Response to the CMS committee inquiry on the creative economy

For more information contact Peter Bradwell, peter@openrightsgroup.org

November 2nd 2012

We welcome the opportunity to respond to the Committee’s call for evidence. Our submission focuses on three of your areas of interest:

1. Barriers to growth in the creative industries—such as difficulties in accessing private finance—and the ways in which Government policy should address them. Whether lack of co-ordination between government departments inhibits this sector.

2. The impact on the creative industries of the independent Hargreaves Review of Intellectual Property and Growth, and the Government’s Response to it.

3. The impact of the failure, as yet, to implement the Digital Economy Act, which was intended to strengthen copyright enforcement. The impact of proposals to change copyright law without recourse to primary legislation (under the Enterprise and Regulatory Reform Bill currently before Parliament).

Our submission to this inquiry largely draws on:

1. Our response to the Government’s copyright consultation, which closed in March this year;

2. Our submission to the BIS Committee inquiry, from the end of 2011;

3. Our submission to the All Party Parliamentary IP Group inquiry that ran in April earlier this year;

4. Our submissions to Ofcom in response to their consultations on the Digital Economy Act’s Initial Obligations Code and Sharing of Costs Order.

 

Summary of key points

1. The Government should ensure that work to reform copyright licensing continues, for example the recommendations set out across the reviews led by Richard Hooper CBE. The stimulation of legal markets is crucial, especially in the case of the film and television industries.

2. Improving access to cultural heritage held in libraries, museums and archives can act as a stimulus for the creative industries.

3. The Government should ensure the voices of creators are understood and listened to when policy is being developed. Too often trade associations are used as a proxy for their perspectives. Equally, the interests of consumers and other ‘users’ of copyright need to be considered.

4. We broadly support the findings of the Hargreaves Review and the Government’s response to it, believing the recommendations add up to a design manual that will help society reap cultural and economic rewards from new technology through greater creation and use of information, ideas and knowledge.

5. The proposed reforms, implemented carefully, should not result in a weakening of creators’ positions or their levels of remuneration but will encourage more socially and economically useful activity.

6. We believe the IPO has run an open policy making process that has given stakeholders a number of opportunities to submit evidence to support their position. This contrasts with the policy making by DCMS, who have made no effort to understand the evidence of the issues and have failed to run an inclusive policy process.

7. The Government should understand and learn from the causes of the delays to the Digital Economy Act – namely, an overly hurried and insufficiently democratic legislative process for a policy that was not based in robust evidence.

8. Strong political leadership is required to ensure that IP policy making is truly inclusive, transparent and is driven by evidence.

1. Barriers to the growth of the creative industries

On the issue of copyright and growth, we broadly support the findings of the review carried out by Richard Hooper CBE and Dr Ross Lynch into licensing and copyright. In their diagnostic report, they identified seven key issues that should be addressed in order to improve the licensing of copyright material. Those included reducing the complexity in licensing markets and rectifying repertoire imbalance between physical and digital markets.

We also believe there is a need for further study of the position of creators in the digital age. This should include considerations of their strengths, weaknesses and vulnerabilities in cultural markets, and should help to disaggregate the interests of creators from intermediaries who are sometimes licensees or custodians of their rights, but more often than not have become proxies for creators’ voices in policy making forums. We would advocate study of how creators’ hand can be strengthened in the digital age in ways that take full advantage of the connectivity, transparency and accountability that technology offers.

For instance, we believe it is critical that collecting societies adhere to minimum standards, in order to ensure the markets in which they operate are fair, that they build greater trusting relationships with their users and to enable the development of other proposals for licensing reform. As an example, the governance of collecting societies is critical to the enabling of extended collective licensing schemes and orphan works solutions.

Technology could also facilitate a market for rights based on an improved and strengthened position for creators that reduces a reliance on collectivised rights management, rather than enhancing it. It is possible that technical and administrative services could emerge to help performers manage their relationship with the market, instead of being ‘passengers’ in intermediaries’ businesses.

For our comments on the co-ordination and nature of IP policy making, please see our concluding notes below on the role of government in IP policy making.

Access to cultural heritage as a stimulus for the creative industries

We suggest the Committee consider the current efforts to broaden access to cultural archives held by libraries, museums and archives. We believe that access to this cultural heritage and stores of material can act as a stimulus, whether directly through reuse or indirectly through partnerships or encouraging the development of creative skills – something recognised, for example, in the 2010 report “Museums Deliver” from the National Museum Director’s Conference. This is something also recognised, in the revision of the EU PSI Directive. We note, for example, the text from a widely leaked proposed (and thus cited with appropriate caveats) text of the Directive, which recognises that “wider possibilities of re-using public cultural material should inter alia allow European companies to exploit its potential and contribute to economic growth and job creation.”

This is something that was also noted by the EU’s Digital Libraries Initiative:

“Digital libraries provide considerable added value in terms not only of cultural visibility, but also of jobs and investment. Making the wealth of material contained in European libraries, museums and archives (books, newspapers, films, photographs, maps, etc.) available online will make it easier for citizens to appreciate their cultural heritage and use it for study, work or leisure. This will complement and support the objectives of the European Union (EU) action on culture. Libraries and archives are major sectors of activity in terms of investments and employment. By increasing their use and the visibility of their resources, digitisation could significantly increase their already considerable impact on the economy as a whole.”

We suggest the Committee study these moves and the implications for UK creative industries, in particular looking to the revision of the PSI Directive. We recommend the efforts to ensure broader access to the cultural heritage held by libraries, museums and archives. Our analysis of the revised text that was published in May this year is available from our website, and includes recommendations for further iterations of the Directive.

2. The impact on the creative industries of the independent Hargreaves Review and the Government’s response to it.

We broadly support the findings of the Hargreaves Review and the response of the Government to it. In particular we support the commitment to evidence-based policy and proposals for new exceptions to copyright, especially for a new exception to support parody. We note that the BIS Committee came to the following conclusion following their inquiry into the Hargreaves Review:

“A considerable amount of high-quality work on policy development has been undertaken in the year since the Hargreaves Review. It will be important to maintain that momentum alongside the more rigorous approach to policy formation that Hargreaves recommended. Conclusions are near to formation in many areas, and the Government should press ahead with measures to implement new policy in those areas as soon as possible. We recommend that the Department act swiftly to bring in legislation to that effect.

169. While we recognise that the Government is undertaking a major reform in a complex area, changes are both necessary and urgent.”

We believe that technology should help increase the creation of and access to information, culture and knowledge. But this requires copyright law that reflects the new opportunities for creative or economically useful activity afforded by new technology. That should go hand in hand with strengthening creators’ position by, for example, encouraging fair markets in which they hold a stronger stake, improving the visibility of the provenance of a work and instances of works’ reuse, boosting mechanisms of redress and remuneration, and by significantly improving relationships between creators and collective licensing bodies.

The direction of travel of the reforms proposed by Professor Hargreaves and the subsequent Government response will help do this. Conversely, without this programme of reforms, we fear copyright will lose credibility by continuing to inhibit society, through a kind of over-regulation, from making the most of new technology. When it prevents legitimate transformative reuses, such as parodies, or prevents researchers from using new technology to analyse large amounts of data in the service of building and sharing knowledge, copyright works instead like a veto over socially or economically useful activity.

Evidence and IP policy making

The Government’s commitment to evidence that followed the Hargreaves review was particularly welcome. This must be an essential part of IP policy making. It would count as a huge step forward.

As we set out in our submission to the Hargreaves Review, one of the clearest examples of the absence of a robust evidence base in past IP policy is the economic impact assessment for the Digital Economy Act. This features references to statistics that are not publicly available, which are given preference for no stated reason and which are taken from research whose methodology is not discussed. There is an absence of any serious critical analysis and a failure to connect evidence with policy choices taken.

In an oral evidence session to the Business, Innovation and Skills Committee in November 2011, Adrian Brazier, from DCMS, admitted that the Government holds no evidence on the effects of copyright infringement online, or of the effectiveness of different ways of dealing with it. Mr. Brazier said that the methodologies behind the evidence used to rationalise the Digital Economy Act (in the Impact Statements) was not publicly available – or indeed available to the Government. He also admitted that the Government were ‘left making the best brick with the straw available’.

Policy making on copyright enforcement has too often been driven by hearsay and assumptions. We submitted Freedom of Information requests to both DCMS and the IPO on this issue. The response effectively confirmed what was said in the BIS Committee – that the Government has no evidence of the scale, nature and effects of copyright infringement. At the time of the response, the Government was not only still supportive of the implementation of the Digital Economy Act, but was hosting roundtables encouraging the development of new self-regulatory enforcement measures. These discussions continue – we are not aware of new research being undertaken by DCMS that would serve to guide this work.

A further example of the problems with DCMS’ use of evidence comes from the UK Film Policy Review, published in January 2012. The report states that the costs of copyright infringement to the film and television industries in the UK is £535m per year in the UK. The citation states this comes from “Ipsos Media CAT (2009) GB Movie and TV Piracy 2009”.

We were not aware of an organisation called Ipsos Media CAT, and could find no record of the cited study. Having asked Ipsos MediaCT, we established that the research is from an annual study commissioned by the British Video Association. The study is not public, but the BVA helpfully met with us and talked through their research in person.

It appeared that the cited figure represents what this study asserts is the loss to the film and television industries from all forms of infringement, rather than just online copyright infringement. Further, it was not clear if the figure in the DCMS report precisely matched the figure from the research. So DCMS inaccurately cited a figure that diagnoses the effect of all forms of copyright infringement in a section on the need to combat online infringement. Further, the evidence is not publicly available.

It is of course perfectly legitimate for trade associations or other organisations to produce research that they hope informs a policy debate. But we do believe that the debate is best served by research being openly available, so that its methodology and findings can be more closely interrogated and so it can serve as a useful contribution to a considered study of the issue. Policy makers should not accept research uncritically, or use evidence around an issue to post-rationalise a policy decision, or haphazardly cite single studies that are not available publicly without any explanation or justification.

There is no doubt that digitisation has had a serious effect on the creative industries. But policy designed to respond to this issue must be evaluated and supported by transparent and robust evidence. So we support the recommendations from the Hargreaves review that policy making on copyright displayed a greater respect for robust evidence. We also welcome the suggestion that the IPO could work with organisations who may be able to contribute evidence to help them develop methodologies and ultimately data that is of a standard worthy of informing and influencing public policy debate.

Evidence and the Hargreaves Review

The BIS Committee report supported the recommendation from the Hargreaves Review that IP policy needs to follow a more evidence-based path. They also noted that:

“We welcome the Intellectual Property Office’s reassurances that more detailed analysis is on-going and trust that it will pursue that work and act on external criticism of data and methodologies. We also agree that the involvement of the Regulatory Policy Committee as an independent auditor of economic analysis is a sensible policy development.”

As is the case for enforcement, we believe the process of implementing the Hargreaves reforms must be grounded in robust evidence.

Comparing the policy processes of the IPO and DCMS is worthwhile. We note that the IPO ran a three month long consultation soliciting the views of all stakeholders following the publication of the response to the Hargreaves review, and ran a number of inclusive seminars. This gave anyone with relevant evidence an opportunity to submit their own evidence of the effects of the various proposals. The IPO have also committed to doing further impact assessments as the recommendations are taken forward. This contrasts pretty clearly with the ‘invite-only roundtables’ approach to policy formation undertaken by DCMS over the past two years which, as we covered above, they admit is not grounded in any evidence or analysis of the issue.

Freedom of expression and copyright exceptions

It is important consider the broad effects of copyright, which means assessing the impact of reforms on the creative industries as well on creators, consumers, and other ‘users’ of copyright. For example, the relationship between exceptions and freedom of expression is recognised by the Council of Europe in a 2009 report prepared by the Group of Specialists on Human Rights in the Information Society, in which they say that:

“The dimension of public interest [in copyright policy] extends to…(ensuring) optimum access to creative works and to stimulate a wide dissemination of knowledge and creativity. Limitations and exceptions (exemptions) are the mechanisms aimed at securing this access, thereby becoming key factors in achieving a balance between rightsholders’ interests and public interest under copyright system”

We agree that people will only reap the benefits of the Internet as a tool that promotes freedom of expression if there are sufficient exceptions that permit legitimate engagement with cultural works. Such exceptions do not necessarily undermine creators’ rights, or unduly take away earning power from them, but they do encourage people to reuse those works in new and useful ways.

For example, the three proposals around exceptions for parody, use of works for quotation and reporting of current events, and for public administration and reporting, all fall under this theme. This will remove unnecessary obstacles in the way of useful activity whilst ensuring that creators’ legitimate exploitation of their work is not compromised. People should be encouraged not simply to consume information, but to engage with cultural works and to use them to say something about themselves, the world around them, and their place in it.

Our submission to the copyright consultation focused primarily on the need for an exception for parody. The issue is whether one channel for the expression of people’s sense of humour is being constrained through copyright laws over-regulating useful activity. We believe that there is clear evidence that it is, and that this has both cultural and economic consequences. Introducing this as a fair dealing exception would help facilitate parody works whilst ensuring creators’ reputational and financial interests are not undermined.

We note that the BIS Committee also looked at the issue of parody in their inquiry into the Hargreaves process and concluded that:

“We are inclined to agree with the Government’s proposal for a fair dealing exception, but with disapplication of the exception where there is reputational damage and subject to a robust assessment of the economic benefits. We recommend that the definition of unfair reputational damage should make provision to protect (within the exemption) genuine political and satirical comment supportive of free speech.”

3. The impact of the failure, as yet, to implement the Digital Economy Act

The delays to the implementation of the Digital Economy Act are an inevitable consequence of a rushed policy and Parliamentary process. The previous Government’s failure to take enough time to consider the drafting of Act, or to consider the technical and legal issues in sufficient detail, has unsurprisingly led to the mess being cleared up after the passing of the Act through the drafting of the Initial Obligations Code and Sharing of Costs Order.

Issues with the Digital Economy Act

Two and a half years after the passing of the Act, Ofcom and DCMS have still not resolved key issues with the Initial Obligations Code and Sharing of Costs Order. In considering the delays to the Act, it is important to consider that there are still valid and very serious concerns about the effects of the related statutory instruments.

Summary of criticisms of Initial Obligations Code

• Providers of publicly available wifi are still left in an uncertain position. They may end up being considered subscribers, thus becoming the subject of Copyright Infringement Reports. We consider this will act as a disincentive to cafes, libraries and others who may otherwise have offered wifi to their customers.
• We consider this to be an important issue because public wifi availability has grown in significance for Internet users in the UK. Ofcom’s own research demonstrates the importance of broadly available wifi infrastructure. The most recent Ofcom market report suggests that 81% of smartphone data traffic was carried over wifi in January 2012. The Act and Code effectively kills off open wifi and places disincentives to the continued proliferation of wifi spots in the UK.
• The standard of evidence of copyright infringement that rights holder will have to adhere to should be completed well ahead of the implementation of the evidence gathering.
• There should full transparency regarding which copyright owners obtain evidence and how, through full publication of the reports provided to Ofcom. Further, those accused of infringement should be able to see details of the process that was used to gather evidence of their alleged infringement.

Our full response to Ofcom’s consultation on the Initial Obligations Code is available at our website.

Summary of our criticisms of the Sharing of Costs Order

• We are concerned about the likelihood that a significant number of letters will be delivered late, and the lack of procedures for dealing with late or non-delivered letters; the cost recovery split across ISPs; and the arbitrary appeals fee of £20.
• We estimate that with 2.33 million letters likely to be issued in the first year, approximately 165,000 of these letters will be delivered late.
• We see no basis for the £20 appeals fee and are concerned that this is too high, with DCMS providing no basis for this figure. The fee stems from a concern about reducing the number of appeals, instead of a consideration about what a fair appeals process would look like.
• More broadly, we agree with the Secondary Legislation Scrutiny Committee, that given the assumptions made in the formulation of this Costs order, questions must be raised “about whether DCMS’s policy objective of reducing online infringement of copyright by 75% is achievable.”

Our full response to Ofcom’s consultation on the Sharing of Costs Order is available on our website.

 

We wish to highlight that the Digital Economy Act has attracted criticism from the UN’s Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression, Frank La Rue. He criticised the UK’s regime for potentially leading to account suspensions:

 

He goes on to recommend such laws be repealed. We believe that the Act remains a mess of a law; expensive, error-ridden and unlikely to work. It should be repealed. The fault for this situation lies in an insufficiently open and considered policy process, with a law hustled through the democratic process. Enforcement policy should be based on evidence and be developed with the interests of citizens and consumers in mind.

Analysis of the impact

We noted above the weak evidential basis for the Digital Economy Act. We hope any further analysis of the impact of delays to the Digital Economy Act reflects a more considered approach to the evidence available.

It is important to look at the development of the legal market for creative work, which has grown significantly in the last two years. For instance, digital album sales rose by 27% in the UK in 2011, according to the IFPI.

Through a study in 2011 of the then-leading legal film sites, ORG showed that the online film repertoire in 2011 was very weak, with only 43% of the top 50 British films available for purchase or rent online. Similarly, only 58% of the BAFTA Best Film award winners since 1960 have been made available. This has belatedly and slowly been changing over the past year, with the introduction of further streaming services and a broader catalogue. However, further study of the availability of, for example, back catalogue British films online would be helpful.

We would expect any analysis of the impact or otherwise of enforcement policy to consider these broader questions of the health of legal markets in the appropriate detail.

The role of Government in developing or supporting enforcement policy

Following the controversies surrounding ACTA and the ongoing disagreements over the direction of copyright policy, there is a need for a demonstrably open, transparent and inclusive policy making that is based in evidence. This will require strong political leadership to draw together the various stakeholders and perspectives.

This is especially necessary in the case of copyright enforcement policy. In the recent past, this has been developed primarily through conversations between trade associations and technology companies. DCMS has held a series of roundtables that have operated with the bare minimum of openness. It has not been possible to ensure that the interests of citizens and others are considered.

These conversations are designed to lead to private agreements that will see content and information removed, blocked, or funding to sites withdrawn. Due process and the law are essential when this sort of power to control what people see and do online is handed out. It is unlikely such interests will be properly considered in a forum involving only a small number of trade associations and technology companies.

We should not be entrusting decisions affecting the flow of information online to the representatives of trade associations from select industries. These concerns are especially valid where the Government takes an explicitly ‘hands off’ role, but at the same time threatens those involved with legislation should agreement not be found. The problem is exacerbated when the Government admits it has no evidence to guide its position. With no evidence to hand, what kind of scheme between industries is the Government hoping to see emerge? What sort of schemes would they consider to be appropriate, or proportionate?

Enforcement policy to date has been based on insufficient evidence and has tended to take place in closed forums. Strong political leadership is now required to lead evidence-based, inclusive and transparent policy making. The consequences of failing to do so are twofold. First, further laws or policies or voluntary agreements that undermine freedom of expression and innovation. Second, the sort of ‘downstream’ and very vociferous campaigns seen in the cases of ACTA and SOPA.