Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023

Lord Clement-Jones Excerpts

Monday 20th November 2023 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, it is a pleasure to follow the noble Earl, Lord Clancarty; I wholeheartedly agree with everything that he said. I should say from the outset that we on these Benches support both sets of regulations, which will, I hope, gladden the Minister’s heart as we start debating them.

There are, however, a number of points to be made in relation to them. I very much support what the noble Earl had to say about DACS, the not-for-profit visual artists’ rights management organisation. It recently helpfully published a report that highlights the pivotal role that artists’ resale rights play in supporting artists and the wider art market. As the noble Earl said, they have been somewhat controversial in the past, but, now that they have been included in trade agreements, I feel confident that they are now bolted fully into our intellectual and moral property rights. They are an absolutely vital source of income for many artists. The noble Earl talked about more than £120 million in ARR royalties, directly benefiting more than 6,000 artists and their heirs. Artists selling at the lower end of the art market benefit in particular from ARR: two-thirds of ARR payments in 2021 were less than £500 and 10% of artists received ARR royalties for the first time that year.

I will not repeat most of the rest of what the noble Earl had to say, just that I very much agree with a great deal of what he said. More than 90 countries worldwide have implemented some form of ARR legislation so we are in good company as regards what I see as this moral right. We have heard about the trade agreements; it would be useful to get from the Minister an idea of which agreements we have included this in. Christian Zimmermann, the CEO of DACS is definitely worth quoting. He said:

“The Artist’s Resale Right is more than a legislative mandate—it is a commitment to fairness, a recognition of the value of artists’ contributions, and an indispensable support for artists and their estates.”


The Minister may notice that I have used pounds sterling in my figures throughout so, naturally, I support that aspect of these regulations and, of course, the other aspects that are provided for in the regulations.

The Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 are, in many senses, a much weightier aspect of the regulations we are considering today. I am grateful to the Alliance for Intellectual Property and the British Brands Group for providing briefings and, indeed, their strong views on these issues. I know that the Minister will have heard many of their arguments in person but I want to put on record those views, with which, I should say, I and the All-Party Parliamentary Group for Intellectual Property strongly agree.

Members of both groups strongly consider that the status quo will deliver the strongest overall outcomes for shoppers, business and the UK economy. Following the UK’s departure from the EU, the UK Government now have control over the exhaustion regime. As the Alliance for Intellectual Property says, the importance of the decision on which exhaustion regime the Government choose cannot be underestimated. Although it seems a technical area of policy, it will have a real-life impact on businesses, consumers and regulatory authorities across the UK. Exhaustion regimes have the greatest impact on export-driven UK sectors as they underpin their ability to determine when, how and what goods to sell in international markets and at what price.

The noble Earl quoted the publishing sector. Industries of that kind are particularly successful at exporting; for example, the UK book sector derives 60% of its income from exports. We have heard that the Government have consulted on which regime the UK should select. In January 2022, the Government made an interim decision to select a UK+ regime that would maintain existing protections. As we have heard, this statutory instrument is being introduced by the Government relating to that interim decision. As the Minister said, though, the Government have not made a final decision on which regime to choose but are likely to announce their decision in the next few months. I hope that the Minister will give us some idea of the time in which he expects that decision to be made.

The British Brands Group believes that advice from officials is to make the interim decision permanent—at least, that is its impression—which would be widely welcomed. I want to take this opportunity to voice support for the interim decision and express concerns regarding any shift to an international regime that might arise in future. I am not going to explain what the alternatives are; I do not think I need to. National exhaustion is one alternative and international exhaustion is another; neither is practical nor attractive.

The current regime is regional exhaustion, an approach that has been working well for 50 years. Rights are exhausted once goods are placed on the UK or EU market, although they can be used to prevent the distribution of goods placed on markets outside those countries. This status quo operates well, as we know; it strikes us on these Benches and those organisations as proportionate, hence our strong support. The SI rightly provides for an IP exhaustion regime meaning that the holders of trademarks would not be able to object to the further distribution of their goods once they are placed on the market in the UK and the EU. They would, however, be able to object to imports from other countries.

The Government’s decision on the UK’s future exhaustion regime will be among the most important taken in relation to intellectual property policy during this Parliament. Its impact will affect businesses, consumers and regulatory authorities across the UK; as I have said, it will particularly affect export-driven UK sectors as it underpins their ability to determine how and what goods to sell in international markets and at what price.

Any shift to an international regime would also affect many of the UK’s leading design and branded goods companies. This would make it significantly more difficult to launch new products in countries around the world as those firms would not be able to vary pricing at launch for fear of those products re-entering the UK. A move to an international regime would also lead to consumer confusion since product and regulatory standards differ across countries internationally. Any “free for all” in parallel imports to the UK would undermine the UK’s product standards regulatory framework and would create uncertainty and confusion for the public.

Opponents of maintaining the status quo and supporters of an international regime suggest that there would be a reduction in pricing for consumers from an increase in parallel imports. Where parallel imports occur currently, in contravention of our regime, prices are not lower. As an example, you occasionally see bottles of Coca-Cola with foreign language labelling in some small shops but at the same pricing as compliant products.

We believe that the retail supply chain, including wholesalers and parallel importers, would therefore be the major beneficiary, rather than the UK public. The cost-benefit equation is likely to be between established creative industry sectors that find their home in the UK market but could choose to move elsewhere against a parallel import sector that does not currently exist and would not even need to be located on UK shores, nor to create UK jobs.

In summary, an international exhaustion regime would represent a significant policy shift away from innovation and growth. It would weaken competition, harm consumers and not help lower consumer prices, in our view. The SI as drafted sustains the current exhaustion regime until the Government confirm their long-term policy approach. The most recent government consultation identified no evidence at all to support a change in regime, so this debate is important.

I hope that the Minister, IPO and others in government resist calls for any change that could reduce IP rights holders’ ability to influence the distribution of their products in markets outside the EU and weaken their IP rights. A change in the UK’s trademark exhaustion regime would be a significant policy shift negatively affecting consumers, brand owners, UK exporters and public enforcement agencies, while not reducing inflation. I hope the Minister has got my message that this would not be a welcome change away from the current exhaustion regime.

[Lord Stevenson of Balmacara (Lab)]

I apologise for my slightly late arrival at the Committee. I hope that it was not noted too carefully, but we are doing two SIs as one group and I was here for the whole second part. I hope that that qualifies me to speak.

Also, it would be a terrible shame not to recapture the spirit of a few years ago, when a little group of three of four colleagues, including the noble Baroness, Lady Neville-Rolfe, debated a number of issues to do with intellectual property that came up at that time. It was interesting that a group from within the confines of Parliament then was able to get together and become quite expert at some of these issues. We had some very enjoyable debates and some of these issues have played out again today. Those who benefited from going on that journey gained a lot of knowledge and expertise, so I am not able to stun the Committee with some new insights; they have largely been covered by those who have built up their expertise from the same route that I have been on, so what I would say would be otiose.

I will congratulate both the noble Earl, Lord Clancarty, and the noble Lord, Lord Clement-Jones, for covering the points I would otherwise have made and piggyback on them to save the time of the Committee, which is a good thing.

However, it is interesting that we are still talking about issues that were live three or four years ago. I am sure the noble Baroness, Lady Neville-Rolfe, remembers them with some interest. We are still not clear what distinguishes our particular configuration of design rights. I still worry about those and hope that the department is working on a way forward with some of them. We had some clarity when we were thinking, within the EU context, of a way of trying to balance the difference between those which operated within the UK only and those that were being developed in Europe but were not able to go back to that. I do not think we quite got over the variations that can occur between the triad of patent, trademark and intellectual property in other forms, because they bump into each other. Although they have been dealt with rather well within these statutory instruments, there are occasions when they point in different directions and it is very hard to get a sense of the Government’s policy on them. There is still a need to do more work on that.

In turning to the SIs before us today, I want to raise a very narrow point on design right, ARR and copyright, from the Explanatory Memorandum. Although the noble Viscount touched on this in his introduction, he did not spend a lot of time on it. It is a question of broadly taking forward the arrangements that existed before we left the EU and making them slightly up to date as we go forward. I have no problem with the Design Right (Semiconductor Topographies) Regulations 1989, which were notably not mentioned by my two colleagues nor dealt with in any detail. That is a sensible move forward. We covered ARR and the copyright tribunal rules in some detail. That is a good change and an important way forward.

--- Later in debate ---

[Viscount Camrose (Con)]

Perhaps I had better write to all noble Lords present to say exactly what form that will take.

[Lord Clement-Jones (LD)]

I am sorry to interrupt the Minister as well. In addition to the timing, it would be useful to know what the instrument is going to be. Will it be another consultation? We have had a consultation, which finished last year, and now we have the SI. Is there going to be another consultation with another SI? The whole process needs unpacking a bit.

[Viscount Camrose (Con)]

That is fair enough. What I am hearing is that noble Lords want to know not just when it will be but what it will look like when it happens. That is an entirely reasonable request, to which I am happy to accede.

I note the views of the noble Lord, Lord Clement-Jones, on how the UK-plus regime supports the publishing industry in particular. I recognise the importance of this issue to a variety of businesses, which have provided extensive contributions to the public consultation on this matter. On behalf of the Government, I thank those businesses for their constructive engagement during the consultation and since. The noble Lord also—no, I am getting ahead of myself. I will move on, except to note that this issue has the potential to impact so many business sectors and therefore it is important for the Government to take the time to get it right.

The noble Lord also mentioned his concerns about a potential move to an international exhaustion regime. As I mentioned, no decision has been made. However, I should advise noble Lords that we intend a future regime to strike the right balance between consumer choice, fair market pricing, protecting creators and promoting competition.

I turn to the matters raised by the noble Lord, Lord Stevenson. I am grateful for his and his colleagues’ expertise on this important area of policy. He raised the review of design rights. The IPO began a review of that legislation last year, with a call for views published in January 2022. We want to make sure that the UK design system best meets the needs of designers and businesses. The IPO is now working on policy proposals on which to consult, which will likely happen in the first half of 2024. The review is fairly wide ranging, as the law around designs is complex and has not been reformed in any meaningful way for some time. It is important to do this work properly to make sure that any changes work for users and all stakeholders.

The noble Lord raised concerns about transparency reports issued by collective management organisations not being audited. The purpose here is to align the treatment of CMOs with that of other organisations in Companies House of similar size; to not treat them differently simply because of the nature of the work they do as CMOs, and therefore not to require organisations that qualify as small to conduct a formal audit in that way, along with other organisations of their size, scope and scale.

Small CMOs will still be required to produce annual transparency reports and to abide by the regulations that govern their conduct and operations. Removing the statutory audit requirement strikes a fairer, more proportionate balance between risk and cost for these small entities. The changes to the audit requirements were in recommendations evidenced by the additional burden imposed on them during a 2021 post-implementation review of the regulations. To provide some reassurance, I hope: this change affects just seven of the smallest CMOs.

The noble Lord, Lord Stevenson, also mentioned the expansion of the European Economic Area and how it would affect our exhaustion regime. Currently, the geographical scope of our exhaustion regime covers the UK and the European Economic Area. If the European Economic Area expanded the Government would consider how that would affect our exhaustion regime, but we would not wish to prejudice such a decision.

I hope all noble Lords will recognise that these proposed changes support a balanced, consistent and stable IP framework that is crucial for businesses, consumers and investors. I absolutely recognise the strength of feeling and argument in favour of maintaining this regime, but meanwhile I commend these regulations to the Committee.