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Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023

Volume 834: debated on Monday 20 November 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023.

My Lords, I beg to move that these regulations be considered. They and the Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 were laid before the House on 16 October 2023. Intellectual property—IP—matters. The IP framework protects creations of the mind, such as inventions, literary works, symbols and names used in commerce. The UK system is widely regarded as among the best in the world. Our IP system is built on laws that ensure consistency, certainty and balance. It has not only helped to incentivise innovation and the creation of new technologies and products but promoted competitive markets and consumer choice. Maintaining a balanced, consistent and stable IP framework is crucial for businesses, consumers and investors.

The draft regulations before the Committee today use powers contained in the Retained EU Law (Revocation and Reform) Act 2023—the REUL Act—to amend or restate certain provisions in IP legislation. They make targeted changes, to the benefit of our IP framework, in line with the aims of the Act. I will take each set of draft regulations in turn, beginning with the Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023. Subject to noble Lords’ approval, they will amend provisions in four pieces of IP legislation. I will explain more about these.

The Design Right (Semiconductor Topographies) Regulations 1989 provide protection for designs that are semiconductor topographies, implementing international obligations under the World Trade Organization’s TRIPS Agreement. Semiconductors, commonly referred to as chips, are the core component of all electronic devices. The semiconductor topography design right is an IP right intended to protect the design of specific semiconductor products, such as circuit boards, which can be relatively easy to copy.

In the UK, the law treats the protection of topographies of semiconductor products as a form of unregistered design right and extends protection to persons from certain qualifying countries. World Trade Organization—WTO—members that are not EU member states are included as qualifying countries by being listed in the Schedule to the regulations. The proposed amendment does not alter the design right but is intended to remove the need for further legislation to update the Schedule when new countries join the WTO, and so will future-proof it and save parliamentary time.

The Artist’s Resale Right Regulations 2006 provide the basis for an artist’s resale right—ARR—in the UK. The ARR is a form of IP protection related to copyright. It gives creators of visual art, such as paintings and sculptures, an unwaivable statutory right to receive a royalty when their works are resold in the secondary market by auction houses or other art market professionals.

The proposed amendments directly replace references to euros in ARR royalty calculations to pounds sterling and are intended to reduce regulatory burdens and costs on UK businesses. These changes reflect the UK market better and provide greater business certainty by removing exchange rate fluctuations when calculating whether artwork is eligible for ARR and the royalty payment due. A transitional provision has been included, so this change will apply from 1 April 2024. This will allow industry time to prepare and adapt to the changes in line with advice from the collective management organisations that administer ARR payment schedules.

The Copyright Tribunal Rules 2010 set out the rules of procedure for the Copyright Tribunal, which adjudicates on various commercial copyright licensing disputes, particularly concerning the terms of licensing schemes for copyright material. The amendments proposed by this instrument will mean a respondent or intervener in a Copyright Tribunal case will be required to provide an address for service in the UK rather than one located in the European Economic Area.

Lastly, the Collective Management of Copyright (EU Directive) Regulations 2016 set minimum standards for the governance, transparency and behaviour of collective management organisations—CMOs—established in the UK. CMOs operate as companies so are subject to domestic company law. The amendments proposed by this instrument will reduce the regulatory burden and costs on CMOs that qualify as small companies, by exempting them from the requirement to audit the accounting information provided in annual transparency reports. The amendments will also redefine other exemptions so that they apply to CMOs that qualify as a micro-entity under the Companies Act 2006. This will include the removal of references to euros. These amendments will ensure greater alignment with the domestic company law regime.

I now turn to the draft Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023. I spoke earlier of the importance of maintaining a balanced, consistent and stable IP framework. An essential mechanism that provides this balance in our IP system is called the exhaustion of IP rights. Put simply, IP rights enable their owners to control the first sale of their creation, but our exhaustion of IP rights regime ensures that once a good is lawfully placed on the market, the rights holder can no longer use their IP rights to control the distribution or resale of that good. For example, after you purchase a book, the copyright owner cannot stop you selling that book to another person in the same territory. A functioning exhaustion regime is therefore crucial for commerce in our modern economy. This mechanism also underpins the rules on parallel imports, which is the importation of genuine, IP-protected physical goods that have already been put on to the market in other countries, such as medicines.

After we left the European Union’s exhaustion of IP rights regime, the Government created a bespoke, unique regional exhaustion regime. Under this regime, once a good is lawfully placed on the market in the UK or European Economic Area, the relevant IP rights in that good are considered “exhausted”. A rights holder can no longer use their IP rights to control the distribution of that good.

This regime was created to provide certainty for businesses and consumers while the Government consulted on what the UK’s future exhaustion regime should be. Here, I draw noble Lords’ attention to how our current exhaustion regime relies on retained EU law, which will no longer exist on 31 December. Without replacing this retained EU law, our exhaustion regime will not operate effectively from the end of this year. This could create uncertainty on the operability of import rules for IP-protected physical goods, which may affect supply chains and create a chilling effect on commerce and investment in the UK. Parliament needs to act now to ensure that the UK has a functioning exhaustion regime at the end of this year; these regulations achieve that purpose.

Subject to your Lordships’ approval, these regulations will restate certain retained EU law relating to the exhaustion of IP rights to ensure the continued operation of the UK’s exhaustion regime without substantial changes to this policy area. This maintains the two general principles of our exhaustion regime. The first principle is that, once a good is lawfully placed on the market within the geographical area of our exhaustion regime, a rights holder cannot use their IP rights to control its further distribution or resale. The second principle is that, in the same way as in retained EU law, trademark and patent rights holders can in specific circumstances seek to prevent the parallel importation of their goods into the UK where it is necessary to protect their industrial or commercial property, providing that this action does not constitute an arbitrary discrimination or a disguised restriction on trade.

I am pleased to advise noble Lords that this restatement also achieves the aims of the REUL Act by making our exhaustion laws more befitting for the UK’s statute book and for restating only retained EU law that is necessary for the continued operation of our exhaustion regime. In terms of the impact of these regulations, consumers and businesses should not see any significant changes to trading practices because they ensure a continuation of the exhaustion regime that has been in place since 2021.

I must emphasise to noble Lords that these regulations do not signify that the Government have taken a decision on the permanent exhaustion regime for the UK. Instead, they facilitate the continuation of our current exhaustion regime until a decision has been taken. Work to select the UK’s permanent exhaustion regime is ongoing and we will make an announcement as soon as a decision is made.

In conclusion, these two sets of regulations seek to use powers contained in the REUL Act to introduce targeted changes. The Design Right, Artist’s Resale Right and Copyright (Amendment) Regulations 2023 will make some technical changes largely to better tailor the legislation to a UK context. The Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 are of paramount importance for ensuring the continued operation of the UK’s exhaustion of IP rights regime. These targeted changes will ensure that rights holders, businesses and consumers can continue to have certainty and confidence in the UK’s IP framework. I beg to move.

My Lords, I declare an interest as a visual artist. Some of my remarks will, I hope, be of interest to DCMS as well.

Many of the areas covered by these regulations are important to the arts and creative industries, but I want in particular to highlight the concerns of the visual arts. On 23 February this year, the noble Baroness, Lady Brinton, and I argued strongly for the retention of the artist’s resale right, having supported an amendment to that effect that was helpfully tabled by the noble Lord, Lord Clement-Jones, during the passage of the Retained EU Law (Revocation and Reform) Bill. I will not repeat all the arguments made in that debate, but I am glad—as will be the artists affected and, of course, the relevant rights management organisation, the Design and Artists Copyright Society—that the Government have rightly decided to allow this extremely useful scheme to be continued. I am grateful to DACS for its briefing on this.

The ARR has been in operation in the UK for 17 years. As the timely report produced by DACS this year shows, it has paid more than £120 million in royalties to over 6,000 artists and their heirs. UK artists themselves earn on average between £5,000 and £8,000 a year for their work—very little for the important work that they do, really—and much of these royalties gets reinvested in their practice, which will include studio rents and materials. Heirs use the royalties to store, restore and archive artists’ work, so this scheme is hugely beneficial not just to the individual artists concerned but, crucially, to the overall culture of the visual arts in this country.

DACS has confirmed what the Minister said, which is that the change from euros to sterling is useful, in that it will simplify the collection process for the royalty, as well as providing a currency that, to UK beneficiaries, will have a consistent value in the sense of not having to go through an exchange rate. I understand that, in response to the IPO, DACS also looked at the number of sales that would qualify under a new threshold—£1,000 rather than €1,000—which turns out to be a small percentage of total qualifying sales per year.

However, I want to make the wider point that, important as this scheme is, it will most benefit artists who are a few rungs up the ladder and have a reasonable secondary market, although the poorer artists will get the greater remuneration through ARR. Times are extraordinarily tough for a variety of reasons for those artists who are starting out or whose work has not yet achieved much value in the secondary market.

By supporting this scheme, the Government are signalling that they support visual artists, but one of the things that a Government could do better is ensure that artists are properly remunerated for the work they do, in particular for inclusion in publicly funded exhibitions. Beyond ARR, we can and should do much better in this country to support visual artists, particularly at the very beginning of their careers.

My only regret with the present legislation is that it was necessary in the first place. We have not had the gap that those who have benefited from the Horizon programme have endured, although the uncertainty will have caused some sleepless nights for the artists affected. As we know, there is no upside whatever to Brexit for the arts and creative industries. We have, quite rightly, talked a fair amount about the multitude of problems facing touring musicians, and it is too easy to forget that other forms, including the visual arts and the arts trade more generally, are significantly affected by Brexit. As I have said before, artists, particularly those without galleries to represent them, have been reduced to unwillingly smuggling their own work across borders, even for prearranged exhibitions in Europe, which is a ludicrous state of affairs. These are artists who are not just making great work but often very engaged in cultural exchange, which, even in an age of globalisation, feels even more important today, given how much communities, even within Europe, can be riven apart from each other.

In this internationalist vein, whatever one thinks, in the round, about the trade agreements that the UK has been making with other countries, it is good that ARR has been included in these deals, such as with Australia, with which we have a reciprocal agreement. Of course, these regulations honour that commitment that this country is making with other countries that also operate this scheme, as well as encouraging others to implement ARR. When the Minister comes to reply, could he provide us with a full list of those deals in which ARR features, and perhaps explain why the resale right has been left out of trade deals with Canada and India, if that is the case?

I thank the Alliance for Intellectual Property, DACS and the Authors’ Licensing and Collecting Society for their briefings on IP exhaustion. I hope that the Government understand by now how significant it is that so many artists in so many disciplines are united in wishing to continue with the current regime and not move to an international exhaustion scenario, which would so detrimentally affect these industries at every level.

Continuing the UK-plus regime is very much to be welcomed, although industry is mindful that it is officially an interim decision. Designers, writers and publishers alike, the music industry, visual artists and so many others within the creative industries are very much in agreement on this. We are very good at exporting our creative product. For example, 60% of the UK’s book sector income comes through exports, yet it is estimated that a significant proportion of its revenue—about £2 billion—could be at risk under an international exhaustion scenario, with the threat in particular to the domestic market. ALCS says:

“If we were to have a regime of international exhaustion the consequences could be less pay for authors and fewer publishers”

based in the UK able to

“take a chance and invest in creative talent across the country.”

It will be no help to the consumer whatever if, in the end, there is no product to buy.

It is worth thinking in this respect about the structure of the arts and creative industries. It is not a few large companies for which shocks to the system just might conceivably benefit consumers. The UK’s IP-rich creative industries are composed of many businesses of differing sizes, with many small businesses and freelancers. They need support. Within this context, what they need above all else is stability—a key word in the Minister’s speech—which the current regime enables. However, I welcome the new government decision on this, which will provide the necessary continuity that the arts and creative industries require, but we need to make this arrangement permanent.

My Lords, it is a pleasure to follow the noble Earl, Lord Clancarty; I wholeheartedly agree with everything that he said. I should say from the outset that we on these Benches support both sets of regulations, which will, I hope, gladden the Minister’s heart as we start debating them.

There are, however, a number of points to be made in relation to them. I very much support what the noble Earl had to say about DACS, the not-for-profit visual artists’ rights management organisation. It recently helpfully published a report that highlights the pivotal role that artists’ resale rights play in supporting artists and the wider art market. As the noble Earl said, they have been somewhat controversial in the past, but, now that they have been included in trade agreements, I feel confident that they are now bolted fully into our intellectual and moral property rights. They are an absolutely vital source of income for many artists. The noble Earl talked about more than £120 million in ARR royalties, directly benefiting more than 6,000 artists and their heirs. Artists selling at the lower end of the art market benefit in particular from ARR: two-thirds of ARR payments in 2021 were less than £500 and 10% of artists received ARR royalties for the first time that year.

I will not repeat most of the rest of what the noble Earl had to say, just that I very much agree with a great deal of what he said. More than 90 countries worldwide have implemented some form of ARR legislation so we are in good company as regards what I see as this moral right. We have heard about the trade agreements; it would be useful to get from the Minister an idea of which agreements we have included this in. Christian Zimmermann, the CEO of DACS is definitely worth quoting. He said:

“The Artist’s Resale Right is more than a legislative mandate—it is a commitment to fairness, a recognition of the value of artists’ contributions, and an indispensable support for artists and their estates.”

The Minister may notice that I have used pounds sterling in my figures throughout so, naturally, I support that aspect of these regulations and, of course, the other aspects that are provided for in the regulations.

The Intellectual Property (Exhaustion of Rights) (Amendment) Regulations 2023 are, in many senses, a much weightier aspect of the regulations we are considering today. I am grateful to the Alliance for Intellectual Property and the British Brands Group for providing briefings and, indeed, their strong views on these issues. I know that the Minister will have heard many of their arguments in person but I want to put on record those views, with which, I should say, I and the All-Party Parliamentary Group for Intellectual Property strongly agree.

Members of both groups strongly consider that the status quo will deliver the strongest overall outcomes for shoppers, business and the UK economy. Following the UK’s departure from the EU, the UK Government now have control over the exhaustion regime. As the Alliance for Intellectual Property says, the importance of the decision on which exhaustion regime the Government choose cannot be underestimated. Although it seems a technical area of policy, it will have a real-life impact on businesses, consumers and regulatory authorities across the UK. Exhaustion regimes have the greatest impact on export-driven UK sectors as they underpin their ability to determine when, how and what goods to sell in international markets and at what price.

The noble Earl quoted the publishing sector. Industries of that kind are particularly successful at exporting; for example, the UK book sector derives 60% of its income from exports. We have heard that the Government have consulted on which regime the UK should select. In January 2022, the Government made an interim decision to select a UK+ regime that would maintain existing protections. As we have heard, this statutory instrument is being introduced by the Government relating to that interim decision. As the Minister said, though, the Government have not made a final decision on which regime to choose but are likely to announce their decision in the next few months. I hope that the Minister will give us some idea of the time in which he expects that decision to be made.

The British Brands Group believes that advice from officials is to make the interim decision permanent—at least, that is its impression—which would be widely welcomed. I want to take this opportunity to voice support for the interim decision and express concerns regarding any shift to an international regime that might arise in future. I am not going to explain what the alternatives are; I do not think I need to. National exhaustion is one alternative and international exhaustion is another; neither is practical nor attractive.

The current regime is regional exhaustion, an approach that has been working well for 50 years. Rights are exhausted once goods are placed on the UK or EU market, although they can be used to prevent the distribution of goods placed on markets outside those countries. This status quo operates well, as we know; it strikes us on these Benches and those organisations as proportionate, hence our strong support. The SI rightly provides for an IP exhaustion regime meaning that the holders of trademarks would not be able to object to the further distribution of their goods once they are placed on the market in the UK and the EU. They would, however, be able to object to imports from other countries.

The Government’s decision on the UK’s future exhaustion regime will be among the most important taken in relation to intellectual property policy during this Parliament. Its impact will affect businesses, consumers and regulatory authorities across the UK; as I have said, it will particularly affect export-driven UK sectors as it underpins their ability to determine how and what goods to sell in international markets and at what price.

Any shift to an international regime would also affect many of the UK’s leading design and branded goods companies. This would make it significantly more difficult to launch new products in countries around the world as those firms would not be able to vary pricing at launch for fear of those products re-entering the UK. A move to an international regime would also lead to consumer confusion since product and regulatory standards differ across countries internationally. Any “free for all” in parallel imports to the UK would undermine the UK’s product standards regulatory framework and would create uncertainty and confusion for the public.

Opponents of maintaining the status quo and supporters of an international regime suggest that there would be a reduction in pricing for consumers from an increase in parallel imports. Where parallel imports occur currently, in contravention of our regime, prices are not lower. As an example, you occasionally see bottles of Coca-Cola with foreign language labelling in some small shops but at the same pricing as compliant products.

We believe that the retail supply chain, including wholesalers and parallel importers, would therefore be the major beneficiary, rather than the UK public. The cost-benefit equation is likely to be between established creative industry sectors that find their home in the UK market but could choose to move elsewhere against a parallel import sector that does not currently exist and would not even need to be located on UK shores, nor to create UK jobs.

In summary, an international exhaustion regime would represent a significant policy shift away from innovation and growth. It would weaken competition, harm consumers and not help lower consumer prices, in our view. The SI as drafted sustains the current exhaustion regime until the Government confirm their long-term policy approach. The most recent government consultation identified no evidence at all to support a change in regime, so this debate is important.

I hope that the Minister, IPO and others in government resist calls for any change that could reduce IP rights holders’ ability to influence the distribution of their products in markets outside the EU and weaken their IP rights. A change in the UK’s trademark exhaustion regime would be a significant policy shift negatively affecting consumers, brand owners, UK exporters and public enforcement agencies, while not reducing inflation. I hope the Minister has got my message that this would not be a welcome change away from the current exhaustion regime.

I apologise for my slightly late arrival at the Committee. I hope that it was not noted too carefully, but we are doing two SIs as one group and I was here for the whole second part. I hope that that qualifies me to speak.

Also, it would be a terrible shame not to recapture the spirit of a few years ago, when a little group of three of four colleagues, including the noble Baroness, Lady Neville-Rolfe, debated a number of issues to do with intellectual property that came up at that time. It was interesting that a group from within the confines of Parliament then was able to get together and become quite expert at some of these issues. We had some very enjoyable debates and some of these issues have played out again today. Those who benefited from going on that journey gained a lot of knowledge and expertise, so I am not able to stun the Committee with some new insights; they have largely been covered by those who have built up their expertise from the same route that I have been on, so what I would say would be otiose.

I will congratulate both the noble Earl, Lord Clancarty, and the noble Lord, Lord Clement-Jones, for covering the points I would otherwise have made and piggyback on them to save the time of the Committee, which is a good thing.

However, it is interesting that we are still talking about issues that were live three or four years ago. I am sure the noble Baroness, Lady Neville-Rolfe, remembers them with some interest. We are still not clear what distinguishes our particular configuration of design rights. I still worry about those and hope that the department is working on a way forward with some of them. We had some clarity when we were thinking, within the EU context, of a way of trying to balance the difference between those which operated within the UK only and those that were being developed in Europe but were not able to go back to that. I do not think we quite got over the variations that can occur between the triad of patent, trademark and intellectual property in other forms, because they bump into each other. Although they have been dealt with rather well within these statutory instruments, there are occasions when they point in different directions and it is very hard to get a sense of the Government’s policy on them. There is still a need to do more work on that.

In turning to the SIs before us today, I want to raise a very narrow point on design right, ARR and copyright, from the Explanatory Memorandum. Although the noble Viscount touched on this in his introduction, he did not spend a lot of time on it. It is a question of broadly taking forward the arrangements that existed before we left the EU and making them slightly up to date as we go forward. I have no problem with the Design Right (Semiconductor Topographies) Regulations 1989, which were notably not mentioned by my two colleagues nor dealt with in any detail. That is a sensible move forward. We covered ARR and the copyright tribunal rules in some detail. That is a good change and an important way forward.

I have one point to make about the Collective Management of Copyright (EU Directive) Regulations. There is a dilution of transparency in the way in which these new regulations are being brought forward. The accounting information provided in annual transparency reports will not be audited. That may sound a narrow point, but it is quite hard to see—even though the numbers are very small—how that will not cause some difficulties for those who might be interested. According to paragraph 7.10 of the Explanatory Memorandum, it

“does not increase the regulatory burden”

because there would be other ways around it, but the issue deserves a bit more of a response. We are in a period in our industrial regulatory process where audit is a matter of concern, so diluting it, even at this level, seems a concern. I would be grateful if the Minister commented on that in his response, although it is not a major issue.

On the second statutory instrument, on exhaustion of rights, the argument has been well made. It is a matter of choice whether we have a regional, national or international regime. The Government have announced that it will be regional for this statutory instrument. I have no particular concern about that and support the line taken by the noble Lord, Lord Clement-Jones. However, that raises two questions. First, do we face the possibility of an expansion of the EU, with the discussions going on? Does that affect this situation? Are we happy with how that might develop outside our direct control—perhaps not preaching to the song of taking back control because of Brexit? As we get on to Ukraine and other things, for very good reasons, and add new places, would that cause the Government any concern? I would be grateful for the Minister’s comments on that.

Both noble Lords said that some of these rights will be affected by trade deals, particularly the Pacific deal which is the subject of a Bill coming before this House. Perhaps the Minister might anticipate some of the impacts it might have. This is slightly playing with the question of why it is regional. If it is to be international because we will have trade deals—it is in some of them, such as the Pacific deal, although I think not in the Canada or India deals; I would like to know why not—are we talking about a pick-and-mix approach? I would be grateful to know, particularly given that this is not the final word on this. It seems odd that we are debating this tonight and will presumably receive tomorrow or the next day agreement through Parliament—certainly from this House—that this SI will go forward, but we still do not yet know where the Government are. Like the noble Lord, Lord Clement-Jones, I would be grateful to know whether we have a timescale for that. Presumably, we would not be going forward with this SI if the decision would be, at least in the medium term, similar to what we currently have.

It would be worth having any thoughts that the Minister has at this stage. I look forward to his response.

My Lords, I very much thank the three noble Lords for their valuable and interesting contributions to this debate. As I said in opening, IP matters. The IP system exists to encourage innovation and the sharing of information, creativity and knowledge. It provides individuals and businesses with the confidence to invest their time, money and energy into developing something new. That is why the Government remain committed to a world-leading IP framework. We hope these regulations will ensure that the IP system continues to support innovation across the economy and will make some targeted changes to the benefit of our IP framework.

I shall respond to some of the important questions raised in the debate. The noble Earl, Lord Clancarty, asked about ARR. I thank him for his kind words and support for the changes to ARR in relation to the change of currency. He mentioned the benefits to smaller artists of the ARR regime and the noble Lord, Lord Clement-Jones, expressed similar support. Under that change, artists who continue to receive ARR payments will see an estimated average increase of around 7%, with the highest-value artworks obviously experiencing the largest increase. In addition, when UK inflation is taken into consideration, the minimum threshold resale price for ARR eligibility will actually be lower in real terms than when it was set in 2006.

The noble Earl and the noble Lord, Lord Clement-Jones, asked about government policy for ARR in free trade agreements and why ARR is not included in some negotiations; the noble Lord, Lord Stevenson, also touched on that matter. It is current government policy to support ARR globally via international fora as well as via UK free trade agreements. For example, in our recent free trade agreements with Australia and New Zealand we negotiated provisions to provide ARR on a reciprocal basis—that is, the UK will provide ARR royalties to Australian artists and vice versa.

Noble Lords asked about provisions in FTAs that are still being negotiated, specifically with India and Canada. They will forgive me if I cannot comment at this point on negotiations that have not yet concluded. Needless to say, I am happy to set out more information as it emerges on where we are with these or other free trade agreements.

I turn to the issue of exhaustion. I note the views of the noble Earl, Lord Clancarty, on the UK’s existing UK-plus exhaustion regime and on making the UK-plus regime permanent. As I think everybody in the Room agrees, this is an important matter. As the noble Earl is aware, the Government have consulted widely on it and continue to consider what the UK’s eventual IP exhaustion regime should be. Work to consider the decision on the UK’s future exhaustion regime is ongoing. We intend our future regime to strike the right balance between consumer choice and fair market pricing, protecting creators and promoting competition. The Government are aware that businesses would like certainty about future arrangements that will be affected by this decision. We will let stakeholders know the outcome of the policy decision in due course.

I think we all asked for a bit more detail than the Minister’s “in due course”. Could he be a bit more specific?

Indeed. DSIT has been making representations to precisely that effect across government and that process is in train. I cannot provide a date for when it is going to be complete.

Could the Minister perhaps hint at what form it might take? Are we at the White Paper stage of the process or will it just be a statement that the issues are finished?

I am sorry to interrupt the Minister as well. In addition to the timing, it would be useful to know what the instrument is going to be. Will it be another consultation? We have had a consultation, which finished last year, and now we have the SI. Is there going to be another consultation with another SI? The whole process needs unpacking a bit.

That is fair enough. What I am hearing is that noble Lords want to know not just when it will be but what it will look like when it happens. That is an entirely reasonable request, to which I am happy to accede.

I note the views of the noble Lord, Lord Clement-Jones, on how the UK-plus regime supports the publishing industry in particular. I recognise the importance of this issue to a variety of businesses, which have provided extensive contributions to the public consultation on this matter. On behalf of the Government, I thank those businesses for their constructive engagement during the consultation and since. The noble Lord also—no, I am getting ahead of myself. I will move on, except to note that this issue has the potential to impact so many business sectors and therefore it is important for the Government to take the time to get it right.

The noble Lord also mentioned his concerns about a potential move to an international exhaustion regime. As I mentioned, no decision has been made. However, I should advise noble Lords that we intend a future regime to strike the right balance between consumer choice, fair market pricing, protecting creators and promoting competition.

I turn to the matters raised by the noble Lord, Lord Stevenson. I am grateful for his and his colleagues’ expertise on this important area of policy. He raised the review of design rights. The IPO began a review of that legislation last year, with a call for views published in January 2022. We want to make sure that the UK design system best meets the needs of designers and businesses. The IPO is now working on policy proposals on which to consult, which will likely happen in the first half of 2024. The review is fairly wide ranging, as the law around designs is complex and has not been reformed in any meaningful way for some time. It is important to do this work properly to make sure that any changes work for users and all stakeholders.

The noble Lord raised concerns about transparency reports issued by collective management organisations not being audited. The purpose here is to align the treatment of CMOs with that of other organisations in Companies House of similar size; to not treat them differently simply because of the nature of the work they do as CMOs, and therefore not to require organisations that qualify as small to conduct a formal audit in that way, along with other organisations of their size, scope and scale.

Small CMOs will still be required to produce annual transparency reports and to abide by the regulations that govern their conduct and operations. Removing the statutory audit requirement strikes a fairer, more proportionate balance between risk and cost for these small entities. The changes to the audit requirements were in recommendations evidenced by the additional burden imposed on them during a 2021 post-implementation review of the regulations. To provide some reassurance, I hope: this change affects just seven of the smallest CMOs.

The noble Lord, Lord Stevenson, also mentioned the expansion of the European Economic Area and how it would affect our exhaustion regime. Currently, the geographical scope of our exhaustion regime covers the UK and the European Economic Area. If the European Economic Area expanded the Government would consider how that would affect our exhaustion regime, but we would not wish to prejudice such a decision.

I hope all noble Lords will recognise that these proposed changes support a balanced, consistent and stable IP framework that is crucial for businesses, consumers and investors. I absolutely recognise the strength of feeling and argument in favour of maintaining this regime, but meanwhile I commend these regulations to the Committee.

Motion agreed.