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Why infrastructure is crucial to unlocking the digital potential of SMEs

6 Mins

The European Commission is excited about the digital economy’s potential – recently quoting €350bn of additional growth. In the UK, we have huge talent and skills in the creative industries as well as global demand for English language content and services, which presents exciting opportunities to the SME community.

With the newly-elected Conservative government pledging to support small businesses with increasing their online presence, now is the time for SMEs to consider how they could be enhancing their digital activity.

So what makes the new ecosystem for digital works and content an attractive environment for the SME sector? 

  • In an intellectual property-centric world, small enterprises can thrive if they have the necessary skills to commercialise creativity through financing, partnering and marketing in an agile way. Think, for instance, of new ways of financing such as crowdfunding
  • The cloud and collaborative technologies enable small businesses to scale up without large internal infrastructure
  • SMEs can engage directly with consumers and be discovered via social media platforms
  • The new ecosystem is made up of partnerships and collaborations, often between the large platform at one end of the spectrum and individual creators and small businesses at the other end
  • Small businesses can go direct to consumer via platforms

The biggest challenge facing SMEs is lack of sufficient investment in developing the infrastructure and skills needed to realise this potential. Infrastructure is the job of the government, either by doing the job itself, or providing the right incentives for business to invest in broadband infrastructure, and in the technical standards and technologies to make it easy for digital content to be traded online.  

On the skills front, the greatest needs are in digital marketing, technology, data analysis, financing and the ability to create and implement innovative business models and deals based on intellectual property. Building these skills requires investment in education and training.

So, the key to unlocking the digital economy is having the necessary infrastructure and business skills. Instead, transforming copyright is often presented as the “magic bullet” to realising the market’s potential. The most frequently cited charges against copyright, at least in the UK and Europe, are:

(1) It locks up ideas and so inhibits innovation, creativity and sharing
(2) The “fair use” defence in US copyright law, especially the notion of “transformative use”, has allowed new digital businesses to flourish in the US, in ways that European copyright law does not
(3) Copyright law is based on territoriality whereas the Internet is a global medium, and as a consequence is inherently unable to adapt
(4) Copyright is simply too complex in a B2C and C2C world

Each charge raises a number of complex issues but time and space only allows a “top line” response to each. In short, copyright is not guilty on the first three charges but does have a case to answer on the fourth.

As regards the first, the 2010 case of Allen vs Bloomsbury & J K Rowling shows that, in the court’s words, “[copyright] does not extend to clothing information, facts, ideas, theories and themes with exclusive property rights”.

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On the second, the differences between the US “fair use” defence, and, taken as a whole, the various individual copyright exceptions found in European copyright law, are much smaller than may appear. It is true that the first “fair use” factor, which relates to the purpose and character of the use, including whether the use is “transformational” in creating something new, does give the US courts flexibility. But to make a fair comparison one must compare that with numerous EU exceptions, including for parody, as well as the extensive rulings of the European Court of Justice on the issue of exceptions.

On the third charge, there are books on this subject. Suffice to say that global licensing solutions are perfectly feasible within the existing framework and, in any event, a global copyright law would not, of itself, prevent licensing by territory. Furthermore, legal principles on free movement of goods and services provide a legal check on copyright.

The fourth has a case to answer. Copyright law is complex and the management of copyright, including gaining permissions to re-use, is not easy. But there are ways in which technology can hide copyright’s complexity and automate rights management. That brings us back to the importance of investment in the infrastructure. 

So whilst some adaptation to copyright law may be needed provided it is evidence-based, that’s not going to be the solution for the SMEs in the UK’s creative industries. It’s all about skills, innovation and investment. 

Laurence Kaye is digital law expert and commercial partner at Shoosmiths.

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