Hargreaves Review of Intellectual Property and Growth

Review cover page

The Hargreaves Review of Intellectual Property and Growth, or Digital Opportunity - A review of Intellectual Property and Growth, was an independent review of the United Kingdom's intellectual property (IP) system, focusing on UK copyright law. Professor Ian Hargreaves was commissioned to chair a review of how the IP framework supports economic growth and innovation in November 2010 by Prime Minister David Cameron. The review was published in May 2011 and made 10 recommendations to "ensure that the UK has an IP framework best suited to supporting innovation and promoting economic growth in the digital age".

Findings of the review

According to the Hargreaves review, the frequency of major IP reviews in the UK indicated the shortcomings of the UK system. There had been four major IP reviews in the past six years, and of the 54 recommendations of the 2006 Gowers Review of Intellectual Property only 25 had been implemented. According to the Hargreaves review, "on copyright issues, lobbying on behalf of rights owners has been more persuasive to Ministers than economic impact assessments." Therefore, the Hargreaves review took on board the importance of having an IP framework which adapts well to change in technology and markets as a guiding theme. The Hargreaves review found that IP policymaking in the UK is not evidence-based, a criticism that had already been made in the 1970s by the Banks Review and the 2006 Gowers Review. In the foreword to the review, Professor Hargreaves summarised what he calls "David Cameron's exam question" as "Could it be true that laws designed more than three centuries ago with the express purpose of creating economic incentives for innovation by protecting creators' rights are today obstructing innovation and economic growth?" "The short answer is: yes", Hargreaves wrote, concluding that "the UK's intellectual property framework, especially with regard to copyright, is falling behind what is needed."

According to the review intellectual property (IP) policy is an increasingly important tool for stimulating economic growth. However, the proliferating use of IP rights can increase IP transaction costs and prevent small innovative companies from entering the market. Digital creative industries rank third in UK exports, behind advanced engineering and financial and professional services. According to the review the further global growth of these businesses required an efficient digital market in the UK in which copyright is licensed speedily and effectively. The review noted the need for IP law to adapt to change as digital communication technology involves the routine copying of text, images and data. However, it found that the IP framework had fallen behind and acted as a regulatory barrier to the creation of new internet based businesses. The review concluded that in order to allow the UK Intellectual Property Office (IPO) to support innovation and promote economic growth on the basis of evidence, institutional changes needed to be made. It recommended that for the first time since its creation as the Patent Office, the IPO should be given an overarching legal mandate to pursue economic objectives, and the powers necessary to make evidence-based recommendations, to, for example, the UK competition authorities.

Copyright licensing

The review noted that numerous respondents to the review's call for evidence made submissions regarding the defects in copyright licensing, including the CBI, News International, Pearson, Reed Elsevier, UK photographers, and the European Publishers Council. On the basis of these submissions, the review concluded that there was a need to make it easier for large and small copyright owners to sell licences in their work and for others to buy them. Market transactions needed to be faster, more automated and cheaper, in order to establish a UK market in digital copyright where disputes are readily resolved without costly litigation. Easier cross-border licensing in the EU and bulk licensing of digital content through collective rights management by collecting societies could allow the UK to build its competitive advantage and become the centre for IP matters in the European time zone, the review speculated.

Copyright exceptions

The review also urged the UK Government to "take long overdue action to update copyright law in ways designed to increase consumer confidence in the way the law works". According to the review scientific data and text mining techniques were prohibited by UK copyright law. Noting that the UK had chosen not to implement all copyright exceptions permitted under EU law, the review drew attention to the fact that UK copyright law did not allow individuals to "shift the format of a piece of music or video for personal use", to make use of a copyrighted work in parody, and nor did UK copyright law allow libraries to archive all digital copyright material. Taking full advantage of the EU-sanctioned exceptions would, according to the review, bring cultural and economic benefits, as well as making copyright law better understood and more acceptable to the public. According to the review "the copyright regime cannot be considered fit for the digital age when millions of citizens are in daily breach of copyright, simply for shifting a piece of music or video from one device to another. People are confused about what is allowed and what is not, with the risk that the law falls into disrepute." According to the review the UK could achieve many of the benefits of the US fair use doctrine by fully implementing the copyright exceptions permitted under EU law. In order to future-proof copyright law so that it accommodated future technological developments and activities which do not threaten the interest of copyright owners, the review argued that the UK should argue for additional copyright exceptions at EU level.

Copyright infringement

Reviewing UK and international research on the level of copyright infringement, the review found "that very little of it is supported by transparent research criteria. Meanwhile sales and profitability in most creative business sectors appear to be holding up relatively well." The review concludes that many creative businesses are experiencing turbulences due to digital copyright infringement, "but that at the level of the whole economy, measurable impacts are not as stark as is sometimes suggested." Existing research indicated that tougher enforcement alone will not solve the problem of copyright infringement and the review recommended that the UK Government should respond in four ways: by modernising copyright law, through education, through enforcement and by doing all it can to encourage open and competitive markets in licensed digital content to increase legitimate digital content at prices which appeal to consumers. According to the review "strong online enforcement measures made possible by the Digital Economy Act should be carefully monitored so that the approach can be adjusted in the light of evidence". The review acknowledged the importance of smaller companies to innovation and job creation, and concluded that the advice and information provided to small and medium enterprises (SMEs) on IP was insufficient. The review recommended that SMEs should be given access to lower cost IP advice, and recommended the establishment of a small claims track for copyright to better resolve the many lower-value IP disputes involving SMEs.

Patents and design

The review also found that the UK patent and design system needs to adapt to changing circumstances. According to the review, technological developments and a very strong growth in the levels of patenting, especially in computer programs and telecommunications, has led to the emergence of so-called patent thickets which obstruct entry to markets and hinder innovation. The growing design sector is the largest source of intangible investment in the UK economy and the emergence of 3D printing has increased the need for a thorough reassessment of IP and design.

Recommendations

1. Evidence: "Government should ensure that development of the IP System is driven as far as possible by objective evidence. Policy should balance measurable economic objectives against social goals and potential benefits for rights holders against impacts on consumers and other interests. These concerns will be of particular importance in assessing future claims to extend rights or in determining desirable limits to rights."
2. International priorities: "The UK should resolutely pursue its international interests in IP, particularly with respect to emerging economies such as China and India, based upon positions grounded in economic evidence. It should attach the highest immediate priority to achieving a unified EU patent court and EU patent system, which promises significant economic benefits to UK business. The UK should work to make the Patent Cooperation Treaty a more effective vehicle for international processing of patent applications."
3. Copyright licensing: "In order to boost UK firms’ access to transparent, contestable and global digital markets, the UK should establish a cross sectoral Digital Copyright Exchange. Government should appoint a senior figure to oversee its design and implementation by the end of 2012. A range of incentives and disincentives will be needed to encourage rights holders and others to take part. Governance should reflect the interests of participants, working to an agreed code of practice. The UK should support moves by the European Commission to establish a framework for cross border copyright licensing, with clear benefits to the UK as a major exporter of copyright works. Collecting societies should be required by law to adopt codes of practice, approved by the IPO and the UK competition authorities, to ensure that they operate in a way that is consistent with the further development of efficient, open markets."
4. Orphan works: "The Government should legislate to enable licensing of orphan works. This should establish extended collective licensing for mass licensing of orphan works, and a clearance procedure for use of individual works. In both cases, a work should only be treated as an orphan if it cannot be found by search of the databases involved in the proposed Digital Copyright Exchange."
5. Limits to copyright: "Government should firmly resist over regulation of activities which do not prejudice the central objective of copyright, namely the provision of incentives to creators. Government should deliver copyright exceptions at national level to realise all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving. The UK should also promote at EU level an exception to support text and data analytics. The UK should give a lead at EU level to develop a further copyright exception designed to build into the EU framework adaptability to new technologies. This would be designed to allow uses enabled by technology of works in ways which do not directly trade on the underlying creative and expressive purpose of the work. The Government should also legislate to ensure that these and other copyright exceptions are protected from override by contract."
6. Patent thickets and other obstructions to innovation: In order to limit the effects of these barriers to innovation, the Government should: take a leading role in promoting international efforts to cut backlogs and manage the boom in patent applications by further extending “work sharing” with patent offices in other countries; work to ensure patents are not extended into sectors, such as non-technical computer programs and business methods, which they do not currently cover, without clear evidence of benefit; investigate ways of limiting adverse consequences of patent thickets, including by working with international partners to establish a patent fee structure set by reference to innovation and growth goals rather than solely by reference to patent office running costs. The structure of patent renewal fees might be adjusted to encourage patentees to assess more carefully the value of maintaining lower value patents, so reducing the density of patent thickets."
7. The design industry: The role of IP in supporting this important branch of the creative economy has been neglected. In the next 12 months, the IPO should conduct an evidence based assessment of the relationship between design rights and innovation, with a view to establishing a firmer basis for evaluating policy at the UK and European level. The assessment should include exploration with design interests of whether access to the proposed Digital Copyright Exchange would help creators protect and market their designs and help users better achieve legally compliant access to designs."
8. Enforcement of IP rights: "The Government should pursue an integrated approach based upon enforcement, education and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields. When the enforcement regime set out in the Digital Economy Act 2010 becomes operational next year its impact should be carefully monitored and compared with experience in other countries, in order to provide the insight needed to adjust enforcement mechanisms as market conditions evolve. This is urgent and Ofcom should not wait until then to establish its benchmarks and begin building data on trends. In order to support rights holders in enforcing their rights the Government should introduce a small claims track for low monetary value IP claims in the Patents County Court."
9. Small firm access to IP advice: "The IPO should draw up plans to improve accessibility of the IP system to smaller companies who will benefit from it. This should involve access to lower cost providers of integrated IP legal and commercial advice."
10. An IP system responsive to change: The IPO should be given the necessary powers and mandate in law to ensure that it focuses on its central task of ensuring that the UK’s IP system promotes innovation and growth through efficient, contestable markets. It should be empowered to issue statutory opinions where these will help clarify copyright law. As an element of improved transparency and adaptability, Government should ensure that by the end of 2013, the IPO publishes an assessment of the impact of those measures advocated in this review which have been accepted by Government.".

UK government response

On 3 August 2011, the UK government endorsed the recommendations of the review.

Implementation of recommendations

The government announced that it would make arrangements to establish a Digital Copyright Exchange to facilitate copyright licensing and that the exchange would operate as a "genuine marketplace independent of sellers and purchasers" like amazon.com. Previously the government said that the progress report is to be published by end 2011 and the exchange should be set up by the end of 2012. However, while the exchange, now known as Copyright Hub, was established as a limited company in 2013, as of May 2015 it is yet to be up and running, and the expected launch date is now 2016.

The government said that will not run the exchange, it will make works subject to Crown copyright available through the exchange and will encourage public bodies to do likewise. The Secretary of State for Business, Innovation and Skills Vince Cable announced at the 3 August press conference that a "champion" would be appointed to lead the work. According to the government implementing the copyright exceptions permitted under the InfoSoc Directive would be beneficial and those copyright exceptions should not be undermined by contracts. Proposals for a limited private copying exception, an exception for parody, and broader exceptions for non-commercial research and library archiving in UK copyright law were to be published in autumn 2011.

The government announced that proposals for the commercial and cultural uses of orphan works, works for which the copyright owner is not known or cannot be traced, would also be published in autumn 2011. Safeguards for the protection of copyright owners, such as a requirement for a diligent search, licensing at market rates and provisions for copyright owners who come forward at a later stage, are to be put in place. The government announced that it would respond to "concerns" about collecting societies and in order to promote good practice minimum standards for voluntary codes would be published early 2012. A "backstop power" was to be made available where a collecting society has failed to introduce or meet the minimum standards. The government also committed to introducing a small claims track in the Patents County Court (PCC), which is to be renamed the Intellectual Property County Court, for cases worth less than £5,000 ($8,000). The small claims track would be designed to provide access to the courts in straightforward, low-value disputes, and should particularly benefit small and medium-sized enterprises (SMEs) in relation to copyright, design and possibly trade mark cases.

In December 2012, the government published "Modernising Copyright," which provided clear statements of the government's intent with regard to amending copyright law.

In March 2014, the final drafts of the resulting Statutory Instruments were laid before Parliament. The changes had been approved thereafter and went into effect in June 2014 and October 2014 respectively.

External links

• Digital Opportunity - A review of Intellectual Property and Growth
• Supporting documents to the Review
• Submissions to the review call for evidence