Laurence Kaye on Digital Media Law

European Data Protection Law - a Tsunami of Change

Dear reader

I wrote a piece about 10 years ago about how data protection was climbing to the top of the business agenda. I was wrong. It's now. That view was certainly reinforced by having attended an excellent Seminar organised by the Society For Computers & Law yesterday.

The Commission's Proposal for a General Data Protection Regulation will replace the 1995 Data Protection Directive. It contains some major changes which make data protection a major compliance issue and could even impact on how businesses which process large amounts of personal data are organised.

Here is a flavour of some of the proposed changes:-

• Data Processors (e.g. 'cloud' service providers who process data for their customers) will now be regulated globally. Currently,it is only 'Data Controllers' who have to comply with European data protection requirements.
• For international data transfers (i.e. outside the EU), contractual provisions rather than consents will be the primary route, although 'Safe Harbor' for the US and exports to other countries deemed by the EU to have adequate safeguards for the processing of personal data will stil apply. 
• Companies with 250+ employees must appoint a Data Protection Officer - a job for life!
• The 'right to be forgotten', which to some extent already exists under current law, could lead to major challenges for social media and platforms hosting information (e.g. photographs) posted by 3rd parties.
• The obligations on data controllers and data processors to maintain internal documentation, to audit  and verify their personal data handling procedures is substantial. In effect, the Regulator is outsourcing compliance to companies.
• Rather like the world of regulated financial services, there will be a legal obligation to notify security breaches to the Data Protection Authority.
• Fines will be serious - e.g. potentially up to 1m euros or  2% of global turnover for a security breach or unauthorised international transfer.

And that's for starters. There is some good news as well in the Proposal, including a 'one stop shop' for legal compliance for companies who have data processing activities in several member states. There's some clarification about the definition of a 'Data Controller' and rules governing non EU data processors who are caught by the EU regime.

The timeframe for introducing the Regulation is not yet definite. I have heard two years. We'll see and, of course, the devil was in the detail.

But one thing is clear: this needs to be on your business agenda now.

Have a good week,

Laurie Kaye

 

 

Digital Copyright Exchange - What's the big idea?

Dear reader

In the incredibly unlikely event you missed it, I thought I'd post my OpEd piece on the Digital Copyright Exchange which appeared in the Bookseller this week. Bottom line: will the DCE live up to its promise or be a digital white elephant? Richard Hooper, who is leading the  feasibility study on the DCE, has just closed his consultation. So watch out for next steps.

Anyway, here's my piece:

The Big Idea

The big idea of the Hargreaves Review on Intellectual Property is to create a “Digital Copyright Exchange” (DCE) to solve problems around copyright licensing in the digital age, and to make the UK a world leader in licensing creative content. It is a great idea. The publishing industry has welcomed the proposal, and the DCE Feasibility Study being led by Richard Hooper.

We’re all familiar with delays and transaction costs in clearing rights in existing works―especially in the context of new digital services―and the problems that can arise in locating the owner of works. So although there isn’t a “one size fits all” solution across all the creative industries, there is a consensus that automating the ways in which copyright works are located and cleared―and permissions for use communicated to users―is essential in the 21st century.

But there are two big issues that need to be resolved before the digital diggers can start building the DCE. The first is the scope and design of the DCE. The second is the government’s role and regulatory response. If these are handled correctly, the DCE could well live up to its promise. If not, we’ll have a digital white elephant.

Scope and design

A fully functioning market of digital rights has three elements: (1) the “metadata registries” which manage and deliver data about the management or ownership of rights; (2) the “exchanges”, the virtual marketplaces where digital rights transactions takes place; and (3) the “standardised communication” layer, the unseen “technical glue” that enables “machine-to-machine” communication to take place between these registries and exchanges, which facilitates these transactions across the internet. This is the vision that the Linked Content Coalition wants to see realised.

It’s vital to recognise that there will be no single exchange or registry. Registries are being created across different industry sectors on a national or transnational basis by individual rights holders and organisations. Exchanges will be created by service providers, collective management companies and others.

Great design is about clarity of vision as much as about deciding what to omit as to include. That is what is essential to the DCE. The government agrees with Hargreaves that the DCE should not be a state-funded and operated entity. It has neither the skills nor money to do that. The DCE needs to be a cross-industry entity that ensures that the standardised communication layer is built. This means encouraging the development of standards that, like the web itself, enable registries and exchanges to exchange messages and data in an automated, seamless way.

Two pointers

The DCE proposal is part of Hargreaves’ recommendations about which the government is consulting. There are many others, including extensions to copyright exceptions. I hope the government will bear two things in mind.

First, the DCE should be based on voluntary participation. Rights holders should not be compelled to use the DCE as a quid pro quo for being able to enforce their rights. Second, digital content services are built on licensing. So while it’s right that copyright exceptions may, in certain cases, need updating, care must to be taken to ensure that over-broad exceptions do not undermine the need for licences for commercial uses.

Digital creative industries are the third most important export sector. The DCE, implemented in the right way, can play a really valuable role in delivering economic and cultural benefit for creators, consumers and the creative industries. Let’s engage with the DCE constructively, and critically, to make sure it delivers on its promise.

 Have a great week

Laurie Kaye

A double edged sword for photographers?

Dear reader,

My colleague, Sherif Malak, has been looking at a recent case involving a photograph of what many would consider a famous but commonplace London city scene – a red Routemaster bus travelling over Westminster Bridge.  In a somewhat surprising decision, it illustrates the impact of the European approach in relation to what is actually protected by copyright i.e. what elements can't be copied without a licence: expressed in Euro-speak, it is those that are "the author's own intellectual creation".  Sherif examines the judge's decision and what elements of the photo in question were protected.

Souvenir maker, Temple Island Collection Ltd (TIC) recently succeeded in its claim against New English Teas (NET), a supplier of tea products, that the photo NET was using on its product packaging infringed  the copyright in TIC’s photo.

Whilst the ruling will on the one hand benefit photographers and their licensees by acting as a deterrent to copycat attempts to recreate their photos, others will have to think twice before recreating a photo they do not own, or certain elements of it, even if it is a commonplace scene or image and particularly if that photo is in commercial use.

In the ruling, the judge summarised the law remarking that “it is possible as a matter of principle to infringe copyright in a photograph in an appropriate case by recreating a scene which was photographed” i.e. copying does not require making a straight facsimile reproduction.

Admitting that it was a difficult question to answer, the judge nonetheless decided that the elements that were protected by copyright derived from and were the expression of the skill and labour exercised by the photographer, Mr Fielder (TIC’s MD) or, put in the way expressed in the Infopaq case: they were “the author’s own intellectual creation”.  And that those original elements had been infringed in NET’s photo.

The elements that were infringed included the photo’s overall composition and the visual contrast of its features which (an interesting and novel aspect to this particular case), had been largely achieved by manipulating the image using Photoshop to “satisfy [Mr Fielder’s] own visual aesthetic sense” (only the bus was in colour and the sky and certain people in the photo erased).  In fact, although not material to the case, there was even some discussion as to whether these manipulations rendered the work a “collage” rather than a photo.

Both NET and its MD - the photographer of the infringing photo -  were jointly liable for the copyright infringement.  So the case is also a reminder that everyone in the publishing chain must be vigilant regarding these issues, as potentially, each is at risk of being on the receiving end of a claim form.

If you'd like to find out more, the judgment can be found here with the photos set out in the Annexes at the end of the page.

Have a good weekend!

Laurie Kaye

UK ENTERPRISE INVESTMENT SCHEME ("EIS")

Dear reader

The EIS scheme is a very significant inducement for investors in start-up and early stage companies in the UK's creative industries. So, I thought I'd take the opportunity to depart from my usual posts on digital media law and, thanks to my friend Bob Wexler, an expert lawyer in this field, provide all my cash rich investors (!) with a handy summary of the rules governing EIS investments.

Bob's in transition from Leeds to London but can be contacted on : 07896 713 982. So here are the rules:

The EIS is generally intended to encourage investment in the ordinary shares of unquoted trading companies but there is an exception for UK listed AIM and PLUS companies. The UK government is encouraging UK taxpayers to invest in EIS companies  in order to help stimulate the UK economy. It has recently substantially improved  the  UK EIS tax benefits for this tax year and next year (which should continue in subsequent years) in an effort to ameliorate the recent tax increase for income from 40 to 50%( for income in excess of £150,000 ) , and capital gains rate increases from 18 to 28%.

The EIS rules are technical and need to be complied with. When a "qualified"  individual subscribes for eligible shares in a qualifying company, the amount subscribed is a tax reduction, i.e., tax credit, saving income tax at 30% (was 20% last year). The shares must be newly issued, fully paid up ordinary shares which carry no preferential rights to dividends, assets, or redemption in the three years from the date of issue. The maximum total investment per investee that can qualify for income tax relief in the current tax year is £500,000, or £150,000 of tax credits. The total amount that a company can receive in EIS funds this year is £2,000,000. Tax relief is given in the year the investment is made, or can be carried back to the prior year. Relief must be claimed within 12 months of HMRC authorising the company to issue a certificate to the investor that the share issue qualifies for relief.

If an individual disposes of shares within three years of their issue, the tax reduction obtained may be wholly or partly withdrawn.  Alternatively, if shares are disposed of  after three years from issue, the tax reduction is not withdrawn.  If there is a capital gain, it is exempt, and any loss for capital gains purposes is restricted by reducing the issue price, i.e., the cost, by the tax relief not withdrawn (but not so as to  create a gain).

A qualifying individual investor is a UK resident taxpayer not connected with the company at any time from two years before the issue to three years  after the issue.  An individual is connected with the company if:

 1            he holds (with other associates) more than 30% of the ordinary  shares;

 2            on a winding up of the company he is entitled to more than 30% of the assets;

 3            he is  an employee or a non-qualifying director of the company or of a subsidiary;  or

 4            a partner of the company or of a subsidiary.

A qualifying director who is also an employee is not treated as connected. A qualifying director generally is one who only receives reasonable remuneration from the company.

A qualifying company  is one that:

 1            carries on one or more qualifying trades;

 2            it does not control any other company except for qualifying 90% subsidiaries and it is not under the control of another company;

 3            the assets of the company must not exceed £7 million immediately before and £8 million immediately after the issue;

 4            the company must have fewer than 50 full-time employees; and

 5            the company must have raised less than £2 million from EIS type funds in the previous 12 months.

 A qualifying trade is one carried on commercially with a view to a profit, and excludes, generally, financial activities, legal and accountancy services, property development, hotel management or operation, operating or managing residential care homes or nursing homes, farming,  dealing in stocks and securities,  and dealing in goods other than in an ordinary  trade of wholesale  or  retail distribution. Solar energy deals with feed in tariffs only qualify for the current tax year. Poland does not have feed in tariffs (it has green certificates) so solar energy deals can be done this year and in future years. Poland also has grant money and low interest loans which can be used in solar deals.

A recent significant change to the EIS is the European Union requirement that a qualifying EIS company need only have a "permanent establishment" in the UK, rather than requiring it to have wholly or a substantial part of its business carried on in the UK. The term "permanent establishment" generally includes a place of management, a branch, an office, a factory, a workshop, and a place of extraction of natural resources. Consequently, there is now an opportunity to use the UK EIS for non UK operating companies, e.g., companies only with UK permanent  establishments that are primarily doing business in non UK countries, such as the United States. UK individual investors would get EIS tax benefits by investing in such companies which can also be publicly traded AIM or PLUS companies.

The EIS is considered by the UK government to be a legal tax avoidance scheme. EIS investors/companies can get HMRC preapproval that the EIS regime applies.

The EIS rules will be further liberalised starting on 1 April, 2012, as follows:

1)   250 employees, up from 50;

2)    no more than £15,000,000  gross assets before investment (was £7,000,000), £16,000,000 after the investment;

3)   £10,000,000 maximum EIS investment (was £2,000,000); and

4)  £1,000,000 individual annual limit (was £500,000).

As you can see, EIS is complex and shouldn't be tried at home - get expert advice!

Have a great week

Laurie Kaye

Predictions for 2012

Dear reader

Just thought I'd look into my crystal ball and share with you my predictions for 2012.  These were published, amongst other predictions, in this month's issue of SCL's Computers & Law Magazine.

• The term "Transmedia", the child of multimedia, will enter the lexicon of digital media.  It's a phrase I recently heard Jeff Gomez (Starlight Runner) use to get people to think about stories and narratives rather than formats.  It is the notion of stories or narratives being expressed across a range of paltforms in ways suited to each platform, whether as an online game, book, interactive site, film, TV programme or otherwise.  This new thinking applies to the entire process from creation through to business and contractual models.

• Comeptition and anti-trust law will be at the top of Amazon, Google and Apple's legal agenda.

• The forthcoming EU review of the Data Protection Directive will spur industry into making data protection compliance more easy and effective.  (A hope or an expectiation?).

• The biggest challenge - and opportunity - in the creative indistries is creating new, innovative business models.

• The real value of the Hargreaves' big idea, the Digital Copyright Exchange, will be in driving all the media and technology industries to work collaboratively to develop standards so that all the different rights exchanges - film, music, publishing etc. - can speak to each other 'machine to machine'.  This is the key to solving problems of rights clearance and unleasing the potential of new digital content services.

• I used to think about ABS as just being about my car's braking system.  No more.

If you have any digital media predictions for 2012 of your own, we'd love to hear them!

Have a great day,

Laurie

 

Laurence Kaye vs Laurence Kaye: the pirate and the lawyer in conversation

Dear reader

Happy New Year! I hope that the weight of your 'Inbox' hasn't made entry into 2012 too painful.

It's one of life's little ironies that the Chairman of the UK Pirate Party (aka Loz Kaye) and I share exactly the same name. Name sharing v. file sharing!

Olivia Solon of 'Wired' magazine recently interviewed Loz and me on a range of digital media law issues. You can find the piece published today in 'Wired' here.

Although we disagreed a quite a few issues (e.g. Digital Economy Act), we also had a lot in common, especially our recognition of the role that the creative industries can play in getting UK plc out of the current economic mess.

I hope you enjoy the read. If you want any more detail on any of the points discussed, just let me know.

Have a good week.

Laurie Kaye

Reflections on yesterday's 'FutureBook' conference

Dear reader

"New business models", "responding to customer needs", "DRM", "Outsourcing" - not phrases from yesterday's very stimulating #FutureBook Conference. I talked about them in my presentation at 'e-Pub@ London Book Fair' in March 2004. But although change may not rapid, it is definitely happening now - that was the clear impression from yesterday's conference which was full of creative thinking.

So here are my 10 key takeaways' from the FutureBook conference, most of which stem from the fact that for trade publishers in the digital world, the customer is the reader, not the retailer. When reading, bear in mind that a lot of this focuses on trade publishing and the shift from 'B2B' to 'B2C'. That said, many of the points apply to other sectors of publishing industry.

1.  The key question for publishers to ask themselves is: "How can we be of most value and use in the conversation between writers and readers?" (Stephen Page, ceo., Faber and Faber @stephenpub).
2. Publishers need to focus on building brands, with multiple products across every platform. (Charlie Redmayne, c.e.o., Pottermore). (Sounds more like the entertainment business than publishing? You bet it does!).
3. 'One size fits all pricing' is dead. (Nicholas Lovell, founder, Games Brief @nicholaslovell).
4. Whilst the big online distributors build vertical distribution models - cloud storage >  device > purchase and payment - it's still the publishers move - content is king. (But don't hang around too long to figure out the move!).
5. As we transition from print to digital + print, we are caught between the print world of territoriality and the online world where world language rights will be the norm. Managing that transition effectively - and perhaps treating print and digital differently - is essential.
6. As the next three points show, understanding the relationship and interaction between technology and content is key to the future of publishing....
7. Google's change to its search ranking algorithm - 'Panda' - reduces the importance of in-bound links and increases that of site content. So, once again, 'Content is King'.
8. For the right market (e.g. education), creating a developer ecosystem by allowing developers access via API to a publisher's content is the way to build the market. (That was illustrated by Diana Stepner, head of future technologies, Pearson - @dianas).
9. Publishing online requires an agile and iterative approach to product development, based on user needs. (Sounds like the software industry? You bet it does!).
10. That leads to another point - we have to accept that the price for innovation is accepting failure (but not to repeat the same mistakes!).

In my next post, I'll reflect on how this all impacts from the legal angle.

Have a good week

Laurie Kaye

Digital Copyright Exchange update

Dear reader

 Hot off the press is news about the Richard Hooper's appointment by Business Secretary Vince Cable yesterday announced the appointment of Richard Hooper to lead a feasibility study on developing a Digital Copyright Exchange (DCE) in the UK: http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=422173&NewsAreaID=2  

 Whilst a feasibility study is not, of itself, going to unleash the potential for the market for trading in rights in digital content, it's a step in the right direction. But let's remember that there are already rights exchanges developing in the audio-visual, publishing and other creative industry sectors. In my view, what we are missing is the 'glue' or links to make them all speak to each other to allow rights trading on a machine to machine basis.

I also think one of the really interesting areas is how public/private partnerships could develop to facilitate increased access to digital content by libraries, museums and other public bodies and by commercial providers of digital content services.

Anyway, here's the announcement about Richard Hooper's announcement as summarised by the IPO:

"A DCE has the potential to boost economic growth in the creative sector by lowering the costs of licensing and giving businesses and consumers easier access to copyrighted material. The recommendation to create a DCE was put forward by Professor Ian Hargreaves in his report; Digital Opportunity: A Review of Intellectual Property and Growth. The review suggested that an exchange has the potential to grow the UK economy by over £2 billion.

Richard Hooper said: "There are people all across the creative sector trying to develop ways of licensing works using new digital technologies. We need to bring that enthusiasm and talent together to create a universal system that benefits everyone. This work is about helping the industry to do more, to do it quicker and grow the economy.

“My work will be in two distinct phases. First I want to talk to people across and outside the sector to find out how they see the licensing challenges facing them.  As part of that process, I'll be looking to meet the key players and to provide opportunities for all those interested to air their views. We will then be able to forge some common understanding so that I can look to produce appropriate industry-led solutions which respond to the spirit of Hargreaves’ vision.”

Interested in following Hargreaves Implementation? Subscribe to updates at http://www.ipo.gov.uk/types/ipreview-whatsnew-rss.xml"

Have a good week (and weekend)

Laurie Kaye

Cyber-Bullying and online grooming

Dear reader

Here's a report really worth reading, produced by ENISA (European Network & Information Security Agency) on helping to protect against the risks of cyber-bullying and online grooming, featuring a scenario on data mining / profiling of data available on the Internet.

Download ENISA Report - Cyberbullying_v3 31

Have a good weekend. I'll be at the Society of Young Publisher's Annual Conference, speaking with Lynette Owen, copyright Director of Pearson Education, on 'The Changing World of Rights".

Thought for the weekend: "11:11:11" is a palindrome which occurs once every 100 years. Is this the day for taking big decisions?

Regards

Laurie Kaye

Transmedia - multimedia re-visited?

Dear reader

With video interviews embedded in online newsites, and music and film clips in enhanced e-books, the idea of multi-media is no longer new. Licensing rights from book to film to TV and merchandising is well-established.

But in the digital world, new thinking is needed for stories or narratives which have the potential to be expressed across a range of platforms in ways suited to each platform, whether as an online game, book, interactive site, film, TV programme or otherwise. This new thinking applies to the entire process from creation through to business and contractual models.

Think narrative, think IP, think cross platform. That's the theme of the presentation on 'The Power of Transmedia Storytelling', given by Jeff Gomez, CEO of CEO of Starlight Runner Entertainment, at Power to the Pixel’s Cross Media Forum held in London last month.

Whilst not every single work has the quality of a story or narrative that works in this way, many do and the need for 'joined up' thinking has never been greater. So do listen to Jeff's presentation. There's real food for thought.

Have a good week,

Laurie Kaye