In December 2005 the Chancellor, Gordon Brown, asked the former editor of the Financial Times, Andrew Gowers, to conduct a comprehensive review of all elements of the IP system in the UK. Amongst his specific terms of reference, Gowers was charged with considering whether the current technical and legal IP infringement framework reflects the digital environment. The Gowers’ Review was published on 6 December 2006. The Review found that the current IP system is broadly performing satisfactorily, but there are a number of areas where reform is necessary. In a 142 page report, Gowers makes a total of 58 recommendations grouped around three main themes: stronger enforcement of rights; lower costs for businesses; and balanced and flexible rights.
The impression formed when reading the Review is that Gowers received a large number of wish lists of proposals from industry, academia, the public and legal sectors in the course of a ‘Call for Evidence’ between March and April 2006. Interested parties submitted over 500 responses in that time. In delivering the results of the Review so close to Christmas, one cannot help feeling that those interested parties read it with much the same excitement and trepidation that is felt when opening presents on Christmas morning. Similar emotions are likely to have been experienced once the recommendations were revealed: expectations met with some surprises and some disappointments.
It is beyond the scope of this article to summarise all of the recommendations. Instead, I will focus upon the recommendations that addressed questions relating to the interrelationship between IP and technology. At the end of this article I also highlight some of the other recommendations that stand out.
Fair Dealing and Fair Use
Reflecting concerns that current UK fair dealing and fair use defences to copyright infringement are too narrow, Gowers notes that in the UK there is no provision for private copying, in contrast with other developed economies like Germany, France and the United States. The Review also notes the position adopted by the British Phonographic Industry that they will not pursue consumers who copy CDs for their own private use in order to simply move music from one format to another. Gowers recommends that that there should be a private copying exception to copyright infringement that allows for format shifting (eg transferring a work from a CD to an MP3 player), but that this should be strictly limited to one copy per format (presumably to address a concern that distribution of copies is not cloaked under a private copying exception). The Review notes that such a provision is allowed under Article 5(2) of the Information Society Directive (Council Directive 2001/29/EC), which sets out that Member States may provide for exceptions to infringement of copyright in respect of reproductions on any medium made by a natural person for private use on condition that the rights holders receive fair compensation. On this latter point, Gowers does not advocate a levy system on hardware and blank media as is used in some countries (and which he criticises as a ‘blunt instrument’). Instead he suggests that the ‘fair compensation’ required in the Directive can be accommodated in the normal sale price of the work. In terms of works already purchased by consumers, Gowers suggests a block licence is granted to consumers by collecting societies to allow format shifting of back catalogues.
In one sense this recommendation seems to be unnecessary. Format shifting goes on all the time and the approach of the rights holders seems to be that they will not pursue consumers for it. On the other hand, introducing a specific exception coupled with the suggestion that rights holders can adjust their price seems to lead inevitably to consumers paying more for something that they do anyway and, one suspects, rights holders already build into their price. However, this recommendation perhaps needs to be viewed in light of other recommendations made in the context of Digital Rights Management, although, strangely, Gowers does not explicitly link them.
DRM
Amongst other things, DRM tools restrict the copying of works. For example, they prevent the copying of a DVD to a computer hard drive or stop content bought in one geographical area being played in another. Gowers identifies three areas were DRM tools are particularly controversial: they can encourage price discrimination by carving up content rights between different geographical areas (Gowers specifically refers to the difference in price of purchasing an Apple iTunes track in the UK as against the rest of the EU); they can prevent copying which is permitted under fair dealing exceptions; and they have been known to damage users’ computers. Gowers also refers to the complaint that the system designed to prevent abuse of DRM by rights holders is slow and cumbersome, as evidenced by the fact that no-one has followed through the procedure of making a complaint to the Secretary of State to issue directions to a rights holder to ensure that a permitted act can be performed.
The Review therefore recommends that by the end of 2008 the complaints process for misuse of DRM tools should be simplified by setting up a mechanism through which consumers can complain online to the Patent Office. To deal with abuse of DRM tools by artificially segmenting markets, invading privacy or damaging computers, the Review recommends that the Office of Fair Trading adopts a tougher stance by undertaking investigations where these abuses appear to be occurring.
Peer-To-Peer
It is perhaps in the area of online copying that the Review is most disappointing. It notes that the unauthorised digital copying of content is one of the major problems facing the worldwide entertainment industry. It quotes from research that the illegal downloading of films and music from the Internet is now the most common offence committed by people aged between 10 and 25 in the UK and that illegal file sharing cost the music industry £414million in lost sales in 2005. Having highlighted this issue, the Review notes that legal action taken against individual infringers has not led to a significant reduction in the use of peer-to-peer technology to infringe copyright. It then turns to discuss whether greater emphasis should be placed upon the liability of Internet Service Providers who offer access to users who subsequently infringe IP rights. While acknowledging that existing Community law gives ISPs a degree of protection, the Review deals in a few short sentences with the debate about whether ISPs, or those whose technology is used to infringe IP rights (like the file sharing software providers in the Grokster case in the United States and the Sharman case in Australia), should have secondary liability for users’ acts of infringement. It notes that the UK law in this area is uncertain. Gowers then sits on the fence and expresses no view, one way or the other, simply noting that, ‘the Review is not making specific legislative recommendations in this area, but this may need to be reviewed sometime in the future if other measures ….. do not work satisfactorily’.
There is, however, a sting in the tail for ISPs and technology providers. The Review encourages ISPs and rights holders to come up with an agreed best practice on co-operation to deal with users who are infringing IP rights. However, if that process does not bear fruit by the end of 2007 in terms of an operationally successful protocol, Gowers suggests that the Government should consider whether to legislate to establish a statutory protocol. This is obviously a little ‘if, but and maybe’, but the possibility of Government intervention is at least there to encourage the establishment of a workable framework between the interested parties.
Criminal Penalties for Online Infringement
Tougher proposals are brought forward in respect of those who are commercially copying copyright protected material. The Review notes that there is currently an anomaly in the criminal law between acts of online infringement and those of physical copying. Section 107(2A) and (4A) of the Copyright, Designs and Patents Act 1988 provides that a person who infringes copyright by communicating a work to the public in the course of a business, or to such an extent as to affect prejudicially the owner of the copyright, is subject to a maximum penalty of two years’ imprisonment. However, the equivalent provisions for physical copying, possession, distribution or dealing in a copyright work carry a maximum prison sentence of ten years. The Review recommends that this anomaly should go so that online infringement should carry the same maximum ten-year jail term as physical infringement.
Software Patents
Finally, in respect of the technology sector, the Review deals with the thorny issue of whether computer programs as such should have patent protection. The Review refers to the practice in the United States of allowing computer software patents to be granted. It also notes a concern that this has been abused, with rights holders effectively stifling innovation by preventing potential competitors from developing competing software. In terms of existing protection, it also refers to copyright law affording protection to the creators of software and the advantage of that being ‘automatic’ rather than involving an expensive and time consuming registration process, as with patents. Gowers also refers to submissions that advances in software technology occur in increments too small to constitute an inventive step and hence to be protected under patent law. In consequence, Gowers concludes that the scope of protection offered by patent law should not be extended to computer programs as such.
Other Recommendations
These are the main findings and recommendations of the Gowers Review in relation to the technology sector. However there are a wide range of other recommendations that will be of interest to those who practise IP law more widely. I have picked out what I consider to be the most significant below.
A further consultation has been proposed to ensure that an effective and dissuasive system of damages exists for civil IP cases. Any proposals for change should be made by the end of 2007. It is recommended that this should form part of the existing Department for Constitutional Affairs review and consultation paper on damages. This is in response to concerns that the current regime for civil compensation for infringement of IP rights is ineffective. It is disappointing that the Review has not gone further and expressed a view on this area. Instead the issue has been left to the DCA to resolve with no firm commitment that proposals will be brought forward.
Gowers recommends a consultation process on fast track litigation procedures for intellectual property cases, including capped fees, limited disclosure and stricter time limits. This is to be looked at within the current consultation process on case track limits. Gowers would like to see proposals for change brought forward by the end of 2007. This is to deal with a concern that IP litigation in the UK is too expensive. This is a controversial proposal. If implemented the Government would have to be careful not to undermine the quality of the dispute resolution processes in the UK in return for a quicker and cheaper solution. It might be better if this were to be part of a comprehensive review of the way in which complex civil litigation is conducted. For example, the Commercial Court has set up a working party to look at this in the light of the BCCI and Equitable Life cases. A joined-up approach would be sensible rather than singling out IP disputes from other serious commercial disputes. Gowers also recommended that Court Practice Directions should be strengthened to provide greater encouragement for parties to mediate IP disputes.
Gowers recommends the introduction of a fast track registration process for trade marks. This is to address a perceived need to offer registered trade mark protection to products that are launched within short timescales. The Review suggests that it takes about 6 to 9 months to register a trade mark. The proposal is to speed up the process of examination and acceptance to 10 days from the application being filed, with the opposition period of three months being retained thereafter. A higher fee would have to be paid to use this service. This proposal is to be welcomed if it speeds up the process. However, one questions whether the Patent Office will have sufficient resources to cope if this fast track system is widely used. Additionally, the Patent Office will need to ensure that if resources are allocated to the fast track system, then this does not lead to a backlog of applications in the normal system for lack of resources there.
Gowers comes out in support of the establishment of a single European Community Patent registration system and of the establishment of a single European Union court to adjudicate cross-border patent disputes.
The Review recommends greater access should be given to ‘orphan’ material (this is material protected by copyright but where the author cannot be located in order to obtain permission for its use). To complement this, Gowers suggests that the Patent Office should establish a voluntary register of copyright so that those wishing to use a work can check to see if anyone is still claiming rights.
Gowers recommends that the European Union should retain the current length of protection on sound recordings and performers’ rights at 50 years. He has rejected arguments for extending these rights to 70 or 95 years, mainly on economic grounds. This recommendation has attracted a lot of attention with a large number of performers in the music industry taking out a one page advert in the Financial Times the day after publication of the Review demanding that the Government rejects it.
Gowers has suggested that a new law of unfair competition, similar to that existing in parts of continental Europe, should not be introduced for the moment. However, if after monitoring the position it appears that the current law is failing (in particular, the law relating to passing off) then the Government should consult on appropriate changes to the law.
The Review recommends that patent rights should not be extended beyond their present limits within the areas of business methods and genetics.
Conclusion
The Gowers Review represents a comprehensive overview of the current state of Intellectual Property law. It makes some pragmatic suggestions for change which should not be seen as merely tinkering on the edges, as some have suggested. It is however disappointing in some respects in that it adopts an attitude of sitting on the fence on important issues like the liability of ISPs and technology providers for secondary infringement of copyright. It also recognises that much of what it deals with is not within the remit of the UK government alone, but is subject to the existing legislative framework of the EU and current areas of debate within the EU Commission and Parliament. In addition, if the Government is going to implement these recommendations it will have to put its money where its mouth is, for example, in providing additional resources to the Patent Office for the fast track trade mark registration procedure. In announcing the Gowers Review in the Pre-Budget Report on 6 December 2006, Gordon Brown emphasised the importance of the knowledge economy. The political will seems to be there, but we will have to wait and see if the Government is truly prepared to back Gowers’ findings.
Ian De Freitas is a partner in the Intellectual Property Group at Berwin Leighton Paisner specialising in the application of IP rights to technology and the online environment.
