Copyright and Rights in Performances (Extended Collective Licensing) Regulations 2014

Lord Howarth of Newport Excerpts

Monday 21st July 2014 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I am privileged to be here speaking for the first time as a Minister for the Department for Business, Innovation and Skills and moving my first piece of business in this House. I should say that I value the work of this House and its expertise very highly.

In a traditional collective licensing arrangement, the relevant licensing bodies—or collecting societies as they are otherwise known—are mandated by their members to manage their rights. Extended collective licensing—which I will refer to if I may as ECL—allows collecting societies to license on behalf of all rights holders who fall in the scope of the ECL scheme. This includes rights holders who are not members of the collecting society and have not given it a mandate to license their rights. They become part of the ECL scheme by default unless they say otherwise. This is known as opting out.

ECL can be used to simplify licensing, reduce costs and increase the amount of legally available copyright material. With an ECL scheme in place, a collecting society can issue the comprehensive licences that its customers demand, but without the risk of infringing non-members’ rights. Consequently, there should be improved compliance with copyright law, enhanced confidence in the UK copyright system and increased returns to non-member rights holders, because the regulations make clear provision for how and when money should be paid to them.

It is well known that de facto ECL schemes are already in operation in the UK. Their existence reflects market demand. Statutory ECL will allow collecting societies running such schemes to put their businesses on a legal footing and protect rights holders’ interests.

As ECL schemes allow for the licensing of non-members’ works, it is essential that they are afforded strong protections. As I shall outline, this is the golden thread that runs through these regulations—golden light dawns. An ECL application simply cannot get off the ground unless the collecting society has a mandate from its members. Not only must it prove that it is acting with the informed consent of a substantial proportion of its voting members, it must also show itself to be significantly representative of the rights holders affected by the ECL scheme. Members’ views and their informed consent are at the heart of an ECL application. They are a good proxy for non-member rights holders, who can reasonably be assumed to share the same interests.

We have been fleshing out the concept of informed consent with stakeholders in recent weeks. The elements that go to making consent informed will be outlined in the legal guidance that accompanies the regulations. It will cover who should be balloted, how they should be balloted, what information they should be given, and so on.

I pause here to say that this work with our stakeholders is but one example of the in-depth research and consultation that we have been conducting since the passage of the ERR Act, taken through under the stewardship of my predecessor, my noble friend Lord Younger of Leckie. We have convened working groups that ran until September 2013; conducted a technical consultation between November and January 2014; developed the regulations and published the government response in May 2014.

The Copyright (Regulation of Relevant Licensing Bodies) Regulations 2014—the codes regulations, for short—which were taken through on 6 April this year, provide a further safeguard for rights holders. They require collecting societies to self-regulate with codes of practice that comply with minimum standards of governance and transparency set by the Government. The Government can act to remedy any problems in the self-regulatory framework. Collecting societies’ compliance with their codes is reviewed regularly by an independent code reviewer, whose evidence will form part of any ECL application.

In addition, these regulations make provision for a period of representations lasting a minimum of 28 days. This is an opportunity for any interested parties to comment on anything related to the ECL application, including the credibility of the collecting society. To cater for the possibility that, despite these safeguards, an ECL scheme is operating less than optimally, the Secretary of State has the power to modify or revoke an ECL authorisation.

The regulations allow for an initial, renewable authorisation period of five years. This mirrors successful ECL schemes in the Nordic countries. Libraries and archives have argued for a longer authorisation period to encourage digitisation. However, the Government feel that the soundness of an ECL scheme must be properly tested within a shorter period of time. As a compromise, if the ECL is renewed, it can continue indefinitely, subject to three-year reviews. These are light-touch unless there are grounds for further scrutiny. This should help facilitate digitisation while still protecting rights holders.

The right of a non-member to say no or opt out is absolute. This allows the non-member to withdraw from a scheme both before and after it has commenced. To facilitate opt-out, the collecting society must show how it will alert non-members to the scheme when it applies. Collecting societies have an obligation to make reasonable efforts to find and pay non-members. Their efforts will be assessed during the renewal and review processes.

I hope that these regulations provide noble Lords with the detail that they asked for and that we promised when the then ERR Bill was at Committee and Report stages. ECL schemes in the UK should benefit licensees, collecting societies and rights holders alike. The Government have put in place a flexible and balanced framework that safeguards the interests of non-members and ensures that ECL schemes are possible only where they have been demanded by the market and sanctioned by rights holders. ECL schemes will enhance respect for copyright, help rights holders get paid and allow for more streamlined licensing so that a greater number of works can be circulated and enjoyed legally. The Government believe that these regulations are a reasoned and proportionate reform and I commend them to the Committee.

[Lord Howarth of Newport (Lab)]

My Lords, perhaps I can be the first to congratulate the noble Baroness, Lady Neville-Rolfe, on her appointment and I welcome her to her new responsibilities. She will bring her experience of administration, business and politics to a fascinating, important and very difficult portfolio, and I wish her well. However, I think I can say on behalf of all noble Lords that we were very fond of her predecessor, the noble Viscount, Lord Younger. He was invariably patient, courteous and helpful in the way that he dealt with issues raised by noble Lords, and I thank him for that. I think that the noble Baroness may be the eighth intellectual property Minister in seven years, which raises a question as to whether, in the institutional life of this country and our culture of government, we organise things very sensibly. This kind of discontinuity cannot make for good-quality government. If policies are well developed, it is in spite of the system of ministerial appointment rather than because of it. It is not only the IP portfolio but a whole series of others that have been subject to these vicissitudes and prodigalities, and all parties have been as bad as each other. It is a cultural, political and governmental problem for us all.

As it clearly cannot be anticipated that the noble Baroness will still be in post beyond 7 May next year, she, too, is unlikely to have very much time in the exercise of these responsibilities. However, I am sure that in the few months allowed to her she will think radically about how we may better balance the interests of the wider public against the legitimate claims of creators, and will think about what dispositions in copyright policy may be appropriate in the digital age, when reproduction can be made at zero marginal cost. There are massive issues that I am sure she will work on, and I hope she will work on them fruitfully. However, before I am reproved by the Committee I must narrow my focus to the specific provisions of this particular statutory instrument.

I will say a few words on behalf of the British Library. I was its Minister—I had ministerial responsibility for the British Library for some years—and I continue to stay in quite close dialogue with it. As the country’s national library and one of the leading research libraries of the world, its interests and concerns ought properly to be taken into account—as I am sure they are—by the Government, and will be by this Committee. The British Library has no problem with the principle of extended collective licenses—and nor do I. We debated that principle at great length in our proceedings during the passage of the Enterprise and Regulatory Reform Act.

I will press the Minister a little further on one aspect which she touched on in her remarks. Mass digitisation of library content is very costly. Among the costs are project management, scanning, digital platforms, hosting and licensing. All those procedures and operations are expensive. The British Library enters into public-private partnerships with publishers and other collaborators, and there is an anxiety for the library and its commercial partners that it may not be possible to recoup the costs of investment in mass digitisation within the five-year timescale that the Government have set as a limit.

The Government want the regime to facilitate mass digitisation of all sorts of material that is out of print and not commercial but of great interest and potential, and which is still in copyright and cannot under the present regime be accessed by people online—you have to visit the library if you want to see that material. That is a great inhibition on education, research, innovation and creativity, so this is important in all our interests. Indeed, it is important in the interests of authors, because authors of such works may then find that their works find a wider audience, and they may indeed receive royalties through the licensing body. So it is in nobody’s interest at all that the system should not work as it is intended to work.

I am therefore puzzled that the Government have decided to set a five-year limit on the terms of licences. The British Library’s existing licensing agreements with its commercial partners last for longer than five years—usually 10 years or more. In Scandinavia, which the Minister touched on, they have been running ECLs, so far as I know, with no set time limits since the 1960s. Very recently, in France, in 2012, and in Germany, in the present year, functioning ECL regimes have been set up which allow the digitisation of out-of-commerce works—in the case of France in the period up to 2000, and in the case of Germany up to 1966. I am not aware that the European Union is asking for any limit on the duration of licences. The European Commission’s 2011 memorandum of understanding on digitisation of out-of-commerce works does not mention any duration for such licences, and the public sector information directive 2013, which is currently being implemented in the UK, also contains no maximum duration for the period of exclusive licences for the digitisation of public domain items. I am perplexed as to why the Government are out of line with European counterpart countries and have adopted an approach which is not sanctioned or encouraged by the European Union.

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[Baroness Neville-Rolfe]

I thank noble Lords for their valuable and supportive comments and, indeed, for their very kind welcome this afternoon. I share the warm words that have been said about my noble friend and predecessor Lord Younger of Leckie. I will do my best to be an equally hard-working and successful Minister. I am also a great fan of the art of letter writing, and if I can learn from him and use that well in my departmental responsibilities and in the House more generally, I will be very pleased. There is one plus to the change, which is that there will be even more people in this House with a knowledge of and a passion for the complicated subject of IP. I assure the House that I come to this area with great passion. I was especially delighted to be offered a role in carrying forward such an important agenda.

ECL is a tool that can be used where there is market appetite for it. That appetite has to come from licensees, the collecting society and, most importantly, the rights holders. The Government cannot impose ECL on a sector; rights holders must want it. It is not possible for the Government or anyone else to force it on the rights holders. It is not possible without a significant representative collecting society acting with the informed consent of its voting members. It is not possible for a non-member to be forced to stay in a scheme. This is because there are a number of safeguards for all concerned. My noble friend Lord Clement-Jones commented positively on the safeguards, and I have gone through some of them. Their range includes: the absolute right of non-members to opt out; the ability of any interested party to make representations about any ECL proposals; and, of course, the minimum standards of good governance and transparency which an authorised collecting society must adhere to and offer.

The noble Lords, Lord Howarth and Lord Stevenson, referred to the length of the authorisation and the practice in other countries. The Government believe that, following an authorisation, it is essential that the ECL is thoroughly scrutinised within a relatively short period to ensure that it is running smoothly. This is particularly so given the additional powers granted to an authorised collecting society. The length of the initial authorisation period is not dissimilar to authorisation periods in the Nordic countries, where ECL schemes have been running successfully for many years, as has been said. The renewal process is designed to strike a balance between the business continuity and low cost, desired by some licensees, and the need to ensure that all those affected by the ECL can continue to have confidence in it.

It is therefore the Government’s view that the renewal process should be open and transparent so that representations can be invited. A renewal application would need to include evidence of the performance of the collecting society in respect of non-members and a number of other features. If the ECL is running smoothly, the renewal process should not prove a barrier. If it is not, the ECL would have needed to be revoked anyway regardless of the length of the authorisation. The Government believe that the authorisation period is balanced and proportionate, reflecting a legitimate need to look at an ECL at a relatively early stage. As I said in my opening remarks, there is a light-touch renewal period after that.

Obviously the Government have sympathy with the efforts of libraries and archives to digitise their collections. However, those efforts cannot be at the expense of safeguards to ensure that ECL schemes are functioning properly, and one of the safeguards is an initial authorisation period of five years. It should also be remembered that only collecting societies can make ECL applications. If a licensee cannot interest a collecting society in the possibilities of an ECL scheme because it makes no financial sense to the collecting society or because member rights holders oppose it, that is a matter for the collecting society and the licensee. The Government have no role to play in this process, and the regulations may not be a factor in what is essentially a commercial decision. It is the Government’s understanding that digitisation projects are not a first-order priority for collecting societies. It is therefore unlikely that there will be applications for such schemes in the first few months. For these reasons, the Government do not think it appropriate to commit to a review in a year’s time.

[Lord Howarth of Newport]

Will the noble Baroness deal with the point that a distinction can be made between the period of authorisation of a collecting society to go about its business—there may well be a very reasonable case to limit that to five years and then to see whether its performance has been good and it should be allowed to continue on the one hand and a licence that is given, for example, to a library to undertake mass digitisation? It does not follow from the need to be sure that the collecting society is doing a proper job, in general, that you have to restrict the licence that it approves to a period of five years. In fact, it can be extended beyond five years, to 10 years perhaps, or further. Can she deal with that, please?

[Baroness Neville-Rolfe]

Perhaps I may comment on the point about the EU directive and then come back to the point that the noble Lord has raised.

My noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson, talked about the EU directive and the interaction between the regulations and the directive. Where relevant and where we have the powers to do so, we have in fact included the provisions from the directive in these regulations. The rest will need to be consulted on—in my view, a vital part of good legislation—and will then be incorporated in time for the coming into force of the directive in, I think, 2016. To give more detail, I should add that where there are concepts that we do not need to consult on that are relevant to these regulations and for which we have the legal power—for example, the definition of a collecting society—we have actually included that in these regulations, obviously with the objective, which I think we share, of keeping administrative and regulatory burdens in this important area to a minimum, while having proper governance.

My noble friend Lord Clement-Jones also talked about the risk of disreputable collecting societies running ECLs. Any collecting society applying for an ECL authorisation must already be licensing the types of works that are subject to the authorisation. The codes of practice regulations which became law in April 2014 are intended to support a system of self-regulation by collecting societies by giving government powers to close any gaps that may emerge in the self-regulatory framework. This should strengthen confidence in the operation of collecting societies. As part of the self-regulatory framework, the collecting society must allow for an initial independent review one year after implementation and further reviews every three years thereafter. Any collecting society applying for an ECL will need to have a code of practice in place. Any collecting society that fails to comply in all material respects with its code of practice would run the danger of having its authorisation revoked. This power can be invoked at any time during the authorisation period. Interested parties concerned about an ECL scheme can make representations to the Secretary of State at any time during its operation.

My noble friend also asked about the Copyright Hub, which he felt could be more valuable than ECL. The industry-led Copyright Hub project is a very important attempt to make licensing easier and more valuable. ECL is likely to complement the hub by allowing broader collective licences to be offered by the hub. However, both use of ECL and use of the hub are of course choices for rights holders; government is merely offering a new choice to collecting societies.

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[Baroness Neville-Rolfe]

I think that this issue merits further discussion, which might need to be the subject of the new art of letter writing.

If I may, I would like to come back to the point made by the noble Lord, Lord Howarth—that libraries do not need regular checks on digitisation projects. All ECLs, including those for digitisation, must be balanced with safeguards for non-members. It is this which has led us to the view that we need regular reviews. Libraries and archives are very important to us, as are digitisation projects, but, as I said earlier, this does not seem likely to be the main focus of use of the provision in the early stages.

[Lord Howarth of Newport]

If it turns out that this five-year limit is inhibiting investment and choking it off, and evidence is seen to that effect in a year or two’s time, would it not be sensible for the Government to take another look at this? The Government have made it clear in the impact assessment and elsewhere that they want the kind of mass digitisation projects that could be undertaken by libraries, archives and other cultural institutions to happen, but that needs very significant investment. Those who are to put up the investment capital for this need to be confident that they are going to get a return. They are saying that the timescale of five years is insufficient to get the return. With the uncertainty about licence renewal, there is a real danger that the investment will not occur. Would it not be sensible for the business department to keep an open mind on this and be willing to look at it again if there is evidence that the policy is inhibiting investment?

[Lord Clement-Jones]

Perhaps I may add a question so that my noble friend can answer them all in one fell swoop. Strangely enough, although I agree with the five-year initial term, it not clear, as the noble Lord, Lord Stevenson, pointed out, whether a subsequent authorisation can be longer than five years. The noble Lord, Lord Howarth, might be entirely delirious with a 20-year extension. I would not be very keen on that but he might think that it was a wonderful thing. But from my reading of the regulations, it is not clear whether or not that subsequent authorisation could be longer than the initial authorisation.