Over complexity and funding gap: potential stumbling blocks for Hargreaves' Digital Copyright Exchange

The Hargreaves Review published today recommends that the Government bring together rights holders and other business interests to create the world’s first Digital Copyright Exchange.

The idea behind this proposal is that it will make it easier for users to obtain licences of rights holders' works for digital exploitation, in the hope that this will help drive digital innovation. However, the proposal is not without significant logistical and funding issues.

While the concept of the world’s first Digital Copyright Exchange is an interesting one, we predict that it will be greatly resisted by the larger players in the creative industries. It will take hugely significant amounts of time, resource and commitment from rights holders to ensure that all relevant rights to all relevant works are recorded within the Exchange.

Issues that arise include:

• Who will police whether rights are being accurately recorded within the Exchange? The opportunity for abuse is immediately apparent, with many disputes over ownership being flushed out at the outset of the Exchange.
• How will limitations on licences (e.g. territorial restrictions or particular restricted uses) be recorded? Some licences will have a string of limitations attached to them, making the Exchange quite complicated to navigate for a lay person.
• Who will fund it? It is unlikely to be the Government given these times of austerity. Therefore, funding is likely to come from within the creative industries. Is this a cost that the industry can stomach or will this be seen as yet another cost to the creative industries, along with those of tackling digital piracy?
• How will it relate to existing forms of collective licensing? The UK already has sophisticated collective licensing organisations (e.g. PRS for Music). What role will they have to play in the new scheme?

Lorna Caddy, trade mark, copyright and media specialist at international law firm Taylor Wessing, comments:

"The question mark over funding and the massive complexity involved in setting up the Digital Copyright Exchange could prove to be major stumbling blocks if this proposal is taken on board by the Government.

"If they can be overcome and the Exchange is adopted, there is a further question mark over whether opting out and not entering details of copyright works is a practical option. The Review recommends that registration should be optional, but if a work could be deemed to be an orphan work if it does not appear in the Exchange, the incentive to enter details of the work is obvious. If, in practice, the Exchange is not optional, we will be introducing a system which is tantamount to a requirement to register copyright works. This could fundamentally change the nature of copyright law. Registration of copyright is something which has been rejected in most countries. In particular, international conventions, principally the Berne Convention, provides for the harmonisation of rights at an international level without a requirement for national registration.

"All in all, there are clearly a number of hurdles to overcome before we see the realisation of this proposal and certainly Hargreaves has set an ambitious target in suggesting that this be designed and implemented by the end of 2012."

Gowers all over again?

A number of the other points explored in this Review have already been thoroughly reviewed by the previous Government in recent years. In 2005, Gordon Brown commissioned a review of the intellectual property rights of the UK. Andrew Gowers’ report was published in December 2006 and recommended a limited exception for format shifting. Gowers anticipated that fair compensation could be built into the price of the content covered by the exception. Following the review, the Government consulted stakeholders on the proposal and came to the conclusion at the end of 2009 that the new exception was likely to be too complex, bringing new confusion. For example:

• How many format shifts would be allowed?
• Would the exception be retrospective?
• Would there have to be a requirement to keep an original copy to evidence initial purchase?
• How would rights holders be compensated?
• Most significantly, which classes of works would be subject to the exception? Sound recordings and films, or works of all kinds?  With the rapid growth of markets for digital forms of other content (such as audio and ebooks), some rights holders argued that an exception could seriously undermine emerging business models. If photographs were included within the exception, photographers would lose the right to control reprints of their work, which could  undermine their incentive to create.

Lorna Caddy comments:

" These issues are all going to need to be explored again if a format shifting exception is to be introduced and, presumably, we are going to see the same hurdles arise once again. We will have to wait and see whether this Government also abandons introduction of the exception due to the complexity of drafting palatable legislation."

"As for Parody, following Gowers’ recommendation that an exception be introduced, the IPO concluded in 2009 that most respondents to the earlier consultation expressed no interest in a proposed exception for parody, caricature and pastiche and that there was not sufficient justification to introduce such a new exception in the UK. However, the then Government concluded that there was scope for further debate within an EU context about the potential for a non-commercial use exception, which if implemented could cover some parody."

Lawyers Lorna Caddy

For further information, please contact:

Lorna Caddy
Taylor Wessing LLP
Tel: 020 7300 4095
Email

Sarah Le Cheminant
Taylor Wessing LLP
Tel: 020 7300 4930
Email

Sonia Malhotra
Taylor Wessing LLP
Tel: 020 7300 4156
Email

Notes to Editors

Taylor Wessing LLP is a leading law firm providing legal support for commercial organisations doing business in Europe, China and the Middle East.