24 June 2011

IP Policy: Does Hargreaves say Anything New?

We have had quite a few reviews of intellectual property law recently. They include the following though I could have listed a number of others:
Now we have “Digital Opportunity A Review of Intellectual Property and Growth” by Prof. Ian Hargreaves of The Cardiff School of Journalism, Media and Cultural Studies. Does this report say anything that has not already been said before? In my view it does. As readers will see from my comments on Innovation Nation and Gowers. I have been pretty underwhelmed by previous reviews.

What’s so special about Hargreaves?
What makes Hargreaves different from the rest is its approach to the topic. In his foreword, Prof Hargreaves compares his commission from the Prime Minister to an exam question:
“Could it be true that laws designed more than three centuries ago with the express purpose of creating economic incentives for innovation by protecting creators’ rights are today obstructing innovation and economic growth?”
He concludes that the answer is “yes”:
“We have found that the UK’s intellectual property framework, especially with regard to copyright, is falling behind what is needed. Copyright, once the exclusive concern of authors and their publishers, is today preventing medical researchers studying data and text in pursuit of new treatments. Copying has become basic to numerous industrial processes, as well as to a burgeoning service economy based upon the internet. The UK cannot afford to let a legal framework designed around artists impede vigorous participation in these emerging business sectors.”
In contrast to Gowers which made 54 recommendations, Hargreaves offers just 10. These are intended to achieve “more open, contestable and effective global markets in digital content and a setting in which enforcement of copyright becomes effective once more.” If followed, the report promises, “the result will be more innovation and more economic growth.”

This is far from a perfect report. In my view Hargreaves misses several tricks, particularly in relation to patents; but it is worth reading, which is more than can be said for at least one of the other reports. Also, some of its recommendations – particularly the digital copyright exchange - are worth implementing.

Evidence Based Policy
The key recommendation of this report is that policy should be based on evidence rather than lobbying:
“Government should ensure that development of the IP System is driven as far as possible by objective evidence. Policy should balance measurable economic objectives against social goals and potential benefits for rights holders against impacts on consumers and other interests. These concerns will be of particular importance in assessing future claims to extend rights or in determining desirable limits to rights.”
Applying that recommendation, Hargreaves challenges the assumption that lengthening the term or widening the scope of legal protection invariably incentivizes innovation. The review cites the European Commission’s evaluation of the Database Directive which showed that database creation had actually slowed in Europe despite legislation conferring a new database right whereas in the USA, where there is no such right, database creation had continued to expand.

However, Hargreaves does not always accept the evidence on offer. On patents, for example, the report acknowledges “substantial evidence on patents as mechanisms to incentivize and reward the exploitation of invention” but then in the same sentence it introduces a caveat. The review challenges the notion that patents should be treated as an innovation output measure relying on UK evidence that British firms rely on confidentiality agreements and secrecy rather than patents to protect their technology. The obvious reason for that is that the high cost of patent prosecution and the even higher cost of intellectual property enforcement in the UK deter many British businesses from seeking patent protection in the first place. In Germany, where enforcement litigation is much cheaper, SME are far more likely to apply for patents. Judging by the sustained success of the German economy since 1945 the Mittelstand’s fondness for patenting does not seem to have done Germany any harm at all.

International Context
Recognizing that our law has to comply with international conventions and EU directives, Hargreaves recommends:
“The UK should resolutely pursue its international interests in IP, particularly with respect to emerging economies such as China and India, based upon positions grounded in economic evidence.”
Worthy sentiments! The trouble is that such forums as diplomatic conferences, the European Council and the World Trade Organization are influenced less by economic evidence than by the need to reconcile conflicting national interests. As often as not a national interest equates to the interests of an industry such as viticulture in France - which explains why the French government campaigns for the protection of geographical indicators of origin - or Hollywood in the USA which explains why the US government demands tougher sanctions for copyright piracy. A good example of the triumph of national interest over economic evidence is the EU patent which Hargreaves supports which would benefit Spanish and Italian inventors and SME just as much as those anywhere else. Yet that initiative that has been blocked for the foreseeable future by the Spanish and Italian governments’ insistence on parity for their national languages with English, French and German.

Copyright
Not surprisingly given Prof. Hargreaves’s background in journalism and Ofcom, the report’s most interesting proposals concern copyright. Observing that digital technology is transforming copyright for better and worse, the review concludes that the law as it stands satisfies no one:
“Infringement is widespread; understanding of the law is poor; millions of works cannot be digitised for conservation or accessed at all and content industry business models are under strain, prompting companies to look to Government for vigorous enforcement action against consumers and suppliers of “pirate” content.”
The solution that Hargreaves proposes is not ever more draconian laws but new business models that enable content providers to derive income from an already vast and rapidly expanding market for their works.

To promote the development of such new business models, Hargreaves proposes a “cross sectoral digital copyright exchange”. That appears to be “a network of interoperable databases to provide a common platform for licensing transactions” which would:
  • attach copyright conditions and rights information directly to digital content in a uniform machine readable fashion (so called meta data);
  • license across delivery technologies, to facilitate open competition between services based on different technologies;
  • adapt to emerging technologies;
  • meet the specific needs of different sectors while remaining governed by common standards and principles;
  • bring in licensing for other rights, such as design right; and
  • provide a low cost dispute resolution system.
Hargreaves is very clear that such an exchange should not be created or managed by the government:
“That way lies a nightmare of IT procurement followed by the birth of a white elephant.”
But it should certainly foster such a scheme:
“The task for Government is to use its convening power, to show leadership to achieve an outcome which others have not been able to manage. It will involve bringing together all relevant interests, and finding ways to overcome divergences of interest to secure the bigger prize in a way that takes account of the interests of all. More than a nudge, perhaps, but less than a full arm lock with menaces.”
A specific recommendation is appointing “a highly respected figure” to lead its formative stage before the end of 2012 under the auspices of the Intellectual Property Office or even Ofcom. Such an exchange could facilitate two of Hargreaves’s other recommendations, a framework for cross border copyright licensing and licensing of orphan works.

Interestingly, Hargreaves has very little to say about licensing schemes or the Copyright Tribunal under Chapters VII and VIII of Part I of the Copyright, Designs and Patents Act 1988. Copyright licensing is essentially a competition issue which needs to be harmonized with existing national and EU legislation. I have often argued that licensing can be regulated much more effectively by a competition authority such as the OFT (or possibly even Ofcom which Hargreaves sees as a candidate for overseeing the digital copyright exchange) than by a tribunal.

Hargreaves’s final recommendations for copyright are on the exceptions. The review stopped short of advocating the introduction of the US fair use doctrine into our law but urged the government to
  • “deliver copyright exceptions at national level to realize all the opportunities within the EU framework, including format shifting, parody, non-commercial research, and library archiving”,
  • promote at EU level an exception to support text and data analytics, to give a lead at EU level to develop a further copyright exception designed to build into the EU framework adaptability to new technologies, and
  • legislate to ensure that these and other copyright exceptions cannot be excluded by contract."
Patents
Hargreaves’s most surprising finding is that “the UK patent system is, on the whole, functioning reasonably well.” Because of that finding the review’s only recommendations were
  • work sharing with other patent offices,
  • ensuring that patents are not extended to computer programs and business methods and
  • “investigating ways of limiting adverse consequences of ‘patent thickets’”.
“Work sharing” by which I think Hargreaves means searching is already done under the Patent Co-operation Treaty. There is a compelling argument that the exclusion of computer software and business method inventions “as such” from the definition of patentable invention in the European Patent Convention and our Patents Act puts us in breach of our obligation under art 27 (1) of TRIPS to make patents available without discrimination “as to the field of technology”. But, more importantly, there is an even more compelling economic argument that those based on the state of the information technology nearly 40 years ago are putting British and European business at a competitive disadvantage to those in the USA, China and Japan whose patent laws contain no such exclusions.

That British industry has consistently trailed not just Germany and France which have similar populations and only slightly larger GDPs but also the Netherlands with a third of our population and even Switzerland with an eighth ought to have set off alarm bells (see the table “European Patent Applications Since 2002” that I compiled for “Why IP Yorkshire” in my IP Yorkshire blog). Graham Barker and Peter Bissell always used to begin their talks to inventors with the observation that most patents on the register are never worked, of those that are only a few ever cover their costs and of those few only a very small percentage ever make serious money for their inventors. In a speech to the Licensing Executives, the great patents judge Sir Robin Jacob remarked that most patents don’t matter. The expenditure by so many businesses and individuals on rights that are effectively worthless should be a national scandal. Hargreaves’ failure to address either of those issues is a serious flaw in this report.

Design
Even though design was not explicitly mentioned in the review’s terms of reference and despite such startling errors as “design right dates from the 18th century” and the omission of artistic copyright from the so-called “patchwork of protection”, the review made a sensible recommendation with regard to design protection:
“In the next 12 months, the IPO should conduct an evidence based assessment of the relationship between design rights and innovation, with a view to establishing a firmer basis for evaluating policy at the UK and European level. The assessment should include exploration with design interests of whether access to the proposed Digital Copyright Exchange would help creators protect and market their designs and help users better achieve legally compliant access to designs.”
Actually the white paper Intellectual Property and Innovation (Cmnd 9712) made such an assessment in 1986. It was on that assessment that the government of the day introduced into our law protection of aspects of the shape or configuration of articles or parts of an article known as “design right” which no other industrial country has seen fit to imitate. As the evidence cited by Hargreaves implies, that legislation has not worked well for designers. A fresh look at design law is long overdue though the IPO may not be the best body to undertake such a task.

Enforcement
Hargreaves dealt separately with online copyright infringement and other IP disputes. Courageously, in view of the enormous pressure that would have been exerted by the film, recording and software lobbies the review concluded:
“we need a combination of enforcement, education and a big push to expand the legitimate market for digital content, through services which attract consumers of all ages and backgrounds. It will be important to ensure that enforcement measures are not designed or implemented in a way that alienates consumers and undermines work in education and extending the appeal of legitimate markets. Emphasising enforcement as an alternative to improved digital licensing and modernised copyright law is the wrong approach. Action is needed on all fronts.”
The report recommends “an integrated approach based upon enforcement, education and, crucially, measures to strengthen and grow legitimate markets in copyright and other IP protected fields.” Since the Digital Economy Act 2010 which was passed in the last Parliament’s wash up is now a reality, Hargreaves recommended that “its impact should be carefully monitored and compared with experience in other countries, in order to provide the insight needed to adjust enforcement mechanisms as market conditions evolve.” Ofcom was urged not to wait until the Act to establish its benchmarks and begin building data on trends. As for other disputes Hargreaves recommended a small claims track for the Patents County Court which is another sensible proposal.

SME and the IP Framework
The review recognized that SME want is an integrated source of advice which combines commercial and technical insight with legal expertise, helping them to commercialize, as well as protect, their IP. It also found that such advice is not always available from patent agents. That was just the sort of service that many – though, alas, by no means all - Business Link advisers used to provide. Hargreaves called upon the IPO to “draw up plans to improve accessibility of the IP system to smaller companies who will benefit from it”. The review added that “this should involve access to lower cost providers of integrated IP legal and commercial advice.” Again, these are worthy aspirations but there is a limit to what the IPO can do. The 13 PATlib libraries may be a better platform. Many such as Leeds, Sheffield and, of course, the British Library run IP clinics and inventors’ clubs. They also hold considerable collections of marketing and general business as well as legal materials which they make available to the general public. Unfortunately, our second city no longer offers the services of a specialist patent librarian (“Goodbye Chris and Thanks” Inventors Club 6 April 2011) and Liverpool Central Library is closed for refurbishment).

Verdict
When I was a child there was a young woman with a strong West Midlands accent on a TV programme that reviewed new pop music record releases whose catch phrase was “Oil give it foyve”. That just about sums up my view of Hargreaves. Five out of ten is not a brilliant score but it is a lot better than the marks that I gave to Gowers and most of the other reports that I mentioned at the start of this article. Hargreaves makes some very sensible recommendations such as basing policy on evidence, supporting a European patent and, of course, a digital copyright exchange, but it has nothing else of value to say about patents and hardly even mentions other important intellectual property rights such as rights in performances and trade marks. As far as the European patent is concerned the best that an be achieved in the short term will be a common European patent for at least some of the member states. Also, there is no immediate likelihood that disputes over such a patent could be resolved by of a European patent court in view of the Court of Justice’s Opinion of 8 March 2011 on the compatibility of the draft European patent litigation agreement with EU Law. As for Hargreaves’s flagship proposal of a digital copyright exchange, the WIPO is probably a better forum for convening the interests that need to be involved rather than the IPO, Ofcom or any other national institution. Fortunately, WIPO’s initial reaction
to Hargreaves has been very encouraging.

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