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Introduction
The war on piracy is moving forward on several fronts with a new impetus. Alongside the emerging regulatory framework for ISP responsibility, the UK government has recently proposed a tenfold increase in the level of summary fines for copyright infringement.
The need to protect the UK creative industries has never been greater. The influential Gowers Review, published in 2006, estimated that around 20% of turnover in the UK music and film industry was at that time lost through pirated CDs and illegal online file-sharing. In the past few years, the digital market has grown significantly: for instance, the digital share of the global music market rose from 2% in 2004 to around 15% in 2007 (according to the IFPI Digital Music Report 2008), and record companies are increasingly benefiting from new digital revenue streams such as advertising and public performance income. This market trend exacerbates what the Gowers Review described as the “anomaly whereby infringement in the digital world carries softer penalties than infringement in the physical world”.
IPO consultation
In its consultation paper on penalties for copyright infringement published on 11 August 2008, the UK Intellectual Property Office (IPO) has consulted on the government’s proposal of an increase in the level of fine for copyright infringement (whether offline or online) that can be handed down by a Magistrates' Court from the current maximum of £5,000 to a maximum of £50,000. The larger level of fine is proposed for a commercial-scale infringement, where the offender profits from the infringement.
By recommending a parallel increase in both offline and online infringement, the proposal reflects the Gowers Review, which recommended that penalties for online and physical copyright infringement should be consistent. The IPO has not, however, followed Gowers’ core recommendation of increasing the maximum custodial sentence for online infringement to ten years’ imprisonment, to match the maximum sentence for physical infringement.
Current law
The Copyright, Designs and Patents Act 1988 (CDPA) sets out several criminal offences for copyright infringement. The physical offences include:
- making or dealing with an article that infringes copyright (s. 107(1));
- making or possessing an article specifically designed or adapted for making a copy of a copyright work (s. 107(2));
- making or dealing with an illicit recording (s. 198(1)); and
- circumventing technological measures, fraudulent reception of programmes and dealing with or possessing unauthorised decoders (ss. 296ZB, 297 and 297A).
The online offences include:
- communicating a work to the public either in the course of a business or to an extent prejudicially affecting the copyright owner (s. 107(2A)); and
- infringing a performer’s making available right in a recording either in the course of a business or to an extent prejudicially affecting the owner of such right (s. 198(1A)).
The more serious physical offences under ss. 107(1), 198(1) and 297A are punishable: (a) on summary conviction, by up to six months’ imprisonment or a fine of up to the statutory maximum (or both); or (b) on indictment, by up to ten years’ imprisonment or an unlimited fine (or both). While the online offences under ss. 107(2A) and 198(1A) attract the same level of fine, they are punishable with the lesser sentence of up to three months’ imprisonment on summary conviction or two years’ imprisonment on indictment.
Proceeds of crime
When applying fines for copyright or trade mark infringement, the courts do not usually have the power to seize the offender’s proceeds of crime. On conviction, however, for an offence that shows a “criminal lifestyle” under the Proceeds of Crime Act 2002 (POCA), all assets and income acquired in the six years preceding conviction that cannot be legitimately accounted for are treated as a benefit of that criminal lifestyle and can be seized by the Crown Court.
The physical offences under ss. 107(1), 107(2), 198(1) and 297A are all “criminal lifestyle” offences under POCA, as are the counterfeiting offences under s. 92 of the Trade Marks Act 1994. POCA also applies, however, if: (a) an offence of any description was committed over a period of at least six months where the profit derived from that offence and/or any others taken into consideration by the court is £5,000 or greater; or (b) the offender is convicted of a combination of offences amounting to a “course of criminal activity”.
Gowers Review
The Gowers Review concluded that the CDPA does not provide adequate penalties for online copyright offences, and favoured an increase in deterrents, as urged in submissions received by Gowers from rights-holders in the creative industries.
Gowers Review recommendation 36 proposed that the maximum penalty for commercial online infringement and (if prejudicing rights-holders) consumer online infringement should be increased to ten years’ imprisonment, on the basis that “the intention and impact of physical and online infringement are the same”.
Government policy
In its February 2008 “Creative Britain” Green Paper, the UK government stated its intention to consult on introducing exceptional summary maximum fines (i.e. above £5,000) for online and physical copyright offences. It did not, however, consider increasing custodial penalties for online infringement.
IPO options
The IPO has since presented three options in its consultation paper:
- Option 1 – to make no change to the law;
- Option 2 – to introduce exceptional statutory maximum fines of £50,000 for all copyright offences (physical and online); and
- Option 3 – to introduce exceptional statutory maximum fines of £50,000 for all intellectual property offences, not just copyright offences.
The IPO made some observations on the three options, including the following:
- Option 1 – POCA already provides a powerful means to seize the profits from intellectual property crime. POCA does not, however, list all copyright offences (including, in particular, the online offences) as lifestyle offences, although penalties do not need to be listed as lifestyle offences for POCA to apply.
- Option 2 – Setting the statutory maxima for copyright offences on summary conviction at £50,000 would allow courts to take account of the profit that an offender has made from his crimes. An alternative might be to set more than one level of fine for the various offences, although there is no particular need to do so given that the courts would be expected to award the fine based on the facts of the case (i.e. the actual profits made).
- Option 3 – Many prosecutions concern goods that involve both copyright and trade mark offences. It can, however, be easier to prosecute trade mark offences than copyright offences: since trade marks are registered rights, the evidential requirements are often more straightforward. There is, again, the alternative of setting different maxima for different offences, but this is not required as the courts can award a fine based on actual profits.
Comment
The period of consultation closed on 31 October 2008, and it remains to be seen at the time of writing how the interested parties will respond.
Option 3 is clearly the most attractive for rights-holders, giving Magistrates’ Courts sufficient clout to administer sharp and effective financial penalties for offences that currently have little deterrent effect on determined operators of major file-sharing services. Further, the IPO refers to the “discrepancy” between the number of copyright and trade mark cases brought before magistrates: in 2006 Magistrates’ Courts sentenced 69 offenders under CDPA, ss. 107 and 198, with a further 16 dealt with on indictment, as compared with 604 offenders dealt with by magistrates alone under the Trade Marks Act 1994 (reflecting the lower evidential burden for trade mark cases). Option 3 would therefore have a greater practical effect than Option 2, while still giving weight to the penalties for online copyright infringement and impacting on the public perception of copyright infringement.
Nonetheless, the IPO proposal is equivocal or silent on two key related issues:
- First, rights-holders would welcome the listing of the online copyright offences as “lifestyle offences” for POCA purposes, so that POCA can be used straightforwardly as an additional deterrent to online infringement. As the law stands, it is hard for a rights-holder to prove the other criteria required for POCA to apply. The IPO consultation makes no recommendation on whether or not those other criteria are sufficient.
- Secondly, organisations in the creative industries will be disappointed that the core Gowers recommendation in this area (i.e. increasing custodial sentences for online infringement) seems to have gone unheeded. The apparent decision to disregard this option seems to reflect current sentencing strategy. In its consultation paper, the IPO alludes to the Lord Chancellor’s view that “prison is … the right place for the most serious offenders”, and also cites a remark from the Green Paper that “copyright infringement is a serious economic crime”. The implication, it seems, is that an economic crime merits – at least on summary conviction – primarily an economic penalty. In many ways, that emphasis is something that the rights-holders will welcome: it is after all the protection of revenue streams that is paramount for the protection of ongoing investment in the creative industries.
Ed Baden-Powell and Jon Baker
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