Gowers reckons intellectual property is doing OK

Music will be sampled free of charge and CDs will rise in price to compensate for music that is copied to iPods under a new intellectual property regime proposed by Andrew Gowers today. But most of the UK's laws are just fine, he concludes.

The former Financial Times editor was commissioned by Chancellor Gordon Brown in December 2005 to undertake an independent review of intellectual property. His 150-page report was published yesterday and contains few surprises.

Private copying

Gowers wants to see a private copying exception written into copyright law. That was expected and will find no opposition from the UK music industry. Currently, copying from your own CD to your hard drive and MP3 player is infringement, though the music industry turns a blind eye. Gowers wants the law to reflect reality: "private copying should enable users to copy media on to different technologies for personal use," says the report.

What is more controversial is that Gowers sees no need for an accompanying copyright levy. In France, Germany and many other countries, private copying is allowed but compensated by a tax on blank media. The Copyright Directive says member states can choose to forbid private copying or allow it – provided there is fair compensation for right holders. Gowers believes that compensation can be won another way.

His report explains: "If rightholders know in advance of a sale of a particular work that limited copying of that work can take place, the economic cost of the right to copy can be included in the sale price. The 'fair compensation' required by the Directive can be included in the normal sale price."

Kim Walker, head of Intellectual Property with Pinsent Masons, said: "He's saying the price of CDs will go up."

It may be that music purchased as a download is less frequently burned to CD than music purchased as a CD is ripped to another device – so the price rise may not affect iTunes. Gowers also warns that any private right to copy "cannot be extended retrospectively as copies of works already sold would not include this 'fair compensation'."

Walker said: "You can rip CDs bought after the law changes – which Gowers hopes will be by 2008. But you also need to pay to legalise your current collection."

The report states: "collecting societies may wish to consider making a single block licence available to allow consumers to format shift their back catalogues legitimately."

Walker says he could be deliberately provoking the music industry here. "Would it dare to hike the prices of CDs and blame this new right to make private copies?," said Walker. "Would it have the audacity to demand a lump of cash from each of us for the right to keep playing our existing collections of ripped music?"

AIM, a trade body for independent music labels, criticised Gowers yesterday for his dismissal of levies. "The fact that these levies, across the board, may be judged to be working imperfectly and arguably may require some reform, rationalisation (possibly even replacement by some system which fulfils the objective more efficiently or imaginatively) does not detract from the essential justice of their existence," it said in a statement. It fears the change could open the floodgates to uncontrolled and unstoppable private copying and sharing from person to person, as well as format to format. "Once owned, however acquired, music will be passed on freely," said AIM.

Gowers addresses peer-to-peer (P2P) file-sharing, but sees no need for immediate changes to the law. Some have called for a new law to make those who facilitate P2P file-sharing liable for copyright infringement.

In the US, concepts of contributory infringement and inducement were used to hold Grokster liable. Australia's concept of authorisation was used to hold Kazaa's owner liable. The UK shares Australia's approach but the Gowers report observes: "Notwithstanding some similarities between UK and Australian law, the outcome of similar lawsuits in UK courts is uncertain."

Gowers favours self-regulation. The ISP Association is encouraging ISPs and rights owners to cooperate on a Best Common Practice document that will address P2P abuse. Gowers sees this as a good way to change public attitudes and behaviours without court action. Only if there is a failure to agree would Gowers advocate new statutory controls.

Listen to the Beastie Boys, not Cliff Richard

Cliff Richard and others in the UK record industry have called for the Commission to increase retrospectively the term of copyright from the current 50 years to 95 years. Gowers disagreed. But while he snubbed Sir Cliff, Gowers does have an ear for hip hop.

The report notes that hip hop grew in the US in the late 1970s and early 1980s because producers could exploit a 'transformative use' exception in US copyright law. That changed in 1991: a court ruling narrowed the exception significantly, so musicians had to "get a licence or do not sample." So musicians today have to clear rights with the owner of the sound recording and the publisher and negotiate a licence fee before using a sample.

The Beastie Boys released the album Paul's Boutique two years before that ruling. All the sampling on the album was uncleared. The New York trio were asked about the changed regime and their reply is quoted by Gowers: "we can't go crazy and sample everything and anything like we did on Paul's Boutique. It's limiting in the sense that if we're going to grab a two-bar section of something now, we're going to have to think about how much we really need it."

Gowers wants the EU's Copyright Directive amended to allow for an exception for creative, transformative or derivative works, provided this does not conflict with the normal exploitation of the original work and does not unreasonably prejudice the legitimate interests of the rights holder. Samplers will argue that their work increases demand for original recordings without prejudice.

Where permissions are required, Gowers notes the hassle of having to obtain rights from different bodies. Those wanting to play music at an event or in a podcast need one licence from the PPL for the rights in the sound recording and a second from PRS for the rights in the music and the lyrics. "Encouraging a cross-licensing agreement between collecting societies could be highly beneficial to users," says the report. "It could also benefit rights holders if the simpler process encourages licensees to take up more licences."

Other changes to UK copyright law should include a new right for “caricature, parody or pastiche,” says Gowers. Such a right exists in other EU member states and is accommodated in the Copyright Directive.

In what could be a reaction to Sony-BMG's 'rootkit' debacle, Gowers wants CDs to carry clear warning labels if they bundle Digital Rights Management (DRM). This echoes a recommendation to the Office of Fair Trading in the wake of the outcry over the Sony-BMG CDs that were accused of harming computers and invading privacy.

Trade marks

Gowers likes the UK's current system. He describes it as "well balanced" and says trade marks are affordable. But he noted that they can take between six and nine months to be granted. He wants a fast-track route "for firms that require protection more quickly in order to start building up their brand." This premium-rate service would allow trade marks to be examined and accepted within 10 days of the application being filed. Once the application is accepted it can be published and thereafter the standard three-month opposition period would begin.

Databases

At a time when nobody is sure how much protection remains for databases, it is surprising that there are no significant recommendations – just a brief acknowledgement of the confusion, the result of European rulings that narrowed the so-called sui generis right.

Patent reform

Gowers made clear that he is no fan of the US approach to patenting business methods. He suggests tweaking our current patent system but there is no suggestion of an overhaul. He saw no reason to lift the current ban on patenting "computer programs as such" – but he did not address the problem of defining this term in a consistent way.

Gowers listened to arguments for a 'utility patent' – a monopoly right that would be quick to obtain and last less than the standard 20 years; but he was unenthusiastic and reported a lack of evidence to suggest that utility patents foster innovation.

Improvements that can and should be made include a fast-track process for obtaining a patent. This already exists, Gowers noted, but few inventors use it. His report concludes that the system should be improved (though few details are offered on how to do this).

Gowers also wants to see the Community Patent system in place. This proposal was first put forward by the European Commission in 2000. It would give inventors the option of obtaining a single patent that would be legally valid throughout the European Union.

The main reason it has made little progress in over six years of debate is not opposition to the principle but a failure to agree on the requirements for the translation of patents and on how infringements of patents which might arise as a result of mistranslations should be treated. Gowers offers no solutions to these problems.

Some of the report's comments are statements of the obvious: the 'inventive step' requirement for obtaining a patent must be set "at the correct level," says Gowers. But he offers no thoughts on measurement or calibration.

The Patent Office is asked to make expired patents accessible online – and it is also asked to change its name to the UK Intellectual Property Office.

Penalties for IP wrongs

Stiffer penalties are recommended.

The maximum penalty for criminal online infringement, such as selling unauthorised movie downloads, should be raised from two years' imprisonment to ten, to match the maximum penalty for those selling pirated DVDs at a market.

For civil claims, "damages should be increased to provide an effective and proportionate deterrent to IP infringement." That answers a call of the software industry: it can sue users of unlicensed software but the damages it can win generally equate to whatever the infringer should have paid in the first place. Gowers appears to support punitive damages.

New powers should be given to Trading Standards because while it can currently prevent the sale of trade mark-protected goods, where the infringement relates to copyright, it has no powers to act and cannot perform searches and seizures.

Passing off is not enough

The remedy of passing off does not go far enough to protect many brands and designs from misappropriation, says the Gowers Review. It says brand owners bear the costs of trying to prize copycat brands by legal remedies or changing their own designs. Kellogg's reportedly spent over £1 million on its advertising campaign to say it does not make cereals for anyone else

To establish the common law remedy of passing off, a brand holder must show that he has a reputation, that there has been a misrepresentation, and that that misrepresentation has caused or is likely to cause damage. This test is difficult for new entrants to a market who want to block copycat products because they may not have goodwill and they may struggle to show consumer confusion.

Gowers sees a possible need for a new law that tackles anti-competitive practices. A new Directive on Unfair Commercial Practices is being transposed into UK law that will tackle practices having an unfair impact on consumers; but Gowers fears that it may not provide sufficient legal sanctions for unfair business-to-business anti-competitive practices. He stops short of demanding such a law. The Government should monitor the success of the Directive's implementation, he says, and if these are ineffective, the Government should consult on changes.

Gowers also supports alternative dispute resolution (ADR) instead of court action wherever possible. But he acknowledges that ADR generally cannot be imposed. All he asks is that practice directions for court procedure are altered to give greater encouragement for parties to mediate.

Final thoughts

Kim Walker said: "Whilst the Gowers Review makes interesting reading, it is predictable in its recommendations. The Review was a rare opportunity to look at whether our IP laws currently strike the right balance between fostering creativity for the general good and giving businesses opportunities to make money, but on the whole it only recommends tweaks to our current approach to fill obvious gaps, facilitate enforcement and remove inconsistencies. Although welcome, these proposals are limited.”