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Monday, 21 July 2008

Extension of sound recordings and performers’ rights: an issue of fairness

The extension of copyright term in sound recordings and performers’ rights was the subject of a Competition Law Association meeting held earlier this month in London. Now that the dust has settled, the IPKat is pleased to carry this report from the elegant pen of CLA stalwart Justin Watts (Freshfields Bruckhaus Deringer). Writes Justin:

"The Competition Law Association held a lively and passionate debate on 8 July, on the extension of copyright in performances and sound recordings. The speakers were Professor Lionel Bently, the Herchel Smith Professor of Intellectual Property Law at Cambridge University, and Richard Mollet, the Director of Public Affairs at the BPI. Both speak with considerable authority on the subject, Professor Bently having been central to the submission of evidence against term extension as considered in the Gowers Report, and Mr Mollet leading the BPI’s engagement with the UK government and the EU. Unsurprisingly though, their views were poles apart. Sir John Mummery needed to be as much a referee as a chairman.

Sir John, whose interest in copyright is long established and well known, opened the evening by noting that CLA events provide a welcome opportunity for cross-fertilisation of IP and competition thinking, given the propensity on the one hand of IP lawyers to know too little about competition law, and on the other hand of competition lawyers to know too little about IP law.

The title for the evening was itself contentious: “Extension of Sound Recording and Performers’ Rights: an Issue of Fairness.” Professor Bently added a subtitle: “What’s love got to do with it? The shift from reason to emotion in the proposal to increase the copyright term for sound recordings.” The thesis of his talk was that the Commission’s Valentine’s Day announcement favouring term extension marked the shift in the debate from a basis is reason to one founded on emotional appeal alone.

In setting up the rationalist background of his title, Professor Bently noted that the 2004 EC Staff Working Paper, the Gowers Report, and the EC-commissioned IVIR report had all approached the question rationally, with evidence-based and economic reasoning. Each had come out against extension. Categorising the counter-arguments under 5 headings, he analysed and found fault in the record industry’s justifications based on incentivisation, lost income, incentive for digitisation, harmonisation with the US, and trading interests. Incentivatisation in particular was a baseless argument given that there could be no creative incentive present in extending copyright in an existing work. Similarly, incentivising digitisation provided no rational basis for term extension – if that objective required incentives, the rational approach would be to reward the digitiser, not the existing owner. The case against term extension had been definitively underwritten in the well-known “17 Nobel prize-winning economists’ brief”. That brief supported the view that improving value far in the future provided no significant incentive for current investment.

The first significant milestone in the shift from a rational, economic view was the May 2007 report of the Select Committee on Media, Culture and Sport. That report based its arguments on treatment of creators, rather than economics. This was followed by the Commission’s report also supporting extension. Although full details are awaited, the basis appears similarly to be grounded in creators’ interests.

Professor Bently observed that extending performer’s rights comes at a cost to society. It is a political question as to whether that cost is worth paying, but the correct approach is to identify the cost and decide that it is worth bearing. The professor added that, in his own view, the cost was indeed a cost worth paying. However, he raised several notes of concern: if extension is really to protect the interests of performers, (a) why does it also apply to sound recordings, (b) why is it not an inalienable right of the performer, and (c) why is it for 95 years rather than the life of the performer? He noted that the problems with term extension are such that UK IP academics, the Max Planck Institute and promenant economists have lined up to oppose it.

It will come as no surprise that Richard Mollet did not agree with much of that. Speaking as the representative of 400 BPI members and with an eye on broader music interests, he emphasised that extension is indeed a question of fairness. He noted that BPI works in partnership with musicians and performers and that the symbiotic relationship of performers and the music industry is underpinned by the rights structure. The perspective of the sector, he stressed, is that copyright represents a “moral right” of the creator, not as that term is understood by lawyers but in a more fundamental sense. This, he suggested, was reflected in the approach that had been taken in Select Committee and was now being taken in the EU. Noting that there is no current proposal aimed at equalisation of copyright terms, he said that nonetheless there was a considerable perceived unfairness in having such a wide disparity of terms for different copyrights. Term extension goes some way to address that unfairness.

The EU had proposed a “use it or lose it” provision on term extension which helped protect public interests and ensure that sound recordings were maintained current. The EU’s proposal to include a levy supporting a fund for session musicians was a welcome benefit for a group whose average annual income was no more than £10,000. Praying in aid support from the government, opposition and Liberal Democrats, he observed that there is cross-party consensus behind the extension proposals that reflects the underlying unfairness in the present regime. He suggested that there is a necessary co-existence between performers’ rights and rights in sound recordings, attributable to the symbiotic relationship of performers and the music industry.

He illustrated the present unfairness by reference to a hypothetical CD. The artwork, lyrics and music all attract protection for 70 years after the death of the respective creator, compared with only 50 years from the event for the sound recordings and performers’ rights. He challenged the economic evidence against extension, relying on counter-examples in a PwC report which had failed to identify any significant pricing difference between copyright and out-of-copyright music. To illustrate this point, he observed that iTunes charge 79p a track regardless of the existence of sound recording protection or lack thereof, and concluded that extending copyright would not act to the disbenefit of consumers. He emphasised that the BPI does not, and never has, argued that extension would incentivise investment; rather, it affects the ability to invest. Market investment is not easy to attract to the specialist model of the music industry and revenues from extended copyright would provide much needed investment capital. In summary, therefore, extension was a fair step to take.

In questions from the floor, Peter Roth of Monckton Chambers asked how it was that term extension had itself been extended from the proposed 70 years to the currently proposed 95 years. Mr Mollet explained that this had resulted from considerations of parity with the US. Professor Bently commented that this lacks rational basis, given that the US is obliged to extend national treatment.

Trevor Cook of Bird & Bird asked a question concerning the disparity existing between different forms of IP (20 years for patents, 25 years for designs etc). Was it right that sound recordings, which could be analogised to an investment-based activity like inventing or design, should attract protection for so long a term? Mr Mollet responded that the closest analogy for sound recordings was with the creative activity in music and the fair approach was to provide an analogous length of protection.

Sir John Mummery commented that the burden of proof in seeking a change in the law ought to lie on those asking for it. He asked: was there clear evidence that the current period was not working properly? Mr Mollet suggested that the evidence was clear, that the current period is hurting performers. Professor Bently observed that the legal regime has been well-known for many years and provides no basis for a retrospective change.

The debate continued for some time, with further questions from the floor considering pricing models and the cost to the public, the comparison of the term for other copyright works and the existing and proposed term for performers’ rights and sound recordings, and the reliability of the economic evidence on each side of the argument.

Left: spare a thought for those artistes whose pension rights depend on term extension (illustration from Caroline's Cats)

In summing up and thanking the speakers, Sir John cautioned that changes in the law do not always have the effects intended by the legislature. He reminded the audience of the Redwood litigation, concerning reversionary interests under the 1911 Act. The Act provided for a second 25 year term of copyright after the author’s death, which reverted to the author’s estate. In the event, the principal beneficiaries had proven to be those who acquired portfolios of reversionary interests, and perhaps also the lawyers involved in the ensuing litigation.

Thanks are due to Bird & Bird for hosting a fascinating event, and to the CLA for organising it. For further details of the CLA, please contact its secretary Sharon Horwitz".

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