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The report, by former Financial Times editor Andrew Gowers, also recommends that the current 50-year limit for copyright on sound recordings is retained, rejecting music industry arguments for it to be extended, and proposes exemptions to IP law for libraries and educational establishments.

Gowers recommends a strengthening of the law in some areas to tackle commercial counterfeiting and piracy and called for new powers and duties for Trading Standards to take action against infringement of copyright law and tougher penalties for online copyright infringement - with a maximum 10 years imprisonment.

Should the Government accept the recommendations then a right to private copying, or format shifting by a CD for transferring to an iPod, could be introduced in 2008. The report added that such a right should not be accompanied by the introduction of levies on music player sales and should cover all types of content.

Libraries would be permitted to copy the master copy of all classes of work in permanent collection for archival purposes and to allow further copies to be made from the archived copy to mitigate against subsequent wear and tear. They would also be permitted to format shift archival copies to ensure records do not become obsolete.

Artists would be allowed to make 'transformative' works - where one piece is used as the basis for a new creation - and 2008 would also see the introduction of a right to use copyright material for 'caricature, parody or pastiche' - a right to satire.

Gowers said that intellectual property will be a key element in the future success of the UK economy and therefore IP rights are more important than ever.

'The ideal IP system creates incentives for innovation, without unduly limiting access for consumers and follow-on innovators,' he said. 'It must strike the right balance in a rapidly changing world so that innovators can see further by standing on the shoulders of giants. And it must take tough action against those who infringe IP rights at a cost to the UK's most creative industries.'

He added: 'Getting the balance right is vital to driving innovation, securing investment and stimulating competition.'

The BPI, the UK music

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industry's main umbrella organisation, said that Gowers has missed opportunity to ensure recording artists and record companies are properly rewarded by not recommending an extension of copyright provision.

'The BPI believes that extending the copyright term from 50 to 95 years would have sent an unequivocal sign to the international community that the UK values copyright and end the competitive disadvantage that British record companies face in comparison with their US counterparts,' it said in a statement.

It said that it would now take its case for an increase to the European Commission, which will have the last word on the matter.

Digital rights campaigners broadly welcomed the report, but raised concerns that the recommendation for stronger enforcement of intellectual property
rights does not clearly distinguish between large-scale commercial and
small-scale non-commercial infringement.

'In increased penalties for copyright infringement, these must be placed against other important law enforcement priorities - particularly those that deal with physical harm rather than economic harm,' said professor Jonathan Zittrain, chair in Internet Governance and Regulation at Oxford University. 'The day cannot come soon enough when publishers finish tweaking their business models so that everyone, including artists, benefits from abundance rather than from a scarcity which is, by everyone's agreement, artificial.'

Suw Charman, executive director of the Open Rights Group (ORG), said that the group was 'delighted that the Gowers Review has seen through music industry hyperbole' to recommend no extension of of copyright protection for sound recordings.

'There is no doubt that this is the right decision - it is supported by all the evidence,' she said. 'But the Government must stand firm in the face of renewed industry attempts to marginalise the Gowers Review.'

ORG also welcomed Gowers' proposals for copyright exemptions for creative,
transformative or derivative works and for caricature, parody or
pastiche, saying they will be important to both artists and the public alike.

'However, we must be sure that the transformative works exemption is not restrictively drawn, for instance, ruling out transformations which "offend artistic integrity", as this would mean that the law would be subject to the vagaries of personal opinion as to what is "offensive",' it said in a statement.

ORG also welcomed Gowers' recommendations on private copying, format-shifting and protection for libraries.

The full 150-page report is available as a PDF: Gowers Review of Intellectual Property.