Intellectual Property (Hargreaves Report)

Lord Foster of Bath Excerpts

Thursday 7th July 2011 Westminster Hall

[Pete Wishart (Perth and North Perthshire) (SNP)]

I refer to my entry in the Register of Members’ Financial Interests. I welcome you to the Chair, Mr Chope, and hope that you find our little chit-chat about intellectual property intellectually stimulating. The Minister for Further Education, Skills and Lifelong Learning is not a regular at our get-togethers about the creative industries and intellectual property, but we welcome him to the debate. I saw him in action yesterday. He was particularly robust in his response then, and I am sure that we will get a comprehensive response to the many issues that will come across his desk in the next few hours.

This debate gives me a sense of déjà vu and Groundhog day. I remember standing here, probably on this same spot, some five years ago responding to a Government-commissioned report and review into intellectual property, which was described as groundbreaking and eagerly anticipated, and as the panacea for all the difficulties and problems that we have with the intellectual property laws. That was the Treasury-commissioned Gowers review, and around the Chamber I can see other veterans who carry the scars of that review. Five years down the line, fewer than half of Gowers’ recommendations have been implemented.

Gowers, and now Hargreaves, follow a long, honourable and noble tradition of Government reviews and reports on intellectual property. Since Gowers, and before Hargreaves, there was the “Digital Britain” report and the Digital Economy Act 2010. In fact, 25 pieces of work on intellectual property or copyright laws have been commissioned from either Brussels or Whitehall, including Green Papers, White Papers, formal consultations, informal consultations and the inevitable round-table discussions. The Government have proven very efficient and effective in initiating such reports, reviews and commissions, but a little less so in implementing the many recommendations that have come across their desk. We wait to see whether Ian Hargreaves will be more successful with his recommendations, but I have a sense and a suspicion that once again, in a few years’ time, we will all be sitting around this table looking at another Government-sponsored review on intellectual property, which once again will have been eagerly anticipated and presented as some sort of panacea for the problems with our intellectual property laws.

My little bit of advice to the Government is that they expend a bit more energy on doing something with the creative industries and less on indulging in this continual and consistent review-itis. We need action from them to support our creative industries, to ensure that they continue to develop and grow. Perhaps the Government could consider some of the financial matters. Finance and funding are a critical factor, and small and medium-sized enterprises in particular are looking just now to the Government for assistance with that, so that they can develop. The Government should also help creative industries to deal with their online market, as that will help with the new digitalisation that is a massive challenge to so many of the industries, and the Government should do something about the corrosive online piracy that eats away at our creative industries, depriving them of profit, investment and growth. The Government can do more than continually and consistently have reviews, so let us get together and do something.

Of course, it is good to see that the Government take an interest in their intellectual property and copyright laws. So they should. Intellectual property and copyright are fundamental to the well-being of the UK economy, accounting for about 8% of our total gross domestic product. Some £65 billion was invested in intellectual property in the UK in 2010, and the creative industries alone account for 2.7 million jobs here. My particular interest is in music, and music—particularly exports—has been a massive success over the past few years. In the United States, in 2010 alone, 9.8% of all album sales were from UK artists. It looks like 2011 will be an equally bumper year, with one artist, Adele, practically owning the US charts just now, such is her phenomenal success. That has helped to maintain the UK’s position as the No. 2 exporter of music worldwide.

It is not just music; we excel in all creative exports, and do well in all sectors. Being creative is just something we do well, and over the years the UK has produced the most innovative and diverse range of creative talent imaginable. We have been successful because we have ensured that artists, creators and those who invest in our talent have been properly rewarded for the work they produce. What we must carry on doing, by way of our intellectual property laws, is ensure that that continues, and resist the ever-constant desire and temptation to tinker with legislation. As we consider the Hargreaves report and wait for the Government’s response, it is worth while reminding ourselves that our intellectual property and copyright laws have not done not too badly in the face of some serious challenges over the past decade, most notably from the online market and the technology that develops almost daily.

So, what does the Hargreaves report bring to the table? What innovations does it have to offer? In considering the report, it is almost impossible to set aside how it was conceived and initiated. This time around, it was the Prime Minister himself, after, I think, a very good lunch with his friends at Google, who posed the question: do our intellectual property and copyright laws get in the way of the emergence and development of a Google in the UK? He then got Ian Hargreaves and his team dispatched to find the answer. The review was perhaps unfairly christened the “Google review”, and those of us who care passionately about our creative industries observed all this with varying degrees of horror.

The question behind the review was: what can be done to help search engines and social networking sites such as Google develop in the UK? Not one shred of evidence, however, has ever been produced to support the initial prime ministerial contention. We must remember that the UK has some fantastic search engines and social networking sites, not least Friends Reunited, which could even be credited with starting the whole social networking revolution. Compared with where Google comes from—silicon valley in mid-California—the UK is an altogether different cultural and economic environment. The set of conditions that exist in silicon valley are unique—they do not even exist on the east coast of the United States, let alone in the UK, or anywhere else in Europe or the rest of the world. Nevertheless, Ian Hargreaves was discharged to bring mid-California to a business park off the M25 in Shoreditch.

A number of us were concerned about all the talk of Google, because Google has not been a great friend of intellectual property over the years, and I think it would be fair to say that it has been a bit cavalier in its approach to IP rights. Mr Chope, if you were to put one of your favourite artists into the Google search engine you would be directed to a number of sites that totally disregard and ignore the intellectual property rights of the artist. Having Google as an inspiration for such a review did not so much set alarm bells ringing as put whole fire departments on stand-by.

To be fair, however, Ian Hargreaves did his job diligently. All talk of good will was quickly abolished, and we had a report that considered economic growth and its inhibitors. The professor approached his task professionally and was not too consumed by the almost baffling inception of the review that he was tasked to pursue. At first, it was all about, “Will he or won’t he recommend a system of fair use, as championed in the US?”. We were able to find out what the good professor was thinking, because he produced a blog that we could follow while he did the review. Looking at all the air miles that were being clocked up in the States, a number of us feared that he was considering adopting fair use as a central recommendation in his report, but he decided that fair use was not for us because, as the report said, it was

“unlikely to be legally feasible”.

What we do not know, Mr Chope, is whether if it was legally feasible you would be looking at fair use coming soon to a creative industry near you. Fair use would have been an absolute disaster for our creative industries, and I think a collective sigh of relief was exhaled when that proposal was dropped.

So what does the Hargreaves report recommend? There are 10 recommendations, and Professor Hargreaves makes the bold assertion that if all 10 were adopted in full, UK GDP would increase from 0.3% to 0.6%. We in politics say that that is a courageous statement, but it was the claim that Hargreaves made. I will not list all the recommendations. Some of them are uncontroversial and are generally supported, some are hangovers from previous reports, and some come directly from the Gowers review. Some are new, some are interesting and some have excited all sorts of concerns and anxieties.

The major underlying recommendation—the one that tops the chart at No. 1—is that all future regulation should be based on evidence. The importance of economic evidence is inarguable—I do not think that anybody could disagree that economic evidence is required for any future regulation on IP laws and copyright—but it is one thing to say that evidence is required and another to act on it, rather than dismissing it if one does not happen to like it. For example, the report does not fully acknowledge the economic case for the current copyright framework, and has little to say about the huge amounts of investment in, and profitability already being derived from, innovative digital products and services. Given the success of creative UK plc, that omission is baffling. The report casually dismisses crucial research and evidence, because it comes from industry, as though it were mere lobbying, even though the Government charge industry time and again with providing evidence and doing research to help shape future policy.

Other recommendations that have received attention include proposals to set up a digital copyright exchange, permit the licensing of orphan works and create further exceptions to copyright. If anything in the report counts as a big idea, it is the creation of a digital copyright exchange. The report describes it as the digital opportunity: the means of unlocking the UK creative industry’s economic potential and solving the problems of rights clearances that Hargreaves maintains give copyright law such a bad press.

The report says of the DCE:

“The prize is to build on the UK’s current competitive advantage in creative content to become a leader in licensing services for global content markets; in short to make the UK the best place in the world to do business in digital content.”

Who could argue with that? But what exactly is the DCE and what is envisaged for it? Is it to be a virtual content megastore in UK cyberspace for rights owners, traders and users, or is it more of a brand name to describe a collection of rights registries and rights databases across the internet? More fundamentally, what will it look like, who will pay for it and how, and who will run it?

In many respects, a DCE already exists, based on a variety of technical standards developed by the music, film and publishing industries and other sectors of the creative industries, which have rapidly developed comprehensive databases with ownership data and online functionality. In such a critical matter, Government must be careful not to duplicate or replicate work already being done within the sector and to work hand in glove with the industry if they are minded to accept the recommendation on a digital copyright exchange.

The DCE must be voluntary and recognise that different industries license content in different ways and for different purposes. Hargreaves hints that non-participation in the exchange might lead to penalties for rights holders, such as being exempted from some of the measures in the Digital Economy Act 2010. That is definitely not welcome. It could create a two-tier approach to rights holding, run counter to international copyright treaties, and discriminate against smaller rights holders.

The report recommends a Government-led approach involving the appointment of some public figure as a digital champion, almost a digital tsar. There are hints that the Government’s delay in responding to the Hargreaves report is due to difficulty finding that digital champion. We wait to see who it will be. I think that all of us would like to see the job description.

[Mr Don Foster (Bath) (LD)]

Before the hon. Gentleman leaves the issue of the digital copyright exchange, will he comment on the use of the word “exchange”? An exchange implies a place where one goes to do business. How does he feel about that?

[Pete Wishart]

I am grateful to the right hon. Gentleman for bringing that up. There are many models for exchanges. An exchange for the creative industry will be difficult to conceive and create. There will be issues categorising work. The report recommends a digital champion. We must know who it will be and how he will be found.

Another issue is orphan works. The idea is that if an owner cannot be identified, a standard statutory licence would be obtained and the payment would go into a fund to pay the owner if they are ever identified, or towards general social use. Hargreaves suggests that if a work cannot be found on the DCE, it should be declared orphaned and become available for licence. I hope that before the Government consider and conclude on that recommendation, they will re-examine the legal situation and take time to consider the British Copyright Council’s proposals on the issue.

Other recommendations, such as those dealing with format shifting and parody, are also hangovers from the Gowers review. On format shifting, Hargreaves wants to proceed without compensation to creators. That is likely to run contrary to the copyright directive and would put the UK out of line with the vast majority of European states. I hope that when the Government consider that recommendation, they will put the interests of British musicians, creators and artists before anything else. The proposed exception for parody is more mystifying. There are countless examples online, for example on YouTube, of parody being enjoyed as part of UK entertainment. If the Government are minded to accept such an exception, they must give us evidence that parody is a problem. Examples have been highlighted, but we need evidence.

The report’s acknowledgement of the importance of an effective rights regime is welcome and puts the report in the context of the Digital Economy Act 2010. The Act is the other weighty piece of work sitting in the Government’s in tray, and it is time that they got down to work and started to implement all the measures agreed in it. We appreciate that there have been difficulties with the DEA, including the judicial review and ongoing work by Ofcom, and we know that tensions remain in the coalition, but it is time to implement what has been agreed.

The Government have it in their hands to help our creative industries significantly and substantially. The DEA was established to reconnect the public with legitimate means of purchasing online materials, and it is time to get on with it. One big theme in the Hargreaves report is economic growth and removing the barriers to development. Illegally taking creative works for nothing is the biggest barrier to growth confronting our creative industries, and that more than anything threatens jobs and investment. The DEA contains real, available and tangible measures to deal with the biggest inhibitor of growth in our creative sector.

[Mr Foster]

I apologise for interrupting the hon. Gentleman a second time during his excellent speech. He says that the Government should get on with the DEA. Is he aware—I know he is—of the problems discovered involving site blocking? Not least because of outstanding court cases, the Government are unable to implement the Act in its current form.

[Pete Wishart]

I have seen the early-day motion to which I think the right hon. Gentleman is referring; it was kicking around just now. I have certainly received correspondence on the issue. That seems to be one of the great misconceptions about the DEA. People are always referring to disconnection, but nowhere in the DEA is there any mention of disconnection. If any technical measure were to be enforced, as he knows, numerous measures would have to be agreed by Government and Ofcom before anything like that could be considered. What would happen is that people would receive a polite letter asking them to stop taking music for nothing and directing them towards legal sites. I am glad that he mentioned the subject.

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[Mr Don Foster (Bath) (LD)]

I am delighted to follow the hon. Member for Perth and North Perthshire (Pete Wishart), who made an excellent speech. I agree with nearly everything that he has said. He rightly began by talking about the importance of the creative industries. Many of us believe that, given the right support and the right environment, they could become as important in this country as financial services are at present. It is critical that we give them the right support and the right environment. That is the climate in which the Prime Minister made remarks that led, in due course, to the Hargreaves report. I share some of the hon. Gentleman’s concern about the language used by the Prime Minister at the time and about the thought that we may end up going down the American fair-use route, which he has described. I want to clearly state on the record that I am very pleased that the Hargreaves report did not conclude that we should take the American fair-use approach.

I also join the hon. Gentleman in agreeing with one critical thing that appears at the beginning of the Hargreaves report, namely the importance of making decisions on the basis of clear evidence. Although I am the first to admit that the evidence is mixed on some of the issues, such as the impact of piracy on the creative industries, I nevertheless believe that the report goes too far when it dismisses some of the information, data and research—it calls them “lobbynomics”—from the industry. The one thing that I think we can learn from that is that getting this information right is really important. I am therefore delighted that discussions are now taking place between the UK Intellectual Property Office and the creative industry sector about the basis of research methodology and the presentation of data. That will help us all in making judgments about how we progress.

Notwithstanding the Hargreaves report’s perhaps overly critical view of the degree of concern about issues such as piracy, I am pleased that it recognises that there is a problem and that we have to address it. I am delighted that the three things it says that we need to do are enforcement, education and the development of new business models, and I accept that those are the three key things that we need to do. On enforcement, it is important that hon. Members acknowledge that, unless we are prepared to recognise the importance of the intellectual property rights of creators, we can never be said to be supportive of the creative industries. It is therefore vital that we find ways of ensuring that we provide much-needed protection in those areas.

During his excellent contribution, the hon. Gentleman said that the Government need to get on with the measures in the Digital Economy Act 2010. I do not fundamentally disagree with him, but it is important that we are aware that a number of problems must be addressed, particularly in relation to the use of illegal websites. During the passage of the 2010 Act through Parliament, I made clear—the hon. Gentleman was present in the House at the time—my concern that sections 17 and 18, which deal with those issues, are unworkable. Although we have not yet seen the report, I understand that Ofcom has looked at the matter and reached a similar conclusion. Therefore, if we are to move ahead, we will have to find other ways to address illegal activity on the internet. I know that productive discussions are taking place between the industry and internet service providers to find a way forward. I welcome those discussions and hope that they will be fruitful. We will also have a look at a number of other measures coming out of Europe, which might also inform our decision.

The hon. Gentleman has rightly referred to peer-to-peer file sharing. It is crucial that every hon. Member is clear that the 2010 Act gives ample opportunity for further discussion, research and debate before any of the actions about which some people are concerned—the so-called technical measures—take place. The legislation already enables us to do that, so I hope that we will be able to implement and progress with those measures as quickly as possible.

I said earlier that Hargreaves said that we also need to address education, which is critical. Far too many people in this country simply do not understand the damage that they are doing to the creative industries by obtaining the intellectual property of other people without making any contribution towards it. If we cannot have a situation in which people are creating material and being rewarded for it, the creative industry simply cannot grow, which is the key thing that the Hargreaves report is concerned about. It is critical that we recognise that and educate people so that they understand that they could be damaging the very creators of whom they are supportive and whose works they enjoy.

The third issue is the development of new business models. I agree entirely with the Hargreaves report that that is important, but it ought to be placed on the record that the picture is nowhere near as gloomy as the report perhaps suggests. For instance, while I acknowledge that it made a very slow start, the music industry has got its act together, and the UK now has 72 different business models for people to easily and cheaply access the music that they are keen to hear. It is already further ahead of the game than the rest of the country in that respect. Other parts of the industry—the film industry, computer games and others—have to try to improve what they are doing. I broadly support what the Hargreaves report says about enforcement, education and the development of new business models. I also broadly support the hon. Gentleman in saying that we need to get on and address those issues as quickly as possible.

One of the kernel ideas in the Hargreaves report is, as the hon. Gentleman has said, the digital exchange. I accept the hon. Gentleman’s argument that it is an exciting idea and that it offers the opportunity to improve the growth of the creative industries. He was right to say, however, that many problems still need to be addressed. First, I am concerned about the use of the word “exchange,” which is why I intervened on him. I do not believe that we are anywhere near developing all the things that we need even to think about having a single port of call where business is transacted. We ought to be looking much more at helping each sector of the creative industry—video games, film, books, magazine publishing, the music industry and so on—to ensure that they are developing their systems, but in such a way that they can work together to develop interoperability.

The music industry is advanced in its thinking on this. Not only is it well advanced in the UK, but it is working with colleagues throughout the rest of Europe. Collectively, they are pulling together the sort of database that Hargreaves talks about. I hope that the industry will be willing to share its data sets with other sectors of the industry, so that we can find some commonality. Commonality is absolutely vital, even simply on the number labelling of an item. Let us imagine a bit of film for which there is some music and a script, and where stills and bits of other people’s films have been used. All those things need different access, but they all need to be coded in the same way, so that we know where they all come from. We need to work at interoperability.

If we acknowledge that different parts of the sector are developing their own databases and their own licensing systems—in some cases, they have had such systems for a long time—it seems somewhat perverse to suggest that we might get rid of all that. As a first step at least, I would prefer the exchange—or whatever it might be called—to be a front page or a signpost to ways of finding this material and establishing how people can get a licence for the use of it for commercial purposes.

We must then address the issue of the digital champion. I apologise to the author if I have got this wrong, but the report seems to be saying, on the one hand, that finding a digital champion should be industry led and, on the other hand, that the Government should appoint someone to do it. That does not mesh together very well. Initially, someone should do a scoping exercise of what is needed. We should consider using somebody who is, for example, a project manager and who gets the support of all sectors of the industry. We could do that very quickly, which would deal with the issue raised by the hon. Member for Perth and North Perthshire about getting on with things. I urge the Minister to consider whether that could be a way forward.

[Jim Dowd]

On that aspect, the report uses the precise expression “a highly respected figure” in the industry. I am not sure that that takes us much further forward in defining how respected they are and by whom.

[Mr Foster]

That is why there are so many problems. The hon. Gentleman is right to raise his concern about the matter. We need to find a way of making progress. I am suggesting that if we can downgrade the issue of what we are looking for and be clear about the job spec, it might be easier for the industry to come together and find a way of doing it.

Finally, on the digital copyright exchange, I agree with the hon. Member for Perth and North Perthshire about its being voluntary. It seems totally wrong to suggest that if I am the creator of something—a piece of music, a film, a book or whatever it might be—I should be automatically forced to place my work on that particular platform. That is not the sort of liberal society in which I want to live. It would also be totally wrong to have a situation whereby if I do not put my piece of work on to the exchange, I will somehow be exempted from access to the law that applies to everybody else. After all, if somebody nicks my work, they should be punished for it and the full force of the law should apply, whether or not I have chosen to put my work on a particular exchange.

The hon. Gentleman also mentioned the important matter of orphan works. Sadly, clause 43 of the Digital Economy Act 2010, which covered those issues, was ditched at the last minute during the wash-up at the end of the previous Parliament. I am concerned about what the Hargreaves report suggests is a possible way forward. In effect, the report says that we should allow an orphan work, of which the creator is unknown, to be licensed and used by somebody in a commercial or possibly a non-commercial venture for a nominal fee. The problem with that is twofold. First, someone has to do some level of due diligence to get that licence and demonstrate that they have tried to find the author. However, I am sure that they will not go any further than they need to if all they have to do is pay a nominal fee. A nominal fee does not provide any additional money to do more diligent searches to try to identify the author or creator of the work.

The second problem is that if by chance a particular piece of work of which the creator is unknown suddenly becomes a worldwide best seller and generates vast sums of money for the person or organisation that obtained the licence, surely we must have a system in place whereby the creator, if identified, has the opportunity to benefit from that worldwide success. The report does not cover real issues that we must address adequately.

I know that other hon. Members want to contribute, so I will briefly make one final point about exceptions. Again, there are real issues surrounding the sort of exceptions proposed in the Hargreaves review. I shall talk about the exception in relation to parody as an example. We all enjoy a parody of something. However, the truth is that if someone takes something, parodies it and achieves an enormous commercial success, that parody is based on somebody’s creation. I am absolutely convinced that the person whose creation has led to the commercially successful parody must be able to benefit from it. The creator must also be able to say that they are unhappy with their work being used in that particular way. We must consider the issue of exceptions more closely and in more detail. That applies to the use of material and so on. There will no doubt be an opportunity for consultation once the Government come forward with their response to the Hargreaves report.

The Hargreaves report mentions many other issues, which I am sure other hon. Members will cover. I may have seemed critical of the report, so I will end by saying that it was important to have such a report to kick-start the debate. What matters is how that debate develops and the action that the Government take. I hope such action will support the creators, who are so critical to our creative industries.

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[Mike Weatherley (Hove) (Con)]

It is a pleasure to serve under your chairmanship, Mr Davies, and I congratulate the hon. Member for Perth and North Perthshire (Pete Wishart) on securing this exceptionally well-timed and vital debate. I also draw the attention of hon. Members to my published declaration of interests. Intellectual property is suddenly popular, not only via my “Rock the House” project, but also in terms of Government attention. Intellectual property seems to have had more reviews than a west end show, and after 300 years, copyright is rightly back on centre stage.

As we have heard many times in this debate, intellectual property is the bedrock of a modern economy. Our traditional manufacturing base has gone, and industries that create new wealth are few and far between. There is one notable exception: we are very good at creating intellectual property in the creative industries. The figures speak for themselves—we heard some numbers earlier and I will introduce others. Global trade in IP licences alone is worth more than £600 billion a year. We are a major exporter of IP. In the UK, investment in intangibles has now outstripped investment in tangible assets by £137 billion to £104 billion. Our creative industries are world class and punch well above their weight.

Lara Croft was born in Wimbledon, and “The King’s Speech” dominated the Oscars. Adele is in the middle of a record-breaking run at the top of the US charts. Other countries envy the talent in this country, and as we heard earlier, our youngsters are queuing up to get a job in the creative industries. Some 2 million people already work in creative businesses. We want that number to grow, as do our youngsters who are looking for jobs now—that includes two of my children, who hope to join the creative industries shortly.

In recent years there have been 26 reviews into intellectual property. Who will invest in a country that is constantly reviewing its legislation and cannot decide whether to protect IP? Who will invest in a country that claims to value IP, yet turns a blind eye to theft on an unprecedented scale? Will the Minister confirm that there will be no more reviews of IP this Parliament? Will he unequivocally state whether the UK will protect IP or allow it to migrate elsewhere?

One example of the problem is the unauthorised reproduction of magazine and periodical publications online. If professional publishers are to continue to make significant investments in new applications for online publications, illegal copying and distribution must be more effectively addressed. That requires support for the enforcement of rights, and support from consumers for the use of legitimate services. Growth will not be promoted by removing or reducing rights that act as incentives for investment.

[Mr Foster]

I thank the hon. Gentleman very much for drawing attention to magazines. Often in these debates, we talk about music, film and video games; rarely do we mention magazines. However, the figures show that there is huge piracy of magazines. Future Publishing in my constituency is in real difficulty because of what is happening.

[Mike Weatherley]

I thank the right hon. Gentleman for his intervention. Future Publishing has pointed out to me a website—I think it is in Poland—that reproduces all its magazines online to as high a quality as it can. That is the type of thing that we need to shut down, so I welcome the intervention.

[Mr Foster]

I apologise for intervening again, but the hon. Gentleman is absolutely right. I, too, have seen that website. Pornographic material is included on the same site. The interesting thing is that it purports to be a genuine site, in that people have to pay a small amount of money to use it, so it is misleading consumers. It also contains advertising from reputable firms. We must deal with that.

[Mike Weatherley]

The right hon. Gentleman is exactly right. I think that the charge is equivalent to $10 a month, the payment of which allows unlimited downloads. Zero cents of that $10 goes back to the publishers.

As we come out of the recession, there is much talk of rebalancing the economy. Where will the growth come from? We cannot compete on labour costs and we do not want to. Our strength is in pharmaceuticals, high-end engineering, brands, bioscience and, of course, the creative industries. Our education publishers are No. l in the world. Our music industry is at No. 2. Our games industry used to be at No. 3—the position is under threat as other countries adapt and offer incentive packages that we are not matching. Surely we should be as proud of our creative industries and their podium positions as we hope to be of our athletes next summer.

To be fair to the present Government, the Hargreaves review is their first review of IP. I should also point out that there is a duty on those in the creative industries to adapt their business models far more quickly than they have done in the past. That includes reduced pricing models for the prime product and a changed emphasis on secondary income streams, such as live music and merchandising.

The Government’s response to the Hargreaves report is a tailor-made opportunity to celebrate our creative industries, and to confirm that we are open for IP business on a global scale. Will the Minister reassure banks in the UK that we are the best place in the world to invest in IP businesses? Will he confirm to creative businesses in this country that their assets will be protected by legislation? Will he encourage new talent with the message that people’s rights in respect of what they have created will not be reduced by exemptions and undermined by unnecessary regulation?

Let me turn to the Hargreaves report. It is better than I was expecting; I know that many other hon. Members have said the same. I have to admit that my heart sank when I met Professor Hargreaves and he hinted to me that he wanted to introduce US-style fair use here. His argument was that our IP laws were preventing internet companies from launching, yet I remember many search engines and social networks starting here. Some, such as Mumsnet and Friends Reunited, have been extraordinarily successful. They were not held back by our IP laws; they just did not have access to the same funding as Google and other silicon valley giants. Introducing fair use here would help only the likes of Google—established players with deep pockets that can fund the legal test cases that are such a feature of the US system. It was therefore with some relief that I read in the Hargreaves report that he rejected fair use for the UK. That is a sensible recommendation, and I urge the Minister to endorse it.

However, the report goes on to recommend a range of new exemptions. Let us be clear about what an exemption means for a creator. On the one hand, with our 300-year-old copyright tradition, we say that an author owns his work when he writes something. It is his property; he created it, and it is his. On the other hand, with an exemption, we say that he does not own his work any more in certain circumstances. Of course, there are situations in which the public interest must outweigh a property right, but we should be wary of taking away someone’s property, especially their own creation.

One example involves text and data mining. No case is made in the report for a text and data mining exemption. Such mining is simply described as making it easier to crawl the internet for material. Surely that is what Google and other search engines do on a commercial basis. Do we really need an exemption to make Google’s life easier? Should it not be obtaining licences if it wants to use other people’s material?

Parody, as we have heard, is another example. Parody is almost the hallmark of British comedy. It can hardly be argued that there is a shortage of parody in the UK. However, the Hargreaves report seems to think that there is a problem. The report concludes, with seemingly no evidence, that we should have a parody exemption, but should someone be allowed to take someone else’s work just because they are making fun of it? I do not see how parody justifies removing a creator’s basic rights in their work. Then there is research. Of course there is value in building on the work of others, but does that mean that the original researcher should get nothing for their work? I strongly urge the Minister to reject those recommendations in the report. This goes to the heart of copyright as a property right. Arguably, something that someone has created is even more precious than property. Our legislation gives creators ownership of their work. We should not take those rights away without good reason.

There are two areas where there is justification for an exemption, and that is broadly accepted by creators. The first is archiving. We have some unique collections of film and music in this country; indeed, I understand that film originated in my constituency of Hove. The British Library, for example, has the national sound archive, with millions of recordings going back to the birth of the gramophone, mostly donated over the years by record companies. Making digital copies is an obvious way of preserving those for future generations. When the Government consulted on an archive exemption three years ago, industry backed it. We should implement it now.

[Mr Christopher Chope in the Chair]

The second area is format shifting. That is copying CDs to MP3s, or DVDs to an iPhone or similar—something that millions of people do, despite its being illegal at the moment. Having just parted with cash for both a CD and their new MP3 player, consumers rightly expect to be able to copy music and films across without paying any extra, as they in effect paid for that in the purchase price.

The sticking point was whether musicians should get some recompense for that format shift. In the rest of Europe, that takes the form of a levy on copying devices. I do not like the idea of a levy. It is a blunt instrument that does not necessarily follow the market. Surely some form of licence could be allowed, provided that the material is solely for the private use of the purchaser. If it turns out to be impractical to stop internet file sharing, we could revisit the idea of a levy on equipment, as that would get some revenue to the rights holders and is attractive for its ease of use. In the meantime, I urge the Government to reject the idea of a levy on equipment and to allow personal-use format shifting, provided that an original licence has been purchased—in most cases, that would simply be someone paying for the CD for their own personal use.

On exceptions, the Hargreaves report gets some things right, but not others. The challenge for Government will be working out what to embrace and what to ditch.

--- Later in debate ---

[Ian Lucas]

I am grateful to the hon. Gentleman for making that point and for his support. We all want this area to move forward, because we want jobs and growth in this sector. We all know and appreciate that this is a hugely important sector for the UK. We have heard the 8% of GDP statistic and the fact that we are No. 2 in the world in exports in this field, and we want the sector to progress. Under this Government at the moment, I am afraid that we are not making the progress that we should. On 18 May, the Secretary of State said that there would be a response within weeks to the Hargreaves review, and I want to hear from the Minister when the response will actually come. We have still not made progress on the Digital Economy Act 2010. We are not clear about the Government’s position on enforcing rights. We still have a spectrum consultation going on, and we are awaiting announcements on broadband funding allocations. In the context of a very serious economic position, with growth flatlining generally over the past few months, we need to have one of the most important and positive sectors in the UK in a position of certainty and stability.

When a new Government are elected, a sector always gives them some time, because it is clearly in their own interests to have a good relationship with Government. I am afraid that the sector is running out of patience, and it needs to have support from Government to take matters forward as quickly as possible. It is important that the Minister understands that the industry wants action in this area, and it wants it as quickly as possible.

I want to thank all the organisations which sent me submissions in connection with the Hargreaves review. I have met many of them, and I have discussed in detail what is a very complex area for anyone who comes to it for the first time, as I did about nine months ago. There are many different groups within the sector who lobby well. When I was reading the papers in connection with this debate, I was struck by the common ground, despite the fact that the different groups are often presented as having a great deal of disagreement. The first common issue is that everyone wants growth. We are good at this sector, and we need to do better. We know that we can compete with anyone in music, drama and computer games, and we know that with the right background and the right framework, we can do better. We need to get more people involved in the creative industries, because we still draw from too limited a pool, but I think that we can make real progress. We all agree that investment and talent need to be rewarded, or there will be fewer people working in the sector, and the growth that we want will not happen.

In its submission to me, Google stated that it

“will continue to help content creators to generate new revenues and take control over their online products.”

I deliberately selected Google as supporting the rights holders in that way. When I read that, I was reminded of an interesting discussion that I had recently with the poet Wendy Cope at a meeting. She is well worth reading, although she is often read online without payment. Not surprisingly, she is frustrated by this, because, like everyone else, she has to pay for her Sunday dinner, too. We need to ensure that all original artists are paid. We all agree that artists need to be paid, and we all agree that their work needs to be disseminated more widely.

Obviously, no artist or creator wants fewer people to see their work. No artist will object to format shifting, provided they are paid for it in some way. I was pleased to hear the hon. Member for Hove make his position on format shifting clear. That is an area that needs to be sorted out. Frankly, I am not clear why it has not been done before. I was struck that it was not an issue for virtually every group that I have met. The fact that we have this format shifting that nobody seems to support is a barrier to growth. The example used by the Secretary of State for Business, Innovation and Skills when publishing the Hargreaves review was the case of Brennan, the format shifting company that first came to my attention in the New Statesman in the very convincing advert that it ran over a number of months, basically indicating that it is a company that is at a competitive disadvantage because of the position of format shifting at the present time. We all agree that the current position is not acceptable, and that we need progress, but no one can agree on a way forward, and in that respect copyright is a bit like House of Lords reform.

So, what can we do? There seems to be a consensus that the matter is best dealt with and led by the industry, but there is disagreement about what precisely should happen next, as has been reflected in the debate today. We have had, for example, a discussion about the digital copyright exchange, and part of the reason for the uncertainty, or disagreement, about that is that no one is exactly sure what is being proposed. If we are simply talking about a one-stop shop where someone goes initially and is then directed to existing registers somewhere else that can cope with the matters, that seems to be largely acceptable, but there is great resistance to any sort of compulsory system and to penalising artists if they do not take part in the digital copyright exchange.

The timetable for the Hargreaves review was so tight that the review was never really going to come up with a detailed and convincing response, but we need the matter to be taken forward and an agreement to be reached—within the industry, I think. There are lots of experts in this field, and it is better that they sort out a way forward themselves. I was very encouraged by the setting up of the Creative Industries Council, which is a good model. We have the Automotive Council UK in the very competitive automotive industry, and the different industry parties sit around the table and devise with the Government a strategy to take forward the UK automotive industry. The Creative Industries Council should perform a similar role in areas such as the Hargreaves report, and one of its first tasks should be to find a way forward through discussion within the industry and compromise. Sometimes, to make progress it is also necessary for the Government to knock a few heads together, but in all the discussions that I have had there has been a desire to establish stability and progress in the sector, and the industry in the UK would benefit as a result of that.

It cannot be beyond the wit of the creative industries to put this together; we know about their capabilities and the fact that they have devised structures and new models of working. The Government must, however, play their part too, and I am afraid that at the moment they are letting the side down. We have delay, confusion and a lack of clarity in the relationship between the Government and the industry, and the Government need to step up to the plate, act as quickly as possible—I hope that we will hear some dates for their responses to the review—improve their relationship with the sector and take matters forward from there.

[Mr Foster]

On a point of order, Mr Chope. Given that we are discussing media matters, would it be appropriate for me to inform the House that I have just received the news that the first major casualty of the appalling behaviour at the News of the World is that the newspaper will close after this Sunday?

--- Later in debate ---

[Mr Hayes]

The Government need to consider such things carefully. The issues are complex. The hon. Gentleman made the point that they are challenging, and the Hargreaves review’s recommendations are wide-ranging. He knows the report well; I have it here. The volume of responses to the consultation was large, and they were wide-ranging in terms of both the ideas presented and the organisations that contributed. It requires serious and studious work. He might have wanted an early response, but better to have something satisfactory than something quick. I make the commitment that it will be published in a month, and I assure him that it will be a studious and carefully considered piece of work. I cannot go further than that. I am unable to give an account of the response’s contents before its publication, but I reassure the House that the Government recognise fully the seriousness of the matters raised in this debate and during the review and its publication, as well as the value of the industries that rely on intellectual property as their life blood.

Professor Hargreaves suggested that in some areas the UK’s intellectual property framework, especially with regard to copyright, is falling behind what is needed to meet new opportunities. That point has been made repeatedly today. The argument is that if we do not fix the framework, our economy will enjoy less innovation and lower growth. It is certainly true—I will comment this far on what we might say—that the UK needs open, contestable and effective markets in digital content and a setting in which copyright enforcement is effective. Copyright provides the legal framework to sustain and protect creative value. It needs to fit current conditions, and it should warrant, and get, the respect of consumers. In other words, while not anticipating our response, I think it is reasonable and fair to say, given that we have had such a serious debate, that we feel that changes will need to be made to bring the system in line with current conditions.

We need copyright content and technology working together, as has been said repeatedly. They should be in harmony, not in conflict. There should be a happy union between changing technology and copyright. We need an environment in which new businesses and technologies can compete fairly with existing ones. I accept the point made by the hon. Member for Solihull. Although I qualified her argument about the relationship between SMEs, partner networks and large players, it is certainly true that there is a risk unless we get the balance right. The law in that respect is important. I mentioned the late Sir Hugh Laddie earlier. The hon. Lady will remember that he made a point, following the Gowers report I think, that the legal system militates against smaller businesses and against individuals purely on the basis of cost. The hon. Lady has reinforced that, and I think that my hon. Friend the Member for Northampton South made the same point. Therefore, there are issues to be considered, and as I have said, we take them seriously.

The review recommends that the Government ensure that the IP system is based on evidence. The right hon. Member for Bath (Mr Foster) was right to insist that the Government’s response should also be evidentially based, and I assure him that it will be. Economic considerations should play a stronger role in assessing the nature and perhaps even the limits to rights, which is another point that he made. It is critical that we take an empirical view, inasmuch as one can in this dynamic and complex area. We will prioritise that kind of evidential approach.

On international priorities, the report recommends that the UK pursue international interests in emerging economies and prioritise the EU patent. We will, of course, look at that too, given some of the comments that have been made during the debate.

To improve the environment in copyright licensing, the Hargreaves review recommends the establishment of a digital copyright exchange. That has been mentioned several times, including by my hon. Friend the Member for Hove (Mike Weatherley). Although he will know that that argument has been made by many people over a considerable period, the nature of the exchange, which we are considering alongside other recommendations, must be founded on consent. The idea that we have a state-driven, compulsory system that dictates and determines from the top is probably not compatible with the arguments that have been made by almost every contributor to the debate. It must be based on a collaborative and co-operative model.

The appointment of a champion for the digital copyright exchange has also been raised. I think it was my hon. Friend who said that the champion must not be a dictator, which is of course true. The champion would have to work closely with the industries concerned. The consultative nature of how the Government have gone about getting to where we are would need to characterise the subsequent arrangements that we put in place.

The review also recommends that the Government legislate to enable licensing of orphan works. I want to say more about that in response to the comments of the right hon. Member for Bath. It is important to design a scheme that prevents reappearing rights holders from losing control of their work. Any scheme proposed will have to involve a diligent search for rights information. That must surely be essential if such a scheme is to be fair to all parties. Perhaps I can put it in these terms: if the creator of a bestseller were to come forward, the work would no longer be an orphan work.

The right hon. Gentleman should welcome and not be fearful of the emergence of a missing great creative work. Occasionally, such things happen. Not long ago, an important work by Mozart was discovered, which is surely a cause for celebration. Mozart was perhaps the greatest of the baroque composers, but let us not go down that road or we will have a longer and perhaps less relevant debate. The character of genius is very interesting, but let us not talk about it here.

[Mr Foster]

I am slightly confused about the response given on orphan works. I apologise if I have misunderstood, but does the Minister agree with the basic principle that, if the creator of a work is unknown and that work is licensed by a separate body for use by a third party and subsequently becomes a commercial bestseller, the creator, if found, should be entitled to fair recompense based on the success of that work—yes or no?

[Mr Hayes]

I would never, in these circumstances and on such complex matters, want to reduce my answer to a yes or no, because that would be most unsatisfactory to the right hon. Gentleman and to the Chamber. Surely, he knows that.

[Mr Foster]

I would be happy with such an answer.

[Mr Hayes]

I think that the right hon. Gentleman is underselling himself. He wants a much more sophisticated response than that. I think that there is an absolutely reasonable case to say that, if the person who authored a work is found in the way that he describes, they should receive some recompense or reward. We will need to look at that in our response to the review. The right hon. Gentleman makes a powerful argument, and it seems to me to be not without merit. That is not bad for someone who was not going to give him a direct answer, as I am sure he will be happy to acknowledge with his typical—characteristic, one might say—generosity.

As my hon. Friend the Member for Northampton South has argued, we also need to ensure that we are influencing effectively what is happening overseas and supporting, again, positions based on evidence. We need not only to look at relationships with key partners, but to encourage other states to develop IP frameworks and enforce them appropriately, which is the point that my hon. Friend made. He will be pleased to know that we recently announced, jointly with the Chinese Government, that we will host an IP symposium. It will take place later this year with the appropriate Chinese authorities. It will seek to find a better mechanism for British businesses to raise and have addressed IP-related issues.

I will visit China next week and have no doubt that, among the many issues that I will discuss with the Chinese authorities, this may come up. I will certainly be able to refer to this debate. I give my hon. Friend my pledge that I will reflect on what he has said and, where appropriate and with all the due diligence and courtesy that is fitting to a Minister of the Crown, raise these issues with my Chinese counterparts. Ministers and officials regularly raise IP issues in that way with their counterparts in other countries. It is important that we build on the good relations that we have established to deal with these issues straightforwardly.