Draft Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023 Draft Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023

Nigel Mills Excerpts

Wednesday 22nd November 2023 General Committees

[Andrew Griffith]

Good morning, Mrs Cummins; it is a pleasure to serve once again under your chairmanship.

Intellectual property underpins our economy: it is the means by which businesses and individuals can commercialise their ideas, turning them into products and artistic impressions. IP drives innovation and investment, which, as set out in the Government’s innovation strategy, is vital to tackling the world’s largest challenges. Industries with an above average use of intellectual property contribute almost a quarter of UK output, 16% of UK employment and over half of goods exports. IP is crucial to support the Government’s long-term vision to cement the UK as a science and technology superpower and a global leader in innovation. Maintaining the current system is crucial to supporting innovation across the economy.

The draft regulations before the Committee use powers contained in the Retained EU Law (Revocation and Reform) Act 2023, or REUL, to amend or restate certain provisions in IP legislation. They make modest and targeted changes to the benefit of our IP framework in line with the aims of that Act. I will take each set of draft regulations in turn.

Subject to the Committee’s approval, the Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023 will amend provisions in four pieces of IP legislation, and I will explain more about these. The Design Right (Semiconductor Topographies) Regulations 1989 provide protection for designs that are semiconductor topographies, implementing international obligations under the World Trade Organisation TRIPS—trade-related aspects of intellectual property rights—agreement. Semiconductor topography design right is an IP right intended to protect the design of specific semiconductor products—for example, printed circuit boards—which can be relatively easy to copy.

In the UK, the law treats the protection of topographies of semiconductor products as a form of unregistered design right and extends protection to persons from certain qualifying countries. WTO members that are not EU member states are included as qualifying countries by being listed in the schedule to the regulations. The proposed amendment does not alter the design right but is simply intended to remove the need for further legislation to update the schedule when new countries join the WTO, to save parliamentary time.

The Artist’s Resale Right Regulations 2006 provide the basis for an artist’s resale right in the UK. ARR is a form of IP protection related to copyright. It gives creators of visual art, such as paintings or sculptures, an unwaivable statutory right to receive a royalty when their works are resold in the secondary market. The proposed amendments directly replace references to euros in ARR royalty calculations with pounds sterling and are intended to reduce regulatory burdens and costs for UK businesses. A transitional provision has been included so that this change will apply from 1 April 2024, which will allow industry time to prepare and adapt to the changes, in line with advice from the collective management organisations that administer ARR payment schedules.

The Copyright Tribunal Rules 2010 set out the rules of procedure for the copyright tribunal, which adjudicates on various commercial copyright licensing disputes, particularly concerning the terms of licensing schemes for copyright material. The amendments proposed by this instrument will mean a respondent or intervener in a copyright tribunal case will be required to provide an address for service in the UK rather than one located in the European economic area.

Lastly, the Collective Management of Copyright (EU Directive) Regulations 2016 set minimum standards for the governance, transparency and behaviour of collective management organisations established in the UK. CMOs operate as companies and are therefore subject to domestic company law. The amendments proposed by this instrument will reduce the regulatory burden on those CMOs, which qualifies small companies by exempting them from the requirement to audit the accounting information provided in annual transparency reports. The regulations also redefine other exemptions so that they apply to CMOs that qualify as a micro entity under the Companies Act 2006. That will include the removal of references to euros.

I now turn briefly to the draft Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023. It is important to maintain a balanced, consistent and stable IP framework. An essential mechanism that provides this balance in our IP system is called the exhaustion of IP rights. Put simply, IP rights enable their owners to control the first sale of their creation, but our exhaustion of IP rights regime ensures that, once a good is lawfully placed on the market, the rights holder can no longer use their IP rights to control the subsequent distribution or resale of that good.

For example, after someone purchases a book, the copyright owner cannot stop them from selling that book to another person in the same territory. A functioning exhaustion regime is therefore crucial for commerce in our modern economy. The mechanism also underpins the rules on parallel imports, which are the importation of genuine IP-protected physical goods that have already been put on the market in other countries—medicines, for example.

After we left the European Union exhaustion of IP rights regime, the Government created a bespoke, unique, regional exhaustion regime. Under that regime, once a good is lawfully placed on the market in the UK or the European economic area, the relevant IP rights in that good are considered exhausted. The regime was created to provide certainty for businesses and consumers while the Government consulted on what the UK’s future exhaustion regime should be.

Our current exhaustion regime relies on retained EU law, which will no longer exist from 31 December 2023; without replacing that, our exhaustion regime would not operate effectively from the end of this year. That could create uncertainty about the operability of rules for IP-protected goods, which may impact on supply chains and create a chilling effect on commerce and investment in the UK. Our position is that Parliament must act now to ensure that the UK does have a functioning exhaustion regime from the end of this year onwards. These regulations achieve that purpose. Subject to the Committee’s approval, the regulations restate certain retained EU law to ensure the continued operation of that regime, but without making substantial changes to the policy area. That also achieves the aim of the rule by making our exhaustion laws more befitting for the UK statute book and only restate retained EU law that is necessary for the continued operation of the regime.

In terms of the impact of these regulations, consumers and businesses should not see any significant changes to trading practice, because in substance they ensure a continuation of the current regime that has been in place since 2021.

[Nigel Mills (Amber Valley) (Con)]

Can the Minister tell us how this applies to electronic sales? If I buy a book on a Kindle, it is always very hard for me to pass on to somebody else. Is that a right I do or should have under these regulations?

Secondly, is this regional principle now the Government’s policy? Does the Minister think a Europe-wide territory for exhaustion is the right answer, or are we going to look at this in our trade deals and try to expand that region to, say, the whole of the comprehensive and progressive agreement for trans-Pacific travel partnership as well?

[Andrew Griffith]

I will address the first, technical point in my winding up. I was about to come to the fact that the Government have consulted but have not listened to industry’s views about what a go-forward exhaustion regime post our departure from the European Union looks like. The regulations that the Committee is asked to approve today effectively maintain a continuation, to provide that certainty. The Government will respond to that consultation, in due course, to directly address the question asked by my hon. Friend the Member for Amber Valley. As part of that, there will be consideration of the relative merits of extending that territory to include new territories such as the CPTPP.

I hope that hon. Members on both sides will reflect on the fact that this is a complex area; it is very much determined by an interlocking web of international rules and treaties, and I think that it is right that the House should proceed cautiously, given the importance of IP protection to the UK’s economy. My hon. Friend makes an important point, and I hope that we can move forward on that, in collaboration with industry and on a cross-party basis, to provide the opportunities that are there for the UK.

In conclusion, this set of regulations seeks to use powers contained in the Retained EU Law (Revocation and Reform) Act 2023 to introduce only targeted changes, at this stage. Those changes will ensure that rights holders, businesses and consumers can continue to have certainty and confidence in the UK’s IP framework.