DIGITAL BRITAIN - THE FIGHT AGAINST ONLINE PIRACY

The tide may have turned against online piracy in the UK. In its Digital Britain final report, published on 16 June, the government outlined proposals to legislate to achieve a reduction of 70-80% in the incidence of unlawful peer to peer file-sharing.

The government hopes this will stem the considerable losses which the creative industries claim they are suffering from unlawful access to digital content - allegedly £180m pa in 2008 for the UK music industry and £152m in 2007 in the UK for TV and films. But the proposals will place increased burdens on both rights holders and internet service providers (ISPs) which they and their legal advisers will need to consider.

Unlawful file- sharing is not the only form of online piracy but it is arguably the most damaging to rights holders because of the nature of the technology. Peer -to-peer file-sharing software allows files to be downloaded and disseminated across the file sharing community very quickly and its decentralised nature means that there is no central server which can be held liable for hosting or authorising the downloading of infringing material. Rights holders therefore have had to seek redress against individuals in respect of their unlawful uploading and downloading although in other jurisdictions cases have successfully focused on the operators of sites facilitating access to torrents hosted elsewhere – most recently in The Pirate Bay trial in Sweden, in which the four founders of the site were earlier this year sentenced to a year in prison and given a £2.4m fine.

The government has been forced to legislate to resolve the issue of illegal file-sharing because the voluntary memorandum of understanding between ISPs and rights holders, which it brokered in 2008, has not been effective in reducing the incidence of such activity. This is hardly surprising given the disparity of interests between the rights holders whose rights are being infringed and the ISPs, which are being asked to take action against their own customers. But this means that the carrot of self-regulation through a voluntary agreement will now be replaced with the stick of legislation.

The government proposes to place the media and telecommunications regulator, Ofcom, under a duty to take steps to reduce online copyright infringement. Specifically, it will be required to place obligations on ISPs to:

notify alleged infringers of rights (subject to reasonable levels of proof from rights holders) that their conduct is unlawful; and
collect anonymised information on serious repeat infringers (derived from the ISPs’ notification activities), to be made available to rights holders together with personal details on receipt of a court order.

The government is hopeful that most people who receive a notification will cease unlawful file-sharing. It has stated that existing evidence to this effect has been backed up by survey results, which found that significant numbers of people say they would stop or significantly reduce their file sharing activity upon receipt of a notification. The second limb of the obligation is intended to facilitate targeted court action against the “serious repeat infringers”.

The proposals have been given a lukewarm reception by many rights holders and their representatives, for whom they do not go far enough. They argue that file-sharing and the expectation of accessing free content has become so embedded in online culture, particularly among the young, that the mere act of notification, unless backed up by sanctions to prevent continued infringement, will not prove to be a sufficient deterrent. There are also concerns that, given the scale of unlawful file sharing, court action against individual 'serious repeat infringers' is impracticable in terms of time and costs and unlikely to have a significant impact on reducing the incidence of illegal file-sharing by the desired 70-80%.

Given that the majority of the individuals engaging in such activity are probably already aware that it is unlawful, the government’s optimism that notification will be effective does appear naïve. In addition, the proposals place the onus on rights holders to inform the ISPs in an agreed format and to provide 'reasonable levels of proof' of infringing activity. It may be that it will be relatively straightforward for rights holders to track downloads and obtain IP addresses from 'torrent swarms'to provide ISPs with the desired level of proof; but will they have the incentive to devote resources to doing s, if notification cannot be backed up by technical measures to restrict future infringement?

The government acknowledges that more draconian measures may be required, and proposes to take the unusual step of providing backstop powers for Ofcom 'to place additional conditions on ISPs aimed at reducing or preventing online copyright infringement by the application of various technical measures'.

Ofcom will be given the power to specify, by statutory instrument, these additional conditions which may include blocking access to subscribers through various means, capping the speed of a subscriber’s internet connection and/or the volume of data traffic which the subscriber can access (bandwidth capping), limiting the speed of a subscriber’s access to selected protocols/services and/or capping the volume of data to such services (bandwidth shaping), and/or content identification and filtering.

Ofcom’s backstop powers will be triggered only if, at the end of a period of 12 months from the date at which a code covering notifications and identification of serious repeat offenders became operational, there has not been a significant reduction in unlawful file sharing. The Government is consulting on the so-called 'trigger mechanism' but it is currently suggesting that it should be calculated by '(a) taking the number of unique individuals notified and (b) assessing what percentage of those notified have stopped unlawful file sharing ,either voluntarily or due to prosecution. If that percentage does not exceed or is not significantly close to 70% the mechanism will be triggered.'

Rights holders will no doubt be quick to respond on this but it does seem incongruous that, having expressed its belief that measures to address the problem of unlawful file sharing need to result in a reduction of 70-80% in its incidence, the government has set the benchmark by reference to the percentage of those notified who have ceased file sharing. As the government itself points out in its illustration: 'If the baseline unlawful peer- to- peer universe identified by Ofcom was 100, and notifications were sent to 50% of that universe with prosecutions against serial repeat offenders, the benchmark would be met if there was a 35% reduction in unlawful file sharing i.e. 70% of 50%'. In fact, given the onus on rights holders to identify infringers and provide evidence to ISPs of infringement, it seems highly unlikely that notifications would be sent to 50% of the file-sharing universe. The number of notifications is therefore likely to be much lower with the result that a comparatively small overall percentage reduction in the incidence of unlawful file- sharing may look like a large one - and the 'trigger mechanism' for additional technical measures will not be activated.

In addition, 12 months is surely an unrealistically short timescale in which to expect to see an impact from court action against serious repeat offenders? Some rights holders have accused the government of 'digital dithering' arguing that it will have to put in place technical measures in any event and should do so now rather than lose another 12 months.

The proposed backstop powers pose a dilemma for rights holders. The government has signalled clearly that the backstop powers should be used only if notification by ISPs and the execution of legal action by the rights holders have been fully implemented, alongside other tasks the government considers to be the responsibility of rights holders. These tasks include educating consumers to respect copyright and evolving business models that provide attractive alternatives to unlawful file sharing. This is a considerable burden to place on rights holders who, to the extent that they are not represented by collective organisations, will vary in their ability to take court action against piracy and put in place the other expected measures. But if they do not, the government will hold back from imposing on ISPs the technical measures to address unlawful file-sharing for which many rights holders have been lobbying.

The tide may have turned against online piracy, but rights holders will still have a difficult course to steer in the year ahead.

Pamela Forte
Forte Law

The above article was first published by and is reproduced here by kind permission of the Law Society Gazette. It reflects the situation as at June 2009 and has not been updated to reflect subsequent developments.

Copyright (c) Law Society Gazette 2009.

DIGITAL BRITAIN – WHY THE GOVERNMENT’S PROPOSALS TO TACKLE ONLINE PIRACY ARE DOOMED

Well-intentioned they may be but the Government’s proposals to tackle online piracy are unlikely to achieve its objective of reducing unlawful peer to peer file sharing by 70-80%.

The Government proposes to legislate to require Ofcom to impose obligations on ISPs to:

“notify alleged infringers (subject to reasonable levels of proof from rights-holders) that their conduct is unlawful; and
collect anonymised information on serious repeat infringers (derived from their notification activities), to be made available to rights-holders together with personal details on receipt of a court order.”

Perhaps in anticipation of criticism from rights-holders that these proposals do not go far enough, the Government has proposed that Ofcom be given backstop powers to impose further obligations on ISPs to put in place technical measures aimed at preventing or restricting unlawful file-sharing. These might include blocking, bandwidth capping or shaping and content identification and filtering. The Government will be consulting on the “trigger mechanism” by which these backstop powers will become exercisable. In essence, it is suggesting that if, at the end of the period of 12 months after which the Ofcom code imposing the notification and data collection obligations on ISPs is operational, 70% of infringers who have received a notification have not ceased the infringing activity, the backstop powers should be used.

Good news for producers, broadcasters and other rights holders then? It may appear so but rights holders need to peer beyond the surface and check out the icebergs beneath.

Identifying infringers and gathering evidence are pre-requisites for the notifications on which the rest of the proposals hang. In its consultation paper “Copyright in a digital world – What role for a Digital Rights Agency?”, issued earlier this year, the Government itself acknowledged “To identify an infringer might well require examination of computers. There are considerable difficulties in identifying downloaders where, for example, illegal downloading has occurred at an internet café or other area where there is public access. In the P2P area for example, infringement is established on the basis of identifying the IP address of uploaders not downloaders”. In the same consultation the Government states “The standard of evidence required from rights holders should be as high as can reasonably be demanded.”

How many rights-holders will have the resources to identify infringers and gather evidence to the standard required? And will they want to if the only outcome is a letter notifying infringers that their conduct is unlawful (a fact of which many accessing sites with names like The Pirate Bay can hardly be unaware)?

Enforcing the second limb of the proposals regarding “serious repeat infringers” (however this may be defined) is even more burdensome with rights holders facing the prospect of financing two sets of court proceedings - one to get a court order for disclosure of identity from the ISP and another for infringement of copyright. As the Government itself stated in the consultation mentioned above, “the cost of bringing an action can run into thousands of pounds very quickly, with estimates in the region of £6k-£10k having been quoted at various times by rights holders”. And surely the determined infringer against whom the proposals are aimed will be able to circumvent the data collection measures by frequently changing IP addresses or ISPs?

Some rights holders will no doubt be thinking that all they need to do is sit tight for 12 months and await the inevitable failure of the notification and data collection measures. The Government will then have to activate the backstop powers to force ISPs to address the issue through the technical measures, right? Wrong. The Government has made it very clear that the backstop powers will be introduced only if the notification and data collection proposals have been fully implemented by rights holders and ISPs along with other measures which the Government expects rights holders to initiate such as consumer education and new business models. Rights holders appear to be between a rock and a hard place – if their pockets aren’t deep enough to fund the identification of and court actions against infringers and consumer education and they don’t embrace new business models they will forfeit the technical measures which some think offer the only real prospect of reducing the impact of unlawful file sharing on the content industries.

And shouldn’t rights holders be asking why, if the Government wants to reduce unlawful file sharing by 70-80%, it would be satisfied with a 70% reduction in unlawful activity limited to those who have been notified. The Government has clearly suggested this for ease of measurement but given that the number of persons notified will, in practice, be likely to represent a very small percentage of the UK unlawful file-sharing universe, it leads to the anomalous situation where a minimal reduction in the incidence of unlawful file-sharing overall (as opposed to those notified) would justify the Government in declining to impose further obligations on ISPs.

The consultation which the Government plans to issue on the proposals may be the last chance for producers, broadcasters and rights holders to shape policy in this key area – they should not miss the opportunity to respond.

Pamela Forte is a lawyer and founder of niche media law practice Forte Law which advises producers, broadcasters and individual talent. She is a visiting specialist lecturer on copyright and rights related issues at the International Film School, Wales and on Newport University’s creative sound and music course.

© Forte Law 2009

This article was first published by Emap (Broadcast) on 26 June 2009.

ONLINE PROGRAMME DISTRIBUTION:TOP TIPS FOR NEGOTIATING THE SHARE OF AD REVENUE DEAL

Have we seen the death of the programme acquisition licence fee? Successful on-line distribution is key to maximising revenue streams but no-one has worked out how to monetise it. How do you make money from exploiting content on-line when the consumers of that content expect it to be made available for free?

One answer is the advertising-funded model. Nothing new there really – TV has been funded that way for years. What is new is that producers may be asked to forgo a licence fee altogether and take a punt on the share of advertising revenue received by the online distributor.

So when the share of ad revenue programme acquisition deal memo lands in the Inbox how should producers approach it? Here are some top tips to help you navigate those white water stretches of the online streaming licence:


1. Exclusive or non-exclusive? If no licence fee is being offered think long and hard before you agree an exclusive rights deal. What are the commitments of the online distributor which would justify your granting exclusive rights?

2. Licence period. Where no licence fee is being paid it makes sense to keep the licence period short, particularly where exclusive rights have been granted. However, you obviously need to factor into this the ad revenue cycle. Don’t forget that ad revenue may continue to be received by the online distributor after the licence period has ended! The licence should make provision for payment of any share of income due following the expiry of the licence period.

3. Territory. As for any agreement for rights distribution, it is crucial for the territory to be clearly defined. The licence should provide for the online streaming to be restricted to the territory by geo-blocking or other appropriate measures and protected by secure DRM measures to ensure it cannot be downloaded and retained by the consumer.

4. Rights licensed. You need to define clearly the rights being licensed. If not, you might restrict your ability to licence rights to other distributors. Don’t accept vague definitions such as online rights – there should be a full definition set out in or annexed to the deal memo. The URL from which the Licensee is permitted to stream the programme should be limited to a specified URL or URLs.

5. Minimum guarantee. Ask the online distributor to guarantee a minimum level of advertising revenue on which you will receive a percentage share, especially if you are being asked to tie up rights on an exclusive basis.

6. Recoupment of production costs. Try to agree that all or a proportion of any unrecouped production costs can be deducted from ad revenue before the distributor takes its share or for an enhanced percentage of ad revenue until production costs have been recouped.

7. Gross or net revenue? You will clearly be better off with a share of gross revenue but the distributor is likely to insist on net. Do not accept vague definitions. The definitions should be detailed and in the case of net revenue you need to ensure that all deductions are proper and reasonable and directly linked to generating the revenue (rather than contributing a princely sum to the distributor’s office overheads!)

8. Payment terms. The licence should specify when the online distributor will account to you for payment and provide for detailed and accurate statements (showing all receipts and deductions) to be provided to you on specified accounting dates so that you can check whether you have been paid the correct amount. A provision for interest on late payments is advisable even though a statutory right to interest may exist - a reminder in the contract can be a deterrent to late payment.

9. Books and records and rights of audit. The licence drafted by the distributor may well omit these essential provisions for the distributor to keep complete and accurate records relating to the exploitation of rights and to allow them to be inspected and audited so you will probably need to ask for them to be included.

10. Options. Licensees are fond of including options to extend the term on the same terms for a further period. Don’t commit yourself to a renewal unless you’re sure this deal is going to work for you. Or if you do, use it as a bargaining counter to get that minimum guarantee or enhanced share of ad revenue until recoupment.

Pamela Forte is a lawyer and founder of niche media law practice Forte Law which advises producers, broadcasters and individual talent. She is a visiting specialist lecturer on copyright and rights related issues at the International Film School, Wales and on Newport University’s creative sound and music course.

Disclaimer: The above tips are general guidelines and should not be regarded as a substitute for legal advice on any particular agreement.

© Forte Law 2009

This article was first published by Emap (Broadcast) on 23 June 2009.

10 TOP TIPS FOR CO-PROS

WILL THE CREDIT CRUNCH MAKE 2009 THE YEAR OF THE CO-PRODUCTION? 10 TOP TIPS FOR SUCCESSFUL CO-PRODUCTION

With production budgets predicted to tighten in the year ahead, co-production is a much more attractive proposition than belt-tightening. Most film-makers already run a pretty tight ship when it comes to budgetary control so when it comes to cutting costs it’s the production values and on-screen quality which are likely to feel the pinch. And down the line this will affect the film’s marketability and distribution prospects with the result being felt in the “back-end” share of net profits.

As well as the obvious benefits of reducing production costs through the pooling of resources, international co-production can unlock access to the Aladdin’s cave of international co-production treaty finance. At the same time, the discipline of being forced from the outset to consider the requirements of international markets and foreign language versions of the film is likely to pay dividends when it comes to seeking distribution.

So if co-production is such a no-brainer why aren’t more film makers doing it? The answer is that co-production, especially if treaty finance is involved, needs a little more thought and care at the contractual stage if you want that co-production agreement to stay in the filing cabinet longer than a pre-nup agreement after a celebrity wedding.

Here are my top 10 tips for navigating the choppy legal waters of international co-production.

1. Know your co-producers! We’re talking due diligence here! It’s surprising how many film-makers are hazy about the correct legal identity of their co-producers/financiers. You should establish the precise legal entity with which you are contracting by carrying out company searches and making other enquiries. This is particularly important given the tendency for SPVs (special purpose vehicles) to be set up for individual productions. These are invariably shelf companies with no assets. You may be jointly and severally liable to financiers/broadcasters for any breach of warranty of your co-producer and if it has no assets guess who they will come after! Just as well you thought about this at the outset and remembered to get that guarantee/indemnity from the parent company!

2. Financiers’ security requirements. On a similar note, if financiers are going to cashflow their contributions to the budget they will need comfort that the production will be fully funded and they will get delivery of the film. Will that comfort be in the form of a completion guarantee and is there provision in the budget for this? Will any of the financiers require a charge over the film? Check out the requirements of the financiers early on so that their requirements can be built into the contractual documentation.

3. Structure. Consider, before instructing your lawyer/drawing up the contractual documentation, how the various contracts with producers and financiers will be structured. If the producer is contracting separately with financiers/broadcasters will there be an inter party /mutual funding agreement under which all parties will undertake directly to the other parties to provide their contribution to the production? Will all financiers be party to this or just the major financiers?

4. Treaty/government funding requirements. If treaty or other government finance is involved make sure that you familiarise yourself with what you and your co-producer(s) will need to do in order to ensure eligibility for the funds and cover this off in the contracts. Yes, the document setting out the criteria is not going to be a page-turner but you will be glad you’ve read it when you realise that you’re not going to be able to use that much archive footage and you need substantial revisions to the treatment/script. There may also be requirements/restrictions relating to division of copyright and rights of exploitation which may need to be reflected in the contractual documentation.

5. Distribution/pre-sales. If a distribution advance or pre-sale licence income is being used to fund the production make sure there is not going to be a conflict between the rights and territories being granted to distributors/pre-sale licensees and the rights which may be granted to co-producers (including any holdbacks on exploitation which may be required by financiers/broadcasters).

6. Language versions, delivery material and delivery dates. Be clear as to how many versions of the film there will be and the delivery materials that will need to be delivered to each stakeholder and when. Be aware of any editing/versioning which may be necessary to render the film suitable for its particular market (having regard, amongst other things, to any material of cultural or religious sensitivity).

7. Editorial control, creative approvals and credits. It is crucial to consider from the outset and provide in the contracts who will exercise editorial control and the creative approvals each of the parties will have at the various stages of the production. Where editorial control is joint set out a procedure for resolving deadlock –it’s always easier to agree this when the parties are still on speaking terms rather than after a dispute has arisen! Take the opportunity to set out the agreed financier/co-production credits at this stage and save yourself those panicked calls/emails (or some of them at least!) when the delivery date is looming.

8. Financial Provisions. It goes without saying that there will be a detailed cashflow and budget and that the cashflow of the various contributions to the budget should be specified. The parties will need to agree the commissions and distribution expenses which may be deducted from Gross Receipts, what proportion of their investment in the production will be recouped from Net Receipts and what their percentage share of Net Receipts will be. The agreement will also need to detail provisions for accounting, reporting and auditing including any collection account arrangements.

9. Copyright and distribution rights. Ownership of copyright and distribution rights should be clearly set out and should reflect any treaty/government funding requirements.

10. Responsibilities and obligations of the co-producers. It should be clear from the contract and the documents scheduled to it precisely which obligations will be undertaken by each of the co-producers. This may sound obvious but it’s surprising how many co-producers don’t commit their understanding of the other party’s obligations to writing until they’re exchanging emails blaming each other for what’s gone wrong!

© Forte Law 2009. All rights reserved.

The above article was first published on Broadcastnow.co.uk (with an edited version being reproduced in Broadcast) in February 2009. The above tips are general guidelines and should not be regarded as a substitute for legal advice on any particular agreement.

OFCOM GUIDANCE ON PROTECTING UNDER 18s IN PROGRAMMES

Don’t draw a line under that list of new year resolutions. Broadcasters and programme makers may need to add a few if Ofcom’s new guidance on protecting the under 18s in programmes, published on 12 December, slipped under their radar at the close of 2007.

The new guidance supports the existing Ofcom Broadcasting Code rules with regard to protecting the under 18s and its real impact will be in the area of participation of under 18s in programmes (rules 1.26 and 1.27). Rule 1.26 requires due care to be taken over the physical and emotional welfare and dignity of participants under 18 and rule 1.27 states that under 18s must not be caused unnecessary distress or anxiety by their involvement in programmes or by their broadcast.

So what’s new in the guidance? The broad principles in rules 1.26 and 1.27 remain unchanged but the guidance is fairly prescriptive as to how broadcasters should ensure compliance, setting out a number of recommendations. These include (depending on genre and level of participation):

• Development of clear guidelines for production staff
• Appropriate background checks on participants’ social, family, health and educational circumstances and a thorough risk assessment
• Providing full information as to positive and negative consequences of participation to children ( in child-friendly language) and parents or guardians to ensure informed consent
• Seeking advice from an appropriately qualified professional e.g. child psychologist
• Ensuring a single point of contact to oversee the child’s welfare throughout production
• Careful consideration of the programme format and its likely impact on the participant.

Hopefully, broadcasters (and their suppliers) are already doing some of the above. However, they may well find that their existing procedures fall far short of what the new guidance requires.

What background checks are carried out on participants’ social, family, health and educational circumstances and how thorough do these need to be? How much information is currently given to participants under 18 (and their parents/guardians) about the negative and positive consequences of participation? Is there a single point of contact for all welfare issues? Should participants be allowed to view the edited programme prior to transmission? What procedures are there for monitoring consequences of participation post-transmission? These are just some of the questions broadcasters and programme makers need to be asking themselves. Most interestingly, the Ofcom guidance suggests that “springing high –impact surprises on under eighteens in “live” or “as live” programmes where conflict or highly emotional situations may be involved could cause harm and/or distress”. Is this a clear signal that participation in certain genres or formats will always be off-limits for under 18s irrespective of the robustness of the broadcaster’s policies and procedures?

Broadcasters and programme makers need to review the new guidance against their existing policies and procedures, identify any shortcomings and put in place measures to address them. This will be a time-consuming process and, given that the guidance is not legally binding, broadcasters may be tempted to ignore the recommendations. They will do so at their peril. The guidance will not just be relevant in determining any breach of the Broadcasting Code but is likely to be used by a court to determine whether reasonable care has been taken by a broadcaster in involving a participant in a programme. Will 2008 usher in the first action in negligence by a parent or former participant alleging harm and loss as a result of participation in a reality format?

This blog was first published on www.broadcastnow.co.uk in January 2008. Please note the above article reflects the Ofcom guidance as at January 2008 and has not been updated to reflect any subsequent additions or changes in the guidance.

IP LAW: THE GOWERS REVIEW Implementation Gives Way to Consultation

The Gowers Review of Intellectual Property, published in December 2006, made no fewer than 54 recommendations for reform of the UK’s framework for a successful IP system. If you’re thinking that these recommendations don’t impact on you and your clients, you could be wrong. The increasing importance of IP rights to the UK economy means that there are few businesses (law firms included) whose value does not depend to some degree on their ability to safeguard and exploit their IP rights and it is estimated that 70 per cent of a typical company’s value lies in its intangible assets, up from around 40 per cent in the early 1980s. So the likelihood is that at least some of the Review recommendations will affect you or your clients.

The Review envisaged a one to two year timeframe for implementation of the recommendations. As we approach the first anniversary, what progress has been made regarding implementation and what further developments can you expect before 2008?

Possibly the most visible of the measures taken so far to implement the Review has been the change of name of the Patent Office to the UK Intellectual Property Office (UK-IPO) with effect from 2 April (Recommendation 53). The Review considered that the former name did not reflect the broad range of functions undertaken in relation to all IP in the UK and created a perception that patents took priority over other forms of IP. The name UK-IPO will be an operating name until the necessary legislative changes can be made.

The Government has been somewhat slower off the starting blocks in implementing the other recommendations of the Review (with only six of the remaining 53 being completed so far).

The Review concentrated its recommendations in three key areas:

• strengthening enforcement of IP rights;

• reducing costs of registering and litigating IP rights (including better provision of IP information to UK businesses at home and abroad); and


• improving the balance and flexibility of IP rights to enable consumers to use material in ways that do not damage the interests of rights holders.

Strengthening enforcement of IP rights

With regard to enforcement of IP rights, most significant has been the bringing into force of section 107A of the Copyright, Designs and Patents Act 1988 with effect from 6 April 2007 (Recommendation 42). Formerly, Trading Standards had powers and duties to prevent the sale of trade mark protected goods but not to deal with copyright infringement, limiting its ability to deal with the counterfeiting of CDs and DVDs. Trading Standards now has responsibility for enforcement in relation to copyright infringement with the power to make test purchases, enter premises and inspect and seize goods and documents. The Government has allocated £5 million to fund enforcement of these new powers.

Other measures to implement the recommendations regarding enforcement include the recognition of IP crime as an area for police action as a component of organised crime in the updated National Community Safety Plan (Recommendation 41) and the launch in February 2007 of the UK-IPO Innovation Support Strategy including the pilot of an IP health check scheme for small businesses and new IP awareness initiatives. This implements Recommendation 35 that the former Patent Office should continue to raise public awareness of IP and the wider impact of IP crime. The Review concluded that consumer awareness of and respect for IP rights in the UK was relatively low with copying and counterfeiting being seen by many as “victimless crimes”.

Reducing IP Costs for Businesses

The launch of the UK-IPO Innovation Support Strategy also had the objective of implementing Recommendation 27 - to improve SME business support by establishing formal collaboration between the UK-IPO and Business Link and by conducting a pilot replicating the French “IP Genesis” Scheme. The latter offers a free IP audit to French SMEs who are not using the French IP system, especially the patent system.

The UK-IPO has signed an agreement with the Japan Patent Office to pilot a scheme (the Patent Prosecution Highway) that will improve the quality and efficiency of processing applications at both offices (Recommendation 19) and the European Patent Office has, based on the UK-IPO’s example, decided to pursue work sharing with the Japan Patent Office (Recommendation 18).

Improving the Balance and Flexibility of IP Rights

Recommendation 33 of the Review invited the Office of Fair Trading (OFT) to consider conducting a market survey into the UK collecting societies to ensure the needs of all stakeholders are being met.

Collecting societies license rights to use copyright protected music content to third parties on behalf of rights holders. In the UK these include Mechanical Copyright Protection Society/Performing Rights Society (MCPS/PRS) and Phonographic Performance Limited (PPL). Whilst acknowledging that collecting societies save licensees the time and cost of negotiating licences with individual rights holders the Review concluded that:

• the multiplicity of collection societies means that businesses are often required to obtain several licences to cover all the rights required e.g. anyone wishing to play music on business premises must purchase one licence from PRS for the rights in the music and lyrics and another from PPL for the rights in the sound recording. The Review felt that encouraging a cross-licensing agreement between collecting societies could benefit licensees and, if simplifying the process encouraged licensees to take up more licences, rights holders

• the exclusive licences taken by collection societies in the UK prevent members from making their work available free of charge (through the use of so-called Creative Commons licences) in contrast to the USA where, owing to antitrust regulations, collecting societies take a non-exclusive licence to their members’ works


• the absence of pan-European copyright licences require copyright licences to be negotiated for each state at increased cost.

Implementation of this recommendation has been in the letter rather than the spirit.
The UK-IPO has stated that “following a full review of the concerns put forward by Gowers, the OFT is able to report that it is provisionally of the view that such a study is not appropriate at this time.”

And implementation of the remaining 47 recommendations may well be characterised by a similar degree of caution. In early October the UK-IPO stated,

“In moving forward with the remainder of the recommendations, the Government needs to carefully consider the costs and benefits before proceeding with consultation on implementation of several of the recommendations. Therefore, in some cases, it is not going to be possible to implement recommendations within the one to two year timeframes suggested by Gowers.”

It is not altogether surprising, given the radical nature of some of the recommendations (particularly in the field of copyright law), that the UK-IPO has determined to consult with stakeholders before rushing to implementation. In early October the UK-IPO released a consultation document on fast track services for patents and trade marks. Consultations on copyright exceptions (including the recommended exception for the purposes of caricature, parody or pastiche), fees and the research exemption in the Patents Act can be expected before the end of the year. Rights holders and users alike (and those who advise them) should not lose the opportunity to respond.




This article was first published in The Law Society Gazette in November 2007 and reflects the legal position at that time.

COPYRIGHT, MUSIC AND EXEMPTION

A government review of copyright exemptions for playing of recorded music may force some not -for-profit bodies to turn off the TV, radio or CD player.

They and charitable bodies may soon decide that silence is golden if the repeal of current exemptions means they will have to cross the palm of Phonographic Performance Limited (PPL) with silver before they can play recorded music in public.

The Intellectual Property Office (UK-IPO), formerly the Patent Office, closed its Consultation on Changes to Exemptions from Public Performance Rights in Sound Recordings and Performers’ Rights on 31 October. If not-for-profit bodies or rightsholders (and their advisers) missed the deadline for responding, there may still be a chance to have a say- the UK-IPO proposes to hold a series of meetings on the issue later this year in its offices in Newport, Wales and London with meetings in Scotland and Northern Ireland also a possibility.

Currently, anyone who wants to play or perform a recording of music in public must first obtain a licence to do so, unless an exemption applies. Public playing and performance covers virtually all playing of recordings outside a domestic setting.

A recording of music will contain a number of copyright works. There will be copyright in the music itself (as a musical work - first owned by the composer), copyright in any lyrics (protected as a literary work- first owned by the lyricist) and copyright in the sound recording (first owned by the producer,usually a record company)). In addition the musicians and vocalists who performed on the recording will have performance rights in the recording.

Copyright owners have the exclusive right to play or perform their copyright works in public. Therefore, anyone wishing to play or perform a substantial part of a copyright work in public must obtain the consent or licence of the copyright owners unless one of the statutory exemptions set out in the Copyright, Designs and Patents Act 1988 (CDPA) applies.

It would clearly be inconvenient for both the owners of copyright works and those wishing to license their use if licences had to be negotiated on an individual basis, so organisations have been set up to administer licences and collect income on behalf of the copyright owners. In the UK, PPL administers licences and collects income for the playing and performance of sound recordings and performances and the Performing Right Society (PRS) administers licences and collects income for the playing and performance of the music and lyrics embodied in the sound recording.

The practical effect of this is that anyone who wants to play recorded music in public will need to obtain a licence from PPL and the PRS unless an exemption applies.

Not-for-profits that profit

Currently, charitable and not-for-profit bodies benefit from an exemption to obtain a licence from PPL in respect of their use of recorded music (though they are still required to obtain a licence from PRS).


Section 67 of the CDPA is available to a club, society or other organisation if that organisation is not established or conducted for profit and its main objects are charitable or otherwise concerned with the advancement of religion, education or social welfare subject to certain qualifications. Any profits from the use of the music must be used for the benefit of the organisation and the person playing the recorded music must not derive commercial benefit from doing so.

Section 72 applies where a broadcast which contains a sound recording is played in public in a location where no admission has been charged for entry. Broadly, where the broadcast contains recordings of music this exemption is only available where the use forms “part of the activities” of the not-for-profit organisation. The example given in the consultation is of an NHS hospital which has a television or radio playing in a day room for the benefit of patients.

Corresponding exemptions in relation to performers’ rights are set out in paragraphs 15 and 18 (1)(A)(a) of Schedule 2 to the CDPA.

Copyright law seeks to strike a balance between the interests of rights holders and society at large (the rights users). It seeks to encourage and reward creativity by allowing copyright owners to exercise exclusive rights in their works for a limited period of time (currently 70 years from the death of the author for music and lyrics:for sound recordings, 50 years from the making of the recording). However, public policy dictates that in return for these exclusive rights access to copyright works should be permitted for certain socially desirable purposes.

The consultation states that PPL has argued that its members are entitled to remuneration from organisations currently exempt from paying licence fees and that the exemptions are in breach of article 8 (2) of the Rental and Lending Directive (which requires member states to provide a right to equitable remuneration for copyright owners of sound recordings and performers when commercially produced sound recordings are communicated to the public). To date the government has taken the view that the exemptions (as amended over time) are permissible under the exceptions permitted under the directive.

Conversely, some small organisations find it difficult to comprehend why they are obliged to obtain licences from PRS and/or PPL for the very limited use they make of music.

New Proposals

The UK-IPO is seeking comments on the following three options:

1. Repealing the exemptions so that charitable bodies and not-for-profit organisations would need to apply for a PPL licence as well as a PRS licence for the playing or performing of sound recordings in public;
2. Narrowing the scope of the exemptions so that they are only available to small charities (the proposal is to define small charities as those whose turnover is less than £20,000 a year) but at the same time extending the scope of the exemptions so that they apply to PRS licences as well as PPL licences;
3. Repealing the exemptions and providing that use should be subject to the payment of “equitable remuneration”. This differs from option1 in that sums due in respect of a right to equitable remuneration are likely to be lower than the licence fees which can be demanded from a copyright owner who has exclusive rights. Another distinction is that a rights holder with a right to equitable remuneration rather than an exclusive right may not refuse to licence rights though in practice it is difficult to think of many situations in which a licence would be refused by an exclusive rightsholder.

Winners and Losers

It is clear that PPL, its record company members and musicians and vocalists stand to be the winners from any changes in the law. All of the three options above mean that PPL will be able to collect income from licensing uses which are currently exempt.

Whether option 1 or option 3 is adopted, charitable and not-for-profit bodies will find themselves having to pay PPL as well as PRS for the use of music. And while option 3 holds the promise of potentially lower fees the question of what will constitute equitable remuneration is likely to raise more problems than it will solve. Those seeking to licence rights need to have certainty as to the fees which will be payable. Given that one of the objects of this exercise is to remove the anomaly between the treatment of copyright in recordings and copyright in the underlying music and lyrics it seems odd that option 3 seeks to address this by providing for a lesser right (to equitable remuneration) in respect of sound recordings than the exclusive rights conferred on the copyright owners of the music and lyrics embodied in them.

Option 2 provides a window of opportunity for small charities to free themselves from the cost and administrative burden of obtaining licences from PRS or PPL, and would clearly benefit those who currently obtain a PRS licence at the expense of the larger charities. For this very reason it is unlikely to be popular with PRS.

Maintaining the status quo is, interestingly, not listed as an option. It may seem inconsistent that exemptions are permitted for sound recordings where they do not apply to the music and lyrics embodied in them but when you consider that PPL represents the interests of the major record labels whereas PRS collects income on behalf of composers/songwriters it is not difficult to understand why, in economic terms, the exemptions could be justified with regard to PPL. However, the exemptions in respect of performers’ rights which are administered by the PPL are difficult to justify in those terms – might it have been possible to maintain the status quo whilst providing for a right of equitable remuneration for performers? This may be less costly but would still involve a payment to PPL which collects the income on behalf of performers.

Will the youth club's radio be switched off? Will the church playgroup have to manage without its CDs? One thing is sure – charities and not-for-profit bodies and rights holders alike should not lose the chance to have their say.

Pamela Forte manages media and entertainment law boutique practice, Forte Law, has lectured on copyright and music industry contracts at Newport College of Art, Media and Design and is a member of The Voting Academy for the Brit Awards 2009.

This article was first published in The Law Society Gazette in November 2008 and reflects law and policy at that time.

ADVANCE WARNING

So you’ve just come back from your skirmishes in the bunker at MIPCOM with that distribution advance. When you’ve told all your disbelieving colleagues how tough it is partying with the rest of the TV industry in Cannes in October, you can relax. All you need to do is sign the distribution agreement and you can get on with the production, right?

Wrong – this is where you need to raise your game and make sure that 10 years down the line that distribution agreement doesn’t cause you an even bigger headache than that one last drink at the final night party.

Here are my top ten tips for negotiating your distribution agreement:

1. Territory. Make sure the territory is clearly defined. Avoid accepting generic definitions like “the US, its territories and possessions”. Ask for a list of the territories included within the definition to append to the agreement. Otherwise, you could unknowingly licence rights in the same territory to someone else. Do you need to do a “throughout the world” deal or can you keep some territories back?

2. Rights. Media and languages should be clearly specified and defined. If you cannot be clear from the agreement exactly what rights you are licensing there is something wrong with the drafting.

3. Term. Negotiate the shortest term you can. Ensure that for agreements for a longer term there are clearly defined performance targets and a mechanism for early termination in the event that targets are not met. Remember that vaguely worded obligations to use reasonable endeavours to maximise receipts are difficult to enforce.

4. Conflicts. Make sure that the above 3 don’t conflict with the rights you have already agreed to grant to other financiers and that any holdbacks in favour of broadcasters are reflected in the distribution agreement. The cross-territorial nature of new media can easily give rise to conflicts of rights.

5. Licence v Assignment. Rights should be licensed (i.e. permitted to be used for a specified period) rather than assigned (where ownership is transferred). Be cautious about language which refers to assignment or executing assignments. If you are required to execute a document to be filed with the US copyright registry be clear as to the effect of this and any mechanism for modifying/removing any entry or, if rights have been assigned, obtaining a re-assignment of rights, on expiry or termination of the distribution agreement.

6. Termination Provisions. There should be some! Make sure that you have the right to terminate for breach of any of the distributor’s obligations and warranties (again, there should be some apart from paying the advance!), for any event of insolvency in any jurisdiction (particularly important in the current climate) and failure to meet those performance targets you included earlier.

7. Receipts, Commission and Distribution Expenses. You will want to make sure that you are happy with the commission rates and that they include all commissions payable to sub-distributors, agents etc. (no double-dipping). Run through that Distribution Expenses definition with a fine tooth-comb and cap them overall at 5% of Gross Receipts.

8. Payment of Distribution Advance. Make sure there is sufficient certainty regarding payment dates and that the delivery requirements don’t allow a distributor to reject the programme/film on arbitrary grounds (increasingly important in the uncertain economic climate).

9. Accounting provisions. These often come near the end of the agreement. Don’t flag now! You need to work out exactly when you will receive your monies following their receipt by the distributor. Go for accounting within 30 days of each 3 month period if you can. Make sure the agreement provides for regular accounting statements setting out all the information you will need to make sure you get what’s due to you. There should be provision for interest on late payments and the right to inspect and audit the books (at the distributor’s expense if the inspection reveals an underpayment.)

10. Finally. If you can afford it, get yourself a lawyer who will review your distribution agreement for you. Many lawyers will be able to quote you a fixed fee for reviewing/amending a distribution agreement. When the distribution advance is a distant memory and your cherished programme is sharing the fate of the ark of the covenant at the end of the first Indiana Jones film you might even think it was value for money!

(c) Forte Law 2008

The above article was first published on broadcastnow.co.uk in October 2008. The above tips are general guidelines and should not be regarded as a substitute for legal advice on any particular agreement.