Britain's intellectual property laws are to be reviewed to "make them fit for the internet age," Prime Minister David Cameron has announced.
He said the law could be relaxed to allow greater use of copyright material without the owner's permission.
The announcement was welcomed by internet campaigners who say it will boost small business.
But any changes could be resisted by the music and film industries who have campaigned against copyright reform.
Speaking at an event in the East End of London, at which he announced a series of investments by IT giants including Facebook and Google, Mr Cameron said the founders of Google had told the government they could not have started their company in Britain.
He 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 six month review will look at what the UK can learn from US rules on the use of copyright material without the rights holder's permission.
It will also look at removing some of the potential barriers that stand in the way of new internet-based business models, such as the cost of obtaining permission from rights holders and the cost and complexity of enforcing intellectual property rights in the UK and internationally.
It will also look at the interaction between intellectual property and competition law - and how to make it easier for small businesses to protect and exploit their intellectual property.
The review, which will report next April, will recommend changes to UK law, as well as long-term goals to be pursued by the British government on the international stage
In a separate development, the Intellectual Property Office will trial a "peer to patent" project, which will allow people to comment on patent applications and rate contributions to help improve the quality of granted patents.
'Basic user rights'
The announcement was welcomed by internet freedom campaigners, who said the government had to redress the balance after the controversial Digital Economy Bill, which strengthens the ability of copyright holders to block access to websites hosting illegal content.
"It is long overdue. Some of our copyright laws are frankly preposterous," Jim Killock, of the Open Rights Group, told BBC News.
"The Digital Economy Act left a massive hole of missing user rights like personal copying and parody.
"It's great to have the opportunity to make the case for modern copyright that works for citizens and artists rather than yesterday's global publishing monopolies."
The Digital Economy Bill was rushed into law in the dying days of the Labour government but has yet to be enacted.
Mr Killock said he hoped the government would introduce "basic user rights" so that people could make personal copies of music and videos, or transfer them from one format to another, without fear of prosecution.
He also called on ministers to relax the laws on parody - citing the case of a recent You Tube clip parodying rapper Jay-Z's Empire State of Mind.
Newport State Of Mind has been taken down by YouTube due to a copyright claim by EMI Music Publishing Ltd.
Mr Killock said relaxing copyright laws would also give companies more freedom to innovate.
But the Publishers Association, which represents some of the big names in book, audio and digital publishing in the UK, sounded a note of caution.
Chief executive Richard Mollet said intellectual property laws had to keep pace with rapidly changing technology but he added: "The immutable fact remains that the people who generate and invest in creativity deserve and need to be rewarded."
He added: "The Publishers Association will work very closely with the Intellectual Property Office during this six month review to ensure that rights holders' interests are not regarded as an obstacle to creating internet based business models, as some believe, but rather as the foundation of the UK's world-beating creative, cultural and educational publishing industries."