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Consumer Focus Social and Commercial Innovation Through Copyright

Consumer Focus Social and Commercial Innovation Through Copyright

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Published by digecon
Consumer Focus look at business, copyright and creativity
Consumer Focus look at business, copyright and creativity

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Published by: digecon on Oct 23, 2010
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06/07/2011

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A Copyright strategy for socialand commercial innovation
Copyright law exists to encourage creativity and innovation. Together with copyright licensing it forms theregulatory framework that underpins the creation, mass production, distribution and consumption of creativecontent. As such copyright law and licensing should foster entrepreneurism, economic growth and social andcommercial innovation. Consumers have a strong interest in competitive markets and a well-functioningcopyright system that encourages the creation and distribution of creative content, and does not imposeunnecessary cost on businesses and consumers. Copyright confers monopoly privileges on copyright ownerswhich can be used to impose inflated retail prices on consumers, deny artists an equitable remuneration andrestrict competition in other industries.
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It is therefore important that the copyright system strikes theappropriate balance.
Summary of recommendations
The UK copyright system does not currently achieve this balance nor support a dynamic market in digitalcontent that meets consumer demands and rewards innovation. Consumer Focus would like to see the IPOdeveloping a copyright innovation strategy that goes hand in glove with the BIS strategy for economic growth.As part of that the IPO should establish close working relationship with the OFT and the CompetitionCommission to ensure a competitive and innovative market for the benefit of consumers.Currently the fragmented copyright licensing system does not allow online and mobile content providers torespond effectively to consumer demand. To remedy this we recommend that the IPO establishes whether thetime and resources currently spent by online and mobile content providers to obtain copyright licenses hindersinnovation. We also support ongoing IPO efforts to make the Copyright Tribunal an effective avenue of redressfor copyright licensing disputes. To resolve the unnecessary fragmentation of rights clearance we recommenda consolidation of the copyright licensing system and in particular, the merging of the two music collectingsocieties. The Government should also work with the European institutions to ensure that the proposeddirective on collective rights management contains a robust regulatory framework to facilitate the developmentof a competitive market. Working licensing solutions exist in other countries to unlock copyrighted works forwhich the copyright owner cannot be located, and we ask the Government to work with European institutionsand at UK level to improve access to orphan works through extended collective licensing.The limited exceptions that exist in UK copyright law for the benefit of consumers are largely outdated and nolonger in line with everyday use of digital technologies. Recent attempts to update UK copyright law havestalled due to lack of economic evidence base. We therefore ask the IPO to establish the economic evidencebase for copyright exceptions such as time-shifting and format-shifting, particularly in relation to the economicimpact on copyright owners and other industries. We also ask the IPO to consider the case for simplifying andconsolidating the various existing copyright exceptions in the Copyright, Designs and Patents Act 1988.The overly enforcement-focused approach adopted by some copyright owners has led to moves towards acriminalisation of non-commercial copyright infringement by consumers. Consumer Focus does not support thisapproach and would like to see copyright owners focus on re-engaging consumers into the growing legal marketin copyrighted content. We therefore ask the IPO to limit the remit of the IP Crime Group to criminal offences,ensure that it operates in a transparent manner, and invite consumer groups to join the group if the IP CrimeGroup decides to work on infringing activities by consumers. We also urge the UK Government to ask for non-commercial infringement by consumers to be removed from the scope of the Anti-Counterfeit Trade Agreement.
 
1
See 
,Monopolies and Mergers Commission's Investigation, 1994
 
Social and commercialinnovation through copyright
September 2010
 
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The role of the IPO in encouraging an innovative market
The UK has a significant consumer market for digital content, including music, games and more recently e -books. Consumer demand has been a key driver for the development of online and mobile content deliveryand in turn new business models. The creative industry increasingly depends on innovation in the informationand communications technology (ICT) industry, and both industries are largely made up of small and medium-sized enterprises (SMEs). As such they will benef
it from the Government‟s recently announced strategy to
encourage new start-ups and support SMEs. Ideally the copyright system supports a dynamic demand andsupply cycle, driving and financially rewarding innovation. We therefore recommend that the IntellectualProperty Office (IPO) works closely with the Department for Business, Innovation and Skills (BIS) to establisha copyright innovation strategy aligned with BIS initiatives to build an entrepreneurial culture and promotecompetition, thus growing UK i
ndustries‟ comparative advantage internationally. We recommend that the IPOalso implements Gowers‟ recommendation for increased co
-operation between the IPO, the Office of FairTrading (OFT) and the Competition Commission to ensure that competition and copyright policy togetherfoster competitive and innovative markets for the benefit of consumers.
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Consumer Focus recommendations:
The IPO should:
 establish a copyright innovation strategy that is aligned with the BIS strategy for economic growth
 
establish close working relationship with the OFT and the Competition Commission to ensure acompetitive and innovative market for the benefit of consumers
 Balancing copyright law: User rights and exceptions
Exceptions to, and limitations on, copyright owners‟ exclusive rights are an important mec
hanism for achieving
balance in copyright law; they are the expression of the consumer „fair use‟ rights. Existing exceptions to
copyright in UK law, also known as fair dealing provisions, have a key role in providing consumers withmeaningful access to copyrighted content. As such they protect the public interest, allow for social andcommercial innovation.
The „fair dealing‟ provision on criticism, review and news reporting is central to the functioning of the UK news
media, and the exceptions for the benefit of visually impaired people allow for the creation of accessibleformats which would otherwise not be provided by the market. Technology neutral exceptions, such as that ontime-shifting, allow copyright law to remain relevant as technology develops and in turn drive newtechnological innovation. The time-shifting exception was initially introduced in 1988 in response to consumersusing video and cassette recorders to tape broadcasts to watch/listen to at a more convenient time.Consumers now time-shift using digital recording devices (DRDs), which entered the UK market in 2000, and
are frequently provided as part of „plus box‟ subscription package such as BSkyB‟s Sky+ and Virgin Media‟s
V+. More than a quarter of UK households now own a DRD and the time-shifting exception has benefitedconsumers as well as allowing media and ICT companies to establish a lucrative new market that meetsconsumer demand.Our research shows that the majority of consumers do not know what user rights they have under existingcopyright law and are confused about what is and what is not legal for them to do.
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Since its enactment, theCopyright, Designs and Patents Act 1988 (CDPA) has been criticised for undue complexity. As various EU andinternational provisions have been amended into the CDPA over time it has become incomprehensible to non-lawyers. Consumers, ICT start-ups, SMEs in the creative industries and creators are subject to the regulatoryregime established by the CDPA and all stakeholders would benefit from the simplification and rationalisationof the CDPA.
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We therefore ask the Government to consider the introduction of a fair dealing provision onnon-commercial use for consumers. Such a fair dealing provision would allow consumers to copy and usecopyrighted content they have purchased for non-commercial purposes, such as format-shifting and back-up,but would not allow consumers to distribute any copies to the public. It would help to update and future proof
2
,HM Treasury, 2006, p.95
3
,Consumer Focus, February 2010
4
See 
,Strategic Advisory Board for IntellectualProperty Policy, 26 February 2010
 
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UK copyright law and it would allow various existing copyright exceptions in the CDPA to be consolidated.Providing a clear copyright framework for consumers, telling them what they can and cannot legally do withcopyrighted content, will aid respect for copyright law. It would also make the UK a more attractive businesslocation for ICT companies and the creative industries.Technology companies are bound by copyright law and will develop consumer products around copyrightexceptions. The iPod, for example, is designed around consumers format-shifting their existing musiccollection from CDs and MP3s into Advanced Audio Coding (AAC)
,
which is the standard audio file format foriPods and iPhones. Format-shifting is legal in the US and continental European countries, but it remains illegalin the UK, and therefore it is unlikely that the iPod could have been developed by a UK based company. The
UK‟s outdated copyright law creates legal uncertainty for any business that wishes to develop or market
innovative ways of delivering copyrighted content to UK consumers. This stunts innovation among UK-basedtechnology SMEs, who may not be able to afford extensive legal advice and are likely to decide againstdeveloping or marketing a product rather than risk being sued. The UK has thus far failed to update copyrightlaw to the full extent possible under EU law, and specifically the InfoSoc Directive. This creates absurdsituations for consumers, who are able to purchase hardware and software designed for activities that areillegal in this country, and puts UK based companies at a disadvantage.Attempts by the previous Government to update UK copyright law in line with EU law have failed, principallybecause of a complete lack of economic evidence base, resulting in prolonged disputes between stakeholders.U
nder the InfoSoc Directive, „private use‟ excep
tions have to comply with the
„fair compensation principle‟ so
that copyright owners are compensated fairly for the economic damage or loss resulting from private copying.
Following Gowers‟ recommendation, the
 
previous Government‟s attempts to introduce a format
-shiftingexception
 –
a private use exception under EU law
 –
 
stalled due to the music industry‟s demand for a levy to
compensate for alleged economic damage resulting from format-shifting by consumers. We thereforeencourage the IPO to quantify the economic damage and benefit to copyright owners from private use such asformat-shifting and time-shifting, and to quantify the economic impact on other industries arising from suchprovisions. Such an evidence base would allow the Government to move forward on the question of format-
shifting and other „private uses‟ of copyrighted content. Any changes to copyright law will impact on a wide
range of stakeholders and the economy at large, therefore we ask the IPO to establish a sound andindependent economic evidence base for any changes to copyright law going forward.We also ask the IPO to establish the evidence base for the plans announced by the previous Government toextend the existing fair dealing provision on non-
commercial research and private study to cover „soundrecording, film or broadcast‟, but only to „a member of an educational establishment for the purposes of 
research for a non-
commercial purpose authorised by that establishment‟. The proposal is
unworkable inpractice and amounts to unnecessary further complication of UK copyright law. The decision by the previousGovernment to limit the extension to certain members of educational establishments only is based onassertions by copyright owners that consumers would abuse such a provision. No evidence base has beenestablished for this claim and Consumer Focus is concerned that the proposal, if implemented, would result inno tangible benefits to either consumers, educational establishments, libraries or copyright owners.
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Consumer Focus recommendations:
The IPO should:
 establish the economic evidence base for copyright exceptions such as time-shifting and format-shifting, particularly in relation to the economic impact on copyright owners and other industries
 consider the case for simplifying and consolidating the various existing copyright exceptions inthe Copyright, Designs and Patents Act 1988
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See 
,Consumer Focus, March 2010

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