The Challenges Facing David Cameron’s Quest To Overhaul UK Copyright Law

It was a speech delivered last autumn by Prime Minister David Cameron, setting out his vision for a “Silicon Roundabout” in Shoreditch, east London, that first gave ammunition to the conspiracy theorists.

“The founders of Google (NSDQ: GOOG) have said they could never have started their company in Britain,” the prime minister told his audience of thrusting internet entrepreneurs. “The service they provide depends on taking a snapshot of all the content on the internet at any one time and they feel our copyright system is not as friendly to this sort of innovation as it is in the United States.”

The announcement that followed, of a wholesale review of the UK’s intellectual property (IP) laws, was greeted with unalloyed delight at Google’s California headquarters – but left the music industry, ravaged by web piracy, with that all-too-familiar sinking feeling.

The review into “Intellectual Property and growth”, chaired by Ian Hargreaves, the professor of digital economy at Cardiff University and a former editor of the Independent, won’t just impact the ability of musicians to be rewarded for the work they have created. The outcome could affect publishers, film companies, designers, medical researchers and every teenager who has digitally altered a picture and posted it on Facebook or created a witty YouTube mash-up.

The review will identify the “barriers to new internet-based business models” raised by the “costs of obtaining permissions from existing rights-holders”. There’s no shortage of examples of these barriers to innovation.

Should a new, web-based radio station, for instance, be prevented from streaming a playlist of music by having to track down and sign individual licensing deals for every track? If a video whizzkid can create an entirely new work by editing The King’s Speech into a three-minute YouTube clip in which Colin Firth is made to lip-synch to Lady Gaga, should such a talent be immediately crushed to dust by corporate lawyers?

But most significantly for the conspiracy theorists, should a $190 billion giant like Google, which has been sued by publishers over the mass copying of copyright-protected works, be allowed a change in the law to make it easier for its search engine to hoover up other people’s content?

Google has its claws in Cameron, say the critics. Rachel Whetstone, Google’s European head of communications, is married to Steve Hilton, the prime minister’s director of strategy. And the prime minister’s declaration that he wanted to see a US-style relaxation of IP laws, creating a “fair use” exemption – giving space for startups to copy and create innovative products, sourced from material which might be copyright-protected – was top of Google’s legislative wishlist.

But by promising a new copyright regime “fit for the internet age,” to boost the growth-led recovery he is pinning his electoral hopes upon, the prime minister even appeared to have pre-judged the outcome of the Hargreaves review. “I was a Cameron supporter but he has been deceived by the people whispering in his ear,” says Mike Batt, the songwriter, producer and founder of Dramatico, Katie Melua’s record label.

“It’s complete bollocks. The reason Google started up in Silicon Valley is because they have banks that understand the entrepreneurial thinking behind startups. We don’t.”

Companies such as Google want to “eat the lunch” of the people who actually create popular works, says Batt, the deputy chairman of the BPI, the record industry trade body. “The review terms of reference are completely biased towards Google, the ISPs and anyone who wants to set up an internet company. Weakening copyright won’t create a Silicon Valley here. It will hit the small music publishing and film outfits that create value for the economy by producing content.”

Feargal Sharkey, the chief executive of UK Music, argues that under the current copyright law, legal music download “startups” are flourishing, with 72 competing sites generating £350 million in sales last year. He warns of the danger of taking “50,000 jobs from the music industry to create 20,000 in technology”.

Those fears are misplaced, insists Sarah Hunter, Google’s head of UK public policy and a former Downing Street adviser to Tony Blair on the creative industries. “None of us are in the business of stifling great content online but we do think copyright law needs fixing in everyone’s interest,” she says.

Google would not have set up in the UK, argues Hunter, because the lack of a “fair use” provision here meant that the founders, Larry Page and Sergey Brin, couldn’t be sure that its search engine product would be legal. “There is a fair amount of case law to give you that certainty in the US but the copyright laws here are unclear about the extent to which exemptions do exist,” she says.

Entrepreneurs would reject Britain and take great ideas elsewhere, adds Hunter, who says Google wants a change in law to create a “climate for innovation” for new technology companies, not to undermine the creative industries.

Yet that legal certainty identified across the Atlantic didn’t prevent Google from being embroiled in a costly legal battle with the U.S. publishing industry over Google Books’ unlicensed copying of authors’ works, in its effort to make “all of the knowledge contained within the world’s books searchable online”.

The record industry has accused Google Search of directing fans to illegal “bit torrent” sites. But Hunter believes there can be a virtuous circle in which “Google enhances the value of rights-holders’ websites because more people see their products and they can monetise those eyeballs”.

The job of Hargreaves’s panel, which has visited Silicon Valley to gather evidence, is complicated by the number of competing interests among the 180 submissions it has received. The British Library wants “fair use” exemptions so that it can embark on a mass digitisation of books and audiovisual recordings that are no longer commercially available – to unlock material that hasn’t seen the light of day for a century.

The speed of medical research could be enhanced by the ability to “format shift” computer programs from disks to files, and to incorporate gobbets of information from thousands of web sources without fear of infringement. Then there is Mixcloud, the music internet radio startup, which told Hargreaves that it could thrive if there was just a single licence it could sign up to for permission to stream its playlist of reggae dancehall, jazz and electronica.

Hargreaves warns that the status quo is not an option. “I don’t think the current system is serving content creators as well as it should,” he says. “For most of my working life, I have been employed in the creative industries. There are times when some change is necessary, in order to generate jobs for tomorrow. This is such a time.”

The Hargreaves inquiry could create a fair-use review panel to rule over test cases, without the requirement for expensive lawyers.

Pearson (NYSE: PSO), the publishing company that owns the Financial Times and Penguin, has proposed the creation of an online global rights registry that startup companies could use to discover what they are able to do legally with someone else’s publication, film or piece of music and make licence payments accordingly.

The review is also expected to tidy up the anomaly of “format shifting” by making it legal to “rip” purchased CDs through computers and on to MP3 players.

Hargreaves admits that Cameron “by design set up a Google versus others” contest in his Shoreditch speech last November. When asked if he could guarantee that there would be a net economic gain from any weakening of copyright law he might propose, he quotes Clint Eastwood: “If you want a guarantee, buy a toaster.”

He has, however, promised the music industry that he is not “about to tear up the whole copyright book”. So is Hargreaves willing to disappoint Cameron, who is demanding a solution that will “encourage the sort of creative innovation that exists in America”, and by extension, his friends at Google?

The Silicon Valley trip was instructive. “In Palo Alto, the IP lawyers almost outnumber the software engineers,” Hargreaves recalls.

“As we sped from Mountain View [the town where Google has its HQ], we passed an evangelical church with one of those comic billboards at its gate. Amid the glaze of the traffic, I think it said: ‘Even Google cannot resolve every search’.”

This article originally appeared in MediaGuardian.