Motion to Approve

Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014 – in the House of Lords at 4:30 pm on 29th July 2014.

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Moved by Baroness Neville-Rolfe

That the draft regulations laid before the House on 9 June be approved.

Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument), 41st Report, Session 2013-14, from the Secondary Legislation Scrutiny Committee

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills 4:42 pm, 29th July 2014

My Lords, I beg to move the lead order but will take the opportunity, if I may, to speak to both instruments before us today. First, I pay tribute to my predecessor, my noble friend Lord Younger, and applaud his great legacy as Minister.

Copyright legislation needs to be strong and respected to keep up with the pace of innovation and the digital revolution. The Government are committed to raising awareness and understanding of IP across all businesses large and small in order to protect innovation and originality and meet changing consumer needs. Many of you will be familiar with the long process that has brought us to this point. The Hargreaves review—like the Gowers review under the previous Administration—recommended that exceptions to copyright should be updated for the digital age. Since then this Government have conducted extensive consultation both formal and informal, including over 250 meetings with interested parties, and brought forward their proposals in December 2012. We conducted a further technical consultation on the draft regulations in 2013 and laid the final regulations before Parliament in March.

We are keen to ensure that copyright continues to act as an incentive to creativity and investment in our creative industries. These industries and our creators are an important part of the economy. We must continue to value the talent and creativity that is the envy of many other countries. We have taken forward a wide range of initiatives which support the creative industries, including extending copyright protection for sound recordings and performances, setting up the Police Intellectual Property Crime Unit and supporting the industry-led Copyright Hub. Only two weeks ago, the Government announced their support for Creative Content UK—a commitment of £3.5 million for a campaign to educate consumers about internet piracy.

The regulations are carefully and narrowly drafted to ensure that they give people greater freedom to use creative content, without undermining copyright’s important role in supporting our creators and creative industries. Parliament has already approved new exceptions for libraries, education, research, disabled people and public bodies. The two instruments before us today represent the remaining changes proposed by the Government and will provide exceptions for personal copying, quotation and parody. Taken together, these various exceptions would, according to last year’s impact assessment, contribute more than £500 million to the UK economy over 10 years. Copyright exceptions are an integral part of a balanced copyright framework. Every country has them and their benefits are widely recognised. They have always been part of British copyright law, which is based on the important principles of fairness and balance.

I turn first to the regulations on personal copies for private use, which will give consumers greater freedom to enjoy creative content in Britain in a modern way. For example, this change would allow someone to copy a CD they have bought, or been given as a gift, in order to listen to it on their iPad. It would allow someone to copy an electronic document or book which they own from one of their personal devices to another. This measure has wide public support, with consumer surveys showing that most people think this type of activity is reasonable. The Government agree. Copyright law should not stand in the way of people being able to use and enjoy their own property. The rule will be that if you lawfully own it, you can copy it, as long as you do not give copies to other people.

Consumers in countries such as Australia and Canada already benefit from similar laws, as do those in many European countries. By introducing this new law, British consumers will enjoy the same advantages. However, our personal copying exception will be narrow and carefully targeted. It aims to support reasonable use of copyright materials by law-abiding people. To accommodate the explosion of digital use, people will be able to copy the content they own on to any device they own, as well as to private cloud storage. Just as consumers would reasonably assume that they should be able to store paid-for content on a laptop or external hard drive, they should be able to do so if they choose to store their music or video for use in a private cloud. The current lack of legal clarity in this area may be an obstacle to growth in cloud services in the UK, reducing consumer choice and putting us at a disadvantage compared to the United States.

I am aware that some parties remain concerned about the scope of the change proposed and its impact on creators’ livelihoods. Therefore, I will spend some time on what this measure does not do: it will not allow someone to give or sell a copy they have made to someone else, or share copies from their personal cloud; it will not allow someone to obtain a copy from sources they do not own, such as rented copies, broadcasts or on-demand services; it will not prevent copyright owners from using technology to guard against copyright piracy, such as the copy protection for films found on DVDs and Blu-ray discs; and it will not prevent copyright owners from licensing additional services, such as cloud services which allow shared access to content.

The scope of the exception contrasts sharply with personal copying exceptions in other EU countries. Such exceptions often allow copies to be shared with family and friends, meaning that people can acquire copies without paying for them, so these countries have mechanisms designed to compensate creators for any sales lost as a result of the exception. Typically, levies are imposed on recording devices and media, which have to be paid whether or not they are used for private copying. French consumers pay a levy of €15 on top of the price of an MP3 player.

The Government do not believe that British consumers would tolerate private copying levies. They are inefficient, bureaucratic and unfair, and disadvantage people who pay for content. That is why the Government’s exception is narrow in scope. It will not allow you to give or sell copies to others, and therefore will not lead to lost sales to copyright owners, making the need for a levy unnecessary.

Some have questioned whether the Government are intra vires in this matter, and this is something we will discuss further when we debate the amendment of the noble Lord, Lord Stevenson. The Joint Committee on Statutory Instruments in its recent report acknowledged that only the European Court of Justice can authoritatively rule on such a question. It is right for the JCSI to alert the House to this point. However, the Government’s view is that EU law as it stands is sufficiently clear, and that EU member states have a wide margin of discretion in this area. In particular, member states do not need to provide compensation where an exception is likely to cause minimal or no harm, or where appropriate payment has already been made.

This view is supported by many, but perhaps most significantly by the UK’s most eminent intellectual property professors, including a former Court of Appeal judge, Sir Robin Jacob. In a recent letter, they said:

“We agree with the Government that in the light of the narrow scope of the exception envisaged, and the terms of the information society directive and case law of the Court, there is no clear requirement to pay compensation”.

Therefore the Government remain confident in their opinion that these measures are intra vires. This new law is an important and overdue step forward in building respect for copyright law. It will make it easier and simpler for ordinary people to lawfully use copyright materials.

I now turn to the second instrument, which covers exceptions for quotation and for caricature, parody or pastiche. Parody and caricature are a valued part of our cultural heritage, from Swift and Hogarth to my particular favourite, “The Thick of It”. In particular we need to protect the right to mock the high and mighty. Many works that are made for the purposes of caricature, parody or pastiche involve some level of copying from another work. Unlike counterparts in countries such as France, Germany, Canada and USA, creators in the UK currently have no defence in law if even a small amount of copying takes place when making a caricature, parody or pastiche. Permission may be granted in some cases, but is sometimes refused or can incur significant costs. Failure to secure relevant permissions can run the risk of legal action and potential damages. This means these creations often do not get published or are quickly removed as a result of action by the original copyright owners.

The critically acclaimed video installation “The Clock” by internationally renowned artist Christian Marclay is a pastiche of thousands of time-related film and television clips. Galleries which exhibit the installation currently risk legal action for copyright infringement. Online creative sites, which are about building grass-roots creativity, have told us that they have encountered sometimes insurmountable issues with lawyers and copyright owners over the years. A generation of people who are the bright new talents in the UK’s creative industry started out by posting their work online, including Ben Wheatley, director of the hit film “Kill List”.

One of the ways that campaigners are able to highlight questionable business practice is by parodying a company’s own brand or slogans. Yet as the law stands, to do so carries considerable risk of legal action and with it the risk of campaign materials being blocked from publication. The Government believe it is time to change the law. The proposed change enjoys wide support: from British broadcasters, production companies, creators and performers; from campaigning groups; and from centres of learning, as the ability to re-edit copyright works in new and experimental ways is an important learning exercise for building creative skills.

The Government have, however, listened to some concerns about the potential for this new exception to harm the market for original works which might be used as part of the parody, caricature or pastiche. As a result, the exception is framed on the basis of “fair dealing”. This is a concept that has been part of UK copyright legislation since 1911. Fair dealing will act as a limitation. In almost all cases, fair dealing will mean that copying a whole work without changing it will not be allowed. For example, it would not be considered “fair” to use an entire musical track on a spoof video. This will mean the market for the original work should be unaffected.

At present, when a whole work, such as a musical track, is used in a parody the copyright owner will often allow this in exchange for appropriate remuneration. The fair dealing exception means that such licensing will still be possible. Fair dealing, therefore, brings with it important protections for copyright owners. People and brands will also continue to benefit from the protection of other laws, such as the laws of libel and defamation. The UK’s tough laws on libel are unaffected.

Copyright should incentivise creation, not obstruct it. It should allow people to voice their opinions, not stifle them. Digital technology has given rise to new types of creative works and copyright law needs to keep up.

I turn finally to the exception for quotation, which sits in the same instrument as the exception for caricature, parody or pastiche. I must own that when I looked up “copyright” and “quotation”, I found this remark of Mark Twain’s:

“Only one thing is impossible for God: to find any sense in any copyright law on the planet”.

With that caution in our ears, I believe that one of the joys of rhetoric and of composition is to be able to quote from the works of others. Many a speech made in this House would be poorer were we unable to quote the words and wisdom of other people. This is a privilege that we enjoy because, as parliamentarians, we have our own exception to copyright. General copyright law is, however, more restrictive.

The right to quote is one of the freedoms that we expect in a modern democracy and many countries allow fair quotation from copyright works. Indeed, the Berne copyright convention requires that all countries should allow fair quotation. However, UK copyright legislation currently allows quotations and extracts only for the purpose of “criticism or review”. So a whole range of activities which the average person is likely to consider reasonable risk infringing copyright because they fall outside the current “criticism and review” exception.

An academic paper or student essay which quotes a title of a journal, book or film, or uses a short extract to ensure proper citation, although likely to be considered fair by a court, is likely to fall outside the current “criticism and review” exemption. Small theatres and record companies have complained that they are often prevented from using quotes from newspaper reviews in their own promotional material. Newspapers themselves of course are able to rely on the “criticism and review” exception; for example, to quote a lyric.

Our proposed changes will remove this limitation and permit all types of fair quotation, as long as there is acknowledgement of the source of the quotation. There should be no obstacle to fair and honest quotation. British citizens should have no less a right to it than those of other democratic nations.

It is the responsibility of government to ensure that the law achieves an appropriate balance between protecting the rights arising from copyright and serving the wider public interest. The UK invests heavily in knowledge and ideas and has many IP-intensive industries. Protection of IP is an issue that dates back centuries, but the Government are committed to responding to the distinctly modern challenges set by technological advancements and to meeting fast-changing and fast-developing consumer needs. This is a delicate balancing act, but I believe that adoption of these regulations will bring us closer to that goal, and I commend them to the House.

Amendment to the Motion

Moved by Lord Stevenson of Balmacara

At end insert “but that this House regrets that the Regulations fail to take account of concerns raised by the Secondary Legislation Scrutiny

Committee about contract override; and fail to take account of the view of the Joint Committee on Statutory Instruments that there appears to be doubt as to whether it would be intra vires to introduce the proposed exception to copyright and rights in performance without also providing for a compensation scheme”.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport)

My Lords, although I have some concerns about the two SIs which the Minister has so ably introduced, the argument that I will put is that, for a variety of reasons, and notwithstanding that the Government have the power to make these regulations, the Government made a grave error in not bringing forward these copyright exceptions in primary legislation. As a result, they have created great concern and confusion in one of our most important industries, and caused considerable disquiet within the creative industries. All this is a matter of regret.

My first point is that we do not have the right structure in place for the creative industries. I regret that this has an impact on our deliberations in this House when we deal with legislation affecting copyright. A proper industrial strategy for Britain which identifies our country’s comparative advantages and global market opportunities must include the creative industries but, as we learnt in a debate in this Chamber only the other night, we have split the creative industries off from the other 11 sectors which BIS has selected and is championing in its drive for growth and a more balanced economy. The creative industries are in DCMS with separate Ministers but we retain the IPO in BIS, reporting to the noble Baroness, with all that this implies in terms of poor integration and a lack of joined-up government. We learnt the other day that the noble Baroness is the fourth Minister for IP in four years, which tells its own story.

In earlier debates on this topic, Members from all quarters of this House wanted the noble Baroness’s predecessor to become the Ivan the Terrible of IP. He was, of course, flattered by this, but in his characteristically modest way, declined to grow the beard or even don the amazing robes. I always meant to say to him—before his untimely removal—that he was really quite good at striking the poses redolent of Nikolai Cherkasov, who played Ivan IV in the eponymous Eisenstein films. It was the way that he turned slightly when criticised that seemed to bring to mind the idea that several palaces full of boyars had just been destroyed under his instructions. I digress. Despite the confusing appellation now accorded to the new Minister of State at DCMS, let us hope that the noble Baroness, Lady Neville-Rolfe, has aspirations to be the tsarina of IP. I see her perhaps adorned in a triple crown in glorious blue to complement her other attributes. She would be a wonderful commissar for IP.

More seriously, your Lordships will recall that during debate on both the Enterprise and Regulatory Reform Bill and the Intellectual Property Bill, there were calls from around the House for the chief executive of the IPO to become an advocate and proselytiser for IP and the creative industries more generally. Perhaps the Minister can respond on progress on these points at the end of the debate.

My second point is about whether having the primary powers is the right approach to introducing secondary legislation. Just because one has the power does not mean that it is sensible to use it. These copyright exceptions have been a long time coming. We have to go back to 2012, when the first sign that trouble was in the air was during the passage of the ERR Bill. In addition to containing a number of quite significant changes to our IP regime in respect of creative designs, new regulations on orphan works, regulating collecting societies and operating extended collective licensing, the Act also confirmed that future reforms to exceptions to copyright and rights in performance would be delivered through secondary, as opposed to primary, legislation.

This last point aroused a great storm of rumours and suspicion. The Government argued that they already had the power to change copyright law through secondary regulation, under the European Communities Act. However, in trying to rectify a different problem within the same clause of that Bill—something about aligning the penalties available under the two regimes—the Government set a hare running which eventually meant that they had to amend the Bill three times before both Houses were content.

I have no doubt that the Government always intended that the recommendations of the Hargreaves report on copyright exceptions, and only those, would be brought in by this route. However, because of the poor drafting of the ERR Bill, they failed to nail the suspicion in the creative industries that they had a great raft of other copyright exceptions ready to implement, and that proved deeply corrosive. Therefore the Government ought to have seen the problems that they were causing over that particular clause and set out to allay concerns raised by MPs, Peers and across the industry by promising to bring forward their copyright exception regulations by primary legislation, even though they did not have to. I regret that this approach was not adopted.

My third point is that if there are substantial changes to an existing regime, such as in IP, they need to be given proper legislative time. Copyright is an extremely valuable but often unrecognised or even misunderstood right, which protects a whole range of original materials, including written documents, software, artistic materials, designs, music and dramatic works. They are the underpinning elements of our creative industries, which are of course an essential element of a modern, successful and prosperous British economy. Those industries generate wealth and employment prospects, and are growing at a faster pace than the general economy. Given the importance of the creative industries, and notwithstanding that the Government were entitled to bring in regulations under the ECA, they should have taken the decision to introduce an IP Bill. If that had done nothing else, it would have reflected to the wider community the importance that the Government see in the sector.

On the back of debates and discussions around that Bill, measures to change the regime to permit more exceptions, so that users could get the content they want and the industry would be remunerated appropriately for its work, might have been applauded not just in the UK but around the world. Ironically, what did we find in the 2013 Queen’s Speech? The Government introduced an IP Bill, which could have done the job. We wait for years for an IP Bill and then in successive years we have two which could have done the job. Why on earth did they not take that opportunity? Instead, the IP Bill of 2013, which is now an Act, set up new powers for the UK to implement the unified patent court agreement and introduce, as the blurb goes on to say,

“new protections for designers, as well as removing red tape and some of the uncertainties for businesses when protecting their designs”.

It could have been a contender, and I regret that missed opportunity.

I also want to talk about scale, because when you have large quantities of secondary regulations, they have to be treated differently from one-off regulations. That is because secondary regulations are not subject to the same level of debate and scrutiny as Acts of Parliament—not least because there is no scope to amend their provisions, so there are no Second Reading debates on principles, no Committee and no Report. Any vote on a regret Motion is effectively on whether to accept or reject the regulations as they stand and as they happen to have been drafted.

It has taken two and a half years, with numerous false starts and unplanned withdrawals, but out of an original batch of 11 SIs on copyright exceptions on private copying and parody we are considering the final two, which the noble Baroness has introduced. The others were approved under the affirmative procedure, combined—in one case, rather artificially—into five SIs which were implemented earlier this year, if not on one of the standard commencement dates.

The Hargreaves report, which started all this, was commissioned by the Prime Minister in 2010 and reported in 2011 amid concerns that current legislation was outdated in the internet age. When he reported, Professor Hargreaves was said to have said that his recommendations were,

“designed to … ensure that the emergence of high technology businesses … is not impeded by our IP laws”.

That may well have been the headline which the Government wanted but when you read the report, it is not quite what he was saying.

The Hargreaves review urged the UK Government to take,

“long overdue action to update copyright law in ways designed to increase consumer confidence in the way the law works”.

Professor Hargreaves noted in the report that the UK had chosen not to implement all the copyright exceptions permitted and drew attention to the fact that, for example, it does not allow individuals to shift formats for personal use or deal with parody; nor does UK copyright law allow libraries to archive all digital copyright material. As he argued, taking full advantage of the EU-sanctioned exceptions would bring cultural and economic benefits, but the main purpose would be to make the copyright law better understood and acceptable to the public.

According to the review:

“The copyright regime cannot be considered fit for the digital age when millions of citizens are in daily breach of copyright, simply for shifting a piece of music or video from one device to another. People are confused about what is allowed and what is not, with the risk that the law falls into disrepute”.

Going back to the original recommendations of the review is very interesting. There is a world of difference between the Government’s present arguments for the exceptions and what was originally proposed. Given that, I regret that the Government did not use primary legislation to confirm that the central plank of their argument is,

“action to update copyright law in ways designed to increase consumer confidence in the way the law work”.

Finally in that list of regrets, I want to look more widely at the Hargreaves report, because it is instructive in another way. Looking back to 2011, it now feels that the recommendations were of their time but perhaps are not quite as relevant to today’s world. Take the emergence of the Copyright Hub, developments in the EU, new and more flexible approaches by licence holders and the development of technology, all of which have rendered some of these exceptions largely redundant.

For example, UK Music, to which I am grateful for its briefing, makes the following points, which the noble Baroness may wish to respond to. The policy decision on those exceptions was made before the launch of licensed music services, such as Amazon’s AutoRip, which enables consumers to buy CDs but also receive a digital copy of their purchase. The policy decision was made before the conclusion of the European Commission’s mediation on private copying, led by former EU commissioner António Vitorino and published in 2013, and Françoise Castex MEP’s own-initiative report from early 2014. The rules on private copying are currently the subject of an EU-level review, which could resolve some of the legal doubts. We are told to expect a White Paper on copyright from the European Commission in September 2014. The Government have not demonstrated that they are taking on board or responding to these market, policy and legal developments over the past 20 months. Instead, they intend for Parliament to adopt a measure which is, in some senses, already in need of review.

To conclude, I want to make a couple of points about the SIs before us today. I noted that in her introduction the Minister covered a large number of points but did not deal with the question of contract override, which was raised by the JCSI. When she comes to respond, will she cover any points that she feels are relevant to our debate, as I am sure that others will also raise them?

On the remaining question that has been raised, the issue of fair remuneration does not seem to have gone away. Article 5(2)(b) of the information society directive says that member states may provide exceptions,

“in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation”.

The Government have argued that compensation schemes are unnecessary when the private copying exception is so narrow in scope and does not cause harm to rights holders or, for example, when rights holders have received payment in another form, such as a licence fee. No further evidence by the Government has been assembled to justify why “fair compensation” in the

UK actually means no compensation. UK Music has published research indicating that the harm to its industry could amount to a loss of £58 million per year.

The Government have also said that compensation is already factored in at the point of sale of these goods. However, the IPO’s report on private copying states clearly:

“We did not find any evidence in support of a widely-held view that stores are including in their price the permission to copy”.

The recent Joint Committee on Statutory Instruments report highlighted concerns about whether it would be intra vires to introduce this copyright exception without also providing for a compensation scheme. It would be helpful if the Minister responded to this particular point. I think that the House would agree that in approving a regulation that experts suggest may have to be tested by the courts before it can be relied on, the Government are not promulgating best practice. An unacceptably high element of risk seems to be introduced here, which may mean that the regulation is ineffective in achieving its objectives. We have been told that the court has already pronounced on this. When this issue was raised in the other place the Minister brushed it away as being largely irrelevant, but it is clearly not.

I have some specific questions. Can the Minister confirm that the department took legal advice on the question of whether a private copyright exception can be introduced without the inclusion of a compensation scheme? If so, in the interests of transparency, will she put a copy of that advice in the Library? Did the Permanent Secretary of her department seek a direction from Ministers on this matter?

Turning to the exception of parody, I made the point in Committee on both the ERR Bill and the IP Bill that this exception does not really seem to do justice to the needs of the many talented artists and performers in the UK who perform parody live and in recorded shows, or to the rather different writers and performers who use pastiche as their preferred art form. I do not think that “fair dealing”, with its very limited amount of material that can be quoted, covers this activity, and to leave in place the droit morale seems to compound the difficulties.

I am also concerned about the quotation issue. I am sure that the Minister will have received a great deal of correspondence recently from photographers, both members of various groups and individually. Their point is important because their argument is that photographs can be “quoted” for genuine criticism and review but are excluded from the exception to copyright when reporting current events. They say that this is a tried and tested definition which has worked. Introducing a more general right of quotation, however, introduces ambiguity and uncertainty that will require legal clarification in the courts, costing rights holders legal fees and lost revenue. I am sure that this will be raised by others, and I would be grateful if the Minister could respond.

In moving this amendment to regret, I believe that the Government have not demonstrated that they are taking on board or responding to market, policy or legal developments over the past 24 months, and are instead making Parliament adopt a measure that may not be necessary and which may already be in need of review. The Government have proved unable to be responsive to the needs of the times when bringing these copyright exceptions forward under the secondary legislation route; they have missed an important opportunity to raise the status and knowledge of IP by not using primary legislation; they have ignored the comments and advice of the expert committees in Parliament; and they have failed to reach a consensus with key stakeholders involved in this policy debate. That is all to be regretted, and I beg to move.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat 5:15 pm, 29th July 2014

My Lords, I thank my noble friend the Minister for her introduction of the draft statutory instruments. Last week we welcomed her to her new role and to the debate on extended collective licensing. Today’s debate, as we have already seen—and I agree with a huge amount of what the noble Lord, Lord Stevenson, said—is much more controversial.

We debated copyright exceptions on a number of previous occasions: during the passage of the Enterprise and Regulatory Reform Act on 5 December last year, and on 14 May, before Prorogation, when we debated the first set of exceptions. I suspect that today is the grand finale. In the mean time, we have seen the launch of Create UK: Creative Industries Strategy, which calls for,

“a stable legal framework that allows rights to be protected and commercialised”,

and says that,

“any consideration of amendments to the IP framework”,

needs to be,

“thorough, objective, evidence-based and transparent”.

It has come too late, I fear, to inform these exceptions.

As I said previously, the reform of copyright should be handled sensitively, with the value of the creative industries and any negative impact caused by changes to the law in mind. The creative industries sector as a whole is alarmed, however—in exactly the way that the noble Lord, Lord Stevenson, described—by the potential negative impact the exceptions could have. The sector considers that they could deter investment, risk jeopardising market-led developments and weaken performers’ and creators’ ability to benefit financially from their work. As I also said, copyright exceptions should be adopted only in response to a well defined public policy objective and market failure. Nowhere is that more important than in respect of the three exceptions and two draft regulations that are being put forward today.

Set against those strong considerations are the very weak and poorly underpinned impact assessments of December 2012, on which the Secondary Legislation Scrutiny Committee itself raised its collective eyebrows. At this point I thank both the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee for their careful scrutiny of the draft SIs and for raising some important issues.

On each occasion that we debated these matters I have raised a number of issues, which I will repeat only briefly. First, there are the basic economics and commercial realities. Why, in formulating the contract override provisions in the exceptions, have they taken little or no account of developments in licensing, both during and after the Hargreaves process, such as commercial offerings through new technology and the Copyright Hub? Exceptions should not apply where commercially available alternatives already exist. Sadly, the Government have not accepted that important principle or, let it be said, the flexibility contained within the information society directive.

The noble Lord, Lord Stevenson, mentioned developments in the music industry. Another example regarding the personal copying exception is in the audiovisual sector. Products such as iTunes and UltraViolet allow legal and secure access to that content through the cloud among six family members for up to 12 personal devices.

The Secondary Legislation Scrutiny Committee in its report in May remarked from the outset on the strength of opinion on the question of contract override, which I attempted to highlight in our December debate. It expressly said that it was not persuaded by the then Minister’s statement that the changes proposed are relatively minor, particularly as regards the personal copies for private use exception. Where does the figure of a total £500 million to the UK economy over 10 years come from? Can we have a complete breakdown?

In fact, there is likely to be a negative impact on rights holders given that under the personal copying exception they will have to give free licences for services such as cloud lockers, which are a potential source of valuable revenue. Photographers and photographic and news libraries make similar arguments in their evidence about potential loss of revenue under the quotation and parody exceptions. Minimal benefits are cited for those under the impact assessments, but it is clear that the risk of licensing revenue loss for them is considerable.

Furthermore, has any analysis of the impact of the exceptions on the UK’s competitive advantage been carried out, in particular on whether it will encourage content companies to contract in other jurisdictions? Rather than encouraging innovation, these provisions could encourage challenge and breach of licensing terms. Will investors now turn away from the UK and invest in content made in other jurisdictions where they can freely negotiate contracts?

In the light of all the above, can my noble friend say whether any new economic impact assessments have been conducted or are contemplated? The Secondary Legislation Scrutiny Committee, noting that the instruments are to be reviewed by the Intellectual Property Office no later than April 2019, said:

“We would urge the Government to monitor the impact of the changes from the point of implementation, and in particular to respond effectively if it becomes clear that any negative potential is being realised”.

How are the Government planning to monitor whether the expected benefits are being achieved?

There are, of course, multiple legal bones of contention. Will the exceptions meet the requirements of the Berne convention and of the three-step test set out in the 2001 information society directive? That states that an exception can be applied only: in certain cases; where it does not conflict with a normal exploitation of a work; and when it does not unreasonably prejudice the legitimate interests of the copyright holder.

Many rights holders are strongly of the view that they do not meet these requirements. Exceptions create contract override provisions that would render unenforceable contracts that seek to restrict or prevent the relevant exception. As a new and untried concept in UK copyright law, this has not received nearly enough examination and consultation. Given their importance to these statutory instruments in particular, why have the proposed contract override provisions not been subject to their own separate consultation and discussion? This is particularly necessary for the enforceability of technical protection measures, as set out in Article 6 of the information society directive and Section 296ZA of the Copyright, Designs and Patents Act 1988.

Why are such fundamental changes to the application of UK contract law being made via secondary legislation? I entirely agree with the points made by the noble Lord, Lord Stevenson. All these exceptions could have been debated and introduced in the Intellectual Property Act. Indeed, if that had happened we would not be standing here now discussing these statutory instruments as the exceptions would have already been passed in the Act. Such fundamental amendments to sections of the CDPA would have been dealt with by discussions in a normal parliamentary process in both Houses, with amendments being debated in the ordinary way.

My noble friend Lord Younger, the previous Minister, referred to 50 exceptions having been introduced by regulations when he gave evidence before the Secondary Legislation Scrutiny Committee and when we debated the other exceptions. I am still not convinced: can we have chapter and verse about those 50 exceptions, please? Perhaps most important of all in terms of legal risk, how convinced are the Government that these exceptions comply with EU law?

As the JCSI pointed out in its report, the private copying exception as currently proposed would not provide any compensation to rights holders for the harm private copying might inflict on them. The JCSI quotes the Government as saying that no compensation scheme is required,

“where the private copying exception is narrow in scope and does not cause harm (or causes only minimal harm) to rightholders”.

That wording was repeated by my noble friend. However, this claim, and whether or not a personal copying exception will cause harm, is hotly contested by rights holders. For example, we have heard from the noble Lord, Lord Stevenson, the estimate from UK Music that there is a potential loss of revenue to the music industry of some £58 million.

Why have the Government chosen to ignore, for instance, the CJEU ruling in the Padawan case, which makes clear that member states must include a mechanism for calculating compensation when introducing a private copying exception? How confident are the Government that these exceptions will survive legal challenge? The JCSI reflects the views of many when it points out that the Government must, if challenged in court, show that “no compensation” is “fair compensation”. How confident too are they that the exceptions can legitimately be introduced under Section 2(2) of the European Communities Act 1972? The Government have not answered my direct question as to whether they have taken independent legal advice on this. Have they?

Surely also the Oakley v Animal case should be interpreted to mean that Section 2(2) can be used only when the UK is obliged to bring in a particular measure. The exceptions being introduced through these regulations are entirely optional. Then again, the contract override effect of these new exceptions is to render unenforceable a contract made at an earlier time. Surely, the Government’s approach to contract override also falls foul of Schedule 2(1)(b) to the European Communities Act 1972. Then of course there have also been a number of significant CJEU opinions and judgments in a number of significant copyright cases from 2013 and 2014, all of which have implications for these copyright exceptions. Should not these cases at the very least give my noble friend pause for thought?

As anticipated, my noble friend prayed in aid the 12 professors of IP to allay some of these legal concerns. They, rather like the three tenors, spring up to sing in harmony on occasion. They did so on the then IP Bill and they have done so with these exceptions. However, there is a strong body of non-academic opinion that takes a contrary view on these matters and much of what they said in their evidence to the JCSI was opinion, not settled law. At the very least, the Government are taking a risk in proceeding with these exceptions.

On top of all this, there is the big new question of why we have to act alone on the personal copying exception in the context of simultaneous harmonisation discussions in the EU. Entirely as the noble Lord, Lord Stevenson, said, there are discussions and consultations taking place, and we are expecting a White Paper this September. This will set the direction for European copyright over the next five years. Surely it is unnecessary for the UK Government to take a risk now with this policy and proceed with implementing a measure which could prove costly, is unpopular in many quarters and may well have to be reversed.

There are also concerns about the specific wording of the personal copying SI, and in particular what is meant by awful acquisition. To save time, I shall not go through all the detail of that; the noble Lord, Lord Stevenson, went through some of the individual aspects. On the technical protection measures in particular, there is doubt about how the wording of the current SI is set out.

As for the wording of the quotation exception, what is fair dealing? It is not defined in any detail; all types of work are treated the same—so, for example, a whole photograph, perhaps, could be reproduced without permission. The noble Lord, Lord Stevenson, referred to a number of organisations representing photographers, and they are numerous—the British Photographic Council, Getty Images, the British Copyright Council and the British Association of Picture Libraries and Agencies. They all have in common the fact that they are deeply worried about the quotation exception.

New wording has been added about when acknowledgement does not need to be given. How will,

“impossible for reasons of practicality”,

be interpreted? Is it right that there should be this relaxation of moral rights? Surely, as regards photographs and video, is not all this premature before we have dealt with metadata in a proper fashion? Should they not have been excluded from the quotation exceptions in the first place?

The noble Lord, Lord Stevenson, discussed the parody exception and I shall not go into detail on that—but many of the same issues apply. There are not definitions of “parody” “caricature” and “pastiche” in UK law, so we have no precedent as to how the concept of fair dealing might be applied to the use of a copyright work in the making of a parody. How is this going to be consistent with what is called the moral right of integrity, allowing a right holder to prevent reputational damage? Surely, in these circumstances, is not a duty of acknowledgement even more important?

On top of all these, the whole issue of explanation to the consumer is of great concern. The guidance notes are defective and the Explanatory Notes, although they have been amended, are also defective. It seems extraordinary that the Government are proceeding with these exceptions in these circumstances. I am afraid that the statutory instruments will pass today, but they are fairly friendless and fraught with the risk of legal challenge. They are badly worded and unnecessary, and they are poorly explained, and the consumer will remain confused. In the old phrase, when asked for directions, “I wouldn’t have started from here”—and I do not think that Professor Hargreaves should have done so either.

Photo of Lord Berkeley of Knighton Lord Berkeley of Knighton Crossbench 5:30 pm, 29th July 2014

My Lords, I suppose I should declare an interest, being both a composer and a broadcaster. I am grateful to the Minister for underlining once again the Government’s support, commitment and gratitude to the creative industries. I am not surprised at that gratitude, since they bring in a huge amount of money to this country and, perhaps even more important, a huge amount of cultural kudos.

However, I am profoundly concerned by these copyright exceptions. I will not rehearse completely the words of the noble Lord, Lord Stevenson of Balmacara, or, indeed, the noble Lord, Lord Clement-Jones, since they could not have been more clear, but I want to stress one very important point. The Government have argued—again, this follows on from the speech of the noble Lord, Lord Clement-Jones—that there is no more than minimal harm arising out of the private copying exception. However, what empirical evidence do the Government possess to support what may otherwise appear to be just an assumption? If the Minister has not already done so, please could she ask her departmental research team to commission further evidence on damage, given the questionable evidential base it is currently relying on? How, precisely, do the Government intend to monitor harm arising out of the exception once it has come into force, given that in practice it is likely not to be the same as has been predicted in theory? Indeed, the level of harm can be expected to change over time as markets develop. Will the Minister give the House an undertaking that if the Government find evidence of harm, the legislation will be promptly amended to provide for a compensation mechanism?

Many people working in the creative industries live on fairly modest means. Their royalties need to be protected—without them, they will find it very hard to survive. Not everyone has the kind of income generated by incredibly successful pop groups or commercial composers, yet those composers who are perhaps working at the sharp end—those artists and photographers—are precisely those who spread the word about the cultural life of this country. I fear that we may be bolting the stable door after the horse has disappeared; but I am hoping that we might be able to prevent more horses following suit. I strongly urge the Government to listen to the points that have been made by noble Lords thus far and which I am now emphasising.

Photo of Lord Scott of Foscote Lord Scott of Foscote Crossbench

My Lords, I declare an interest in this debate. I was a member of the Select Committee that produced the report to which reference has been made. I agreed with the contents of that report wholeheartedly and recommended the forcefulness of the views expressed in it to your Lordships.

The importance of this is plain. There are a number of individuals who create copyright works on which they rely for their livelihood. They are entitled at the moment to the protection of the law of copyright so that the work they have brought into existence is not taken advantage of by others, without reward for them. The regulations now before the House will have a very serious effect indeed on people of that sort.

I agree with the noble Lord, Lord Stevenson, and others that this is a change in the law that would have been better brought about—if it was to be brought about at all—by primary legislation. The House could have gone into Committee and amendments could have been put forward and fully debated. To use regulations to bring about a change in the law of this extent seems to me a misuse of the legislative procedure that has been adopted.

I do not want to add to what the noble Lords, Lord Stevenson and Lord Clement-Jones, and my noble friend Lord Berkeley of Knighton said. I agree with what they said but want to draw attention to the aspect of contract override, which was discussed in the Select Committee. The Minister who gave evidence to the Select Committee was the noble Viscount, Lord Younger, accompanied by Ms Heyes. He defended the legislative proposals that your Lordships are now considering and raised the matter of contract override. He and Ms Heyes informed the Select Committee that the effect of the provisions in the regulations,

“would not be retrospective, but would apply only to new contracts; and that the provisions were precedented, inasmuch as an existing exception allowing material to be photocopied in schools could not be overridden by contractual terms”.

However, we are not talking now about education but about private use.

The text of the private use regulation does not confirm the assurance that we thought was given by the noble Viscount, Lord Younger, that the provisions,

“would not be retrospective, but would apply only to new contracts”.

However, in Regulation 3, new Section 28B(10) of the relevant Act states:

“To the extent that a term of a contract purports to prevent or restrict the making of a copy which, by virtue of this section, would not infringe copyright, that term is unenforceable”,

so it is retrospective. It would apply to negate the content of contracts that have been entered into, perhaps since the Minister appeared before the Select Committee in May and gave the assurance to which I have referred, which is set out in the report. That assurance may have been relied on but the proposition that this retrospection can now be incorporated in the regulations seems to me quite wrong. I hope that the Minister will comment on that when she replies to the debate.

The proposition that personal use copying should be permitted and should be free from any copyright infringement is obviously a very important one for all producers of copyright material. What does personal use mean? Does it mean that it would be a breach of copyright for the person who acquires a copyright work to copy it for the benefit of his children? Presumably, that would not be his personal use. How would the personal use limitation be enforced? How could the copyright proprietor possibly know what was being done with his copyright work by the person entitled to copy it for his personal use? Can you copy it and give it to friends as Christmas presents or give it to your children to take to school to show their school friends?

I respectfully suggest that it is not a satisfactory limitation at all. I suggest that this is precisely the sort of legislation that ought to have been referred to Committee to be gone over paragraph by paragraph, with amendments being put forward, discussed and voted on. I thoroughly support the Motion of the noble Lord, Lord Stevenson.

Photo of Baroness Morris of Yardley Baroness Morris of Yardley Labour

My Lords, I am grateful to the Minister for presenting the statutory instruments but I agree with everyone else who has spoken. I have real doubts about what they will mean for the creative industries. I know that her predecessor noted how much consultation had taken place round the issue, and my noble friend Lord Stevenson made the same point. The history of this is very long, and we are left asking if after all those years of consultation and all those meetings, with everyone being opposed to it, what is it doing here in the House about to be passed? Consultation has an element of taking people with you, or persuading people and putting them in the position of seeing the strength of the argument. That has not happened in the sector, which is the sadness of today. As it is not primary legislation we know that it will go through at the end of this debate, and in terms of a responsible House and good-quality legislation that is to be very much regretted.

I have two points to make on a particular aspect of the statutory instrument, but before doing so I declare an interest as a director of the Performing Rights Society and, along with the noble and learned Lord, Lord Scott, as a member of the Secondary Legislation Scrutiny Committee, which considered this legislation. I agree with the Minister that we need to bring the position up to date. I can see that the legislation looks old fashioned and is not fit for purpose, but people are unwittingly breaking the law day after day. It is not an argument against bringing legislation to the Houses of Parliament but an argument against the detail. If we take the example that we have to make it legal for somebody to download or transfer information from their CD to their iPod, I cannot disagree with that. It is what happens and it makes sense. It is allowing the user to take advantage of new technology and I do not think that many rights holders would complain about that.

I want to concentrate on the fact that the statutory instrument extends the right to private copying to the cloud service. This is new technology. A lot of the other private copying exceptions that have been given as examples are not about new technology; it is legislation catching up with the past. With the cloud service—locker service being new technology—this statutory instrument will set the framework for this technology for many years to come. It is a golden opportunity. New technology is not within the legal framework of protecting rights, so this is our chance to ensure that the signals we give do not repeat earlier errors of a creative sector that is not in line with the technology and the way in which people want to use it.

I know that the statutory instrument says what is not allowed—but ask anyone in the film industry about how it has suffered from what was not legally allowed but what was easy to happen. In introducing the debate the Minister said that it is quite clear in cloud technology that it is for personal use only and does not allow friends, family or anyone else to use it. However, it is easy to happen. We will see exactly what happened in the film and music industries. Half the world will say it is illegal and the other half will say that it is easy and everyone does it, so it will continue. To introduce that for new technology with cloud services is a wasted opportunity. I wonder whether the Minister realises the full range of services operated by the cloud locker services. With Dropbox, which many people access now, it is so easy to share information and data with other people. It is almost possible to do it inadvertently or by accident. It is almost that easy that people will assume that that is what the technology is for.

Now is the time to give a message, but is there education on this? Is there any good-quality information in the guidance that goes with the legislation about how this should be interpreted and what should happen? There is not. Why have the Government not put an obligation on the people who run cloud locker services to provide information to customers about what they can or cannot legally do? None of that happens but there is legislation, which includes in its title,

“Personal Copies for Private Use”,

and which by its lack of understanding of the cloud locker services gives the message that it is possible. We have missed the opportunity to give a message about what is and what is not legal. Moreover, we have given the opposite message that copying is possible with this new technology.

Secondly, what makes this issue different is that these services are commercial. People are making money from them. They are monetised and revenue earning. Unlike many of the other new technologies, where the creative sector was very slow to act and to make it possible to legally download for personal use, on this new technology—to its credit—it has tried to get ahead of the game. Many of the cloud services are being licensed at the moment, so it is possible legally to pay money, return to the copyright holder and make, if you like, a legal market.

With this legislation there is confusion for the user over what is legal in relation to cloud services; and the Government are interfering in a new market that is building up, into which a lot of people have put a lot of hard work. They have tried for the first time to ensure that it is easier for people to use this new technology, while still providing a return to the licence holder.

Finally, I have a great deal of sympathy with the argument that the lack to compensation to rights holders is what the Government have wanted to do, and that they have looked through every bit of case law and every word in every directive to justify their decision. Rather than looking at the evidence and weighing up the different cases—which I know are contradictory—the Government have sought a few phrases with which to justify a decision that they wanted to make. The cloud will stand to benefit financially from this legislation. It will make it financially a more attractive service because of personal copying. Because of that, the people who will lose are the rights holders and the creators. If nothing else in this statutory instrument makes the Government pause to revisit the issue of whether compensation should be paid, their action on cloud locker services should do so.

Photo of Lord Grade of Yarmouth Lord Grade of Yarmouth Conservative 5:45 pm, 29th July 2014

My Lords, I find myself agreeing with so much of what the previous speakers have said. What I have not got at any time from the Government since the publication of the discredited Hargreaves report is any sense that there is a public interest in investment in content and that thereafter it becomes available in forms of which those who have invested are in control.

What has been unleashed is a global army of parasites who live off the investment that creative people have made in the UK and throughout the world. I publicly described Google as a parasite. I was picked up by one of its leaders, who asked: “Why did you describe us as parasites?”. I said, “Last week you used a clip of Susan Boyle on ‘Britain’s got Talent’ and had 300 million hits on YouTube. That piece of material cost us a great deal of money, you did not ask permission, and you put it out there to promote YouTube and Google’s fortunes”. He replied, “Well, if you had called us, we would have taken it down”. I replied, “If I go to Harrods and steal a Cartier watch; if they ring me up and say ‘Can we have it back?’, and I give it back it is not shoplifting”. What the Government have failed to understand throughout their deliberations on copyright since the Hargreaves report is that there is a direct correlation between investment and the investor’s ability to control and police its copyright, and to protect that investment to ensure that it gets value for it.

The Government seem to think in all the deliberations that I have heard, read and seen that there should be a free for all, that everything should be made free for the public and that there is a public interest in everything being made available as easily and freely as possible. Yes, there is a public interest in that but it will last about five years because in the end there will be no more investment in original content.

Throughout the creative industries, particularly the film, television and games industries, people are struggling to avoid piracy, and struggling to get value for the risk investment that they have made in the content. Since that wretched Hargreaves report, I have heard nothing from the Government to suggest that they understand that there is a public interest in continued investment in the creative industries.

Today’s Motion is yet another step forward in liberalising the copyright laws and chipping away at one of the great success stories. On the one hand, this Government have been tremendous at supporting the creative industries. I myself, as chairman of Pinewood Studios, have been a beneficiary of that, so I should declare an interest. But at the same time the Government are demonstrating a complete ignorance of the economics of investment in the creative industries. Today’s Motion is yet another example. It is time they tore up the Hargreaves report and listened to the people who make the investments. Then we might get some serious deregulation and some serious thinking about how we can modernise the copyright laws. But if this continues, I have to tell the Government that they are putting the creative industries at risk.

Photo of The Earl of Erroll The Earl of Erroll Crossbench

My Lords, I want to say a few things about this subject, because everyone seems to be so much against these regulations. I, and many other members of the technical community and the general public, welcome them, as they bring some common sense into an area in which the world has moved on from the days of the printing press. That was when copyright was first conceived. Those old laws managed to adapt to encompass the physical sale of performances that were recorded, such as music, films and so on. But now, in the internet age, they need some major modernising modifications.

One thing keeps coming up and causing confusion, and I want to talk about it up front, because I have great difficulty getting my head round it, and I think a lot of other people do too. The terms “creators” and “rights holders” keep getting put together as if they meant the same thing. They do not. There are the talented performers, who might actually have been put together by programme creators and producers. Then there are the rights holders, who buy rights to the performances, and the distributors, who also take a chunk or two. How many of the talented performers have gone bust? They often go broke quite early, because they have sold all their rights. Yet that is what the rest are all feeding off. When I hear all this great cry about how badly the poor rights holders are suffering, I sometimes look at some of those broken performers who at some point have performed brilliantly, but who at the end of the day have been milked dry. So I am sorry, but I do not always listen to those cries of woe.

The noble Lord, Lord Clement-Jones, asked why we do things differently from some other members of the EU. There is a clever idea—I think that this is what they did with Philips cassette tapes—whereby people put a levy on every bit of hardware. That is all supposed to go into a big pot to reward the creative industries, which get the benefit of it. But that means the big boys again. The trouble is that this puts extra cost on to every bit of equipment—every iPhone, every iPad, every Microsoft Surface, and everything else that I buy. The trouble is that these things break down with monotonous regularity.

Let us say that I go and buy myself an MP4 player and download some music on to it, and then it breaks down. That causes problems, particularly if you are involved in one of those proprietary chains. If the device breaks down and you have to move on to another one, you often have to pay again—and if it is all wrapped up in the hardware levy, you are paying again and again. All that does is inflate the cost of the machines—the gadgets that we buy.

That is a brake on innovation, productivity and so on among the small people and the small businesses, who cannot afford to be shelling out the whole time. I have seen reports that had different statistics from those in all the others, and suggested that if the EU were to remove those levies, it would be better off by nearly €2 billion a year. I have no idea whether that is true—people may well be sitting in front of dartboards when they produce such figures—but it is probably just about as genuine as some of the others. Certainly, when you have a broken machine you suddenly find you have to pay out and buy the material again, because format-shifting is not allowed and the digital rights management is different. Some of that has now changed, and some of it is better.

Turning to the subject of parodies, I see satirical students taking clips from the internet and making mashups, which are wonderful and very interesting and bright. But all that is illegal. I can see that politicians want to protect themselves from that sort of stuff, but where would all those wonderful satirical programmes of the past be if we had not quietly permitted it? Now that we are trying to crack down on it, we have to be very careful. That is why I think exceptions for parody and artistic creativeness are essential.

If you copy a newspaper article or something like that, which is illegal, because you have some memorable, magical moments that you want to keep about your family, you will have to put it in a locker and store it, and you will have to keep format shifting and changing it to new media the whole time. But it will not last for ever as CDs will fall apart after a number of years. The original newspaper will fall apart in 50 to 100 years and will be unreadable. If you have it electronically, that will fall apart unless you keep moving it. If it becomes illegal to copy, you will lose those memories and everything like that. The trouble is that most people are getting around these things in practical ways but what they are doing is illegal and, in some cases, illegal under the Digital Economy Act. Under that Act, certain things that used to be a civil offence became a criminal offence and the waters were muddied even more.

The really important thing is that if the law creates rules and laws which diverge significantly from the way in which the general public behave, the rule of law falls into disrepute and people start to disregard it.

When that happens, they start to pick and choose which laws they will obey. I do not think that that is a good principle. There are moments when we have to admit that the world has moved on, although that means tough luck on some people. We see retrospectivity the whole time in a lot of areas. For example, as regards leases, rentals, landlords, tenants and all sorts of other arrangements, the Government have interfered with contracts that were set up and they have tampered with them in such a way that you no longer have protection of your own property, which you used to have. In general, they say that provisions apply only to new contracts but very often they tamper with existing ones. We have been tampering retrospectively for a very long time. I do not like it and I disapprove of it but sometimes we have to do it in order for the law to catch up with what is happening anyway.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank colleagues for the points raised in this debate and for the high level of technical expertise that they have shared with me, so new to the Dispatch Box. First, I will address some of the points made by the noble Lord, Lord Stevenson. As noble Lords know, the Government support growth of the creative industries in multiple ways. I am a new and passionate advocate for doing this broadly and through intellectual property. We recently announced £16 million funding from the Employer Ownership of Skills pilot to boost skills in the creative industry sector. We have welcomed the launch of the Creative Content UK scheme and have provided £3.4 million to co-fund the Creative Content UK educational campaign. The campaign will help to reduce online copyright infringement and to promote the use of legal digital content, which is an important theme of this debate.

The Government have welcomed the industry-published creative industries strategy and will continue to work with industry to help to achieve the growth and export success outlined in the vision and strategy for 2020. The IPO, along with other government departments, is fully involved with this strategy. In thanking the noble Lord, Lord Stevenson, for his kind words about my potential role as the Minister for the IPO, I remind the House that my friend in the other place, Ed Vaizey, now is also a Minister of State in the business department as well as at DCMS. On arriving in the department, he gave me helpful suggestions about who I should see and talk to. Joined-up government can work and it is our determination that we will make it work.

The noble Lord, Lord Stevenson, expressed his regret, as did some others, as to why the Government were using secondary legislation rather than primary legislation for these measures. I repeat the point—that he indeed has made—that changes have been carefully developed with wide and extensive consultation. We have also published the draft regulations for technical review and have welcomed many debates in this House and the other place.

The fact that these regulations are affirmative has afforded us the opportunity to have this debate today and I welcome that. The two regulations were indeed unbundled to allow the opportunity for this important debate, which as a new Minister I very much welcome. I agree that copyright is valuable and sometimes misunderstood so it is right for us to debate it, to talk more about it and to emphasise its economic contribution to our country. You go right round the world and you find people’s admiration for our creative industries.

The measures in these SIs, in the SIs that have already passed and in the Intellectual Property Act, which my predecessor helped to facilitate through this House, have long been fought. Much time has been devoted to going, to some extent, this way and that way. I think we should now press ahead with the full package of measures. We need to bring our legislation in this area up to date, as the noble Baroness, Lady Morris, very helpfully said and to bring some common sense, as the noble Earl, Lord Erroll, said. Obviously we will continue to review the arrangements but it is important that this set of changes come in and together can be communicated to all the important stakeholders on 1 October.

The noble Lord chided me for not covering the question of contract override in my opening remarks but I wanted to hear what he was going to say on this important issue. The presence of the contract override clause gives users, consumers and businesses certainty and clarity that the exceptions apply in all circumstances regardless of the detail of a contract. Without such clauses restrictive contract terms could prevent the uses permitted by the exceptions, thus preventing benefits from being realised. This is not merely a hypothetical fear. Many responses to the various consultations have told us that contracts permitting access to copyright works frequently contain terms that prevent users from carrying out activity that otherwise would be permitted by law.

The noble and learned Lord, Lord Scott of Foscote, in an interesting intervention talked about retrospection. When we say a law is retrospective we mean that it takes effect in the past and therefore could affect the legality of an action that took place in the past. Obviously we are not allowed to do that with this legislation and we do not intend to. However, that does not mean that the new law will apply only to new contracts. The law will apply to contracts regardless of the date on which they were formed but will take effect only after the new law comes into force. The contract override provisions simply ensure that, where the law provides for an exception to copyright, people are able to rely on that law without having to work out whether there is a contract term to the contrary creating a whole patchwork of different legal situations.

Ensuring that the personal copying exception cannot be overridden by contract terms will mean that consumers are given clarity and certainty over what they can do with the media they buy. Most people assume that the law already allows them to make the type of personal copies covered by our legislation. Very few people read the detailed licensing terms that accompany digital downloads. We want the goods so we just tend to accept the terms. Ensuring that the new law on personal copying applies in all circumstances, regardless of contract and licensing terms, will bring much needed clarity to the law and fairness for consumers, which I welcome.

The noble Lord mentioned the cost to the industry of £58 million and asked me to comment. That report is based on assumptions that do not seem to take account of the status quo, where we know a large proportion of the public already copy music for personal use. The report also appeared to compare this to a situation where unlimited copies could be made, whereas the Government’s private copying exception is for personal use only and so does not permit unlimited copies. Therefore, the Government have a number of doubts about the robustness of the research report’s conclusions and that figure of £58 million per annum. The Government’s impact assessment was based on a number of sources, including independent economic research and consumer surveys.

While I am on the subject of impact assessments, perhaps I could turn to the points made about that by my noble friend Lord Clement-Jones. He raised a number of points and asked about the figures on the total benefit to the UK economy of £500 million over 10 years. My predecessor spoke in this place on 14 May on the other exceptions in the package and gave a detailed breakdown of the figures. I will not repeat those today, but the predicted impact of the regulations in the two statutory instruments is £260 million over 10 years, mainly from the personal copying exception. A small benefit of £3 million over 10 years is also predicted from the quotation exception. That is the net present value figure, discounted to today’s terms, in line with HM Treasury guidance.

My noble friend Lord Clement-Jones also asked why the impact assessments were not updated. When credible new evidence has been provided relating to any of the exceptions, the impact assessments have been updated. For example, the personal copying impact assessment was updated, as I have said, following the submission of new evidence by the music industry.

In his helpful and detailed speech, my noble friend Lord Clement-Jones addressed a number of other questions which I will try to answer. If I am not able to answer them all, perhaps I can follow up in writing. He referred to the Padawan case on private copying and questioned whether the outcome means that a compensation mechanism must be included. As my noble friend Lord Younger said in his letter at the time, the exception before us today is,

“different to the one considered in the Padawan case”.

As the letter says:

“The Padawan case confirmed that compensation is due when a private copying exception causes harm to copyright owners which is more than minimal”.

A payment obligation does not arise where harm is minimal, something which I will come back to in a minute.

The noble Lord, Lord Stevenson, and my noble friend Lord Clement-Jones asked whether the change would apply to existing contracts. From October 2014, if you undertake an act that is permitted by a copyright exemption, you will be able to do that without fear of copyright infringement, regardless of the contract terms. As the noble Lord, Lord Howarth, observed in the debate on 14 May, contract override clauses are not uncommon in other legislation and it is therefore entirely reasonable that legislation, in the public interest, should modify the enforceability of existing contracts in the field of copyright.

My noble friend Lord Clement-Jones asked why there was no separate consultation on contract override and whether the impact on inward investment had been fully considered. Again, as my predecessor stated in the December debate, contract override has been fully consulted on and considered, including in respect of the impact on inward investment.

Photo of Lord Scott of Foscote Lord Scott of Foscote Crossbench 6:00 pm, 29th July 2014

The noble Viscount, Lord Younger, gave evidence, in terms, that the new provisions would apply only to new contracts.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank the noble and learned Lord and will come back to him on that. I think that I addressed the issue—perhaps we could look at Hansard together and have a further word on this important point.

The noble Lord, Lord Stevenson, my noble friend Lord Clement-Jones and the noble Baroness, Lady Morris, were interested in compensation schemes and the EU law on this, which is set out in the EU copyright directive, also known as the information society directive, or infosoc. Article 5(2)(b) of the copyright directive permits member states to introduce exceptions for private copying, such as the one before us today. The article requires that any exception must include certain conditions, for example that the copy must be for ends which are neither directly nor indirectly commercial. The exact wording is on page 2 of the instrument before us. The article states that the right holder must receive fair compensation when copying takes place under the exception. It is what exactly is meant by “fair compensation” that is at the crux of this question. In interpreting this phrasing, the Government have been guided by recital 35 of the copyright directive. This states:

“In cases where rightholders have already received payment in some other form, for instance as part of a licence fee, no specific or separate payment may be due”.

Later it goes on to say:

“In certain situations where the prejudice to the rightholder would be minimal, no obligation for payment may arise”.

In other words, fair compensation can mean no compensation, as long as the exception causes no, or minimal, harm, or if an appropriate payment has been received. This is how the exception before us has been designed, and it therefore falls within the margin of discretion that the directive allows.

As I said earlier, this view is supported by many, including several eminent legal experts. The JCSI noted in its report that there are persuasive arguments in the Government’s favour. Furthermore, European case law to date, although not directly addressing the question as to what is meant by minimal harm, is consistent with the Government’s approach. I would add that there is no guarantee that the European Court ruling in the Copydan case will have any bearing on the UK’s exception for personal copying. The recently published Advocate-General’s opinion confirms once again the wide latitude that member states have in this area.

The Government do not deny that ultimately only the European Court of Justice can rule definitively on the definition of minimal harm, and it has not done so to date. However, uncertainty—for the reasons I have already articulated—is not a justification for inaction, particularly when the evidence and reasonableness of a change is clear. For all these reasons, the Government believe that the regulations are intra vires.

In response to the request from the noble Lord, Lord Stevenson of Balmacara, the Government do not routinely publish their legal advice, and I am not persuaded that an exception should be made in this case. The Government are confident in the advice they have received that the exception proposed is compatible with all the relevant EU case law and also with our international obligations, such as the Berne convention. On the question of EU law, it was right to mention that there are talks going on in Brussels in this important area. This is a new area that I will be looking at, and I have spent a lot of time in Brussels. But the fact that there may be new measures coming in at an EU level is no reason not to proceed with a package which is useful and important, both to copyright holders and to consumers. The personal copying exception before us today is narrowly drawn, and merely legitimises existing consumer behaviour. This policy is right and fair to both rights holders and consumers.

The noble Lord, Lord Clement-Jones, asked whether the changes will be evaluated, as did others. I reassure the House that the impact of these changes will be evaluated in line with evaluation best practice, and the results of this evaluation will be published within the five-year evaluation period. The Government believe that these changes will have a positive effect on the economy including the creative industries. Additionally, the strategy for carrying out the evaluation will be published. The evaluation will seek to study a range of impacts, including on the creative industries. The Government will obviously be keen to hear from experts and from noble Lords on the proposed evaluation.

The noble Lord, Lord Clement-Jones, asked whether there were really 50 exceptions to copyright law. There are around 50 exceptions in Chapter 3 of the Copyright Designs and Patents Act 1988. They are found in sections 28-76.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat

I asked whether there are 50 exceptions that have been introduced by secondary legislation.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills 6:15 pm, 29th July 2014

I think that the answer is that some were in the original Act, and some were introduced via secondary legislation. Of those present in the original Act, some have since been modified by secondary legislation, but I will set out more detail in a letter if the noble Lord would find that helpful.

The noble Lord, Lord Clement-Jones, also asked about the use of the European Communities Act to make changes. I am aware that this has been discussed before, but to reiterate, the Government are confident that they can make these changes by means of Section 2(2). That section allows provisions to be made in relation to obligations arising from treaties entered into by the EU. Use of this Act is therefore not limited to implementing provisions in the infosoc directive. Case law, like in the TV catch-up case, makes it clear that Section 2(2) can also cover matters arising out of or related to UK rights and obligations.

The noble Lord asked whether government had taken independent legal advice on the legality of the use of Section 2(2). Again, the Government are confident that they have a sound legal basis for the proposed changes. This analysis is presented in the Explanatory Memorandum accompanying the statutory instruments.

The noble Lord asked about what is meant by “lawfully acquired”.

Photo of Lord Berkeley of Knighton Lord Berkeley of Knighton Crossbench

I am sorry to interrupt. This may be a point that the Minister has covered; if it is one that she is about to come on to, I await the answer eagerly. If the research which she has said will be undertaken to see how the policy works finds that there has been harm, will a compensation scheme be brought about to compensate right holders who have been found to have lost out?

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank the noble Lord for that question. I think that we will need to wait and see what the evaluation looks like—I urge him to make some input on the nature of evaluation. It is a bit of a hypothetical question. As a representative of the Government, I would be uneasy about making any promises, but I thank the noble Lord for the point made.

I should move on, as time is pressing, to say a little about fair dealing, which the noble Lord, Lord Clement-Jones, raised. Fair dealing is an established legal concept that has been part of copyright law for more than 100 years. It is a question of fact, degree and impression and will take into account a number of factors, the main ones being whether the alleged fair dealing is in commercial competition with the owner’s exploitation of the work; whether the work has already been published or otherwise exposed to the public; and the amount of work which has been undertaken and the importance of it. We did not intend to define it further in the legislation, because doing so would upset this well established case law and undermine its main benefit, its ability to adapt to the circumstances of any specific case.

The noble Lord, Lord Berkeley, asked what evidence the Government had relied on in developing their policy proposals. The Government have worked hard to ensure that the proposed changes are based on evidence. The impact assessments are based on the best evidence available and were reviewed and validated by the independent Regulatory Policy Committee.

The noble Baroness, Lady Morris, referred to cloud services. This is a difficult and very important area which was explored as part of the Government’s impact assessment. However, we were not provided with sufficient data to enable us to determine what the impact would be. The majority of evidence received related to licence services, which would not fall within the scope of the exception; for example, because they provided streamed content so were not relevant. The music industry has accepted unlawful private copying for many years, so one might reasonably assume that the ability of the consumer to make copies of CDs is already taken into account when licensing deals are negotiated. Negotiation of contracts between businesses is a matter for those businesses. If, however, this is an issue of market abuse, it would obviously be a matter for the competition authorities.

The Government have published the changes through social media and website updates and through contacting interested stakeholders, such as those who responded to the technical review. They have published plain English guidance aimed at different user groups as well as an unofficial consolidated version of the copyright Act. We would expect wider education initiatives, such as the recently announced education campaign, to include educational messages—

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat

I alluded briefly to inaccuracies in the guidance. If those inaccuracies are clearly shown to the IPO, will the Minister undertake that those guidance notes will be changed? They are extremely important for consumers.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Business, Innovation and Skills

My Lords, I accept that the guidance notes are important and I will take the point away, if my noble friend is kind enough to give me the detail. I also say to the noble Baroness, Lady Morris, that I will keep an eye on the cloud aspect, which she rightly raised. I feel that it is important to include the cloud, because it is part of modern life, but clearly we need to look at how it is going.

My noble friend Lord Grade of Yarmouth felt that changes would harm rights holders. I would say that the exception legitimises what millions of people already do, something that the market has accepted for many years. This is aimed at consumers who have paid for content and support the creative industries by paying for music, films and books.

Many points have been made. I will study Hansard carefully and come back if there are points that I have not addressed in my summing up. As I said in my opening speech, this is a delicate balancing act. The Government believe that the copyright system has not kept pace with the digital revolution. As a result, a great many intuitively acceptable activities are illegal or uncertain. These changes relating to private copying, parody and use of quotations form part of a package that should make copyright works more valuable to all, give users clarity about their rights and build respect for copyright in the process. They will contribute to a more modern statute book that meets the challenges of an increasingly digital and changing world.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport)

My Lords, I thank all those who participated in this debate. It was wide-ranging and many noble Lords made helpful and informative speeches, even matching those points picked out by the noble Baroness when she referred to the noble Lord, Lord Clement-Jones. The point of having the debate was made in the range and diversity of the issues raised all round the House. I am glad that a number of noble Lords were able to pick up on the concerns which I raised in my speech.

I would make one point to the Minister. I regret that I did not welcome her to her first substantive position on the Front Bench in this Chamber, although she has appeared in the Moses Room. She is turning out to be a formidable performer and we are all impressed by her ability to grasp such a complex issue in such a short time. However, she was quite wrong to say that these two statutory instruments were unbundled simply to provide us with the opportunity for a further and more substantial debate. They were unbundled because they had a car crash on the way to being approved. As a result, they had to be brought back in a different Session, separated from the other statutory instruments. I do not think that the noble Baroness should gloss too much over that.

Would we have got to the same place we are in today had we proceeded down my recommended route of going primary in these matters? Probably, but I suspect that we would still face, as many noble Lords have said, the prospect of these rather imperfect instruments being brought into law. However, as the noble and learned Lord, Lord Scott, said, the advantage would have been that we would have had some sensible, mature discussion—in the right order and at the beginning of the process, not the end—about what was going on, what the purposes were of these exceptions and whether they fitted some overall narrative, as my friend the noble Lord, Lord Grade, said in his prescient point. It would also have presented the opportunity, as my noble friend Lady Morris said, of trying to raise the whole level of the debate in the country about this really important issue. If we cannot get people on board in terms of what IP is and what it can do for them, we have lost the battle.

In putting down this amendment to regret, my challenge was to raise the question of why the Government had gone for a secondary legislation route rather than a primary route and how it had come to be so badly handled, as we heard from the evidence of those who were consulted about this issue. Why did the Government not raise the questions asked during the debate about changes in the licensing regime, which have now caught up with—and in some cases overtaken—this set of SIs? Why was no real consideration given to the Copyright Hub, which is going great guns in solving a lot of problems in the copyright area; and why and how is this at variance with what we think will be the way that some developments take place with our EU colleagues?

I do not think that I have had satisfactory answers to those questions. I have had the detail, but not the overarching view. Perhaps in a subsequent letter that is yet to come, some of these points might be picked up. In particular, I hope that the letters that come will recognise that the point made by the noble and learned Lord, Lord Scott, about contract override has not been resolved; that the question of whether the regulations —in particular, with respect to remuneration—are intra vires lies open to judgment; and that the question of whether the Government should legislate in an area where they are not yet fully certain still raises questions of propriety. I felt that my noble friend Lady Morris was right in her jibe that the way that the Government argued the case on intra vires was really a question of looking for appropriate fig leaves for their position. They may be right, but it is unfortunate that it has been left for the courts to decide.

The feeling in the industry is that the battle over these regulations is over and that those affected have been consulted to death but not listened to and, as a result, are simply exhausted. That, more than anything, suggests that the Government have got this completely wrong from beginning to end—although, in fact, I do not think that we have heard the last of these proposals.

Having listened to the debate and having been buoyed by the support of those around the Chamber who picked up on the points I made, I still think that we should accept the inevitability that the regulations will come into law, and therefore, with the leave of the House, I beg leave to withdraw my amendment to the Motion.

Amendment to the Motion withdrawn.

Motion agreed.