Wednesday, 19 June 2013

Patent Box

Jane Lambert

The patent box is an important tax concession to encourage investment in research and development which came into effect on 1 April 2013.

Over the last few months we have been running a patent box roadshow with seminars at Leeds and Liverpool

Our next seminar will be in London at the Liverpool embassy on 12 July 2013 and you can book for that event here.

As we are one of the few chambers with expertise in tax as well as intellectual property we are concentrating all our resources on the patent box and research and development credits here.   Just one article and some links and presentations at the moment but it will grow.

Saturday, 15 June 2013

UK: Comment is free - and so are private copies

On 7 June 2013 the Government published four short consultation papers, setting out for technical comment the draft statutory wording by which it proposes to implement new exceptions for private copying, parody, quotation and public administration. I should like briefly to discuss the private copying exception.

The consultation paper states that it is the Government’s intention that the exception be available to an individual, not a body corporate; that the individual must have lawfully acquired the copy from which the further copy is made and on a permanent basis; and that the further copy must be made for the individual’s private use, for non-commercial ends. The Government contends that no compensation should be payable to the right holder, on the basis that its proposal “allows for appropriate compensation to be paid at the point of sale, and ensures the exception will cause minimal harm to copyright owners”.

The Government proposes to insert the following section 28B in the 1988 Act:

28B Private copying
(1) Copyright is not infringed where an individual uses a copy of a copyright work lawfully acquired by him to make a further copy of that work provided that:
(a) the further copy is made for that individual’s private use for ends that are neither directly nor indirectly commercial;
(b) the copy from which the further copy is made is held by the individual on a permanent basis (for example it is not a copy that is rented to the individual for a specified period or borrowed from a library); and
(c) the making of the further copy does not involve the circumvention of effective technological measures applied to the copy from which it is made.
(2) Copyright is infringed where an individual who has made a further copy of a copyright work pursuant to subsection (1):
(a) permanently transfers the copy to another person; or
(b) permanently transfers the copy from which it is made without destroying the further copy
and the further copy shall in those circumstances be treated as an infringing copy.
(3) Nothing in subsection (2) prevents an individual from storing a further copy made pursuant to subsection (1) in an electronic storage facility accessed by means of the internet or similar means, where that facility is provided for his sole private use.
(4) To the extent that the term of any contract purports to restrict or prevent the doing of any act which would otherwise be permitted by this section, that term is unenforceable.
The Government will add this new exception to the list of exceptions falling within the intervention mechanism under section 296ZA of the 1988 Act.

It will be recalled that Article 5(2)(b) of the Copyright Directive 2001/29/EC permits an exception “in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures … to the work or subject-matter concerned”. Application of any exception “shall only be applied in certain special cases which do not conflict with a normal exploitation of the work or other subject-matter and do not unreasonably prejudice the legitimate interests of the rightholder” (Article 5(5)).

There are some interesting and, for right holders, concerning aspects to the proposal.

Lawful ownership
The Government was clear that the exception would apply only to copies lawfully owned by the copier. In a digital era, however, the defining of ownership requires some thought. The Government attempts to address this by providing that the original copy has been “lawfully acquired” by the copier and that it is held by him “on a permanent basis”. There is no requirement that he be the owner of the physical carrier in which the original copy is embodied. However, in digital transactions there is no transfer of a physical carrier, so it would be difficult to define the exception by using explicitly the concept of “ownership” - in the “sale” of a digital copy, nothing changes hands: the vendor performs a service which changes the condition of media in the prior possession of the purchaser. The drafting of sub-section (2), which appears to attempt to confine the use of private copies to temporary lending, can be expected to provoke much debate. 

Cloud storage
Sub-section (3) aims at legalising the use of online storage facilities for private copies. The proposed wording does not purport to insulate Cloud service providers from liability. It will be for the courts to decide who “makes” the copy when a user stores a copy in the Cloud. Cloud storage facilities usually encode the uploaded data and potentially perform various transformations upon them, all of which would appear to require a licence of the reproduction right. The problem with this draft provision is that it applies where the online storage facility “is provided for [the user's] sole private use”. This condition seems to focus on the setting up of the facility, not its use. It might be read as excepting the stored copy even if it could easily be accessed by others. Questions would then arise whether there was an infringing communication to the public and if so, by whom and in what jurisdiction.

Strictly sub-section (3) is unnecessary. If from a technical perspective the consumer is “making a private copy” within sub-section (1), it does not matter where it is stored. It might better for it simply to be omitted; or for the reference to provision of the facility amended so as to read: “where that facility is used [or “accessed”] solely by him”. In this way the copy would cease to be a private copy if the online account were accessed by others.

As mentioned above, the Copyright Directive requires that where there is a private copying exception there be “fair compensation which takes account of the application or non-application” of TPMs. In Padawan the Court of Justice of the European Union held that “[c]opying by natural persons acting in a private capacity must be regarded as an act likely to cause harm to the author of the work concerned.”

The exception would apply whether or not the original copy was made by or with the consent of the holder of the UK copyright. Clearly it is the holder of the UK copyright who is entitled to compensation (if any). If, as the Government argues, the UK right holder can “compensate” himself at the point of sale it seems inadmissible that, for example, copies could be acquired from outside the UK and then copied pursuant to this exception without compensation. It would be more logical to provide that the original copy must be one which was put in circulation or made available to the public “by or with the consent of the owner of the [UK] copyright”.

As mentioned in previous postings, the Government’s argument that the value of the private copy is “priced in” at the point of sale has been undermined by recent research, which shows that in the audiovisual sector right holders can and do segment the market for licensed copying by price, charging more for content which can be format-shifted. In any case, the right holder may have nothing to do with the setting of the price in the UK.

The Government’s justification for denying compensation ignores the requirement of Recital 35 that “account should be taken of the particular circumstances of each case”. It would deny compensation even to right holders whose works have never been the subject of a sale. As mentioned above, it ignores the fact that the UK right holder often will not be the licensor of the copy from which the private copy is made. It treats all right holders in the same way, whatever their vulnerability to the copying of their works. It would seem also to apply to the entire legacy of physical copies in the market, even thought they were sold prior to the application of any private copy exception (a point which the 2006 Gowers Review recognised as preventing retrospective application of a format-shifting exception). Arguably, to impose a private copying exception on existing copies would be an expropriation of private property, contrary to Article 1, Protocol 1 of the European Convention of Human Rights: Balan v Moldova (2008) ECHR, application no. 19247/03.

The CJEU in Padawan held the Spanish system of private coping levies incompatible with the Directive because it failed to strike the correct balance between the need to compensate right holders and the interests of persons involved in production of private copies. An indiscriminate levy on all copying media, whether used privately or professionally, was not permissible. The court also held in Thuiskopie that, having regard to the Three-Step Test, a Member State which introduces a private copying exception “must guarantee, within the framework of its competences, the effective recovery of the fair compensation intended to compensate the authors harmed for the prejudice sustained, in particular if that harm arose on the territory of that Member State”.

In the present case, the reverse applies: instead of an indiscriminately broad levy on recording media, there is an indiscriminately narrow (or rather, non-existent) levy in respect of all works. It seems possible that the present wording, if enacted in a statutory instrument, would be struck down by the English court as being incompatible with the Directive.

The closing date for comments on the proposed exceptions is 17 July 2013. The UK Intellectual Property Office will hold a series of open meetings in the week commencing 8 July 2013 for discussion of the draft exceptions.

Thomas Dillon

Monday, 10 June 2013

Introduction to Intellectual Property Law - 26 June 2013 16:00 - 18:00

Jane Lambert

Not long ago most commercial practitioners spent a lifetime in the law without ever having to advise on an intellectual property matter or coming anywhere near the Patents Court. It was a specialist field with its own court having its own rules, the judges and practitioners of which spoke an almost impenetrable argot. Most law schools ignored IP except as a specialist option with the result that many practitioners did not have a clue what it was all about. There were horror stories of solicitors receiving writs for writing the same sort of letter before action as they would write in any other case and it was all horribly expensive. Best left to specialist law firms like Bird & Bird and Bristows and the handful of specialist counsel who knew what they were doing.

The internet and programmes like Dragons' Den  have changed all that. Clients often with quite small businesses are now coming to you with questions about software licensing and domain names or with piles of ring binders from law firms demanding undertakings that will put them out of business before next Thursday or else.

Despite the best efforts of the judges and practitioners to bring down costs and align their practices with other types of work IP is still scary and expensive with plenty of pitfalls for the unwary. It has its own special Part of the Civil Procedure Rules and Practice Direction, special court guides for litigation in the Patents Court and the multitrack and small claims tracks of the Patents County Court. And there is still that special language with its counterintuitive pronunciations any slip of which is punished at best with howls of derision by those in the know and worse with cutting sarcasm or more. That is why my light hearted post "How to spot an IP blagger at 30 paces" 23 Feb 2009 IP North West went viral.

If you or any of your colleagues are IP newbies or even if you do have some experience of IP and have picked up some basic knowledge but want to systematize it we can help you. We can also help if you are an IP specialist but have just recruited a bright young man or woman to your team whom you need to train up quickly. I am presenting a course "Introduction to IP" at 4-5 Gray's Inn Square on Wednesday, 26 June 2013. We will give you CPD points and it's all free.

"Baby stuff" I hear you say, "Boring!" "We've heard it all before." "I can get a book"   Well no, It's not actually. It is an introduction and overview but I shall put IP law into context.  I will explain why our statutes have to conform to TRIPS, intellectual property treaties and EU directives. I will introduce you to the institutions that administer IP law like our own Intellectual Property Office in Newport, the European Patent Office in Munich, OHIM in Alicante and WIPO in Geneva. I will tell you how our law protects investment in branding, design, technology and works of art and literature. I will even explain how you can get a patent and how you construe it.  And, above all, I will have you speaking patent-talk like a pro.

All that in 90 minutes? Won't it all be terribly superficial.? How will you ever remember it? Well I will work you hard. I will work you as hard as my dance teacher, Fiona, makes me work in ballet class.  Everyone who attends this course will get a complete manual either digitally or in hard copy with hypertext links and URLs to the treaties, directives, statutes, statutory instruments, cases and other materials to which I refer. With any luck, GeniusIP, a web 2.0 application that I am helping to develop will be ready by the 26 June but even if it is not you will get free access to those materials and more through that tool so long as you attend my course.

If you do attend the course you will also get to meet me and my team and perhaps even my clerks Steve and George over a cup of tea or perhaps a class of wine. You can make up your own minds as to whether we can cut the mustard and deliver on our promises. Perhaps just as important you can meet your fellow litigators and commercial practitioners. Helps to break the ice when you are negotiating that licence or agreeing case management directions..

You can register for the course through Eventrbrite or the announcement in London IP. You can call Steve or George on 020 7404 5252 for more information or fill out their contact form.  You can tweet us through twitter, poke me through Facebook or message me through G+, Linkedin or Xing.

Now although this course is free we should be overjoyed if you would donate to the Jane Tomlinson appeal and Northern Ballet's Sponsor a Dancer Campaign. Indeed, we'd be happy if you would make a gift even if you are not coming to my talk. Jane Tomlinson was a remarkable athlete who raised £1.85 million for charity while suffering from terminal cancer. She is a national hero who came from Yorkshire where we are all very proud of her here. Northern Ballet, one of our great cultural institutions which is also from Yorkshire, recently took London by storm with Great Gatsby (see my review "Life Follows Art" 8 March 2013 in Terpsichore). Now there is a very convenient way in which you can support both causes and that is by sponsoring my teacher, Fiona, in the 10 kilometre "fun" (sic) run for the Jane Tomlinson Appeal and Northern Ballet in Leeds on 14 July 2013. Either that or you take part in the run yourselves.

See you on 26 June in 4-5 Gray's Inn at 16:00. Looking forward to meeting you all.