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The House of Lords has dealt a second defeat to the government over its Data (Use and Access) Bill.
Peers had already backed an amendment calling for more copyright protections for the creative industries from artificial intelligence (AI) scrapers once.
MPs rejected that amendment and sent the Bill back to the Lords, where Technology Minister Baroness Jones told peers it would lead to "piecemeal" legislation as it pre-empted consultation on AI and copyright.
However, there was broad and vociferous support for Baroness Kidron, a film director and digital rights campaigner, who accused ministers of being swayed by the "whisperings of Silicon Valley" asking them to "redefine theft".
The Lords rebellion follows condemnation from Sir Elton John, who called the government "losers" over the weekend and said ministers would be "committing theft" if they allowed AI firms to use artists' content without paying.
He joins the ranks of high-profile musicians, including Paul McCartney, Annie Lennox, and Kate Bush, who are outraged by plans they say would make it easier for AI models to be trained on copyrighted material.
Kidron's amendment would force AI companies to disclose what material they were using to develop their programmes, and demand they get permission from copyright holders before they use any of their work.
Highlighting the power differential between the big tech giants in the US and creatives in the UK, Kidron branded the government's plans "extraordinary".
"There's no industrial sector in the UK that government policy requires to give its property or labour to another sector - which is in direct competition with it - on a compulsory basis, in the name of balance," she said.
"The government has got it wrong.
"They have been turned by the sweet whisperings of Silicon Valley who have stolen - and continue to steal every day we take no action - the UK's extraordinary, beautiful and valuable creative output.
"Silicon Valley has persuaded the government that it's easier for them to redefine theft than make them pay for what they have stolen."
Defending her amendment, the crossbench peer said it was "the minimum viable action from the government" to signal that "UK copyright law is indeed the law of the land".
Otherwise, Kidron said, the Bill was merely a "political gesture" ignoring "widespread theft" of UK copyright and "starving" the creative industry of "the transparency they need to survive".
She was backed by Labour's Lord Brennan, who said the government was trying to set up "a double standard" with AI companies, and abandoning its historical leadership over the importance of intellectual copyright.
"This country has shown leadership throughout history in relation to copyright and setting the highest standards in order to try and drag people up to our level rather than simply putting up the flag of surrender," he said.
"I fear there is a view that we have to allow AI companies to do anything they want because otherwise they'll just go and do it somewhere else."
Lord Watson, former deputy leader of the Labour Party and clearly a fan of Sir Elton, reeled off a string of song lyrics urging ministers to heed "the clarion cry of this country's creators".
A third Labour peer, Lord Knight, also called on his party colleagues to "protect the livelihoods of artists from big tech" and said he believed this could be done at the same time as "taking advantage of the creative and economic opportunities of AI".
The strength of feeling around the urgency to protect artists was made clear by others, including crossbencher and composer Lord Berkeley, who labelled the current situation "burglary".
"The only way you will stop it is by acting now before the gate is trampled down by the horses," he said.
"If this door is left open we will destroy the future of our creative industries."
Conservative Lord Dobbs agreed those who had "slogged away, struggled and suffered" for their art deserved the government's protection and Liberal Democrat Floella Benjamin said she saluted Kidron for her "tenacity and dogged determination" to ensure "creativity will not be stolen".
Baroness Jones spoke again at the close of the debate to plead with peers not to overturn the will of MPs for a second time, insisting "this isn't about Silicon Valley", denying the government was being complacent, and pointing out that "no other territory has cracked this either".
"We all want to see a way forward that protects our creative industries while supporting everyone in the UK to develop and benefit from AI," she said.
"Kidron's amendment will not provide certainty of anything except for certainty of more uncertainty, of continuous regulations stacked one upon another in a pile of instruments...
"Jumping the gun on one issue will hamstring us in reaching the best outcome on all the others and especially because this is a global issue and we cannot ringfence the UK away from the rest of the world."
However, Kidron said her amendment "does not challenge the primacy of the Commons" and pushed ahead.
The result was a decisive defeat for the Government, with 287 votes in favour of Kidron's amendment and 118 against - a majority of 169 - and the Bill will now be sent back to the Commons.
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