My Lords, I thank my noble friend the Minister for her introduction of the draft statutory instruments. Last week we welcomed her to her new role and to the debate on extended collective licensing. Today’s debate, as we have already seen—and I agree with a huge amount of what the noble Lord, Lord Stevenson, said—is much more controversial.
We debated copyright exceptions on a number of previous occasions: during the passage of the Enterprise and Regulatory Reform Act on 5 December last year, and on 14 May, before Prorogation, when we debated the first set of exceptions. I suspect that today is the grand finale. In the mean time, we have seen the launch of Create UK: Creative Industries Strategy, which calls for,
“a stable legal framework that allows rights to be protected and commercialised”,
and says that,
“any consideration of amendments to the IP framework”,
needs to be,
“thorough, objective, evidence-based and transparent”.
It has come too late, I fear, to inform these exceptions.
As I said previously, the reform of copyright should be handled sensitively, with the value of the creative industries and any negative impact caused by changes to the law in mind. The creative industries sector as a whole is alarmed, however—in exactly the way that the noble Lord, Lord Stevenson, described—by the potential negative impact the exceptions could have. The sector considers that they could deter investment, risk jeopardising market-led developments and weaken performers’ and creators’ ability to benefit financially from their work. As I also said, copyright exceptions should be adopted only in response to a well defined public policy objective and market failure. Nowhere is that more important than in respect of the three exceptions and two draft regulations that are being put forward today.
Set against those strong considerations are the very weak and poorly underpinned impact assessments of December 2012, on which the Secondary Legislation Scrutiny Committee itself raised its collective eyebrows. At this point I thank both the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee for their careful scrutiny of the draft SIs and for raising some important issues.
On each occasion that we debated these matters I have raised a number of issues, which I will repeat only briefly. First, there are the basic economics and commercial
realities. Why, in formulating the contract override provisions in the exceptions, have they taken little or no account of developments in licensing, both during and after the Hargreaves process, such as commercial offerings through new technology and the Copyright Hub? Exceptions should not apply where commercially available alternatives already exist. Sadly, the Government have not accepted that important principle or, let it be said, the flexibility contained within the information society directive.
The noble Lord, Lord Stevenson, mentioned developments in the music industry. Another example regarding the personal copying exception is in the audiovisual sector. Products such as iTunes and UltraViolet allow legal and secure access to that content through the cloud among six family members for up to 12 personal devices.
The Secondary Legislation Scrutiny Committee in its report in May remarked from the outset on the strength of opinion on the question of contract override, which I attempted to highlight in our December debate. It expressly said that it was not persuaded by the then Minister’s statement that the changes proposed are relatively minor, particularly as regards the personal copies for private use exception. Where does the figure of a total £500 million to the UK economy over 10 years come from? Can we have a complete breakdown?
In fact, there is likely to be a negative impact on rights holders given that under the personal copying exception they will have to give free licences for services such as cloud lockers, which are a potential source of valuable revenue. Photographers and photographic and news libraries make similar arguments in their evidence about potential loss of revenue under the quotation and parody exceptions. Minimal benefits are cited for those under the impact assessments, but it is clear that the risk of licensing revenue loss for them is considerable.
Furthermore, has any analysis of the impact of the exceptions on the UK’s competitive advantage been carried out, in particular on whether it will encourage content companies to contract in other jurisdictions? Rather than encouraging innovation, these provisions could encourage challenge and breach of licensing terms. Will investors now turn away from the UK and invest in content made in other jurisdictions where they can freely negotiate contracts?
In the light of all the above, can my noble friend say whether any new economic impact assessments have been conducted or are contemplated? The Secondary Legislation Scrutiny Committee, noting that the instruments are to be reviewed by the Intellectual Property Office no later than April 2019, said:
“We would urge the Government to monitor the impact of the changes from the point of implementation, and in particular to respond effectively if it becomes clear that any negative potential is being realised”.
How are the Government planning to monitor whether the expected benefits are being achieved?
There are, of course, multiple legal bones of contention. Will the exceptions meet the requirements of the Berne convention and of the three-step test set out in the 2001 information society directive? That states that an exception can be applied only: in certain cases; where
it does not conflict with a normal exploitation of a work; and when it does not unreasonably prejudice the legitimate interests of the copyright holder.
Many rights holders are strongly of the view that they do not meet these requirements. Exceptions create contract override provisions that would render unenforceable contracts that seek to restrict or prevent the relevant exception. As a new and untried concept in UK copyright law, this has not received nearly enough examination and consultation. Given their importance to these statutory instruments in particular, why have the proposed contract override provisions not been subject to their own separate consultation and discussion? This is particularly necessary for the enforceability of technical protection measures, as set out in Article 6 of the information society directive and Section 296ZA of the Copyright, Designs and Patents Act 1988.
Why are such fundamental changes to the application of UK contract law being made via secondary legislation? I entirely agree with the points made by the noble Lord, Lord Stevenson. All these exceptions could have been debated and introduced in the Intellectual Property Act. Indeed, if that had happened we would not be standing here now discussing these statutory instruments as the exceptions would have already been passed in the Act. Such fundamental amendments to sections of the CDPA would have been dealt with by discussions in a normal parliamentary process in both Houses, with amendments being debated in the ordinary way.
My noble friend Lord Younger, the previous Minister, referred to 50 exceptions having been introduced by regulations when he gave evidence before the Secondary Legislation Scrutiny Committee and when we debated the other exceptions. I am still not convinced: can we have chapter and verse about those 50 exceptions, please? Perhaps most important of all in terms of legal risk, how convinced are the Government that these exceptions comply with EU law?
As the JCSI pointed out in its report, the private copying exception as currently proposed would not provide any compensation to rights holders for the harm private copying might inflict on them. The JCSI quotes the Government as saying that no compensation scheme is required,
“where the private copying exception is narrow in scope and does not cause harm (or causes only minimal harm) to rightholders”.
That wording was repeated by my noble friend. However, this claim, and whether or not a personal copying exception will cause harm, is hotly contested by rights holders. For example, we have heard from the noble Lord, Lord Stevenson, the estimate from UK Music that there is a potential loss of revenue to the music industry of some £58 million.
Why have the Government chosen to ignore, for instance, the CJEU ruling in the Padawan case, which makes clear that member states must include a mechanism for calculating compensation when introducing a private copying exception? How confident are the Government that these exceptions will survive legal challenge? The JCSI reflects the views of many when it points out that the Government must, if challenged in court, show that “no compensation” is “fair compensation”. How confident too are they that the exceptions can legitimately
be introduced under Section 2(2) of the European Communities Act 1972? The Government have not answered my direct question as to whether they have taken independent legal advice on this. Have they?
Surely also the Oakley v Animal case should be interpreted to mean that Section 2(2) can be used only when the UK is obliged to bring in a particular measure. The exceptions being introduced through these regulations are entirely optional. Then again, the contract override effect of these new exceptions is to render unenforceable a contract made at an earlier time. Surely, the Government’s approach to contract override also falls foul of Schedule 2(1)(b) to the European Communities Act 1972. Then of course there have also been a number of significant CJEU opinions and judgments in a number of significant copyright cases from 2013 and 2014, all of which have implications for these copyright exceptions. Should not these cases at the very least give my noble friend pause for thought?
As anticipated, my noble friend prayed in aid the 12 professors of IP to allay some of these legal concerns. They, rather like the three tenors, spring up to sing in harmony on occasion. They did so on the then IP Bill and they have done so with these exceptions. However, there is a strong body of non-academic opinion that takes a contrary view on these matters and much of what they said in their evidence to the JCSI was opinion, not settled law. At the very least, the Government are taking a risk in proceeding with these exceptions.
On top of all this, there is the big new question of why we have to act alone on the personal copying exception in the context of simultaneous harmonisation discussions in the EU. Entirely as the noble Lord, Lord Stevenson, said, there are discussions and consultations taking place, and we are expecting a White Paper this September. This will set the direction for European copyright over the next five years. Surely it is unnecessary for the UK Government to take a risk now with this policy and proceed with implementing a measure which could prove costly, is unpopular in many quarters and may well have to be reversed.
There are also concerns about the specific wording of the personal copying SI, and in particular what is meant by awful acquisition. To save time, I shall not go through all the detail of that; the noble Lord, Lord Stevenson, went through some of the individual aspects. On the technical protection measures in particular, there is doubt about how the wording of the current SI is set out.
As for the wording of the quotation exception, what is fair dealing? It is not defined in any detail; all types of work are treated the same—so, for example, a whole photograph, perhaps, could be reproduced without permission. The noble Lord, Lord Stevenson, referred to a number of organisations representing photographers, and they are numerous—the British Photographic Council, Getty Images, the British Copyright Council and the British Association of Picture Libraries and Agencies. They all have in common the fact that they are deeply worried about the quotation exception.
New wording has been added about when acknowledgement does not need to be given. How will,
“impossible for reasons of practicality”,
be interpreted? Is it right that there should be this relaxation of moral rights? Surely, as regards photographs and video, is not all this premature before we have dealt with metadata in a proper fashion? Should they not have been excluded from the quotation exceptions in the first place?
The noble Lord, Lord Stevenson, discussed the parody exception and I shall not go into detail on that—but many of the same issues apply. There are not definitions of “parody” “caricature” and “pastiche” in UK law, so we have no precedent as to how the concept of fair dealing might be applied to the use of a copyright work in the making of a parody. How is this going to be consistent with what is called the moral right of integrity, allowing a right holder to prevent reputational damage? Surely, in these circumstances, is not a duty of acknowledgement even more important?
On top of all these, the whole issue of explanation to the consumer is of great concern. The guidance notes are defective and the Explanatory Notes, although they have been amended, are also defective. It seems extraordinary that the Government are proceeding with these exceptions in these circumstances. I am afraid that the statutory instruments will pass today, but they are fairly friendless and fraught with the risk of legal challenge. They are badly worded and unnecessary, and they are poorly explained, and the consumer will remain confused. In the old phrase, when asked for directions, “I wouldn’t have started from here”—and I do not think that Professor Hargreaves should have done so either.
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