3.99 A major concern of stakeholders is that reform should be ‘evidence-based’. The ACCC considered it important that the ALRC takes into account available economic evidence when considering reform, as well as stakeholder views and economic rationales for reform.
3.100 One of the main criticisms made by copyright owners in this Inquiry is that there is ‘no evidence’ for reform of copyright law. Stakeholders cited the view of Professor Hargreaves in insisting that ‘IP reform takes place in the light of the best available economic evidence’. A perceived lack of evidence was said to militate against any reform, unless it constituted greater enforcement or stronger rights. In doing so the stakeholders who cited the Hargreaves Review tended to overlook the fact that the overall thrust of Hargreaves was to ‘call for a more adaptive IP framework’.
3.101 A number of submissions to the ALRC Inquiry asserted that giving owners and publishers total control over use of copyright material is the only way to create value. Asserting that copyright law must entrench ‘orderly management’ of copyright material through permitting only the exercise of monopoly control by the copyright owner, is not a valid argument. Indeed, those most avidly asserting the need for total control rely most heavily on existing exceptions, and extensively use the copyright material of others. For example, publishers, broadcasters, newspapers and authors are the main users of copyright material provided under document supply and interlibrary loan provisions of the Copyright Act.
3.102 In the UK, perhaps the main outcome of the Hargreaves Review has been the setting up of the CREATe Centre, to investigate issues relating to copyright and new business models in the creative economy. A major concern of the Centre is to investigate the question of what constitutes evidence for the purposes of copyright policy.
3.103 In the US, a major report on building evidence for copyright policy in the digital era noted that ‘not all copyright policy questions are amenable to economic analysis. In some cases, it may be possible to determine only the direction of the effect of policy change, not the magnitude’. The report further noted that copyright policy research can use a variety of methods, including ‘case studies, international and sectoral comparisons, and experiments and surveys’.
3.104 In Australia, the ARC Centre of Excellence for Creative Industries (CCI) focuses on research into the contribution of creative industries and their constituent disciplines to a more dynamic and inclusive innovation system and society. The CCI submission stated that ‘there are substantial costs and inefficiencies for creators associated with current copyright arrangements that adversely affect public access to new and original creative works’. CCI recommended ‘a broadened concept of fair use that permits unlicensed use of copyright material … in socially beneficial ways’.
3.105 With respect to theoretical research, one submission noted that it is simply too early to tell what the economic effect of the digital environment is for many sectors, particularly creators. Therefore ‘proposals for new exceptions to copyright should be based on clearly identified policy grounds as the economic analysis of the digital environment is contentious’. Pointing to the Hargreaves Report, the Arts Law Centre of Australia identified three obstacles to using evidence on the economic impacts of changes to intellectual property regimes:
absence of reliable data from which conclusions can be drawn to guide intellectual property policy; evidence relevant to policy questions involving new technologies or new markets, such as digital communications, is problematic as the characteristics of these markets are not well understood or measured; and the data that is available is held by firms operating these new technologies and the data, when it enters the public domain, cannot be independently verified.
3.106 While many stakeholders urged caution in making changes that may disrupt the emerging digital economy, the ACCC supported ‘a review of the use and extent of copyright across the digital economy to ensure that the benefits continue to exceed the costs’. The ACCC applied an economic analysis to the incentives to create and produce copyright material in the digital environment and evaluated economic literature and the presumptions upon which the literature relies. The ACCC concluded that the ‘available literature mainly focuses on the impact of digital technologies on copyright holders and submits that such analysis is incomplete, as the interests of consumers and intermediate users must also be considered’.
3.107 The ACCC noted that most of the empirical, rather than theoretical, economic evidence available is focused overseas and relates to particular industries, particularly unauthorised copying in the music industry, and that the results can be ‘inconclusive’.
3.108 There is some economic evidence regarding the economic contribution of Australia’s copyright industries, notably a PricewaterhouseCoopers (PwC) Report which demonstrates that copyright content industries in 2010–11 generated the equivalent of 6.6% of gross domestic product and employed 8% of the Australian workforce. The PwC report is a snapshot of economic activity in the copyright sector, and does not comment on likely effects of any reform.
3.109 A report by Lateral Economics takes the approach of looking at the contribution of a wider group of industries described as ‘exceptions industries’ including ‘education and research’. Taking into account the economic contribution of industries using this expanded methodology, in 2009−10 they were responsible for 14% of gross domestic product and employed 21% of Australia’s workforce.
3.110 WIPO is promoting the need to quantify the contribution of ‘non-core’ copyright industries including interdependent and support industries.
3.111 It is clear that the economic contribution of Australia’s copyright industries is significant. What is contentious is how to increase that contribution to the benefit of copyright owners, users and the community, and what reform, if any, would effect this.
3.112 It is recognised that a number of industries claim that they ‘would not exist, or be much smaller, but for the limitations and exceptions to copyright law’ including ‘Internet publishing and broadcasting, Internet service providers and search engines, data services, computer equipment and components, computer services, telecommunications, and other industry segments’. Indeed, it is suggested that ‘valuable research could build upon initial attempts to quantify the benefits of exceptions and limitations in terms of the economic outputs and welfare effects of those individuals, businesses, educational institutions and other entities that rely on them’.
3.113 Commissioned research on the economic benefits of fair use in copyright law, using Singapore as a case study, found copyright industries to be ‘relatively unaffected’ by the introduction of fair use although significant stimulation of growth in private copying technology occurred, with overall benefits for economic activity. This research has been endorsed by some stakeholders and criticised by others.
3.114 Professor Hargreaves has written further on copyright law since his review was completed, and stated:
The review rejected adoption of the fair use approach as technically too difficult in the EU legal context at this stage. Instead, the review advocated reforms … with the aim of securing specific benefits of flexibility comparable with those afforded by fair use.
3.115 The emphasis on creating licensing solutions in Hargreaves was taken to mean that owners’ rights should be enhanced, overlooking the emphasis in the Hargreaves Review on collaboration to reduce deadweight costs in the economy through the waste of resources on, for example, the HADOPI legislation. The ALRC agrees that a commercially-focused, market-based approach to dealing with IP rights is entirely appropriate, and considers that fair use has the potential to enhance negotiated outcomes in the developing digital economy.
3.116 Those advocating for greater enforcement have little or no evidence for the efficacy of increased legislative measures. The ALRC notes that the report of the House of Representatives in the IT Pricing Inquiry, relied on economic research to conclude that the impact of infringement on copyright owners was ‘less severe than rights holders claim’ and that ‘household spending on entertainment, and growth in employment in the entertainment industry, and … the number of creative works being produced has grown at a tremendous rate’. The Committee cited with approval a 2012 Report demonstrating growth in worldwide box office receipts for the film industry and also growth in the global music industry:
you wouldn’t know it, just listening to the entertainment industry talk about how much the entertainment industry is ‘dying’, but data from PricewaterhouseCoopers (PwC) and iDATE show that from 1998 to 2010 the value of the worldwide entertainment industry grew from $449 billion…to $745 billion. That’s quite a leap for a market supposedly being decimated by technological change.
3.117 One stakeholder pointed out: ‘the ‘no evidence’ position is ‘very self-serving, and is counter to the contents within submissions of a number of major organisations within the IT sector that Australian copyright law would better accommodate the development of the digital economy by the adoption of the proposed fair use test’.
3.118 The polarisation of views about ‘evidence’ and research is evident elsewhere. A House of Commons Committee, despite the favourable reception given to the Hargreaves Review by the UK Government, had this to say:
Following all the evidence we have received, we think Hargreaves is wrong in the benefits his report claims for his recommended changes to UK copyright law. We regret that the Hargreaves report adopts a significantly low standard in relation to the need for objective evidence in determining copyright policy. We do not consider Professor Hargreaves has adequately assessed the dangers of putting the established system of copyright at risk for no obvious benefit. We are deeply concerned that there is an underlying agenda driven at least partly by technology companies (Google foremost among them) which, if pursued uncritically, could cause irreversible damage to the creative sector on which the United Kingdom’s future prosperity will significantly depend.
3.119 Professor Hargreaves has responded critically to these comments, and so have other commentators:
The creative industries are innovating to adapt to a changing digital culture and evidence does not support claims about overall patterns of revenue reduction due to individual copyright infringement. The experiences of other countries that have implemented punitive measures against individual online copyright infringers indicate that the approach does not have the impacts claimed by some in the creative industries.
3.120 The ALRC considers that, given the impossibility of obtaining empirical research informing most aspects of copyright reform, it is appropriate to adopt a hypothesis-driven approach. This is explicitly approved of with respect to copyright reform in the European context:
Despite the evident stakes, there is a shortage of reliable data that directly addresses the relationship between copyright reform and economic growth. Forecasting the relationship between specific acts of reform and quantified economic outcomes is, therefore, and assumptions-based exercise. There have, however, been a number of reports which clearly show the significant scale advantages for Europe of developing its digital economy, and there is a clear line of logic in suggesting that a more flexible copyright regime, better adapted to digital circumstances, would add to these economic benefits.
3.121 The ALRC considers that there will be minimal free riding from the recommendations in this Report, and the micro-economic changes envisaged will encourage innovation and creation of copyright material, without harm to the interests of copyright owners.
Combined Newspapers and Magazines Copyright Committee, Submission 238; AFL, Submission 232; Cricket Australia, Submission 228; News Limited, Submission 224; Australian Copyright Council, Submission 219; Screenrights, Submission 215; Newspaper Works, Submission 203.
ACCC, Submission 165.
H Bakhshi, I Hargreaves and J Mateos-Garcia, A Manifesto for the Creative Economy (2013), 91.
News Corp Australia, Submission 746; Australian Publishers Association, Submission 629.
News Corp Australia, Submission 746.
ADA and ALCC, Submission 868.
M Kretschmer and R Towse, What Constitutes Evidence for Copyright Policy? (2013).
Board on Science, Technology and Economic Policy, Copyright in the Digital Era: Building Evidence for Policy (2013), 2.
Australian Research Council Centre of Excellence for Creative Industries and Innovation, Submission 208. The CCI also considers that development of a digital exchange would assist in reducing transaction costs associated with legal re-use of copyright materials.
Arts Law Centre of Australia, Submission 171.
Ibid, citing I Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011).
ACCC, Submission 165.
PricewaterhouseCoopers, The Economic Contribution of Australia’s Copyright Industries 1996–97–2010–11 (2012), prepared for Australian Copyright Council, 4.
Lateral Economics, Exceptional Industries: The Economic Contribution of Australian Industries Relying on Limitations and Exceptions to Copyright (2012), prepared for the Australian Digital Alliance, 6. See favourable comments on this research: Google, Submission 217; eBay, Submission 93; iiNet Limited, Submission 186.
World Intellectual Property Organization, WIPO Studies on the Economic Contribution of the Copyright Industries (2012).
Board on Science, Technology and Economic Policy, Copyright in the Digital Era: Building Evidence for Policy (2013).
Ibid, 42. A number of stakeholders overlooked what the ALRC said in the Discussion Paper about building policy for economic evidence, based on this report. See Australian Film/TV Bodies, Submission 739; News Corp Australia, Submission 746.
R Ghafele and B Gibert, The Economic Value of Fair Use in Copyright Law: Counterfactual Impact Analysis of Fair Use Policy On Private Copying Technology and Copyright Markets in Singapore (2012), prepared for Google.
American Library Association and Association of Research Libraries, Submission 703; Copyright Advisory Group—Schools, Submission 231; Google, Submission 217; iiNet Limited, Submission 186.
News Corp Australia, Submission 746; Australian Film/TV Bodies, Submission 739; ARIA, Submission 731; Arts Law Centre of Australia, Submission 706; G Barker and I Png, Submission 507.
I Hargreaves and B Hugenholtz, ‘Copyright Reform for Growth and Jobs: Modernising the European Copyright Framework’ (2013) 13 Lisbon Council Policy Brief 1, 4. One of the arguments common to a number of stakeholders was to suggest that the ALRC had misstated or misread the Hargreaves Review. However, on reading that document, it is clear that a number of stakeholders selectively quoted from it to support their position, but without giving the correct impression of what was actually said by Hargreaves.
S Datoo, ‘France Stops Controversial ‘Hadopi law’ after Spending Millions’, The Guardian, Wednesday 10 July 2013, <www.theguardian.com/technology/2013/jul/09/france-hadopi-law-anti-piracy>.
Ericsson, The Tide is Turning: Now is the Time to Reform Copyright for the Digital Era (2013). See also H Bakhshi, I Hargreaves and J Mateos-Garcia, A Manifesto for the Creative Economy (2013); Sarah Laskow, Does copyright law work? (2013) Columbia Journalism Review <http://www.cjr.org/cloud_control/empirical_ip.php?page=all> at 6 November 2013. See also R Giblin, Evaluating Graduated Response (2013): ‘there is little to no evidence that that graduated responses are either successful or effective. The analysis casts into doubt the case for their future international roll-out and suggests that existing schemes should be reconsidered’.
House of Representatives Standing Committee on Infrastructure and Communications, At What Cost? IT Pricing and the Australia Tax (2013), [4.39] citing M Masnick and M Ho, The Sky is Rising (2012), 2.
M Masnick and M Ho, The Sky is Rising (2012).
See also Australian Society of Authors, Submission 712.
Internet Industry Association, Submission 744.
House of Commons Culture, Media and Sport Committee, Supporting the Creative Economy (2013), 55.
I Hargreaves, ‘MPs Have Missed the Mark in Copyright Reform’, The Conversation, 30 September 2013, <http://theconversation.com/mps-have-missed-the-mark-in-attacking-copyright-reform-18703>;I Hargreaves, ‘MPs Have Missed the Mark in Copyright Reform’, The Conversation, 30 September 2013, <http://theconversation.com/mps-have-missed-the-mark-in-attacking-copyright-reform-18703>.
B Cammaerts, R Mansell, B Meng, Copyright & Creation: A Case for Promoting Inclusive Online Sharing (2013).
I Hargreaves and B Hugenholtz, ‘Copyright Reform for Growth and Jobs: Modernising the European Copyright Framework’ (2013) 13 Lisbon Council Policy Brief 1, 2.