The Independent View: How to legislate for the digital economy

“What to do about copyright?” In many ways this is a tired, fraught, complex and frustrating debate. It involves lawyers, economists, policy makers, campaigners of varying stripes, international legislation and huge corporate interests. It has been raging for hundreds of years. Change can be painfully slow. That means every so often it is important to revisit your principles.

Organisations such as Open Rights Group believe in the astonishing potential of the internet to expand our creative, economic and democratic horizons. And we believe that this potential is partly dependent on a flexible system of copyright that facilitates the reuse of the culture and knowledge around us.

We believe that in a media saturated age, the key to a creative future, an economically healthy future, a democratically healthy future, and a future in which people’s human rights are respected requires rules that permit people to engage with the culture and knowledge around them.

We want a copyright regime that recognises the right of creators and rights-holders to make money from their works, at the same time as respecting rights such as freedom of expression and privacy. We believe they are not irreconcilable aspirations. But we believe that the latter rights are being trampled on by the narrow interests of a few rights holders, driven by flawed evidence of the problem. That has marginalised the interests of citizens and consumers and individual or follow on creators.

We believe the solution is to abandon copyright maximalism and a turn towards evidence-based copyright modernisation that prioritises innovation and a permissive environment of reuse.

The copyright calculation

Through YouTube, Twitter, Facebook, RapidShare, BitTorrent or Soundcloud, people are sharing links, downloads, music, pictures, news and stories for cultural, economic or political ends. This is all dependent on an Internet that makes it possible for anybody, without permission or (much) money, to spread digitisable information.

This has also, of course, had an enormous impact on the businesses designed around the creation and delivery of this ‘content’. As people have moved from physical to digital content the revenues of such industries have been disrupted. At the same time, the Internet has also created new ways for people to make money out of creativity, offering consumers many more ways to access information quickly, almost anywhere, at any time.

So there is a new calculation necessary in the digital age. What is the best way of allowing creators to continue to be remunerated for their work, of providing consumers with new opportunities to discover and buy content, whilst also taking advantage of opportunities to enhance and protect basic human rights and civil liberties such as freedom of expression?

Copyright is one of the most important tools we have for this end. It can reward creativity and innovation where it grants creators the right to sell their works. And in setting up boundaries to that right, it helps make sure that people can access, engage with and reuse the information, culture and knowledge around them in useful ways.

So this calculation needs to be a calculation largely about copyright. Getting that calculation right will mean we can have both a booming creative economy whilst making sure our culture and knowledge is available to build upon and use.

Rethinking the copyright calculation

The kind of copyright regime we have now does not get that calculation right. The mix of flexibility, legal protection and enforcement favoured by policy makers in recent times has been skewed too strongly towards the latter issue. This is largely down to a focus on a narrow set of evidence and assumptions about the economic impact of digitisation. This is true in two senses. First, because there is a tendency to focus on industry revenues as the metric for measuring the effect of digitisation on society as a whole. Second, because this evidence usually comes from too few sources, usually rights holders.

The result is that flexibility and consequent benefits for freedom of expression and social or economic innovation have been ignored. That means that legitimate and important uses of work such as ‘format shifting’, research, commentary or criticism can be illegal. It can lead to knowledge being unnecessarily locked away. It has seen the creative industries struggle to adopt new business models quickly enough to satisfy online market demand. And it has led to a wrong-headed and aggressive legal pursuit of individuals who often have little or nothing to do with any seriously harmful infringement.

Below we outline four of the important responses to this problem: a new look at the evidence; a recognition of the limits and problems of enforcement; moves to support the market opportunities; and a commitment to important copyright exceptions. Following these, a simpler, more flexible copyright regime would stimulate innovation and creativity by allowing people to engage with and build on the ideas and work of others more easily, and by matching supply to the voracious demand still evident for content online.

A new look at the evidence

The first important step is re-evaluating the evidence of the problem facing us. There are a number of weaknesses evident in the use of evidence in policy making on the digital economy.

First, studies such as those by Felix Oberholzer-Gee and Koleman Strumpf suggest that the impact of file-sharing has been far more muted than is often suggested. These are contested figures, but a proper analysis of the extent to which the problems of the content industries’ are down to piracy is needed, alongside an analysis of the extent to which measures to address it will solve those problems. Huge economic and behavioural assumptions are used to justify the figures usually cited.

Second, analyses of evidence rarely includes the wider welfare benefits of digitisation to consumers and citizens. In 2010 SABIP produced a report which argued that this has not received enough attention because of the focus on figures relating to industry revenue. The report suggests that ‘…in order to inform copyright policy, it is not sufficient to establish that so-called ‘piracy’ harms existent rights holders’. Further, little attempt has been made to establish the different types of infringing behaviour – personal, creative, commercial, non-commercial – and the relative effects of them. All sorts of counterfeiting, sharing and minor infringements are often conflated.

One manifestation of these problems is the Impact Assessments for the Digital Economy Act. It relied on estimates of the revenue harms of piracy and the effects of the Act’s provisions on industry well-being. The Assessment cites a range of studies on the impact of file-sharing on industry revenues, which place the percetnage of the decline in revenues due to file-sharing in the region of 0% to 20% (Digital Economy Bill, ‘Impact Assessments’, March 2010, Table 1, p. 107).

However, the Assessment proceeds using single studies picked from that range to work through the revenue costs to industry in detail. There is no rationale given for the choices made, even though this is the basis for the oft-cited claim that file-sharing costs industry £400m per year. The study used to measure the costs to the music industry is cited simply as ‘Jupiter 2007’. ‘Jupiter 2007’ is not available to the public. Its methodology is not disclosed or critiqued. Other studies that establish less dramatic conclusions about the effect of file-sharing are ignored, for unexplained reasons. It is not clear why these studies were privileged, or why broader analyses of the effects of digitisation on society were not considered.

These mistakes should not be repeated. Such figures provide the moral and economic fuel for demands for action on copyright. There is little chance of taking reasonable steps to tackle file-sharing without a proper understanding of its nature and effects. There is likely no definitive answer to these economic questions. But being clear about why certain assumptions are made, why certain evidence chosen, and a renewed commitment to independent, robust analysis is all vital. We also recommend a commitment to a broader understanding of the social and economic impact of digitisation.

The limits of enforcement

Second, there needs to be greater attention to what kind of enforcement will work, and with what consequences. There are both legal and technical limits to how enforcement should work.

Legally, there needs to be a respect for due process and the provision of adequate means for appeal and oversight when people are accused of infringing. That is especially pressing given the recent stories of ACS:Law and their ‘speculative invoicing’ campaign (see the ruling of Judge Birss on this case, available at http://www.bailii.org/ew/cases/EWPCC/2011/6.html).

With regard to technical questions about enforcement, including detection of infringement and moves to pursue web blocking, policy makers need to work with technology experts to understand how these measures play out in practice. For example, the reliability of ‘IP address’ has been seriously questioned by various experts such as Richard Clayton, undermining its use as proof of infringement. A broad range of legal and technical experts should be consulted before future enforcement policy is pursued.

Establishing the rules for a creative future

Third, there is a need for a renewed commitment to copyright exceptions that permit fair dealing of copyrighted works. In a media saturated world in which the images, sounds and text shared in digital form is the currency of our conversations about the world. So it is imperative that the rules for the use of that currency favour citizens and facilitate everyday engagement.

The exceptions that embed these rights into copyright works are currently outdated. There needs to be a renewed commitment to pursue exceptions that facilitate parody, that allow the reuse of material in the pursuit of accessibility for visually impaired people, that allow ‘format-shifting’, and which, with an eye on the longer term, allow transformative works. These were recommendations made by Andrew Gowers, but which have been ignored by subsequent policy making. Some of this requires work at a European level. (Some options for copyright exceptions were set out in February 2011 by Consumer Focus: IP and Growth: Options for ‘fair use’ rights in UK copyright law’.)

There is no evidence that these exceptions would damage the revenue interests of rights holders. Consumer Focus commissioned a study on the economic impact of copyright exceptions. It found that “the economic evidence that format-shifting, parody and user-generated content cause any kind of economic damage to rights-holders simply does not exist”.

The market solutions

Fourth, it is important to recognise that embracing fair digital markets, for example through simpler and more effective licensing, is crucial if online businesses are to thrive.

Copyright is worth what people will pay for it. Governments cannot determine that, but companies can. Music and film lobbyists are focused on controlling markets rather than innovation. Giving them new legislation like the DEA (2010), ACTA (2010) and term extension (2009) encourages them to think government will fix their problems, and discourages them from focusing on their customers.

The broad point is that there are problems that digitisation has posed for content industries that copyright alone cannot solve. Work needs to be done to ensure that moves to simplify licensing proceed as speedily as possible and to investigate the relationship between contracts, copyright and competition. Markets need to be fair and open, with a healthy wholesale market and non-discriminatory copyright licensing. This will be a far more effective way of helping content industries adjust to and capitalise on the opportunities of the digital age than overly aggressive enforcement.

A new commitment to copyright for social and economic innovation

The job of copyright is to encourage the useful arts. It is a tool, to be measured against that. It is not a moral crusade against “theft”. Plenty of copyright infringements slandered as “theft”, from playing records on the radio (“theft”), playing songs onto records (“piracy”) and video recorders (“Boston strangler”) have turned out to be the key revenue generators. This could even be true of file sharing, if companies allow a way to license it.

Open Rights Group and others interested in civil liberties and human rights in the digital age want evidence-based policy that works from a broad understanding of social and economic innovation, grounded in an understanding of the effects of their policy making on basic human rights. Whether it is the Digital Economy Act in the UK or the internationally negotiated Anti-Counterfeiting Trade Agreement (ACTA), policy makers have tended see losses where they should see expansions to our creative and democratic possibilities. It is time to challenge this poverty of imagination.

Jim Killock, Executive Director of the Open Rights Group. This piece was written with Peter Bradwell, also of ORG.

The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.

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4 Comments

  • Andrew Suffield 21st Apr '11 - 9:00pm

    There is very little here I’d disagree with, but I do take exception to Jim’s position on the impact assessment of the DEA. He implies it is a careless and unclear piece that fails to make a convincing argument, which is entirely too generous a description of what is one of the most stunning pieces of intellectual dishonesty that I have ever read in a government document. The authors went out of their way to misinterpret the evidence and distort the facts to support the result which it had been decided the assessment would deliver. Glibly they even admit to the worthlessness of the evidence:

    There are reasons to believe that this figure may not be a
    completely accurate estimate of the displacement effect. In the
    first place, we haven’t been able to fully assess the reliability
    of the methodology used in the music, TV and film studies. Even
    though both estimates fall into the range of values generally
    found in the literature (Table 1), estimates are proven to be very
    sensitive to the methodology used.

    So they don’t know how reliable the methodology used to collect this
    data is, but do admit that the reliability of the methodology is
    crucial. They don’t seem to want to admit that this makes the data
    completely worthless for an impact assessment. The source of this data
    whose reliability cannot even be assessed? Estimates by the media
    companies, which are combined with numbers they just guessed at (at
    the end of p70 they start from “Assuming a sales displacement effect
    of 2%…” and use this figure in their final result, with no
    justification ever given for why they picked that particular
    value). To cap it off, they also admit that this is a worst-case
    estimate and they have compelling reason to believe that the actual
    number is smaller.

    Discussion throughout the document indicates that they are aware of the evidence which stands against their conclusions, and they give no reasons for why they discarded it, merely stating that they have not attempted to survey the available literature. One has to wonder what they think their job is. Having admitted their total lack of knowledge on the subject, the existence of a significant body of research which disagrees with the media company numbers, and their own inability to assess the validity of the media company numbers, they used those numbers as their conclusion anyway. I am puzzled as to why they can get away with this.

    This is not an article about that travesty of a document, so I’ll skip all the detailed examples. But the biggest lie in the whole thing is right on the front page. It’s not an “impact assessment”. They did not set out to determine the impact of the legislation. It is a political position paper written for the sole purpose of arguing that the legislation should be passed, impact be damned.

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