Government approves updating of UK intellectual property law for digital age

The Chancellor of the Exchequer has broadly welcomed the conclusions of the review into the UK’s intellectual property taws that he initiated a year ago. The Gowers Review sets out 54 recommendations designed to make enforcement of intellectual property rights easier, to better balance the interests of owners and users of right-protected works, and to make the process of applying for and protecting rights easier for businesses.

The Review broadly supports the existing frameworks and boundaries of the various IP rights existing in the UK and does not recommend groundbreaking changes or significant new rights. The Review recommendations, if accepted by the Government, would however result in some noticeable amendments to UK intellectual property law affecting various sectors.

Some recommendations are high-profile — such as the creation of a private copying exception to copyright to allow format shiftíng (for example, by the transfer of sound recordings on a CD to a MP3 player). Others are less headline-worthy but of importance to right-holders — permitting Trading Standards officers to enforce copyright infringements. A section of the report recommends DTI and Patent Office activity to make rights easier and more transparent to UK businesses, especially SMEs. A number would require the European Commission to take action, or suggest the Government continue to support EC-wide IP initiatives such as the Community patent.

Overall, Gowers is evolutionary not revolutionary. The report is a clear and lucid summary of many policy and legal issues affecting the exercise of IP rights in today’s business environment. It will be important background to the policy debate in the UK. That debate has already started — the music industry has already called for the Gowers recommendation not to increase the term of copyright in sound recordings to be ignored by Government. Rights-holders generally will hope that the more practical recommendations around enforcement will find an easy route onto the statute-book.

Background

On 6 December Chancellor Gordon Brown published the Gowers Review of Intellectual Property. He had established a committee led by ex-Financial Times editor Andrew Gowers in December 2005 to investigate UK IP laws, believing that national economic competitíveness is increasingly driven by knowledge based industries. Consequently, the protection and promotion of innovation under an appropriate legal framework has never been more important.

Recommendations apply at the UK, EC and global (World Trade Organization) levels and will no doubt serve a roadmap for UK governmental policy in this area. The review concentrates on three main areas for the improvement of IP rights:

  • Strengthening enforcement of IP rights to protect creative industries from piracy and counterfeiting;
  • Reducing the costs of registering and litigating IP rights for business large and small; and
  • Improving the balance and flexibility of IP rights to allow individuals, business and institutions to use content in ways consistent with the digital age.

Findings and recommendations

Patents

The review found that the UK patent system is clearly defined, applied consistency and aligned with other IP rights. However, the review did identify key areas of concern:

  • The costs of obtaining and litigating a patent are often seen as prohibitive. This has the dual effect of undermining confidence in a patent as a credible right with remedies to match, and restricting the volume of case law. This has the effect of increasing uncertainty around the application of the law which in turn leads to a reduction in the effectiveness of the patent as a right.
  • In the UK those conducting private research for the purposes of understanding and improving existing products and processes are exempt from the need to get the permission of the patent owner. This has the benefit of reducing costs. However, much research carried out in the academic sector is no longer “private” because of the increase in collaborations with commercial organizations. Matters are made more complicated by the lack of statutory clarity around what uses fall under the scope of experimental use and there is very little case law to assist.

To remedy these issues, the review suggests:

  • Work sharing between different patent offices in an effort to reduce costs, time delays and quality problems associated with parallel patent searches.
  • Continued support for and the expedition of a single European Community patent. lt recommends specifically a unitary Community patent which would be a single right covering the whole EU community with a single application and litigation procedure. The Community patent is a longstanding goal of the European Commission, currently stalled politically over differences between member States on language issues.
  • Amending the Patents Act to clarify the research exemption, most notably through a simplified experimental use exception which would allow researchers to examine, learn from and improve upon inventions.

Copyright

The report viewed copyright as being the right most at risk from unwarranted exploitation in the digital age, based on two related findings:

  • Copyright is not perceived by the public as a legitimate right; and
  • There is little guilt or sanction associated with infringement, especially with respect to the copying or downloading of music.

The report also focuses on the issue of ‘orphan works’. These are copyright works for which no owner can be found to seek clearance (permission to use the work) making any use potentially an infringing act. The review believes that many works which remain unused could create value.

Gowers recommends:

  • The introduction of a private copying exception for format shifting for works published after the date the law comes into force — without (as has been suggested, and is traditionally the case in some European countries) any accompanying levies on consumer goods (such as recording media or PCs).
  • An increase of legislative and non-legislative determents for infringement. In particular, the review recommends increasing penalties for commercial online infringement to match those of physical infringement, and a policy of raising awareness of IP rights within the public domain.
  • Industry agreements on protocols for the sharing of data between ISPs and rights-holders to disbar users engaged in ‘piracy’.
  • That the Copyright Directive 2001/29/EC be amended to allow use of orphan works following a reasonable search for the owner.

Other recommendations

The review recommends a number of policy developments aimed at improving the competitiveness of UK business:

  • A fast track system for patents and trade marks with accelerated procedures for grant, recognizing the technology sector’s rapid development pace and that product life cycles are reducing.
  • DT guidance on the reporting for accounting purposes of intangible assets and potentially the provision of model IP reports. The review believes that current accounting standards in the EU and USA do not satisfactorily capture P valuations often leading to an undervaluation of the relevant business.
  • Increasing cooperation between the UK Patent Office, the Office of Fair Trading and the Competition Commission to ensure that competition and IP policy foster competitiveness and innovation for the benefit of consumers.

Digital technologies and new rights

Gowers discusses the trans-Atlantic debate over the patentability of software and business methods and makes his landing on the European shore, recommending that the existing limits of patentability relating to software, business methods and genetic inventions should remain. In a section clearly influenced by the “commons’ debate and anti-trust issues, the report describes the USA’s practice on business method patents as “out of step with Europe”.

The Report is concerned that digital rights management technologies, now protected in the EC by the 2001 copyright directive, are used by rights-holders to restrict lawful acts in relation to copyright works and recommends that challenges to DRM systems are made easier by an online interface to be provided by the Patent Office.

Source: Beachcroft LLP