East London—the next Silicon Valley?

UK Prime Minister David Cameron hopes so. In a major speech yesterday, Cameron admitted that outmoded UK copyright laws have chilled innovation on the Internet, where a bottom-up, no-permission-needed approach has proved most successful. He wants to change UK law and change the UK's approach to industrial policy. Instead of just propping up the big national champion industries, Cameron wants to create the conditions for unplanned innovation, and he wants to create them in East London.

"Right now, Silicon Valley is the leading place in the world for high-tech growth and innovation," he said. "But there’s no reason why it has to be so predominant. Question is: where will its challengers be? Bangalore? Hefei? Moscow? My argument today is that if we have the confidence to really go for it and the understanding of what it takes, London could be one of them. All the elements are here."

One of those key elements involves changing UK IP laws, which can be quite restrictive. The country has no flexible "fair use" provisions of the kind found in US law, and even its specific exemptions can be unduly limited (there's no exception for "parody," for instance, or for ripping CDs to computers).

"The founders of Google have said they could never have started their company in Britain," Cameron said. "The service they provide depends on taking a snapshot of all the content on the internet at any one time and they feel our copyright system is not as friendly to this sort of innovation as it is in the United States. Over there, they have what are called ‘fair-use’ provisions, which some people believe gives companies more breathing space to create new products and services. So I can announce today that we are reviewing our IP laws, to see if we can make them fit for the internet age. I want to encourage the sort of creative innovation that exists in America."

The Intellectual Property Office has now rolled out details of this new review, due to be completed by April 2011. The review will consider "barriers to new internet-based business models, including the costs of obtaining permissions from existing rights-holders" and "what the UK can learn from the US's 'fair use' rules covering the circumstances in which copyright material may be used without the rights-holder's express permission."

That doesn't sound very friendly to rightsholders, but they already got their IP law review in the form of the controversial Digital Economy Act, which will soon create a "three strikes" style regime in the UK to cut down on illegal file-sharing.

But will the review actually lead to a friendlier environment for innovation? Jim Killock of the Open Rights Group is skeptical.

"The problem David Cameron will come up against is that 'fair use' may be difficult, if not impossible, to establish in current European law," he wrote today. "EU copyright does not allow a general, US-style 'fair use' provision, but has an exhaustive list of possible user rights, like format shifting, back ups and parodies. Each EU country chooses which rights they wish to allow."

But venture capitalists, universities, and company have already responded positively to Cameron's plan, though the major companies that will "seed" the new technology park seem largely American. ("We’ve persuaded some of America’s most dynamic companies to set up research and development spaces right here," said Cameron.) Intel will put up a new research lab in East London. Google will launch an "Innovation Hub." Facebook is building a permanent facility. BT will bring in high-speed Internet connections.

Silicon Valley this is not—but Cameron's speech shows a real commitment to innovation and competition. Perhaps one day London will be known as much for disruptive technological innovation as it is for finance.