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The government has scrapped plans to introduce the blocking of illegal filesharing websites, it has been announced.
Business secretary Vince Cable said that ministers had accepted recommendations on intellectual property following a review by Professor Ian Hargreaves on UK copyright law.
The review was intended to identify legislation that had been outdated by technological change.
Blocking websites that host copyright infringing material was one of the key provisions in the Digital Economy Act.
At present, it is technically illegal to transfer content from CDs or DVDs on to a different format, such as a computer or iPod.
Speaking at the British Library this morning, Cable backed all ten of the reports recommendations, published in May, including that the UK should have a digital market place where licenses in copyright content can be bought and sold.
The review estimated this could bring £2bn a year to the UK economy by 2020.
A feasibility study into the digital copyright exchange will be completed by the end of 2011.
Other recommendations include scrapping restrictions on copying content from a CD to a computer or portable device such as an iPod, which millions of people already do, assuming it is legal.
And it will be made legal for performing artists to parody other artist's work without seeking permission from the copyright holder.
Cable said: "The government is focused on boosting growth and the Hargreaves review highlighted the potential to grow the UK economy.
"By creating a more open intellectual property system it will allow innovative businesses to develop new products and services which will be able to compete fairly in the UK's thriving markets for consumer equipment.
"We are accepting the recommendations and will now set about reforming the UK's intellectual property systems. Opening up intellectual property laws can deliver real value to the UK economy as well as the creators and consumers."
Creative industries minister Ed Vaizey said: "We need a copyright system fit for the digital age. Creating these new exceptions to copyright will enable innovators to develop new products and services.
"But it is essential that businesses have the right tools to protect their hard work and investment in the digital age.
"The UK's creative industries are a key part of our economy but online copyright infringement poses a real threat to their continued success.
"Our creative industries must be able to protect their products and the Digital Economy Act will help them do that."
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