The UK market works on a principle that has served it well: "if it's worth copying, it's worth protecting". However, with the technological metamorphosis of the music industry, which has seen a shift of power from producers to consumers, this principle is being challenged.

The 2006 Gowers Review of Intellectual Property recommended a private copying exemption to copyright infringement for "format-shifting" – such as ripping CDs (for example copying music from a CD to a home computer) or moving your music collection to your iPod. This exception would be without compensation to rights-holders. But the UK music industry, as represented by the Music Business Group (MBG), has now hit back in its response to the UK-Intellectual Property Office ("UK IPO") consultation on implementing the Gowers Review, by seeking redress for this loss in value by imposing a copyright licence.

At present, much to the surprise of the general public, the practice of format-shifting is actually illegal. This is all set to change. One of the most contentious copyright proposals recommended in the Gowers Review is to allow format-shifting, provided that:

• it is purely for personal use;
• it is for the purpose of allowing the playback of a copyright work on another device;
• only one copy is made; and
• there is no distribution of copies to anyone else, such as P2P file sharing.

The UK IPO published a consultation paper that echoed the Gowers proposal, which closed on 8 April 2008. The MBG response calls for the licensing of private offline copying in order to create a new revenue stream for rights-holders. Licences would be negotiated between rights-holders and those who manufacture and distribute devices for making copies of music, such as MP3 players.

But how can the MGB justify a licence fee for consumers making a single copy from a lawfully owned copy for personal use? Their response is very much grounded in the rhetoric of "value" to rights-holders. The MBG states that "enormous value is derived by those companies who enable consumers to copy. UK creators and rights owners are legally entitled to share in this value (of the transferability of music), but are currently excluded from the value chain".

The MGB states that a system of compensation would not leave the UK at odds with the majority of EU countries. There the "format-shifting" exception is counter-balanced by a levy on the makers of storage devices and blank CDs, where the proceeds are routed back ultimately to copyright owners via their collecting societies. The EU copyright levy systems are themselves the subject of heavy criticism due to a lack of uniformity and their arbitrary nature. Thus the EC is currently investigating the levy system and if it should be introduced on a harmonised Community-wide basis.

Article 5 of the Copyright Directive (2001/29/EC) requires that fair compensation be provided in respect of private-copying exceptions. However, the UK IPO's opinion is that the proposed exception is very narrow and presents no obligation under the Directive on the consumer to pay fair compensation. They also say that rights-holders could still protect their assets by incorporating Digital Rights Management technologies (DRM) into their works and set sales prices at higher levels to reflect the ability to copy conferred by the new exception.

It is difficult to see how the MBG's proposed licence system will actually operate on a fair basis. The industry gets paid once for the sale of a lawful copy and possibly further by rights-holders receiving additional payments through DRMs – and now they want a second bite of the same apple via a copyright licence fee. It is this form of "double payment" that has raised concerns in the EC consultation.

The Government will be faced with weighing up the respective interests of consumers and the music industry when considering what action to take, if any, following on from the UK IPO consultation. Music fans deserve legal clarity on this area as well as the freedom to enjoy music they have legitimately obtained, but this must be balanced against ensuring that this will not hinder the creative industries by failing to provide it with adequate protection. In considering this issue it is suggested that the Government will also need to ensure that an education programme accompanies any reforms, so that consumers do not go beyond the permitted limits of copying.

07 May 2008

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