsequently contested in court by two large UK companies, BT and TalkTalk, indicates the absence of business consensus. Lord Puttnam, a major gure in the UK creative industries, commented at the time: “We have been subjected to an extraordinary degree of lobbying... The lobbying process that has gone into this Bill has been quite destructive and has done none of us very much help at all”.6
10.12 A prominent and persistent example of the lobbying problem concerns the duration of copyright protection, which has been periodically extended in recent decades. In spite of clear evidence that this cannot be justi ed in terms of the core IP argument that copyright exists to provide economic incentives to creators to produce new works. As has been noted by a number of commentators,7 no one has yet discovered a mechanism for incentivising the deceased.
Review of Intellectual Property and Growth 93
10.13 The most recent example of such extensions involved a UK decision to support a still
incomplete EU process to extend the rights of owners of sound recordings from 50 years to 70 years.
Such an extension was opposed by the Gowers Review and by published studies commissioned
by the European Commission.8 A decision in favour of the change was, nonetheless, announced
by the Secretary of State for Culture, Andy Burnham, in December 2008. The Government’s own economic impact assessment subsequently estimated that extension would cost the UK economy
up to £100m over the extended term. One justi cation for extension might be that Ministers wished to afford extended copyright as a mark of respect and gratitude to artists and their families – a perfectly legitimate argument, though one that ignores the fact that very often artists’ rights are owned by corporations. Independent research commissioned for the Gowers Review suggested that the bene ts to individual artists would be highly skewed to a relatively small number of performers.9
Policy Development
10.14 The IPO is the principal IP framework institution, and its CEO has statutory duties concerned with providing services in support of registered rights (i.e. patents, trade marks, and designs). It is nancially self suf cient through application and renewal fees for these rights with a Trading Fund Order that essentially con nes its activities to the IP eld. It has no other underpinning duties or functions, and policy on IP is currently developed by civil servants working in the IPO and reporting to Government ministers. The IPO currently employs 900 people and has an annual budget of £70m.
10.15 The IPO’s service delivery function is technical, subject to requirements of legal process, and delivered through decisions which apply the law and seek to achieve consistency with Government policy goals, such as promoting innovation. This activity takes place in Newport, South Wales, and directly or indirectly occupies a large majority of staff. The policy function is split between London and Newport. Although the policy work demands technical IP knowledge in some elds it does not require professional specialism of the sort required by an experienced examiner of patent rights. It does demand general policy competences such as strategic thinking, political awareness and breadth of vision.
10.16 The independent review of SABIP mentioned above found considerable improvement within the IPO since the Gowers Review, for example in building research capability. There are other signs that the IPO is moving in the right direction. The Gowers push led to the appointment of the IPO’s rst economist (in 2008) and this has played a signi cant part in focusing the IPO’s attention upon the economic aspects of IP. Internationally, the IPO’s reputation is good.
10.17 There is nonetheless other recent evidence10 that the IPO’s culture and character is still not suf ciently outward looking and strategically focused. A management review of the IPO completed in January 2010 identi ed many positive features, but called for action in a number of areas, including the development of the of ce’s strategic and corporate planning skills. It concluded that the IPO “is not a hospital case, but it does need to go the gym for a serious tone up if it is to be t enough to handle the challenges it faces in the future.”11 The IPO has a major change programme underway in response. It is beyond the scope of this review to comment further on the management of the IPO, which is governed with the assistance of an advisory board recently placed under new leadership.
by the European Commission.8 A decision in favour of the change was, nonetheless, announced
by the Secretary of State for Culture, Andy Burnham, in December 2008. The Government’s own economic impact assessment subsequently estimated that extension would cost the UK economy
up to £100m over the extended term. One justi cation for extension might be that Ministers wished to afford extended copyright as a mark of respect and gratitude to artists and their families – a perfectly legitimate argument, though one that ignores the fact that very often artists’ rights are owned by corporations. Independent research commissioned for the Gowers Review suggested that the bene ts to individual artists would be highly skewed to a relatively small number of performers.9
Policy Development
10.14 The IPO is the principal IP framework institution, and its CEO has statutory duties concerned with providing services in support of registered rights (i.e. patents, trade marks, and designs). It is nancially self suf cient through application and renewal fees for these rights with a Trading Fund Order that essentially con nes its activities to the IP eld. It has no other underpinning duties or functions, and policy on IP is currently developed by civil servants working in the IPO and reporting to Government ministers. The IPO currently employs 900 people and has an annual budget of £70m.
10.15 The IPO’s service delivery function is technical, subject to requirements of legal process, and delivered through decisions which apply the law and seek to achieve consistency with Government policy goals, such as promoting innovation. This activity takes place in Newport, South Wales, and directly or indirectly occupies a large majority of staff. The policy function is split between London and Newport. Although the policy work demands technical IP knowledge in some elds it does not require professional specialism of the sort required by an experienced examiner of patent rights. It does demand general policy competences such as strategic thinking, political awareness and breadth of vision.
10.16 The independent review of SABIP mentioned above found considerable improvement within the IPO since the Gowers Review, for example in building research capability. There are other signs that the IPO is moving in the right direction. The Gowers push led to the appointment of the IPO’s rst economist (in 2008) and this has played a signi cant part in focusing the IPO’s attention upon the economic aspects of IP. Internationally, the IPO’s reputation is good.
10.17 There is nonetheless other recent evidence10 that the IPO’s culture and character is still not suf ciently outward looking and strategically focused. A management review of the IPO completed in January 2010 identi ed many positive features, but called for action in a number of areas, including the development of the of ce’s strategic and corporate planning skills. It concluded that the IPO “is not a hospital case, but it does need to go the gym for a serious tone up if it is to be t enough to handle the challenges it faces in the future.”11 The IPO has a major change programme underway in response. It is beyond the scope of this review to comment further on the management of the IPO, which is governed with the assistance of an advisory board recently placed under new leadership.
Review of Intellectual Property and Growth 94
Here we will focus upon the legal framework within which the IPO sits and ask whether it might be
bene cially adjusted, in order to enable the IPO to develop as a more effective body.
10.18 If the current Government wishes to ensure that the IPO is focused on promoting innovation and growth, subordinating other IP issues to that objective, it will be necessary to equip the IPO with an overarching legal mandate. This should state that IPO decisions will be based in evidence and take due account of the impact of the IP system on innovation and growth. The aim would be to rebalance the interests at play in the IP system so that potential new entrants and consumers are better served, along with existing rights holders. These new functions would need to comprise:
of the IP system to growth. It would also support a more forward looking outlook, identifying and understanding developments in technology and markets which might require further adaptation of the framework. To be robust in a highly contentious area like IP, these changes would need to be embodied in legislation. This could be achieved at the same time as the legislative implementation required to enact our proposals below for copyright opinions.
10.20 These functions would be exercised within a framework of public accountability, including statutory provision for Parliamentary scrutiny of reports. We would expect this accountability to sharpen the evidence gathering performance of the IPO.
Copyright Opinions
10.21 We noted in Chapter 5 that there is no obvious means to clarify the boundaries of copyright infringement in the new circumstances which digital technology creates. Nor has the IPO any means to clarify the law where it is causing misunderstanding or confusion – as it manifestly is for many people – in a way which carries formal authority, although it has equivalent functions in patents and trade marks.
bene cially adjusted, in order to enable the IPO to develop as a more effective body.
10.18 If the current Government wishes to ensure that the IPO is focused on promoting innovation and growth, subordinating other IP issues to that objective, it will be necessary to equip the IPO with an overarching legal mandate. This should state that IPO decisions will be based in evidence and take due account of the impact of the IP system on innovation and growth. The aim would be to rebalance the interests at play in the IP system so that potential new entrants and consumers are better served, along with existing rights holders. These new functions would need to comprise:
-
a) A duty to keep under review the impact of IP and IPRs, and market positions founded
on IPRs, on innovation and growth, including adverse impacts on competition and the
competitive spur to growth, and to report annually;
-
b) Powers to prepare one off reports on speci c areas or cases where there appears to be
detriment to competition and consumer welfare;
-
c) Powers to require information to support the exercise of these reporting functions;
-
d) Powers to make recommendations to the competition authorities, and to fund investigations
that competition authorities may make as a result, thereby recycling income from fees paid
by rights holders in the interests of maintaining healthy and ef cient markets, as well as
servicing the needs of rights holders and applicants.
of the IP system to growth. It would also support a more forward looking outlook, identifying and understanding developments in technology and markets which might require further adaptation of the framework. To be robust in a highly contentious area like IP, these changes would need to be embodied in legislation. This could be achieved at the same time as the legislative implementation required to enact our proposals below for copyright opinions.
10.20 These functions would be exercised within a framework of public accountability, including statutory provision for Parliamentary scrutiny of reports. We would expect this accountability to sharpen the evidence gathering performance of the IPO.
Copyright Opinions
10.21 We noted in Chapter 5 that there is no obvious means to clarify the boundaries of copyright infringement in the new circumstances which digital technology creates. Nor has the IPO any means to clarify the law where it is causing misunderstanding or confusion – as it manifestly is for many people – in a way which carries formal authority, although it has equivalent functions in patents and trade marks.
Review of Intellectual Property and Growth 95
10.22 The Review therefore proposes an additional statutory function for the IPO in this area:
• A power to publish formal opinions in order to clarify the application of copyright law, and speci cally the application of copyright exceptions, where new circumstances have arisen, or where there is evidence of confusion as to what is allowed under copyright law.
10.23 These opinions would not be binding but the courts should have a duty to take account of them in considering cases to which they are relevant.
10.24 The aim is to increase clarity and predictability in relation to copyright infringement. This opinions function would enable the IPO to issue formal notices setting out its interpretation of, for example, the application of copyright exceptions to particular circumstances and applications of technology.
10.25 In Chapter 4 we recommended that the Government bring about a Digital Copyright Exchange. We noted that some oversight of its operation would be required, and that that role might be given to the IPO or to Ofcom. The nal decision on its location should be consistent with the objective of an IPO equipped to oversee the copyright framework and secure its continuing adaptation to its evolving environment.
• A power to publish formal opinions in order to clarify the application of copyright law, and speci cally the application of copyright exceptions, where new circumstances have arisen, or where there is evidence of confusion as to what is allowed under copyright law.
10.23 These opinions would not be binding but the courts should have a duty to take account of them in considering cases to which they are relevant.
10.24 The aim is to increase clarity and predictability in relation to copyright infringement. This opinions function would enable the IPO to issue formal notices setting out its interpretation of, for example, the application of copyright exceptions to particular circumstances and applications of technology.
10.25 In Chapter 4 we recommended that the Government bring about a Digital Copyright Exchange. We noted that some oversight of its operation would be required, and that that role might be given to the IPO or to Ofcom. The nal decision on its location should be consistent with the objective of an IPO equipped to oversee the copyright framework and secure its continuing adaptation to its evolving environment.
10.26 And nally. In their response to the Call for Evidence the Patent Judges in England and Wales
said that a comprehensive review and redrafting of the Copyright Act is now considerably overdue.
The Review agrees. Implementation of the strategic assessment of the IP framework provided by
the Review would be incomplete without consideration of the statutory underpinning, which needs
to be both tailored to modern circumstances and as clear as possible. The Review recognises the pressures on Parliamentary time, and the Government’s commitment in March to avoid further IP reviews during this Parliament. We urge Ministers not to allow these constraints to prevent the Government from bringing the Copyright Act up to date.
the Review would be incomplete without consideration of the statutory underpinning, which needs
to be both tailored to modern circumstances and as clear as possible. The Review recognises the pressures on Parliamentary time, and the Government’s commitment in March to avoid further IP reviews during this Parliament. We urge Ministers not to allow these constraints to prevent the Government from bringing the Copyright Act up to date.
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