Professor Ian Hargreaves has published his independent report into whether the current intellectual property framework in the UK is sufficiently well designed to promote innovation and growth in the UK. Professor Hargreaves concludes that current IP laws are obstructing innovation and economic growth and sets out a number of proposals designed to change the strategic direction of IP policy in the UK. In particular he proposes a Digital Copyright Exchange, reform of the patent system and a review of the law relating to designs.
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Professor Ian Hargreaves' report of May 2011 entitled "Digital Opportunity – A Review of Intellectual Property and Growth" (the "Report") was recently commissioned by the Prime Minister to address the risk that the current intellectual property framework might not be sufficiently well designed to promote innovation and growth in the UK. If this theme sounds familiar, that's because the last Government also commissioned a comprehensive review into the state of intellectual property laws in the UK in the form of the Gowers Review, and then set out its vision for a more competitive "digital economy" in its Digital Britain report. This in turn informed the creation of the Digital Economy Act (the "DEA"), certain provisions of which relate to measures to prevent copyright infringement online and which recently emerged unscathed from a Judicial Review challenge. Despite recent developments in this area, the present Government's willingness to commission the Report so soon into its term and the Report's particular focus on enabling economic growth suggest that the Government will take its findings seriously.
Key Recommendations for Growth
The Report is an involving 123 pages long and provides 10 key
recommendations for economic growth. These are set out below in
abridged form (bold added for emphasis):
1. Government should ensure that development of the IP System is
driven as far as possible by objective evidence.
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.
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.
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.
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.
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,
should 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 and should 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.
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.
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 DEA 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. 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.
Advocating Change
The English intellectual property judges have expressed the view
that the UK's copyright legislation, which dates back to 1988,
should be completely overhauled. The Report does not go this far
but Professor Hargreaves is keen to reform the law where it is not
seen to be working. Its proposed review of designs law and a call
for copyright exceptions that reflect reality or commercial
expediency will be welcomed by most.
Although the last Government also promised a new copyright
exception to allow 'format shifting', it failed to deliver
(the UK is unusual in that the copying of lawfully purchased
digital material to other formats, e.g. CD to MP3, remains unlawful
without separate licence). The reasons for the last
Government's failure in this regard arose from the complexities
of defining the scope of the exception whilst complying with the
restrictions in the EU Copyright Directive and without introducing
a levy system. Complex and costly levy systems are in use in many
other EU countries, mostly with disastrous effects. This
demonstrates the problems of translating good ideas into workable
legislation in this area. If the Government takes up the challenge
of converting these proposals into law, it will test their resolve
and commitment.
The prospect of a Digital Copyright Exchange is an exciting one,
and may gain more traction than the last Government's attempts
to encourage industry to form a comparable Digital Rights Agency. If implemented
properly it could provide a robust and reliable means by which to
identify and enforce rights in digital content, although some may
see it as an undesirable step in the direction of requiring
mandatory registration of copyright.
The Report recommends that the UK should push ahead with plans to
develop an EU Patent Court and Unified EU patent system, a position
seemingly shared by many other member states, despite the European
Court of Justice's recent
view that constitutional issues stand in the way of the unitary
court system as currently proposed. These proposals have been
underway for some time and the Report does not impact on the
likelihood that they will come to fruition.
Getting the Shears Out
In Chapter 6 of the Report, Professor Hargreaves identifies "patent thickets", areas where too many patents crowd a market and prevent innovation, as a major concern. As an example he identifies one smartphone as being the subject of hundreds of patents. The industries most affected are identified as computer technologies and telecommunications. However, that is the inevitable result of the impact of technical standardisation and this does not per se, in our view, amount to the sort of patent thicket that obstructs innovation. Professor Hargreaves proposes preventing the extension of patenting to business sectors such as software where the incentive effect of patents is low compared with the overheads imposed, resetting financial incentives for assessing whether to renew patents, and ensuring that only high quality patents are granted (this is, of course, easier said than done). In essence Professor Hargreaves seems to be advocating granting fewer patents, charging more to grant or renew them and clearly demarcating non-patentable subject matter. Some will take the view that these proposals are misguided, as technology patents are an essential tool driving competitiveness.
Keeping it Real
Although the Report focuses on copyright, patents, designs, IP
policy and enforcement, it also briefly addresses the problem of
counterfeit goods which infringe trade marks and may erode the
incentive to build and protect brands. The UK is identified as
spending over £3billion per annum on clothing and footwear
fakes, making it "one of the largest consumer markets for
counterfeit goods per capita in the world". A strengthened IPO
and cheaper access to justice should at least help to address this.
The Report states that the 2004 IP Crime Strategy is about to be
updated and is supportive of the IPO's role to act as an
information gathering and sharing body to support public and
private investigations.
Nevertheless the Report does not seek to address whether the trade
mark system is fundamentally well designed to drive growth, nor
does it refer to The European Commission's recent study on the EU trade mark
systems carried out by the Max Planck Institute for Intellectual
Property and Competition Law.
Creating Value
The Report's author is confident of the significance and economic value of his recommendations. In his Foreword, Professor Hargreaves writes, "If the Review's recommendations are followed, the result will be more innovation and economic growth". With the recommendations requiring alterations to copyright law, the establishment of a Digital Copyright Exchange, a review of patent filing fees, progress on the EU patent and a review of the law relating to designs to name but a few, the Government has been presented with a considerable opportunity.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 20/05/2011.