Digital Economy Bill

Lord Foster of Bath Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 6th February 2017 Lords Chamber

Moved by

[Lord Foster of Bath]

77: After Clause 29, insert the following new Clause—
“Copyright and the role of active hosts
(1) The Electronic Commerce (EC Directive) Regulations 2002 are amended as follows.(2) At the end of Regulation 19 insert—“(2) Where an information society service is storing and providing access to the public copyright protected works, and is playing an active role, including the promotion and optimising the presentation of those works, sub-paragraph (1) shall not apply.(3) The service provider of an active host under sub-paragraph (2) is required to secure licensing agreements with rightsholders.””

[Lord Foster of Bath (LD)]

My Lords, in moving Amendment 77, I shall speak briefly to Amendment 79. Amendment 77 probes the Government’s intentions with regard to the recent proposals for an EU directive on copyright in the digital single market. The amendment would clarify that the hosting defence contained within paragraph 19 of the Electronic Commerce (EC Directive) Regulations 2002 does not apply to digital services that play an active role in the provision of online content, specifically those user upload services that optimise the presentation and promotion of copyright-protected works. The amendment would require those services to secure licensing agreements with rights holders.

To explain in more detail, many services are passive hosts, which are defined in EU law as those that provide a,

“technical process of operating and giving access to a communication network over which information made available by third parties is transmitted or temporarily stored, for the sole purpose of making the transmission more efficient”.

Examples would include internet service providers such as BT, TalkTalk or Virgin, cloud locker services such as Dropbox, Microsoft’s One Drive or Google Drive, and online bulletin boards such as HootBoard or MyBB. Services such as these are accepted as essential to the operation of the digital market and so quite reasonably have what is called “safe harbour protection”—that is, a limitation of their copyright liability on the basis that they have no knowledge of copyright infringement. On the other hand, there are sites that also give access to works made available by third parties, but actively provide functionality that promotes works, makes recommendations and optimises the upload for the purpose of presentation. It is this functionality that provides users with the ability to find what they want when they want it. These are active hosts. They directly compete with licensed providers. Examples include Facebook, YouTube, Dailymotion, Bandcamp, Vimeo and Metacafe. They should not have safe harbour protection and should be required to secure licencing agreements with rights holders.

Therefore, while there was, and in some areas continues to be, justification for exemptions for passive hosts, like all exemptions they must reflect the balance between the rights of rights holders and users. There is a strong argument that the existing provisions are not sufficiently defined and as a result are open to deliberate misinterpretation. This means that some services can use copyright-protected content to build their businesses without fairly remunerating rights holders. UK Music’s recent report Measuring Music highlighted that the user-uploaded service YouTube, the most frequently used global streaming platform and one that currently benefits from the safe harbour provisions, increased its payments to music rights holders by only 11% in 2015 despite consumption of the service growing by 132%. This further underlines what is called in the trade the “value gap”. The current legal ambiguity and imbalance has created distortions in the digital market with services like YouTube benefiting from these exemptions whereas Apple Music and Spotify, providing similar services, do not. The growing significance of the music streaming market must not go unremarked. Over a four-year period, the UK music industry has grown by 17%, and during the same period, there has been a massive shift from consumers owning music to streaming it. The value of subscription streaming services jumped from £168 million in 2014 to £251 million in 2015.

There has been a number of legal cases seeking to clarify the situation. In 2011, in the L’Oréal v eBay case, the Court of Justice of the European Union held that online marketplaces cannot benefit from the hosting exemption where they play an active role, for example by promoting and optimising content. This amendment seeks merely to clarify what should already apply in the law right across the EU, including in this country. However, some services are still arguing that they are not active hosts, and as a result, avoid licences or are underlicensed, hence the need for the clarification that may be provided by this probing amendment.

There is another reason why we need greater clarity from the Government. Initially, the Government made it clear that they believed:

“Clarification of terms used in the Directive would, we believe, help to address … concerns”,


about the active/passive host issues. However, in a letter to the EU institutions in April last year, the then intellectual property Minister, the noble Baroness, Lady Neville-Rolfe, argued in relation to digital services that,

“we should avoid introducing legislation that might act as a barrier to the development of new digital business models and create obstacles to entry and growth in the European digital market”.

This probing amendment seeks to ensure that that sort of view does not preclude strong and robust positions being taken in support of safe harbour clarification. The proposals in the draft EU directive in this regard are welcome, and we ask that the UK Government continue to support the clarification in the law that the draft directive seeks and that they continue to engage in this important process.

The referendum result and the path towards Brexit raise many issues in relation to these proposals. It is highly conceivable that we will be Brexiting at the very time that Europe begins to adopt copyright rules for the digital age, so an opportunity to clarify UK law will be lost as a consequence of other factors. It is therefore necessary to consider how we can take this opportunity of having a Digital Economy Bill to safeguard these important principles once we leave the European Union. I hope very much that the Minister will confirm that the Government are committed to implementing the draft directive, and Article 13 and Recital 38, into UK law, if they are not implemented by the point that we leave the European Union. Finally, I am well aware that the Government have been consulting stakeholders on these issues. I hope we get a commitment from the Government to publish the consultation and that the new IP Minister, Jo Johnson, will commit to a meeting with representatives of the music industry and others to discuss these issues.

Briefly, we on these Benches fully support Amendment 79 in the name of the noble Lord, Lord Stevenson, which my noble friend Lord Clement-Jones and I have also signed. I have no intention of stealing the thunder of the noble Lord, Lord Stevenson, and will leave him to explain the importance of the amendment, which seeks simply to help the Government achieve their own manifesto commitment to reduce copyright infringement and ensure that search engines do not link to the most offending sites.

I will say merely that the Government have already hosted a number of round tables to seek ways forward, and some sources are telling us that a voluntary agreement for a code of practice is close to finalisation. If that is true then I am delighted to hear it, but this amendment would not preclude a voluntary agreement. Already many have argued to us that tabling the amendment may have helped to speed up the process towards a voluntary agreement with teeth, but the amendment would not do anything other than ensure that we had a backstop mechanism in the event of a failure to get a voluntary agreement or if the voluntary agreement fails. I hope that on that basis Amendment 79 will also be considered seriously by the Government.

--- Later in debate ---

[Baroness Buscombe]

My Lords, on Amendment 77, over recent years the UK has made great strides in the enforcement of intellectual property, and we are now judged to have one of the best IP enforcement regimes in the world. This is definitely a position that we are keen to maintain, and the Bill sends a clear signal that the Government believe copyright infringement is a serious matter, irrespective of whether it is online or offline. This includes measures to increase the penalty for online copyright infringement from two years to 10 years. We understand that there are concerns in the music industry particularly that online intermediaries need to do more to share revenues fairly with creators, which the amendment seeks to tackle. However, we need to find balanced solutions that provide clarity without undermining basic freedoms or inhibiting the development of innovative digital models.

As the e-commerce directive is EU single-market legislation in origin, we will in effect have to wait until after we exit the EU and then possibly initiate a debate as to whether this regime, or indeed the e-commerce regulations as a whole, is still fit for purpose. We are also wary of making piecemeal changes to this important regime that has helped to foster the development of online services and has been helpful to the development of the UK’s burgeoning tech sector without a proper debate involving all parties.

That said, the current law, including the exemptions from liability, has fostered an open and innovative internet, giving online services the legal certainty required to start up and flourish. This has been good for creators, rights holders, internet businesses and consumers alike. Platforms, like all businesses, have a role to play in helping to remove copyright-infringing material, and there is no place for a system that encourages copyright infringement online. However, the UK Government are fully committed to ensuring that our creative industries receive fair remuneration for their work. We want to see creators remunerated fairly, while encouraging investment in new content and innovative services. We will carry forward these principles when engaging at policy level with the EU while considering our own UK-based solutions.

The Government are clear that we must maintain our rights and obligations as members of the EU until we leave. That means that we carry on making arguments within the EU concerning our preferences for EU law. Once we leave the EU, we may choose to reconsider a range of issues, including the limited liability regime, but for now, government policy remains unchanged. The European Commission has recently published a series of copyright proposals in that area, and we are in the process of carefully considering those proposals. While we remain a member of the EU, we will continue to engage with policy development in this space, alongside considering the development of our own copyright framework.

Amendment 79 would mean that the Government take a power to impose a code of practice on search engines, to dictate how they should work to prevent copyright infringement. The return of that suggestion, which was also discussed in another place, gives me an opportunity to update noble Lords on progress in this important area. Since the idea was last discussed in the other place, IPO officials have chaired a further round-table meeting between search engines and representatives of the creative industries. While there are still elements of detail to be settled, the group is now agreed on the key content of the code and I expect an agreement to be reached very soon. All parties have also agreed that the code should take effect, and the targets in it be reached, by 1 June this year. The search engines involved in this work have been very co-operative, making changes to their algorithms and processes, but also working bilaterally with creative industry representatives to explore the options for new interventions, and how existing processes might be streamlined. I understand that all parties are keen to finalise and sign up to the voluntary agreement, and so we believe there is no need to take a legislative power at this time.

Surely it is better to act on a co-operative basis now, and start tackling this serious issue right away. If, however, a voluntary deal cannot be achieved, we will re-evaluate our options. I hope therefore that the noble Lord is reassured, and feels able to withdraw the amendment.

[Lord Foster of Bath]

My Lords, I thank the Minister for her response. On the second amendment, my concern is that although she is optimistic that we will have a robust agreement in place, if that does not happen—or if the agreement breaks down at a future date, for whatever reason—she has said merely that the Government will re-evaluate their position. She will be as aware as I am of the difficulty of bringing new legislation before your Lordships’ House to address any decision they might make at this time. The amendment would provide that backstop mechanism if it is needed in the long run, which is why I hope we will have an opportunity to discuss that at further stages of the Bill.

On the first amendment, the Minister has not been able to reassure me that the Government are committed to introducing appropriate legislation if the EU legislation has not been finalised at the time we leave the European Union. I hope therefore that we will have an opportunity to discuss that matter in more detail on a future occasion. For the time being, however, with an opportunity for us to reflect on what the Minister has said, I beg leave to withdraw the amendment.

Amendment 77 withdrawn.