HANSARD
Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023
- Considered in Grand Committee
- 4:57 pm
- Moved by
- That the Grand Committee do consider the Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023.
- My Lords, I beg to move that these regulations be considered. They and the Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 were laid before the House on 16 October 2023. Intellectual property—IP—matters. The IP framework protects creations of the mind, such as inventions, literary works, symbols and names used in commerce. The UK system is widely regarded as among the best in the world. Our IP system is built on laws that ensure consistency, certainty and balance. It has not only helped to incentivise innovation and the creation of new technologies and products but promoted competitive markets and consumer choice. Maintaining a balanced, consistent and stable IP framework is crucial for businesses, consumers and investors.The draft regulations before the Committee today use powers contained in the Retained EU Law (Revocation and Reform) Act 2023—the REUL Act—to amend or restate certain provisions in IP legislation. They make targeted changes, to the benefit of our IP framework, in line with the aims of the Act. I will take each set of draft regulations in turn, beginning with the Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023. Subject to noble Lords’ approval, they will amend provisions in four pieces of IP legislation. I will explain more about these.The Design Right (Semiconductor Topographies) Regulations 1989 provide protection for designs that are semiconductor topographies, implementing international obligations under the World Trade Organization’s TRIPS Agreement. Semiconductors, commonly referred to as chips, are the core component of all electronic devices. The semiconductor topography design right is an IP right intended to protect the design of specific semiconductor products, such as circuit boards, which can be relatively easy to copy.
- 5:00 pm
- In the UK, the law treats the protection of topographies of semiconductor products as a form of unregistered design right and extends protection to persons from certain qualifying countries. World Trade Organization—WTO—members that are not EU member states are included as qualifying countries by being listed in the Schedule to the regulations. The proposed amendment does not alter the design right but is intended to remove the need for further legislation to update the Schedule when new countries join the WTO, and so will future-proof it and save parliamentary time.
- The Artist’s Resale Right Regulations 2006 provide the basis for an artist’s resale right—ARR—in the UK. The ARR is a form of IP protection related to copyright. It gives creators of visual art, such as paintings and sculptures, an unwaivable statutory right to receive a royalty when their works are resold in the secondary market by auction houses or other art market professionals.
- The proposed amendments directly replace references to euros in ARR royalty calculations to pounds sterling and are intended to reduce regulatory burdens and costs on UK businesses. These changes reflect the UK market better and provide greater business certainty by removing exchange rate fluctuations when calculating whether artwork is eligible for ARR and the royalty payment due. A transitional provision has been included, so this change will apply from 1 April 2024. This will allow industry time to prepare and adapt to the changes in line with advice from the collective management organisations that administer ARR payment schedules.
- The Copyright Tribunal Rules 2010 set out the rules of procedure for the Copyright Tribunal, which adjudicates on various commercial copyright licensing disputes, particularly concerning the terms of licensing schemes for copyright material. The amendments proposed by this instrument will mean a respondent or intervener in a Copyright Tribunal case will be required to provide an address for service in the UK rather than one located in the European Economic Area.
- Lastly, the Collective Management of Copyright (EU Directive) Regulations 2016 set minimum standards for the governance, transparency and behaviour of collective management organisations—CMOs—established in the UK. CMOs operate as companies so are subject to domestic company law. The amendments proposed by this instrument will reduce the regulatory burden and costs on CMOs that qualify as small companies, by exempting them from the requirement to audit the accounting information provided in annual transparency reports. The amendments will also redefine other exemptions so that they apply to CMOs that qualify as a micro-entity under the Companies Act 2006. This will include the removal of references to euros. These amendments will ensure greater alignment with the domestic company law regime.
- I now turn to the draft Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023. I spoke earlier of the importance of maintaining a balanced, consistent and stable IP framework. An essential mechanism that provides this balance in our IP system is called the exhaustion of IP rights. Put simply, IP rights enable their owners to control the first sale of their creation, but our exhaustion of IP rights regime ensures that once a good is lawfully placed on the market, the rights holder can no longer use their IP rights to control the distribution or resale of that good. For example, after you purchase a book, the copyright owner cannot stop you selling that book to another person in the same territory. A functioning exhaustion regime is therefore crucial for commerce in our modern economy. This mechanism also underpins the rules on parallel imports, which is the importation of genuine, IP-protected physical goods that have already been put on to the market in other countries, such as medicines.
- After we left the European Union’s exhaustion of IP rights regime, the Government created a bespoke, unique regional exhaustion regime. Under this regime, once a good is lawfully placed on the market in the UK or European Economic Area, the relevant IP rights in that good are considered “exhausted”. A rights holder can no longer use their IP rights to control the distribution of that good.
- This regime was created to provide certainty for businesses and consumers while the Government consulted on what the UK’s future exhaustion regime should be. Here, I draw noble Lords’ attention to how our current exhaustion regime relies on retained EU law, which will no longer exist on 31 December. Without replacing this retained EU law, our exhaustion regime will not operate effectively from the end of this year. This could create uncertainty on the operability of import rules for IP-protected physical goods, which may affect supply chains and create a chilling effect on commerce and investment in the UK. Parliament needs to act now to ensure that the UK has a functioning exhaustion regime at the end of this year; these regulations achieve that purpose.
- Subject to your Lordships’ approval, these regulations will restate certain retained EU law relating to the exhaustion of IP rights to ensure the continued operation of the UK’s exhaustion regime without substantial changes to this policy area. This maintains the two general principles of our exhaustion regime. The first principle is that, once a good is lawfully placed on the market within the geographical area of our exhaustion regime, a rights holder cannot use their IP rights to control its further distribution or resale. The second principle is that, in the same way as in retained EU law, trademark and patent rights holders can in specific circumstances seek to prevent the parallel importation of their goods into the UK where it is necessary to protect their industrial or commercial property, providing that this action does not constitute an arbitrary discrimination or a disguised restriction on trade.
- I am pleased to advise noble Lords that this restatement also achieves the aims of the REUL Act by making our exhaustion laws more befitting for the UK’s statute book and for restating only retained EU law that is necessary for the continued operation of our exhaustion regime. In terms of the impact of these regulations, consumers and businesses should not see any significant changes to trading practices because they ensure a continuation of the exhaustion regime that has been in place since 2021.
- I must emphasise to noble Lords that these regulations do not signify that the Government have taken a decision on the permanent exhaustion regime for the UK. Instead, they facilitate the continuation of our current exhaustion regime until a decision has been taken. Work to select the UK’s permanent exhaustion regime is ongoing and we will make an announcement as soon as a decision is made.
- In conclusion, these two sets of regulations seek to use powers contained in the REUL Act to introduce targeted changes. The Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023 will make some technical changes largely to better tailor the legislation to a UK context. The Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 are of paramount importance for ensuring the continued operation of the UK’s exhaustion of IP rights regime. These targeted changes will ensure that rights holders, businesses and consumers can continue to have certainty and confidence in the UK’s IP framework. I beg to move.
- My Lords, I declare an interest as a visual artist. Some of my remarks will, I hope, be of interest to DCMS as well.Many of the areas covered by these regulations are important to the arts and creative industries, but I want in particular to highlight the concerns of the visual arts. On 23 February this year, the noble Baroness, Lady Brinton, and I argued strongly for the retention of the artist’s resale right, having supported an amendment to that effect that was helpfully tabled by the noble Lord, Lord Clement-Jones, during the passage of the Retained EU Law (Revocation and Reform) Bill. I will not repeat all the arguments made in that debate, but I am glad—as will be the artists affected and, of course, the relevant rights management organisation, the Design and Artists Copyright Society—that the Government have rightly decided to allow this extremely useful scheme to be continued. I am grateful to DACS for its briefing on this.The ARR has been in operation in the UK for 17 years. As the timely report produced by DACS this year shows, it has paid more than £120 million in royalties to over 6,000 artists and their heirs. UK artists themselves earn on average between £5,000 and £8,000 a year for their work—very little for the important work that they do, really—and much of these royalties gets reinvested in their practice, which will include studio rents and materials. Heirs use the royalties to store, restore and archive artists’ work, so this scheme is hugely beneficial not just to the individual artists concerned but, crucially, to the overall culture of the visual arts in this country.DACS has confirmed what the Minister said, which is that the change from euros to sterling is useful, in that it will simplify the collection process for the royalty, as well as providing a currency that, to UK beneficiaries, will have a consistent value in the sense of not having to go through an exchange rate. I understand that, in response to the IPO, DACS also looked at the number of sales that would qualify under a new threshold—£1,000 rather than €1,000—which turns out to be a small percentage of total qualifying sales per year.