UK: Government Determined to Pass Digital Economy Bill and Allocate Costs

Last Updated: 7 April 2010
Article by Chris Watson and Scott Fairbairn

The Government is pressing ahead with plans to pass the Digital Economy Bill into law before the general election on 6 May. The Bill would introduce plans to require Internet Service Providers (ISPs) to send notifications to customers at the behest of rights holders, and would require ISPs to keep lists of alleged infringements (together known as the 'initial obligations'). More controversially, the draft legislation includes the grant of powers to the Secretary of State to draft secondary legislation to require ISPs to take 'technical measures' against Internet users accused of multiple infringements and to introduce a new regime requiring courts to order ISPs to block access to websites which may be associated with copyright infringement.

Meanwhile, the Government has recently opened a consultation on who should pay for the 'initial obligations' set out in the Digital Economy Bill, including costs incurred by Ofcom in overseeing the new regime. The consultation is likely to elicit strong responses as rights holders, ISPs, consumers and the Government take differing views on who should pay for the measures.

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The Government is pressing ahead with plans to pass the Digital Economy Bill into law before the general election on 6 May. The Bill would introduce plans to require Internet Service Providers (ISPs) to send notifications to customers at the behest of rights holders, and would require ISPs to keep lists of alleged infringements (together known as the 'initial obligations'). More controversially, the draft legislation includes the grant of powers to the Secretary of State to draft secondary legislation to require ISPs to take 'technical measures' against Internet users accused of multiple infringements and to introduce a new regime requiring courts to order ISPs to block access to websites which may be associated with copyright infringement.

Meanwhile, the Government has recently opened a consultation on who should pay for the 'initial obligations' set out in the Digital Economy Bill, including costs incurred by Ofcom in overseeing the new regime. The consultation is likely to elicit strong responses as rights holders, ISPs, consumers and the Government take differing views on who should pay for the measures.

The Digital Economy Bill is designed to implement several disparate strands of Government policy arising from the 'Digital Britain' white paper published in June 2009. These include imposing new obligations upon Ofcom to report on the state and development of electronic communications infrastructure. The Bill grants the Secretary State new powers in relation to internet domain registries, empowers Ofcom to appoint and fund providers of local news services and provides for the regulatory framework necessary for the delivery of a switchover of radio services to Digital Audio Broadcasting. It also empowers Ofcom to oversee the allocation of freed-up spectrum available for next generation mobile broadband services, known as the 'Digital Dividend'; it requires video games to be classified with age restrictions and introduces new copyright provisions relating to exploitation of orphan works (works whose owners cannot be identified).

The Bill also includes controversial provisions to punish and prevent peer-to-peer (P2P) file-sharing. These include powers for the Secretary of State to require Internet Service Providers (ISPs) to impose "technical measures" on their customers and introduce a new regime whereby courts could order ISPs to block access to websites which may be associated with copyright infringement.

The Bill is currently at the second reading stage in the House of Commons where the content of the Bill will be debated.

New Clause 18 – Injunctions Preventing Access to Websites

In the run up to the second reading, Lord Mandelson wrote to Jeremy Hunt, the Shadow Secretary of State of Culture Media and Sport, justifying the Government's decision to remove the version of clause 18 of the Bill inserted by the House of Lords at Report Stage which would have empowered the courts to require ISPs to block access to websites associated with copyright infringement. Lord Mandelson expressed his desire to replace clause 18 with a new clause that Lord Mandelson claims 'achieves the same effect' but which is designed to overcome some of the drawbacks of the House of Lords' version of clause 18.

The new clause 18 does rectify some of the deficiencies in the original drafting, for example by requiring that the operator of the website in question be notified of a request to have a site blocked in advance. However the new clause raises a number of concerns.

Power and the Glory

Unlike the original clause 18 the new clause grants the Secretary of State the power to draft new regulations rather than setting out the new law in the Bill for all to see. The basis on which the Secretary of State will be able to draft such regulations is very broad, so as to govern court injunctions in respect of any 'location on the internet' which 'has been, is being or is likely to be used for or in connection with an activity that infringes copyright'. In addition the new clause grants the Secretary of State the power to 'make different provisions for different purposes' and to alter sections of the Copyright Designs and Patents Act 1988 which relate to remedies for infringement.

In any event the proposals indicate that the Government is minded to push ahead with the controversial plans to allow rights holders to request court orders requiring ISPs to block access to certain websites associated with copyright infringement. Such injunctions may threaten the existence of websites which rely heavily on content provided by third parties or user generated content.

We're All Ears

Meanwhile, the Government has recently opened a consultation on who should pay for the proposed obligations to require Internet Service Providers (ISPs) to send notifications to customers at the behest of rights holders, and to require ISPs to keep lists of alleged infringements (together known as the 'initial obligations'). The costs to be apportioned include costs incurred by Ofcom in overseeing the new regime. The consultation is likely to elicit strong responses as rights holders, ISPs, consumers and the Government take differing views on who should pay for the measures.

One surprising aspect of the consultation is that it presupposes that the initial obligations in the Digital Economy Bill will be passed into law in their present form. For example, it is questionable whether the communications regulator, Ofcom, established to promote competition and champion consumers' interests, should oversee the new obligations designed to empower copyright holders. It is also questionable whether ISPs or Ofcom have the necessary independence or experience to determine appropriate levels of evidence that would trigger the obligations, and there are still question marks hanging over the legality of keeping lists of alleged infringements.

The consultation sets out the fundamental principles by which it will consider how the initial obligations should be paid for. It states that copyright owners should bear all of their own costs in detecting infringements, sending the information onto ISPs in the required form and to the required standard (i.e. sending the Copyright Infringement Reports – CIRs), and the cost of any legal action. ISPs and copyright owners should share the cost of processing the CIRs, maintaining the infringer lists and issuing any notifications to subscribers (the notifications costs). It is proposed that the mechanism for this is via the payment of a "flat fee" by the copyright owner for each CIR sent to an ISP. The consultation states ISPs and copyright owners should share the costs incurred by Ofcom.

The consultation recognises that as the main beneficiaries of the proposals there is a strong argument that copyright owners should bear all of the costs incurred. However the Government feels there is a need for ISPs to bear some of the costs to incentivise ISPs to minimise the cost of sending notifications.

The Government has announced its working assumption that the notification costs should be shared between copyright owners and ISPs broadly in the ratio 75:25 - in other words with copyright owners bearing the majority of the costs and ISPs a significant minority.

Lack of Definition

The fundamental drivers of the cost of notifications are likely to be the number of CIRs made, who can make them, how they can be requested and the extent to which ISPs can process them without further verification or fear of legal challenge. As the code of practice governing the initial obligations is yet to be agreed, ISPs will be concerned they may be inundated with requests of dubious unverified evidential quality. Furthermore the initial obligations as currently drafted are broad enough in scope to cover all copyright infringement online and not just peer-to-peer file-sharing (as earlier Government consultations had proposed). Debating allocation of costs without knowing how the process will work is bound to make those who are likely to end up footing the bill very uncomfortable, especially as rights holders and ISPs require certainty of costs to plan effectively. Consumers may be concerned that any process that is costed so as to be delivered as cheaply as possible will inevitably lack evidential credibility.

Not Appealing

The consultation also invites views on whether Internet users should be required to pay a fee to access the appeals process, for example if they believe they should not have been identified on a list of 'infringers'. This right to appeal may be very important as the Government has already alluded that repeated identification as an alleged infringer may, in itself, be sufficient to trigger 'technical measures' being taken against such users at a later date.

The consultation sets out that appeals could be free or available only on payment of a fee which could be refundable if the user is successful. Consumer groups may question the appropriateness of requiring individuals to pay for an appeal if allegations of copyright infringement have not been proven.

Running out of Time and Money

The Government is driving the Digital Economy Bill on despite the uncertainty of the coming election, and arguments that it should be more thoroughly debated. The Government's consultation on costs relating to the initial obligations demonstrates that it is willing to grapple with some of the more difficult issues that the Bill presents. However the Government's motivation in doing so seems to be primarily because it doesn't have the resources to sufficiently fund Ofcom's new role and so must take steps to secure payment from those industries and consumers it is charged with protecting before the Bill is passed. The closing date for submissions is 25th May 2010.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 07/04/2010.

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