What is a “quotation”?

I'm not sure what copyright exception I'm relying on for this image...

I’m not sure what copyright exception I’m relying on for this image…

The title to this post may sound a bit “meta” – like Bill Clinton asking what the meaning of the word “is” is. However, it’s prompted by the impending changes in UK copyright law, which (from tomorrow) will include new exceptions for quotation, parody and private copying.

The parody and private copying exceptions have been widely discussed, but the quotation exception may also have a significant impact. The exception states:

Copyright in a work is not infringed by the use of a quotation from the work (whether for criticism or review or otherwise) provided that—

(a)  the work has been made available to the public,

(b)  the use of the quotation is fair dealing with the work,

(c)  the extent of the quotation is no more than is required by the specific purpose for which it is used, and

(d)  the quotation is accompanied by a sufficient acknowledgement (unless this would be impossible for reasons of practicality or otherwise).

But what is a “quotation”? Specifically, how does a quotation differ from any extract or excerpt from a larger work? Is the result of this exception to say, in effect, “anything goes, provided it’s fair dealing”? (Fair use by the back door…?)

My instinctive response is “no”, but I’m not sure where you would draw the line between a “quotation” and an “excerpt”. It’s notable that the corresponding permitted exception in the Copyright Directive (on which the UK exception is founded) covers:

quotations for purposes such as criticism or review, provided that they relate to a work or other subject-matter which has already been lawfully made available to the public, that, unless this turns out to be impossible, the source, including the author’s name, is indicated, and that their use is in accordance with fair practice, and to the extent required by the specific purpose.

In other words, “quotation” is not some new category of usage. It is no more and no less than the sort of usage that is covered by the existing “criticism or review” exception – except that it can now be done for purposes other than criticism or review. (The UK government’s guidance, quoted here, confirms this as the intention of the regulations.)

Which does imply that “quotation” can be quite broad: not just text, but potentially encompassing the “quotation” of photographs, video clips, music, and so on – though subject, it should be emphasised, to the “fair dealing” and “minimum extent” requirements (paragraphs (b) and (c) as set out above). But does this mean that any excerpt or reproduction could potentially be defended as a “quotation”?

It seems to me that the difference between a “quotation” and an “excerpt” or “reproduction” lies in the purpose for which it is used. An excerpt or reproduction can be merely “decorative” – library footage used as background to a TV news report, for example. A quotation, however, needs to be in some way pertinent to the context in which it is quoted. Its use needs to be making a point, or at least confirming or illustrating a point made by the work in which it quoted.

However, all this is (hopefully reasonably educated) guesswork. If anyone has come across any more compelling authority (e.g. from other EU member states) on what a “quotation” is, please feel free to post details in the comments to this post.

Update (1 October) 

Emily Goodhand (a.k.a. @copyrightgirl) has pointed me in the direction of the CJEU’s decision in the Painer case, in which the court considered the quotation exception in some detail (see paras 118ff.).

In para 120, the court describes the purpose of the exception as follows:

That provision is intended thus to preclude the exclusive right of reproduction conferred on authors from preventing the publication, by means of quotation accompanied by comments or criticism, of extracts from a work already available to the public.

This seems to confirm my earlier guesswork. Note the court’s insistence that a quotation be “accompanied by comments or criticism” – that is, even though the quotation needn’t be specifically for “criticism or review”, it must still have some supporting context (“comments”). I think we can take it as read that there must be some connection between the comments and the quoted work, rather than a mere juxtaposition.

The CJEU added that there is a need to strike “a fair balance” between “the right of freedom of expression of users of a work” and the reproduction right of the work’s author – and that, in the case of quotation, users’ freedom of expression should have priority. This suggests a wider, rather than narrower, interpretation of the exception.

It will still be interesting to see where the courts draw the line in practice – especially as authors start to push the boundaries of how they can use existing material in their own work.

Linking isn’t illegal; internet saved(?)

Court of Justice of the European Union (public domain image)Is it lawful to post a link to someone else’s website, or does it infringe copyright?

It will probably come as a surprise to most people – even to most lawyers – that this could still be an open question in 2014. After all, if linking to other sites were an infringement, and if (*BIG* if) that were to be enforced on a wide scale, then the internet as we know it would come to a juddering halt.

Conversely, though, think of a situation in which someone sets up a website that links to hundreds of unlicensed video streams of recently-released movies, hosted by other people. The hosts are clearly infringing copyright, but should DodgyStreamsRUs.com be able to do link to them with impunity? Maybe this question of linking isn’t as straightforward as it looks.

Enter the Court of Justice of the European Union (CJEU) or, as it is more popularly known, the ECJ. In a long-awaited judgment, the ECJ today gave its definitive view on whether linking infringes copyright. Its conclusion (you will probably be relieved to hear) was that (generally) it doesn’t. The exception is where the linking enables people to circumvent protections on the copyright owner’s website (e.g. evading a paywall).

Now, there are a lot of legal blogs and websites out there that will go into the details of this case, the Svensson case, in far more detail and with far more expertise (see, for example, this post by Eleonora Rosati at IP Kat, or this excellent analysis from Bird v Bird). But I hope I can give a quick overview of the basis of the decision.

The main legal question at issue was whether posting a clickable link to a copyright work (such as a web page or hosted file) amounts to communicating that work to the public – which would infringe copyright if done without permission. In brief, the court concluded:

  1. Yes, to post a link to a work does indeed communicate it to the public. BUT (and this is where the CJEU pulls a rabbit out of the hat to save the internet, as some might see it)…
  2. …if the copyright owner has made the work freely accessible online, then anyone could already see it anyway. So linking to it doesn’t make it available to anyone who couldn’t lawfully access it already. Hence “there is no new public”. So it hasn’t actually been communicated to the public in a way which would infringe copyright. Ta-dah!

The one exception the court gives is where the link would enable users to circumvent “restrictions put in place by the site … in order to restrict public access to that work to [its] subscribers only”. In that case, the work would be made available to a new public, namely non-subscribers, and hence “communication to the public” would have occurred, and the link would infringe.

There still remain plenty of questions about how the judgment will work in practice (what is “freely accessible”? what is a “restriction”? what is “circumvention”? etc. etc.). As I see it, though, the really critical question which Svensson bequeaths to us is this: 

Does this link communicate the work to a “new public”?

I suspect that could turn out to be something of an unexploded bomb in certain circumstances.

Opening the Patent Box

A patent (unboxed), yesterdayIn recent years, the UK government (both this government and its predecessor) have come up with various ideas aimed at incentivising innovation through the tax system. The best known of these is probably the Patent Box (10% corporation tax rate on profits from patented inventions), but for many companies, the new R&D Expenditure Credit (the “above the line” replacement for the existing R&D tax credit regime) is of at least equal interest.

That’s all very well, but how is this actually playing out in the market? The Patent Box and RDEC apply from 1 April 2013, so there have now been six months to see how companies (and HMRC) respond to the new regime. A seminar I attended yesterday, hosted by Keltie, provided some useful insights into this from a team of PwC tax specialists.

Here are some of the trends identified by PwC which particularly struck me: 

  • Some companies that expected to benefit from the Patent Box are not doing so. PwC cited one manufacturer that campaigned vigorously for the Patent Box, but has found that its pension liabilities wipe out its trading profits – so the 10% tax rate has no benefit for it.
  • The Patent Box shows signs of having its desired effect of drawing businesses back into the UK. PwC mentioned an Anglo-Swiss company which is looking to bring its IP back into the UK once its current tax arrangements in Switzerland come to an end.
  • One difficulty companies are having is mapping their patents onto their products, in order to demonstrate that the products are generating income from patented inventions. HMRC are taking a hard line on this.
  • Companies need to ensure there is good communication between IP managers and tax teams. HMRC will not look kindly on a company that keeps claiming under the Patent Box using patents that have been allowed to lapse.
  • While the Patent Box tends to get most of the attention in the press, it is the RDEC that is proving most popular with companies so far – mainly because it offers cash upfront rather than a tax rebate later in the process.
  • The definition of “R&D” used by HMRC is very broad. You don’t have to be doing “blue-sky” research: incremental improvements are enough. What matters is that you are reducing “technological uncertainty”. Once you have “resolved technological uncertainty” – e.g. you reach a point where you can start commercial production – then the RDEC ceases to apply.
  • Manufacturing and R&D companies contracting on “cost-plus” terms (common with MoD contractors) will need to renegotiate these to disregard the RDEC, as this operates as a reduction of cost rather than a rebate on tax. This is one reason why the existing R&D tax credit scheme will continue to run alongside RDEC until 2016.

Some strange discrepancies are emerging between patent law and the Patent Box legislation (or at least HMRC’s interpretation of it…). For example:

  • The definition of an “exclusive” licence in the Patent Box legislation seems to differ from the definition in patent law. While the speakers didn’t go into details, it sounds as if the Patent Box definition may be somewhat wider.
  • HMRC is taking a restrictive approach to “systems” patents. For example, if a patented system has five components, of which three are incorporated into the product and two are “back-office” elements outside the product, HMRC are saying that the product does not qualify for the Patent Box as the patented invention is not “incorporated” into the product.
  • The seminar ended with a rather abstruse discussion about “use patents” – i.e. what used to be called “Swiss-type” claims, where the patent is not for the product (or component) itself, but for the use of a known product in a new way. HMRC are perceived to be resistant to this type of invention.
  • It also remains to be seen how HMRC will deal with interim patent applications, where the original priority application is dropped once the full application is made a year later. If HMRC insist on dating the Patent Box rebate only from the date of the full application, rather than the priority date of the interim application, this could have a major impact on patent practice.
  • The consensus was that HMRC doesn’t understand patent law, and doesn’t yet realise that it is going to have to learn.

What about HMRC’s attitude in all this? The picture seems to be a mixed one:

  • The relevant HMRC teams are actively encouraging companies to consider the Patent Box and RDEC, and are keen that companies engage with them early in the process to ensure they don’t make any mistakes that will reduce the benefit to them.
  • That said, as noted above HMRC are taking a hard line on some of the requirements, and are showing some idiosyncratic interpretations of patent law.
  • HMRC are also keen to remind people of the anti-avoidance provisions in the legislation: you can’t artificially incorporate patents into your products (e.g. putting a patented sticker on a car won’t mean the car qualifies for the Patent Box), and you can’t artificially relocate your IP in the UK to try to qualify. “It’s a generous regime, but don’t take the mickey,” is the message.
  • HMRC like to talk to the development teams within companies, particularly so they can find out how the patented invention is incorporated into the product. 

It will be interesting to see how the Patent Box and RDEC develop over the next few years – especially given the political hostility that they are already attracting in some quarters. I heard a speaker last year wonder aloud as to how long it would take for the Patent Box to be perceived, not as a creative incentive to innovation, but as a “tax loophole”, and it seems to be coming to pass already (FT link, naturally… 🙂 ).