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Pro-innovation regulation of digital technologies – the Government approach

Posted on 22 March 2023

In February 2023, we reported on developments relating to artificial intelligence (AI) and the implications of generative AI for protection and enforcement of intellectual property rights. The focus of our earlier article was a House of Lords' Communication and Digital Committee Report which had highlighted particular issues for the creative industries arising from increased use of generative AI. Following publication of that report, the Government indicated that it would revisit its proposal, announced in 2022, to introduce a broad text and data mining exception (TDM) to copyright infringement for any kind of commercial use. This appeared to take on board the significant concerns that had been raised by various voices from the creative industries.

Clues as to what might happen next may be found in the Government's response to a Pro-Innovation Regulation of Technologies Review: Digital Technologies, produced by Sir Patrick Vallance, the Government Chief Scientific Adviser, with input from experts Priya Lakhani and Matt Clifford. The context for the Vallance Review was a booming UK digital sector, that is constrained by a complex regulatory framework. The UK digital sector contributed 7.4% of UK total GVA in 2022, with over 85,000 tech start-ups and scale ups fostering over 3 million job roles and a strong innovation ecosystem. However, navigating a patchwork of regulatory barriers presents significant obstacles for businesses looking to innovate and bring new products and processes to market quickly.

To meet this concern, the Vallance Review suggests a light-touch approach to regulation of emerging technologies by reference to the following three criteria:

  • Allowing regulatory flexibility and divergence at an early stage for emerging technologies, thereby defining regulations and standards.
  • Promoting and learning from experimentation to support the scaling of key technologies.
  • Seeking international regulatory harmonisation once technologies are established.

Generative AI and IP rights

Of particular interest, given very live discussions (and a number of test cases proceeding through the courts), are the proposals – and the Government's response to those proposals – in relation to the interplay between IP rights and generative AI. The Vallance Review calls upon the Government to announce a clear policy position as an immediate priority to provide confidence to both innovators and investors. Central to this, the authors recommend, is an enabling environment for TDM in the UK, there being an 'urgent need' to prioritise practical solutions to overcome the issues raised by AI firms restricting them using materials protected by copyright and database rights. The Review therefore calls for the use of TDM for any purpose and seeks to deal with the concerns of rights holders by suggesting that the Government encourage technological solutions to ensure attribution and recognition, such as watermarking.

In its response, the Government accepts the need for regulatory certainty on this issue to unlock AI's huge potential. The difficulty is how the Government can square that with the recent backlash to its proposals for a liberal TDM exception. It appears that the middle ground, at least in the first instance, will come in the form of an Intellectual Property Office (UKIPO) code of practice, to be published in Summer 2023. The code is intended to provide 'balanced and pragmatic' guidance to AI firms to access copyright-protected work as an input to their models, whilst ensuring protections are in place on generated output to support right holders (such as labelling). The Government suggests that an AI firm that commits to the code of practice can expect to have a reasonable licence offered by a rights holder. If a code of practice cannot be agreed or adopted, legislation may have to be implemented.

We will see if attribution is workable in practice. Some forms of generative AI produce content on a word-by-word basis from multiple sources and so no straightforward attribution is available. In addition, it seems very likely that there will be further resistance within the creative industries to any approach that seeks to water down existing IP protections. In particular, the suggestion of using watermarking and labelling to provide protections that support rights holders will need to take into account, and deal with, the ease with such methods of marking can be removed or doctored.

Other recommendations

Aside from generative AI and IP, the Government has confirmed it will take forward a number of other recommendations in the Vallance Review:

A multi-regulator sandbox for AI in operation within the next six months.

The Government proposes to engage regulators, including the Digital Regulation Cooperation Forum (which was established in 2020, bringing together regulators to ensure cooperation in the regulation of online platforms), to prepare for the launch of a new sandbox. This will provide a live testing environment for firms to test their AI propositions withing a time-bound period and by reference to a well-defined relaxation of relevant rules, all under enhanced regulatory supervision without the risk of fines or liability. The Vallance Review suggests the sandbox could initially focus on particular areas of regulatory uncertainty such as generative AI and medical devices based on AI, and could link in with the Information Commissioners Office's (ICO) sandbox on personal data applications.

Facilitation of greater industry access to public data.

The Vallance Review notes that the private sector faces an inconsistent and fragmented landscape when seeking to access public data. The Government, in response, says it will 'work at pace' to transform 50 of the top 75 public services by 2025, working alongside innovators from industry, and aligned with its commitment to delivering a Data Marketplace by 2025. We will see how this matches EU initiatives in this area such as the prospective Data Governance Act and Data Act.

AI as a service (AIaaS).

 The Vallance Review calls upon the ICO to update its guidance to clarify when an organisation is a controller, joint controller or processor for processing activities relating to AI as a service, including guidance on when providers can reuse personal information for improving their models. This will be for the ICO to take forward. The ICO has already published extensive guidance including the recently updated Guidance on AI and data protection, Guidance on the use of cloud computing and, with The Alan Turning Institute, Explaining decisions made with AI. Its issue appears not so much whether the AlaaS provider is a controller or processor, but rather how it can make use of the feedback provided by the users of the AlaaS service. Although there have been some improvements in the most recent Data Protection and Digital Information Bill, data protection law is quite inflexible here. We have previously considered some of the issues arising when data processors re-use controller data for AI purposes.

Future of Transport Bill.

Future of Transport Bill. The Vallance Review highlights the need to prioritise the package of reforms relating to automated transport application, suggesting that the Government allow Parliamentary time in the Fourth Session, starting in Autumn 2023, for the Future of Transport Bill. The Government confirms that it will publish its response to the Future of Transport Regulatory Review consultation in the coming weeks and will bring forward the Bill when parliamentary time allows.


The Vallance Review notes that, despite the drone sector predicted to generate savings for UK businesses of £22 billion a year by 2030, and contributing £45 billion to the UK economy, regulatory risk aversion remains a barrier to their wider use. The Government plans to pursue the various recommendations in the Review through its Future of Flight programme.

Cyber security.

The Vallance Review recommends amending the Computer Misuse Act 1990 to introduce a statutory public interest defence to provide a stronger legal framework for cyber security researchers and professionals. In its response, the Government points to the ongoing consultation by the Home Office into the 1990 Act, albeit the proposals in that consultation focus more on new powers for law enforcement agencies.

Space and satellite technologies.

A consultation will be led by the Department for Science, Innovation and Technology into proposals for a variable liability approach to granting licences to launch satellites commercially in the UK, with an intended implementation timeline of early 2024.


At the same time as publishing the response to the Vallance Review, the Government has published its National Quantum Strategy, setting out its plan for the next ten years in relation to the development and use of quantum technologies. Further policy proposals are expected imminently, with the forthcoming white paper on AI, alongside a Creative Industries Vision for 2030 to be published by the Department for Culture, Media & Sport.

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