5.1 There are two circumstances in which it is permissible to make use of copyrighted works. The rst, considered in the previous chapter, is where the rights holder has given permission. The second, the subject of this chapter, is where the law places some acts outside the coverage of copyright – copyright exceptions.
5.2 In the UK, exceptions have failed to keep up with technological and social change, leading to widespread consequences. Technology has expanded the potential for communication, research, learning and access to resources, but out of date rules mean this potential is not fully realised. The UK’s world class universities – a sector of strategic importance to future growth, both as source of skilled people and knowledge – nd this on a daily basis.
5.3 Researchers want to use every technological tool available, and they want to develop new ones. However, the law can block valuable new technologies, like text and data mining, simply because those technologies were not imagined when the law was formed. In teaching, the greatly expanded scope of what is possible is often unnecessarily limited by uncertainty about what is legal. Many university academics – along with teachers elsewhere in the education sector – are uncertain what copyright permits for themselves and their students. Administrators spend substantial sums
of public money to entitle academics and research students to access works which have often been
produced at public expense by academics and research students in the rst place. Even where
there are copyright exceptions established by law, administrators are often forced to prevent staff
and students exercising them, because of restrictive contracts. Senior gures and institutions in the
university sector have told the Review of the urgent need reform copyright to realise opportunities, and to make it clear what researchers and educators are allowed to do.
5.4 Copyright involves a necessary balancing of divergent interests. When new opportunities arise, the law sometimes needs to adapt so that the right balance is maintained. In education and research in particular, but also in other elds including everyday consumer behaviour, there is a clear need to make that adaptation happen.
Copyright Exceptions
5.5 Copyright exceptions are designed to allow uses of content that offer bene ts deemed
either more important than those delivered by the core aims of copyright and/or bene ts that do not signi cantly detract from those aims. The copyright exceptions for educational purposes and for research are intended to promote knowledge, skills and innovation in the economy, without unduly undermining the incentive for educational and academic publishers to create the works that students, teachers and researchers need. International law places restrictions on the use of exceptions, so that they may not compromise the rights holder’s legitimate interests and the normal exploitation of the work.vVv
5.6 EU law con nes copyright exceptions to a closed list of categories, such as criticism, news reporting, research, or archiving. Almost all are restricted to non-commercial uses. Individual EU countries may implement exceptions within these categories to a greater or lesser degree, but there
is no exibility to create exceptions in new areas. The UK does not currently exploit all the exceptions available. Most notably, we do not have exceptions for private copying or for parody and the exception for archiving falls well short of current needs. Previous attempts to modernise this framework in the UK have not succeeded.
5.7 Several responses to the Call for Evidence emphasised the complexity of copyright law, and in particular how to apply the exceptions regime in current circumstances.
5.8 We address this issue in Chapter 10, where we recommend the IPO take on an additional role in providing interpretations of the law, which the courts would have to take into account, to increase certainty in the system.
5.9 The US has a more exible approach to copyright exceptions. It includes the concept of “Fair Use”, a defence in the US copyright framework which builds on certain general principles through case law to develop permitted uses of copyright works. Fair Use serves a number of purposes in the US, xing what might otherwise be imbalances in the copyright system.
v The Berne Convention (incorporated in the TRIPs Agreement) limits the range of exceptions by a three step test. This
requires that exceptions are con ned to certain special cases which do not con ict with a normal exploitation of the work
and do not unreasonably prejudice the legitimate interests of the rights holder.
5.5 Copyright exceptions are designed to allow uses of content that offer bene ts deemed
either more important than those delivered by the core aims of copyright and/or bene ts that do not signi cantly detract from those aims. The copyright exceptions for educational purposes and for research are intended to promote knowledge, skills and innovation in the economy, without unduly undermining the incentive for educational and academic publishers to create the works that students, teachers and researchers need. International law places restrictions on the use of exceptions, so that they may not compromise the rights holder’s legitimate interests and the normal exploitation of the work.vVv
5.6 EU law con nes copyright exceptions to a closed list of categories, such as criticism, news reporting, research, or archiving. Almost all are restricted to non-commercial uses. Individual EU countries may implement exceptions within these categories to a greater or lesser degree, but there
is no exibility to create exceptions in new areas. The UK does not currently exploit all the exceptions available. Most notably, we do not have exceptions for private copying or for parody and the exception for archiving falls well short of current needs. Previous attempts to modernise this framework in the UK have not succeeded.
5.7 Several responses to the Call for Evidence emphasised the complexity of copyright law, and in particular how to apply the exceptions regime in current circumstances.
5.8 We address this issue in Chapter 10, where we recommend the IPO take on an additional role in providing interpretations of the law, which the courts would have to take into account, to increase certainty in the system.
5.9 The US has a more exible approach to copyright exceptions. It includes the concept of “Fair Use”, a defence in the US copyright framework which builds on certain general principles through case law to develop permitted uses of copyright works. Fair Use serves a number of purposes in the US, xing what might otherwise be imbalances in the copyright system.
v The Berne Convention (incorporated in the TRIPs Agreement) limits the range of exceptions by a three step test. This
requires that exceptions are con ned to certain special cases which do not con ict with a normal exploitation of the work
and do not unreasonably prejudice the legitimate interests of the rights holder.
“During the course of a learning activity children will cross over the multiple boundaries and traverse
the vagaries of copyright and licensing. They will trip over ‘orphans’, bump into third party rights, be turned away by pay-for services, use licensed and make their own materials – often without knowing that there are multiple copyright dimensions to what they are doing, because, who can know all about copyright?” National Education Network submission
the vagaries of copyright and licensing. They will trip over ‘orphans’, bump into third party rights, be turned away by pay-for services, use licensed and make their own materials – often without knowing that there are multiple copyright dimensions to what they are doing, because, who can know all about copyright?” National Education Network submission
Review of Intellectual Property and Growth 42
5.10 Under the European approach to exceptions, new kinds of copying which have become
possible due to advancing digital technology are automatically unlawful. They require agreement
of rights holders if they fall outside the pre-established and closed list of categories for permissible exceptions. Even copying which falls within one of the permissible areas at EU level can still require new action by national legislatures to create or develop the exception to meet new needs. The risk in this situation is twofold:
as part of normal use. This alienates customers and puts the state in a position where it is invited to “choose sides” between rights holders and citizens. Effective enforcement of the law, in these circumstances, can become impossible.
of rights holders if they fall outside the pre-established and closed list of categories for permissible exceptions. Even copying which falls within one of the permissible areas at EU level can still require new action by national legislatures to create or develop the exception to meet new needs. The risk in this situation is twofold:
-
Innovation may be blocked and growth hampered when unduly rigid applications of
copyright law enables rights holders to block potentially important new technologies. We have experienced this when the interests of rights owners have put them in con ict with developers of video recorders and web search engines. Research scientists, including medical researchers, are today being hampered from using computerised search and analysis techniques on data and text because copyright law can forbid or restrict such usage. As data farming becomes routine in systems across the economy, from the management of transport to the administration of public services, copyright issues become ever more important as potential obstacles. In these circumstances, copyright in its current form represents a barrier to innovation and economic opportunity.
-
A second and also signi cant problem is that we have in recent years witnessed a growing
mismatch between what is allowed under copyright exceptions, and the reasonable
expectations and behaviour of most people. Digital technology has enabled use and reuse of
material by private individuals in ways that they do not feel are wrong – such as sharing music
tracks with immediate family members, or transferring a track from a CD to play in the car. It is
dif cult for anyone to understand why it is legal to lend a friend a book, but not a digital music
le. The picture is confused by the way some online content is now sold with permissions to
format shift (iTunes tracks) or to “lend” les (Amazon ebooks) at no extra cost. This puts the
law into confusion and disrepute. It is not a tenable state of affairs.
as part of normal use. This alienates customers and puts the state in a position where it is invited to “choose sides” between rights holders and citizens. Effective enforcement of the law, in these circumstances, can become impossible.
Review of Intellectual Property and Growth 43
Fair Use
5.12 By contrast the US approach enables judges to take a view as to whether emerging activities in relation to copyright works should legitimately fall within the scope of copyright protection or not. Fair Use provides a legal mechanism that can rule a new technology or application of technology
(like shifting music from a CD to a personal computer) as legitimate and not needing to be regulated, so opening the way to a market for products and services which use it. It has been suggested that this is one of the factors creating a positive environment in the US for innovation and investment in innovation.viVviFair Use offers a zone for trial and error, for bolder risk taking, with the courts providing a backstop to adjudicate objections from rights holders if innovators have trespassed too far upon their rights.
5.12 By contrast the US approach enables judges to take a view as to whether emerging activities in relation to copyright works should legitimately fall within the scope of copyright protection or not. Fair Use provides a legal mechanism that can rule a new technology or application of technology
(like shifting music from a CD to a personal computer) as legitimate and not needing to be regulated, so opening the way to a market for products and services which use it. It has been suggested that this is one of the factors creating a positive environment in the US for innovation and investment in innovation.viVviFair Use offers a zone for trial and error, for bolder risk taking, with the courts providing a backstop to adjudicate objections from rights holders if innovators have trespassed too far upon their rights.
“The founders of Google have said they could never have started their company in Britain. The
service they provide depends on taking a snapshot of all the content on the internet at any one time
and they feel our copyright system is not as friendly to this sort of innovation as it is in the United
States. Over there, they have what are called “fair use” provisions, which some people believe gives
companies more breathing space to create new products and services.” David Cameron, November
2010, announcing the Review of IP and Growth.
“With the emergence of ever new platforms and formats for creative content existing exceptions and
fair dealing provisions in UK law have become outdated. UK copyright law currently makes everyday
consumer activities, such as back-up and format-shifting of music, lms and e-books, illegal. The
law needs to be updated urgently if it is to remain relevant; copyright law also needs to be future
proof so that primary legislation does not have to be updated in step with technological advances. Ultimately copyright law should be relevant to consumers, and provide certainty to the creative and the technology industry which innovates within the limits of the regulatory framework.” Consumer Focus submission
law needs to be updated urgently if it is to remain relevant; copyright law also needs to be future
proof so that primary legislation does not have to be updated in step with technological advances. Ultimately copyright law should be relevant to consumers, and provide certainty to the creative and the technology industry which innovates within the limits of the regulatory framework.” Consumer Focus submission
5.13 In its Terms of Reference, the Review was speci cally asked to investigate the bene ts of
Fair Use and how these might be achieved in the UK. Much of the evidence submitted to the Review on exceptions focuses, however, upon two subtly different questions: the perceived pros and cons of the US Fair Use approach in general and the desirability or not of transplanting it to the UK.1 Most responses to the Review from established UK businesses were implacably hostile to adoption of a US Fair Use defence in the UK on the grounds that it would bring: massive legal uncertainty because of its roots in American case law; an American style proliferation of high cost litigation; and a further round of confusion for suppliers and purchasers of copyright goods.2 These are important arguments.
5.14 By contrast many submissions also recognise that copyright needs to accommodate some unlicensed copying that is considered to be fair, in the ordinary sense of the word: whether that involves transferring CD les to a laptop and MP3 player or sharing a family home movie on your Facebook page which makes incidental use of copyright material.
Fair Use and how these might be achieved in the UK. Much of the evidence submitted to the Review on exceptions focuses, however, upon two subtly different questions: the perceived pros and cons of the US Fair Use approach in general and the desirability or not of transplanting it to the UK.1 Most responses to the Review from established UK businesses were implacably hostile to adoption of a US Fair Use defence in the UK on the grounds that it would bring: massive legal uncertainty because of its roots in American case law; an American style proliferation of high cost litigation; and a further round of confusion for suppliers and purchasers of copyright goods.2 These are important arguments.
5.14 By contrast many submissions also recognise that copyright needs to accommodate some unlicensed copying that is considered to be fair, in the ordinary sense of the word: whether that involves transferring CD les to a laptop and MP3 player or sharing a family home movie on your Facebook page which makes incidental use of copyright material.
vi By Google and other (mainly American) technology companies.
Review of Intellectual Property and Growth 44
5.15 In response to the arguments against Fair Use, it is also worth noting that the creative
industries continue to ourish in the US in the context of copyright law which includes Fair Use. It is
likewise true that many large UK creative companies operate very successfully on both sides of the
Atlantic in spite of these differences in law. This may indicate that the differences in the American
and European legal approaches to copyright are less troublesome than polarised debate suggests.
But this does not stop important American creative businesses, such as the lm industry, arguing
passionately that the UK and Europe should resist the adoption of the same US style Fair Use
approach with which these rms coexist in their home market.
5.16 It is equally true, however, that the economic bene ts imputed to the availability of Fair
Use in the US have sometimes been over stated.3 When the Review brie y visited Silicon Valley in February, providing the opportunity to meet companies such as Google, Facebook, Yahoo and Yelp, along with investors, bankers, lawyers and academics, a consistent story emerged, namely that Fair Use is (from the viewpoint of high technology companies and their investors) just one aspect of the distinctiveness of the American legal framework on copyright, albeit in the view of most an important part. In such discussions, the “safe harbour” provisions of the Digital Millennium Copyright Act are usually mentioned as another part of the legal context which encourages risk taking and innovation by protecting platform providers from legal responsibility for content carried on their networks. Google, however, does arguevii that Fair Use was vital to the successful emergence of the indexing and search technology which has turned it into one of the most valuable and dynamic companies in the world. Facebook likewise believes that a global business based upon user generated content required a exible legal view of copyright to enable it to emerge with its highly successful business model.
5.17 Does this mean, as is sometimes implied, that if only the UK could adopt Fair Use, East London would quickly become a rival to Silicon Valley? The answer to this is: certainly not. We
were told repeatedly in our American interviews, that the success of high technology companies
in Silicon Valley owes more to attitudes to business risk and investor culture, not to mention other complex issues of economic geography, than it does to the shape of IP law. In practice, it is dif cult to distinguish between the importance of different elements in successful industrial clusters of the Silicon Valley type. This does not mean that IP issues are unimportant for the success of innovative, high technology businesses. The Review’s judgment is that they are of growing importance and that they merit serious attention from the UK Government.
5.18 There are also learning points from elsewhere. Some other countries see a need for similar exibility to embrace new economic opportunities. The Philippines has a Fair Use doctrine, Israel adopted one in 2008, and Singapore uses a Fair Use type multi factor test within its fair dealing. The recently elected Irish Government has launched a review of copyright in the digital environment which will consider moving towards a Fair Use style doctrine, among other issues. But even if the UK were to set aside the powerfully stated objections of the UK creative sector and potentially in the future
join forces with the Irish Government or others to promote a Fair Use exception in Europe, the result would be a very protracted political negotiation, against a highly uncertain legal background. Evidence considered by the Review on the legal arguments about the feasibility of introducing Fair Use into the
vii Google argued this point to the Gowers review in 2006, and in its submission to the current Review.
5.16 It is equally true, however, that the economic bene ts imputed to the availability of Fair
Use in the US have sometimes been over stated.3 When the Review brie y visited Silicon Valley in February, providing the opportunity to meet companies such as Google, Facebook, Yahoo and Yelp, along with investors, bankers, lawyers and academics, a consistent story emerged, namely that Fair Use is (from the viewpoint of high technology companies and their investors) just one aspect of the distinctiveness of the American legal framework on copyright, albeit in the view of most an important part. In such discussions, the “safe harbour” provisions of the Digital Millennium Copyright Act are usually mentioned as another part of the legal context which encourages risk taking and innovation by protecting platform providers from legal responsibility for content carried on their networks. Google, however, does arguevii that Fair Use was vital to the successful emergence of the indexing and search technology which has turned it into one of the most valuable and dynamic companies in the world. Facebook likewise believes that a global business based upon user generated content required a exible legal view of copyright to enable it to emerge with its highly successful business model.
5.17 Does this mean, as is sometimes implied, that if only the UK could adopt Fair Use, East London would quickly become a rival to Silicon Valley? The answer to this is: certainly not. We
were told repeatedly in our American interviews, that the success of high technology companies
in Silicon Valley owes more to attitudes to business risk and investor culture, not to mention other complex issues of economic geography, than it does to the shape of IP law. In practice, it is dif cult to distinguish between the importance of different elements in successful industrial clusters of the Silicon Valley type. This does not mean that IP issues are unimportant for the success of innovative, high technology businesses. The Review’s judgment is that they are of growing importance and that they merit serious attention from the UK Government.
5.18 There are also learning points from elsewhere. Some other countries see a need for similar exibility to embrace new economic opportunities. The Philippines has a Fair Use doctrine, Israel adopted one in 2008, and Singapore uses a Fair Use type multi factor test within its fair dealing. The recently elected Irish Government has launched a review of copyright in the digital environment which will consider moving towards a Fair Use style doctrine, among other issues. But even if the UK were to set aside the powerfully stated objections of the UK creative sector and potentially in the future
join forces with the Irish Government or others to promote a Fair Use exception in Europe, the result would be a very protracted political negotiation, against a highly uncertain legal background. Evidence considered by the Review on the legal arguments about the feasibility of introducing Fair Use into the
vii Google argued this point to the Gowers review in 2006, and in its submission to the current Review.
Review of Intellectual Property and Growth 45
EU legal framework and so into the UK is violently diverse. It ranges from those who argue that it
could, in effect, be achieved within the terms of current EU law,viii to those who see this as de nitively
impossible.
5.19 The advice given to the Review by UK Government lawyers is that signi cant dif culties would arise in any attempt to transpose US style Fair Use into European law. It is against this background that the Review has stuck to its Terms of Reference and sought to isolate the particular bene ts for economic growth that Fair Use exceptions provide in the US, with a view to understanding how these bene ts can be most expeditiously obtained in the UK.
Copyright and Technological Change
5.20 Copyright law was never intended to be an instrument for regulating the development of consumer technology. But where it can block or permit developments or applications of technology that is precisely what it becomes. When this happens, copyright’s signi cant economic bene ts as a mechanism to incentivise individual creativity need to be measured against their negative impact in impeding innovation elsewhere in the economy. Copyright holders have a long history of resisting the emergence of technologies which threaten their interests, including audio tape recorders and VHS recorders. When the rst sound recording technologies emerged, some music rights holders opposed the recording of music. At that time, it was the recorded music industry who were seen as dangerous innovators.
5.21 For policy makers, working within the European system of speci c exceptions to copyright, the challenge has been to construct exceptions to allow the use of such technologies in a way that makes the exceptions technology neutral and so capable of adapting to subsequent waves of change. A successful example is the time shifting exception introduced in 1988, which allowed consumers to record TV programmes and view them later. Because it was not written in terms that speci ed video tape (the main technology of the time) it could be adapted to other technologies be they DVD-R or hard disks as they emerged. The exception was thus able to support innovation rather than inhibit it. But this is not always the case.
5.19 The advice given to the Review by UK Government lawyers is that signi cant dif culties would arise in any attempt to transpose US style Fair Use into European law. It is against this background that the Review has stuck to its Terms of Reference and sought to isolate the particular bene ts for economic growth that Fair Use exceptions provide in the US, with a view to understanding how these bene ts can be most expeditiously obtained in the UK.
Copyright and Technological Change
5.20 Copyright law was never intended to be an instrument for regulating the development of consumer technology. But where it can block or permit developments or applications of technology that is precisely what it becomes. When this happens, copyright’s signi cant economic bene ts as a mechanism to incentivise individual creativity need to be measured against their negative impact in impeding innovation elsewhere in the economy. Copyright holders have a long history of resisting the emergence of technologies which threaten their interests, including audio tape recorders and VHS recorders. When the rst sound recording technologies emerged, some music rights holders opposed the recording of music. At that time, it was the recorded music industry who were seen as dangerous innovators.
5.21 For policy makers, working within the European system of speci c exceptions to copyright, the challenge has been to construct exceptions to allow the use of such technologies in a way that makes the exceptions technology neutral and so capable of adapting to subsequent waves of change. A successful example is the time shifting exception introduced in 1988, which allowed consumers to record TV programmes and view them later. Because it was not written in terms that speci ed video tape (the main technology of the time) it could be adapted to other technologies be they DVD-R or hard disks as they emerged. The exception was thus able to support innovation rather than inhibit it. But this is not always the case.
Researching Malaria
About ve per cent of the world’s population is infected with malaria, a parasitic infection which kills
around 800,000 people annually (mainly children). Malaria is estimated to cause a reduction in economic growth in sub-Saharan Africa of up to 1.3 per cent per annum.4
During the rst half of the twentieth century tens of thousands of patients with neurosyphilis were
intentionally infected with malaria. This treatment, which cured a proportion of patients, is unique
in the history of medicine, and the resulting literature contains a wealth of knowledge relating to the biology of the disease. The Mahidol-Oxford Tropical Medicine Research Unit, based in Thailand and supported by the Wellcome Trust, is interested in making generally available to researchers a set of some 1,000 journal papers from the rst half of the twentieth century describing malaria in indigenous peoples, soldiers, and details of malaria therapy – a unique and unrepeatable experiment. This
About ve per cent of the world’s population is infected with malaria, a parasitic infection which kills
around 800,000 people annually (mainly children). Malaria is estimated to cause a reduction in economic growth in sub-Saharan Africa of up to 1.3 per cent per annum.4
During the rst half of the twentieth century tens of thousands of patients with neurosyphilis were
intentionally infected with malaria. This treatment, which cured a proportion of patients, is unique
in the history of medicine, and the resulting literature contains a wealth of knowledge relating to the biology of the disease. The Mahidol-Oxford Tropical Medicine Research Unit, based in Thailand and supported by the Wellcome Trust, is interested in making generally available to researchers a set of some 1,000 journal papers from the rst half of the twentieth century describing malaria in indigenous peoples, soldiers, and details of malaria therapy – a unique and unrepeatable experiment. This
viii Analysis provided to the Review by Professor Lionel Bently
Review of Intellectual Property and Growth 46
information offers potentially signi cant insights for the development of methods for preventing and
treating malaria today.
It is often impossible to establish who are the copyright holders in these articles, many of which appeared in long defunct journals – they are orphan works. Copying them to make them generally available in online form would break the law. Reproducing individual illustrations and diagrams in articles is not possible. If the orphan works problem could be overcome it would still not be possible to text mine them – copy the articles in order to run software seeking patterns and associations which would assist researchers – without permission from the copyright holders who can be found, since there is no exception covering text mining. Even overcoming those obstacles would not guarantee that text mining would be possible in future cases. For that any new text mining exception must also include provision to override any attempt to set it aside in the words of a contract.
The malaria papers remain unavailable to researchers because of rights clearing requirements which
appear out of all proportion to any bene t the rights holders would be likely to want if they could be
found. According to the Wellcome Trust, 87 per cent of the material housed in UK’s main medical research database (UK Pub Med Central) is unavailable for legal text and data mining.
treating malaria today.
It is often impossible to establish who are the copyright holders in these articles, many of which appeared in long defunct journals – they are orphan works. Copying them to make them generally available in online form would break the law. Reproducing individual illustrations and diagrams in articles is not possible. If the orphan works problem could be overcome it would still not be possible to text mine them – copy the articles in order to run software seeking patterns and associations which would assist researchers – without permission from the copyright holders who can be found, since there is no exception covering text mining. Even overcoming those obstacles would not guarantee that text mining would be possible in future cases. For that any new text mining exception must also include provision to override any attempt to set it aside in the words of a contract.
The malaria papers remain unavailable to researchers because of rights clearing requirements which
appear out of all proportion to any bene t the rights holders would be likely to want if they could be
found. According to the Wellcome Trust, 87 per cent of the material housed in UK’s main medical research database (UK Pub Med Central) is unavailable for legal text and data mining.
5.22 So the question is how to build in suf cient exibility to realise the bene ts of new
technologies, without losing the core bene ts to creators and to the economy that copyright provides.
In the US, Fair Use has successfully ful lled this role in a small number of cases which have been
extremely important for the development of consumer technologies, notably those relating to reverse
engineering,ixixhome video recording, and internet search caching and thumbnail images.
5.23 In order to make progress at the necessary rate, the UK needs to adopt a twin track approach: pursuing urgently speci c exceptions where these are feasible within the current EU framework, and, at the same time, exploring with our EU partners a new mechanism in copyright law to create a built-in adaptability to future technologies which, by de nition, cannot be foreseen in precise detail by today’s policy makers. This latter change will need to be made at EU level, as it does not fall within the current exceptions permitted under EU law. We strongly commend it to the Government: the alternative, a policy process whereby every bene cial new copying application of digital technology waits years for a bespoke exception, will be a poor second best.
5.24 We therefore recommend below that the Government should press at EU level for the introduction of an exception allowing uses of a work enabled by technology which do not directly trade on the underlying creative and expressive purpose of the work (this has been referred to as “non-consumptive” use5). The idea is to encompass the uses of copyright works where copying is really only carried out as part of the way the technology works. For instance, in data mining or search engine indexing, copies need to be created for the computer to be able to analyse; the technology provides a substitute for someone reading all the documents. This is not about overriding the aim of copyright – these uses do not compete with the normal exploitation of the work itself – indeed, they may facilitate it. Nor is copyright intended to restrict use of facts. That these new uses happen to fall within the scope of copyright regulation is essentially a side effect of how copyright has been de ned, rather than being directly relevant to what copyright is supposed to protect.6
ix Reverse engineering is, in effect, taking something apart to see how it works. To reverse engineer software, it is necessary to make a copy of it.
5.23 In order to make progress at the necessary rate, the UK needs to adopt a twin track approach: pursuing urgently speci c exceptions where these are feasible within the current EU framework, and, at the same time, exploring with our EU partners a new mechanism in copyright law to create a built-in adaptability to future technologies which, by de nition, cannot be foreseen in precise detail by today’s policy makers. This latter change will need to be made at EU level, as it does not fall within the current exceptions permitted under EU law. We strongly commend it to the Government: the alternative, a policy process whereby every bene cial new copying application of digital technology waits years for a bespoke exception, will be a poor second best.
5.24 We therefore recommend below that the Government should press at EU level for the introduction of an exception allowing uses of a work enabled by technology which do not directly trade on the underlying creative and expressive purpose of the work (this has been referred to as “non-consumptive” use5). The idea is to encompass the uses of copyright works where copying is really only carried out as part of the way the technology works. For instance, in data mining or search engine indexing, copies need to be created for the computer to be able to analyse; the technology provides a substitute for someone reading all the documents. This is not about overriding the aim of copyright – these uses do not compete with the normal exploitation of the work itself – indeed, they may facilitate it. Nor is copyright intended to restrict use of facts. That these new uses happen to fall within the scope of copyright regulation is essentially a side effect of how copyright has been de ned, rather than being directly relevant to what copyright is supposed to protect.6
ix Reverse engineering is, in effect, taking something apart to see how it works. To reverse engineer software, it is necessary to make a copy of it.
Review of Intellectual Property and Growth 47
Copyright Exceptions: UK Options
5.25 The future proo ng of the exceptions regime discussed above will, as noted, need to be negotiated at EU level and may, as is often the case with EU negotiations, take many years. In the interim, action should be taken at UK level to deal with those areas where the current UK regime has already become outdated.
Enabling New Research Tools
5.26 Text mining is one current example of a new technology which copyright should not inhibit, but does. It appears that the current non-commercial research “Fair Dealing” exception in UK law will not cover use of these tools under the current interpretation of “Fair Dealing”.xXxIn any event text mining
of databases is often excluded by the contract for accessing the database.7 The Government should introduce a UK exception in the interim under the non-commercial research heading to allow use of analytics for non-commercial use, as in the malaria example above, as well as promoting at EU level an exception to support text mining and data analytics for commercial use.
Private Copying / Format Shifting
5.25 The future proo ng of the exceptions regime discussed above will, as noted, need to be negotiated at EU level and may, as is often the case with EU negotiations, take many years. In the interim, action should be taken at UK level to deal with those areas where the current UK regime has already become outdated.
Enabling New Research Tools
5.26 Text mining is one current example of a new technology which copyright should not inhibit, but does. It appears that the current non-commercial research “Fair Dealing” exception in UK law will not cover use of these tools under the current interpretation of “Fair Dealing”.xXxIn any event text mining
of databases is often excluded by the contract for accessing the database.7 The Government should introduce a UK exception in the interim under the non-commercial research heading to allow use of analytics for non-commercial use, as in the malaria example above, as well as promoting at EU level an exception to support text mining and data analytics for commercial use.
Private Copying / Format Shifting
5.27 EU law permits Member States to introduce an exception for private copying, provided that fair
xiXIxi
compensation is paid. In other EU countries private copying exceptions are supported by levies on
copying equipment, but the schemes vary greatly in terms of the size of levies, what they are charged
on, and how the revenues are used.8
5.28 The UK has a thriving market for personal media devices which rely on private copying.
We see no economic argument for adding an extra charge to these devices in order to authorise reasonable private acts which are part of the normal use of devices. Indeed, without that copying, normal use of those devices would be largely restricted to playing music or lms bought online. We are not aware of strong evidence of harm to rights holders done by this kind of private copying in the normal course of using digital equipment to play works. There is considerable evidence of overall public bene ts from consumer use.
We see no economic argument for adding an extra charge to these devices in order to authorise reasonable private acts which are part of the normal use of devices. Indeed, without that copying, normal use of those devices would be largely restricted to playing music or lms bought online. We are not aware of strong evidence of harm to rights holders done by this kind of private copying in the normal course of using digital equipment to play works. There is considerable evidence of overall public bene ts from consumer use.
x
3.18 Beyond the EU there are two key global fora which specialise in IP: the World Intellectual Property Organisation (WIPO) and the Trade Related aspects of Intellectual Property rights (TRIPs) Council, which is part of the World Trade Organisation (WTO).
3.19 WIPO is the United Nations (UN) agency which administers most of the global IP treaties. In recent years, divisions between the developed and developing world have led to a general stalling of discussions on a range of issues. However, the current Director General, Francis Gurry, has shown a strong commitment to reforming the organisation, focusing it upon economic issues and improving its effectiveness since his appointment in 2008.
3.20 The TRIPs Agreement is one of the agreements underlying the WTO, and ties a number of the key provisions of international treaties into the WTO dispute resolution system, meaning that violation of those provisions can lead to trade sanctions within the WTO framework. Development issues have come to the fore in recent years, particularly at the beginning of the Doha trade round, when access to medicines for developing countries was a key issue in the trade talks.
3.21 With the basic structure of rights generally established by international treaties and in particular the TRIPs Agreement, attention in international negotiations – particularly Free Trade Agreements (FTAs) and most recently the Anti Counterfeiting Trade Agreement (ACTA) – has focused on effective enforcement of rights.
3.22 It is apparent from the sometimes heated nature of discussions in WIPO and the WTO that developing countries often feel the developed world is seeking to impose an approach to IP which serves the interest of advanced economies upon countries whose economies are at an earlier stage of development. The evidence based approach advocated in this review offers a better basis upon which to seek routes through these complex questions and con icts of interest.
3.23 The evidence suggests that developed economies such as the UK’s bene t from effective IPR regimes, and in particular from effective enforcement regimes, in markets for their goods. It also appears to be the case that for low income countries with a weak scienti c and technological infrastructure, stronger IP protection has little effect on their own economic growth and may even hinder it – while having no signi cant effect on the likelihood of developed country industry seeking to sell goods there. Access to infrastructure, nance and skills can be much more important to investment decisions in low income countries than the effectiveness of the IP regime. By contrast, for middle income and emerging economies such as China, improved enforcement regimes may yield better rewards both for domestic innovation and returns to foreign rms through foreign direct investment and technical cooperation.12
3.19 WIPO is the United Nations (UN) agency which administers most of the global IP treaties. In recent years, divisions between the developed and developing world have led to a general stalling of discussions on a range of issues. However, the current Director General, Francis Gurry, has shown a strong commitment to reforming the organisation, focusing it upon economic issues and improving its effectiveness since his appointment in 2008.
3.20 The TRIPs Agreement is one of the agreements underlying the WTO, and ties a number of the key provisions of international treaties into the WTO dispute resolution system, meaning that violation of those provisions can lead to trade sanctions within the WTO framework. Development issues have come to the fore in recent years, particularly at the beginning of the Doha trade round, when access to medicines for developing countries was a key issue in the trade talks.
3.21 With the basic structure of rights generally established by international treaties and in particular the TRIPs Agreement, attention in international negotiations – particularly Free Trade Agreements (FTAs) and most recently the Anti Counterfeiting Trade Agreement (ACTA) – has focused on effective enforcement of rights.
3.22 It is apparent from the sometimes heated nature of discussions in WIPO and the WTO that developing countries often feel the developed world is seeking to impose an approach to IP which serves the interest of advanced economies upon countries whose economies are at an earlier stage of development. The evidence based approach advocated in this review offers a better basis upon which to seek routes through these complex questions and con icts of interest.
3.23 The evidence suggests that developed economies such as the UK’s bene t from effective IPR regimes, and in particular from effective enforcement regimes, in markets for their goods. It also appears to be the case that for low income countries with a weak scienti c and technological infrastructure, stronger IP protection has little effect on their own economic growth and may even hinder it – while having no signi cant effect on the likelihood of developed country industry seeking to sell goods there. Access to infrastructure, nance and skills can be much more important to investment decisions in low income countries than the effectiveness of the IP regime. By contrast, for middle income and emerging economies such as China, improved enforcement regimes may yield better rewards both for domestic innovation and returns to foreign rms through foreign direct investment and technical cooperation.12
1.12 As advanced economies become ever more knowledge intensive, the stakes involved in
IP are rising. Profound and far from complete economic and technological changes mean that an appropriate and enabling IP framework has become one of the prerequisites for prosperity. IP related spending has come to dominate rms’ investment across the developed world while services now dominate these economies.9 UK rms spent £137 billion on intangible investment, or investment in IP, compared to £104 billion on xed assets in 2008 (see Figure 1.1).10 This investment in IP is worth 13 per cent of market gross value added (GVA), with almost half of it covered by IPRs.11 Global trade in patent and creative industry licences alone is now worth more than £600 billion a year, over ve per cent of all world trade - and rising.12
The Innovation Ecosystem
1.13 Small and young innovative rms are playing an increasing role in job creation. They represent only six per cent of UK rms with more than 10 employees but they have created 54 per cent of all new jobs since 2002,13 although churn amongst Small and Medium Enterprises (SMEs) remains high and their contribution to net employment is lower than this.14 At the same time, larger rms continue to play a crucial but changing role in innovation, with less emphasis on in-house R&D
IP are rising. Profound and far from complete economic and technological changes mean that an appropriate and enabling IP framework has become one of the prerequisites for prosperity. IP related spending has come to dominate rms’ investment across the developed world while services now dominate these economies.9 UK rms spent £137 billion on intangible investment, or investment in IP, compared to £104 billion on xed assets in 2008 (see Figure 1.1).10 This investment in IP is worth 13 per cent of market gross value added (GVA), with almost half of it covered by IPRs.11 Global trade in patent and creative industry licences alone is now worth more than £600 billion a year, over ve per cent of all world trade - and rising.12
The Innovation Ecosystem
1.13 Small and young innovative rms are playing an increasing role in job creation. They represent only six per cent of UK rms with more than 10 employees but they have created 54 per cent of all new jobs since 2002,13 although churn amongst Small and Medium Enterprises (SMEs) remains high and their contribution to net employment is lower than this.14 At the same time, larger rms continue to play a crucial but changing role in innovation, with less emphasis on in-house R&D
Figure 1.1 UK Business Investment, £bn
Source: NESTA (2011)
Review of Intellectual Property and Growth 12
and increased partnerships with smaller companies developing new technologies. These trends
are very apparent in, for example, the biotechnology and software sectors. Hence the relationship between SMEs and larger rms can be symbiotic: they provide each other with direct support for innovative thinking and work together on R&D. Larger rms then provide routes to new and emerging markets for smaller rms.
1.14 Another shift in the innovation ecosystem is the increasing internationalisation of research – in 2007 the top 50 European corporate R&D spenders spent $51 billion of their $117 billion total R&D spend overseas.15 This shift in the landscape changes the pattern of how rms have to manage their still largely nation-speci c IPRs and indicate the importance of policy makers taking an international approach to IP systems.
The Increasing Impacts of Transaction Costs
1.15 IP transaction costs have risen as rights users navigate an ever more densely populated landscape of increasingly subdivided rights. This presents a risk analogous to the problem
familiar in the world of planning, where small ownership interests can block value generating large developments. In the patent world, a surfeit of property rights can mean that the transaction cost of acquiring permission to innovate or create new work is prohibitively high. Research shows that in certain technology elds this can cause a kind of gridlock with innovation delayed or even prevented.16 Michael Heller, an American law professor, coined the phrase “tragedy of the anticommons” to describe this situation,17 which he says has resulted in signi cant blockages in areas such as medical research.18
1.16 In the copyright area transaction costs can create similar problems. Digital technologies have brought large reductions in the cost of copying, storage and distribution for words, music, images
and all forms of data. This has the effect of making transaction costs around rights a much more signi cant element in the business equation and so, potentially, a likelier barrier to licensing and follow on innovation.
The Transforming Effects of Digital Technology
1.17 Digital technology is probably the most important and transformative technology of our time. Because digital is fundamentally an information and communication technology (ICT), intellectual property rights lie at its heart. Not only has ICT adoption and use been among the strongest drivers
of growth,19 but it has pushed content and communication technology into new uses, meaning the IP system has become part of people’s daily lives.20 This has transformed us all into regular, if not daily, copyright creators and allows rms to capture information on customers and transactions in ways that help them experiment in real time with business models and marketing approaches.21 Digital also gives rms the opportunity to market themselves locally, nationally and internationally at relatively low cost, reaching previously inaccessible customers. These are already unprecedentedly global markets, even though the internet has yet to be used directly by two thirds of the world’s population.22
are very apparent in, for example, the biotechnology and software sectors. Hence the relationship between SMEs and larger rms can be symbiotic: they provide each other with direct support for innovative thinking and work together on R&D. Larger rms then provide routes to new and emerging markets for smaller rms.
1.14 Another shift in the innovation ecosystem is the increasing internationalisation of research – in 2007 the top 50 European corporate R&D spenders spent $51 billion of their $117 billion total R&D spend overseas.15 This shift in the landscape changes the pattern of how rms have to manage their still largely nation-speci c IPRs and indicate the importance of policy makers taking an international approach to IP systems.
The Increasing Impacts of Transaction Costs
1.15 IP transaction costs have risen as rights users navigate an ever more densely populated landscape of increasingly subdivided rights. This presents a risk analogous to the problem
familiar in the world of planning, where small ownership interests can block value generating large developments. In the patent world, a surfeit of property rights can mean that the transaction cost of acquiring permission to innovate or create new work is prohibitively high. Research shows that in certain technology elds this can cause a kind of gridlock with innovation delayed or even prevented.16 Michael Heller, an American law professor, coined the phrase “tragedy of the anticommons” to describe this situation,17 which he says has resulted in signi cant blockages in areas such as medical research.18
1.16 In the copyright area transaction costs can create similar problems. Digital technologies have brought large reductions in the cost of copying, storage and distribution for words, music, images
and all forms of data. This has the effect of making transaction costs around rights a much more signi cant element in the business equation and so, potentially, a likelier barrier to licensing and follow on innovation.
The Transforming Effects of Digital Technology
1.17 Digital technology is probably the most important and transformative technology of our time. Because digital is fundamentally an information and communication technology (ICT), intellectual property rights lie at its heart. Not only has ICT adoption and use been among the strongest drivers
of growth,19 but it has pushed content and communication technology into new uses, meaning the IP system has become part of people’s daily lives.20 This has transformed us all into regular, if not daily, copyright creators and allows rms to capture information on customers and transactions in ways that help them experiment in real time with business models and marketing approaches.21 Digital also gives rms the opportunity to market themselves locally, nationally and internationally at relatively low cost, reaching previously inaccessible customers. These are already unprecedentedly global markets, even though the internet has yet to be used directly by two thirds of the world’s population.22
Review of Intellectual Property and Growth 13
1.18 Because copyright governs the right to own and use data and information, as well as the output of authors, musicians, photographers and lm makers, copyright law is now of primary interest to players across the whole of the knowledge economy, not just those involved in the creative industries. Digital technologies are based on copying, so copyright becomes their regulator: a role it was never designed to perform.
Services and the New Innovation Process
1.19 The services which provide most jobs in advanced economies are being changed in other ways by digital technology. Innovations in the insurance industry, for example, rely upon improved data from medicine, demographics and pro ling of individual customer lifestyles. Risk calculations applied to premiums for farmers and event organisers rely upon improved data analysis of weather patterns. Sophisticated assessment of safer cars and better roads can be factored into motor insurance judgments. Understanding these connections and computing the related business risks requires knowledge of what happens at boundaries between systems and the ability to analyse large quantities of data from what, until recently, were separate industries and sectors.
1.20 Collaborative and more “open” distributed innovation processes are especially important because services are not produced in the laboratories and factories of the industrial R&D arena where they can be tested and optimised. Services are usually produced at the point at which they are consumed: the act of consumption rather than invention is the focal point for innovation.
1.21 New services are therefore developed using a “market facing” approach, often connected
to information databases generated by people and organisations that articulate and express their requirements and demands as they experience the innovation. This is sometimes described as a more democratic approach to innovation, where companies trial different approaches – such as beta versions of web pages – and respond to user feedback. It also, however, frequently relies upon the ability to analyse large and complex volumes of data copied between machines, potentially raising multiple copyright issues.
1.22 The nature of services innovation implies that answers to technical problems will not lie exclusively within research institutions or companies with proprietary R&D cultures and the means to manage and protect IP. Instead, they will emerge through integration of ideas from a wide range of organisations, some of whom may consider managing IPR to be an unacceptable obstacle in a high value business, raising further challenges to traditional concepts of ownership of IP.
The Next Wave – Cloud Computing and the Internet of Things
1.23 The next wave of digital technologies and services is likely to create opportunities and disruptions in a very broad range of industries. The internet of things – billions of devices and components with an internet address, enabling them to communicate in massive sensing systems – coupled with cloud computing, will underpin more sophisticated applications, and thereby a host of new services: digital wallets will replace cheques and credit cards; personalised electronic adverts will compete with static hoardings; transport, electricity, power and water systems will provide a continuous
Services and the New Innovation Process
1.19 The services which provide most jobs in advanced economies are being changed in other ways by digital technology. Innovations in the insurance industry, for example, rely upon improved data from medicine, demographics and pro ling of individual customer lifestyles. Risk calculations applied to premiums for farmers and event organisers rely upon improved data analysis of weather patterns. Sophisticated assessment of safer cars and better roads can be factored into motor insurance judgments. Understanding these connections and computing the related business risks requires knowledge of what happens at boundaries between systems and the ability to analyse large quantities of data from what, until recently, were separate industries and sectors.
1.20 Collaborative and more “open” distributed innovation processes are especially important because services are not produced in the laboratories and factories of the industrial R&D arena where they can be tested and optimised. Services are usually produced at the point at which they are consumed: the act of consumption rather than invention is the focal point for innovation.
1.21 New services are therefore developed using a “market facing” approach, often connected
to information databases generated by people and organisations that articulate and express their requirements and demands as they experience the innovation. This is sometimes described as a more democratic approach to innovation, where companies trial different approaches – such as beta versions of web pages – and respond to user feedback. It also, however, frequently relies upon the ability to analyse large and complex volumes of data copied between machines, potentially raising multiple copyright issues.
1.22 The nature of services innovation implies that answers to technical problems will not lie exclusively within research institutions or companies with proprietary R&D cultures and the means to manage and protect IP. Instead, they will emerge through integration of ideas from a wide range of organisations, some of whom may consider managing IPR to be an unacceptable obstacle in a high value business, raising further challenges to traditional concepts of ownership of IP.
The Next Wave – Cloud Computing and the Internet of Things
1.23 The next wave of digital technologies and services is likely to create opportunities and disruptions in a very broad range of industries. The internet of things – billions of devices and components with an internet address, enabling them to communicate in massive sensing systems – coupled with cloud computing, will underpin more sophisticated applications, and thereby a host of new services: digital wallets will replace cheques and credit cards; personalised electronic adverts will compete with static hoardings; transport, electricity, power and water systems will provide a continuous
Review of Intellectual Property and Growth 14
real time update of their performance and user status. Firms will offer us advice and services built on analysis of this kind of data – assuming IP law allows them to copy and manipulate it.
1.24 The convergence of technologies is likely to increase the range of context aware, location based services available to and about citizens. In some cases digital content may be transferred
from one system to another automatically as people or businesses interact using digital devices. Improvements in machine to machine learning, for example, may create the possibility for further automation in transfer of content. Interactions may therefore become implicitly as well as explicitly monitored and measured. This data will form new and valuable content to be traded within and between systems in the delivery of new services. Data on context and activities transferred to adjacent systems may be repurposed and traded, giving rise to a range of issues relating to copyright.
1.25 These issues are already visible – as the Review goes to press, concerns are being raised by the discovery that the Apple iPhone tracks and stores its location continuously, giving a complete picture of its user’s movements for later retrieval, with legal justi cation in a short paragraph in a long “terms of use” agreement.23 Questions of IP, privacy, and security are converging in ways that will, over time, present sharp challenges to the current legal framework.
The Work of the Review
1.26 The full shape and impact of this coming revolution in innovation models is, by de nition, unknowable.
1.27 The point is that the UK’s system of IP will be tested by some version of these scenarios and it will need to be ready to adapt. The challenge is to make sure that the IP framework is exible enough to facilitate, rather than obstruct, the capacity for digital technology to deliver growth. This needs to
be accomplished in a way that simultaneously protects, as far as possible, the position of existing communities of rights holders, notably the extraordinary diversity of individuals and rms which make up the UK’s highly successful creative industries.
1.28 Digital technology has already generated enormous turbulence among creative businesses. That is certain to continue, until digital business models establish themselves around a new settlement for the terms and conditions on which digital goods and services are priced in global digital markets. As digital’s full impact extends across the rest of the economy, it is impossible to imagine that the line between IP protection which merits public support and that which does not will remain static.
1.29 The Review has set itself the challenge of identifying 10 recommendations to ensure that
UK policy on IP moves in a direction which will enable the necessary adaptation to take place. The explicit goal of all the recommendations in this review is to support dynamic UK businesses, within and beyond the creative sector, which will deliver innovation, growth and jobs in the years to come.
1.24 The convergence of technologies is likely to increase the range of context aware, location based services available to and about citizens. In some cases digital content may be transferred
from one system to another automatically as people or businesses interact using digital devices. Improvements in machine to machine learning, for example, may create the possibility for further automation in transfer of content. Interactions may therefore become implicitly as well as explicitly monitored and measured. This data will form new and valuable content to be traded within and between systems in the delivery of new services. Data on context and activities transferred to adjacent systems may be repurposed and traded, giving rise to a range of issues relating to copyright.
1.25 These issues are already visible – as the Review goes to press, concerns are being raised by the discovery that the Apple iPhone tracks and stores its location continuously, giving a complete picture of its user’s movements for later retrieval, with legal justi cation in a short paragraph in a long “terms of use” agreement.23 Questions of IP, privacy, and security are converging in ways that will, over time, present sharp challenges to the current legal framework.
The Work of the Review
1.26 The full shape and impact of this coming revolution in innovation models is, by de nition, unknowable.
1.27 The point is that the UK’s system of IP will be tested by some version of these scenarios and it will need to be ready to adapt. The challenge is to make sure that the IP framework is exible enough to facilitate, rather than obstruct, the capacity for digital technology to deliver growth. This needs to
be accomplished in a way that simultaneously protects, as far as possible, the position of existing communities of rights holders, notably the extraordinary diversity of individuals and rms which make up the UK’s highly successful creative industries.
1.28 Digital technology has already generated enormous turbulence among creative businesses. That is certain to continue, until digital business models establish themselves around a new settlement for the terms and conditions on which digital goods and services are priced in global digital markets. As digital’s full impact extends across the rest of the economy, it is impossible to imagine that the line between IP protection which merits public support and that which does not will remain static.
1.29 The Review has set itself the challenge of identifying 10 recommendations to ensure that
UK policy on IP moves in a direction which will enable the necessary adaptation to take place. The explicit goal of all the recommendations in this review is to support dynamic UK businesses, within and beyond the creative sector, which will deliver innovation, growth and jobs in the years to come.
Review of Intellectual Property and Growth 24
3.24 The UK recently13 announced that it would be appointing IP attachés in a number of countries including China and India, re ecting the importance to the UK of sound IP frameworks in these countries, as well as in assisting IP intensive UK rms to exploit new markets. Deployment of evidence-based positions in global negotiations can move parties further from entrenched positions, towards an overriding objective of developing a mutually bene cial world trade in intangibles. This represents a high strategic priority for the United Kingdom.
The Patent Cooperation Treaty
3.25 One area where the international patent system is not functioning well enough is the operation of the Patent Cooperation Treaty system. This system, administered by WIPO, provides a single point of entry to the patent systems of 142 contracting states via a single application. Applications are sent to one of a number of patent of ces which have been designated as “International Search Authorities” for a search to determine if the invention claimed is novel or inventive. The results of the search
are then sent, along with the application, to the individual of ce of the country the applicant wants
protection in, for grant or refusal.
3.26 In theory, this system offers a highly ef cient way of processing patent applications; in particular, by providing a way of only requiring one search worldwide. Unfortunately, as documented by WIPO,14 national of ces have proved reluctant to commit themselves to relying on the international searches, on the grounds that they doubt the quality of the examinations meets their own standards.
The Patent Cooperation Treaty
3.25 One area where the international patent system is not functioning well enough is the operation of the Patent Cooperation Treaty system. This system, administered by WIPO, provides a single point of entry to the patent systems of 142 contracting states via a single application. Applications are sent to one of a number of patent of ces which have been designated as “International Search Authorities” for a search to determine if the invention claimed is novel or inventive. The results of the search
are then sent, along with the application, to the individual of ce of the country the applicant wants
protection in, for grant or refusal.
3.26 In theory, this system offers a highly ef cient way of processing patent applications; in particular, by providing a way of only requiring one search worldwide. Unfortunately, as documented by WIPO,14 national of ces have proved reluctant to commit themselves to relying on the international searches, on the grounds that they doubt the quality of the examinations meets their own standards.
Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain
aspects of copyright and related rights in the information society (The so called InfoSoc Directive)
Member States may provide for exceptions or limitations to the reproduction right provided for in Article 2 in the following cases:
(b) in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures
referred to in Article 6 to the work or subject-matter concerned;
Member States may provide for exceptions or limitations to the reproduction right provided for in Article 2 in the following cases:
(b) in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures
referred to in Article 6 to the work or subject-matter concerned;
Review of Intellectual Property and Growth 48
5.29 There is a recent example of the detrimental effects of the UK’s failure to keep up with
developments in consumer technology. The Brennan J7 music player, the brainchild of Martin
Brennan, a young British entrepreneur, enables consumers to store music from CDs which they have
purchased on its hard disk, making them easily accessible for playing from one point. It is hard to
see this product as an undesirable innovation, or to see it as requiring actions any different than those
already done by millions of consumers with other digital music players. However the Advertising
Standards Authority has ruled (understandably, given where the law stands) that advertisements for
the Brennan should include a warning that using it involves copyright infringement. The UK cannot
afford to place unnecessary obstacles in the way of innovation in consumer products.
“My company is possibly one of the best examples of the sort of SME that can help lead this country
out of the recession – 10,000% growth in 30 months during the recession – but out of date legislation
and red tape may sabotage my growth. It is no exaggeration to say that this matter has caused me
more sleepless nights and wasted days than any other in my company’s history... Aside from legal
headaches I face the cost of reassuring customers that record companies will not sue them. It’s daft
because US companies Apple and Microsoft have been selling format shifting products in the UK for a
decade.” Martin Brennan, J7 Music Player designer
“As a matter of general principle the exception should, on the one hand, be drawn as broadly as
possible to embrace all those acts of format shifting which everyone knows are happening as a matter
of course, and that most reasonable people believe already are, or should be, permissible. On the
other hand, it is imperative the exception remains narrow and suf ciently limited so that it causes no
signi cant harm to rights holders and, as such does not give rise to a requirement for payment of
compensation in accordance with the EU Copyright Directive 2001/29/EC.” Nokia submission
5.30 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 bene t 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 de nition not
entail a loss for right holders.
5.31 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 prices accordingly.
Other Copyright Exceptions
5.32 There are some other exceptions which could be implemented in the UK without changes to EU law and which would be bene cial to the UK economy: extension of the non-commercial research exception to all forms of copyright work; extension of archiving; and an exception for parody and pastiche.
5.31 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 prices accordingly.
Other Copyright Exceptions
5.32 There are some other exceptions which could be implemented in the UK without changes to EU law and which would be bene cial to the UK economy: extension of the non-commercial research exception to all forms of copyright work; extension of archiving; and an exception for parody and pastiche.
Review of Intellectual Property and Growth 49
5.33 We have already argued that research should not be unnecessarily impeded by copyright in
relation to data mining. The research exception needs to be modernised to cover the full range of
media.
5.34 We have noted too that libraries are inhibited in preserving content through digitisation, that they cannot preserve all categories of works and that as a result, works continue to deteriorate. This makes no sense and it should be uncontroversial to deliver the necessary change by extending the archiving exception, including to cover fully audio visual works and sound recordings. Supporting the potential of new technologies for archiving will prevent the loss of works, and could open the way to new services based on digital use of those archives. We may well nd that this public digital archive turns out to have considerable economic as well as social and cultural value, but this will not happen if our cultural institutions are prevented from securing it through digitisation.
5.35 As for an exception in copyright law to permit parody, the most important issues in that area concern freedom of expression and in that respect sit outside this review’s terms of reference. Here too, however, there is an economic link. Video parody is today becoming part and parcel of the interactions of private citizens, often via social networking sites, and encourages literacy in multimedia expression in ways that are increasingly essential to the skills base of the economy. Comedy is big business.
5.36 A good example of homemade parody is Newport State of Mind (based upon Empire State of Mind, a hit song by the American rapper Jay-Z). The music video parody, written by M J Delaney and performed by Alex Warren and Terema Wainwright, achieved great success when posted on YouTube last year, but resulted in action by the right owners to exercise their legitimate authority under UK copyright law to have it removed from the internet. In the US, many previous parodies of the same original song have not attracted such action, perhaps because US Fair Use can protect parodies. In practice, the offending video has remained both visible and popular, giving rise to further parodies in response. One of these was from the Newport rapper Goldie Lookin’ Chain; another by this year’s BBC Comic Relief team, featuring a galaxy of Welsh stars from John Humphrys to Bonnie Tyler. Given that the IPO has its headquarters in Newport (a point un-noted by all of the parodists) future PhD students may well nd deeper layers of meaning in this sequence of creations, which together amount to a persuasive satire upon the confusion of UK copyright law.
5.37 Summing up, the case for introducing and updating these exceptions is strong in both cultural and economic terms. Using the full range of these exceptions will reduce transaction costs and stimulate new works in growing sectors of the creative economy. A healthy creative economy should embrace creativity in all its aspects. A legally sound structure would not be mocked by pervasive infringement by otherwise law abiding citizens and organisations with the stature of the BBC.
5.38 The failure to adopt these exceptions, despite the previous Government’s acceptance of Gowers’ recommendation ve years ago, is a clear demonstration of the failure of the copyright framework to adapt. The Government must ensure that this failure is remedied.
5.34 We have noted too that libraries are inhibited in preserving content through digitisation, that they cannot preserve all categories of works and that as a result, works continue to deteriorate. This makes no sense and it should be uncontroversial to deliver the necessary change by extending the archiving exception, including to cover fully audio visual works and sound recordings. Supporting the potential of new technologies for archiving will prevent the loss of works, and could open the way to new services based on digital use of those archives. We may well nd that this public digital archive turns out to have considerable economic as well as social and cultural value, but this will not happen if our cultural institutions are prevented from securing it through digitisation.
5.35 As for an exception in copyright law to permit parody, the most important issues in that area concern freedom of expression and in that respect sit outside this review’s terms of reference. Here too, however, there is an economic link. Video parody is today becoming part and parcel of the interactions of private citizens, often via social networking sites, and encourages literacy in multimedia expression in ways that are increasingly essential to the skills base of the economy. Comedy is big business.
5.36 A good example of homemade parody is Newport State of Mind (based upon Empire State of Mind, a hit song by the American rapper Jay-Z). The music video parody, written by M J Delaney and performed by Alex Warren and Terema Wainwright, achieved great success when posted on YouTube last year, but resulted in action by the right owners to exercise their legitimate authority under UK copyright law to have it removed from the internet. In the US, many previous parodies of the same original song have not attracted such action, perhaps because US Fair Use can protect parodies. In practice, the offending video has remained both visible and popular, giving rise to further parodies in response. One of these was from the Newport rapper Goldie Lookin’ Chain; another by this year’s BBC Comic Relief team, featuring a galaxy of Welsh stars from John Humphrys to Bonnie Tyler. Given that the IPO has its headquarters in Newport (a point un-noted by all of the parodists) future PhD students may well nd deeper layers of meaning in this sequence of creations, which together amount to a persuasive satire upon the confusion of UK copyright law.
5.37 Summing up, the case for introducing and updating these exceptions is strong in both cultural and economic terms. Using the full range of these exceptions will reduce transaction costs and stimulate new works in growing sectors of the creative economy. A healthy creative economy should embrace creativity in all its aspects. A legally sound structure would not be mocked by pervasive infringement by otherwise law abiding citizens and organisations with the stature of the BBC.
5.38 The failure to adopt these exceptions, despite the previous Government’s acceptance of Gowers’ recommendation ve years ago, is a clear demonstration of the failure of the copyright framework to adapt. The Government must ensure that this failure is remedied.
Review of Intellectual Property and Growth 50
Making Exceptions Mandatory
5.39 At present it is possible for rights holders licensing rights to insist, through licensing contracts, that the exceptions established by law cannot be exercised in practice.
5.39 At present it is possible for rights holders licensing rights to insist, through licensing contracts, that the exceptions established by law cannot be exercised in practice.
“A recent study analysed 100 contracts offered to the British Library and found numerous examples
of the diversity of contracts and licences, as well as demonstrating that contracts and licences often override the exceptions and limitations allowed in copyright law. This imbalance must be addressed, as licences should never substitute for legislation on core maters such as exceptions and limitations. The licensing framework now underpins much of the content online and contracts rather than copyright dictate how content can be used. Legislation must be amended to ensure that contracts are prevented from overriding copyright exceptions.” LACA submission (Libraries and Archives Copyright Alliance)
of the diversity of contracts and licences, as well as demonstrating that contracts and licences often override the exceptions and limitations allowed in copyright law. This imbalance must be addressed, as licences should never substitute for legislation on core maters such as exceptions and limitations. The licensing framework now underpins much of the content online and contracts rather than copyright dictate how content can be used. Legislation must be amended to ensure that contracts are prevented from overriding copyright exceptions.” LACA submission (Libraries and Archives Copyright Alliance)
5.40 Applying contracts in this way means a rights holder can rewrite the limits the law has set
on the extent of the right conferred by copyright. It creates the risk that should Government decide that UK law will permit private copying or text mining, these permissions could be denied by contract. Where an institution has different contracts with a number of providers, many of the contracts overriding exceptions in different areas, it becomes very dif cult to give clear guidance to users on what they are permitted. Often the result will be that, for legal certainty, the institution will restrict access to the most restrictive set of terms, signi cantly reducing the provisions for use established by law. Even if unused, the possibility of contractual override is harmful because it replaces clarity (“I have the right to make a private copy”) with uncertainty (“I must check my licence to con rm that I have the right to make a private copy”). The Government should change the law to make it clear no exception to copyright can be overridden by contract.
on the extent of the right conferred by copyright. It creates the risk that should Government decide that UK law will permit private copying or text mining, these permissions could be denied by contract. Where an institution has different contracts with a number of providers, many of the contracts overriding exceptions in different areas, it becomes very dif cult to give clear guidance to users on what they are permitted. Often the result will be that, for legal certainty, the institution will restrict access to the most restrictive set of terms, signi cantly reducing the provisions for use established by law. Even if unused, the possibility of contractual override is harmful because it replaces clarity (“I have the right to make a private copy”) with uncertainty (“I must check my licence to con rm that I have the right to make a private copy”). The Government should change the law to make it clear no exception to copyright can be overridden by contract.
Recommendation: Limits to copyright.
Government should rmly resist over-regulation of activities which do not prejudice the central objective of copyright, namely the provision of incentives to creators. Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving. The UK should also promote at EU level an exception to support text and data analytics. The UK should give a lead at EU level
to develop a further copyright exception designed to build into the EU framework adaptability to new technologies. This 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. The Government should also legislate to ensure that these and other copyright exceptions are protected from override by contract.
Government should rmly resist over-regulation of activities which do not prejudice the central objective of copyright, namely the provision of incentives to creators. Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving. The UK should also promote at EU level an exception to support text and data analytics. The UK should give a lead at EU level
to develop a further copyright exception designed to build into the EU framework adaptability to new technologies. This 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. The Government should also legislate to ensure that these and other copyright exceptions are protected from override by contract.
Review of Intellectual Property and Growth 51
5.41 The approach advocated here stops short of advocating the big once and for all x of the
UK promoting a Fair Use copyright exception to the EU, as recommended by Google and under examination by the Irish Government. We do so because we believe that the economic bene ts
of a more adaptive copyright regime are more likely to be attained in practice by the approach recommended above and because there are genuine legal doubts about the viability of a US case law based legal mechanism in a European context.
5.42 It is this review’s judgment that lack of progress in achieving an adaptive copyright framework will impose mounting costs on the UK and indeed the EU economy. Adjustment will take place sooner or later. The Review urges the Government to give a constructive and engaged lead to a process from which the UK has much to gain.
UK promoting a Fair Use copyright exception to the EU, as recommended by Google and under examination by the Irish Government. We do so because we believe that the economic bene ts
of a more adaptive copyright regime are more likely to be attained in practice by the approach recommended above and because there are genuine legal doubts about the viability of a US case law based legal mechanism in a European context.
5.42 It is this review’s judgment that lack of progress in achieving an adaptive copyright framework will impose mounting costs on the UK and indeed the EU economy. Adjustment will take place sooner or later. The Review urges the Government to give a constructive and engaged lead to a process from which the UK has much to gain.
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