§ Order for Second Reading read.9.37 am
§ Mr. William Powell (Corby)
I beg to move, That the Bill be now read a Second time.
It may be for the assistance of the House if I start by explaining what I propose to cover in my speech. First, I propose to set the Bill in the context of the computer software market in western Europe and in Britain as it is now and as all projections suggest that it will grow during the next five or six years. Secondly, I propose to analyse the development of Government and public policy over the past decade or so and to show why it is necessary to deal with this problem on its own without waiting for more general legislation, which I believe the Government contemplate at some stage. Thirdly, I propose to analyse some of the difficulties which exist under the law as it is believed currently to stand, there being considerable uncertainty among lawyers about exactly how the law stands. Thereafter, I wish to move on to the consequences for the industry of the present state of the law and the difficulties of enforcement. I shall then deal with the measures that the industry is taking to deal with some of its problems.
Whatever the industry does, it will still be faced with its first and most fundamental difficulty, which is the absence of a sure copyright law in this area. I propose to analyse how this problem is being tackled by our principal trading partners and the major countries that are involved in computer programming. I then propose to analyse the Bill, concentrating on how it is proposed to enforce it. I shall deal finally with the prospects for the industry if this measure is passed.
I begin by dealing with the size and scope of and prospects for the industry, because this sets the context in which the measure must be seen. In 1983 more than $61 billion—nearly £61 billion on the current exchange rate — was spent on data processing in western Europe. About 57 per cent. was spent on external products and services and the remainder was spent on data processing staff and overheads. The software and services segment of this market was worth more than $12 billion in 1983 and— this is the crucial point—it is expected to grow on average by no less than 22 per cent. per annum between now and 1989. By any standards, this must be one of the most dynamic sectors of our economy.
In 1983, processing vendor services had 39 per cent. of the market, but this proportion is expected to decline by 1989 to less than 25 per cent. The composition of the market is changing. There is likely to be a rapid growth in the software sector. The software sector had a 28 per cent. share of the market in 1981 and a 38 per cent. share in 1984. On current projections, its share is expected to grow to no less than 57 per cent. by 1989.
In 1981 the total value of sales of software in western Europe was $1.3 billion. By 1989 it is expected to grow to approximately $7 billion. That effectively means that sales will multiply 2.5 times between now and 1989. This 1333 market is growing at a staggering rate. In 1983 independent suppliers of package software and custom software had 27 per cent. of the market, but this share will grow by 24 per cent.—higher than the average expected rate of growth—between now and 1989. For the small houses this projected growth in the market is little short of dramatic.
We are dealing with a dynamic market. On a national basis, taking the western European market as a whole, France offers the best opportunities, with projected growth of 23 per cent. Projected growth in Germany is 18 per cent., in the United Kingdom 16 per cent. and in Italy 11 per cent. This point is important, because in the past Great Britain has always been assumed to be the world leader in software packaging. We are in a state of substantial decline compared with our major competitors. One of the main purposes of the Bill is to ensure that we return to our position as world leader.
The basic legislation governing copyright is the Copyright Act 1956. Clearly the world has changed a great deal during the past 30 years. Many products that are commonplace today were unimaginable 30 years ago. From time to time, Parliament has had to extend the conditions of the Copyright Act to cover new products. For example, two years ago the legislation was extended to cover video material. My Bill seeks to extend the cover to computer software, which was barely understood 30 years ago as having any prospects.
It was plain that the 1956 Act would have to be revised. In March 1977 the Whitford committee, led by Mr. Justice Whitford, produced a report, Cmnd. 6732, paragraph 486 of which stated:The demand for clear and effective protection has increased as the programming industry has grown.The report went on to analyse how it has been long recognised that copyright is the most appropriate intellectual property right for the protection of computer programmes. Mr. Justice Whitford concluded in paragraph 489:Having considered the issues involved we are strongly of the opinion that there is a need for clear and effective protection. Accordingly we recommend that all computer programmes and software which have involved a sufficient degree of skill and/or labour to be considered as works in the normal copyright sense and which have been reduced to writing or other material form should be clearly and effectively protected against copying.As a result of the report's publication, the Government started consultation on general reform of the law on copyright. I must point out that Mr. Justice Whitford's committee considered more than just the protection of computer software; it considered the updating and modernising of the law generally.
In 1981 the Government issued a Green Paper entitled "Reform of the Law relating to Copyright, Designs and Performers' Protection", Cmnd. 8302. Paragraph 2 of chapter 8 concluded:It may be questioned whether copyright is the right vehicle for the protection of programs. However, as Whitford remarked, it is probable that programs are already protected under the 1956 Act and the Government accepts that there is much to be said for dealing with programs under copyright law, since the essential need is for protection against copying. To remove any uncertainty that may exist it is proposed to make explicit in new legislation that computer programs attract protection under the same conditions as literary works. In these circumstances considerations such as term and ownership and, indeed, the basic 1334 question of whether a program possesses sufficient originality to attract copyright protection will apply to programs in the same way as to other copyright works.The process of consultation continues.
The Information Technology Advisory Panel, which reported in 1983, said:Copyright legislation is a fundamental building block in the infrastructure of the information business. … We would stress the crucial importance of copyright legislation to future economic activity. it is essential that the (Copyright) Bill now being proposed should take account of the web of developments that have been described in the Report"—that is the Green Paper—in order to provide a secure legal foundation for the information business to the year 2000 and beyond and we urge all interested parties to give the subject close and continuing attention.The Government have not been able to publish a Bill on that matter. May I explain why? It is in the fundamental interest of the industry that common standards be obtained among our trading partners. In considering the modernisation of any copyright law, it is necessary to take into account not only the developments in the United Kingdom since 1965 but to secure a common approach to the problem with our major trading partners. As I understand it, the Government have not been consulting solely with interested parties in the computer software industry and other aspects of copyright law reform, but are having to consult with our European partners to obtain, as far as is possible, a common approach to the whole problem.
The House will be aware that many of the major firms involved in this industry are trading not just in the United Kingdom but throughout the Common Market and the rest of the world. Nothing could be more harmful to the development of the industry than to have different laws applied in different countries. Although reform is necessary, it is essential that that reform be not rushed if, as a consequence of taking the matter slowly, properly and sensibly, we can obtain much wider reform than would be possible if we were dealing within our own national context.
I shall deal with some of the problems caused by piracy in the software industry. It is appropriate to start this part of my speech by saying that it is impossible to state with precision and complete accuracy the extent to which piracy exists in our coutry. That it is substantial is undoubted. I shall give some evidence—there is a mass of evidence for anyone who wishes to study it — that I think accurately reflects the best judgment of the dangers and weaknesses in the present law.
The evidence begins with a survey conducted by Dr. Elsom of the University of Aston which was published in the spring of 1982. That study revealed that approximately one in four microcomputer software houses were suffering from what they regarded as a serious loss from unauthorised copying of their software by users and/or piracy by software dealers.
In 1984, a study by Newcastle polytechnic revealed that the proportion of companies conscious that their programmes had been pirated had risen to a staggering 56 per cent. It would be a bold man who would say that one year after the publication of the Newcastle polytechnic survey that proportion had declined. It is an almost inevitable inference from the evidence that is accumulating week by week that it is growing, not declining.
At my request, following publication and First Reading of this Bill, Dr. Elsom returned to the same sources to find out what had happened to the companies that he surveyed 1335 in 1982. Whereas in 1982 25 per cent. of the microcomputer business software developers were unaware that unauthorised copying of their products was taking place, he found that 37 per cent. of the 27 companies that he had identified in his survey — 10 altogether — had gone into liquidation or were untraceable. A further company which was unable to survive on its own had been taken over. Of the remaining 16, three had become purely retailers of software and had ceased development, three companies were in the process of taking or had taken legal action against those who had been pirating their products, and another three had to confess that they were unable, although they wished to do so, to take legal action because they could not afford expensive actions in the civil courts to try to establish their title. That is a depressing follow-up from the 1982 survey.
In the past three months a whole range of companies, from the largest to the smallest, have approached me with evidence of what has been happening to their companies. As it is fundamental to my case that software piracy is occurring in all sections of the software industry, from the highest to the lowest, from commercial and business software of the £1 million-plus scale to the smallest computer game available in any house, I shall give three examples—I believe them to be representative samples of the type of evidence that has come before me —so that the House may have some idea of how the problem is affecting individual companies. I do not propose to name the companies involved. I assure the House that they have all approached me in confidence and I am prepared, in confidence, to pass on the information which has come to me.
The first of the three examples is a company with a turnover in the United Kingdom of approximately £10 million per year. Its managing director estimates that for every authorised copy of his software on the market there are two unauthorised copies. His company is owed £1 million by one software pirate who has been identified. The managing director estimates that the total loss of revenue from lost royalties and sales during the past nine years of that pirate's activities is more than £2 million. At the turn of the decade, 1979–80, that company was hoping to expand substantially into providing educational software. When I use that term, I stress that I am not talking about educational software which will teach children in schools and youngsters in colleges the technique of using a computer, but rather software that can become a substitute for and often a great improvement on the textbooks which are otherwise available for the teaching of academic subjects in schools.
That company wished to move into that area, but the managing director has found that it is impossible because of the ease with which the material can be copied. He has withdrawn, and is now concentrating all his activities on operating systems software which can be protected by post-sales maintenance. When it becomes necessary to maintain the hardware involved, he can discover what software is being used and has some idea whether it has been pirated. That is a self-protection technique which more and more companies are having to use. It is thoroughly dangerous for the development of the industry because more and more of the major houses are having to turn in on themselves and to rely not just on their own hardware but on their own software. It is the familiar argument that the House is used to hearing of free trade against protection.
1336 My contention is that the best opportunities and the best prospects of growth for this industry will exist if there is a free interchange of trade between hard and software and not the development of software which will be exclusive to the manufacturer's hardware where it becomes impossible to use that software on another company's hardware. That would be a very dangerous development for our industry and would ensure that we missed out entirely on the international opportunities which are currently open to us if we are able to put our own house in order.
The company was employing fewer than 10 people at the start of the decade. The managing director had hoped by now, with the opportunities and plans that he had at the start of the decade, to be employing 100 or more people, but because of piracy he has had to curtail virtually all the growth that he intended and to restrict himself to a limited range of services in order to protect himself as closely as possible. If ever there was a case of lost opportunity, that is an example of it.
I have been told by a second firm — a major international software company producing business programmes — that for every authorised copy of its software available in the market there are between three and eight unauthorised copies. It is an international company trading across the world. That has resulted in lost sales and royalties of more than £600 million during the past two or three years. The company believes that piracy has affected its export markets, and it is now only distributing software containing measures designed to prevent users and dealers from copying it. Thus, in the clearest possible way, piracy has had an effect on the manner in which the company develops and distributes its software. It is an appalling tale. It is a problem that extends across the world, and I shall deal with it in a moment.
§ Mr. Paddy Ashdown (Yeovil)
The hon. Gentleman has mentioned two quite large firms, particularly the second one. Does he agree that, whereas large firms may well have the resources to police the market place, and even to change direction or to feed in certain security devices, the problem is much greater for smaller firms which have no such resources, so that in their case software theft can kill them off?
§ Mr. Powell
The hon. Member is correct. One of the conclusions that I ask the House to draw from my analysis is that the large firms are always able to raise the cost to the pirate of breaking the protection for the software system. Therefore, with the large firms there is an escalation of cost, between the manufacturer and the pirate, in the breaking and copying of the system. The small firms do not have the necessary resources. There has been a sharp decline in the number of houses writing their own software and commissioning software from independent agents. The evidence suggests that in 1983 there were about 500 houses dealing in that section of the market. By the end of 1984 the number had declined to about 350 as firms had gone out of business altogether and as other firms had ceased to commission outside software from independent agents. That has resulted in a decline in the number of people writing software programmes during the past 15 to 18 months. The brunt of that decline has been at the lowest end of the market. I am grateful to the hon. Gentleman for drawing the matter so clearly to the attention of the House.
1337 My final example concerns another multinational software house supplying business software on microcomputers. It estimates that between 10 and 20 per cent. of its users are unauthorised. That is resulting in a loss of revenue of between 10 and 20 per cent. The company is having to invest more than £1 million per annum in alternative technological methods of protection. All of them are necessarily — at a price — vulnerable to penetration and to copying. Money is having to be spent to protect the software but no final protection is possible. All that is necessary is for the pirate to invest more to break the protection.
A pirate is able to sell the pirated product for as little as one tenth of what the market price would be to the author of the software product, so that it becomes impossible for legitimate businesses to make any worthwhile return on their efforts. That has dampened all prospect for successful development of the market.
One of the world's largest computer software houses, Digital Equipment Corporation — my hon. Friend the Member for Basingstoke (Mr. Hunter) hopes to say something about it in due course—has estimated that in 1983 in the United Kingdom it lost £10 million in revenue from unauthorised copying of its software through piracy. The best estimate for 1984 is that lost sales and royalties amounted to no less than £150 million. As the total size of the market for 1984 is just over £1 billion, the £150 million is consistent with my examples of between 10 and 20 per cent. loss of revenue.
All the companies which have approached me about the problem, and also approached the organisation — the Federation Against Software Theft—which has been set up by the industry itself to tackle some of the fundamental problems of the law and organisation, have stressed the fundamental importance of copyright law in the protection of computer programmes, and the need to remove remaining uncertainty about their copyright position. There is not the slightest doubt that, even though there are many actions that the industry itself can take, none will be successful unless the law of copyright is extended so that it without doubt covers computer software.
That is the one safeguard which, more than anything else, Parliament can give to the industry. That is why I put such importance in my analysis on the taking of that one step. If we give the software houses that opportunity, it will be in their hands to take all the other necessary steps to guarantee their survival, growth prosperity, and contribution to the national economy in the future. Then, if they fail, it will not be because we have let them down but because they have been unable to rise to the challenge of the enormous growth to which I referred at the beginning of my speech.
The consequences flowing from the situation that I have described are lost investment and lost opportunities. At the bottom end of the market, a computer game of any merit may cost between £50,000 and £100,000 of investment to bring to the market and to sell. A computer game can be copied in 40 seconds on to a floppy disc. To get that pirated floppy disc to produce a sufficient quantity of the computer game and get it on to the market can take three to four weeks, so the manufacturer of a software game may have as short a time as three weeks in which to make a return on his investment.
1338 In those circumstances, it is not surprising that very few new worthwhile games are being commissioned at present. There is no hope that any company can get a worthwhile return against such a background. I know that the House will be fully aware that only good software is copied. Nobody bothers to pirate a thoroughly inferior and worthless product that nobody would buy. It is the quality material that is most vulnerable, and inevitably it involves more investment.
Let us suppose that any hon. Member or any member of the public listening to the debate decided that he could develop a software programme, and he went to his bank manager and said that he would have four weeks, and no more, to get a return on the investment. Is there the slightest prospect that the bank manager would be prepared to lend the money necessary for that investment? Of course not. Therefore, investment for the development of computer software programmes is drying up. That is part of the overall tragedy, with declining numbers of firms, declining outside commission with declining jobs in the industry. That is why the industry itself feels uncertain about its propects. As it stands, the law is pathetically inadequate to cope with the situation.
Lawyers will argue among themselves whether copyright covers software. Some will say that it does, and some will say that it does not. Some will say that it might, although something else might be the case, and each case has to be dealt with on its individual merits. Prosecutions in the criminal courts are extremely rare. It has been necessary to resort to the most undesirable developments and extensions of the law to try to catch the pirates.
In July last year, in the county of Devon, a youngster from west Yorkshire was accused of hiring out a copy of a software tape and photocopies of the manual that went with it. He was summoned before the Teignmouth magistrates' court in Devon under the Trade Descriptions Act. It had been necessary to resort to that Act to try to bring any sort of case at all against the youngster, effectively to accuse him of selling something that was not what it described itself to be because it was pirated. He was fined £40 with £50 costs.
In no way can the Trade Descriptions Act be an effective vehicle in the criminal courts for stopping piracy. Therefore, the industry has had to resort more and more to expensive, time-consuming and often rather uncertain civil actions. The House will be aware that when a company feels that its commercial position is being undermined by piracy it is possible to apply to the court for an Anton Piller order, which will effectively stop it, pending the outcome of proceedings in the civil courts. It is fundamental to the procedure of obtaining an Anton Piller order that one moves immediately it becomes plain that one is in trouble. However, because of the difficulty for the person to prove, so accurate are the copies that are made in pirated programmes, that it is his own programme and he had the copyright to it, there is delay. Thus there are substantial risks that the court will not come to someone's assistance because he has delayed much longer than was necessary.
However, equally, no lawyer could advise his client to proceed by the civil law unless he had 100 per cent. proof of his claim. The risk of failure is too great and the prospect of being undermined if there is a failure is so overwhelming that lawyers have had to be extremely cautious. Substantial sums of money are now being spent essentially on lawyers. I declare an interest. I am a lawyer. 1339 The Bill that I am promoting is definitely against my interest as a lawyer—and so it should be. It is a scandal that money that should be used to develop the industry is being used to cushion some of the uncomfortable facts of life for lawyers in the Temple and elsewhere.
Therefore, the prospects of successfully protecting software programmes under existing law are uncertain at best and hostile at worst. As the hon. Member for Yeovil (Mr. Ashdown) stressed, many of the smaller firms simply do not have the resources to do anything. They concede defeat even before they start because they do not have the resources. I am certain that the House will be anxious to end that situation as soon as possible.
However, the industry is taking several important steps to protect itself, through technical protection. It is possible to build into a programme means of technical protection. It is expensive to do so and increases the cost of the product, but it raises the stakes in the battle between software houses and pirates. Certain pirates might be deterred from piracy because of the additional cost involved in breaking that protection. As I have said, the simple fact is that the large houses can raise the stakes, but that still does not represent a satisfactory administration of our law.
Because of all those difficulties, in the summer of last year the industry came together to form its own body, the Federation Against Software Theft, with the avowed purpose of focusing on the inadequacy of the law, particularly the copyright law, and to bring to the public's attention what was happening and to try to sway public opinion so that people began to realise that piracy was theft and was doing considerable damage to industry, employment, investment and jobs for the future.
I should like to use this opportunity to pay tribute to the way in which FAST has carried out its activities in the past year. We in the House are all used to lobbyists. We are all used to mail and literature raining upon us, which is unwelcome. We need large wastepaper baskets to accommodate all that descends upon us. If ever there was an example of a successful, persuasive body carrying out its duties and objectives in the most professional and successful way, FAST is it. I pay particular tribute to the chairman of FAST, Mr. Donald Maclean, who has done so much to bring us to the point of discussing this subject almost at the first reasonable opportunity that the House could have had.
Very early on Mr. Maclean was able to persuade my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell) to introduce a Bill under the ten minutes rule on 25 July last year, which for the first time in the House focused on the industry's problem. That Bill was not consigned, like so many such Bills, to the wastepaper basket after a short airing of the grievance that it raised but became the springboard of a sustained campaign, within the House and without, for a change of the law. I am delighted to say that, before my hon. and learned Friend introduced his Bill, my right hon. Friend the Member for Mole Valley (Mr. Baker), then the Minister for Information Technology, had written to Mr. Maclean of FAST, saying:I warmly welcome the setting up of the Federation Against Software Theft. The software industry is a very important, and quickly growing sector of the British economy. It is already a major contributor to national wealth and employment in this country, and it is essential that it should be in a position to protect itself unlawful copying. I am very pleased to see that the industry is organising itself to counter in a concerted way the threat of 1340 software theft, and I would like to assure the new Federation Against Software Theft of my support and encouragement for their valuable efforts in this area.My right hon. Friend the Member for Mole Valley was as good as his word and so has been his successor. My hon. Friend the Minister for Information Technology and the Under-Secretary of State for Trade and Industry have been of invaluable and fundamental assistance to our efforts to secure a change in the law. Without their help none of this would have been possible. Equally, it would not have been possible if both sides of the House were not convinced that a change in the law is necessary.
I am delighted to be able to pay the most fulsome tribute possible to the hon. Members for Dagenham (Mr. Gould), for Motherwell, South (Dr. Bray) and for Yeovil who are here today, and for Stockton, South (Mr. Wrigglesworth), all of whom represent parties different from my own. Without their assistance and advice, none of this would have been possible. All are entitled to their share of the thanks which I know the industry would wish to extend for the assistance which it has received.
It is interesting that what is occurring in Britain has been occurring in other countries. We are not alone. We are not acting in isolation in seeking a reform of the copyright law. We are parallel with some countries, and slightly behind or slightly ahead of others. The United States, through federal legislation in 1980, extended the copyright law to cover computer software. Various state legislatures in the United States are considering specific anti-piracy laws for their jurisdictions. Louisiana was the first state to pass a distinctive anti-piracy measure for computer software.
In 1984 the Australian Parliament passed what is virtually emergency legislation because a judgment given at first instance appeared to suggest that copyright did not subsist in computer software and it was necessary to reverse that. The Canadian Parliament is considering a change in the law almost identical to the one which we are now considering.
The House will be alert to the fact that the examples that I have given so far have been common law jurisdictions. In Europe the Roman-Dutch law jurisdictions of the Common Market do not think of copyright in the same way as we do. They do not have such a sophisticated view of copyright. To them, copyright must be seen as part of a wider legal pattern involving concepts of unfair trading, which we do not have as finely developed as they do. Their legal analysis is frequently different from our own, which creates some of the difficulties to which I alluded earlier in my call for a common response throughout the Community to these problems. It is no good wishing that they were not there because they are.
Throughout the Community, it has been necessary for courts of first and sometimes appellate status to extend copyright by case law to cover computer software. In country after country, bodies such as FAST have been formed in order to try to protect the industry and to seek a change in the law. Only last week such a body was set up in Italy. There is already such a body in Holland, and moves are afoot in France, Germany and throughout the Community parallel to those here. Not only in North America, the Commonwealth and the Common Market, but in countries of the orient, courts of first jurisdiction are beginning to extend the law of copyright so that it covers their particular problem.
1341 What we are doing is no more and no less than what has taken place and is and will be taking place in other countries. Therefore, although we may not take action at the same moment as other countries, we shall soon find ourselves with broadly parallel laws, which will be to Britain's immense advantage.
I have said that my hon. and learned Friend the Member for Mid-Bedfordshire introduced a Bill under the ten minutes rule. As one would expect from its origins, that Bill was most professionally drafted. Hon. Members frequently claim that the legislation that comes before the House is indigestible and incomprehensible because it alludes to earlier statutes into which we have to substitute words which we cannot find and which, if we can, we then find are virtually incomprehensible.
I know that my hon. and learned Friend will not regard what I am about to say as disrespectful. Since his introduction of a Bill under the ten minutes rule the matter has been reconsidered. Assistance has been given by my hon. Friend the Minister for Information Technology and the Under-Secretary of State and the Bill has been drafted with the assistance of parliamentary counsel. Those gentlemen are frequently the object of substantial criticism for producing incomprehensible legislation. For once, if only for once, they have produced a triumph of clarity and brevity. Nothing could be easier than the Bill. Clause 1(1) provides:The Copyright Act 1956 shall apply in relation to a computer program (including one made before the commencement of this Act) as it applies in relation to a literary work and shall so apply whether or not copyright would subsist in that program apart from this Act.I hope that for once the House will join me in praise of the parliamentary counsel who have managed to produce it.
§ Mr. Nicholas Lyell (Mid-Bedfordshire)
I am most grateful to my hon. Friend for drawing attention to that point. Might it have something to do with the fact that the Statute Law Society gave a prize for the redrafting of a Bill which was won by someone who redrafted the Copyright Act 1956? If that is so, does he not welcome the beneficial results?
§ Mr. Powell
My hon. and learned Friend is right. If ever there were a pilot scheme which should lead to a much wider scale of opportunities and prizes, surely that was it.
Clauses 2 and 3 bring into effect the provisions of the Copyright Act 1956 for computer software programmes. It will be possible to apply to magistrates for a search warrant—a crucial power of law enforcement. In that I am following the scheme which was adopted two years ago by my noble Friend Lord Eden of Winton in his private Member's Bill which extended the law of copyright to cover video programmes.
The scheme of things under the Bill is identical to that in the legislation passed two years ago. That Act has been one of the most successful ever passed in modern times. The industry faced colossal problems and action was taken perhaps later than it should have been so that the problems were aggravated, but it is estimated that the legislation has eliminated two thirds of illicit and unlawful piracy. Given the ease of copying, much will inevitably never be stopped. The Bill is not designed to prevent copying for personal use at home, although I hope that people will be 1342 alerted to the moral implications of copying other people's property, but it is designed to make life as difficult as possible for those who pirate and copy works and then sell them at a fraction of the true cost.
§ Mr. John Powley (Norwich, South)
As my hon. Friend has said, technical development in the computer software industry is moving very rapidly. I understand that the Bill will cover the pirating of existing software, but will it cover developments in methods of which we are now unaware but which may occur in the technological progress of the next few years?
§ Mr. Powell
I am grateful for that intervention. All the advice that I have received is that the Bill will be sufficient for that purpose, but I believe that the Government will be introducing further copyright legislation in due course so that if the Bill proves inadequate in any way we shall have the opportunity to review it. At present I merely seek sufficient power to deal with the overwhelming bulk of commercial piracy in this country, and all the evidence that I have received suggests that the Bill will do that.
The video amendment to the Copyright Act has been successful because a special body of people has been established to police it. The video industry came together in the Federation Against Copyright Theft and established a small unit of highly qualified people to investigate piracy and present evidence to the police. The matter is then subject to ordinary police inquiries as in any other criminal case. That system has worked extremely well and I pay tribute to the director general of FACT, Mr. Bob Birch, a former solicitor with the Metropolitan police, and to Mr. Peter Duffy, a former commander in the Metropolitan police. They have established a first-rate unit working closely with police forces throughout the country, collecting and collating evidence of criminal activities and bringing it to the attention of the police. The police then apply for search warrants and make arrests if the evidence justifies it. The police conduct a perfectly normal criminal investigation and bring charges if there is evidence of crime. None of that is done by the special unit, which merely collates the evidence and puts it to the police. The Federation Against Software Theft would wish to act in exactly the same way, to employ people highly qualified in this kind of work and to operate in the closest possible collaboration with constabularies throughout the country to ensure that criminals are brought to justice. Evidence from police officers shows how well the system is working with FACT.
Clause 3 provides for the penalties. At the moment there are no criminal penalties, but if the Bill is passed the penalties will be the same as for any other breach of the Copyright Act — a maximum sentence of two years' imprisonment on trial by indictment, and unlimited fines. That will be a substantial deterrent. The pirates will find their activities ever more closely monitored by experts, there will be a substantial risk of prosecution and the penalty will not be a £40 fine under the Trade Descriptions Act or prolonged civil proceedings at escalating cost which at present prevents so many firms from taking action.
The single most important thing that we can do to help the industry to develop and to prosper is to extend the Copyright Act. That is why I have taken so long to outline the reasons for the Bill and to lay before the House an analysis of the evidence. I am confident that if the Bill becomes law all the possibilities for the industry will be 1343 put into forward gear, bringing growth, new jobs, new export potential and new wealth for this country. Without it, there will be increasing piracy, further bankruptcies, reduced commission and wasted prospects. I am sure that the House would not countenance such a prospect.
§ Mr. Paddy Ashdown (Yeovil)
First, I apologise for the fact that I shall have to leave at about 12.30 and thus may not be present when the hon. Member for Corby (Mr. Powell) sums up. I congratulate him on a comprehensive speech packed with interesting information and powerful examples to show the necessity for the Bill, which I strongly welcome. I also congratulate him on coming fairly high in the ballot for private Members' Bills, which we all enter half hoping to come high and half hoping not to come high because we realise how much time it takes to handle a Bill of this kind. I entered the ballot hoping to come high specifically to introduce this type of legislation. It was thus a particular pleasure to hear the hon. Member for Corby introduce his Bill so cogently and powerfully. As the hon. Gentleman generously said, the foundations for the Bill were laid by the hon. and learned Member for Mid-Bedfordshire (Mr. Lyell), to whom I also pay tribute — indeed, it was his ten-minute Bill that encouraged me to pursue the matter myself.
If Britain is to maintain her prosperity we shall have to establish a new base for that prosperity and a new kind of industry. I believe that the whole House is aware of that. I have long believed that we shall have to move away from the old high-resource use, relatively low value-added industries and away from Britain's old traditional base towards a new sort of base, or towards what might be called a low-resource use, high value-added industry.
§ Mr. Ashdown
Does the hon. Member for Amber Valley (Mr. Oppenheim) wish to intervene, because I would gladly give way to him? I gather that he does not want to intervene. He just did so, as usual, from a sedentary position.
That is the economic base that we shall have to encourage. We shall have to make use of our human and intellectual property much more effectively in future if we are to develop that base and that sort of wealth for the future. The software industry is pre-eminently that sort of industry. It converts intellectual capacity, brainpower and ingenuity into wealth. It is a classic example of a low-resource use, high value-added industry that turns brainpower into money. It is also a classic example of an industry that has, and will continue to have, a thriving small firms sector that feeds into the larger software houses.
Perhaps this industry is the 20th or 21st century successor to the old cottage industry. It is conducive to being centred away from the big cities, and people can work from their own homes. It is something much to be encouraged. As the hon. Member for Corby has said, we are very good at it in Britain, or at least we were. We were once world leaders. Indeed, I still believe that in terms of ingenuity of software packaging and production we are as good, if not better than anyone else in the world. But as the hon. Member for Corby pointed out, our industry, while not perhaps in total decline, is certainly not progressing as it used to do.
1344 One reason for that is that much of Britain's brainpower has a habit of translating itself abroad. Recently, I went round Silicon Valley in America and discovered that the highest proportion of non-Americans there is accounted for by British expatriates. There are even more British expatriates there than Hispanics and most of them are involved in the software business.
However, we are good at producing software, as we have proved in the past. We already have an industrial sector in Britain that is to be encouraged by any means that we can find. I know that the Minister, the hon. Member for Coventry, South-West (Mr. Butcher), who is not at present in his seat, is very keen to do that. I have some doubts of a broader nature about the Government's policy for developing that sector properly. Indeed, I have some doubts about whether they are encouraging it and developing it in the way that they might do. But that is a matter for a different debate.
There are two barriers to the proper development of this most important sector of our industry. One barrier is looming and yet to come, but the other already exercises a profound and doleful influence over the industry. I hope that we shall debate the barrier yet to come in a month or so. I refer to the application of the licensing requirements for the export of software abroad under the new COCOM regulations. How they will apply, how they will affect the market, and how we are to honour the commitments apparently laid on us are matters of deep concern for the industry. But with any luck they are again a subject for a future debate. I hope that the Government will grant that debate, because the implications of that agreement are profound for that sector of the market.
The barrier that is here, and here with a vengeance—and which the Bill tackles with great effect—involves software theft. I have said that it is a barrier to the development of the industry, because it establishes a black market that unbalances the whole industry. The rewards for the production of intellectual property accrue not to those responsible for it, or to the inventor or designer, but to the pirates. It is they who get the profits. The black market is also highly developed. The hon. Member for Corby said that we had perhaps let the piracy of video tapes go on for too long, as that also involves a highly developed black market. Although I very much welcome this Bill, one could always say that one might have hoped for its introduction even sooner.
According to most reliable calculations, we are losing about £150 million a year to the software pirates. There is a fully established black market distribution system. As FAST has reminded us and as I think the hon. and learned Member for Mid-Bedfordshire mentioned, a person can go to Blackbushe market and find such items sold perfectly openly and in some volume. Backing up that distribution system is a sophisticated production mechanism. Again, I think that the hon. and learned Member for Mid-Bedfordshire mentioned that in at least one case—and no doubt in others—people have been known to have factories specifically for piracy purposes, and the reproduction of software.
Furthermore, piracy is not confined to one sector. It spans the whole industry, from the high-price, relatively low-volume software right down to the computer games area. The pirates are even sophisticated enough to make some minor changes to the product that use somebody else's intellectual property, and to add certain things to it that give it a new characteristic and perhaps appeal. In all 1345 those senses, we are talking about tackling a highly developed black market. It is large, and growing every day. In a sense, it is perhaps a cancer that sits in the industry, preventing the proper development of the industry and robbing people of their rightful rewards.
That must be stopped to the benefit of British industry and to the benefit of the development of this country's intellectual property. But as the hon. Member for Corby has said, there are problems about stopping it. The problem about software theft is that it is easy. It does not seem like theft. To copy a programme, the person merely has to sit down at his computer, call up his copy programme, touch the button and there it is. That does not seem like theft. There is no break-in or anything clandestine. It can be done at home. I recognise, of course, that the Bill is directed not towards the casual copier at home but towards the commercial pirate, but that is how simple it is.
The problem is that, because we have ceased to treat the matter seriously, many people who would not dream of stealing a piece of hardware would nevertheless think that the copying of software is somehow not theft. But theft it assuredly is. It is the theft of somebody else's intellectual property. The Bill provides a framework enabling that point to be made.
I think that the hon. Member for Corby probably made the case more powerfully than I can, but it should not be believed that legislation will solve the problem. In itself, it will not. The hon. Gentleman used the word "policing". As he is a lawyer, I was surprised to hear him say that. He went on to say that it was the police who did the policing. But a back-up organisation is needed, as with video piracy. A back-up organisation is needed to police or scrutinise the Bill effectively so that it can be operated in the way that the hon. Gentleman intends. It must be remembered that that is what, under a similar piece of legislation, has reduced video piracy by two thirds since 1983.
I pay tribute to FAST for what it has done to bring this matter so effectively, and in a very responsible way, before the House. I also pay tribute to it for providing us with a back-up system with which to scrutinise the Bill's operation.
This is an important Bill. As the hon. Member for Corby said, it is a Bill to protect property, investment and jobs. It will help to provide a framework for creating new jobs, new wealth and prosperity. It is an important component in a new strategy for the industrial regeneration of Britain. It is a vital component since it addresses itself to a vital sector of industry. I am happy to welcome the Bill. I hope that it will progress as fast as possible and become legislation as quickly as possible.
§ Mr. Michael Marshall (Arundel)
I agree with much of what the hon. Member for Yeovil (Mr. Ashdown) said. I apologise to my hon. Friend the Member for Corby (Mr. Powell), the Minister and the House because I shall probably have to return to my constituency before the end of the debate, although I shall listen to as much of it as I can. I welcome the Bill and I intend to do everything that I can to help my hon. Friend with the Bill's further stages.
Once again we are trying to legislate in the face of a technology which leaps ahead of us all the time. My hon. Friend the Member for Corby and the hon. Member for 1346 Yeovil were right to argue that the Bill should be considered not in isolation, but within the broader context of copyright. I declare an interest as an author and playwright and one who hopes to see some of his work translated to software.
One cannot but be worried by the many copyright problems which remain. The literary copyright involved in books is pirated throughout the world. Pirated copies of paperbacks are to be found everywhere. The video piracy problem was one of enormous proportions. When we legislated it was estimated that about 70 per cent. of videos sold in Britain were pirated. We legislated just in the nick of time.
We should be able to look to a back-up organisation. I support the work done by the Federation against Software Theft and Mr. Maclean. I hope that the Minister will take the opportunity to explain the Government's view of the wider copyright question, how we should seek to keep in touch with technology and the difficulty of producing legislation which encompasses the leaps ahead in technology. I am thinking in particular of the role of the World Intellectual Property Organisation. That has been set up to try to deal with some of the problems. I hope that my hon. Friend the Minister will say something about the prospects for an international convention. My hon. Friend the Member for Corby described some vivid examples of international competition.
I shall highlight some of the existing problems. My hon. Friend the Member for Corby spoke about legislation running parallel in other countries. I welcome that, but some anxieties remain. For example, Australia is regarded as the piracy capital for software mainly because a recent case resulted in the decision that computer software does not fall within Australian copyright law. Australia seems to have greater freedom in that respect.
§ Mr. William Powell
That case caused appalling problems but the Federal Parliament intervened and legislation was passed. The original decision was reversed and the law has now been straightened out in Australia.
§ Mr. Marshall
I am obliged to my hon. Friend. I was sure that he would be able to help. However, it is a simple matter to take software out of the country. For example, it can be put in an envelope and posted to Australia. If the software is then adapted, the law is uncertain. Software which is adapted, even marginally, can be sent back here and may not be covered by copyright law. The role of Governments in such matters is important and I hope that the Minister will say something about it.
I have declared my interest as an author. I am the co-author of a pamphlet which argues that, with the wholesale adoption of new technology, 3 million new jobs could be created by the end of the century. This assumes that the balance of traditional industry, net losses and net gains is neutral. In that argument and detailed estimates I was assisted by Philip Virgo who has done some important work at the National Computer Centre. We estimate that the creation of the new jobs turns precisely on the reform of copyright as it affects software. I shall explain why.
The way in which jobs can be created in the entertainment world through legislation to prevent video piracy has already been shown. My hon. Friend's proposal will also have its beneficial impact on computer games.
I have a particular interest in educational material. On a recent visit to a school in my constituency I saw 1347 something which is new in my experience. I saw a class being taught by a teacher who had prepared software which simulated the production of a chemical. The software showed the way in which raw material costs and other costs are brought together. It enabled the 16-year-old pupils to work through the process by which a chemical is produced. It showed how its selling price was worked out and how resulting profit enabled new investment to be made.
To me that is a rare form of software. It was created by the enthusiasm of the teacher and because he had access to a company which helped him to put the software together. It points the way to an enourmous opportunity for more creative software with practical application in education. Such activity can create large numbers of jobs. However, such software is labour-intensive. In short, using new technology is likely to make teaching more effective and to create jobs.
We are approaching the time of shorter working lives, shorter working weeks and early retirement. The growth of adult education is therefore likely. Many of us see a role for ourselves in that area. Adult education is one of the inbuilt advantages of this place.
About 3,750,000 people are involved in further and adult education. It is estimated that if that figure were trebled—which is not unrealistic—and 12 million adults demanded 200 hours of material a year on 25,000 different topics, that would create employment for 400,000 programme preparers. Such figures are within our grasp if the fruits of this labour are not frittered away through piracy. Again, our estimates for information services show the potential for an additional 400,000 jobs during the next few years, once more based on adequate copyright reform. The United Kingdom information services industry is already employing over one million people. Prestel, which has barely begun to make its full impact, is the sort of area in which jobs will develop. It is a typical example of a product that is dependent on copyright reform. My hon. Friend the Member for Corby was modest in his remarks about job creation; I believe that there is substantial scope.
My hon. Friend also touched on the competitive position, and here there are some anxieties. Experts suggest that although we have been extremely good at producing software to make computers work, we are not as effective in producing software to help companies perform particular tasks—yet that is the area in which competition now runs most strongly. We must watch some of the opportunities being exploited by our competitors. The design of software for more effective use by manufacturing companies is an area that provides an obvious target for piracy. Industrial espionage is a highly developed form of piracy, and I can envisage piracy being directed down to a narrow point with the stealing of industrial secrets through software unless legislation is tightly drawn and applied internationally.
However, Britain has certain competitive advantages. Japanese development still has difficulties to overcome, not least the question of language. The United States, because of the pound-dollar relationship, is now expensive. The United Kingdom software industry is well placed to look for a further drive with this legislation behind it. We should look to the leading edge of technology and provide software that is more directly relevant to company needs rather than simply exploit the computer, which is no longer the area where innovation and inventive skills can best be deployed.
1348 There is another aspect of international competition, which is the degree to which other countries, in making their parallel legislation, agree to further consultations and discussions — not only through the World Intellectual Property Organisation but on a Government-to-Government basis. I also agree with the suggestion of the hon. Member for Yeovil that the future of the COCOM export arrangement is relevant.
The Bill is admirably clear. It sets out to do something that we can all support. However, I am a little anxious about how it will be seen to be effective and whether we can be sure that it will not be overtaken by further technological development. Will my hon. Friend the Under-Secretary consider whether it might be worth while extending the process that the Government have already taken on board — to look for the establishment of a number of small bodies, possibly created through industry itself—as FAST has been—but a body that is also seen to be outside the industry. It is difficult for an industry-organised body to adjudicate between competitive claims in industry. Oftel and the proposed Space Centre have recently been created. Possibly, following that example, the Government could see a way not only to meet my point about adjudication but to see the matter in relation to the industry's international activities — for example, its relationship with WIPO and with other countries. That might be a helpful way to ensure that we keep ahead in that area.
My hon. Friend the Under-Secretary has always shown the greatest enthusiasm in these matters. He must recognise that from time to time Ministers and civil servants move posts. It is a weakness in our system that something which has been sustained through legislation and by understandings between countries can suffer a setback through a change of personnel or a change of the driving force in certain policies, and that we can no longer continue along the road that we had begun to walk with some certainty.
I would not normally suggest that a quango is still hidden in the corner of every heart, but in such a practical area there is an opportunity to consider with clarity and purpose the ways to make this Bill more effective.
I welcome the Bill and congratulate my hon. Friend the Member for Corby on the way that he introduced it. I wish it every success and I will help my hon. Friend in any way that I can during the Bill's further stages.
§ 11.7 am
§ Mr. Nicholas Lyell (Mid-Bedfordshire)
I am very glad to follow my hon. Friend the Member for Arundel (Mr. Marshall) and endorse his sentiments. I congratulate my hon. Friend the Member for Corby (Mr. Powell) both on his good fortune in rising high in the ballot and on his supreme good sense in picking up this Bill and promoting it so efficiently and diligently to its present stage. I hope that before too long it will have a safe passage through this House and another place and on to the statute book. I thank FAST for its extremely efficient efforts to correlate the information and present it in an extremely attractive and effective form. I also thank the Ministers who have been involved—my right hon. Friend the Member for Mole Valley (Mr. Baker), my hon. Friend the Member for Chertsey and Walton (Mr. Pattie), my hon. Friend the Member for Pudsey (Mr. Shaw) at the Home Office—which played a significant part because of the enforcement 1349 aspects—and my hon. Friend the Member for Coventry, South-West (Mr. Butcher) who is with us today and who has such great knowledge of this area.
I do not want to repeat the speech that I made in July on my ten-minute rule Bill. I want to do what both my hon. Friend the Member for Corby and my hon. Friend the Member for Arundel did, which is to put the matter into the wider context of intellectual property reform, in which it has a real place. Some people are worried that this is another piece of piecemeal legislation and that we should not indulge in it. The House recognises that the need for protection against piracy is so urgent that the simple and beautifully clear Bill provided by the parliamentary draftsmen is eminently justified.
In the piracy of computer software, we are dealing not with the sophisticated plagiarist but with the outright crook. We are not dealing with someone who has his own sensible ideas and who may be overstepping the mark in drawing upon other people's ideas. We are dealing with people who have in the recent past invested money to pirate videotapes, and, having found that avenue to a quick buck closed off, have reinvested their ill-gotten gains in equipment that enables them to copy computer software.
The profits that can be made were amply set out by my hon. Friend the Member for Corby who pointed out that there can be, and has been, enormous innovation in the games market, which is at the bottom end, but that that innovation has been stolen in the most crude and callous way by the pirates so that, for the time being, innovation has largely dried up.
There is also a serious problem in business software, particularly for use on microcomputers. One can copy a floppy disc for, say, word processing software—such a disc would market at between £200 and £300—on a twin-disc drive microcomputer in perhaps 10 seconds.
That brings me to another unattractive feature of piracy that is not so much to do with the back-street manufacture and marketing through Blackbushe or the less reputable shops in the metropolis and elsewhere, but concerns the temptation offered to hardware manufacturers to encourage the sale of their hardware by supplying genuine software that is not good value but under-the-counter, swiftly pirated software, so enabling the user to get many hundred pounds more value out of his recently purchased hardware at someone else's expense—that someone else being the software house that has developed the software at substantial investment.
The industry has made great efforts to create a policing structure and I am confident that FAST and members of the industry will create a real policing structure once the Bill is on the statute book, a structure that will not put a significant extra burden on the public authorities and the police. Once we get the framework of law right, neither the policing nor the process of prosecution will be difficult. Once it is widely recognised by the pirates that they can swiftly be prosecuted, the object of the Bill—which is not to bring people to court but to dry up piracy—will be achieved.
On the wider scene, what should be our overall objective in the reform of our intellectual property system? That system covers patents, copyright, trade marks and other ancillary aspects. Hon. Members will agree that the 1350 object of our intellectual system should be to promote the technical and commercial interests of British industry in a fair and effective way.
The December 1983 Green Paper set out a framework for that, but it tried perhaps to construct an over-elaborate system that appeared to give so much protection to the owner of the intellectual property right that it could be abused to the disadvantage of certain aspects of the market. I say that not in a dogmatic way but to stimulate further consideration of the matter.
The intellectual property sub-group of the Society of Conservative Lawyers issued a paper, from which I have drawn heavily, which merits careful consideration by the Department of Trade and Industry, and I shall mention a few areas into which we should be progressing in parallel with the objectives of this measure.
People often think that intellectual property rights, patent rights and copyright are there to help the brilliant small innovator against the big man. All too often, however, patent rights and copyright can be exploited only by the large firm with substantial resources. The brilliant innovator who is seeking to do constructive work for himself and the nation can find himself enmeshed in a web of restriction and patent control, often involving trivial modifications of earlier patented or copyrighted aspects about which he cannot afford to litigate.
Lawyers who practise in this area—I am not one of them, although I have some experience of it—must time and again explain to their innovative clients that while they are almost certainly right in law, the maelstrom into which they would become involved if they embarked on litigation would bankrupt them; and they must advise them, as a matter of commercial common sense, to withdraw.
§ Mr. Michael Marshall
My hon. and learned Friend reminds me of a point that I intended to make but omitted to do so. I appreciate the line that he is pursuing and, like others, pay tribute to the spadework that he has done in this sphere. For the sake of simplicity and of trying to be comprehensive, will he accept that the use of the words "electronic publishing" would be better in some respects than talking about "computer software"? As we are looking for wider forms than those which relate purely to computers, he might care to join me in tabling an amendment in Committee which might be helpful in that respect.
§ Mr. Lyell
I am grateful to my hon. Friend for raising that interesting point. There is always difficulty in finding a more accurate phrase but we need one which bites firmly on the mind of the potential infringer. While I concede that his phrase may have certain advantages in accuracy, it might not come so swiftly to the mind of the pirate, and that is the mind we seek to impress. However, I shall give the matter further thought.
In considering how we proceed in parallel with the Bill in other aspects, we must remember that our present systems of intellectual property protection seem to give more protection to the foreigner than to the home-based innovator or producer. It is interesting to note that today the majority of patent holders in Britain are not United Kingdom-based. In 1983, the latest year for which I have statistics, 80 per cent. of all patents granted were granted to non-United Kingdom residents.
The structure of our intellectual property law is such that in wide areas the negative effects outweigh the 1351 positive. Our restrictions bite heavily on those who seek to innovate and manufacture in our home market but are much less restrictive on those who import.
We have the ludicrous situation that manufacturers in this country can be faced with competition from abroad which our existing legislation does not prevent, while, when those same manufacturers seek to export to other countries, as they lawfully can under the laws of those other countries, they may be prevented from doing so by our own intellectual property law in Britain. I hope that the Department will give urgent attention to that state of affairs because it needs correcting.
The Green Paper seems to go back on, if not a previous commitment by the Government, then at least a strong indication by Government that it would abolish industrial design copyright.
I do not think that it is widely recognised that our system of protection of industrial design copyright arose by accident. It was unforeseen and unintended by Parliament at the time of the passing of the Copyright Act 1956 and the Design Copyright Act 1968 and has come to be established only because skilful lawyers—who could perhaps be described less attractively as clever lawyers —were able to put together section 3(1)(a) of the 1956 Act which defines drawings as artistic works, "irrespective of artistic quality", and section 48(1) which says that a reproduction in a case of an artistic workincludes a version produced by converting the work into a three-dimensional form".Thus, artistic copyright protection is given to the shape of mechanical parts. No one using the English language in its ordinary sense would have contemplated such a possibility.
Those who could produce parts for machines and functional items and could compete in this country are prevented, by a side wind, from doing so. All patent and copyright law legitimises monopoly, but monopolists are being given a far wider monopoly than was ever intended. These are sophisticated matters and I do not wish to weary the House with too much detail, but similar problems arise with parallel imports and on copyright law and piratical imports.
Case law can adversely affect practical considerations. I speak against myself as a lawyer and a practitioner in the courts, but in intellectual property law, the case of American Cyanamid v Ethicon has had an adverse effect. One of the great advantages of patent law used to be that when one went to court for an interlocutory injunction — one seldom went further because the object was to stop the infringer in his tracks—one was given a good indication of the strength of one's case because the law before American Cyanamid v Ethicon required that the court had to form a significant view, though not a final view, on the merits of the case.
The House of Lords subsequently said that that was not the correct law in the general field, which then applied to intellectual property law, and all that one now has to show is that one has a fairly arguable case, which is different from showing that, on at least an initial view, the merits are in one's favour.
We have changed that lesser requirement in industrial relations law, and everyone agrees that we were right to do so, and we should also abolish that approach in intellectual property law, so that those who go to court for swift and effective procedures get once more the swift and effective judgments that were so useful in the past.
1352 I congratulate my hon. Friend the Member for Corby and ask that the Bill be seen not as an isolated piece of legislation, but as an important measure which will be essential to protect the industry from a serious problem and will, I hope, be part of moves by the Department of Trade and Industry towards further sensible reforms in intellectual property law.
§ Mr. Andrew Hunter (Basingstoke)
Those of us who attempt to follow my hon. Friend the Member for Corby (Mr. Powell) face two daunting tasks. The first is to match his eloquence, which is difficult, and the second is to match the detail of his exposition, and that can he done only by indulging in a degree of repetition.
I cannot claim marks for the originality of the preface to my comments because the point has already been made by my hon. Friend the Member for Arundel (Mr. Marshall), my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell) and the hon. Member for Yeovil (Mr. Ashdown), but I do claim marks for sincerity when I congratulate my hon. Friend the Member for Corby on taking the initiative that led to the Bill and to this debate.
My hon. Friend the Member for Corby was the first to say that some acknowledgement must also be given to my hon. and learned Friend the Member for Mid-Bedfordshire whose ten-minute Bill established him as the parliamentary progenitor of this Bill.
It would also be appropriate at an early stage in my speech for me to join in singing the praises of the Federation Against Software Theft, which has been the prime mover in the campaign which has resulted in the Bill. My hon. Friend the Member for Corby paid tribute to the effective, reasoned and sensible way in which the federation handles its affairs. I echo that sentiment and note the sharp contrast with much of the sensationalism and bellyaching that we get from so many other lobby forces. I heard on the radio yesterday that dentists have been asked to write not only to their own hon. Member, but to all hon. Members.
May I inject an irreverent but heartfelt plea. For 13 years before becoming an hon. Member, I was a school teacher and one of the subjects that I taught was English. Perhaps I am more fussy than some other hon. Members, but I make the plea that on this side of the Atlantic we should spell the word programme with double "m" and an "e" at the end. That spelling appears in the body of the Bill, but not in the explanatory and financial memorandum. Let us have some consistency.
§ Mr. Timothy Wood (Stevenage)
I support my hon. Friend's plea for consistency. One can take the view that the use of the word "programme" in relation to computers is different from any other use of the word and that therefore we should use the spelling "program". In that case, we should use that spelling throughout the Bill and not use one version of the word in one part of the Bill and duck the issue in another part. The spelling "program" is used throughout the world and I believe that it should be adopted in the Bill.
§ Mr. Hunter
All hon. Members can claim, to a greater or lesser extent, to represent the interests of high-tech industry. Computer business is a prominent part of that industry. High-tech industry tends to gravitate to certain 1353 parts of the country, one of which is the corridor between the M3 and the M4. Within that triangle, Basingstoke has increasing importance. I am advised that about 5,000 of my constituents are employed in the computer industry, and the number is rising rapidly as IBM and the Digital Equipment Corporation increase their presence in the town.
Thousands of my constituents therefore depend for their livelihoods on a flourishing computer industry, and the point of the Bill is precisely that: to ensure the prosperity of the computer industry. The Federation Against Software Theft does not mince its words. It says:Software theft is a serious and immediate problem threatening innovation, jobs and investment in the computer industry.It is estimated that the industry is losing about £150 million a year through software theft. That is intolerable. That loss hits at the profitability of industry and, as we all know, that decreases the prospects of reinvestment, innovation and job creation.
A point which has been made frequently in the debate is that it is relatively easy to engage in software piracy. Such theft takes a variety of forms depending on the type of computer software which is involved. To the lay mind the distinction between various forms of software theft are perhaps not immediately discernible. I understand that there is replication without permission; there is counterfeiting; there is the production of look-alike copies substantially reproducing legitimate programmes; and there is the unauthorised supply and use of computer software. I have no doubt that there are many other forms of software theft.
My hon. Friend the Member for Corby warned that I would concentrate on one firm if I were lucky enough to catch the eye of Mr. Deputy Speaker. The Digital Equipment Corporation has a major presence in my constituency. It is known in the trade as DEC, and from now on I shall refer to it thus. It is worth while considering the way in which that company has analysed the problem of theft and set about seeking solutions.
About two years ago DEC undertook an analysis to try to establish the loss which it was suffering from software theft. It calculated the number of computers which it was selling in the United Kingdom, presumably not an especially difficult task. It then made certain assumptions about the average number of operating systems, allied projects and application programmes that it expected to licence per computer. The calculations of the expected licence revenue were compared with actual revenue and the company made the staggering calculation that it was losing about £10 million per year: clearly a figure of great consequence and seriousness to it, notwithstanding that it has the third largest turnover in the industry in Britain.
I have already stressed the consequences for companies whose profit margins are being hit by theft. Reduced profit margins ultimately affect job creation. DEC's reaction was typical of companies in this position. First, it joined the organisation that is called the Federation against Software Theft. It was one of the founding members of FAST. Mr. Roger Tuckett of the law department of DEC in the United Kingdom became, and remains, a member of the FAST management team. DEC senior management in the United Kingdom and in Europe gives the federation full and total support. The international factor has already been 1354 introduced into the debate. DEC sees the initiative which has been taken in Britain as one that should be followed up in other European countries.
DEC's second reaction was to work through the trading association to counter the problem of software theft. DEC is represented on the intellectual property committee of Beta, which is considering the interests of companies similar to DEC.
The company's third reaction was to take legal action. In 1983 there was an out-of-court settlement following a dispute about the unauthorised copying of DEC software and the failure to pay licence fees. Nearly $5.5 million were paid to the company in settlement. Other proceedings continue. There are proceedings against another company alleging unauthorised copying and distribution of DEC software. There have been 11 court hearings to date and, apart from one minor issue, DEC has won at each hearing.
The company's attitude is typical of that which is being adopted by other comparable companies. It feels that it must protect its investment in its technology and it will not hesitate to enforce its rights in the courts if necessary.
The growing significance of software manufacture to the computer industry is not always realised. It is the largest growth area within the industry. I received a letter from DEC this morning, one paragraph of which reads:on the relative importance of DEC's software business, this now corresponds to about 15 per cent. of total turnover. While DEC's business overall is growing at about 30 per cent. per year in the United Kingdom, the software related part of this is growing at about 65 per cent. per year.Those are most impressive figures.
It is clear that theft affects all parts of the software business. FAST has distinguished three major categories. First, it speaks of theft of high-cost/low-volume software. That is software that is used on large or medium-sized computers which retail at a price of £1,000 upwards. This software includes operating systems and application packages. In this area we are up against unauthorised copying and using by users, illicit copying by distributors and the production of look-alikes.
The second area which FAST identifies is the theft of medium-cost/medium-volume software. This is software that is used on microcomputers within a price range of £50 to £1,000. It includes smaller business computers and personal computers. The illegal practices include illicit copying and use and supply by users and distributers.
My hon. Friend the Member for Corby referred briefly to a study which was undertaken by Aston university in 1983. Among other things, those who undertook the study came to the conclusion that 25 per cent. of microcomputer software companies suffered serious losses of revenue through software theft. The more successful programmes are the most susceptible to theft. The number of illegal copies exceed legitimate copies by more than three to one.
Thirdly, FAST has drawn attention to the category of low-cost/high-volume home computer software theft. This includes computer games and education software. We are talking of software that is distributed mainly through high street outlets. There is widespread counterfeiting. Illegal copies outnumber legitimate copies by up to 12 to one.
FAST has analysed current prosecution activities. It is clear that software copyright owners are already pursuing policing and enforcement activities, including investigations, the targeting of criminals, the search and seizure of 1355 illegal material, prosecutions, and, above all, publicity and education. These are some of the activities in which companies are already involving themselves to the full.
Major companies are conducting a growing numbr of investigations into software theft, especially in the high-cost/low-volume software league. Legal action is being taken and I have learnt of the establishment by the Guild of Software Houses of a fighting fund to help finance legal actions.
In all cases FAST stresses that prosecutions are limited to civil actions because of the unrealistic criminal penalties currently available for copyright infringement of computer software. The most significant point is that the smaller companies with slender resources, especially in the microcomputer software sector, are reluctant to take legal action because of the element of doubt that still remains about copyright protection applying to computer software. There is a residual doubt about that part of the law, and that doubt must be removed.
A paper produced earlier in the year by Mr. Roger Tuckett contains clear thoughts on this matter. The paper was entitled "Controlling Infringement of Copyright in Computer Software" and stated:Under Section 21 Copyright Act 1956, it is a criminal offence to manufacture or distribute articles which are known to be infringing copies of a copyright work. There is no reason why prosecutions should not be brought under the present legislation in appropriate cases for software piracy. However the police and other authorities are reluctant to investigate and institute prosecutions for two reasons. First, they believe there is still legal doubt that computer software is protected under copyright law. Secondly, they believe the present criminal penalties are derisory.The paper continued:In the past, criminal prosecutions for software piracy have been rare. Today there are a handful of such criminal investigations taking place, some of which may result in appropriate prosecutions and convictions.Prosecutions are normally brought by Police Authorities or Trading Standards Officers. These bodies are showing increasing willingness to become involved in helping to deal with this increasing area of dishonesty. They will continue to look to the computer industry for technical advice and support when bringing prosecutions. If a company which is suffering from software piracy is able to persuade these authorities to take action, it will obviously avoid the considerable expenses involved in bringing civil proceedings. It is hoped that the clear effective remedies to be provided by the new Copyright (Computer Software) Amendment Bill will encourage these public enforcement agencies to use their resources to deal with the current and future problems.I believe that we all share that hope.
The need for legislative changes is indisputable. There is an urgent need for clarification and strengthening of the law. This serious problem will be reduced and the effectiveness of all the remedies—civil and criminal—will be increased by these amendments to the Copyright Act 1956. That is why we need the amendments. They are straightforward and are not contentious. It is clear that they will appeal to, and be accepted by, all parties represented in the House.
The Bill will enable the industry to continue its fight against software theft within a framework of legal certainty and more effective copyright protection. As FAST concludes, for all categories of software theft, the explicit reference to computer programmes in the Copyright Act will be the cornerstone for educating everybody that software theft is not "fair game" but illegal and to the detriment of the community. I welcome the Bill, and I wish it well.
§ Mr. Phillip Oppenheim (Amber Valley)
I warmly welcome the initiative taken by my hon. Friend the member for Corby (Mr. Powell) in introducing the Bill and the earlier initiatives of my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell). The information technology and software industry owes them a great deal for the large amount of time they have spent in pushing the Bill through.
I believe that the Bill should not be necessary. It is necessary because of a fundamental fallacy. The same fallacy gave rise to the Data Protection Act 1984 which is costing British industry several hundreds of millions of pounds. The fallacy is that data are somehow fundamentally different if stored magnetically on a floppy disc, a hard disc, a tape or by some other method of digital storage rather than stored on paper in black and white. It is ludicrous that companies can store millions of names and addresses in card index systems without falling within the jurisdiction of the Data Protection Act, but if the information is stored on a home computer or microcomputer, the companies fall within the bounds of the Act.
In the past, lawyers, in their wisdom, have decided that, because data are stored magnetically or electronically, they do not fall within the bounds of the Copyright Act 1956. The Bill is an important part of a jigsaw. If over the next few years we can find the other pieces of the jigsaw, we may reveal a picture of a healthy information technology industry. The Bill is only one piece of the jigsaw. Unfortunately, too often we in Britain put ourselves down. Company failures in the information technology industry cause us great concern and receive great publicity, but, for every company that fails in a blaze of publicity, there are many more healthy companies. Failures are a facet of a young and growing industry.
The NEDO report, which was published in the summer of last year, cast gloom over the information technology industry. Astonishingly, the report did not deal with microchips. British companies are rapidly becoming European leaders in microchip production, especially in certain types of chips such as Customs chips and fast Dynamic RAMs. Because the report did not mention microchips, it missed a vital component of the information technology market.
We can be proud of our achievements in information technology. Some of the best business computers are made in Britain. It is interesting to note how one relatively small Birmingham company—ACT—managed to change itself from being largely an importer of American computers into a major force in the manufacture of home computers. Although British industry is under severe pressure from foreign competition, some companies, such as PSION, are producing products that are world beaters.
Government policy has been forward looking and instrumental in encouraging the information technology sector in England. Pump-priming policies and specialist schemes have been the correct way forward. It would be wrong to go for vast, ludicrous bureaucratic and expensive projects, such as those mounted by the last Labour Government. For example, the Labour Government wasted £36 million of taxpayers' money on one project—a company called NEXOS which, apparently, Labour politicians dreamt would one day rival IBM. Two years 1357 ago, predictably, that company went under because of mismanagment and the problems of setting it up. The taxpayer is £36 million poorer.
Despite the successes of the policies of the Department of Trade and Industry in encouraging the information technology sector, we need more direction. I am not talking about French-style dirigisme which has helped to plunge the French information technology sector into massive losses. I am talking about the realisation of where our national interests lie, and that means that a more aggressive attitude must be taken to trade barriers which inhibit the growth and prosperity of the information technology industry in England.
The European, Japanese, and far east telecommunications markets are far from free. Any British company wanting to export software or information technology products to American markets come up against the Buy American Act. That means that if public corporations wish to buy foreign products they must cost at least 10 per cent. less than comparative American products. I should be astonished if that could be called free trade. Yet this country freely allows in telecommunications products from Italy, Germany, Japan and Taiwan. Our schools are full of American products.
I understand that one of the major reasons for the problems of Acorn was its failure to break into the American market. One of the reasons for that failure was that it could not get into the American education system because the United States Government insisted that it brought American-made products. The company also came up against the Buy American Act. I strongly believe that free trade is the best way to further the prosperity of all nations, but it is clear that we do not have free trade in the world. When other countries refuse to take our products on a reciprocal basis, we must be far more aggressive in putting barriers in the way of their products until they open their markets to our information technology and other products.
We seem to be acting against the interests of our information technology industry over origin marking. The origin marking regulations are now hopelessly out of date. Most business equipment, including computers and software, do not have to have on them the country of final assembly or the countries where most of the components are made. We can buy a computer or software over the counter or by mail order without knowing where it was made. Most people want to buy British goods, be they computers or software, but more often than not they do not have the opportunity to know where the equipment was made.
I shall quote the example of a British company called Amstrad. It imports its own-brand computers from Taiwan. It is a successful home computer which is sold with a range of computer software and most people buying that product believe that it is British. Even the Financial Times, which should know better, called it a British product.
How can British consumers buy British-made computers? The structure of the industry is such that many computers contain foreign components. How can we urge our consumers to buy British when we do not, by law, insist on manufacturers, importers and distributors putting the countries of origin on computers, telecommunications equipment and software?
1358 Another way in which we seem to be acting against the interests of our information technology sector is that we charge more duty on the import of components that go into British computers than we do on the import of fully built computers. It is a disincentive for British manufactured computers to compete if their components carry more duty than the finished, imported product which probably contains the same components.
This country has a great opportunity to win a large share of the world software markets if we can get matters right. There are many ways to get it right other than by the Bill. The structure of the information technology market is moving in such a way that it is especially easy for small companies to produce and market software to run on a range of machines, because increasingly over the past five years world computer manufacturers have a few standard processes and operating systems which they buy and assemble into their products.
The result is that computers, be they made in Taiwan, Tokyo, Frankfurt or Farnham, almost invariably run the same software. That means that a company no longer, as it did 10 years ago, has to be massive, with massive resources, to write software. Relatively small outfits can now succeed. A problem that many of those companies experience, apart from piracy, is the cost of marketing. It does not cost a vast amount to produce an excellent software package, but it costs perhaps 20 or 30 times as much to market it successfully. The Department of Trade and Industry might consider helping some of our fledgling software companies to market in the United Kingdom and overseas.
The Bill will help British information technology enormously. It is an important part in the jigsaw. If we could find the other pieces, it would lead to a vibrant prosperous industry in this country over the next 20 years. The British industry is a delicate shoot. More direction is needed, but not direction in the French sense of the all-seeing, all-powerful bureaucracy trying to control and mould every aspect of the industry. It needs a little more recognition of where our national interest lies, and a few prods in the right direction from the Department of Trade and Industry would be welcome. I recognise that it has already done a great deal to help the industry.
The Bill is a small but vital step in the right direction. I warmly welcome it, and I warmly thank my hon. Friend the Member for Corby for taking such pains and making such efforts to ensure that it came before the House.
§ Mr. Timothy Wood (Stevenage)
I should like to join all those who have offered their congratulations to my hon. Friend the Member for Corby (Mr. Powell) on introducing the Bill. When one comes high in the ballot it is always difficult to decide which of all the subjects of merit one should pursue.
A change in copyright legislation is vital for the software industry. I should declare my past interest in the subject as, for many years before being elected to this this place, I worked for ICL in the development of computer software and advising people on the use of such software.
The nature of computer software, as has already been said, has changed significantly. In the early days of computer use there were relatively few different computers, costing substantial sums of money. A few bespoke software packages were made and there was much greater tailoring activity. Over the years the cost of 1359 computer hardware has fallen dramatically. It is an essential requirement that package software is produced that can be matched easily with many machines. That has the advantage of spreading development costs over large numbers of copies.
As has been said by my hon. Friend the Member for Corby and others, there is an enormous potential for growth in the production of software. A figure of 22 per cent. has been mentioned. Whether that is accurate will depend in part on the Bill's passage. There is no doubt that the development of good quality software depends upon good profits being made from it.
It is relatively easy to produce software cheaply and quickly, but if we are to produce the software that will provide effective systems for users, or good games for children and others, substantial efforts will have to be made. If there is piracy, the value of those efforts is destroyed.
Therefore, although in the short term it may appear that the passage of the Bill would aid the computer software industry, in the slightly longer term the real beneficiary would be the user. Whether the user be the child playing the fun computer games or the large company operating a major stock control system, if there is not the incentive, through good returns and good profits, to develop expensively the software that is necessary, inferior products will be the type available to all. That is the growing danger.
In the computer world there have been planted a considerable number of seeds of computer software, and we are seeing them grow. The danger is that there is also a parasite that is growing quickly. It may stunt the growth of individual items of software and damage the quality of those that are produced. I believe that the Bill will help to end that blight.
There are substantial differences in the nature of software and software sales for differenct types of machines. With home games it is ludicrously easy to copy cassettes containing such games; indeed, even where the manufacturer endeavours to protect his software when it is loaded on to the computer, it is possible to copy the software by using an audio cassette system. By that means an identical version is produced through an electronic or audio machine, thereby overcoming the efforts that the manufacturer has made to protect his investment and his users' interests.
With regard to business microcomputers, as has been said, most of the software is distributed on floppy discs, and that software can be copied from disc to disc in a matter of moments. I have seen attempts made to protect such software and there are suitable means that can be used, but sometimes those very means can be a confounded nuisance to the genuine users of software. I know of instances where a manufacturer of software has put in date locks so that, unless the user of the software returns to the manufacturer after a year or some such time and gets a special modification, the software ceases to work. It is a good way of preventing the illicit use of such software, but the confusion that can be caused to the legitimate user, if there is some failure in communication, can be enormous. Therefore, whenever a manufacturer endeavours to provide protection, he may well be making life more difficult for the valid user.
With the most expensive forms of software, distributed on large mainframes and so on, there are different realms of complication. Today most packages are built in modular 1360 form, and the manufacturer will endeavour to use some of those modules in his packages. It was said earlier that there is not too much sophisticated copying taking place. That is not so, because there is an advantage to be gained by a software thief in taking some of those modules and incorporating them into another package that the rival manufacturer may be producing, thus saving money and enabling the rival to develop a series of packages at a cheaper rate simply because he has been saved the cost of some of the essential modules. I hope and believe that the Bill will enable that sort of abuse to be dealt with. It is an essential requirement of any legislation.
There have been comments about the use of the terms "computer programme" and "computer software". I hope that the promoter of the Bill will resist any attempts to change the term "computer software". Among its other merits, the Bill has the merit of clarity. The intention of the Bill is clear in meeting a particular problem. The Copyright Act 1956 is the appropriate measure to be amended, and in extending that Act to enable it to cope with a new and developing problem we are taking the most effective legislative action that we can. I congratulate the promoter of the Bill and hope that it will have a speedy passage through the House.
§ 12.7 pm
§ Dr. Jeremy Bray (Motherwell, South)
The Bill is a useful and necessary measure, and, on behalf of the official Opposition, I hope that it will complete its passage through the House at the earliest opportunity.
I congratulate the hon. Member for Corby (Mr. Powell) on drafting and producing the Bill and on his comprehensive exposition of the industry's problems and the way that the Bill will address them. The Bill does not, of course, deal with all the problems of copyright in what is a very complex and rapidly changing technological field. Still less does it tackle all the problems of the software industry, but the hon. Gentleman did not claim that it did.
There is the converse problem of securing standardisation of software. In terms of the propagation of the use of computers and applications for computers that is extremely important, but there is no sense in which the Bill conflicts with that area. Indeed, a proper protection of copyright is a necessary part of the securing of standardisation. The necessarily complex operating systems that can be used to secure standardisation and portability themselves need to be properly protected by copyright.
The Bill cannot solve all the problems of electronic publishing—a matter that was mentioned by the hon. Member for Arundel (Mr. Marshall). It cannot cover questions of copyright of data bases or data banks which, presumably, can range from the design of a jet engine to the design of a microcircuit, the on-line access to all the United Kingdom company accounts in Companies House, the complete set of laws of all industrial countries, or whatever may be the data bases that are available now or may come to be available in the future. That is the whole area of copyright and electronic publishing, and the idea of sweeping up all that in a private Member's Bill is not only impracticable but outside the long title of the Bill. Therefore, it could not be dealt with during the passage of the Bill.
The best service that the Opposition can do for the Bill and, indeed, for employment in that vital industry and its 1361 future development, is to facilitate the Bill's progress both on Second Reading and in the remaining stages. Speaking personally, I should have no objection to the Bill completing its remaining stages today and would not seek to block that, if it was the wish of the hon. Member for Corby.
We have had no representations against the Bill, nor any representations seeking amendments to it. If we receive any representations or objections to it, we shall certainly see that they are pressed in another place. I believe that the Under-Secretary has had no objections to the Bill, either. If, when the industry reads the debate and realises the progress that has been made, it were to raise any questions or propose any amendments from outside the House, I hope that the Under-Secretary would consider them carefully before the Bill went to another place.
Out of consideration for the progress of other private Member's Bills—we understand the natural pressure of time—and as the Bill is supported on both sides of the House and no objections have been raised, my best service is simply to commend it to the House and sit down in the hope that it will secure a speedy passage.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)
I thank all hon. Members on both sides of the House for the contributions that have been made in an excellent and informed debate. I am sure that you, Mr. Deputy Speaker, will join me in noting the unanimity in the House. I think that it is no exaggeration to say that in the House the Bill has no enemies. Suffice it to say that outside the House we cannot detect a lobby that has attempted to counter the arguments put forward by the Federation Against Software Theft and, in fairness, by several companies and individual associations that wish to protest and do something about software theft, which is what we are discussing today.
I do not think that "theft" is too strong a word. We are talking of the theft of intellectual property, the loss of revenue to those who rightfully can expect to accrue benefit from their intellectual effort. Therefore, I join hon. Members in congratulating my hon. Friend the Member for Corby (Mr. Powell), and my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell), who set the scene for today's events.
My hon. Friend the Member for Corby reminded us of the $61 billion turnover of the industry. He talked about the $12 billion turnover in western Europe, which illustrated vividly the burgeoning growth of and significant contribution made by information technology, particularly the software industry. I shall refer later to some other figures that illustrate the point that my hon. Friend made, but in a particularly British context. Those figures come from the Computing Services Association and prove yet again that the industry is growing at geometric rates and seems to be immune from the problems which, tragically, affect other industries in terms of recession and recovery. Worldwide, we are looking at a growth of about 20 per cent. per annum, consistently, remorselessly, and with great effect.
My hon. Friend reminded us of a significant report published by the Information Technology Advisory Panel. I remember that report with considerable affection. There 1362 were times when I felt that there should have been a slightly more vigorous response to its recommendations. It stated that information and the information industry are of great significance, and that of itself information is a product. It can be assembled, bought and sold; one can add value to it, and one can import and export it. It is one of my objectives, and indeed one of the objectives of my Department to ensure that all the measures and policies required to make London the international exchange for information in this respect, as it is currently the international exchange for financial services, should be invoked and encouraged by hon. Members. It is the new entrepot trade of the final years of the 20th century and the early years of the 21st century. We in the United Kingdom are particularly equipped with the talents to make a major contribution and, indeed, to earn major revenues on the international market in information trade.
Therefore, as my hon. Friend and others have reminded us, the Bill is a legitimate measure to underpin, with an appropriate protective mechanism, the continued growth of the information trade, and the interests of the United Kingdom information and software providers in particular. Not only do we want London to become the world's information exchange; we should also like to see the rapidly growing business in value-added network services continue to grow at that rate. The business is still in its infancy, but I believe that it will be a major provider of wealth and, indeed, jobs. However, again those people need the protection that is contained in this measure.
I welcome the support and contribution of the hon. Member for Yeovil (Mr. Ashdown). I know that he is pressed for time today, so I appreciate his courtesy in returning to the Chamber and participating in the latter stages of our debate. I have already endorsed his observation that copying is theft. It is the stealing of intellectual property.
My hon. and learned Friend the Member for Mid-Bedfordshire reminded us of the path that he trod in earlier months and the intellectual wrestling that he had to undertake to establish that the House would welcome a measure under the ten-minute Bill procedure to protect our software authors and houses. I join hon. Members on both sides of the House in commending that trail-blazing work of my hon. and learned Friend.
My hon. Friend the Member for Arundel (Mr. Marshall) raised several points that I should like to deal with later in the debate. Like my hon. Friend the Member for Corby, he rightly said that there has to be an international dimension to the debate. Of course, we wish to consider how we monitor and assess the progress of our industry and the pressures that may damage it. As my hon. Friend the Member for Arundel said, we are aware that the industry still could do several things to help itself. However, as a result of the activities of FAST, the Federation Against Copyright Theft and other organisations that have fought this battle, we see the trade associations in the industrial sectors coming together to counteract the increasing, but—I hope soon—decreasing threat of theft.
My hon. Friend the Member for Basingstoke (Mr. Hunter) forcefully fought on behalf of the interests of the industry and his constituents. That is the happiest combination of circumstances to which an hon. Member can hope to be beholden. I take his point that in one company alone that is strongly represented in his 1363 constituency there is concern about the £10 million loss per annum through software theft. That supports the view that there is a significant problem.
My hon. Friend the Member for Amber Valley (Mr. Oppenheim) made one of his coded speeches which was based on remarks, which are as perceptive today as they have been on previous occasions, concerning the international trade barriers against telecommunications products. I assure my hon. Friend that the Department of Trade and Industry is aware of the problem. No doubt my hon. Friend will continue to pursue his campaign through questions, and I hope that I shall be able to allay his anxieties. We are anxious to see a free and fair market in telecommunications products. That is not the subject of today's debate but may I, en passant, mention that I have endorsed my hon. Friend's line, not least in Dusseldorf when I pointed out in a recent speech that it was easier to sell telecommunications products in Detroit than in Dusseldorf. We need to see a true common market in those products as soon as possible.
My hon. Friend made an excellent point about the need for help with marketing. The Department of Trade and Industry has a legitimate role here. As I have said before, I should be delighted if the information technology industry, particularly the smaller companies and the software houses, were to take greater advantage of the market entry guarantee scheme which can provide up to £350,000 worth of help in meeting the costs of gaining access to a market which are crucial for a new small growing company that has to go through the pain barrier of gaining access to such markets. I have put that on the record again. I cannot make the invitation more vividly than I have today. No doubt my hon. Friends will draw that to the attention of companies in their constituencies whose interests we seek to support.
The hon. Member for Yeovil said that he hoped that the House would have an opportunity shortly to discuss the licensing of software items for export. That is a matter for the Leader of the House, and I have nothing to add to what my right hon. Friend the Minister for Trade told the House on 8 February. In the meantime, I commend to the hon. Gentleman, who is, shall we say, worldly in matters of security and strategic considerations, an excellent book about the KGB which contains a magnificent chapter on the huge resources that the KGB deploys internationally through front and other organisations to obtain software and hardware which Russia can make use of in its armaments and industrial programmes. It makes for stimulating, if not terrifying, reading.
§ Mr. Butcher
No; I am referring to another book which I bought at York station only two days ago. I am desperately trying to remember the name of the author. I think that it is a chap called Baron. It certainly gives an interesting insight into the efforts made by the KGB to obtain information in this area.
§ Mr. Ashdown
I must obviously buy that book as I pass through Waterloo in 20 minutes. "Techno-Bandits" is another excellent book which deals with the same subject. One of the points that is most powerfully made in it is that it is the nature of the attempt to apply licensing provision universally which makes the system so leaky that the KGB can get in and lift out all the secrets that it 1364 wants. A more appropriate licensing system which would be easier to police would be tighter in its definitions that that which is now proposed.
§ Mr. Butcher
I am grateful to the hon. Gentleman for making that point. As I said earlier, that is not the subject of today's debate, but I should like to take this opportunity to join the hon. Gentleman in that objective. It may be that in the detail of our wish to achieve it we differ tactically, but I hope that the hon. Gentleman will not be embarrassed on a future occasion if I were to remind him of his words today.
We share a mutual anxiety that behind the whole COCOM debate and the rather hysterical observations that have been made there is a serious problem. But we must look after United Kingdom interests, both industrial and commercial. I hope that that will not be done in an atmosphere of naivety on the part of some our domestic companies. Perhaps today we can exhort them to read that same section, if not the whole book, in "Techno-Bandits". No doubt we shall return to this matter on another occasion.
My hon. Friend the Member for Arundel asked for a comment on a possible international convention on software protection. He may know that a joint study is proceeding in the World Intellectual Property Organisation and UNESCO on the legal protection of computer software. I believe that as part of that study there is to be a meeting next week in Geneva. Although the possibility of a new international convention has been considered in that study, I understand that that, is not the direction in which it is currently moving. There is a wide international consensus that copyright is the right vehicle for protecting software, and there is a widely held view, which I share, that the existing international conventions on copyright — the Berne convention and the universal copyright convention—are the appropriate international vehicles for protection.
There is a need for further study internationally and that is proceeding. No doubt my hon. Friend's observations will be noted in the appropriate quarters. Through my right hon. Friend the Minister for Trade and others we shall consider whether our input into that process should be a little more pointed.
My hon. and learned Friend the Member for Mid-Bedfordshire suggested that the Bill might be amended to deal with the broader questions of electronic publishing. Reference has already been made to the comprehensive review of copyright currently being undertaken by the Government. An important consideration that arises in that context is the need to introduce a modern law of copyright that is capable of dealing with the present and future state of technology. The impact of electronic publishing is clearly an important element in that. I can assure my hon. and learned Friend that when the Government introduce their plans for a coprehensive copyright reform great care will be taken to ensure that they are appropriate to deal with advances in technology.
§ Mr. Michael Marshall
My hon. Friend is answering questions that I put to him, but my hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell) made the same points. I am obliged to my hon. Friend for what he has just said. In the light of that assurance, I make it plain that I certainly would not wish to delay the passage of the Bill. Any suggestion that I may have made about an 1365 interest in tabling amendments in Committee I am glad to withdraw in the light of his assurances. I want to ensure that the Bill reaches the statute book at the earliest possible moment. Any day that is saved in that process will significantly save jobs and the basis of British industry.
§ Mr. Butcher
No doubt the whole House will note my hon. Friend's comments. I should also correct the record and credit him with the very perceptive question that I answered earlier. He also raised the Australian issue and the international massaging of programmes for re-export.
Copyright protection covers not just authorised reproduction of a complete work, but the copying of a substantial part of the work. Thus, if a computer programme is copied in the manner suggested by my hon. Friend sufficient of the original programme is likely to be contained in the copy for it to be an unauthorised copy under copyright law. The copyright law cannot be avoided by making small and insignificant changes to a copyright work, even if the work is imported and the changes were made overseas. This will apply to computer programmes as much as to any other work.
On behalf of the Government, therefore, I welcome the Bill. It is particularly welcome in view of the importance we attach to encouraging the software industry in the United Kingdom. The Bill will provide the protection needed by the creators of original computer programmes to ensure continued development and expansion of this successful sector of the information technology industry.
A number of hon. Members have reminded us that there is growing concern about the scale of software piracy both in business software and in computer games. When I talk about piracy, I am thinking of those people who make unauthorised copies of computer programmes and then sell them, thereby threatening the livelihood of legitimate producers and dealers. The success of any industry is underpinned by protection from unfair competition and the software industry is no exception.
It is difficult to be sure about the exact scale of software piracy, but it is clear that a significant problem exists. I also believe that piracy could pose a real threat to the software industry if not acted against now. The amendments to copyright law contained in the Bill will go a long way towards helping the software industry to combat this growing threat. The Government are therefore glad of an opportunity to support the measures in the Bill and thus to prevent piracy getting out of hand.
A number of hon. Members referred to the relationship between the Bill and the broader implications of copyright law and future attempts to bring together some of the pressing copyright issues currently outstanding. Copyright law essentially provides an author with protection against unauthorised copying of his work. To attract copyright protection, the work must be original. Another important feature of copyright law is that registration of a claim to copyright is not required. The protection commences automatically as soon as the original work has been created. It does not depend on publication or any other form of public exposure of the work. Various categories of work can attract copyright protection—for example, literary works, artistic works, films and sound recordings.
The protection provided by copyright law is given by the Copyright Act 1956, which gives original literary works protection against unauthorised copying and various 1366 other acts such as publication and adaptation. Protection is also given against trading — for example, selling, importing or exhibiting copies of a work known by the trader to be infringing copies. It is established that the term "literary work" includes such mundane items as street directories and railway timetables.
In the enforcement of copyright, both the civil and criminal arms of the law can be brought into play. The civil remedies are available to a copyright owner suing someone whom he detects to be infringing his copyright. They include injunctions, which can often be used very effectively to stop unauthorised copying of a work subject to copyright. There is also the possibility of damages, which the courts will award after taking into account the seriousness of the unauthorised copying. It is clear that the damages awarded could be extremely high if a copyright owner has suffered seriously at the hands of a person involved in large scale piracy of his work. The civil remedies can therefore be used very effectively by many copyright owners to deal with the majority of cases of copyright infringement.
I should stress that the Government believe that copyright should in general be enforced by the use of the civil remedies as I have just described. The criminal remedies are important, but they can only be viewed as a last resort. The civil remedies are, in any case, more comprehensive since they can be used against any unauthorised copying, not just where the copying is done for commercial purposes. The criminal remedies, on the other hand, are available only against a person who makes infringing copies for sale or hire or who trades in infringing copies.
It is, however, right that the criminal remedies should be used in cases where the seriousness of the offence justifies this approach. However, other than for offences involving copyright films and sound recordings, it is true to say that at the moment the criminal remedies under copyright law are very seldom used.
In 1981, the Government published a Green Paper entitled "Reform of the Law Relating to Copyright and Performers' Protection", Cmnd. 8302. There we indicated the intention to strengthen the criminal measures under copyright law. In particular, an increase in the scale of penalities to deterrent levels was proposed. In due course, we intend to introduce increased penalties for all categories of copyright material in a comprehensive copyright Bill.
I come to the detailed provisions of the Bill. I shall consider its two distinct aspects separately. First, there is the intention to make clear provision for the protection of computer programmes by copyright. Although it is widely believed that copyright protection under existing law already extends to computer programmes, there is some doubt about the matter. It was precisely that area of doubt that my hon. Friend the Member for Corby illustrated so vividly and successfully in reinforcing his argument for the Bill. After all, computers were in a very early stage of development when the Copyright Act 1956 was drafted, so it is hardly surprising that copyright law does not specifically mention how computer programmes are to be treated. The courts have not resolved the matter, so some doubt remains.
Under the Copyright Act 1956, making an unauthorised adaptation of a literary work is an infringement of the copyright in the work. The Bill, by giving computer 1367 programmes the same copyright protection as is currently enjoyed by literary works, therefore presents an opportunity of clearing up a few crucial definitions.
The second aspect of the Bill concerns penalties and enforcement — matters that are obviously of great importance to the software industry. Naturally enough, the industry has seen the dramatic effect of recent changes to copyright law in reducing video piracy, and now seeks similar changes to deal with the piracy of computer programmes. Indeed, one or two commentators feel that those who exploited the video piracy market but who now find it difficult to do so, may be the same people who see similar opportunities in this market. Perhaps we need to protect this industry from those self-same individuals who wish to make another killing. So the Government support these changes to deal with piracy in this new area before it becomes an even more serious problem.
As I have said, the current level of criminal penalties under copyright law is generally low. All offences are triable only summarily and the maximum fine is £400 with the option of up to two months imprisonment. The Bill will have the effect that the more serious offences of making for sale or hire, importing by way of trade or distributing infringing copies of computer programmes knowing them to be such will become triable either way. On conviction on indictment, an unlimited fine and/or up to two years imprisonment will apply. Less serious trading offences, such as selling, hiring, exhibiting or possessing infringing copies of computer programmes knowing them to be such, will remain triable only summarily with a maximum fine of £2,000 and/or two months imprisonment.
The Bill will also give the police the power to enter premises in order to search for and seize evidence of a copyright offence involving computer programmes, upon the issue by a magistrate of a warrant to do so. A warrant may be issued only if the police satisfy the magistrate that there are reasonable grounds for believing that one of the more serious offences has been or is about to be committed. He must also be satisfied that there are reasonable grounds for believing that there is evidence on the premises that the offence has been or is about to be committed. Thus, the police powers to deal with piracy of computer programmes will be introduced with the same important safeguards that already apply to video and record copyright offences.
The Bill will give the police powers of entry, search and seizure. I must add a reservation about these additional powers. It must be for individual chief police officers to determine the priority that they can assign to these powers, and they can normally be expected to allow police involvement only where there is some evidence of a link with serious, large-scale or organised crime. As with video piracy, it is essential that the trade should undertake the bulk of enforcement work. I know that this has been accepted by the industry, mainly through the Federation Against Software Theft. I am glad that its commitment to fighting piracy of computer programmes will complement the important provisions in my hon. Friend's Bill.
I stress that the Government see the Bill only as an interim measure to deal with the immediate problem of uncertainty as to the copyright protection available to computer programmes, and to halt the growth of software piracy. Wider reforms are needed in copyright law which must await the introduction of a comprehensive Bill. Nevertheless, the Government welcome and support the Bill of my hon. Friend the Member for Corby. We 1368 congratulate him, and we give the Bill our wholehearted support. My hon. Friend will be able to guide the House on how he wishes to proceed today, in the light of the many comments that have been made.
§ Mr. Robert Rhodes James (Cambridge)
This is the first occasion, Mr. Deputy Speaker, that I have caught your eye since your knighthood. That honour gave pleasure to hon. Members on both sides of the House.
I warmly welcome the Bill presented by my hon. Friend the Member for Corby (Mr. Powell). Cambridge is the father of the computer industry. The area's prosperity is based upon high technology. The Bill is overdue and welcome.
I declare an interest as an author. I enter one caveat. When we consider legislation we must remember that copyright is of value only if it has international strength. The international copyright convention is more important than a change in our own law. The current copyright law victimises certain scholars who wish to make quotations because they have to go through such a long process. I hope that my right hon. and hon. Friends will consider those two crucial points.
When I was elected in December 1976 to represent Cambridge, the Cambridge science park consisted of one building, and fewer than 40 people were employed there. The park now comprises 40 companies employing 1,400 people. That is as good an example as any of the crucial link between research, science, industry, jobs and prosperity. An important element in that prosperity has been built in Cambridge, as elsewhere, on the remarkable development in computers.
Until my hon. Friend the Member for Corby introduced the Bill, there had been no real protection for the brains, initiative and research lying behind the software industry. Although my hon. Friends will have to address themselves to the Bill's international application, the Bill is welcome to me, to my constituents and, in many ways, is overdue.
I was glad that my hon. Friend the Under-Secretary responded to the important point raised by my hon. Friend the Member for Arundel (Mr. Marshall). My reservations about the Bill are not a criticism of my hon. Friend the Member for Corby or his Bill—they represent the fact that we are dealing with a rather larger subject than can be dealt with briefly in a short Bill.
§ Mr. Lyell
My hon. Friend has made the excellent point that some of the anomalies in our existing copyright law are impinging upon scholars and those involved in the work of highest scholarship. Is he aware that as a result of changes through the courts, copyright protection is now given even to the drawing of a washer — and an old-fashioned washer at that?
§ Mr. Rhodes James
I am constantly amazed at the wisdom and the variety of standing of my colleagues. I was not aware that an ancient washer is covered by copyright, so I shall now leave the House a wiser person.
I warmly welcome the Bill, with the reservations that I have expressed and which go beyond the Bill. I hope that the Government will give it all assistance on to the statute book.
§ Mr. William Powell
With the leave of the House, Mr. Deputy-Speaker, I shall reply to the debate. During the 1369 past three hours many generous tributes have been paid to me. I thank the House for its courtesy in listening to my very long opening speech and I thank hon. Members for the generosity of their remarks about me—which were largely undeserved. It was my good fortune to emerge towards the top of the ballot, and to be given the opportunity to introduce this Bill.
The last two or three months have been very rewarding while I have tried to get myself into a position to present the Bill with some degree of confidence. It is not an exaggeration to say that the day before the ballot was held I was aware of the word "computer" and had heard people talking about software, but about either or both of them I knew little else. I am privileged to introduce this Bill and I am grateful to everyone both within and without the House who has helped me. Without the efforts of so many people it would have been impossible to have reached this stage today. I know that that point will be recognised in the industry.
The hon. Member for Yeovil (Mr. Ashdown) was right to refer to piracy as a cancer. That is as good a description as any of what has been going wrong in the software industry during the past two years. I hope that when people outside the House debate the implications of the Bill and the future of the industry they will bear in mind the essential truth of the hon. Gentleman's description of this pernicious disease that has been eating away at the prosperity of the industry of the future. No better description has been given. It is a cancer that we must do everything possible to eradicate, and the first step is the passage of this measure.
I thank hon. Members for the manner and style in which they have welcomed the Bill. We listened with care to the remarks of the hon. Member for Motherwell, South (Dr. Bray), and I am sure that his comments will be reflected in the future passage of the Bill.
I am grateful for the generous welcome that the measure received from the official Opposition and from the spokesman for the alliance, the hon. Member for Yeovil, and for the manner in which my hon. Friends—many of whom know much more about the subject, from years of experience, than I do—welcomed it and wished it speed through Parliament. I am sure that their words will have been noted carefully.
My hon. Friend the Member for Stevenage (Mr. Wood) was right to emphasise that the greatest advantage of the measure will be to the consumer. The weakness in the market today is that, because there is no reliable protection against piracy, the consumer, the user, is getting a substandard product. It is not substandard in the sense that video material used to be substandard. In that case the sharks and criminals made appalling copies and sold them at rip-off prices, so that the consumers bought a product that was inferior in quality.
In this case the consumer gets a first-class product in terms of quality of reproduction, but an inferior work. Instead of using software—my hon. Friend the Member for Arundel (Mr. Marshall) spoke of how this particularly applies in education — to produce, say, a first-class textbook, which provides an excellent means of using computer software to develop the mind and open up 1370 educational advantage and so on, the consumer gets a product which is beautifully produced, with, no doubt, excellent reproduction, but which is, in its intrinsic material, thoroughly substandard and second-rate. If we can reverse that process, the consumer will be the first to gain.
§ Mr. Wood
I emphasise the point that my hon. Friend has just made. I disagreed with the suggestion of my hon. Friend the Member for Amber Valley (Mr. Oppenheim) that the development of software was a relatively cheap operation. Some packages can cost hundreds of thousands of pounds, and some can even cost well over £1 million, to develop. What incentive is there for developing such software if, within a few months or even weeks, it can be reproduced for a few pennies?
§ Mr. Powell
My hon. Friend is right and I cannot emphasise the point with greater clarity and force.
I warmly welcomed the Minister's remarks and I will comment on only two aspects of law enforcement. First, it is the intention that in future the law should primarily be enforced through civil remedies. There is no intention on the part of the industry to use the magistrates courts as a first strike weapon to enforce the law against commercial piracy. However, this law will make it much easier to go to the civil courts for civil remedies.
Secondly, because it is uncertain whether copyright law applies to a software product, enforcement of the civil law is chancy and colossally expensive. We should not tolerate that situation any longer and the Minister was right to emphasise that civil remedies will be much more effective as a consequence of the Bill.
The back-up power will be the availability of the criminal courts to deal with outrageous criminal cases. Those powers have been necessary in the video market. I hope that we are acting with sufficient speed to ensure that the criminal network that undermined the video market will not have penetrated computer software as deeply.
The Federation Against Software Theft will set up a unit to monitor what is happening. It will collect evidence of criminal conduct, including offences against the copyright laws, the conspiracy and forgery laws and the Theft Act — for handling and receiving stolen goods. That unit will hand over the evidence to the police who will decide whether the case merits further investigation.
There is no intention that a substitute police force should be established. Nothing could be more damaging to this country's long-term interests than to allow rival police organisations to be set up. The monitoring unit will do no more than present evidence to the police, who will allocate their resources in the proper way, as they do in the ordinary course of their work. I have put that on the record so that everyone knows how it is intended to proceed in that matter.
I am grateful for the kind comments of hon. Members and for the welcome given to the Bill. I am also grateful for the assurance that it will be given a fair wind through the House.
Question put and agreed to. Bill accordingly read a Second time and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).