Internet companies that fail to stop music piracy on sites they host could face a legislative clampdown, the author of a Treasury-commissioned intellectual property review warned on Wednesday.

Andrew Gowers said internet service providers and music companies needed to show they could sort out the problem on a voluntary basis by the end of 2007 or face the prospect of legislation.

The former Financial Times editor predicted his review would cause “heaving and straining” in some areas , although it went “with the grain” in pulling back from recommending fundamental change to the intellectual property system.

In an interview, Mr Gowers said media businesses needed to make a “real effort” on unlawful copying as part of wider attempts to enforce intellectual property rights more strictly.

“We said: ‘Music industry and ISPs, get your act together to [close] down sites that use illegal file sharing’. “If that doesn’t work with a voluntary approach supported by court action, legislation may be necessary.”

Music companies, which had been pushing for ISPs to take more responsibility for illegal file sharing, welcomed the report’s recommendation that the penalties for online copyright infringement be increased. However, musicians including Eric Clapton and U2 expressed anger that their plea for an extension to the length of recorded music copyrights had been rejected.

Mr Gowers also said manufacturers of branded goods seemed to have “legitimate” complaints about supermarkets piggy-backing on their marketing efforts by selling similar-looking products. The brand manufacturers found it “quite hard to get the courts to see their case” for protecting their intellectual property rights, he said.

The Treasury had agreed with his recommendation to provide £5m to enable better enforcement of existing intellectual property laws by trading standards officers, Mr Gowers said. He added that he had held successful talks with the home office aimed at persuading the police to pursue intellectual property crime as part of the national community safety plan.

The push on enforcement is part of what Mr Gowers describes as a “corset” of implementable recommendations resulting from the 146-page review, commissioned by the government a year ago.

He said the review had received 500 submissions as part of its attempts to answer the main questions posed by the Treasury: how well is intellectual property administered by government, how is it used by the public and private sectors, and how efficiently is it protected?

Mr Gowers said it was a “bit alarming” that companies and individuals in Britain did not have a better understanding of intellectual property and its related laws, especially compared with the awareness of Japanese business people or even “the man on the Yokohama omnibus”. “There is a cultural point here,” he said.

The review recommends cutting the cost of enforcing intellectual property rights by encouraging parties to mediate rather than go straight to court, where Mr Gowers has said even a “cheap” case could cost £1m.

It also recommends restructuring the Patent Office to make it more business-friendly, renaming it the Intellectual Property Office, and creating an independent board to advise the government on intellectual property strategy. Mr Gowers said the Patent Office was “among the best in the world” in terms of operational efficiency, but had “not been so good” at making strategic policy.

The review rejected the idea of introducing a “utility patent” that would be quicker, cheaper and easier to obtain. It also rejected a CBI proposal to create a minister for intellectual property.

Mr Gowers acknowledged that many big changes in intellectual property rules would have to come at a European level, where there had been “agony” about the failure to make more progress on patent law. He said he hoped his review could influence a renewed effort in Europe, where member states are haggling over whether to establish a continent-wide network of specialist patent courts.

The review had recommended tweaks to domestic law where it had failed to keep pace with technological developments, Mr Gowers said. He has proposed a limited private copying right to make it legal to copy music for personal use from a CD on to an MP3 player, for example.

He also proposes changes to rules that prevent archives and museums from saving culturally important but deteriorating recordings - such as Nelson Mandela’s 1964 Rivonia trial speech - because copying them to a new format would break the law.

Mr Gowers was bullish in defending his decision to recommend that the European Commission should not increase the 50-year copyright protection terms for sound recordings and related performers’ rights. He said musicians had other sources of income, such as live gigs and deals to endorse brands, and the industry had not proven that extending the term would increase revenues by more than 1 per cent.

It would even have been possible, on the basis of this evidence, to conclude that the copyright term could be shorter, he added.

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