The system's fine, but where's the money?

Much loved by innovative SMEs:
the Loan Arranger

In a thoughtful and much-commented piece hosted by tytoc collie on Friday ("Pioneers, Pirates and Parvenus – IP v Innovation", here), Gwilym Roberts -- who attended one of the Hargreaves Review meetings last week -- made some valuable observations about the "problem" of the IP system being not so much the system itself but the failure of funding to back innovative projects. To this, Mary Ellen Field adds some highly pertinent comments of her own:

"It is very sad that there was little input from SMEs at the meeting last week, but not at all surprising. SMEs are trying to keep their heads above water when the banks won't lend and they are often fighting off attacks on their IP from counterfeiters and larger well funded companies with clever aggressive lawyers. They are in my opinion effectively excluded from the Hargreaves report by virtue of the makeup of the panel and the language used. It might also be because they think IP Law in the UK is fine and that they don't have the time nor the money to navel-gaze

I tried very hard to be allowed to attend that session this week and I believe I had a lot to offer. I am not a lawyer or an academic but I have been successfully managing, protecting and exploiting my clients' IP from a commercial perspective for thirty years, working with lawyers throughout the world. I wrote to my MP, to the IPO and to Prof Hargreaves himself but had no luck despite my MP writing to Baroness Wilcox on my behalf [tytoc collie would love to see more involvement from MPs in general -- the All Party Parliamentary IP Group seems to have gone to ground again -- and from the IP Minister Baroness Wilcox]. I have finally managed to get a slot on Monday afternoon [today!] at the IP Review Surgery Event

The fact is that SMEs are not usually populated by lawyers and academics, the wording in the review document suggests that unless you are a lawyer or an academic, your opinions count for nothing. Professor Hargreaves states that the submissions must be "evidential", this word alone would put any hard working SME off. Perhaps as an academic Professor Hargreaves does not want case studies from SMEs who may well be able to shed great light on this issue. Perhaps SMEs are intimidated by the language of the Review document. Surely if the government or the panel wanted to know the problems facing innovators, they would have put an innovator on the panel. At least he or she would have spoken the same language as the SMEs, also I don't think there are any women on the panel

There are three major problems facing innovative individuals and SMEs in the UK and IP framework is not one of them.

1. The lack of people willing to invest in startups. Our banks won't consider lending to you and the turnover you need to attract Private Equity investors grows each year. Added to this is the fact that investors in this country usually require 100% security over the innovator's IP, and too often the founder finds himself removed from his creation if things don't move as fast as the investors require. As the banks have done away with the concept of bank managers who took it upon themselves to understand their client's business, there is no one to talk to at our banks who knows what you are talking about. If you doubt me, trying explaining the concept of a royalty stream to your local Barclays business branch [tytoc collie entirely endorses this. He has been hearing it from small innovative businesses since the 1980s].

2. The catastrophic consequences of financial failure in the UK. Our laws relating to financial failure are so draconian that a failure when young can prevent you ever being able to raise funds in the future and even if you manage to start up again and be successful, whenever you are mentioned in the media no matter how successful you are even decades later you will be referred to as "Bill Smith the former bankrupt" In the United States failure is regarded as a part of the learning curve unless you have intentionally defrauded people. That is seen as capitalism in action [Strange how, at the bottom level, banks are so reluctant to take even the smallest of risks, while they seem to throw caution to the winds when it comes to buying subprime mortgage portfolios and investing in financial paper of which they have manifestly little understanding]

3. Predatory behaviour by larger British firms, particularly retailers with very scary lawyers. The costs to an SME to take on a large company that the SME believes has infringed his IP rights are simply out of the question for most SMEs. It is possible of course to arrange IP litigation insurance but that requires an opinion from counsel before the insurance company will commit. The cost of this can be prohibitive to a small company or individual. Even if you can force the big company to back down enforcement can become a full time job [If evidence is needed here, Hargreaves can speak to ACID, which can provide some real examples]

Perhaps it is because I am Australian but I get extremely annoyed when the British do whatever the Americans tell them to do. It drives me nuts. Who cares what Google wants? They don't care about innovation in the UK, they just want it made easier for them to make money here. This UK has never been short of innovators and it isn't now, it's just extremely bad at supporting its innovators, forcing many to move abroad or giving up their innovations for next to nothing because it's not polite to fight back. I have several innovative British SMEs as clients, they export throughout the world they use the Internet as an integral part of their businesses. Sadly most of them could not raise funds here and have raised them abroad from foreign investors who take a long term view".

tytoc collie applauds not just the message but the manner of its delivery.  Members of the Hargreaves Review, please take note!

The Hargreaves Review: the debate begins

The copyright debate always livened up when the subject of Creative Columns cropped up

tytoc collie learned earlier today from his friend Laurence Kaye (the digital media guru, not the Pirate Party UK one: see here for explanation) that the Institute for Public Policy Research (IPPR) hosted a roundtable discussion yesterday on the (Hargreaves) Independent Review of Intellectual Property and Growth (here).  It was the opening event of the IP Review.  Laurence was asked to make some introductory remarks. Here they are:

"The interaction between the extant IP regime, innovation and economic growth: what works, what doesn’t and how it could work better

I was consulted last week by an Internet start-up in the field of education. Their site will include free resources and paid-for content via an e-commerce store, as well as a subscription-based service. It’s just the kind of start-up we want to see thrive.

They wanted to discuss their ‘copyright needs’, as they put it. They made two things clear. First, protecting copyright in their materials, including their authors’ rights, was really important and valuable to them. Second, they had lots of questions about how to deal with rights clearances and permissions. Whilst they saw copyright as central to their business, they had questions about the practical workings of the system. That theme – of bringing permissions and rights management into the 21st century world of ‘search, find, click, clear and, where relevant, pay’ - is in my view the key to making the system work better.

I am not complacent about the copyright system. But there is some merit in the old adage, ‘if it ain’t broke, don’t fix it’. The creative industries are 7.3% of the economy, employing two and a quarter million people. The UK is an international centre of creative activity, bringing major social, cultural and educational benefits to the country as well as the obvious economic ones. The UK has some of the world’s most successful authors and creators. And it is copyright which underpins these industries.

That is all the more so as a result of the ‘digital shift’ - the shift from selling physical goods to the provision of virtual goods and digital services based on licensing– download to own, rental, streaming and so on. Those licences, whether granted individually or by collecting societies, derive from, and are facilitated by, copyright. 

But as I said earlier, there is no place for complacency in the search for innovation and growth. In analysing the IP framework in this context, especially in the copyright field, I would suggest some important criteria which should be applied to the case for change:-

• First, we need to distinguish between the copyright system per se and the way it works in practice. We should not equate problems about the working of the system with the system itself. For example, improving the way permissions are managed can largely be solved within the existing framework.

• Second, we should not ascribe to the copyright framework, problems or barriers to growth which are attributable to other factors such as lack of access to start-up capital, technical expertise or the absence of tax breaks.

• Third, where there is a proven case for change to the copyright framework, we should make the minimum change needed to accomplish the objective.

• Fourth, solutions should be appropriate and proportionate to the problem. For example, education and information provision are the right tools to use to remove confusion and uncertainty concerning copyright – for example, what can and can’t be taken without infringing copyright. In the case of certain barriers to growth, there are other legal tools available to remove them, such as competition law.

• Fifth, let’s be careful not to introduce changes which solve an analogue problem which will disappear over time in the digital age. For example, any proposals to deal with ‘out of commerce’ works should recognise that as works become increasingly ‘born digital’, they will almost always be available in the digital store. 

So let’s look at the case for legal change. There are instances where legislative intervention is needed. There is general consensus that the problem of ‘orphan works’ needs a legal solution, most appropriately at the EU level. The most recent statement on the subject was the Report of the ‘Comite des Sages’ published this month from the perspective of bringing Europe’s cultural heritage online.

There is also consensus that some of the proposals following the Gower Review need to see the light of legislative day in the UK, including updating exceptions for education to include distance learning (where no collective licence is available) and the extension of the exception for Libraries and Archives to sound recordings and films. We may need to re-visit the issue of ‘format shifting’ as proposed by Gowers, but only insofar as licensing solutions don’t deal with the issue.

The Call For Evidence mentions investigating the benefits of “fair use” exception to copyright. I have some real concerns about that:-

• First, the differences between the US ‘fair use’ exception and the various exceptions in UK copyright law are more apparent than real – compare US cases on ‘fair use’ for commentary and criticism with UK cases on the ‘fair dealing’ exception for criticism and review.

• Second, a lot of emphasis is placed on the concept of ‘transformational use’ developed by the US Supreme Court in a line of cases on fair use. We don’t have time for a detailed discussion but it would be misleading to represent it as a simple facilitator for the creation of new works derived from existing ones.

• Third, we also need to recognise that introducing a general exception of this type into European copyright law would require deep pockets to fund litigation over a number of years to develop the case law to tell us the scope of any such new exception to copyright law.

I would like to end by making three points:-

1. First, I would repeat that there is no room for complacency. It is no longer acceptable for rights and permissions to be locked inside old paper contracts stored in filing cabinets. But much of that change we need is non-legislative. In particular, I hope Professor Hargreaves’ Review will focus on the need to encourage the development and take-up of technology to build an integrated rights and transactional infrastructure with machine readable permissions and licences which also accommodate and respect legal exceptions. The core elements are standards-based machine readable expressions (such as Creative Commons, ACAP and ONIX), Online registries, including the ARROW project and the Book Rights Registry, and persistent content identifiers such as ISBN, ISWC and DOI and then linking all of this to payment solutions. And let’s be clear. I am not talking here about ‘DRM’ in the sense of technical protection measures. I am talking about an infrastructure which makes it easy to ‘click, find, use and pay’. If this infrastructure can become as ubiquitous as broadband itself, everyone in the ‘copyright chain’ will benefit – creators, producers, distributors, intermediaries and, of course, the citizen and consumer of digital content and services.

2. Second, all of this takes investment. Weak IP laws and weak enforcement substantially reduce the case for investment. The Commission’s Report on the Enforcement Directive published in December last year contains some important points about the problems of enforcing IP rights online in the face of the economic damage caused by piracy.

3. Finally, discussion and debate about copyright can easily become polarised. And that’s something we can all be guilty of. So let’s take as our starting point that we are a ‘community of interests’, encompassing traditional actors in on the copyright stage and new players too, even if those interests sometimes diverge. Working together, we can realise the commercial and societal benefits of a rich and diverse variety of professionally produced and amateur created content".

Laurence Kaye blogs here and can be contacted here.
The IP Review blog lives here

A message to the Hargreaves Review team

On Tuesday, in "Five Go For Growth", tytoc collie commented on the selection of the team of five which has been picked to assist Professor Ian Hargreaves in the forthcoming review of the UK's intellectual property system. That post has attracted some none-too-favourable responses, as well as a comment posted by one of the five, Tom Loosemore, who says

"I've talked to a couple of IP lawyers, albeit no-one from private practice. Who might you suggest I meet?"

tytoc collie is happy to make as few suggestions but, before he does so, he thinks it might be a good idea to state a few brief points.

* IP is a vast subject and even a large team of acknowledged experts covering all aspects of IP protection and commercialisation would be hard-pressed to cover it adequately. The Kat assumes that the five are chosen not because of their specific expertise or understanding of IP but because of their ability to analyse objectively the issues covered by their brief and, having discussed them together, to make comments and proposals that are related to the discharge of their review functions;

* No-one wants this review to fail. If it produces any thoughts, comments or observations that are of any value, we are all the beneficiaries of it;

* Given the limitations imposed by time and money, the review is almost inevitably bound to make its recommendations in general terms. However, every industrial and commercial sector in the UK is a special case and its IP rights mean completely different things within it.  Thus, while the rules of trade mark law for example are the same for pharmaceutical manufacturers, fashion houses and fast-food outlets, their manner of exploitation and role within a business plan are so different that suggestions which benefit trade in one sector may be neutral or deleterious in another.  The same applies with patents: the digital and telecoms sectors are awash with protected innovation and it is effectively impossible to launch a new product or service without serious risk of infringement, whereas in sectors like civil engineering the situation is quite the opposite. This is perhaps the main reason why IP reviews are not well received, however well thought-out they might be;

* The European Union's single market is paved with increasingly harmonised intellectual property rights and there is a widely-held notion that any shifts in normative IP law must take place on a pan-European level or not at all. Likewise, since European and national competition rules are harmonised, ways of commercialising IP are likely to be measured against the same yardstick of acceptability. This being so, it may be argued that the review team's best bet is to concentrate on examining ways that British businesses can achieve better growth under the existing rules rather than look at changes in the rules themselves (though that should not stop the review team pointing to areas of law which need attention, if necessary on a pan-European basis);

* The review team should not be surprised at hostile and cynical responses from active members of the intellectual property communities. Starting with the Nicholson Report in the 1980s and running past the Gowers Review and the European Commission review of pharmaceutical patents to the ill-fated experiment with the Strategic Advisory Board on Intellectual Property Rights (SABIP), we have been treated to what feels like an almost never-ending series of reviews, which have generally added up to nothing or have recommended the predictable. We have for example learned that small businesses find it more burdensome to acquire and litigate IP rights than to big, well-funded ones, for example, and we have found that intellectual property offices and courts run more efficiently when they are better managed and operate under more flexible rules; that specialist IP judges handle complex IP litigation with less difficulty than those who have never experienced the field before; and so on. In short, the IP communities are quite review-weary and wonder if these exercises are worthwhile;

* The IP communities are sometimes characterised as a sort of mafia of greedy, self-seeking capitalists intent on milking profits through unfair legal privileges conferred by their monopoly rights. tytoc collie hopes that the review team will not allow this sentiment, which is increasingly pervasive, to percolate into its thinking. IP rights owners are often surprisingly sensitive to the dangers of over-protection since, while they own rights themselves, they are also subject to limitations imposed on them by the rights owned by others;

* Further to the previous point, the appointment of one of the review team is seen by some of this blog's readers, if my recent crop of incoming emails is anything to go by, as a statement of hostile intent towards IP protection, given his writings on the subject. The person in question is a respected and stimulating thinker on IP issues and I personally have no doubt that he is capable of performing an objective review of a subject in keeping with his brief and of formulating, together with his colleagues, perfectly sensible recommendations. However, some of the things he has said about IP rights have worried some people that his appointment is based on the positions he has argued, rather than on his scholarship and ability. This is an unfortunate burden for the review team to bear.

Having said that, to whom would the Kat recommend that Tom speak?  Good question.  Without having consulted any of the following, and hoping that I am not embarrassing any of them, I think that their opinions, their perspectives and their experience might enrich both Tom and his colleagues, as indeed they have enriched the understanding of this blogger over the years.  Not all are IP lawyers in a classical sense, but all are involved at the point at which IP rights are crucial to the operation of a business, an investment opportunity or a consumer's decision-making process.  I'd suggest:

* Deborah Prince: head of legal at Which? and previously in-house at Tesco -- a no-nonsense approach to IP, whether you like it or not;

* Melanie Hatton: head of Legal at Latitude Digital Management, she has good insights into how IP/IT issues trickle down into the workplace;

* Robert Pitkethly: former patent attorney, now Tutor in Management, Said Business School, Oxford -- hugely respected for his objectivity, clarity of thought and patience;

* Paul Leonard: previously Director of the Intellectual Property Institute, Paul's hands-on industrial experience  of working with IP spans the sciences and design for the built environment;

* Shireen Smith: a private practitioner specialising in internet-related issues, she is an effective exponent of the social media as a means of practice development;

* Ben Challis: barrister, visiting academic, author of Music Law Updates and General Counsel, Glastonbury Festivals Ltd.

* Mark Anderson: a solicitor in private practice who has a remarkable sensitivity to the way that contracts facilitate technology transfer and the sharing and exploitation of intellectual property;

* Sheila Henderson: in-house IP counsel with Richemont, formerly of Reckitt Benckiser, she can contrast the way branding and trade mark protection works in the luxury sector (where the brand virtually is the product) and for mundane household goods.

* Dids Macdonald: originally a designer but now CEO of ACID -- Anti Copying in Design, Dids has helped a large number of small businesses to help themselves more effectively in their attempts to grow IP-based operations.

There are very many others who are not on this list only because I've run out of time to add them. Readers may want to add names of their own. There are a lot of very knowledgeable, talented, creative and imaginative IP practitioners in the United Kingdom; the Kat hopes that this review will deliver something to which they can relate and from which they can help build the foundations of a better future for IP-driven business.