Laurence Kaye on Digital Media Law

Pottermore.com launches!

So welcome Pottermore.com, the Harry Potter site that launched this weekend. 

We're certainly proud to have worked as the core legal team on the new site. Our work included contract negotiations with all initial suppliers and partners (Sony Corporation) and crafting the innovative international compliance programme.

In my view, Pottermore.com is going to be significant in many ways:

• it will show how online transforms the author-reader relationship into a multi-dimensional digital community which engages author with readers and readers with readers.
• it will show how the author-publisher-reader relationship, which remains at the core of publishing, is expressed in new online business models.
• Pottermore.com points the way to the new skills - technical, creative and in consumer marketing - that publishers need to survive in the 21st century.
• it also illustrates that building collaborative relationships with key partners is at the heart of the new publishing model.
• and last, but not least, for lawyers working in the sector, it challenges us to devise practical legal solutions to reconcile national laws with a borderless medium.

Have a good week

Laurie Kaye

 

Phase 1 diagnostic report on the Digital Copyright Exchange feasibility study.

Dear reader

The Phase 1 diagnostic report on the Digital Copyright Exchange (DCE)feasibility study, led by Richard Hooper, has been published today. You can find it here - Download Diagnostic Report

The DCE was one of the centrepieces of the Hargreaves Review, focusing on digital licensing. So the publication of the study is a significant first step in realising the full potential for 21st century digital licensing.

Here's the Exec Summary:

"This Study has concluded on the basis of the evidence collected that copyright licensing
processes in the UK compare well with other countries in the world but there is much that still
could be improved.

The UK has, for example, more digital music services operating (70+) than any other country.
Copyright licensing can be made more streamlined, easier and cheaper to use, especially for
the small and medium-sized enterprises (SMEs) which make up 90% of the creative industries,
without eroding the rights of rights owners.

As a result, innovation will be further encouraged and an ever more diverse array of fi xed and
mobile digital services across all media types (moving pictures, still pictures, text, music, mixed
media) can be expected, driving economic growth across the UK’s creative and technology
industries.

There is no evidence of significant problems in the computer games industry, the public
performances/theatre sector, nor in the corporate use of copyright licensing.
But we did identify signif cant problems in a range of other market segments and industry
sectors:
• Libraries, archives and museums
• Educational institutions
• The audiovisual industry (feature fi lms and television)
• The publishing industry (newspapers, magazines, books and journals)
• The music industry
• The images industry (still pictures, photo libraries, artworks)

We also identified an overarching cross-sector and cross-territory problem which, if resolved,
will further improve copyright licensing for the mixed media and borderless world of the internet.
Digital Copyright Exchange Feasibility Study

Those problems can be summarised as follows:
• Complexity of licensing processes
• Complexity of licensing organisations
• Repertoire imbalance between the digital and physical worlds
• The diffi culty in fi nding out who owns what rights to what content in what country
• The diffi culty in accurately paying to creators the fair share of revenues from uses and
reuses of their copyright content
• The labour-intensiveness, expense and diffi culty of licensing copyright for the high
volume low value transactions that characterise the digital world
• The lack of common standards and of a common language for expressing, identifying
and communicating rights information across the different creative sectors and across
national borders

There is a political dimension to the issues surrounding copyright licensing, but it is not party
political.

Media companies wish to see tougher enforcement against copyright infringement.
To achieve this, the media companies must be – and, as important, must be seen to be – doing
everything possible to enable and encourage new digital services.
Making copyright licensing easier to use, less expensive, more accessible for licensees both
large and small, for companies and for individuals, will encourage new digital services.
A wide and diverse range of new digital services for the fi xed and mobile internet that are easy
to use, that offer a repertoire not too different from the physical world, that are customer-oriented
and sensibly priced, reduce, for example in the eyes of the politicians, the justifi cation for any
copyright infringement by consumers.

As a result, there will be stronger political will to enforce copyright ever more vigorously across
peer to peer fi le-sharing, websites, search engines, payment systems and advertisers.
A combination of three streams of activity: our own Phase 2 work – Seeking Solutions; the
various initiatives already underway in the creative industries such as the publishing industry’s
Linked Content Coalition; and the solutions coming out of the IPO’s parallel consultation into
copyright matters, will together enable UK copyright licensing to be even more fi t for purpose in
the years to come."

Have a good week

Laurie Kaye

IPO Copyright Consultation closes; publishers speak

Dear reader

The Intellectual Property Office's Consulation on proposed changes to UK copyright law following the Hargreaves Review has just closed. My friends at the Publishers Content Forum have put in a very succinct submission which gives the publishers' perspective. It captures the key issues really well.

Copyright and licensing are absolutely central to the creative industries' ability to develop viable digital content businesses for the benefit of consumers, creators and everyone else who add's value in the 'content chain'. Sure, some changes to the copyright system are needed, as indicated below. But we must take great care not to kill the patient with the 'cure'.

So wit the PCF's permission, here is their submission:

"Introduction

 We are encouraged that the minister responsible for Intellectual Property, Baroness Wilcox, recognises in the foreword to the Consultation paper that “copyright is the central IP right relied on by the UK’s strong creative industries”. The Minister is right. However, her laudable sentiments are not matched by the tone and much of the content of the remainder of the Consultation paper and accompanying impact assessments.

 Copyright does not need to be weakened

 Time after time copyright is portrayed in the Consultation paper as a ‘regulation’ or a ‘cost’ that should be removed to stimulate growth. This gives the impression that the Government has been unduly influenced by the opinions of US technology companies who repeatedly argue that copyright is a problem. Hargreaves warned about the danger of ‘lobbynomics’ and yet it appears that the Government has fallen foul of it.

 Copyright is a fundamental right that provides rewards and incentives for creators as well as a legal framework to support the UK’s creative industries. Weakening copyright puts those industries at risk. They employ 1.5 million people and represent 3 % of the economy in terms of gross value added. The Government should not be gambling with such an asset.

 Publishing businesses are Digital businesses

 The preoccupation throughout the Consultation paper with introducing exceptions in order to support new technology and digital businesses ignores the fact that the UK’s publishers are themselves vibrant digital business that use technology to improve access to content and rely on strong copyright. By choosing to weaken copyright the Government would not be assisting new digital businesses – it would be strengthening parasitical business models over creative ones. This would be a strategic error.

 Evidence based policy making – where is it?

 Ian Hargreaves quite rightly said that IP policy should be guided by solid evidence. An inspection of the Consultation paper and impact assessment reveals that the Government has not implemented this suggestion. We are genuinely shocked by the extent to which policy is being based on anecdotes, claims and complaints rather than well rounded evidence and monetised costs and benefits. We understand there will be another round of impact assessments and trust that these will be of a much higher standard. Decisions regarding policy should only take place once further impact assessments have been published, taking account of all available evidence, and subject to further consultation.   

 Digital Copyright Exchange (DCE)

 Although not part of this Consultation we would like to say briefly that we are pleased that the Government is looking at the feasibility of establishing a DCE and has engaged Richard Hooper. The DCE was the single most important recommendation by Ian Hargreaves, as the Consultation paper notes, and we urge the Government to collaborate with publishers to make it work. The DCE has the potential to simplify significantly the process of licensing copyright works in the digital age in way that would not damage the UK’s vibrant creative industries.  

 On the specific proposals we would make the following comments:

 Orphan Works

 We support efforts to reform UK copyright law with regards to orphan works, providing they are properly and narrowly defined.

 Text and Data Mining

 Given the embryonic nature of the market for data text mining we are not convinced there is a case for an exception, and we note that the STM Association has produced a model licence to simplify the contracting process.

 Education

 We do not support the introduction of a Fair Dealing exception for educational establishments, as this would replace the clarity of licences with the confusion of a Fair Dealing exception. There is no case for removing or restricting existing collective licensing schemes. They are highly successful and comprehensive and serve educational establishments well.

 Quotations

 We are opposed to the widening of this exception to include more uses such as ‘information’ and ‘analysis.’ The danger of unintended consequences is considerable."

See you at the London Book Fair? It's all change

Dear reader

If you're in the industry, this year's London Book Fair comes at a fascinating time in the publishing industry. We're in the middle of a period of change, upheaval and transition requiring publishers to simultaneously:

• maintain physical book revenues which still account for majority of publishers’ income.
• grow digital revenues via e-books, apps etc.
• try to figure what the future looks like, say 3 years out, and planning accordingly.

It's been a great period for us too, as the core legal team which has been working on Pottermore.com for the last 3 years.

So do let me know if you're going to be at the Book Fair. It would be great to meet up. We're certainly going to be busy. At the ‘Digital Minds’ conference on Sunday April 15^th,I'll be giving an short introductory talk and then leading one of the ‘Join the Conversation’ Round Table Discussions. Mine will be on “Publishing Law: Barrier or Enabler? Discussions on piracy; DRM; pricing; territoriality; royalties and everything else!” You can find details here.

And on April 17^th (10am), I am running the seminar entitled: “Contract-Copyright-Collaborate-and-Communicate-The ‘4-Cs’ of Successful Publishing Business Models in the 21^st Century” (Cromwell Room). Details here . My panel includes Neil Blair (JK Rowling’s agent and a director of Pottermore), Henry Volans of Faber, Jadis Tillery of dot.Talent (social media specialists) and Omer Ginor of start-up ‘Touchoo’.

If you're going to the LBF, just a reminder that you'll need to register (£25 in advance online; £40 on the door) and seminar places are on a first come, first served basis.

Hope to see you shortly.

Have a good week.

Laurie Kaye

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