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Monday, 22 August 2011

More Digital Economy Act delays? Cost Sharing Order goes to EC, no sign of IOC

Only one of two remaining pieces of legislation required for the digital copyright clampdown under the Digital Economy Act was notified to the European Commission (EC) at the start of August, indicating progress enacting the anti-filesharing measures may have been hit by further delays.

The UK is obliged to notify Europe of legislation that may affect cross-border competition, such as technical requirements placed on ISPs under the Digital Economy Act.  At the time of publication, the EC database of such notifications, TRIS, showed only the so-called Cost Sharing Order had been notified.

The counterpart Initial Obligations Code, the main body of legislation that describes in detail how the copyright infringement notification and appeals process will run, is not currently listed in TRIS.

EC notification is significant as it adds a 3-month delay to enactment of legislation in order to give other EC member states a chance to comment or object.  The absence of the main Initial Obligations Code means the Code is unlikely to get a vote in the UK parliament until early 2012 at best.

Even when passed by both Houses of Parliament, it will take several months to establish the notification and appeals bodies, meaning it's now highly unlikely the first copyright infringement notifications will hit the doormats of alleged pirates before 2013 - nearly 3 years after the Digital Economy Act was passed.

Further significant delays could be incurred if legislation is later amended as it passed through parliament, requiring the draft Statutory Instruments to be re-submitted to the EC and incurring further 3-month standstills.

There is always a possibility The Government has decided the UK has no obligation to notify the Initial Obligations Code to Brussels.  However, a department official told me in June that it would be notified.  That same official told me 2 months ago that the Digital Economy Act was on an "accelerated" timetable for completion, known internally as "the reboot".

Maybe it's time to call in tech support if the reboot failed to fix the problem?

At what cost?

The Cost Sharing Order determines how the not inconsiderable cost of running the UK's 3-strikes law will be split between ISPs and copyright holders.

I feel the Order submitted to Brussels represents a best-case scenario for ISPs and a rare win against the persistent lobbying efforts of music and film industry representatives.  ISPs will be liable to pay only a quarter of the cost of running the body to hear appeals, whilst copyright holders will have to pay three-quarters of the ISPs own costs of notifying subscribers about alleged copyright infringement said to have occurred using their assigned IP address.

In a surprise at the start of this month, the government announced a £20 fee would apply to internet users wishing to appeal against an allegation of copyright infringement on their connection.  The fee would be refunded should the appeal be successful, but given serious questions still exist over the standard of evidence required to trigger a notification, some consumer groups argue even a modest appeals fee may deny justice to many low-income households.

Copyright holders using the process will have to pay an additional fee to help cover the estimated £5.9m cost of setting up the scheme; a Judicial Review into the act ruled that European law prevented ISPs from paying any portion of this cost.

Some industry insiders have voiced concerns to me that the measures in the act will now be too expensive for copyright holders to be much use in reducing online copyright infringement.

The experience in France, where a similar law known as HADOPI has been in operation for a year, shows rights holders have submitted a large number of notifications: 18 million.  But only 470,000 warning letters were dispatched due to rules designed to filter-out repeat warnings.  Similar rules will exist in the UK, meaning an ISP subscriber will receive no more than one notification a month, to give the alleged infringer time to change their ways.

Should the French experience be reproduced in the UK, the cost to a copyright holder of submitting a Copyright Infringement Report (CIR) would be negligible, since the set-up costs would be amortised over many millions of CIRs raised.

For argument's sake let's set the cost of a CIR at £5, a likely minimum. The problem highlighted in France is that only 1 in 38 CIRs results in an actual warning letter to the subscriber, putting the effective cost of a warning letter at around £190.  Not forgetting that 3 warning letters are required before further action is taken against the infringer (ie slowing or suspending internet access) this could be a costly process for rights holders.

Let's imagine the copyright owners are more frugal with their Infringement Reports to UK subscribers, and submit only a fraction of the volume of reports seen in France.  The cost of each CIR will have to rise - perhaps significantly - to cover the cost of setting-up and running the scheme.  If the cost rises too much it will further reduce the number of copyright owners using the scheme, leading to a further increase in cost.

Several contacts have told me confidence in the Digital Economy Act amongst copyright owners is low, and to expect a return to private copyright prosecutions, using the measures in the Digital Economy Act only to garner intelligence on repeat infringers (which would, presumably, include a number of restaurants, hotels, pubs and cafes offering free WiFi).

It's likely that any new attempts to bring private prosecutions for online copyright infringement in the UK will learn from ACS:Law (and Davenport Lyons before them) and ensure that there is a serious intention to prosecute - and plenty of corresponding evidence - before launching proceedings.


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