The copyright “paradox”

Copyright works, created by professionals and amateurs alike, are ubiquitous on the network, on social media platforms, websites and online services. In June this year, the Intellectual Property Office (IPO) and Imperial College published new estimates of investment in the UK’s copyright industries, of which the publishing industry is a significant part. When adopted in the National Accounts this adds more than £3 billion to the economy.

Yet at the same time, copyright faces a tidal pressure for change. It is often portrayed as a negative force, a hindrance to the economy and as a drag on growth. More fundamentally, many critics say that the internet, digital technology and social media are turning copyright into an anachronism.

This is not an academic debate. Copyright is at the heart of the digital publishing industry. In place of the sale of a book as a physical product, the digital transaction is the grant of a licence to access, stream, rent, download to own, share and to use creative content in an ever increasing variety of ways. So copyright is truly at the heart of publisher’s digital business models, even if challenges remain around pricing, illegal copying via peer-to-peer file sharing networks and the consumer’s willingness to pay. Publishers therefore have a vested interest in the policy and practical solutions which are needed to ensure that copyright truly becomes, and is seen as, an enabler of the digital economy.

Paradox or conundrum?

In truth, this is not really a paradox. Copyright cannot be heading for extinction and at the same time underpin the digital economy. This apparent contradiction is a product of the “digital shift”. It reflects differing perspectives on copyright and an on-going process of adaptation of law, policy, business models and the way technology is used to make copyright function more efficiently online.

There are two features of the digital shift that have made these differences in perspective more acute. The first is sometimes dressed in the language of freedom of expression on the internet but is essentially a consequence of the desire for mass digitisation and the mass use of copyright works. Copyright is a permissions-based system and for that reason copyright can, wrongly in my view, be portrayed as a barrier.

The second relates to the shift of copyright from business-to-business to business-to-consumer in the online world. Copyright law is complex but the consumer is shielded from this complexity in the physical world where the transaction is the purchase of a book, a physical good. Not so in the digital world where everyone is in the B2C business, from publishers and authors as self-publishers to e-tailers such as Amazon and Apple and to consumers. The consumer/reader, whether or not they bother to read the terms and conditions, are licenceholders and, as such, buyers of copyright rights.

So can copyright adapt itself to the digital age? Can a system built on a collection of national copyrights function adequately in an internet-enabled world where national boundaries are crossed at a click? Can it provide an effective mechanism to incentivise, reward and protect creators and producers of works whilst at the same time enabling access to that wealth of creativity?

The answer to all these questions is a resounding “yes”. Copyright is a Darwinian species but it needs to continue to evolve to meet the needs of today’s always-on networked society.

Why copyright can adapt

There are three fundamental reasons why copyright has the inherent capacity to adapt.

Copyright is format neutral

When Mozart or Beethoven composed an entire work in their head, it became a copyright work before it was ever recorded on paper as a musical composition. It’s true that national copyright laws require the work to be recorded in some medium, either analogue or digital, before the work qualifies for protection under copyright law. But that doesn’t alter the fact that the work is still a copyright work in its immaterial form. To turn Marshall McLuhan’s dictum on its head, it’s the message, not the medium.

We are beginning to see a shift in focus away from the book to a “format-neutral” version of the narrative or story. One of the opportunities in the digital age is to take the world embodied in the story and to extend aspects of it across multiple platforms in ways which play to the strengths of each of those platforms and which tell different parts of those stories in fresh and engaging ways. This is the approach which underlies “transmedia” or “cross-media”. As Jeff Gomez (CEO, Starlight Runner Entertainment), transmedia guru, puts it, “For publishers it offers the opportunity to participate in revenue streams from every way in which the property is monetised.”

Telling stories across platforms is not a universal panacea for all works, and it may involve significant investment. But as Benedicte Page pointed out in The Bookseller, “Publishers must explore transmedia approaches to engage children whose lives revolve increasingly around gaming, online communities and social networking.”

However, it’s high time that the focus switched to the role of copyright licensing to drive business. As one publisher put it at the Futurebook event this year, “I’ve told my staff to stop talking about selling books and start talking about licensing a copyright.”

There is no copyright in ideas

There is a misconception that copyright gives a monopoly over ideas. It doesn’t. Copyright is often portrayed as an obstacle or barrier to the way new works are created in the digital age, standing as a King Canute against a tide of mash-ups. But that misses the key point about copyright.

Ideas are a freely exchangeable currency on the internet. Lawyers talk about the “idea/expression” dichotomy. Put simply, copyright does not protect ideas, but only what the courts now call “the author’s own intellectual creation” which is reflected in the way those ideas are expressed.

In a recent decision by the European Court of Justice (SAS Institute Inc. v World Programming Ltd (C-406/10)), it was decided that the ideas and functionality of a computer program cannot be protected by copyright, so there is no infringement unless the source code is copied.

UK copyright law, in line with the continental European approach, increasingly talks about copyright protecting only the “author’s own intellectual creation”. So if someone finds their own way of expressing the ideas embodied in a work, without copying the work itself, they are free to do so.

Even where copying takes place, there is no infringement unless the whole or a substantial part is taken. So, generally speaking, taking small parts of a work on an irregular basis is not restricted by copyright law.

Checks and balances are built in

The role of copyright law has always been to balance the rights given to authors, performers and producers to incentivise and reward their creations with the public interest to have access to those works. The levers which maintain this balance in copyright law are copyright exceptions and legal constraints which derive from competition law and the concept of free movement of goods and services.

There are extensive exceptions built into copyright legislation which allow copyright works to be used without permission for purposes such as education, research and private study, reporting current events, criticism and review. Some of those exceptions need updating and, following the Hargreaves Review, a number of changes are in the legal pipeline.

Competition law, and the rules in Europe governing the free movement of goods and services, also play a restraining influence in the way copyright is exercised, especially in the area of territorial licensing. For instance, the European Court of Justice recently decided (in UsedSoft GmbH v Oracle International Corp, Case C-128/11, 3 July 2012.), that once a lawfully acquired and paid-for copy of a software product has been downloaded from the internet, which included a licence to use the copy for consideration for an unlimited period of time, the software owner could not prevent the re-sale of that copy. In legal speak, the software owner’s distribution right under copyright was “exhausted”.

Another important case focused on contractual restrictions. In 2010, actions were brought in the High Court in two cases involving pubs that bought cheap foreign satellite-decoder equipment and cards for use in screening live football matches in UK pubs, so as to avoid the higher fees charged by the satellite broadcast rights-holder in the UK. In one case, the Football Association Premiere League (FAPL) sought to prevent the circumvention of the exclusive territorial licences and brought actions against Greek suppliers of equipment and decoders into pubs and against the licensees of four pubs that showed live Premier League matches broadcast on the channels of an Arab broadcaster. The second case stemmed from an appeal against conviction in criminal proceedings brought against Karen Murphy, the landlady of a pub who showed Premier League matches using a Greek decoder card.

The cases were referred to the Advocate General of the European Court of Justice. He concluded that a contractual obligation, linked to a broadcasting licence, requiring the broadcaster to prevent its satellite decoder cards from being used outside the licensed territory, is equivalent to an agreement to prevent or restrict parallel exports. Such licences with absolute territorial protection are incompatible with the internal market and breach Article 101(1) of the TFEU, without it being necessary to show the actual effect on competition. The Advocate General also concluded that the licences breach the freedom to provide services in Article 59 of the TFEU, without legitimate justification.

What needs to be done?

There is no “silver bullet”. I would suggest there are five interrelated elements in copyright’s adaptation to the digital age: the law, technology, business models, education and enforcement.

Here I cover changes in copyright law; for the other elements do request the full white paper.

There is work to be done in the law at an international as well as a national level. There are still some legal questions to answer such as when a work is made available on the network, does this take place at the point of upload, download or both? The relevance is in knowing where to clear the rights. This is a question before the European Court of Justice at the moment.

At a national level, change to UK copyright law is fairly imminent. Following the publication of the Hargreaves Review (“Digital Opportunity, A Review of Intellectual Property and Growth”) in May 2011, the Government published a Consultation on Copyright in December 2011 on a number of quite far-reaching changes to UK copyright law and in June it published a summary of the responses it received to the Consultation.

Many of the possible changes on which the Government consulted have been under discussion for a number of years, following periodic reviews including the Gower Review in 2005. But it now looks as though we are actually going to see some change. How far reaching the changes will be is difficult to say at the time of writing this report, because the Government has not yet made its intentions public. But the Government is looking for a quick route to introduce a number of changes to copyright exceptions under secondary legislation enabled by the Enterprise and Regulatory Reform Bill.

The proposed changes fall into two broad categories broadening or updating existing exceptions to copyright law and introducing statutory licensing solutions in two areas “orphan works” and “extended collective licensing”.

There are several proposed changes where there is consensus between copyright stakeholders. For instance, almost everyone supports a solution to the problem of orphan works, ie copyright works whose owner is unknown. The likely solution will involve a requirement to carry out a “diligent search” to try and find that owner and, if they cannot be found, getting a licence from a collecting society to permit non-commercial use (and, possibly, commercial use as well) of the orphan work with provision for remuneration being paid to the owner if and when they appear.

Also, in the field of copyright exceptions, there is general agreement that it makes sense to extend the existing exception which allows libraries and archives to make copies of literary and artistic works for digital preservation to cover sound recordings, films and broadcasts as well. In the educational field, it is logical to extend the current exception which allows teachers and examiners to make “chalk and talk” copies of work to enable them to use digital white boards.

So updating certain exceptions to reflect the realities of the digital world makes sense. But there will be conflict between rights-holders and users where exceptions could potentially undermine licence-based business models or deprive rights owners of remuneration to which they may otherwise be entitled.

As I have already observed, in the world of digital media, the transaction between the supplier and the consumer is licence-based. So removing the need for licensing by broadening or introducing an exception which could have a commercial impact is a real and legitimate concern for rights-holders.

Here is one example. The Government is considering a private copying exception to allow consumers to copy a lawfully acquired work from one format to another. Of course, the record industry has tolerated this for years and many online services allow consumers to have a number of copies of the same work on different devices. But, as in all things, the devil is in the detail. Many rights-holders are worried that it could adversely impact on already declining revenues, pointing to the fact that elsewhere in Europe rights-holders are compensated for private copying by equipment and other forms of levies. The UK Government is not intending to introduce a levy scheme for private copying in the UK. But some rights-holders are worried. For instance, if private copies held on “cloud-based” services were permitted under an exception, could that have a commercial impact?

Another controversial exception is for text and data mining, defined in the Hargreaves Review as “the automated analytical techniques such as text and data mining work by copying existing electronic information, for instance articles in scientific journals and other works, and analysing the data they contain for patterns, trends and other useful information”. Whilst it is common ground amongst all stakeholders that there is no copyright in facts, there is industry concern that a copyright exception for content mining could prejudice the primary market for, or value of, the copyright works. The industry would certainly prefer to facilitate data mining by licensing solutions and not by a copyright exception.

Laurie Kaye is an expert lawyer in the fields of digital law, intellectual property and media law. He combines cutting-edge legal work on digital media projects with strategic and policy-related work in the field of copyright and online law. He founded Laurence Kaye Solicitors in 2002. The firm is now top ranked for client service in the Chambers Guide 2012 for “Media & Entertainment”. Laurie can be followed on Twitter @laurencekaye and is a regular blogger.

Email laurie@laurencekaye.com.

Note. This article is part of a White Paper written by Laurie Kaye on how to adapt business models and brands to sustain competitiveness in the digital revolution. The paper is about “the 4 Cs” (Collaboration, Copyright, “Communitycation” and Contract) which are a framework for shaping successful business models for publishers in the 21st century. To obtain a free copy of the full paper, go to laurencekaye.com.