A review of copyright laws aimed at updating legislation for the digital age recommends legalising the practice of copying music and films.
The Digital Opportunity report follows a six-month independent review of IP and Growth, led by Professor Ian Hargreaves. The changes could add up to £7.9bn to the UK's economy, says the report.
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The government should update what it is lawful to copy, including copying for private purposes (such as shifting music from a laptop to an mp3 player), it says. For instance, under the current copyright law, users are not allowed to transfer music from CDs to an iPod.
Another key recommendation is an online copyright shop, "Digital Copyright Exchange" - a digital marketplace where licences in copyright content can be readily bought and sold.
The report also advises the government to legislate to permit access to orphan works, where the author is unknown or cannot be traced.
"In recent years, the UK has failed to make the changes needed to modernise copyright law, for which we will pay an increasing economic price as we make our way into the third decade of the commercial internet," Hargreaves said. "My recommendations set out how the IP framework can promote innovation and economic growth in the UK economy."
Chancellor George Osborne said he welcomed Professor Hargreaves' review on how the intellectual property framework could be updated to better support economic growth in the digital age.
Peter Bradwell, campaigner at The Open Rights Group, also welcomes the findings. "From our perspective, it is really useful - it could add up to a design for copyright that sits well in the 21st century. Reform has been necessary for some time. It is important now that the government follows the recommendations."
Business secretary Vince Cable said the review was not about sacrificing the interests of Britain's creative industries to those of Google or about preserving the business models of the creative industries. "It is about reforming our system to stimulate both technology and content creation. There is no reason to believe that encouraging and rewarding content creation should be at odds with the fantastic new opportunities brought about by the internet and the possibilities it creates for imaginative uses of data."
The government said it will not release an official response until after next month.
Katja Hall, CBI chief policy, said: "The report raises important issues around so-called patent thickets. While we accept that these can present barriers to innovation and growth, the government must be careful to avoid action that will penalise genuine patent clusters and the risk of undermining investment in these important industries."
Photo: David Lee/Rex Features