House of Commons Business, Innovation and Skills Committee The Hargreaves Review of Intellectual Property: Where next? First Report of Session 2012–13 Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/bis Ordered by the House of Commons to be printed 21 June 2012 HC 367-I (incorporating HC 1498-i, ii, iii, and iv of Session 2010-12) Published on 27 June 2012 by authority of the House of Commons London: The Stationery Office Limited £20.00 Business, Innovation and Skills Committee The Business, Innovation and Skills Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Business, Innovation and Skills. Current membership Mr Adrian Bailey MP (Labour, West Bromwich West) (Chair) Mr Brian Binley MP (Conservative, Northampton South) Paul Blomfield MP (Labour, Sheffield Central) Katy Clark MP (Labour, North Ayrshire and Arran) Julie Elliott (Labour, Sunderland Central) Rebecca Harris MP (Conservative, Castle Point) Margot James MP (Conservative, Stourbridge) Simon Kirby MP (Conservative, Brighton Kemptown) Ann McKechin (Labour, Glasgow North) Mr David Ward MP (Liberal Democrat, Bradford East) Nadhim Zahawi MP (Conservative, Stratford-upon-Avon) The following members were also members of the Committee during the parliament. Luciana Berger MP (Labour, Liverpool, Wavertree) Jack Dromey MP (Labour, Birmingham, Erdington) Dan Jarvis MP (Labour, Barnsley Central) Gregg McClymont MP (Labour, Cumbernauld, Kilsyth and Kirkintilloch East) Ian Murray MP (Labour, Edinburgh South) Nicky Morgan MP (Conservative, Loughborough) Chi Onwurah MP (Labour, Newcastle upon Tyne Central) Rachel Reeves MP (Labour, Leeds West) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/bis. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are James Davies (Clerk), Neil Caulfield (Second Clerk), Peter Stam (Inquiry Manager), Josephine Willows (Inquiry Manager), Ian Hook (Senior Committee Assistant), Pam Morris (Committee Assistant), Henry Ayi-Hyde (Committee Support Assistant). Contacts All correspondence should be addressed to the Clerk of the Business, Innovation and Skills Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5777; the Committee’s email address is [email protected] The Hargreaves Review of Intellectual Property: Where next? 1 Contents Report Page 1 Introduction 3 History 3 Evidence-based policy 4 2 Copyright 7 Concepts 7 Proposals for new copyright exceptions following Hargreaves 8 Format shifting 8 The legal position on a copyright exception for format shifting 9 Evidence from the music industry and open rights groups 10 Options proposed by the Intellectual Property Office 11 Conclusion 11 Parody 12 Comparison with sampling 12 Hargreaves on parody 13 Relevance of moral rights and reputation 13 Free speech arguments 14 Intellectual Property Office proposals 14 Conclusion on parody 14 Content mining 14 What is content mining? 14 The legal issue 15 The proposals 15 The arguments for and against 15 Possible solutions 17 Public access to publicly funded research 18 Conclusion 19 Orphan works 19 Background 19 The issue of misidentifying works as “orphan” 20 A new copyright statute 21 EU draft Directive 22 Intellectual Property Office proposals 23 Conclusion 23 Orphan works and moral rights 24 The proposed Digital Copyright Exchange 24 Overview and status 27 Collecting societies 29 3 Designs and patents 31 Designs 31 Patent thickets 32 The proposed unified patent and patent court system 34 2 The Hargreaves Review of Intellectual Property: Where next? Present system 34 Contrast with other jurisdictions and obstacles to a proposed supranational patent 35 The current proposals and concerns about them 35 European Scrutiny Committee review 36 Summary 38 4 Enforcement 40 Enforcement of copyright 40 The Digital Economy Act 42 5 Advice for SMEs 43 6 Conclusion 46 Annex: Glossary 47 Glossary of abbreviations 47 Conclusions and recommendations 48 Formal Minutes 52 Witnesses 53 List of printed written evidence 53 List of additional written evidence 54 List of Reports from the Committee during the current Parliament 57 The Hargreaves Review of Intellectual Property: Where next? 3 1 Introduction History 1. The Hargreaves Review of Intellectual Property was commissioned by the Prime Minister in November 2010 to consider whether the UK’s intellectual property framework was up to the task of supporting innovation and growth. Its findings were contained in a report entitled Digital Opportunity, published in May 2011.1 Many of these findings recommended further investigation before determination of policy ; first, because the inquiry panel had had only six months in which to produce its report; and secondly because one of the most significant findings of the Review was the need for more evidence to support policy making in the field of intellectual property. 2. Following the Review, the Government published a response in August 20112 which largely endorsed Professor Hargreaves’ recommendations and set out a programme of consultation and policy development to take place over the following year. The programme contained an impressively detailed set of timescales for developing individual strands of policy, and it is commendable that those timescales have been adhered to. 3. Witnesses to our inquiry were invited to submit evidence on the recommendations of the Hargreaves Review and the resulting Government response, with particular reference to the overall strategic direction taken by the Hargreaves Review and the practicability of its proposals. We held evidence sessions on the proposals made in the Review in the latter months of 2011, following which, in late December 2011, the Government produced a Consultation on Copyright with a large number of greatly more detailed proposals.3 Responses to the Consultation were received in March 2012, and the Government is at the present time considering how to finalise policies in light of those responses. As they are current, we have taken the options presented in the Consultation as the main starting point for discussion of copyright matters in this Report. 4. Also in the period since our oral evidence sessions, the European Scrutiny Committee held its own set of evidence sessions on the proposed Unified Patents Court. As this was one of the topics we addressed, we have taken that Committee’s more recent evidence into account in reaching our conclusions on the Unified Patents Court. 5. As well as inviting written evidence to our inquiry, we held four oral evidence sessions: with Professor Hargreaves; with Professor Sir Robin Jacob, former Court of Appeal judge and Queen’s Counsel at the intellectual property bar; with representatives of industry bodies and interested organisations; and with the Minister and representatives of the Intellectual Property Office. The Intellectual Property Office also very helpfully briefed us on the background to the subject matter in a preliminary private session. We are grateful to all those who gave their time to contribute to the inquiry. 1 www.ipo.gov.uk/ipreview.htm 2 www.ipo.gov.uk/ipresponse 3 www.ipo.gov.uk/pro-policy/consult/consult-live/consult-2011-copyright.htm 4 The Hargreaves Review of Intellectual Property: Where next? 6. In line with the Hargreaves Review’s recommendation of more evidence-based policy, we have confined this Report to areas on which we believe we can usefully comment based on the evidence available to us. In particular, we looked at the Review’s proposals for opening up copyright exceptions as a means to stimulate growth, for new modes of copyright licensing, and at the position on matters relating to patents, enforcement and small and medium sized enterprises. In some instances it has not been appropriate for us to anticipate a detailed policy process based on full consultation and economic data. That is not to say, however, that we might not wish to scrutinise such policies at a later stage of their development. Evidence-based policy 7. The Hargreaves Review acknowledged that there were obstacles to greater use of evidence in the formation of intellectual property policy, identifying three main problems: • there are areas of intellectual property rights on which data is simply difficult to assemble; while patents are well documented, and traceable to their owners, unregistered design rights and copyright use are not; • the most controversial policy questions usually arise in areas (such as computer programs, digital communication and biosciences) which are new and inherently uncertain because they involve new technologies or new markets whose characteristics are not well understood or measured; • much of the data needed to develop empirical evidence on copyright and designs is privately held; it enters the public domain chiefly in the form of “evidence” supporting the arguments of lobbyists (“lobbynomics”) rather than as independently verified research conclusions.4 The Review went on to refer to The need for any machinery in this area of policy and public administration to be robust. This matters because there are strong and divergent interests in play and with some of the most skilful and influential lobbyists on the UK political scene.5 8. We put this point about so-called lobbynomics to our witnesses.