The EDRi recommended the move in a report it published to shadow the European Commission's recent strategy review into intellectual property (IP) rights.
The civil rights group criticised variances in existing EU copyright laws, which EU members created when implementing the European Commission's Copyright Directive, and said they did not keep up with technological change. Flexibilities in EU copyright law should be made mandatory, EDRi said.
"The EU must look at the options for expanding the scope of exceptions either through the development of a general 'fair use' rule or, following the findings of the UK's IP review, a further exception that facilitates similar kinds of technological innovation," EDRi said in its report (22-page /256KB PDF).
In the US the 'fair use' exemption in copyright law allows copyright material to be reproduced for the purposes of research and education, commentary, criticism and reporting.
EDRi said that EU law makers should adopt a "renewed commitment" to exemptions that allow copyright material to be reused.
"There should be a renewed commitment to the copyright exceptions that permit the fair reuse of culture and information, and how those exceptions are exercised in practice," EDRi said.
"These exceptions do not only bring softer benefits such as rights that create a greater environment for democratic expression. They bring economic benefits when follow-on innovators are encouraged, educational and research benefits where researchers' ability to analyse content in new ways is permitted, and social benefits where people with accessibility issues are allowed to transform works to make them, for example, more easy to read," EDRi said.
Pan EU licensing arrangements should be established as a matter of priority, EDRi said. A recent UK report into IP law proposed establishing a "digital copyright exchange" where copyright rights owners could licence out the use of their works to others.
"A comprehensive framework on copyright in the digital context would if anything not extend copyright with fundamentally alien notions to placate special interests, but would embrace the opportunities digital technology give that warrant a reduction of the scope of copyright," EDRi said.
EDRi said that software patents hamper competition and said that the EU's push towards a unitary patent protection system would encourage more patent lawsuits.
The group said that only "fraudulent imitations" of trade marks should be considered as counterfeiting and said that there should be less resources used to help trade mark owners enforce their rights.
"Trade marks are private rights, no public resources should be spent enforcing them beyond the means the private law system already grants to rightsholders," EDRi said.
"Civil and border measures should be proportionate to the public interest in having an adequately working trade mark system," EDRi said.
The civil rights group said that the EU did not suitably distinguish between the different requirements within IP protection when drawing its enforcement laws.
"Policy has taken refuge under the catch-all term 'Intellectual Property Rights' and largely ignored differences in the nature and scale of each IPR challenge. That means that issues that are materially distinct in nature and size are dealt with in much the same way," EDRi said.
EDRi also criticised the EU's current push towards handing over enforcement powers to interenet service providers (ISPs). It said such a move was "unlikely to work on its own terms" as it "assumes a perfect overlap between actions ... of private companies ... and the public good".
"The ultimate affect will be disruption to legitimate traffic and a precedent that censorship as a strategy to combat wrongdoing – rather than the pursuit of those doing wrong – is acceptable," EDRi said.
EDRi called on the European Commission to conduct an independent review of the "societal effects" of IP infringement over the internet and said the Commission should not "export" its internet IP enforcement rules to third world countries.
"There is a very real danger of crippling the Internet as a force for social and democratic progress based on highly flawed evidence of what harm infringement is doing to the EU's creative economy," EDRi said.
The EU could improve economic growth and enhance citizens' rights by adopting its recommendations, EDRi said in a website statement.
"Policy makers face a choice. They can enable a radical expansion of society's ability to access the world's trove of information, culture and knowledge," Joe McNamee, EDRi advocacy coordinator, said in a statement.
"Or they can unnecessarily prevent a wide range of valuable activities from taking place and, for no sound reason, pursue repressive enforcement measures that cripple the democratising potential of new technology. Currently the EU is choosing the latter," McNamee said.
"This report argues forcefully for a change of track to embrace new technology and the best of what it offers,” McNamee said.