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• First Review of the UK Intellectual Property System for 20 Years

Introduction

Following much industry speculation the Gowers Review of Intellectual Property was made available to the public on the 6 December 2006 as part of Gordon Brown's Pre-Budget Report. This report was commissioned by Gordon Brown in 2005, and was set up to review the UK Intellectual Property (IP) system and, where appropriate, to make recommendations for improvements.

The review covers most aspects of the UK IP system including registration, use, exploitation and enforcement, and concluded that, whilst the system is not in need of "radical overhaul" there is significant room for improvement.

As Gowers illustrates, in today's economy, where the value of a business' intellectual assets is often many times greater than the value of its tangible assets, IP rights have become more important than ever before. It is surprising that so few businesses and consumers are aware of their IP rights. The Gowers review, in making recommendations for improved awareness, efficiency and flexibility hopes to make IP rights more accessible, workable and user-friendly. Whether those recommendations will be taken up remains to be seen.

The report makes a total of 54 separate recommendations for improvement to the UK IP System. The suggestions range from re-branding "The Patent Office" to the "UK Intellectual Property Office" (to add clarity) to reforming the Patent Courts. It is important to remember that the recommendations are just that, they are simply suggestions for improvement. Many of the recommendations cannot be implemented by the UK government acting alone, collaboration from the EU or further a field would be required. Furthermore, it remains to be seen which of the recommendations, if any, the government chooses to implement.

The Impact for SME's

The report makes a number of recommendations aimed at improving the system for Small and Medium Size Enterprises (SME's) which, by increasing awareness and potentially speeding up the time it takes to register a trade mark or patent, may help them in the long term. These recommendations are set out in more detail below.

The Review has however missed an opportunity to make the registration, use and enforcement of IP rights more accessible and affordable for SME's. The same barriers, such as the high cost of enforcement will still exist.

The report considered providing SME's with tax credits to help pay for Patent Agent fees similar to the tax credits already given for R&D. The report does not recommend that these tax credits be given. This is a missed opportunity for the UK (Wales and Northern Ireland already offer SME's funding for IP registration costs).

SME's have always had a problem with funding proceedings to enforce their IP rights. "David and Goliath" scenarios, where a large company simply outspends an SME in legal proceedings and in essence side-steps the SME's IP rights as a result are common. The Gowers Review makes no recommendations which would avoid this problem.

The biggest aid to SME's suggested by the Gowers Review comes in the form of education. The Review suggests a greater level a collaboration between The Patent Office and Business Link to aid the dissemination of information regarding IP to SME's. In a similar vein, the Review recommends that, when registering a company, Companies House issue new companies with detailed information about IP rights, their registration, use and enforcement.

Extension to Copyright Term

Under copyright law the composer of a musical work (and their estate) enjoys a monopoly in the exploitation of the work for a period equal to their life plus 70 years. By contrast, the performer or producer of a recording only enjoys a monopoly, and hence a right to royalties, in that work for a period of 50 years.

Calls from interested parties, including Cliff Richard and U2, for the rights of performers to be brought into line with those of composers has created much media interest. Nonetheless, the Gowers review recommends that no amendments be made to the term of copyright enjoyed by performers. Gowers' reasoning for this is given in detail but in essence, the report concludes that there is no legitimate reason to extend the term; there would be no resulting increased incentive to produce copyright works; consumers would be forced to pay higher prices for recordings for longer and; extending the term would create a net loss of revenue.

The Digital Age

Many of the recommendations put forward by the report are intended to bring the UK IP system up to date to cope with legal issues created by recent technological developments.

The advent of digital media and the internet makes it easier than ever before to copy things. Currently, copyright legislation does not permit an individual to purchase a track from an online music library such as iTunes and then transfer it to a CD. Such a transfer of copyright material from one format to another would create an infringing copy and, in theory, leave the individual responsible for creating that copy open to prosecution. The Gowers Review recommends that consumers be permitted to make such a copy from one format to another without infringing copyright.

Meanwhile, Gowers advocates tougher sanctions for digital infringement of copyright works. Currently, the maximum sentence for digital infringement is 2 years imprisonment. Gowers recommends that this should be increased to 10 years to bring it into line with the sanctions for tangible infringement.

The Gowers Review also recommends extending the exemptions to copyright infringement enjoyed by museums and libraries. Currently many older works risk being lost as they deteriorate on their old media. Gowers recommends that it should be permissible to transfer old media onto new, digital media, in the interests of preservation.

Modern technology makes it easier than ever before for consumers and those in the creative industries to interact with the culture around them. Digital sound, image and video files can be easily manipulated. Under current UK copyright legislation an individual wishing to create a new work by, for example, sampling an existing copyright work, would need to obtain a licence from the copyright holder to use that sample. The Gowers Review recommends that an exception should be introduced whereby copyright in an earlier work is not infringed where that work is used to create a transformative or derivative work, provided that the new work does not impact on the commercial success of the old work. Further, the author of the old work will still retain the right to be identified as the author and to object to derogatory treatment of their work. The Gowers review also recommends that an exception to copyright infringement be introduced for the purposes of caricature, parody or pastiche.

Gowers also advocates that orphan works (i.e. work in copyright but where the copyright owner cannot be identified) should be available for reproduction and incorporation into new works provided reasonable searches have first been made to identify the copyright holder.

Gowers recognises that the advent of the internet, email and digital media has the potential to add value to distance learning. Presently, educational institutions are not permitted to send digital copies of educational material such a television programmes to their distance learning students. To do so would infringe the copyright in the work in question. Gowers recommends that an exception be introduced to permit digital transfer of copyright works by educational institutions to their distance learning students.

Operations

The Gowers Review makes recommendations for improvements to both the way IP is used and awarded.

In terms of awards, fast-track patent and trade mark application systems are advocated. Currently, the lengthy period it takes for these rights to become registered leaves businesses with a significant period of uncertainty in terms of the rights available for exploitation. This period of uncertainty naturally arises at the beginning of a product's life cycle and, with technology evolving rapidly, this period of uncertainty may run parallel to a business' ideal time to take a product to market. This is particularly onerous to SME's who often only have one product to market in their early days. It is hoped that a fast track registration procedure would avoid this lengthy period of uncertainty.

Gowers hopes that the system of Patent registration could also be made more streamlined if national Patent Offices were to collaborate with each other. It is hoped, for example, that this would reduce the need to duplicate prior art searches carried out in respect of a given patent application. Gowers also recommends increased training of Patent Office staff and increased Patent Office transparency in an attempt to streamline the IP registration system.

The Gowers Review does not recommend that new varieties of patent be created for different industries/products, for instance genes, plant varieties or computer software.

Enforcement

The report reveals that many consumers do not take IP crime seriously, many viewing it as a "victimless crime". To counter this Gowers recommends increasing public awareness through education, an increase in criminal sanctions (as detailed above) and the transfer of powers to Trading Standards to enforce IP crime.

Gowers recognises the high costs and time consuming nature of IP litigation. To combat this Gowers asks the government to consider introducing a streamlined process through a review of the Patent Courts. Gowers suggests that a track system, whereby certain cases can be fast tracked, should be introduced. Gowers also recommends increasing awareness of Alternative Dispute Resolution procedures as an alternative to IP litigation.

The report recommends that the government should look at and assess whether an "unfair competition" law would be a more efficient tool than current passing off law. Passing off cases are notoriously costly, time consuming and difficult to bring. Furthermore, in order to succeed, a business needs to show that goodwill has accumulated in the relevant product/packaging/trade mark which they are alleging has been infringed. Many start up business will not have been trading for long enough to have accumulated this goodwill by the time their IP is infringed.

Conclusion

The Gowers Review is a comprehensive and lucid review of the UK IP System in 2006. It is unfortunate however that the Gowers Review, the first review of UK IP in 20 years, and probably the last for some time, does not go further.

In particular, many will be disappointed that more assistance, especially financial, is not recommended for SME's.

The recommendations which the report makes does make are clear, logical and we believe will be welcomed across industry. It is now up to government to make the recommendations a reality.

"The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. The material in this article is published on the basis that Ashfords excludes all liability whatsoever for any loss or damage arising or claimed to arise out of use of this article or reliance on the material displayed on it. Save where otherwise indicated this article is © Ashfords Solicitors. All Rights Reserved. See our Website Disclaimers for our permissions policies."

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.