Ask the experts: The Gowers review

Andrew Gowers, head of communications at Lehman Brothers and former editor of the FT, (above right) and Ron Marchant (above left), head of the Patent Office, discuss the Gowers review’s recommendations with FT.com readers in a live online debate on Friday from 2.30pm GMT.

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What does Mr Marchant make of the Gowers review’s recommended restructuring of the Patent Office? And can Mr Gowers explain exactly what the restructuring will involve?
George Stewart, Brighton

Andrew Gowers: The restructuring involves creating greater distinction between the different functions of the Patent Office - for example between functions to do with award and arbitration of IP; or between operations and policy-making. It also involves creation of a new Strategic Policy Advisory Board to oversee IP strategy, an the renaming of the Patent office as the UK Intellectual Property Office.

Ron Marchant: I welcome what Andrew has to say here. In fact this report is the first to open up the question of the role of IP in wider policy context including innovation in the round, international development, and the competitiveness of the UK.

I welcome the fact that the report recognises the pivotal role to be played by the UK Intellectual Property Office - not just a rename but a new beginning. Not surprisingly the office does require a degree of restructuring but it is something we are eager to do. In fact in 2005 I initiated a programme called “A Patent Office for the 21st Century” which fleshed out some of the changes needed.

This report both validates that approach and carries it further. In particular, the proposes Strategic Advisory Board for IP Policy will provide the current missing strategic drive needed to ensure that the IP system and the Office continue to keep pace with economic, technological, and global developments.

Personally I am delighted that “The Patent Office for the 21st Century” will be “The UK Intellectual Property Office”.

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Should there not now be a UKPO sponsored initiative to get ISPs and particularly free municipal broadband Wi-Fi networks that are publicly funded to agree to a voluntary code of conduct to phase in network filtering to prevent the transmission of infringing files?
Mike Edwards, London

Andrew Gowers: We said in our report that we were observing current efforts by the music industry and the ISPs to reach agreement on such a modus operandi, in which music companies would ideally persuade ISPs to close offending accounts on presentation of appropriate evidence. We also said, in effect, that if that did not work, we would urge the government to consider legislating on this matter by the end of 2007.

Ron Marchant: In order to minimise burdens on business it is better to have voluntary codes of practice. This is recognised by the review but the recommendation also says we should consider legislation should the industry protocols prove ineffective.

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Transformative use is described in US legal journals as the most troublesome provision in US copyright law because its parameters are so arbitrary. Why are you proposing it is introduced here? We have a system here which works - if you want to use a sample, you need to clear it. The licensing of samples is a significant part of copyright trade in the UK and it works! The system also provides a means for creators to say no to the use of samples of their work with a violent or political tone that they do not wish to endorse. The same concerns apply to the suggested exceptions on parody and pastiche. If its clarity we are after, this is the wrong way to go.
Emma Pike, British Music Rights

Andrew Gowers: We have proposed the exceptions to copyright in our report largely in response to prompting from those using the IP system, who identified inflexibilities in these areas as an economic impediment. Web think copyright is a very flexible system - which is why it has survived for centuries - but we also think it needs to adapt to changing economic and technological conditions.

Ron Marchant: As the person responsible for the Copyright legislation which will implement these recommendations I appreciate that it is not straightforward. Andrew has given us guidance on what needs to be done and we now have work out the best way of implementing. This will clearly require us to draw up options and consult widely including the music industry regarding acceptability, simplicity, and impact.

It is too early to go further.

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Mr Gowers, I applaud your review’s recommendation to cut the cost of enforcing intellectual property rights by encouraging mediation over going to court. But, without some form of legal coercion this encouragement would only be theoretical. Any large company will use the prohibitive cost of going to court to their advantage against a smaller competitor. What would you suggest to prevent this?
Adil Allawi, London

Andrew Gowers: It’s not, so far as I understand the law, possible to be coercive in promoting mediation as a means of settling disputes, and may not be desirable or sensible, since achieving a mediated settlement depends by definition on goodwill on both sides.

However, raising awareness of the costs of full-dress litigation and educating those who use and operate the system in the cost savings obtainable through alternatives are a good way forward. You will, I suspect, never be able to achieve changes in the courts that redress the fundamental balance of advantage between large companies against smaller ones.

Ron Marchant: Although this question is specifically addressed to Andrew I would like to offer my view. We have received a number of representations from SMEs about the costs and uncertainties of going to court. It isn’t simply a matter of big versus small but it can seem that way when the small are affected. For this reason we in the patent Office have launched a couple of initiatives in response to discussions with customers.

Firstly for a fee of £200 we will conduct a thorough review of validity of a patent (which may be involved in any infringement allegation) in the light of new prior art brought to our attention and for the same fee assess whether any action is likely to infringe a given patent.

Secondly, we have recently introduced a mediation service. This has been welcomed by all in the IP profession as a way of seeking to avoid the need for costly and adversarial litigation. Details can be found on our website at www.patent.gov.uk

Both of these should make dispute resolution more accessible and will be welcomed by small businesses. We are also looking at further options in relation to litigation insurance.

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To an ordinary music fan, an extension to 95 years after a work is created seems odd and probably excessive. After all, for the rest of our wages cease when we retire at 65 and not at age 160. Why do already rich musicians think they are a special case given that we have seen reports recently of 40 per cent of the world’s wealth being in the hands of 1 per cent? An extension will just concentrate it even further.
Music Lover, UK

Andrew Gowers: I agree with you. That’s why we proposed keeping copyright term for sound recordings where it is - at 50 years. Actually, you could make a very good case for reducing copyright term on the basis of the economic arguments we reviewed. We did actively consider doing that, but ended up making the sensible and modest proposal to maintain the status quo.

To propose changing term in any way you would have to produce strong arguments concerning the public benefit of doing so. The music industry comprehensively failed to do so.

Ron Marchant: As a 61-year old music lover myself (old recordings of blues especially) I can see both sides of the debate here. When I retire I do expect to get a pension and hope to spend part of that on music. Thus I want artists to be rewarded and produce more and I want access to their works at a reasonable price.

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Do you think that the policies and working structure of the UK & European Patent Offices put those member countries at a permanent IP disadvantage compared to patent submissions made via the USPTO in the US?
Dr Garry Harper, Dorset UK

Andrew Gowers: No, I don’t think so at all. First of all, the operations of the UK Patent Office appear a great deal more expeditious than those of the USPTO, which must be worth something to IP industries in the UK. Second, I think there are clear signs that the US has in some cases gone too far in allowing new forms of IP protection which have not been an unalloyed economic god.

Software patents are one category I would mention; another is business method patents. The effect, in all too many cases, has been to enrich US lawyers but not to advance healthy competition in the economy.

Ron Marchant:This is a very timely question. The report rightly recognises the need to improve the patent system in Europe in order to reduce the costs of access and protection in the European “home market” as compared with the home markets in the USA and Japan. Progress has been slow and difficult and I welcome the proposals that we redouble our efforts to achieve the solution that European Industry needs.

Translation and litigation reform is a first step and would assist us in developing the basis for a community patent.

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The Gowers report recognises how an implementation of a DRM mechanism could trump copyright law. Should DRM implementations be legally limited to meet a European standard that does not conflict with copyright/IP?
Michael Walsh, London

Andrew Gowers: We have adopted the reasonable principle that where a DRM mechanism seeks to prevent something that is permissible under the law, the law should trump DRM.

Ron Marchant:The report recognises the right of creators to apply technology in protecting their copyright but also recognises that this needs to be appropriate in the light of the legitimate interests of consumers. In practice this is difficult to achieve within a purely legal framework and the proposal that the Patent Office provide a web interface to facilitate notice of complaints from consumers about DRM will enable the development of the a workable solution which balances all needs.

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My question concerns the new private copying exception envisaged by Recommendation 8 of the report. It’s clear that digital technology has added value to the way that creative works are used; as users we enjoy smarter, faster, more convenient access, while commercial entities are able to create business models around producing and supplying the necessary products and media to facilitate these enhanced uses. It is also clear that an irreplaceable part of this whole process is the generation of original, creative content. Should content creators, such as writers and artists, be entitled to share in the overall value added by new technologies and, if so, what policy measures should be considered in this area?
Richard Combes, London

Andrew Gowers: I think creators do share to a significant extent in value created by new technologies - in the sense that they have opened up new distribution channels and new ways of getting their work in front of huge audiences at very low cost. I only need mention the social networking sites such as MySpace or specific music sites which are growing so fast right now.

And I think the new possibilities being opened up by the internet to share, and give new commercial life to, the “long tail” of works that may be in copyright but out of print are hugely exciting for artists and writers as well as for publishers. That is why we proposed new measures to promote the re-publication of “orphan works”, for example.

Ron Marchant: In any work there can be many creative contributors. Copyright law is designed to provide incentives and rewards to each. It is also important to recognise the contribution of those who provide the technologies and the channels delivering the use-value to consumers but this does not preclude creators from receiving their just reward.

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Which is the best way forward: another independent review every year, or a new kind of statutory body, replacing the Patent Office, with more powers, and with real responsibility to create the best system for public, user and industry interests?
John Howkins, UK

Andrew Gowers: I sincerely hope there will not be the need for another independent review in the near future. Nor do I think, after carefully considering the facts and arguments, that there is any need to replace the Patent Office or to reinvent the IP wheel by creating a wholly new system. There is a need, however, for sensible reforms of the governance of IP in the UK, which is what my review has proposed.

The Patent Office has done a good operational job in awarding patents and administering other aspects of the system, and its efficiency and effectiveness compare well with its peers around the world. Where it has done a less good job is in taking the lead in strategic development of IP policy in a rapidly changing economic and technological environment, spotting new challenges and setting out a policy framework for government to deal with them.

That is why we have proposed, first, creating a clearer distinction between the different functions of the Patent Office and, second, adding a new Strategic Policy Advisory Board to give advice and oversight in this area, with its own reporting line to ministers and its own modest secretariat and research resource. If that functions well - and whether it does so will depend crucially on the quality of its membership and the extend to which IP-relevant industries and other interested groups engage - then there should be no need for another IP review for quite a few years.

Ron Marchant: Obviously we do not want or need a review every year. This doesn’t mean we should set up a replacement body. That would create an artificial barrier between IP and innovation. Rather the review proposal to restructure the Patent Office as the UK Intellectual Property Office and create a Strategic Advisory Board for Intellectual Policy is the optimal way of using the skills of the Patent Office, its connections with the Office of Science and Innovation, together with the skills and experience of the business community in the new advisory board.

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The UK wanted parity with the US regarding sound recording copyright term. This was said to be 95 years in the US. However, I have on good authority that sound recording copyright in the US does not discriminate with other copyrights, such as literary copyright, and that it is actually life plus 70 years. Can you confirm this?
K Kwaku, London

Andrew Gowers: Sound recording copyright, as stated in our report, has a term of 95 years in the US, whereas for literary works the term in most parts of the world including the US is life plus 70 year. It is not true to say that “the UK wanted parity with the US regarding sound recording term”.

Parts of the music industry were arguing for this. I would point out in response that there are a number of ways in which copyright terms are more favourable to musicians and music companies in Europe compared with the US. The most obvious of these is that radio stations do not generally pay royalties for music airtime in the US, and that under the “bars and grills exception”, quite a lot of US public establishments where music is played do not pay licensing fees either, whereas in Europe they do.

Ron Marchant: Not completely expert on all aspects of US legislation but we understand that 95 years for sound recordings applies to “works made for hire” (that is owned corporately). Otherwise similar term. Note that there are other differences. In the UK royalties are paid for public broadcasts. In the US there exceptions for eating and drinking establishments and shops. Around 70 per cent of such establishments and 45 per cent of shops don’t have to pay royalties to performers.

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Already, the predictable response from professional musicians has appeared: that the UK government should ignore the Gowers review and extend copyright to 95 years on music recordings. Do you think their view will sway the government, or will the (in my opinion, eminently sensible) view of Andrew Gowers prevail?
Andy O, UK

Andrew Gowers: The Government has already accepted all of my recommendations. Copyright law, however, is a competence of the European Union, and therefore the question of whether term for sound recordings should be extended - or, for that matter, reduced - is a matter in the first instance for the European Commission.

So in this respect, it is correct to aim my review recommendations at Brussels. My team and I have had a number of good discussions with the people responsible at the Commission, and we have every reason to believe that our report will be read there with keen interest.

Indeed, I would like to hope that it will have a formative influence on the debate on copyright term. I am not aware of any other piece of work by a quasi-official body that has looked more thoroughly at this issue anywhere in the developed world. What we have done, in effect, is to give a prominent public airing to a view subscribed to by most leading economists - that there is no broad public interest in extending copyright term, and that the social and consumer costs of doing so are considerable.

If politicians base their policy on evidence, rather than on giving in to single-issue lobbies, they will follow our advice.

Ron Marchant: The government response to the recommendations has been positive. It is not really a question of whether the UK will be swayed as this is a matter for the European Union and we understand the Commission will be looking at this next year. The UK will then respond to any Commission proposals.

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My company works in the internet software area and has spent five years developing a very clever development tool for rapid application development in the Java internet world. Our software is copyright, we own the IPR but we have not patented it (we understand this is next to impossible in the UK). We don’t sell the product as it gives us a considerable competitive advantage. However, if we did sell it (and there may be a good reason for doing so) and a large competitor (ie Microsoft or Oracle) decided that somehow we had infringed some patent or IPR of theirs (which we haven’t as it’s all original work), how could we fend off the immense legal tie-up that such companies invoke to wear down (and kill) their competitors?
David Quarterman, Cirencester

Andrew Gowers: I’m afraid I hesitate to offer advice without knowing the full facts of the case.

Ron Marchant: When the IPR is in the form of patents it is relatively easy to check whether any of your activities are likely to infringe (and the Patent Office can help here). Where the IPR is in the form of copyright this is not so straightforward, though the recommendation that we look to create a voluntary register of copyright could help here.

The general point is that any business needs to be aware of the IPR of its competitors and that negotiation and perhaps licensing is an alternative to going to market yourself and also can avoid litigation.

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For the mobile telephony equipment manufacturer (eg, phones and networks) to be compliant with the standard (eg, 2G or 3G), it must obtain licenses for all patents declared essential. The licensor has certain market power with respect to the manufacturer. In an attempt to mitigate risks arising from dominance, the licensors were obliged to provide licences on Fair Reasonable And Non Discriminatory (FRAND) terms. The concept of FRAND however seems to be quiet vaguely defined.

Could you suggest what are the key rough principles where it could be possible to check whether license fees set by the licensor are FRAND? How would it be possible to conclude whether fees are somewhat above FRAND? Are there any benchmarks for FRAND prices?
Alexander, London

Andrew Gowers: This is precisely the sort of area on which mediation - as opposed to full-scale litigation - ought to offer companies in dispute a way forward. The definition of FRAND would be bound to depend in part on comparable licensing arrangements struck by other companies in the recent past. But it would be impossible to offer hard and fast definitions.

One of the priorities my review identified was the need to create more liquid markets in which to transact IP - for example through such means as easier licensing.

Ron Marchant:I do not know the answer to this and it is not something with which the Patent Office normally deals and not something the report focuses on directly. I understand that his is a matter being considered by the European Telecommunications Standards Institute. If you need further information I suggest you contact the DTI (Telecoms Policy).

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