The Hargreaves Report - a way forward for IP? Part 1

Prof Ian Hargreaves of Cardiff University was commissioned by the government last November to assess the suitability of the current UK intellectual property regime for a growing digital economy. This was an important task for, as his report notes, global trade in intellectual property licences currently accounts for 5% of world trade at around £600 billion.

1. future development of intellectual property regulation should be based on objective evidence
2. the UK should pursue its international interests in intellectual property and should give the highest immediate priority to the introduction of a unified EU patent court and patent system
3. a digital copyright exchange should be put in place by the end of 2012
4. a regime should be put in place to permit the licensing of orphan works
5. the EU framework permits a number of exemptions to the copyright regime which should be introduced into the UK system
6. steps should be taken to avoid patent thickets and obstructions to innovation in particular patents should not be extended beyond their current sector coverage and patent fee structures should be established by reference to innovation and growth goals
7. a review of the relationship between design rights and innovation should be undertaken within the next 12 months
8. IP enforcement, education and measures to strengthen and grow a legitimate markets in copyright and other IP protected fields should be pursued and in particular a small claims track should be introduced in the patent county court
9. accessibility to the IP system for smaller company should be improved and this should involve access to lower cost providers of integrated IP, legal and commercial advice
10. the intellectual property office should play a part in “future proofing” the IP system including having the right to issue statutory opinions to help “clarify” copyright law.

There is generally a lot of support within the UK for a unified European patent court and system and notwithstanding the recent European Court decision progress does seem to be being made on this project after many years gestation. Less likely to attract universal support is the Professor’s view that patent coverage should not be extended to technologies that are currently excluded such as business methods and non-technical computer programs. Non-technical computer programs are generally protected by copyright and perhaps it may be more appropriate to consider how those rights could be more effectively protected rather than seeking to bring them within the patent regime. Protection of business methods however is more problematic as there is not really an alternative form of protection available for innovation in this area. Protection for non-technical software and business methods does of course exist in one way or another in a number of other countries however in the US in particular recent cases have tended to restrict its scope.

The bulk of the report unsurprisingly deals with copyright matters. It urges the government to make use of current potential exemptions to copyright infringement already permitted under EU legislation such as authorising the use of copyright materials in parody, format shifting, archiving and private research. He would also like to see provisions prohibiting such rights being overidden by contract. The report in recommending the adoption of these exemptions does not favour introducing any payment regime in respect of them. Format shifting involves fees and licences in a number of EU states and these have not generally been considered successful. Prof Hargreaves proposes that the government should also lobby for a new exemption at European level for text and data analytics. Such an exemption would be a great boon to many industries including medical research in allowing more effective data trawling. Such an exemption is likely to encourage the development of more data searching tools and through their use accelerate innovation in many areas while also allowing a more rapid understanding of safety issues. In general the report recommends that activities should be made legal where they are undertaken for private non-commercial purposes or where they do not damage the underlying aims of copyright however it stops short of recommending a wholesale US style “fair dealing” exemption on the pragmatic grounds that it would simply be too difficult to introduce at the necessary EU level. By setting out a general presumption of legality however he hopes that the legislation can in some way be “future proofed” in the face of fast developing technology.

The areas of the report that have received the most attention have been the proposals to set up a digital copyright exchange and to permit the licensing of orphan works, that is works with respect to which an owner cannot be identified. This latter proposal was recommended by the Gower Report but was surprisingly dropped from the draft legislation at the last moment.

It is not entirely clear how a copyright exchange would work and SMEs in particular would want to be sure that it was not a backdoor way of introducing some form of compulsory registration for copyright however the concept of a one-stop shop for all forms of copyright so that if someone wish to use a piece of copyright material they could go to this site, identify the owner and in many cases the specific license terms ultimately obtaining a licence online, combined with a low-cost dispute resolution service could be very attractive. Similarly owners would have an open marketplace in which to display and manage their material. Online transparent license terms are clearly very attractive for a routine matters however more complex or, can one say, innovative schemes, would still require to be individually negotiated. Prof Hargreaves also sees this as a business opportunity whereby the UK which is already a leading provider of content could become a leading supplier of management too. interestingly he sees the role of government here merely as a facilitator in bringing together other bodies to collaborate in establishing an exchange through connecting interoperable databases . He takes this further and proposes that consideration be given to making cross-border licensing easier and encouraging competition between collecting agencies, although of course this would require international cooperation. A regime whereby a “licence” could be obtained for orphan works is also very appealing, the idea being that if an owner could not be identified a standard statutory licence would be obtained with the payment going into a fund to pay the owner if they were ever identified or if not perhaps to be put to general social use. It is considered that this would put much more material into the potential commercial domain.

Prof Hargreaves makes clear that the purpose of this report is to consider intellectual property within an economic framework and rightly notes that SMEs are the source of a disproportionate amount of innovation in this area and making it easier for them to protect and market their ideas would be good for the economy and job creation. Nonetheless although he makes some very welcome suggestions regarding the establishment of the digital copyright exchange and cheaper and quicker dispute resolution mechanisms that would undoubtedly help SMEs, other proposals would be less favourable to their interests. For example he suggests that increasing patent office fees would act as a disincentive to patent or maintain low value ideas so reducing the backlog in patent offices around the world and inhibiting the growth of patent “thickets” around certain technologies-the best known example being the multiple patents involved in even the simplest mobile telephone. High patenting costs already deter SMEs from protecting and so effectively exploiting their innovations so putting the costs up will hardly help. Additionally most innovation comes through incremental improvement rather than the “eureka.” moment. It is impossible to tell which innovations will truly prove valuable in the future and it would destroy the growth of platform technologies essential to creating high-growth businesses if only limited ideas in a developing technology are patented. Increasing prices will simply allow the wealthy to create more artificial barriers and to exclude others from entering the market. One might say that increasing renewal fees towards the end of patent life would go some way to discouraging the continued protection of ideas that have not proven commercially valuable but this would probably come too late to allow the idea is to be used effectively by others and would still fall disproportionately on the shoulders of the SME. in any case the report notes that a very substantial number of patents are already abandoned before the ten-year mark. The patent thicket is only a problem in a particular range of technologies albeit those that the report specifically addresses but one should be careful here of letting the tail wag the dog.

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