Wednesday, 16 March 2011

Hargreaves and the Call for Evidence: why creating an RCP is easy as 1, 2, 3

However much work you have to do right now, however many unread documents or emails are sitting in your inbox, spare a thought for Professor Hargreaves and his team.  On Friday 4th March the broadband network at the Intellectual Property Office must have been creaking for bandwidth as submissions arrived in response to their Call for Evidence.

IP-watchers will know that Professor Hargreaves was asked to review the existing UK intellectual property law and framework “to consider how it might be changed in the interest of promoting innovation and economic growth”.  He and his team now have the task of reviewing these submissions, making sense of them and reporting to Vince Cable and George Osborne next month.

The Prime Minister didn’t really do Professor Hargreaves many favours when he announced the review, painting a fairly unrealistic picture that Google, when starting out, could not have made a success of its business in the UK due to its draconian copyright laws.  Poor Larry and Sergey had to launch in Silicon Valley instead of Shoreditch High Street which I’m sure would otherwise have been their preference.

All joking aside, the Prime Minister cast a shadow over the review which, in political terms, may have encouraged respondents to take extreme positions.  The copyright up against the copyleft as it were.  I hope this is not the flavour of the submissions since, as always in business, a collaborative approach between organisations is far more likely to result in change for the better for everyone, both rights-owners and users alike. 

The Financial Times (FT) is owned by Pearson Plc and we have worked very closely together in preparing the submission made by Pearson to the review team.  In doing so, we tried to focus on what Professor Hargreaves had requested – that is, a Call for Evidence; not a Call for Opinion.  You should be able to read the entirety of our submission on the IPO’s website, but in this blog post I’d like to talk about one element of it that we believe is original, innovative and could facilitate the growth of the digital economy that the government rightly wants to achieve.  And that is, the creation of what we have called a Rights Clearance Panel (RCP).

We have recommended the creation of a Panel which “provides both rights owners and users the opportunity, at minimal cost, to petition the RCP for non-binding guidance as to whether a particular use made or proposed by a user of third party content without an express licence to do so from the owner, infringes UK copyright and whether a defence is available if such use constitutes copyright infringement.”  Or as we also referred to it in our submission, “an independent intermediary and non-judicial body, which it is cost-effective for petitioners to access, with jurisdiction to hear copyright disputes and issue non-binding guidance in relation thereto.” 

Let’s take a quick time-out.  Firstly, why is a content-owner like Pearson proposing the creation of a body that could – gasp – make it easier for third parties to understand whether or not they are entitled to make use of Pearson’s IP?  And secondly, isn’t the creation of the RCP just an idea or an opinion, what’s it got to do with the evidence requested by Professor Hargreaves?

I’ll answer the second question first.

Pearson’s complete submission sets out an evidence based argument why litigation does not assist either rights-owners or would-be users of those rights.  It is expensive and time-consuming.  We cite evidence submitted to both the Gowers Review and stated in the Jackson report that puts the cost of IP related litigation as in the region of £1million.  That is prohibitive to start-ups or SMEs seeking to push the envelope of IP law (too much risk kills innovation) and, believe it or not, also prohibitive to rights-owners wanting to enforce their rights.  In addition to being expensive, litigation takes time.  Is it worth litigating today’s new business model, when by the time of trial, what looked worth fighting over one or two years ago has ceased to have relevance in a changing market?  Often, the answer will be no.  The litigation process is ill-fitted to serve a fast technology driven economy.

So having identified the problem, why do we think the RCP is a solution?

Other than (one) the cost and (two) the (lack of speed) of litigation, a third argument underpinning our recommendation is the evidence-proven fact that low-cost and easy to access dispute resolution processes result in an increased willingness of parties subject to a dispute to use them.

We studied some existing alternatives to litigation in the non-copyright context.  In particular, the Uniform Domain Name Dispute Resolution Policy which ICANN requires all registrars of top level domain names to adopt as a dispute resolution procedure for resolving disputes regarding the ownership of domain names.  WIPO handle a decent chunk of UDRP cases claim to hear and dispose of some 2,000 cases each year and the cost of filing a complaint varies between $1500 to $5,000.  We also looked at the analogous Nominet Dispute Resolution Service  which can be used by complainant’s at a cost of just £750.  In addition, the number of complaints submitted to and dealt with by each of the Advertising Standards Authority and the Press Complaints Commission evidence that quick, cheap-to-access complaints processes encourage their use by complainants.  The data backing up these assertions is available in the complete Pearson submission. 

I think that our fourth and final argument in favour of the RCP is the most interesting and, if we say so ourselves, possibly the most unlikely argument for a rights-owner to put forward.  That is, litigation is generally the preserve of the rights-owner, the would-be claimant.  A user of third party intellectual property is a potential defendant, who has no means (other than seeking legal advice or an expensive declaration of non-infringement from the court) of ascertaining whether or not a proposed unlicensed use by them of third party intellectual property may lead to legal proceedings being issued against them.  Users will usually only find themselves party to a dispute on a reactive basis.  There is no proactive objective mechanism available to them to seek to pre-emptively address issues that might only otherwise be addressed once litigation commences.

Such potential defendants wishing to make use of third party intellectual property in the absence of a specific licence or other right to do so, must consider whether such use is lawful and permitted in the absence of an express right.  Part of the diligence process carried out by such users may involve obtaining legal advice, often at relatively substantial cost, and such advice will often be less than definitive as to whether a particular business model is lawful or not.  The cost of such diligence and the uncertainty of its outcome may stifle innovation, particularly by start-ups and businesses operating in the SME sector.  The introduction of a RCP would allow otherwise would-be defendants to obtain non-binding guidance on whether an actual proposed activity is lawful, removing to a large degree the uncertainty of whether such activity is likely to lead to a successful claim being brought against them by a rights-owner.

I work for a rights-owner and I will not pretend that we don’t see benefits for rights-owners too.  As stated above, the cost of litigating is a barrier to entry to rights-owners using it as an enforcement tool.  Rights-owners would be able to utilise the RCP as a cost-effective way of obtaining non-binding guidance as to whether a particular use made of their rights by a third party is or is not unlawful.  And that guidance could effectively become a useful business development tool for rights-owners seeking to encourage reluctant users to strike a deal to formalise any unlawful use of rights.

So having recommended the creation of the Panel, how do we see that it might work?  We suggest that its remit be limited to copyright, to start with at least.  That petitioners would be required to meet a baseline criteria in order for the Panel to accept a submission in order to avoid vexatious or nuisance claims.  That it adopt a “paper hearings” approach (i.e. written submissions only), with  a cap on the length of submissions.  It would issue written “decisions”, published on its website, from which there would be no grounds of appeal due to the non-binding nature of the guidance.  Finally, a panel of copyright and industry experts would sit on the RCP as potential panellists to hear a petition.  We recommend that a suitable mix of lawyers and business executives (drawn from both the rights owner and user business communities) would constitute the optimal combination of individual panellists, ensuring that the RCP is free to adopt a business and commercial emphasis in its pragmatic application of the law.

The ultimate goal would be to establish the RCP as a best-of-breed model for resolving copyright disputes which could be adopted across the world.

We recognise the potential weaknesses with a body whose remit is restricted to only issuing non-binding guidance.  But we want to ensure that the focus of the RCP is to offer fast and cheap guidance and to encourage parties to discuss their differences in a non-adversarial manner that does not require the parties to incur substantive legal fees.  We also believe that our desire for the RCP to take a business-led approach in applying the law and issuing its guidance may be curtailed if the RCP were created as a judicial body.  The success of organisations such as CEDR, who claim that over 70 per cent of cases referred to CEDR Solve for Mediation settle, prove that non-binding models can work. 

Nevertheless, in order to give RCP guidance some “bite”, we have also suggested that Professor Hargreaves consider recommending a change to the Civil Procedure Rules, to provide the courts with  discretion to make adverse costs orders against eventual litigants who do not utilise the RCP in appropriate cases and who fail to comply with its guidance in circumstances where a subsequent court decision is broadly similar to the guidance issued by the RCP.  Over time, as a successful Panel established a credible reputation, perhaps the courts could even consider referring disputes to the RCP as an alternative mediation body.

Professor Hargreaves has been asked by the government to consider how the law and its framework might be changed in the interest of promoting innovation.  We have collated evidence which demonstrates that the UK courts do not offer either rights-owners or users with a  framework for the resolution of disputes or even the answering of questions in a manner which facilitates or encourages innovation. 

We believe that the creation of an RCP would correct this procedural barrier and allow both rights owners and users to innovate even more than they currently do under the current UK statutory framework.

To conclude, I’ll answer the first question I posed above – why is a content-owner proposing the creation of a body that could make it easier for third parties to understand whether or not they are entitled to make use of its IP?  Readers not familiar with Pearson or the FT might think this is a strange idea for a rights-owner to put forward.  Have the copyright turned copyleft?

No.

Although Pearson is a business built on intellectual property, it is not an organisation on the copyright, so-to-speak.  Pearson is an organisation which states it is “Always Learning” and that strives to be Brave, Imaginative and Decent.  Corporate guff?  We don’t think so and I think our proposal to Professor Hargreaves is brave, imaginative and decent.  Yes, Pearson and the FT want to ensure that they obtain a return on their investment in intellectual property.  Yes, we will protect our businesses when we have to.  And yes, you will find arguments in our full submission as to why, for the most part, we believe the existing statutory framework facilitates that innovation.  But we realise that the process for clearing rights could and should be easier, cheaper, better.  The RCP could go some way to achieving that.  To making it easier for businesses both large and small to achieve certainty.  With certainty comes investment.  With investment comes innovation.  And both Pearson and FT are organisations which support innovation wholeheartedly – whether in Shoreditch High Street or in sunnier climes.

3 comments:

  1. I'm posting this comment on behalf of @drycloud who had tech issues posting it (sadly, I find this happens with this platform a lot, maybe time to move to Wordpress):

    From@drycloud
    @legalbrat I can't post comments on your blog. Have tried Google login and OpenID. My comment is here: http://www.overthecounterculture.com/

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  2. At Azrights we see a lot of start ups and I don't think any single one of them would find such a solution one bit relevant to them. It is something that is more likely to benefit big businesses such as the FT itself, who have more riding on receipt of accurate advice they can rely on.

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  3. Interesting. Why no go the whole hog and make it binding? And who pays? Did you consider an Ombudsman style model? And if so, why did you reject it?

    I know next to nothing about this area, so take all this with a pinch of salt but, apart from the who pays point, my main concernw would be a non-binding panel will generally benefit the wealthier party where they are still willing to litigate (either because of the value at stake or because of they have some other interest in playing hardball)?

    V v interesting post - thanks!

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