Shoosmiths LLP
  April 7, 2010 - England

Digital Economy Bill set to Become Law
  by Joseph Stephenson

The music, film and broadcast industries look set to get the robust protection from illegal peer-to-peer (P2P) file-sharing they crave, as the Digital Economy Bill moves closer to becoming law.

It passed its third reading at the House of Commons on 7 April.

However, whilst the Bill seeks to protect the interests of these creative industries, it may stifle other legitimate businesses such as user-generated content websites like YouTube and MySpace, and Wi-Fi access providers.

The digital era has undoubtedly reshaped the creative industries. The ease with which media - such as music, film and television programmes - can be made available to the public for free has played a key role in the evolution of the internet, and has been a driving force behind the hugely controversial P2P distribution networks.

P2P file-sharing involves websites which use software to identify and share files between members of the network. Invariably, the vast majority of material shared is protected by copyright - most notoriously music, but increasingly film and television broadcasts - and done so without the copyright owner's consent.

However, P2P file-sharing websites do not actually store these illicit files. They merely facilitate an exchange between individuals, thus avoiding breaching current UK copyright laws.

Although, technically, the individuals sharing and downloading via P2P infringe the copyright in the materials exchanged, the copyright owner rarely has the appetite to pursue these infringers as it is unlikely to deter others from continuing to file share. The copyright owners would much rather attack the source of the problem, but up until now have had very little means of redress.

This has had a major impact on the revenue streams of both the creators of copyright work and those who invest in its creation.

Beyond the music industry's major record labels and publishers, there are approximately 13,760 music businesses in the UK. Most of these are small and medium enterprises (SMEs), with more than 80% employing fewer than five people. Whilst a handful of acts enjoy great financial success, the majority do not. 90% of PRs for music members earn less than £10,000 a year from song writing royalties.

These music industry SMEs - and indeed the wider music industry - are at financial risk from P2P file-sharing. Between 2005 and 2008, UK recorded music sales declined from £1.74 billion to £1.27 billion (a 27% drop). Earlier this year research commissioned by UK Music and undertaken by the University of Hertfordshire, highlighted that the level of file-sharing among 14-24 year-olds remains high. Of the 1,800 respondents, over 60% stated that they downloaded music illegally.

The Bill intends to combat this epidemic by increasing the role that Internet Service Providers (ISPs) play in policing its customers Internet usage.

In particular, the Bill proposes that ISPs must send a warning letter to those customers who are caught illegally downloading using their Internet service. ISPs must also keep track of the number of reports about each customer and compile - on an anonymous basis - a list of those who are reported on.

After obtaining a court order to obtain personal details, copyright owners will be able to take action against those included in the list. Offenders could have their internet connection temporarily suspended as a result. These obligations on ISPs are to be underpinned by a code of practice approved by the Office of Communications (Ofcom).

However, in addition to the proposal to suspend an offender's Internet connection, the Bill contains other deterrents which are, arguably, more controversial and which could, according to Labour MP Tom Watson - a leading opponent of the Bill - lead to 'catastrophic disaster' and 'unintended consequences'.

Most controversially, the Bill contains a power to block any website which 'the court is satisfied has been, is being or is likely to be used for or in connection with an activity that infringes copyright'.

How widely and aggressively this power is used in practice, only time will tell, but on first sight it would seem to have the potential to be used very broadly and catch not only those websites actually used in connection with copyright infringement, but also those 'likely to be used'. This reiterates the concern that popular websites such as YouTube, or even Google, could be 'blocked' or forced offline.

Furthermore, the Bill provides no safeguard for businesses that offer Wi-Fi access, such as cafes, pubs and airports, which have been told that they will not be exempt from the Bill's proposals. This effectively means that Wi-Fi hot spots could be closed down, and businesses prosecuted, if it is found that customers have used those networks to download or share illegal or copyright material.

The Bill will now pass to the House of Lords where it will receive its final vote, although it is extremely unlikely to encounter any further objections before it receives Royal Assent and becomes law.