In March the Department for Business, Innovation and Skills launched a consultation based on proposals for the sharing of costs relating to the initial obligations for addressing the problem of online infringement of copyright. The obligations arise from the Digital Economy Act 2010 (although they have their roots in the Gowers Review and the Digital Britain Report), and the indications suggest that the broad proposals remain live notwithstanding the change of government. Broadly, the costs concerned arise (i) from the obligation to be imposed on ISPs to send notifications to subscribers who have been the subject of alleged infringements of copyright and (ii) from the obligation imposed upon them to maintain anonymised records of the number of times an individual subscriber has been the subject of such reports and to maintain lists of those most frequently identified in such reports and provide copyright owners with lists on request. Those obligations would be underpinned by a code drawn up by stakeholders and approved by Ofcom and that element has associated costs too. There are also costs relating to the establishment and running of an appeals mechanism and Ofcom’s own costs in discharging its duties in relation to these obligations.
Following a lively meeting and online exchanges, an SCL team led by Scott Fairbairn of Cameron McKenna has produced a response to the call for views. The full response is available as a download (in pdf format) from the panel opposite.
The SCL Response highlights a series of omissions in the draft regulations that accompanied the consultation and in the scheme which they underpin. For example, it indicates that ISPs will incur capital expenditure in establishing the systems for notifying subscribers and for maintaining databases and these costs too should be part of the equation. It goes on to question the incentives for ISPs in the proposed structure:
‘The SCL questions whether requiring ISPs to bear 25% of the costs would provide an incentive to ISPs to take voluntary measures to reduce online copyright infringement. ISPs will incur significant start-up costs to establish systems for processing CIRs [copyright infringement reports]. If the only way of recouping these start-up costs is to process CIRs, then ISPs may have an interest in ensuring that they process as high a number of CIRs as possible, and so may not be inclined to take steps to reduce the number of CIRs received. An alternative methodology would be to implement another funding mechanism that reimburses these costs irrespective of the number of CIRs processed.’
The SCL Response also sets out certain reservations about the prospects for fair participation in the scheme and fears that some may be excluded from participation:
‘Smaller copyright owners and those copyright owners who cannot easily predict in advance the likely extent of future copyright infringement may be less willing or able to participate in a system that requires them to predict numbers and commit to payment at the beginning of a notification period, and so may be disadvantaged or excluded.
Further, the proposed system makes no provision for rights holders who create a new copyright work during a notification period. In order to ensure that such copyright owners can participate in the scheme, copyright owners should be able to enter the scheme in the middle of a notification period (although perhaps subject to certain limits), by paying a higher fee to use the system at short notice. For example, the scheme could operate a membership model whereby those users who estimate certain volumes of CIRs and pay in advance qualify to pay only 75% of costs annually in advance, whereas others could use the system at short notice by paying a premium.
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Small copyright holders may be unwilling to access the system for the following reasons:
(a) They may have difficulty in estimating in advance the number of CIRs which they expect to send to each ISP. Obtaining advice from consultants may be costly.
(b) Their financial position may inhibit them from making payment in advance at the start of each notification period.
(c) The proposed system envisages that OFCOM’s costs are borne by copyright holders and ISPs. OFCOM’s initial costs may be high.
(d) The level of costs to be paid in advance by small copyright owners may prevent them or deter them from using the scheme.’
Since the original consultation was commenced even before the Act received Royal Assent in a bid to avoid delay in implementation, and since the industry pressure for speedy action still remains, it seems likely that final proposals for the costs-sharing and associated elements will be published in the Summer.
