The Letta and Draghi Reports

The Need for New Thinking and Flexibility in Europe’s Information Ecology to Drive Competitiveness and Growth

Blog post by Benjamin White

Two recent influential reports coming out of Brussels have both highlighted the link between a more open approach to the regulation of information and Europe’s ability to maintain an economy that can support its way of life into the future.

Enrico Letta’s landmark paper for the European Council before the election – Much More than a Market – underlines that the data, knowledge and skills that exist across the continent, are key for Europe’s future success. Demanding a comprehensive and ambitious action plan, Letta calls for the free circulation of knowledge “without disciplinary or artificial borders and limitations” – the so-called fifth freedom of the European Union.

Earlier this month, a year after the European Commission President, Ursula von der Leyen, tasked Mario Draghi with assessing the future of Europe’s economy, the former Italian Prime Minister presented his report “The Future of European Competitiveness”. Draghi highlights consistently the importance of Europe’s universities and research institutions as an engine of growth. Moreover, as KR21 has itself often pointed out, Draghi stresses that “we are failing to translate innovation into commercialisation, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations.”

In other words, one issue is Europe’s underperformance at knowledge valorisation – the so-called ‘innovation paradox’– where a strong research base contrasts with a relatively low numbers of knowledge-intensive new businesses.

A common factor contributing to the innovation paradox that both reports highlight are the inflexible rules that govern how information and data can be utilised and shared to drive innovation. One core aspect of this is copyright law which was developed 300 years ago to support the book trade but now regulates every corner of the digital economy.

This might seem a somewhat unexpected statement but can be put down to the simple fact that because operationally computers copy the information they process, inevitably, copyright law is triggered across the entirety of our modern society and economy. Thus, just to take a few examples, receiving an email, carrying out market research on the internet, machine learning with scholarly articles are all regulated by copyright law because they all involve computers.

While copyright is without question an important cultural policy, it now also leverages “copy control” over every aspect of the modern economy, and so dictates the speed at which electronic commerce can grow, research can be spun out from universities, automotive after-sales markets can thrive,¹ and even what medical advances can be made. It goes without saying this is emphatically not what copyright was designed for.

How governments respond to the all-encompassing control copyright exerts over our digital society and economy therefore matters greatly. In essence, the decision facing governments is how much breathing room to give those wishing to use copyrighted works (such as the internet, e-books, articles, etc) they have legitimate access to without requiring authorisation from rightsholders. As highlighted by both the Letta and Draghi reports has a particularly restrictive regulatory environment. In terms of European copyright law it means that nearly all new uses of copyright works are automatically unlawful – as it were, all the innovation levers are switched to off. Thus given that much cutting-edge research takes place in universities etc our public institutions and by extension public-private partnerships, spin-outs etc are faced with a particularly unhelpful copyright environment.

Recent research commissioned by KR21 shows that competition-minded science and technology-oriented countries, particularly in Asia, have woken up to the negative impacts that an overly-broad and inflexible copyright regime has on the economy.² Wanting to support their own research-intensive industries, we see a number of countries acting to introduce more innovation-oriented provisions in their copyright laws.

In countries such as Japan, South Korea, Taiwan,³ Singapore and Israel, governments have over the last twenty years intervened to introduce more open and flexible rules that don’t automatically render all novel uses of copyrighted works automatically unlawful as is the case in Europe. Realising that innovators need flexibility to grow, these governments have acted to introduce some breathing space into copyright law.

Taking just one example, Japan – a leader in robotics and automotive technologies – acted in 2018 to supports its own AI industries by introducing an open norm into its own copyright act. Like Europe now, before this it only had prescriptive and narrowly drawn subject-specific copyright exceptions. Realising this acted as a barrier to new innovations, it decided to introduce new provisions which are based on principles rather than prescriptive acts. Thus, even if the law does not explicitly foresee a novel use of copyright protected works, as long as this complies with principle-based rules in the Japan Copyright Act (such as not damaging the legitimate interests of the copyright holder), they are lawful.

Japan is not alone in this. Indeed, many countries in Asia have acted to support their homegrown research-intensive industries.⁴ As the UK government has also pointed out, this flexibility in law is one reason why American firms have been so successful and dominate e-commerce and technology markets.⁵

This makes a lot of sense. Legislators cannot keep up with the pace of technology. In the absence of principle-based exceptions to copyright law, innovative R&D and knowledge valorisation involving copyright works even in a tangential way is by default always illegal, and requires many years of discussion, debate (and if lucky) an update to the law.

As Letta and Draghi’s reports highlight, if Europe is serious about a sustainable economic future, new thinking is required around how we approach digital markets and knowledge creation. We need to think about regulation – and in particular copyright – from the perspective of what will best support science, technology and innovation in a digital age. As this article shows, a broad-brush approach to copyright law isn’t serving the modern digital economy as well as it ought.

Within the existing strictures of the EU Copyright Acquis, as a recent European Commission report highlights, the introduction of a flexible open norm for scientific research is already possible.⁶

Yet we need more ambition. If Europe is serious about supporting research-industry collaborations as part of a wider knowledge valorisation and competitiveness strategy, the 2001 Information Society Directive needs to be modernised.

Moving to other parts of Europe, there is the possibility to move quicker – this is the case for the UK. This is why KR21 has joined forces with the Day One Project, to push for an overhaul of copyright law there and introduce “UK fair use”.⁷

In sum, agreeing with the technology-oriented countries of East Asia, KR21 believes that the whole innovation cycle (from basic research, through knowledge valorisation to market entry) can be enhanced and speeded up by a more flexible approach to copyright law. Furthermore, as we see in South Korea and Japan, known for their technology and their hugely successful entertainment industries, this doesn’t come as a trade-off against the interests of the entertainment industries.

30 September 2024