Intellectual Property (Hargreaves Report)

John Hayes Excerpts

Thursday 7th July 2011 Westminster Hall

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

I am delighted to be able to respond to this important debate, and I congratulate the hon. Member for Perth and North Perthshire (Pete Wishart) on securing it. He spoke with knowledge and commitment on a subject that I know is dear to his heart. I have, in fact, spoken on the subject on two consecutive days; I was in this Chamber debating with him just yesterday. As I shall explain later, the Minister in my Department with responsibility for intellectual property is Baroness Wilcox, so I am not here as the Minister with responsibility for the subject but am pleased to speak on it. I pray in aid my professional background in the IT industry. I had a small business, which I subsequently made bigger, and was heavily involved with many but not all of the topics that have been debated today.

The Government are acutely aware that there have been previous reviews and consultations on intellectual property, and I understand the point the hon. Gentleman made at the outset: this is a challenging area, not least because of the changing character of the industry and the technology, and consequent events. He is probably right that we will return to the matter time and again, because of that dynamic quality. The Government are equally acutely aware of the need to facilitate growth. That theme has punctuated this debate, and there is a close relationship between how far we intervene in some of these matters and how we catalyse or, conversely, inhibit growth. That has been the perhaps unspoken dynamic at the heart of today’s considerations.

I am mindful of the words of the late Sir Hugh Laddie, a distinguished commentator on such matters and a judge who presided over many intellectual property cases. He said:

“If patents had been applied from the start we would still be on very early operating systems”—

in the IT industry. He continued:

“To give a business method example, if Ford had patented the concept of the assembly line, the US’s industrial development would have been held up”

altogether. So there are, of course, tensions between how we protect intellectual property and how we facilitate the growth that we need to deliver prosperity.

The economic importance of intellectual property is clearly profound and growing, and it has been said this afternoon that the creative industries are critical in delivering the growth that we seek. I have regular interface with those industries in my role as the Minister for Further Education, Skills and Lifelong Learning and am anxious that we tie the development of skills policy to growth, by identifying the sectors, including the creative industries, high-end manufacturing and the information systems industries, in which skills gaps and shortages might limit what we can achieve. Through that dialogue, I have gained some understanding of how we protect innovation. Innovation and growth are intimately linked by nature—a point made by successive speakers—and we need to make critical decisions about how we facilitate innovation and take advantage of its effect on business activity and employment.

This is a complex environment, and it will continue to change, perhaps even more quickly than at the moment. When people think about macro-economics and economic change, they often say, as has been said today, that as economies advance they become more high tech. I do not dismiss that by saying that it is often said—perhaps it cannot be said too often. What is less frequently cited, however, is the increasingly dynamic need of economies as they advance. Increasing dynamism requires public policy makers to be ever more responsive, and nowhere is that more true than in our handling of licensing, patents and copyrights. That is particularly significant in industries that are at the cutting edge, many of which have been cited. They are not all the same of course, and part of the problem with this debate is that we are dealing with an extremely diverse range of sectors and all kinds of innovation, with different pressures and opportunities.

To support growth, we certainly need an intellectual property system that helps business and consumers realise the opportunities that technology and change create. That is why, as the hon. Member for Wrexham (Ian Lucas) said, the Prime Minister commissioned the Hargreaves review in November. Professor Hargreaves was asked to develop proposals on how the UK’s intellectual property framework can further promote entrepreneurial activity, economic growth and social and commercial innovation.

The Prime Minister asked the review to identify barriers to growth in the IP system, how to overcome them and how the IP framework could better enable new business models appropriate to the digital age. The review considered intellectual property and barriers to the growth of new internet-based business models, including information access, the cost of obtaining permissions from existing rights holders and fair use exceptions to copyright and how they might be achieved in the UK. It also considered the cost and complexity of enforcing IP rights within the UK and internationally, the interaction of the IP and competition frameworks and the cost and complexity to SMEs of accessing IP services to help them protect and exploit IP.

The review issued a call for evidence and undertook a programme of stakeholder meetings and events, to engage with a broad range of organisations. The review team also travelled internationally, visiting the USA to share experiences on managing patent systems and discuss the role of fair use in the US copyright system. There were more than 300 responses to the call for evidence, from a wide variety of sources. More than half came from representative organisations such as the Creative Coalition Campaign and the Open Rights Group that represent hundreds of firms and thousands of individual members.

My hon. Friend the Member for Northampton South (Mr Binley) will be pleased to know that 20% of responses came from small and medium-sized enterprises. He was right to point out that some of our most innovative companies are SMEs, perhaps because innovation often springs from the mindset of an individual or small group of people, as I experienced in my own career. I emphasise, as did he, that the interaction between small businesses and larger corporations can be immensely positive in protecting small businesses’ interests.

I do not want to disagree with the hon. Member for Solihull (Lorely Burt), but having worked with IBM for many years, I think that the partner networks established in that industry by organisations such as Microsoft, Oracle and IBM can be positive for SMEs, although I am not complacent about that. I think that my hon. Friend the Member for Northampton South was right to say that those interactions can be a useful means of protecting the interests of small firms, rather than limiting or damaging them. It is not the time to debate that issue, as it is tangential to the thrust of what I want to say, but it is an important matter that perhaps we can debate on another occasion, when I will be more than happy to avail the House of my insight into such matters.

As I said, 20% of the responses came from SMEs. They are usually hard to reach, which is why it is so important that we proceeded on a consultative basis. Small businesses often have fewer resources available to get involved in Government consultations and reviews. We often hear from big representative organisations, and sometimes from large corporations, but ensuring that we have a dialogue with small businesses seems critical. The high response rate from SMEs tells us how important IP issues are to them. The hon. Member for Wrexham is right that the amount of correspondence and information that Ministers, shadow Ministers and MPs have received on the subject reinforces the level of commitment and proper concern felt.

[Lorely Burt]

Given all that the Minister is saying about the importance of submissions from small businesses, I am sure that he is as mystified as I am that the submission from the SME Innovation Alliance was never alluded to or listed among the submissions. Will the Minister confirm that he is prepared to meet me and the SME Innovation Alliance to rectify the Hargreaves report’s failure to take certain things into account?

[Mr Hayes]

The hon. Lady made both those points earlier. With her usual assiduity, she has taken advantage of this opportunity to intervene on me to amplify them. I will deal with them in turn. First, that submission was indeed received and considered, and it played a part in informing the review’s recommendations, although it was not listed because, as I understand, it was received informally rather than through the formal process. Secondly, I am more than happy to commit my noble Friend Baroness Wilcox to meet her. My right hon. Friend the Minister for Universities and Science will want to be involved, too, and will be happy to join that meeting. The Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage (Mr Vaizey) was also mentioned, and I shall deal with him later in my remarks. Given his Department’s involvement in the digital industries, an interface with him would be desirable, too. Having committed three of my colleagues’ diaries, I had better end on that point. However, we will have the meeting. I will insist that it happens.

Professor Hargreaves delivered his report, “Digital Opportunity”, to Ministers and the Government in May. Members know that the Government are considering that report and will not expect me to anticipate our response, but—it is right that the hon. Member for Wrexham raised the issue in his role as shadow Minister—I again make a clear commitment that the Government will publish our response within a month. There is another commitment made by a Minister who is not responsible for these matters; that is one of the virtues of being in this position.

[Pete Wishart]

When presented with the Hargreaves report, the Government said that the response would be published by the summer recess. What is the reason for the delay? It was a clear commitment to respond by the summer recess. Now the Minister is saying that it will take a month. Why the delay?

[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.

[Mr Binley]

Will my hon. Friend the Minister give way?

[Mr Hayes]

I will give way to my hon. Friend in a moment, but I want to give him one other piece of good news first. The UK recently announced that it will appoint IP attachés in countries including India and—my hon. Friend will be delighted to know—China. We expect them to be in place by the end of this financial year. They will work with host Governments on IP policies and with UK businesses to help to ensure that they can exploit and protect their IP effectively overseas.

[Mr Binley]

That is the quickest response for action I have every had from any Minister. I am most appreciative. I congratulate the Minister on taking on a very difficult brief that is not primarily his own. I understand that he does not want to say too much before the Government consultation has finished but, on the basis of our long friendship, will he talk to the Minister concerned about the use of search engines? The need to ensure that the creative arts get well recompensed for their product is vital and increasingly urgent.

[Mr Binley]

I shall sit down, Mr Chope. Your guidance is welcome, as it is based on experience.

[Mr Hayes]

My hon. Friend is right about the matter that he raises, and I will certainly do as he asks. He has some professional expertise in this field. Other hon. Members may not know that, but I have been pleased to visit Northampton with him many times, including this week. He brings some expert understanding to the subject. As I said, I share his background in the information systems world. He is right about search engines. I will draw his comments to the attention of both my noble Friend Baroness Wilcox who has responsibility in this area and, indeed, the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Wantage. If he had been asked to respond to the debate, contrary to what the hon. Member for Wrexham said, he would have been a peg below me; hon. Members are getting a Minister of State dealing with the matter, rather than an Under-Secretary. I think that that is a bonus. My hon. Friend the Member for Northampton South makes a fair point and, as I say, I will pass on his comments.

[Ian Lucas]

rose—

[Mr Hayes]

I give way to the hon. Gentleman. I did not mean to be unkind to him.

[Ian Lucas]

No, not at all, and I did not mean to be unkind to the Minister. I want to make that absolutely clear. This is not in any sense a personal criticism of him. As he knows, in November, the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage (Mr Vaizey) was a Minister within BIS and he would have been responding to this debate if that situation had continued. He stopped being a BIS Minister because of the Secretary of State’s discussions with his constituents and he is now a Minister in the Department for Culture, Media and Sport. That has a real impact on this area. I am making a serious point about a problem that the Department needs to address.

--- Later in debate ---

[Mr Hayes]

That is a point about the Government’s structure, which is a matter well above my pay grade, as the shadow Minister knows. I understand why he has made the point and it is his absolute right to put it on the record.

My hon. Friend the Member for Folkestone and Hythe (Damian Collins) spoke about orphan works in his thoughtful contribution. As he knows, a number of details need to be worked out on that, including the matter of remuneration. If that recommendation were accepted, we would need to work out a protocol and system for dealing with the matter in more detail than Hargreaves understandably gives us. I would be interested to hear my hon. Friend’s further thoughts on that. If he wants to develop his argument following this debate rather than on the hoof, I am sure that the Government would be happy to take into account that further insight.

[Damian Collins]

rose—

[Mr Hayes]

My hon. Friend is going to give me a further insight now.

[Damian Collins]

In response to the Minister’s invitation and following the comments of the right hon. Member for Bath (Mr Foster), if there were a system for recompense—a protocol, as the Minister suggested—would it include an escalator? Would that just include the lost licence fee not paid, or would it reflect the value of the use of the work to the person who used it?

[Mr Hayes]

That is exactly what I was alluding to. My hon. Friend implied that in his earlier remarks; but for the reasons he has just given, the matter is complicated. The system would need to be thought through carefully to get the balance right. As I said, if he wants to give that more thought, I would be happy to receive representations on the matter. I will then pass them on to my noble Friend Baroness Wilcox and my hon. Friend the Member for Wantage.

[Pete Wishart]

I simply remind the Minister that I have five minutes to sum up at the end.

[Mr Hayes]

That is very generous of the hon. Gentleman.

[Jim Dowd]

As there is a spare slot for an intervention, can I ask whether the protocol for orphaned works will include a description of due diligence, if the Minister follows such a path?

[Mr Hayes]

That is another interesting point. Again, that will form part of what we say when we respond to the report. The review did not deal with the subject in the detail that the hon. Gentleman refers to. The review recommendations do not come to a definitive conclusion on that subject, as he will know from having read them, but the proposal seems to be a useful addition to those recommendations and is certainly something that we will cover in our response. I am more than happy to give him that assurance.

[Mr Christopher Chope (in the Chair)]

Order. I remind the Minister that it is customary in these general debates to leave five minutes at the end for the hon. Member who initiated the debate to respond and that we have to finish by 5.30 pm.

--- Later in debate ---

[Mr Hayes]

I am happy to allow that, Mr Chope. In fact, I was just about to conclude by saying that the debate has been helpful and shown the House at its best. It has been technical, informed and non-partisan. In part, that is because of how it was introduced by the hon. Member for Perth and North Perthshire, whom I should be delighted to hear from further.