Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014

Lord Clement-Jones Excerpts

Tuesday 29th July 2014 Lords Chamber

[Lord Clement-Jones (LD)]

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 lawful 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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[Baroness Neville-Rolfe]

I thank the noble and learned Lord and will come back to him on that. I think that I addressed the issue—perhaps we could look at Hansard together and have a further word on this important point.

The noble Lord, Lord Stevenson, my noble friend Lord Clement-Jones and the noble Baroness, Lady Morris, were interested in compensation schemes and the EU law on this, which is set out in the EU copyright directive, also known as the information society directive, or infosoc. Article 5(2)(b) of the copyright directive permits member states to introduce exceptions for private copying, such as the one before us today. The article requires that any exception must include certain conditions, for example that the copy must be for ends which are neither directly nor indirectly commercial. The exact wording is on page 2 of the instrument before us. The article states that the right holder must receive fair compensation when copying takes place under the exception. It is what exactly is meant by “fair compensation” that is at the crux of this question. In interpreting this phrasing, the Government have been guided by recital 35 of the copyright directive. This states:

“In cases where rightholders have already received payment in some other form, for instance as part of a licence fee, no specific or separate payment may be due”.

Later it goes on to say:

“In certain situations where the prejudice to the rightholder would be minimal, no obligation for payment may arise”.

In other words, fair compensation can mean no compensation, as long as the exception causes no, or minimal, harm, or if an appropriate payment has been received. This is how the exception before us has been designed, and it therefore falls within the margin of discretion that the directive allows.

As I said earlier, this view is supported by many, including several eminent legal experts. The JCSI noted in its report that there are persuasive arguments in the Government’s favour. Furthermore, European case law to date, although not directly addressing the question as to what is meant by minimal harm, is consistent with the Government’s approach. I would add that there is no guarantee that the European Court ruling in the Copydan case will have any bearing on the UK’s exception for personal copying. The recently published Advocate-General’s opinion confirms once again the wide latitude that member states have in this area.

The Government do not deny that ultimately only the European Court of Justice can rule definitively on the definition of minimal harm, and it has not done so to date. However, uncertainty—for the reasons I have already articulated—is not a justification for inaction, particularly when the evidence and reasonableness of a change is clear. For all these reasons, the Government believe that the regulations are intra vires.

In response to the request from the noble Lord, Lord Stevenson of Balmacara, the Government do not routinely publish their legal advice, and I am not persuaded that an exception should be made in this case. The Government are confident in the advice they have received that the exception proposed is compatible with all the relevant EU case law and also with our international obligations, such as the Berne convention. On the question of EU law, it was right to mention that there are talks going on in Brussels in this important area. This is a new area that I will be looking at, and I have spent a lot of time in Brussels. But the fact that there may be new measures coming in at an EU level is no reason not to proceed with a package which is useful and important, both to copyright holders and to consumers. The personal copying exception before us today is narrowly drawn, and merely legitimises existing consumer behaviour. This policy is right and fair to both rights holders and consumers.

The noble Lord, Lord Clement-Jones, asked whether the changes will be evaluated, as did others. I reassure the House that the impact of these changes will be evaluated in line with evaluation best practice, and the results of this evaluation will be published within the five-year evaluation period. The Government believe that these changes will have a positive effect on the economy including the creative industries. Additionally, the strategy for carrying out the evaluation will be published. The evaluation will seek to study a range of impacts, including on the creative industries. The Government will obviously be keen to hear from experts and from noble Lords on the proposed evaluation.

The noble Lord, Lord Clement-Jones, asked whether there were really 50 exceptions to copyright law. There are around 50 exceptions in Chapter 3 of the Copyright, Designs and Patents Act 1988. They are found in Sections 28 to 76.

[Lord Clement-Jones]

I asked whether there are 50 exceptions that have been introduced by secondary legislation.

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[Baroness Neville-Rolfe]

I thank the noble Lord for that question. I think that we will need to wait and see what the evaluation looks like—I urge him to make some input on the nature of evaluation. It is a bit of a hypothetical question. As a representative of the Government, I would be uneasy about making any promises, but I thank the noble Lord for the point made.

I should move on, as time is pressing, to say a little about fair dealing, which the noble Lord, Lord Clement-Jones, raised. Fair dealing is an established legal concept that has been part of copyright law for more than 100 years. It is a question of fact, degree and impression and will take into account a number of factors, the main ones being whether the alleged fair dealing is in commercial competition with the owner’s exploitation of the work; whether the work has already been published or otherwise exposed to the public; and the amount of work which has been undertaken and the importance of it. We did not intend to define it further in the legislation, because doing so would upset this well established case law and undermine its main benefit, its ability to adapt to the circumstances of any specific case.

The noble Lord, Lord Berkeley, asked what evidence the Government had relied on in developing their policy proposals. The Government have worked hard to ensure that the proposed changes are based on evidence. The impact assessments are based on the best evidence available and were reviewed and validated by the independent Regulatory Policy Committee.

The noble Baroness, Lady Morris, referred to cloud services. This is a difficult and very important area which was explored as part of the Government’s impact assessment. However, we were not provided with sufficient data to enable us to determine what the impact would be. The majority of evidence received related to licence services, which would not fall within the scope of the exception; for example, because they provided streamed content so were not relevant. The music industry has accepted unlawful private copying for many years, so one might reasonably assume that the ability of the consumer to make copies of CDs is already taken into account when licensing deals are negotiated. Negotiation of contracts between businesses is a matter for those businesses. If, however, this is an issue of market abuse, it would obviously be a matter for the competition authorities.

The Government have published the changes through social media and website updates and through contacting interested stakeholders, such as those who responded to the technical review. They have published plain English guidance aimed at different user groups as well as an unofficial consolidated version of the copyright Act. We would expect wider education initiatives, such as the recently announced education campaign, to include educational messages—

[Lord Clement-Jones]

I alluded briefly to inaccuracies in the guidance. If those inaccuracies are clearly shown to the IPO, will the Minister undertake that those guidance notes will be changed? They are extremely important for consumers.

[Baroness Neville-Rolfe]

My Lords, I accept that the guidance notes are important and I will take the point away, if my noble friend is kind enough to give me the detail. I also say to the noble Baroness, Lady Morris, that I will keep an eye on the cloud aspect, which she rightly raised. I feel that it is important to include the cloud, because it is part of modern life, but clearly we need to look at how it is going.

My noble friend Lord Grade of Yarmouth felt that changes would harm rights holders. I would say that the exception legitimises what millions of people already do, something that the market has accepted for many years. This is aimed at consumers who have paid for content and support the creative industries by paying for music, films and books.

Many points have been made. I will study Hansard carefully and come back if there are points that I have not addressed in my summing up. As I said in my opening speech, this is a delicate balancing act. The Government believe that the copyright system has not kept pace with the digital revolution. As a result, a great many intuitively acceptable activities are illegal or uncertain. These changes relating to private copying, parody and use of quotations form part of a package that should make copyright works more valuable to all, give users clarity about their rights and build respect for copyright in the process. They will contribute to a more modern statute book that meets the challenges of an increasingly digital and changing world.