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Digital Economy Bill [HL]

My Lords, the intention of this amendment is to ensure that the costs incurred by rights holders in generating copyright infringement reports under the provisions of the initial obligations code are taken into account when framing the provision on the sharing of costs. Currently, the Bill makes reference only to the costs that will be incurred by internet service providers and Ofcom. There is a clear lacuna. The copyright owners’ costs are nowhere to be seen in the Bill, yet they are and they will be considerable and therefore deserve to be recognised and reflected in these provisions. Copyright owners’ costs are incurred at the very first step of the notification process. In order to detect copyright infringement within peer-to-peer networks, rights holders have to spend considerable sums, usually with third party providers, to defend infringements, generate the copyright infringement reports and send these to internet service providers. In short, none of the Bill’s measures on reducing online infringement works unless copyright owners first spend money. It is sometimes suggested that these costs are optional and that rights holders are under no obligation to incur them. That may be strictly true in the sense that they are not being imposed by statute, but the harsh practical reality is that it is an economic imperative for rights holders to spend money on detecting infringement. As has been mentioned in earlier debates on the Bill, the music industry alone stands to lose £200 million of revenue to online copyright infringement this year alone. The cumulative loss between 2007 and 2012 will be £1.2 billion. The figures for the film industry are similar. No industry losing that level of revenue can afford not to invest in combating it. If there is a choice to incurring those costs, it is a Hobson's choice. Rights holders already invest in infringement detection, but currently, much of that activity is to no avail. Internet service providers are under no obligation to process the copyright infringement reports and, indeed, currently none do so. The initial obligations code will change that. It will require ISPs to call on the CIRs. That will make it possible and viable for copyright owners to up the level of detection activity. The Bill means that the ISPs have to process the CIRs, their capacity for dealing with them will increase and there will be meaningful levels of engagement with copyright owners. The entire logic behind the measures in the Bill is to reduce unlawful file-sharing by about 70 per cent. That represents a considerable sum. One of the main ways to achieve that is through notification having a deterrent effect on infringements. We have had lots of discussions, and I am sure that we will have even more, on that. That is estimated to involve about 7.3 million people. The more notifications that can be sent to as large a number of infringers as possible, the more marked that effect will be and the better off the creative industries and the whole economy will be. To this end, the Bill must be structured so as to optimise the ability of copyright owners to use the system, not lumber them with the undue burden of all of its costs. Otherwise, we are just creating an elaborate structure that will never be used and, by extension, just will not work. There is also a question of fairness to be addressed. We see from the draft statutory instrument on costs that the department has published that rights holders will be expected to meet some of the ISPs’ costs of sending notifications. The ratio in square brackets in that document is a 75:25 split. We are told that that is an indicative level, but it has achieved the status of a working assumption. That means that rights holders will have to pay three-quarters of the costs that ISPs incur in meeting their statutory obligations under the Bill. Let us bear in mind, again, that rights holders will have already met 100 per cent of their costs in raising copyright infringement reports. Furthermore, it must be borne in mind that it is the copyright owners and the creative sector that has been losing money to infringement over the past decade. The ISPs have not lost any revenue as a result of piracy. Indeed, it is argued by some—although, I agree, not by all—that their businesses have actually prospered in part because of the growth in consumers keen to get online so that they can download music and films, often unlawfully. Again, the amendment is an attempt to bring some fairness and balance to the equation of costs. To conclude, the amendment would allow the Secretary of State to take account of the costs necessarily incurred by copyright owners in using the notification system. I hope that it will find favour with the Minister, and I beg to move.