Intellectual Property (Hargreaves Report)

Mike Weatherley Excerpts

Thursday 7th July 2011 Westminster Hall

[Damian Collins]

My hon. Friend makes a compelling point, which will have been heard by Ministers and search engine owners. I attended a briefing with the BPI, which represents the music industry, to talk about that very issue and was given a live demonstration, in which typing “download music” into Google meant that the predictive search came up with “download music for free”.

If we believe that technical measures should be used to restrict people from downloading content illegally, we should consult those who run search engines about the priority and ranking that they give to sites that direct people to sources where they can do that. That is a legitimate part of the debate, and search engine representatives should welcome it and be open to consultation with Government about it.

[Mike Weatherley (Hove) (Con)]

Is my hon. Friend aware of the traffic light proposals by the BPI and others that may go some way towards what he suggests?

[Damian Collins]

Yes, I am. It sounds like a sensible way forward. Those things are always best achieved in dialogue with the industry, through Ministers. That is often a much better approach than regulation and direct legislation, which, as we know from other remarks that have been made, can often be difficult to accomplish successfully. That dialogue is important. The companies concerned will have heard the remarks of my hon. Friends the Members for Hove (Mike Weatherley) and for Northampton South (Mr Binley).

Going back to my time in the advertising industry and to a case brought to me by a constituent, I can think of issues on both sides. A gentleman who runs a television business in Cheriton, Folkestone thought that a good way to sell the latest high-definition televisions would be to run an old-fashioned television next to a high-definition one, to show how that set revealed the improvement in the quality of the broadcast. Someone told him that he might need an entertainment licence to do that and that, for that simple demonstration in his shop, he would be charged several thousand pounds. He suggested that he would not do that, and a frank exchange of words was had—after which the problem seemed to go away. Nevertheless, he was potentially running foul of copyright laws.

Many people, if not in this room then elsewhere, will have put together a presentation for their work with images found on Google or elsewhere, and they will not have had a copyright licence to use them. I am sure that people of my generation can think of times when a friend lent them a tape-to-tape copy of some new musical work for their enjoyment, and they, too, would have been in breach of copyright regulations. Those issues have always existed. In some ways the digital economy brings them to a head. In the days when people made cassette copies for each other, peer to peer, the quality of reproduction was relatively poor. However, when the reproduction quality is almost perfect and a reproduction can be transmitted at any time at virtually zero—or actually zero—cost to people, with no effort, the market is changed dramatically. The ability of an owner to own, control and sell the perfect rendition of the work is changed. The rules of the game change, and we should consider what that means for the law.

I was interested in the Hargreaves recommendations on private use. I suppose that copyright and licensing have always respected the idea that the value of a work is based not on the time and effort taken to produce it, but in many cases on the value to the user. In the advertising industry, if music or a photograph or other image is used for a campaign that will run around the world, the cost will be much greater than for the insertion of a stand-alone image in one newspaper, or a radio advert on one local station. There is a recognition of the benefit to the user as well. That is important. If some relaxation of the rules on private usage, where there is very limited commercial value, if any, to the creator, would simplify people’s ability to use work for their own entertainment and for their and their family’s pleasure, I think that it would be reasonable and sensible to consider it. As the Secretary of State for Culture, Olympics Media and Sport has said, we do not necessarily want a system in which someone can be sued for using a piece of Beatles music on a video of their cat on YouTube. That does not mean an open licence system without any attempt at regulation and control.

I am sure that many people would hope that a simplified version of rights clearance and the purchase of rights will mean that older materials—old pieces of film and programming—might be more readily available on services such as BBC iPlayer and elsewhere online. That might bring into play the rich archive of material that broadcasters such as the BBC own, which it is currently difficult to licence and use.

I agree almost entirely with the remarks of my right hon. Friend the Member for Bath about the digital exchange. The idea put forward by Hargreaves is interesting and compelling. There are already clearance houses for rights—PPL and PRS for music in particular—so I wonder what that new exchange would mean for them. I support the view that it would be wrong to compel people to register their works at the digital exchange with the back-door threat that otherwise they might not be covered by any of the legal protections in the Digital Economy Act 2010. Such compulsion would be cause for concern.

When I was a candidate for Parliament, like many other candidates at the time, and many hon. Members of the previous Parliament who were part of the debate on the 2010 Act, I met photographers who were concerned about the proposed legislation on orphan works. Not only should a way be found to pay a nominal licensing fee for orphan works such as images that people want to use, but if that use brings substantial financial gain—particularly if a found image is used in an advertising campaign, which brings great commercial benefit to the company using it—there should be a way to assess what the real value would have been if a proper licensing agreement had been in place. Clearer guidance is also needed on the commercial value of orphan works, in cases where the person in question comes forward after the image’s use.

The issues present a great overall challenge. Our responsibility is to protect the industry and the rights of the content creators, so that they know that they are in an industry where their endeavour and work receive a fair price and are fairly used, and they have incentives to carry on producing their work. One of the challenges that we face, in addition to an uncertain regulatory playing field, is the public’s attitude towards the illegal use of content, particularly in the music industry. Research demonstrates that, on the whole, the problem is not that people do not think they will be caught downloading material illegally, but that they do not think that there is anything wrong in it. The problem is that people do not necessarily understand the impact of piracy and the illegal use of works and the knock-on consequences for the creative industries. That is a communications and attitude-change challenge for the industry.

Part of the solution should be effective resolution using ideas in the Hargreaves report, a better framework for licensing works and understanding how those things work; but there is also a challenge for the industry to make the legitimate means of getting access to music and purchasing content so attractive, simple and easy to use that people would on the whole be deterred from using illegal sources, as the quality of the product and the method of delivering it would be so inferior and the potential consequences not worth the risk.

I welcome the report and hope that we shall not be back here in two years discussing yet another Government report on the issue, but that we shall instead be celebrating some progress on the matter.

--- Later in debate ---

[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.

[Ian Lucas (Wrexham) (Lab)]

I would like clarification. Is the hon. Gentleman saying that the licence would be bought at the same time as the CD, as part of the price?

[Mike Weatherley]

I thank the hon. Gentleman for his intervention. Yes, my belief is that once someone has bought a CD, they should be able to shift the music to another format to listen to it in their own home, for their own private use; that becomes an infringement only if the material is used for other purposes. The industry got that wrong years ago. It is making illegal users out of millions of people in this country. They tend to ignore the law on copyright protection because they see it as a ridiculous law, and once people see something as a ridiculous law, they throw away other laws. We should allow format shifting for personal, private use once someone has bought a full legal copy.

I was saying that the Hargreaves report got some things right, but not others, and that the challenge for Government would be working out what to embrace and what to ditch. The same is true of the idea of a digital copyright exchange and the recommendations on licensing. The report identifies licensing as underpinning creative businesses. Indeed, licensing is now central to almost every business model, whether we are talking about a direct licence from a rights holder for a specific repertoire, or a collective licence covering an entire catalogue. The report recommends that the collective licensing bodies adopt a code of practice to facilitate efficient markets. That is a good suggestion, but does it need legislation and, if so, how intrusive should it be? The British Copyright Council is already producing a template code, and all the collective licensing bodies in the UK have agreed to sign up to it. If the industry is adopting good practice voluntarily, we do not need more regulation.

Perhaps the most high-profile recommendation in the report is the one for a digital copyright exchange. In essence, that is a good idea. Indeed, many parts of the industry are already developing databases. Phonographic Performance Ltd, for example, has a database of 5 million recordings, and the database includes record company ownership and performer line-up. That is essential for its licences with the BBC and others, so that the broadcasters know what is in their licence and the right musicians can be paid. Book, newspaper and music publishers, along with photographers and others, are developing similar facilities. There may even be a role for Government in co-ordinating those efforts and encouraging greater co-operation between databases.

However, the Hargreaves report certainly goes a step too far. It recommends that the digital copyright exchange become a licensing platform, with flat-rate pricing available at the click of a mouse. Far from encouraging growth, that is anti-market. It is extraordinary that a review about growth should recommend a trading platform where prices are static and there is no room for negotiation. How on earth could any rights holder be expected to set a price in advance for a totally new service that at the time exists only in the mind of the creative entrepreneur? That is a recipe for stagnation.

As if that was not enough, the report also proposes introducing penalties for rights holders who do not participate in the digital copyright exchange. Such wrongdoers would be denied access to their rights under the Digital Economy Act 2010, creating a two-tier system for copyright, and that must be resisted. Effectively, it is compulsory registration by the back door, and we should not allow it. One of the great strengths of copyright is its flexibility, and the fact that it is available to all creators, big and small. The principle of not requiring formal registration to enjoy copyright is enshrined in international treaties. We should uphold that principle, not undermine it.

We then come to the report’s suggestion that Government should appoint a digital champion to sort everything out. This is perhaps the most extraordinary of the report’s recommendations. The review rightly concludes that, if it is to work, the digital copyright exchange must be industry-led and must respond to the business needs of the creative sector. It then recommends that Government appoint a tsar to direct that industry initiative. “Industry-led” means led by the industry, not by a digital champion appointed by the Government. Will the Minister reject the idea of a digital champion, and allow the digital copyright exchange to be led by the industry from the start—or at least by a digital champion who is advisory rather than dictatorial?

In conclusion, I urge the Minister to be selective in his response to the Hargreaves report. Will he say yes to protecting our creative industries and the property owned by the creators? Will he say yes to archiving, private format shifting and some form of central rights database? Will he say no to the exemption of text and data mining for research and of parody, and will he be selective in exemptions linked to the national interest? Will he say no to fair use and to a centralised pricing model in the central rights database? Such confirmations and rejections would confirm this country’s commitment to ensuring that IP gives world-class support to business, and to the talent that drives it.