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Implementing the European Copyright Directive
Draft Regulatory Impact Assessment
Title: [The Copyright and Related Rights Regulations 2002]
1. Purpose and Intended Effect of the Regulations
1.1 The Regulations are to implement in the UK EU Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society ("the Directive"). The Directive entered into force on 22 June 2001 and is required to be transposed by 22 December 2002.
1.2 The Directive is an internal market measure. It supplements five Directives1 already adopted in this field with common rules on issues which are mainly relevant to the global nature of digital communications technology. The Directive harmonises the basic rights associated with digital dissemination of works, namely the rights of originators of works to control reproduction and communication to the public by transmission of their works, including protection for "on-demand"2 services. Also harmonised are the right of distribution (of physical copies of works), exceptions to rights (eg concerning copies made for private purposes and temporary copies in electronic environments) and the legal protection of technological systems for identification and protection of works. Finally, the Directive requires that effective, proportionate and dissuasive sanctions and remedies be provided for infringements of these rights and obligations.
1.3 A complementary purpose of the Directive is to implement some new international obligations resulting from two treaties in the copyright field concluded in December 1996 under the auspices of the World Intellectual Property Organisation (WIPO).
1.4 The Regulations amend an existing regulatory regime in this area. Current UK legislation is set out in the Copyright, Designs and Patents Act 1988 as amended by the Broadcasting Acts of 1990 and 1996 and Regulations3 implementing earlier Directives. UK law already provides the basic framework of rights relevant to transmission and access via the Internet, including specific exceptions to such rights, and the main adjustments needed to comply with the Directive are limited to certain key areas.
1.5 The main effects of transposition are introduction of exclusive rights (as opposed to current remuneration rights) for performers to control "on-demand" transmissions of recordings of their performances (Article 3.2 of the Directive), amendments needed to comply with the regime of compulsory and permitted exceptions in Article 5 of the Directive, amendments to take account of the comprehensive nature of the legal protection for technological measures in Article 6, introduction of new provisions for the legal protection of electronic rights management information (Article 7) and improvements to sanctions and remedies (required by Article 8).
2.1 As the subject of this assessment is a Community Directive, actual options are necessarily limited - the Directive's provisions must be implemented in national law within the timescale set out in the Directive. Non-implementation would leave the Government open to infraction proceedings by the European Commission and actions by those persons who could demonstrate a loss due to failure to deliver the required protection in national law.
2.2 The Directive is, in the main, prescriptive, but there is a degree of choice within the provision on exceptions to rights (Article 5) in that the types of exception listed in paragraphs 2 and 3 of the article are optional. It is, therefore, for individual Member States to decide whether to maintain or introduce exceptions in their national legislation in line with any one or more of such categories of exceptions. However, the list in Articles 5.2 and 5.3 is also exhaustive so that exceptions outside the scope of the specified categories are not permitted. Moreover, all exceptions to rights in national law must be framed so as to comply with the "three-step test" of Article 5.5 of the Directive.
2.3 The approach adopted in the draft Regulations in the area of exceptions is unchanged from the line pursued during negotiations on the draft Directive. As made clear in consultations with interest groups both before and after adoption of the Directive, it has always been the Government's intention to maintain as far as possible the existing exceptions regime in UK law, and thereby continue the present balance in the law between the interests of all the key stakeholders. No new exceptions permitted by the Directive have therefore been proposed in the current Regulations4; rather, existing exceptions have been analysed and amended as necessary in the light of the detail of Articles 5.2 and 5.3, bearing in mind also the limitation of Article 5.5.
2.4 As is normal for Community measures, the Directive also leaves Member States to decide the precise nature of the criminal sanctions and civil remedies to be provided in national law for the infringing activities covered. The Regulations extend and strengthen the current position in UK law.
3. Risk Assessment
3.1 The Regulations are necessary to implement an EU Directive, which also takes account of obligations under the two new international (WIPO) treaties. Risk assessment, therefore, should also be seen in the context of these adopted international measures. Both treaties and Directive have been generally welcomed by legitimate interests. Digital technology permits perfect copies of works to be made and transmitted almost instantaneously across national boundaries, and it is widely accepted that strengthening and harmonisation of basic rights is necessary in order to ensure that copyright laws can be in a position to cope effectively with the demands of the information society. In particular, the continuing fight against copyright piracy requires the introduction of common rules specific to on-line transmission, coupled with stronger sanctions and remedies overall. Effective legal protection is also required for technological measures which right owners are beginning to apply to their works in digital formats and environments in order to protect these works against infringement and assist in management of rights.
3.2 Independent quantitative assessments of the risks involved are difficult to obtain, but the UK recorded music industry recently estimated that the number of counterfeit CDs rose by 150% in year 2000 (up to 2.9 million units) leading to a rise in the overall cost of UK recorded music piracy to over, 20 million. On an international basis, CD piracy has been held by the industry to be mainly responsible for a reported fall in world sales of recorded music of nearly 7% in units in the first half of 2001. The overall global estimate for losses due to music piracy in 2000 is over Ŭ billion. The music industry is in the front line in the fight against copyright piracy as shown by recent high profile court cases, but they are certainly not alone. The film industry too has potentially much to lose from the advent of new data compression technologies and the spread of broadband access, and there are strong indications that the contagion of on-line copyright piracy is spreading to leisure software and books.
3.3 Even though UK copyright law has proved remarkably "future-proof", the need for international and regional action on rights and remedies has been clearly demonstrated. Nevertheless, it is also important that the law in this area continues to be properly balanced to take account of the interests of legal users of protected works and also of intermediaries, such as Internet service providers and equipment manufacturers. The concerns of consumers of works must be addressed if public perceptions of copyright are to be influenced in a positive way.
4.1 Despite repeated efforts to obtain quantitative information on probable benefits of the Directive's proposals for the various parties involved, little data has been received. However, the software industry has suggested that software piracy (estimated at nearly $12 billion worldwide - $3 billion in Western Europe - in 2000) could be reduced by at least one third as a result of globally harmonised rights.
4.2 The limited information offered to date by interested parties on likely benefits (and costs) of the Directive's requirements is quite typical as a reaction to proposed measures in the copyright field. Indeed, it has generally been the case that interested parties have experienced considerable difficulties in attempting to compile such data for proposals in the area of intellectual property as a whole. The nature of intellectual property rights means that changes to them are inherently difficult to quantify. For example, an owner of a right, such as a creator of a copyright work, does not have to exercise that right (and thereby benefit) unless he or she chooses to do so. Also, if rights are exercised, then benefits can vary depending on whether the owner acts independently or collectively.
4.3 Despite the underlying difficulties in quantifying specific economic effects of amendments to copyright law, there are some general conclusions that can be drawn regarding the changes contained in the draft Regulations:
5. Compliance Costs for Business, Charities and Voluntary Organisations
Business sectors affected
5.1 The changes to UK law will potentially affect any holder of rights covered by the Directive, ie authors of all descriptions, performers, record producers, film producers, broadcasting organisations, cable operators, and publishers. Businesses of all sizes involved in such activities could therefore be affected. The Regulations are also relevant to those providing on-line services and networks, to certain suppliers of hardware and software, and to all users of works involving the rights in question, including (again) businesses of any size or description, private individuals, libraries, educational and scientific research establishments, and disabled groups.
5.2 The economic significance of the main copyright-based industries is shown by their contribution to the UK's GDP. Present estimates6 are close to 5%, but if industries with some dependence on copyright protection are included, the figure would be well over 6% with nearly 1.5 million employees involved. These industries generated revenues of around £128 billion in year 2000 (£10.8 billion in exports). About one third of this revenue is attributed to the software and computer services sector. The recorded music sector alone (business sectors D22140 and D22310) has reported annual revenue of about, 4.6 billion, with total overseas earnings of, 1.3 billion. Equivalent figures for electronic publishing (sector D22150) are £18.5 billion revenue (£1.7 billion exports) and for the film and video industries, £3.6 billion (£650 million). UK electronic publishing firms have an estimated 80% of the Community market for on-line services and products.
5.3 The European Commission has estimated the market for copyright goods and services Community-wide to range between 5 and 7% of GDP. This market comprises traditional print products, performances, films, videos and phonograms, as well as software, CD-ROMs, interactive CDs (CD-Is), satellite and cable broadcasts, and the new on-demand services. The growth rate of the market for recorded music (CDs) over the last decade (well over 60%) is seen by the Commission as a good indicator of future growth in the copyright market as a whole, with TV broadcasting also growing rapidly. The software market in general (D22330) has been forecast to grow by over 10% a year, while the European computer games sector has also seen considerable year-on growth (eg 50% increase in overall turnover during 1998). The EU leisure software industry employs about 100,000 people and has a current Community value of $8billion, with EU developed software taking 45% of European sales (30% globally).
Compliance costs for a typical business; total compliance costs
5.4 Given the scope of the Directive and the comments above on affected sectors, the notion of a 'typical' business is not a particularly useful one to pursue. Clearly the cost to a particular business will depend on whether that concern is a net holder or exploiter of protected material, or whether it only uses copyright works in the course of business. Moreover, as noted under 'Benefits' above, quantitative information on the likely economic impact of the Directive has not been generally forthcoming from the many business sectors consulted, despite specific and repeated requests for such data. While it is hoped that the current consultation on implementation of the Directive will generate some useful specific data on the question of costs to typical businesses in different sectors, there are some general points to note:
5.5 Legal protection for the integrity of technical systems of copy protection already exists in UK law, but the Regulations enhance this protection and also introduce similar protection for electronic systems of identification and management of works. Since these provisions should only impinge on the activities of those with illegal aims, there should be no additional cost to legitimate business in this respect. Concerns that the increasing use of such technical systems and the enhanced legal protection for them could act to prevent legal users from benefiting generally from exceptions to rights in national laws, should be met by the official 'safeguard' scheme proposed in this context.
6. Small business litmus test
6.1 As noted above, there is no single kind of business which could be said to be typical as regards the impact of the Regulations. The Department has been in contact with small firms in certain sectors to which the Directive is relevant and has sought to identify appropriate businesses in other areas, but no significant information has been forthcoming so far. Although this also proved to be the case on earlier Directives in the copyright field, efforts are continuing to identify suitable businesses willing to try to evaluate the impact of copyright measures on their activities. This is an important aspect of ongoing work to ensure British businesses, and small and medium enterprises in particular, are aware of the opportunities provided by intellectual property protection to enhance their profitability and competitiveness. The European Commission holds the view that the digital environment, which is particularly addressed by the Regulations (and Directive), offers many opportunities to innovative and specialised SMEs. However, they too seem unable to supply more specific data for 'typical' businesses.
7. Other Costs
7.1 The more significant potential costs of the changes to UK law seem to lie with consumers and other net users of copyright works such as libraries (sector O92510) and educational institutions, rather than with businesses as such. Some amendments to certain long-established exceptions in UK law are necessary in order to comply with the regime on exceptions to rights in Article 5 of the Directive. While we have sought to minimise overall effects on users in the amending Regulations, it is likely that some users who at present benefit from particular exceptions will need to negotiate permission for certain uses of works with rights holders and possibly have to pay for such use. However, many businesses and organisations are already using copyright material to such an extent that it would be well outside the scope of existing exceptions, so that they will already be paying for such use. The additional businesses that may have to pay an increased royalty for use of music in public because of a narrowing of an exception in this area will be balanced by others who will be taken within the scope of the exception regarding their use of copyright material currently excluded from its scope.
8. Results of Consultations
8.1 This draft Regulatory Impact Assessment accompanies a consultation paper on draft amendments to the 1988 Act to transpose the Directive that will ultimately be made by Regulations. The consultation package has been published on the Patent Office website at http://www.patent.gov.uk/ and has also been sent to organisations representing all main stakeholder groups as well as to others who have registered a particular interest since the Directive was adopted. A list of those consulted directly is attached as Annex I.
8.2 Consultation on the Directive and earlier documents7 8 has also been extensive. The draft Directive was distributed widely to UK interested parties and their views sought on the specific proposals for legislation. A summary of this exercise is given in the Regulatory Impact Assessment accompanying the Explanatory Memorandum on the Commission's amended proposal for the Directive9. The amended proposal was distributed to those originally consulted and others who had made their interest known since the initial consultations. Over 180 organisations were contacted and 30 or so formal written submissions were received. One of the main themes to emerge from the consultation on the amended proposal was that users' concerns had been greatly increased by the further limitations on exceptions introduced by that text. The Department then held an extensive series of meetings with key stakeholders. So-called "mega-meetings" involving all interests on particular issues (arranged by the Department) proved particularly successful in brokering compromise solutions to complex and controversial problems. The Department also sought to ensure that interest groups were kept fully aware of developments in the EU Council's discussions and of suggested compromises.
8.3 The intensity of consultations with interests increased in the run-up to adoption of the Directive and a fairly general view developed that the text of the Common Position represented a workable compromise. However, while most users and intermediaries were more or less content with the balance of the Common Position and made this known to Government, some interests, especially right holder groups, lobbied the European Parliament strongly for further moves in their direction. With some limited changes to the Common Position adopted by the Parliament, all interests then indicated that they could accept the Common Position as amended.
8.4 Consultation has continued since adoption by the EU Council (9 April 2001). As the Department began its formal analysis of the Directive's impact on UK law, interest groups were informed of the intended legislative route and general approach to be adopted on implementation. Many meetings were held with key interests prior to publication of the consultation on draft amendments and about 30 written submissions were received in this period suggesting how certain aspects of the implementation should be addressed. Officials have also attended meetings with other Member States called by the Commission to try to encourage as much harmonisation as possible on transposition of certain provisions of the Directive, and major interests have been kept up to date on these discussions.
8.5 Other related consultations have also taken place. These have dealt with (1) amendment of the statutory licence provisions for broadcasting of sound recordings (s.135A-G of the 1988 Act), (2) a possible exception to copyright for the benefit of visually-impaired people, and (3) possible changes to criminal provisions in intellectual property law. Details of these consultations, including summaries of responses, can be found on the Patent Office web site (http:///) . Some of the changes proposed in the first of these exercises are delivered by the draft amendments now proposed. The second and third of these exercises have led to Government-supported Private Members' legislation.
9. Monitoring and review
9.1 Views will continue to be sought from UK interested parties on the financial and administrative effects of the Directive and the Regulations. The Directive requires the Commission to report on the application of the Directive not later than 22 December 2004, and every three years thereafter. Particular emphasis is to be placed on the area of exceptions to rights and the interplay with technological protection systems. The Directive establishes a Contact Committee to facilitate both implementation and information exchange, and to study future developments in the field.
10. Summary and Recommendations
10.1 Changes to the law of copyright and related rights tend to alter the balance between different players in the market rather than imposing additional costs overall, so that the net economic effect UK-wide (aside from any administration costs) should be broadly neutral, as the gains to one will offset the costs to another. Nevertheless, the strengthening of basic rights brought about by the present Regulations should assist all right holders in their development of new business models. The changes will also provide the legal framework for more effective action against piracy and other unauthorised use of works, while largely maintaining the essential balance in copyright law between, on the one hand, rights and, on the other hand, exceptions for the benefit of legitimate users of works, such as educational establishments and libraries.
The recommendation is that Directive 2001/29/EC should be transposed into UK law as soon as possible by approval of the draft Regulations.
T: 020-7596 6506
(Alternative contact: Roger Knights; T: 020-7596 6505; other details as above)
I have read the Regulatory Impact Assessment and I am satisfied that the balance between cost and benefit is the right one in the circumstances.
Signed by the responsible Minister
LIST OF THOSE CONSULTED DIRECTLY ON THE DRAFT AMENDMENTS IN ANNEX A OF THE CONSULTATION PAPER OF 7 AUGUST 2002
Action with Communities in Rural England (ACRE)
Bangladesh Caterers Association (UK)
Cable & Wireless
Design & Artists Copyright Society (DACS)
Educational Copyright Users Forum (ECUF)
Faculty of Advocates
Gathering the Jewels
Her Majesty's Stationery Office (HMSO)
Incorporated Society of British Advertisers (ISBA)
Law Society of England & Wales.
Macrovision UK Ltd
National Archives of Scotland
Satellite and Cable Broadcasters Group
Talking Newspaper Association of the UK (TNAUK)
UK Chinese Catering Association
Video Performance Limited (VPL)
Welsh Consumer Council
ORGANISATIONS FROM WHICH WRITTEN SUBMISSIONS HAVE BEEN RECEIVED [For final RIA]
1 91/250/EEC, 92/100/EEC, 93/83/EEC, 93/98/EEC and 96/9/EC.
2 Services whereby works are accessed by members of the public at a time and place individually chosen by them.
3 SI 1992 No.3233, SI 1995 No.3297, SI 1996 No.2967, SI 1997 No. 3032 and SI 2000 No. 1175.
4 New exceptions for the benefit of visually impaired people are, however, being introduced into the 1988 Act by the Copyright (Visually Impaired Persons) Bill.
5 The Conditional Access (Unauthorised Decoders) Regulations 2000 (SI 2000 No. 1175).
7 COM(95)382 final of 19 July 1995.
8 COM(96)568 final of 20 November 1996.
9 EM 8723/99 of 27 May 1999; submitted by the DTI on 15 June 1999
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