The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, following the gracious Speech, predictably and understandably, there was considerable interest in the Bills which were read out. One major newspaper chose to use a scaling system of one to five to describe the importance of each Bill in terms of its impact on our lives, with a crown motif. The Intellectual Property Bill was given no less than three—perhaps best described as the triple crown. Three crowns are worth having, and so are the measures in the Bill.
The Government recognise the importance that intellectual property rights play in our economy. Total annual investment in IP rights represents 4.3% of UK GDP. We are always looking to clear obstacles that stand in the way of investment in IP-intensive businesses and innovation. That is why we have introduced the Bill.
I will set out the background to the Bill. In November 2010, the Prime Minister commissioned a review of intellectual property and growth—the so-called Hargreaves review. It examined how the intellectual property framework could better contribute to UK economic growth. The Government responded in August 2011, broadly accepting the recommendations and committing to bring forward policy proposals. Some of these require primary legislation, others secondary legislation, and some can be handled outside the legislative framework. A number of proposals were brought forward in the Enterprise and Regulatory Reform Act 2013, which was given Royal Assent last month, as your Lordships will know.
Professor Hargreaves called on the Government to take action on the important and growing design sector and to deal with the “patchwork” of intellectual property rights for designs which puts it at a disadvantage in comparison with other sectors. The Government’s call for evidence on the UK design legal framework in September 2011 led to further thinking and analysis. This was followed by a formal consultation in September 2012. I am now pleased to bring to this House a Bill which seeks to implement the results of that consultation.
With Hargreaves in mind, the Bill before your Lordships has three broad aims: first, to simplify and improve design and patent protection to help businesses and, in particular, small and medium-sized enterprises; secondly, to clarify the intellectual property legal framework; and, thirdly, to ensure that the international IP system supports UK businesses effectively. The Bill proposes changes to help businesses to better understand what is protected under the law, reduce the need for costly litigation and to provide greater certainty for investors in new designs and technologies. Cutting red tape and helping to speed up the granting of patents internationally will help businesses protect their innovations more easily. These reforms are vital to helping Britain to succeed in a competitive global market.
I turn to the issues facing businesses which the Bill seeks to address. Businesses will benefit from greater legal certainty and clarity over what can be protected. This will allow investment in new design, with lower risk of copying, and a potential for an increase in trade. Greater certainty over legal rights could lead to a reduction in the use and cost of legal services to business.
Design owners, particularly small businesses, have told the Government that their designs are often blatantly and deliberately copied. The Government want to increase protection for registered design holders and to reduce the scale of design theft. Design rights should be given the same level of protection as copyright and trademarks. The armoury of enforcement agencies should be increased.
To this end the Bill introduces a new criminal offence for deliberate copying in the course of business. To clarify: if a person deliberately copies a registered design without the consent of its owner in order to profit from it, they would be subject to criminal sanctions. A conviction would require the high standard of proof necessary in any criminal case. In addition, enforcement agencies would bring proceedings in criminal cases only if it were in the public interest to pursue a conviction.
Extending criminal sanctions to registered designs would create a coherent approach to enforcement and protection. Infringers do not divide up the rights they plan to steal. If criminals produced a fake product, for example a golf club, they would steal the golf club design as much as the trade mark and any copyright existing in the instructions for use and the packaging. The sanction would act as a deterrent and provide proportionate punitive measures. A criminal offence will only apply to deliberate and intentional copying of a registered design. Where someone has infringed a registered design right unintentionally it would continue to be up to the parties to pursue any case with the civil courts if they chose to do so. We will have ample opportunity to discuss this particular matter further in Committee.
In addition, the Government are also seeking to simplify the law and intellectual property framework to provide better support to businesses. This will include making it easier for businesses to enforce their design rights and to understand who owns what. The changes are intended to help reform the system by harmonising it, where appropriate, with international regimes. In particular, we want to make it easier for small businesses and individual designers to use and navigate the system.
One example of this is the provision for the United Kingdom to join the Hague international designs registration system. Joining this system will allow businesses to include the UK in an international design application. This will streamline the registration process for businesses which want to register in a number of countries and will lead to direct savings. A legal firm has estimated that the cost of registration in six countries is currently up to £7,500. In contrast, the same number of registrations would cost less than £500 under the Hague system.
In addition to reducing costs for business by streamlining processes and registration systems, this Bill also seeks to reduce costs for business in the area of litigation. At present the cost of IP litigation is seen by many as prohibitive. For example, a small or medium-sized enterprise responding to our consultation told us that it had received advice that it would cost it £100,000 to bring revocation proceedings against a competitor’s patent. The potential for this level of cost meant that it was unable to challenge in court a patent that it believed to be invalid. In this Bill we are expanding the patent opinions service and introducing a new design opinion service. The services will provide low-cost alternatives to costly litigation.
Since the Intellectual Property Office launched the non-binding patent opinions service in 2005, nearly 200 opinions have been issued. The service enables parties to resolve disputes without the need for costly litigation. Users of the opinions service are primarily small and medium-sized enterprises, but a number of large businesses, such as Dyson, have also used this service. The expansion of the patent opinions service and creation of a design opinion service are part of the Government’s wider strategy to enable them to support businesses to enforce their IP rights.
Other positive changes include the introduction of a small claims track into the patents county court for copyright, trademark and unregistered designs cases, for claims of up to £10,000. Many rights holders who could not previously afford to go to court can now do so. The small claims track provides a cheap and swift resolution to their IP disputes. The extension of the opinions services seeks to build upon this by providing an alternative route for resolving disputes.
I now turn to the other changes being made to patent law. The Bill proposes a number of changes to aspects of patents legislation, to provide clarity and legal certainty to users of the patent system. An example of this is enabling the Intellectual Property Office to share information on unpublished patent applications with its counterparts in other patent offices, on a strictly confidential basis. This will help clear existing backlogs and speed up clearance times.
An additional year of waiting, also known as “patent pending” time in the USA, Japan and Europe, has been estimated to reduce growth, due to lost innovation and enterprise, by up to £7.6 billion in the global economy. By reducing duplication of work and speeding up the patent granting process overseas, UK businesses applying for European, US and Japanese patents in addition to UK patents could increase the value of their patents by £4.2 million per annum. The Bill seeks to bring about these economic benefits to business.
Let me now turn to the reform of the European patent system, which this Bill will enable. This will allow UK businesses to apply for a single patent to be administered across Europe. The change could bring about direct savings to UK businesses of up to £40 million per annum in translation costs alone. The proposed creation of a unified patent court will mean a single regime for enforcement of patents in almost all EU countries. In February this year, my right honourable friend the Secretary of State for Business, Innovation and Skills signed the agreement which will lead to the establishment of the court.
In the Bill we are making an amendment to UK patent law to enable the Government to give effect to this agreement at a future date. We shall bring forward an order for the approval of this House and the other place. This is a key step towards the establishment of a unitary patent court, part of which will be based in London. According to independent estimates, hosting part of the unified patent court in London could also bring a benefit of around £200 million to the UK economy.
I now move on to the changes being made to the Freedom of Information Act. This Act currently protects research information held by public authorities which are subject to the Act, but other than in Scotland there is no dedicated exemption for information obtained during a programme of study. The Bill introduces a new exemption into the Freedom of Information Act to protect continuing programmes of research intended for future publication by public authorities. This will achieve parity with Scotland.
The change was recommended in the Justice Committee’s post-legislative scrutiny of the Freedom of Information Act, and ensures public sector research bodies, including universities, can where necessary protect their research findings pre-publication. This will provide public sector researchers with clarity and certainty. It also provides the opportunity to validate and analyse research results before putting them into the public domain, or before any related patent application has been filed.
I turn to the Secretary of State’s duty to produce an annual report to Parliament. The Hargreaves review stressed the importance of intellectual property for innovation and growth. It noted, however, that IP policy development was characterised by an incomplete evidence base and strong lobbying activity. This requirement is intended to act as an incentive to improve the way in which policy development takes account of innovation and growth. It will also increase transparency and enable a wider range of stakeholders to scrutinise the IPO’s activity.
In summary, the measures contained in the Bill are designed to help SMEs, larger businesses and the research sector. They strengthen and simplify intellectual property law. Following the Hargreaves review, and before the bringing-forward of this Bill, the Government consulted extensively with stakeholders. The formal responses to the relevant consultations have been placed in the Libraries of both Houses. We continue to engage with the wider IP community, and are thankful to the Chartered Institute of Patent Attorneys and the Institute of Trade Mark Attorneys. They have organised a seminar in early June, which my officials will attend. As IP Minister, I have met the CIPA and ITMA myself and found their feedback on the Government’s consultation very instructive.
This is a technical Bill and I am certain that noble Lords will wish to scrutinise these measures in more detail in Committee. To assist with this, my officials have produced a text highlighting the amendments proposed to the relevant legislation, which I shall place in the Libraries of both Houses. In addition, the Government will make available documents in advance of Committee stage which will clearly set out the details of what related secondary legislation will include. I look forward to engaging further with your Lordships as the Bill progresses. Before the Committee stage I shall be holding a meeting for all Peers in Committee Room 2A at 4 pm on 4 June to which, of course, you are all most welcome.
I particularly wish to welcome today the noble and learned Lord, Lord Walker of Gestingthorpe, on his return to the House of Lords. The noble and learned Lord has a long and distinguished legal career and, I am certain, will bring great expertise to the House. I look forward to hearing his maiden speech in the debate today. I commend the Bill to the House and beg to move.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for introducing the Bill and for the courtesy of the meeting that I had with him yesterday. We look forward to working together on this legislation.
I am joined on the Front Bench by my noble friend Lord Young of Norwood Green, a veteran, he tells me, of the Digital Economy Act 2010—which we discussed at Question Time but which seems to have disappeared. That means that he has form in this area, and I give warning to the Minister that there will many detailed discussions in Committee on some areas of the Bill. Like the Minister, we look forward to the maiden speech of the noble and learned Lord, Lord Walker of Gestingthorpe.
The UK’s intellectual property framework, which includes copyright, design rights, patents and trademarks, should support and encourage companies large and small as well as individuals to innovate by introducing new products and processes or through opening up new markets. Our IP framework has evolved over time, but we live in a fast-moving world and ongoing effort by government is required to simplify and streamline the IP framework and make sure that it better serves the needs of the UK.
After a long period of inactivity, the Government have produced two Bills dealing with intellectual property in the space of barely 12 months. I would like to think that this is because they have finally woken up to the need to modernise our IP regime and to support our creative industries, but given the considerable time and effort which had to be put into the ERR Bill and the ongoing furore about the Hargreaves recommendations on copyright exceptions, which are due to come before the House in a series of SIs later this year, we have to recognise that the jury is out on this matter.
This slim Bill hardly lives up to the rhetoric in the gracious Speech, let alone its Long Title, and so slim is it that one might almost wonder whether it started out as a minor section tagged on to the end of a much bigger Bill—perhaps the missing communications Bill, about which we heard so much in the early days of the coalition Government but which seems to have died a death. Is this yet more evidence of the strains within the main government party?
Whatever its provenance, the Bill is yet another attempt by the department to tinker with one or two fringe areas in IP. It represents another piecemeal approach, picking up issues that happen to be at the top of the pile, rather than doing what the industry is crying out for and what was recommended by Hargreaves; that is, a root-and-branch job with strong evidence within a coherent plan that will provide crucial support for our creative industries to grow and prosper and, in turn, contribute to the rebalancing of our economy.
It is worth recalling that some of the measures that were included in the Enterprise and Regulatory Reform Act will have the effect of gifting lengthy and valuable copyrights back to companies that manufacture chairs and other objects, and wallpapers. Many of the copyright exceptions that will come forward in secondary legislation later this Session will directly impact on profitable businesses that currently trade on rights purchased and acquired over many decades. Changes to the IP regime are not to be taken lightly and they need to be considered properly and with due regard both to fairness and enterprise.
I suspect that the problems which arise in this area stem in part from the continuing split in responsibilities for IP between BIS and DCMS which bedevils this area. The Minister styles himself as the IP Minister—indeed, he referred to himself as such earlier—but, with DCMS directly responsible for film, broadcasting, the performing and the visual arts, and the cultural industries more generally, that claim has a hollow ring. Having said all that, I agree with the Minister that this modest Intellectual Property Bill is broadly a positive measure and, while we will be doing what we can to improve it, we will do so in a constructive manner, as we want the Bill to go forward.
As the Minister said, the Intellectual Property Bill is intended to help businesses better understand the protections afforded by IP law, to reduce the need for costly litigation and to provide greater certainty for investors in new designs and technologies—something that we can all get behind.
The measures in Part 1 flow, as was said, from the Hargreaves review of intellectual property, published in May 2011. They have been crafted after extensive work and consultation by the IPO, which we acknowledge, and after several years of energetic lobbying by the design industry, which has long argued for greater protection for design work. However, the Hargreaves report found that our design system is amazingly complex. There are five ways to protect designs—UK registered designs, UK unregistered designs, UK copyright, community registered and community unregistered designs. Indeed, the Hargreaves report recommended that no action be taken until a much more detailed survey of evidence had been prepared.
The issue is complicated by the wide range of industries involved. Different industries have different levels and types of need from the IP framework. For example, the fashion industry lives with a high rate of appropriation of its designs. It does, however, frequently pursue infringement of trade marks.
Evidence submitted to the Hargreaves review was predominantly concerned with protection and enforcement issues and raised the discrepancy in levels of protection between design rights, which protect technical design, and copyright, which largely protects artistic designs. This applied both in terms of the duration and availability of rights and their enforcement. Unlike copyright, which is supported by criminal sanctions and is therefore of interest to police and trading standards officers, design rights offer only civil sanctions. However, Clause 13, which sets out to change that, applies only for registered designs, not unregistered designs.
Clearly, there is a case for offering effective remedies to designers who find that their ideas are simply taken over and used without compensation, and this situation is exacerbated in the small companies that make up the design community, which have often invested time and money in developing these designs but either could not afford to take enforcement action or found the law inadequate to do so. Can the Minister explain the rationale for excluding unregistered designs, when ACID reports that the majority of the UK’s 350,000 designers rely on unregistered design rights, with 18,000 to 25,000 unregistered designs lodged with ACID each year, compared with only 4,000 registered with the authorities annually? The development of the copyright hub may well be relevant to the design sector and perhaps the Minister could say whether it is envisaged that it will include design interests of interest to this Bill. If it does, that needs to be taken into account.
The Government rely on saying that,
“blatant, deliberate copying of designs, for commercial gain safe in the knowledge that many of the victims will be unlikely to have the resources to respond, is an act worthy of punishment”,
and believe that the UK needs,
“a coherent approach to the protection of intellectual property rights”,
as copyright and trade mark infringements can attract criminal penalties in certain circumstances. The Government say that their approach is supported by a number of respondents to the IPO consultation, in particular SMEs and independent designers, who criticised the time, cost and uncertainty of existing civil remedies and said that they found it difficult to protect their designs against deliberate copying. On the other hand, the measure is opposed by the IP Federation, the Intellectual Property Bar Association, the City of London Law Society, the Chartered Institute of Patent Attorneys and a number of IP lawyers and specialists, as well as Dyson and the Ministry of Defence.
In particular, this group questions the evidence relied on by the Government to argue that such a measure is necessary. It argues that this area of law is too complex for juries to consider and that criminalisation would require specialist courts. It says that criminalisation is inadequate in the context of a civil wrong and that criminalising design infringement would be akin to criminalising breach of contract. On the comparison with trade mark and copyright, it points to the fact that prosecution largely occurs in cases where the rights are clear and a serious public harm has occurred. Finally, and perhaps crucially, it argues that criminalisation would create a “chilling effect” on innovation, where deliberate activities are genuinely believed to be non-infringing, but would have no defence.
In this context, creating a serious criminal offence punishable by a maximum penalty of 10 years’ imprisonment for copying of a registered design needs careful consideration. I look forward to hearing why the Minister thinks that existing remedies for design infringement, which include injunctive relief, damages and costs, are inadequate; and why he thinks it necessary to introduce the stigma of a criminal record into what is a highly technical field.
Part 2 of the Bill amends the Patent Act 1977 and the main measure here, as we have heard, is to provide for the Agreement on a Unified Patent Court to be brought into effect in the UK. We on this side welcome the agreement, which establishes a unified patent court within participating EC countries. The agreement means that it will be possible to apply to the European Patent Office for a single patent that will have effect across all participating countries and, for some issues, can be litigated in the new unified patent court. This seems to be a very good example of the EU working together and countries coming together to harmonise regulation and assist businesses. I trust that this is not one of the issues on which the Prime Minister will be seeking a UK opt-out. There is likely to be sufficient work allocated to the UK to justify two centres for the UPC in the UK. Can the Minister confirm that this is the case and that, if so, a sensible approach here would be to locate one of these in Scotland?
Part 3 of the Bill creates a new exemption under the Freedom of Information Act 2000 for continuing programmes of research intended for future publication, which we welcome. This formed an amendment that my noble friend Lady Warwick of Undercliffe, with several other noble Lords, notably the noble Baroness, Lady Brinton, who is in her place, argued for during the passage of the Protection of Freedoms Bill. The Justice Committee of another place took up this argument and the Government have finally accepted that some real harm could flow from the premature exposure of ongoing research material. I congratulate the Government on taking this step.
We also welcome the requirement being placed, under Clause 20, on the Secretary of State to report annually to Parliament on how the activities of the IPO have supported innovation and growth in the UK. If I recall correctly, suggestions for an annual report on IP were discussed during the ERR Bill in an amendment moved by the noble Lord, Lord Jenkin, who is in his place. The terms of the report as specified in the Bill are rather narrower than was suggested in our discussion, and this is something to which we might return in Committee.
Finally, there are some areas of IP law that have not made it into the Bill, but which we might consider in Committee. These include various considerations of the differences across the design rights legislation and the way in which criminal offences already in existence do not seem to match well with that. We will come to these in Committee, to which I look forward.
Lord Clement-Jones
My Lords, I thank the Minister for his characteristically careful exposition of the Bill and for the amendments to legislation briefing that he provided beforehand. I am also very much looking forward to the maiden speech of the noble and learned Lord, Lord Walker of Gestingthorpe, a fellow alumnus of Trinity College, Cambridge. I am sure that we are all looking forward to it.
I shall not re-rehearse some of the points made on the Enterprise and Regulatory Reform Bill, when we had a full canter through the intellectual property policy issues. As the noble Lord, Lord Stevenson, said, later in the year we will have the statutory instruments bringing forward further policy recommendations of the Hargreaves report. I agree with him, however, that the separation between the DCMS and BIS in terms of intellectual property and the creative industries is unfortunate. It was not done by the previous Government. It is not being done by this Government, but a common intellectual property and creative industries Minister is much to be desired.
I broadly welcome the changes in the field of patent and design law made by the Bill. As the Minister says, it is particularly technical in nature. The setting-up of a new unified patent court is an essential ingredient of the new unitary patent, which is effectively the realisation of a long-standing, six-year ambition by the IPO, strongly supported by successive British Governments. There will be a branch of the central division of the court in London. Here I must declare an interest as a partner in a global law firm. I hope that the parties will have the freedom to choose which branch of the court to litigate in. I welcome many of the other provisions relating to patents, which will benefit small business in terms of simplification and cost. I hope that the Minister will confirm that court fees in particular will be affordable to small business.
There is, however, clearly confusion between the Government’s press release, which estimated some £200 million of benefits, and the Explanatory Notes, which put them at £2 million per annum over 20 years—yet another demonstration of the benefits of EU membership. Generally, doing away with the need for validation in every country should mean that the cost of protecting inventions for the whole of the internal market will be much reduced. However, my noble friend will be aware of considerable concern about the changes to the opinion service under Clause 15(4), which gives power to the comptroller to revoke a patent after issuing an opinion. This, it is strongly argued, would be a deterrent to using that service.
I welcome many of the detailed measures in relation to registered and unregistered design right which, as the Alliance for Intellectual Property says, has long been a forgotten IP right. It is also one which Anti Copying In Design, or ACID, has been pressing for. In particular, there is: the change in ownership of unregistered designs commissioned by a third party so that the designer will be the initial owner of the design, not the commissioner; clarifying the meaning of “qualification by first marketing”; the introduction of a non-binding opinion service for registered designs; and enabling UK SMEs to gain protection, in addition to the EU, through territories covered by the Hague agreement.
However, the scope of the Long Title provides an opportunity to extend some of the provisions of the Bill relating to designs and to correct some anomalies within existing IP law. I would like to outline those today and I hope we will be debating them on further stages of the Bill. On measures relating to design, Clause 13 introduces a new criminal offence of deliberate infringement of a registered design right. While this is a welcome move—and I do not agree with some of the points made by the noble Lord, Lord Stevenson—to be of any benefit to the vast majority of designers in this country, the Bill needs amending so that criminal sanctions will also apply to the deliberate infringement of unregistered designs.
Design is of key importance to the UK economy. It is estimated that there are in the region of 350,000 designers in the UK, as has been mentioned, and that UK businesses spend some £35.5 billion on design each year. The majority of the UK’s design community are lone, micro or small and medium-sized enterprises. Eighty-seven per cent have fewer than 10 employees and 60% have fewer than four. Yet there are only approximately 4,000 designs registered annually in the UK. Each year, between 18,000 and 25,000 unregistered designs are lodged with ACID’s data design bank by its approximately 1,100 members, so it is reasonable to assume that the majority of the UK’s designers rely on unregistered design rights and copyright.
The introduction of criminal sanctions for deliberate registered design infringement is of course a progressive step, as this is the first time that criminal sanctions will mirror those for copyright and trade marks, but why is this new criminal offence limited to the infringement only of registered designs? Surely, criminal sanctions need to apply to unregistered design rights, as they do to copyright, to have any real and lasting benefit to UK designers. I plan to make the case in greater detail in Committee, but criminal sanctions have been available for copyright infringement since 1862, and for trade mark infringement since 1994. Criminal prosecutions have been used sparingly, sensibly and appropriately. Copyright, trade marks and unregistered design rights are all property rights, and so is a registered design. But whereas persistent copying of the first two constitutes a serious criminal offence punishable by up to 10 years’ imprisonment, persistent copying of designs is currently not a criminal offence at all. This is completely anomalous.
Persistently copying a two-dimensional drawing of a design or a design document can therefore give rise to criminal liability. Yet when this 2D work is converted into a 3D design, unless it is protected as a work of artistic craftsmanship—and we have many happy memories of discussing that on the enterprise Bill—copying that 3D version would not be a criminal offence. I fail to understand the reason for the policy decision behind that. How do the Government justify giving a higher level of protection to a 2D design than is given to the 3D manifestation of that design?
Civil action is often very difficult, given the inequality of arms between designer and infringer. I will give further examples of that in Committee. In some cases we have a designer with a turnover of £50,000 a year versus an £8 billion-turnover company. It is grossly unequal when one considers the possibility of taking civil action. One might argue that this was an attempt to incentivise design registration and increase revenue for the IPO, which, of course, we should be reminded is a trading body. I hope that the Minister will confirm that financial considerations have not been elevated above the needs of the majority of UK designers who rely on unregistered rights. Finally on the new criminal penalties, why have Section 110 of the CDPA and Section 101 of the Trade Marks Act, which ensure that company officers are liable if conniving or consenting, not been replicated here? Surely that is a crucial omission.
I turn to Clause 20 and the content of the annual report. The clause contains a very welcome requirement for the Secretary of State to report annually on the activities of the Intellectual Property Office and how it has supported innovation and growth. The clause is, in part, a response to the recent consultation on the role of the IPO. Overall, this is a positive step and provides a much-needed focus for the IPO’s activity. However, it is at the moment limited in scope and needs to be expanded. During the consultation, UK Music argued that there should be a requirement to report on how the activities of the IPO have maximised growth and innovation arising from the creation and exploitation of intellectual property. The Government accepted this point in their response to the consultation, while acknowledging that such a requirement cannot be restricted to existing industries and business models. However, the commitment is not currently explicit within the clause. Committee stage presents us with an opportunity to incorporate a clear reference as to how the IPO’s activities have supported IP businesses.
Similarly, paragraph 91 in the Explanatory Notes that accompany the Bill suggest that the report will cover new legislation and policy developments, including those related to copyright licensing. The music industry made a voluntary commitment, as part of Richard Hooper’s Copyright Works report last year, to report annually on progress around joint licensing. This is a welcome step and I believe that we can expect the first such report from the industry via UK Music later this year. But the Minister gave an assurance at Grand Committee stage of the Enterprise and Regulatory Reform Bill in January that this would be included in the annual report. This is reflected in the Explanatory Notes. However, it is not included in the clause in the Bill. Why not?
On Report, the Minister encouraged us to think that the report would also include updates on the state of protection of metadata and of cross-border co-operation. The noble Lord, Lord Howarth of Newport, was keen for the report to contain discussion about how the Intellectual Property Office seeks to balance its defence of the interests of intellectual property holders with the interests of the dissemination of knowledge. I am sure that he will expand on that today. Will the report also review the operation of the unified patent and the court? I very much hope that the Minister can confirm these specifics, either now or in Committee.
There are other areas where there is the opportunity to correct anomalies in intellectual property law for potential inclusion in the Intellectual Property Bill: first, to increase the maximum penalty for digital copyright theft to match that available for physical copyright theft. Criminal offences for online copyright theft have maximum penalties of two years’ imprisonment. However, criminal offences for physical copyright theft have maximum penalties of 10 years’ imprisonment. This discrepancy came about because the new offences were introduced by secondary legislation, using the European Communities Act 1972, as part of the UK’s implementation of the copyright directive in 2003. Penalties for new criminal offences, introduced by secondary legislation via the ECA, are limited to two years’ imprisonment. That was also after my right honourable friend Vince Cable’s Private Member’s Bill, which increased penalties for criminal copyright offences to harmonise them with those available for trade mark offences at 10 years. I very much hope that I have a receptive audience. Surely, criminal sanctions should not be dependent on whether the offence is taking place in an online or physical environment. Intellectual property is being stolen whatever format is being used.
Secondly, the discrepancies in the level of financial penalties available in magistrates’ courts should be addressed. Thirdly, a deterrent element to UK civil damages should be introduced for IP infringement by providing for the awarding of exemplary damages. This was recommended by the Gowers report, the report of the Culture, Media and Sport Select Committee in 2007, and so on.
Fourthly, the Government should use the Bill to extend the public lending right to remote e-lending. Over the past few months, William Sieghart and a distinguished advisory panel have reviewed myriad issues and concerns around the subject of e-lending in libraries. It is a very good report that I very much hope will be implemented. The Government have now committed to pursuing the legislation, and it seems that the Bill is a good instrument for doing so.
Finally, the Minister is exploring the question of unfair contracts, which he undertook to do on Report on the ERR Bill. I very much hope that this will happen during the passage of this Bill, which would provide a useful vehicle for any such changes.
There a number of other issues in the Bill relating to Clauses 1, 7 and 19, which I will raise in Committee, but I hope that the Minister will answer at least some of the questions that I have raised.
Baroness Buscombe
My Lords, I, too, very much look forward to the maiden speech of the noble and learned Lord, Lord Walker of Gestingthorpe.
It is testament to the importance of intellectual property and the value of the creative industries that this House is again considering the issue of copyright as the ink of the Enterprise and Regulatory Reform Act has barely dried. Indeed, I was surprised and very pleased when Her Majesty the Queen spoke in the gracious Speech of a “further Bill” which,
“will make it easier for businesses to protect their intellectual property”.
This aim reflects what I and many others in this House have long recognised: that this country has a strong and vibrant creative industries sector which, as the Secretary of State for Culture recently stated, should be central to the UK’s economic growth. I have to say that it is a bit rich of the noble Lord, Lord Stevenson of Balmacara, to begin his speech by saying that this is a sign that the Government have finally woken up to the importance of intellectual property. I might say that his previous Government never woke up.
Of course, I agree with the Minister that we must have a copyright regime which is fit for the digital age. However, this should not mean that we cannot also protect our most valuable assets—simply put, our creators. Indeed, the title of the Bill suggests that this is what this legislation is all about. It suggests to me that creators will at last be properly recognised and properly paid for their works in this digital age. The question is: does the Bill deliver? Is this an opportunity missed?
There is much to commend in the Bill. However, I want to take it a step further. Given our rich cultural history of Shakespeare, Dickens and Elgar, it might be easy to take for granted our world-leading creators and creative industries and to forget the extent to which we are enriched by them, culturally and economically. Without artists, who rely on a fair and secure copyright regime to be paid for their work, we would be a much poorer society in so many ways.
The current copyright climate is regrettably highly divided. There is a wide perception that large and well funded businesses such as Google and Yahoo! have more influence than creators on decision-makers around the world. These companies are too often portrayed, usually by themselves, as pioneers on the frontier of digital development, held back by the creative analogue luddites. I believe that this view of the search engines is wrong and, more importantly, short-sighted. These digital businesses need creators and their content to drive their businesses as much as they need the software developers to provide new ways to develop that content.
In the future, as the markets converge, these businesses will demand more high-quality content and innovation from the creative industries. These two groups are increasingly dependent on the same ecosystem to survive. However, there is a problem here, a huge problem which calls into question the worth of introducing more legislation to protect intellectual property when the powerful can continue to exploit with alacrity and for their own ends the creative work of others.
I want to make it clear at this point that I am not joining some populist—this week’s—bandwagon. This is an issue which I have been raising for over a decade and I now feel I must spell it out very simply for those who might think it has to do with tax. It does not. It is about how these search engines, otherwise known as content aggregators, make their money in the first place. It is also something of which I have personal experience. As chief executive of the Advertising Association, I visited Google back in 2005 to talk to its management about following its mantra of “doing the right thing” and supporting the system of self-regulation for advertising. Its firm and first response was that it was a technology company and that somehow that is where its value-added, its income, came from—not advertising.
Where is the integrity in that? If you do not think the right thing, you will not do it. I remember thinking then that these people make the BBC look almost humble—no mean feat. Let me explain how it works. The key question is: how do search engines—content aggregators—make money? How, for example, will Yahoo! recoup more than the $1 billion it has paid for Tumblr? Yahoo! will, I suggest, judge when the time is right to seek to attract advertisers to Tumblr. What attracts advertisers? Good content. Yahoo! will treat that valuable content produced by hard work and so many brilliant, creative minds—many of them British—as free and advertisers will pay Tumblr to appear next to that content. It is essentially a David versus Goliath situation—David is the creator. What we as legislators should be doing is making sure, to the best of our ability, that David is paid. If the Google model is followed, David will probably not be paid.
In 2009, Eric Schmidt, then CEO now executive chairman of Google, made it very clear when he said: “All we care about is the end user”—meaning, of course, the consumer not the creator. A recent article by Luke Johnson, someone with considerable business experience, a track record of success and a former chairman of Channel 4, is instructive. He said:
“Essentially, Google is a gigantic parasite that makes a fortune from exploiting the creativity and entrepreneurship of others. Its search engines do not actually make anything; they just take advantage of the achievements of others”.
He went on to say:
“Google has been destroying the cultural capital that is so vital to our economic success. If the concept of copyright is obliterated, then our creative industries will be shattered, since there will be no protection of original work”.
Strong stuff, but it needs to be said. As Luke also stated in his article:
“Sadly, Britain is particularly vulnerable to Google’s predations in this regard, since our creative industries are one of the fields in which we are world leaders”.
I was reminded of this only last week when I was lucky enough to attend the Ivor Novello awards, awards that champion great British authors and musicians. In that world, we are simply the best. In his opening speech, the chief executive of the Performing Right Society made a plea for politicians to recognise the importance of protecting our valuable British intellectual property. That protection is being constantly eroded by these corporate raiders—US companies taking advantage of great British content. Will this Bill address this? I fear it will not. I am afraid that this Bill, while a good Bill and one, I should stress, I wholeheartedly support as far as it goes, is tinkering at the edges. Perhaps legislation is not the answer. Perhaps this requires a sea change in the culture of the way the search engines do business. In many ways that is so much harder than just introducing legislation.
That said, of course, there are many positive proposals in the Bill. There are in the region of 350,000 designers in the UK and UK businesses spend in the region of £335 billion on design each year. I welcome the greater protections which the draft Bill proposed, in particular a more proportionate response to deliberate infringements of design rights, although I hope that the Government will consider further how the rights of unregistered design can equally be protected. There will clearly be many opportunities for this House to discuss these issues. However, as this House begins these discussions and begins to scrutinise the Bill, I would urge the Minister and the Government to remember the need to secure a copyright regime which protects and nurtures our creators and creative industries. More importantly, I urge them not to be distracted by those big businesses which have the most to gain from the illusion of a war between consumers, creators and businesses.
I believe that we should be striving to ensure that our copyright laws give our creative industries the incentive and freedom to grow and innovate. This will ensure that we can all benefit from their significant talents and skills, culturally and economically. Only this morning, the Prime Minister made it very clear on Radio 4 that he will continue to introduce bold policies and measures to drive our economic success. He also talked about the global race. Effective intellectual property law would make a good, strong contribution to that aim.
Lord Browne of Ladyton
My Lords, in the introductory remarks of the noble Viscount, for which I thank him, he used the active verbs of strengthening, improving, simplifying and clarifying the law. The robust contribution from the noble Baroness, Lady Buscombe, indicated the metrics against which the Government may be judged in relation to their ambition to strengthen, improve and clarify the law. The House should be grateful to her for setting that metric, even if it appears an impossible task, if I may say so from my inexpert observation.
That leads me to my second point. I consider my engagement with this Bill to be a learning process. During in excess of 20 years of practising law in Scotland before I was elected to the House of Commons, I had only the most fleeting engagement with intellectual property law, so in preparation for this short speech I tried to acquaint myself with some of the complexity in this area of law. I have to say that I found it extremely complex. I came in this morning and my heart sank somewhat when I saw that immediately following me was the noble Lord, Lord Walker of Gestingthorpe, who will be making his maiden speech. I suspect that my inexpertise will be exposed substantially by his learned contribution to our debate. None the less, I am looking forward to it, even if it has that consequence.
I welcome the Bill—I suppose that I should say that, as everyone else has—as far as it goes. It is part of a process and it is perfectly clear that the Government are engaged in a process and will be judged against a number of metrics, including some that they have set for themselves, which I shall return to in a moment. I will make three general points and three specific points in my short contribution. First, I welcome the Bill because it gives me, a Scot who is a unionist, an opportunity to celebrate the United Kingdom. This is a not entirely unique event in your Lordships’ House, but they are fewer and further between than they used to be. This is an opportunity for us to consider an area of UK law that is extremely important to the whole United Kingdom, including Scotland, and we should make the most of it. We should make the most of it particularly in the context of what is going on in Scotland at the moment and the important decision that the people of Scotland will have to make next year in their referendum. It is important because the Hargreaves review suggested that changes effected at a UK level but in the context of proper international priorities had the potential to add of the order of £7.9 billion to the UK’s economy.
We are debating this Bill the day after the SNP Government in Scotland published a document entitled Scotland’s Economy: the Case for Independence. For noble Lords who have not had a chance to read it, the document does what Scots always do when talking on this issue: they celebrate the achievement of innovation, innovators and inventors in Scotland. I can do it as well as everybody else: from the discovery of penicillin by Alexander Fleming, who was born and brought up in the constituency I represented, through the invention of television—the list is endless, and all Scots can recite it as we learn it at our mother’s knee—to the creation of Dolly the sheep and the bio-industries in Scotland. However, conspicuously absent from that document is some of the detail of how an independent Scotland, separated from the United Kingdom and consequently from this body of law, would seek to recreate what already exists, with all the criticisms we have heard or that have been implied in the reviews, and so on? How will it be done in a way that will not make Scotland a good hunting ground for those who wish to exploit other people’s intellectual property rights, even if for a comparatively short time in an interim period? There is no engagement in this document with the nuts and bolts, the detail and the complexity.
For most of us who have been engaged in this debate since it started, that is not surprising. There is a consistent failure to engage with the nuts and bolts and the challenges of independence for Scotland, even against the reasonable request that Scotland should be maintained at the level that it is in a number of areas of life through this transition period if the people of Scotland choose independence. I do not think that there is any indication that they will, but we cannot be complacent.
Much more important, it is incumbent on the Government and politicians to highlight opportunities that show the people of Scotland and of the United Kingdom the value of the union. This is a great opportunity to do so. This body of law is being reviewed in this considered way for the protection of those who are innovators and inventors in Scotland. It is a good opportunity for Ministers of the Crown legitimately to be in Scotland, talking about something at a UK level that affects the nuts and bolts of Scottish society in a way that does not look as though Ministers are going there to frighten the Scottish people against the consequences of independence but are there just to engage with them and explain how important this area of law is. I encourage the Minister and his colleagues in government to do just that during the process of the Bill, and to overtly engage and make it clear to the Scottish people how much they benefit from having this degree of support.
My second general point is that this Bill highlights the value of good regulation—the contributions thus far reveal that. There has been a tendency in this House, particularly recently, which I fear has been driven by the Government—to undermine the value of regulation. Good regulation that addresses the protection of just the sorts of skills and innovation that have been addressed in this debate is important. It is important and valuable to the country that we are, and it is slightly ironic that our Prime Minister should have set the challenge to those who reviewed this to find a form of regulation that will necessarily involve additional regulation. We have had some debate already about the possibility of increasing and creating criminal offences. The Prime Minister charged those responsible for this to increase regulation in a way that will be a driver of the economy. We should be honest that there are two sides to regulation. I make the point that the Government should be honest.
The other area in which the Government need to be honest is that the Bill highlights the value of the European Union. I understand that the Hargreaves review attaches the highest immediate priority to achieving a unified EU patent court and patent system. That is utterly counterintuitive to the direction of travel of the public discourse on the European Union that is going on at the moment. Why is this voice not being heard? Where are the Government Ministers who are saying, “Actually, there is a place in the structure of our society for an additional European court? We think that it will help innovators and others in a positive way to build our economy and to drive innovation and wealth in the country”. I regret that the Government do not have the courage to put this argument forward as strongly as they should, and instead concentrate on the negatives in relation to the structures of Europe while—one might say through the back door—adding to those structures and doing it in the form of a patent court. It is remarkable.
My specific points have already been addressed, but I will highlight them. They relate first to Clause 13, which concerns the creation of a criminal offence. I am compelled by the logic of the argument that if one is to create an additional criminal offence in this area, it is illogical to restrict it only to registered designs, when unregistered designs in particular are such a significant element of this area of practice. However, in the broad analysis, I am persuaded that the Hargreaves review recommendation in this regard was the right one, and that the preponderance of evidence suggests that there is no justification for an additional criminal offence. It strikes me that in this very narrow area the creation of a criminal offence, potentially carrying these quite significant penalties, is taking a sledgehammer to crack a nut. It may operate in the way in which has been suggested, which is that no one will ever need to be prosecuted, because it will be a deterrent, but I doubt very much that that will be the case.
I suspect—in fact, I probably know—that in Scotland there is likely to be very little capacity for the investigation of offences of this complexity. It is unlikely to become a priority over all of the other issues that we face in relation to criminal prosecutions. I wonder whether the noble Viscount might indicate at some stage what degree of engagement there has been with the Crown Office, with the Scottish Law Commission and with the Scottish Government about the necessity or the sheer value of an additional criminal offence, particularly in Scotland, which is a separate jurisdiction in the criminal sense. It would be helpful to me, with the background that I have and the ambition that I have that the Bill will have some visibility in Scotland, to know what degree of communication there has been with the Scottish Government and other institutions in Scotland.
My second point relates to the challenge that the Government have set themselves to report annually in relation, effectively, to the success of the Bill and this area of law in meeting and achieving the objectives they set themselves in Clause 20. I wonder why the Government have restricted this method of reporting to this area of law. Why is it only in the area of IP law that we are to have reports about the success of legislation against the objectives that they set themselves? It would be an interesting principle to apply. The House and Parliament may be encouraged to replicate this provision in other pieces of legislation that are presented to it, so that reports over time will show whether or not the amendments that we make to the law, often having been persuaded by the Government that they will have certain consequences, are having those consequences. I wonder how we are to judge these reports. What metrics have to be applied to judge whether or not the changes to the law are as successful as the Government hope? I would be assisted in that regard if the noble Viscount would, in summing up, indicate how this is to be judged.
My final point is to reinforce what my noble friend Lord Stevenson said about the unitary court. Is it the Government’s expectation that there will be two of these courts, and is it their plan that one of them will sit in Scotland? If that is right, that again would be a very welcome fact to communicate to the people of Scotland so that they understand the importance of their place in this law in relation to their ambitions to share in the prosperity that this suggests. I reinforce the point I made about the United Kingdom to the noble Viscount and I would welcome it if he gave me some indication, either in summing up this debate or separately, of what communication there has been between the Government here, the Government in Scotland, the Scottish Parliament, the Scottish Law Commission and other institutions in Scotland so that I can follow that up during the course of my continued learning process in this, and can ensure that the Scottish voice is heard in these debates and discussions and communicated back to the people of Scotland.
Lord Walker of Gestingthorpe
My Lords, coming back to your Lordships’ House as I have, after three and a half years’ hard labour in the Supreme Court on the other side of Parliament Square, I have been touched by the friendliness and helpfulness of so many of your Lordships and the officers and staff of the House, whether or not they had any acquaintance with me in my earlier incarnation as a Law Lord. When I was a Law Lord I followed the practice of some, but not all, of my colleagues in sticking to the day job. That is why, more than 10 years after I became a Member of your Lordships’ House, I am making my maiden speech today. It will, I fear, be a very modest contribution, which will disappoint some of your Lordships, who have made kind remarks.
My first serious encounter with intellectual property law was about 20 years ago, when I was first appointed as a High Court judge in the Chancery Division, and the allocation of responsibilities between judges in that division was the task of the Vice-Chancellor, my noble and learned friend Lord Scott of Foscote, who I see is lurking behind me. He rang me up and said he was going to make me a judge of the Patents Court. I should explain, perhaps, that the Patents Court is a sub-division of the Chancery Division, and that most of its work is done by judges who have been patent experts all their lives. However, because patent litigation goes on for a long time and judges cannot sit in judgment on cases on which they have advised, there is a need for some supernumeraries. I said to the Vice-Chancellor, “I ought to tell you that I do not have a single O-level in any science subject”. I am not proud of that, but it is true; I had a very old-fashioned education. This carried no weight at all with the Vice-Chancellor. He said that I would find it an interesting intellectual experience, and hung up on me. It has indeed been a most interesting intellectual experience and I have learnt just a little bit of science along the way.
Maiden speeches are not meant to be controversial. I hope it is not controversial to say that one of the most important and problematic provisions of the Bill is Clause 16, which introduces a new Section 88A to the Patents Act 1977, and provides for a unified patent court. This is a remarkably bold step forward, on which successive Governments are to be congratulated, because it has been a very long haul indeed. It is a long, and in many ways sad, story. The European patent convention, which was signed in Munich in 1973, was in fact a pan-European measure; it was not an EU measure at all. Part of the difficulty, I suspect, is that it took the EU a very long time to recognise that the Community patent convention was simply dead in the water, because it was signed by only seven member states, including the UK, when unanimity was required. It is perhaps right to say that the failure of the EU to recognise that it was dead in the water is one of the reasons why it was been such a long and hard struggle to get to the agreement signed in Brussels last February.
One difficulty under the European patent convention was that, although a single application produced a bundle or sheaf of patents good in each contracting state, enforcement of the patent rights required litigation in different countries. Where a European patent was attacked as invalid or enforced in infringement proceedings in the courts of a number of different states, there were several well known—indeed, I might say notorious —cases in which national courts administering the same law under the European patent convention reached different conclusions. In particular, there were several cases in which the courts of Germany and the Netherlands reached different conclusions from those reached in the courts of England.
That has sometimes been explained by the very different procedure that applied in different member states. Typically, in this country, there would be a long trial—long oral proceedings with, perhaps, days of cross-examination of expert witnesses—whereas, in Germany or the Netherlands, the procedure would be conducted much more on paper. It is therefore a truly bold and radical move that jurisdiction is now to be divided not by national boundaries but by sectors of the fields of science and technology in which patents are granted. It is a bold and unpredictable move. As so often, I suggest that the devil will be in the detail. For instance, we are told that there are to be procedural changes made in the new unified patent court. It will be important to see them.
As the clause would enable the Secretary of State to act merely by a draft order that requires the approval of both Houses, it will be important to see as much as possible in Committee what will be in that vital order placed before both Houses by the Secretary of State to understand just how far the unified court, as far as it sits in London—or, as it may be, in Edinburgh—will adopt a different procedure from that applied in the court at present. All those are matters that I hope to follow closely in the Bill’s later stages.
Lord Sheikh
My Lords, I must begin by congratulating and extending a very warm welcome to the noble and learned Lord, Lord Walker of Gestingthorpe, to your Lordships’ House. It is a pleasure for me to follow his maiden speech in today’s debate. He brings with him an excellent array of credentials in the field of law, the depth and quality of which I think we all agree was reflected in his marvellous contribution today.
The noble and learned Lord was called to the Bar at Lincoln’s Inn, where he served as treasurer in 2010. That holds personal resonance for me, because my brother and niece were also called to the Bar at the same Inn of Court. He has built a career filled with remarkable achievements in the legal profession, including appointment as a Queen’s Counsel in 1982 and serving as a High Court judge and as a Lord Justice of Appeal. Most notably, his career as a judge culminated in his appointment as one of the original Justices of the Supreme Court on its inauguration in 2009.
The reverence for the noble and learned Lord’s work has stretched even beyond these shores. He served as a non-permanent judge of the Hong Kong Court of Final Appeal. He is also a strong family man with four children, and last year he celebrated his golden wedding anniversary with his wife Suzanne. With his legal expertise and undoubted other qualities, he will be an invaluable addition to your Lordships’ Chamber, and I commend him on his maiden speech.
I am pleased to speak in the Second Reading of the Bill, as it has personal resonance for me. I briefly talked about the matter in a speech that I made in your Lordships’ House following her Majesty’s most gracious Speech. On that note, I declare an interest in that I was previously the chairman and chief executive of an organisation that arranged insurance schemes for the protection of patents and copyrights. I therefore have first-hand knowledge of how part of an organisation’s resources and finances are often utilised for the purposes of intellectual property.
I have been heartened by our Government’s commitment to reforming intellectual property law ever since coming to power. We have seen a strong and consistent desire to see the changes through in the interests of removing obstructions for businesses and ultimately assisting economic growth. Ian Hargreaves and his panel should be commended for their work, particularly in the light of the Government accepting the majority of its findings and recommendations. The legislation in this area, as the report stated, is falling behind what is needed and must be reformed to make the most of today’s challenges—and, indeed, those of the future.
At the very heart of the Bill is the concept of helping to release innovation that is otherwise being stifled by current intellectual property laws. For me, some of the key proposals that will no doubt provide the greatest returns are those intended to allow a greater degree of flexibility to aspiring designers and creators. The Government made clear in their response to the Hargreaves report that they are concerned at the extent to which businesses and entrepreneurs are restricted and prevented from realising their full potential due to the heavy chains and shackles of outdated legislation.
I believe in the free and competitive spirit of the market and everybody’s right to reap the rewards of their creations, but I also realise that innovation and creativity do not always come from completely original, alien concepts; they are also bred from inspirations, from the merging, adapting and fine-tuning of ideas. I am very supportive of limiting the protection of trivial features of design both to curtail overly opportunistic designers from making unreasonable claims and to clear up uncertainty where cases are taken before the courts.
I also believe strongly in the provisions enabling a right of prior use by third parties of designs that are subsequently registered by others. Again, that is a concept based on fairness and the recognition that substantial work is often undertaken before the process of legal registration. It also allows for what the Department for Business, Innovation and Skills has referred to as the “limited exploitation” which such third parties should rightly be entitled to in the circumstances. However, it is also crucial that we implement measures to ensure that our talents here at home are adequately protected and thus encouraged to develop further.
I am particularly pleased to see provisions being made to amend the Freedom of Information Act for continuing programmes of research intended for future publication. I believe that the increased transparency provided by the Freedom of Information Act has, on the whole, been good for the public, not least in the name of political accountability. However, in some circumstances, such disclosure will inevitably pose a threat to the integrity and potential economic gain of such research. When the Justice Select Committee looked at this matter last year, it was informed by Universities UK that there was strong concern across the country about how such early releases of information are threatening the competitiveness of our universities against each other and, perhaps more importantly, internationally.
Freedom of information is a concept introduced on the basis of it being very much in the public interest, and I would argue that this tweaking of the original legislation takes it even further down that road. A natural extension of this is the introduction of protection from infringement in relation to acts undertaken privately and, in particular, in teaching and experimenting. It simply does not make sense for activities undertaken with no commercial purpose to be susceptible to laws designed to protect designers from commercial loss, and it is good to see that the Bill takes note of this.
In order adequately to protect our designers and creators, we must also ensure that the law is accessible to them and properly serves their interests. The Bill makes very clear that the deliberate copying of a registered design is to be rightly designated a criminal offence that is dealt with by criminal courts, and clearly outlines the conditions and circumstances in which an offence is to be considered as such. This is perhaps the most important advance made by the Bill, giving designers the concise guidance they need, further deterring those who look to produce and sell counterfeit products, and helping to bring the law in this area uniformly into line with that of breaching copyright and trade marks. I am also pleased that time has deliberately been taken to ensure appropriate lines of defence for those accused of such offences. This is a firm policy that still ensures that genuinely innocent individuals who unintentionally break the rules will not be caught by it.
As well as ensuring strength and clarity in intellectual property laws, it is also crucial that we streamline internationally where possible. We live in a globalised world, and these laws must reflect that. The power which the Bill provides for ratification of the unitary patent court agreement will provide an essential step in seeing this beneficial mechanism finally implemented. The opportunity for businesses to create single EU-wide patents for products, rather than separately across all countries, as well as to litigate where necessary in one unitary court covering all countries, will reduce costs and administration substantially. In fact, the Intellectual Property Office estimates that this will benefit UK business by about £40 million per year. The negotiations on this have been long and arduous for all countries involved, and we must now seize the opportunity to make it happen.
I am sure all the noble Lords in this House will agree that small businesses form the backbone of our economy and will be the driving force behind our economic recovery. I am therefore supportive of any and all measures designed to help SMEs better utilise the systems of protection that are available to them. In this vein, it is long overdue that we accede to the Hague agreement, and I am extremely pleased to see this included in the Bill. The current anomaly whereby companies can apply for protection covering only the whole of the EU has been hampering our small businesses for too long. They are unlikely to require such wide protection and often find it difficult to meet the costs of such a substantial registration. The Hague system is a sensible system, and it is about time we implemented it in the United Kingdom, both in the name of simplicity of administration and, even more importantly, in giving our small businesses a route to target specific markets with their products and services. It will also enable us to encourage other countries to sign up, thus opening up our markets further.
Finally, the proposed IPO opinions service for UK-registered designs seems to be the most obvious and progressive step forward in furthering direct government support for innovation, particularly given the success of the existing service, which has proved both cheap and efficient to use, and with the vast majority of opinions requested being issued within the target timeframe of three months. In 2010, the IPO conducted a survey of the users of its opinions service, and 70% declared that they would be in favour of the service’s expansion. Several reviews, including Hargreaves, have found that the expense and time needed to resolve intellectual property disputes can actually prevent small businesses from making proper use of their rights, and thus act as a barrier to innovation. Therefore, such a service can be a valuable tool in helping to avoid costly litigation. Such a service will help to ensure that intellectual property remains the preserve of innovators, rather than those with the deepest pockets.
Reform of our intellectual property laws is long overdue. I believe that the Bill provides the clarity, transparency and overall efficiency that our innovators need to help them flourish and realise their full potential in assisting our economic growth.
Lord Borrie
My Lords, I add my welcome to the maiden speech of the noble and learned Lord, Lord Walker of Gestingthorpe. It was a very valuable speech and from his remarks I understand that he will be able to take part in the Committee stage of the Bill. He will be very welcome there and, no doubt, in the other debates that he will take part in as he chooses. I was not surprised that the consultation document said that the law relating to design is complex and difficult to understand. It went on to say that it is difficult to enforce the law relating to design. I therefore suggest that the Government’s proposal in Clause 13, whereby civil remedies are given the benefit of criminal sanctions, provided there is a deliberate breach of a registered design, will be an extremely helpful addition.
The consultation document dealing with this matter referred to SMEs as the people—mostly designers—who are likely to lack the resources to challenge infringement themselves. In the debate on the gracious Speech, I ventured to suggest that a major problem for SMEs was not getting paid by their suppliers, a loss of cash flow and so on. I suggested that a public official is needed to assist them. It is rather a similar proposition that I make now—namely, that with registered designs it should be possible for SMEs and other designers to have the benefit of a public official to put forward the possibility of a criminal charge against deliberate infringements. The public official in this case will be trading standards officers up and down the country. I declare an interest as a vice-president of the Trading Standards Institute.
One of the things that I want to make clear today is that, over the years, I have also had a long interest in competition policy or competition law and the need to deal firmly with anti-trust or anti-competitive practices. The new body that we in this House set up—together with the other House, of course—the Competition and Markets Authority, will be a much more significant body than those that it replaces; it will be very powerful.
I want to make it clear that, in relation to intellectual property, there is sometimes a tension between the general importance of competition in promoting efficiency in the provision of goods and services and the value of intellectual property. As many people have already said in today’s debate, the invention of new products and new designs and other outcomes of creative talent in the industry requires intellectual property. However, I suggest that intellectual property rights may be inherently anti-competitive because they create barriers to entry into the market by others who are not the first people, and therefore have not managed to register their property rights. If the intellectual property is particularly powerful and lasts for an unduly long time, surely it is anti-competitive and not what we in this House, with this Bill, are encouraging with regard to people who are granted intellectual property.
Once obtained, intellectual property rights, whether patents, copyright or registered design, can all operate initially as being pro-competitive, of course, but if the protection continues for too long, beyond a reasonable time, clearly that restricts competition from other parties and people. For that reason, I have some doubt about the proposition in the Bill that unregistered designs should receive the benefit of intellectual property rights along with registered designs. It is interesting that an unregistered design lasts for 15 years. That is a monopoly position for 15 years, which may be less than justified. In relation to unregistered designs, and indeed other aspects of intellectual property, are the Government content with the period of benefit that the owner of the patent, design or whatever it is has for its invention and its creative outcome?
One very welcome provision in the Bill, as other people—although not all of them—have said, is the obligation on the Intellectual Property Office to give a non-binding but none the less authoritative opinion. The validity of the design is then given a firm basis, with an opinion available that will not be costly. I noticed that the consultative document talks about a modest fee of £200. As this has not been referred to today, I do not know if the Minister could confirm whether that is the intention, but clearly that is a very modest sum compared with any sort of legal action that someone would otherwise have to bring for infringement. The Federation of Small Businesses, which no doubt has written to many of us on the subject of intellectual property, feels very strongly that the service has helped with regard to patents, where it has been available for some time, and could be very useful regarding designs, enabling one to get a firm opinion from an authoritative body without having to go through court proceedings.
The Earl of Erroll
My Lords, the excellent maiden speech by the noble and learned Lord, Lord Walker of Gestingthorpe, suddenly reminded me of something from about the time when I had just about finished my A-levels. My parents were great friends with the late Lord Jauncey of Tullichettle, and they were having lunch with him in Edinburgh when he was just an advocate. I found him struggling with some simple chemistry and science books. I had done physics, chemistry and maths. He was struggling to understand polymers, because he was taking a case regarding coatings on razorblades. I gave him a quick rundown on polymers and polymer coatings, at the end of which he said he understood it perfectly and went on to win his case. He suggested to me that I ought to become an advocate and a patent lawyer. Probably one of the bigger mistakes in my life is that I did not take his advice. Still, I have ended up in other places.
One of the interesting things about the Bill, as people have pointed out, is the anomaly of the silos in government. The copyright and culture side of it sits in DCMS, while the other stuff, which generates huge amounts of jobs, industry and work, sits in the IPO, which comes under BIS. However, the two things are basically related. When we talk about the creative industries, where does the creativity cross over between the two? There are a lot of anomalies as a result of this approach of splitting the area into two when it comes to legislation. There is a principle, I think, that we cannot have two departments sponsoring one Bill, or something like that—I am not quite sure how it works. As a result, we get a dichotomy, a mismatch, and all these things.
The noble Lord, Lord Borrie, for instance, is worried that 15 years is too long to protect an unregistered design. Well, an unregistered copyright, which may be generated purely by accident—after all, you get copyright simply by writing a letter, even if no one intended ever to make any money off it—lasts for the life of the author plus 70 years, which causes huge problems elsewhere and does not advance the cause of other intellectual property and research there. There is a complete mismatch between the two, and the whole area needs some proper, maybe philosophical, thought about it in order to rationalise it.
I ought to declare an interest. I am an adviser to Flexeye Ltd, whose software is being used very cleverly by a major manufacturer to try to protect its intellectual property and designs where it is manufacturing in foreign countries and it knows that people are going to try to rip it off and make copies. How you control access is an interesting and important problem. As people have been pointing out, there is a huge amount of money in this area.
I shall run through the clauses quickly. Clause 4, on fair use, which is essential and very good, says that we can use these things in teaching and in other areas and for private use. That is very good and it is obvious, so why could we not also have had it in the other Bill with regard to cultural copyright? If it is needed in one Bill, why not in the other? The fair use provision is essential.
Then we have Clause 7, about prior use. It should not apply if someone inadvertently uses something. There is a defence for the person whose design is being used; the third party has to prove that it is not copied from the design. The trouble is that if the design that they are copying from is unregistered, how do you prove that they copied it from that design unless you actually find evidence of that? I can see an opportunity for a nice little business looking at unregistered designs, getting some money and then invoking the prior use clause so that you actually have use of it. Then if you wanted to extend the use, you would have to enter into an arrangement with the person who had the registered design. You could use this exemption for registered designs to get an advantage. That needs looking at.
Clause 13 is also about copying. It applies to registered designs: why not to unregistered ones as well? Again, there is a constant mismatch in the Bill between registered and unregistered. DCMS sees no such difference regarding copyright; copyright is copyright, whether it is registered or unregistered. Maybe we should apply the Bill’s principles in the Copyright, Designs and Patents Act where it applies to copyright, or maybe we should apply that Act’s principles here. I find that mismatch difficult.
I reinforce what the noble Lord, Lord Clement-Jones, said about 2D and 3D. I am not quite sure how the legislation applies here, but we now have 3D printers, so copying something in three dimensions now is not a problem. As for the idea behind the discrepancy between the two, we can make 3D copies cheaply now; the printers are only around £2,000.
On Clause 16, a quick note was passed to me from the Law Society of Scotland. This has already been said, but I am going to say it more precisely to reinforce it. The note said that it would be very nice if one division of the court of first instance of the unified patent court could in fact, should they win enough cases, be the Court of Session in Scotland. I wanted quickly to reinforce that.
I was most intrigued by the provision in paragraph 3 of the Schedule to extend the period to a year and a day. Why do they suddenly want the extra day? You do not get that in leasehold; you do not get it in lots of other laws. I could envisage a renewal period, or whatever it might be, being rolled forward by a day all the time. I thought there was a very good reason for ending it on the 365th day, or whatever, and then starting it again on day one. I just hope they do not introduce this principle elsewhere, because it could lead to chaos.
I very much welcome Clause 19, which is about protection from requests under the Freedom of Information Act for research. This is long overdue, because there have been some very difficult cases. I think that at the moment you are required to have a commercial reason not to disclose. We have to have it for pure research and other things because we do not know how long it will be before some of this stuff is useful. This whole business of an academic moving from one establishment to another and then requesting information from the previous establishment because he knows it is there can cause a lot of problems to people’s credibility and the amount of investment in some of those data sets being gathered for research.
In general, the Bill is very good, and I look forward to seeing it progressing.
Lord Howarth of Newport
My Lords, I have no interests to declare. I have no financial benefit from any dealings in relation to intellectual property and I have not talked to anybody seeking to lobby us on this Bill. I say this, which noble Lords may consider to be superfluous, because policy-making in the field of intellectual property is peculiarly beset by lobbying. It is good for the House and it is good for everyone who may take an interest in our proceedings that, as we in this House and Members of the other place take part in the scrutiny of this legislation, we make it clear where we are coming from.
The Minister is a serial legislator. He hardly draws breath between concluding legislating on one intellectual property Bill and bringing in another. We should praise him for his enthusiasm to make progress and for his invaluable helpfulness to all of us across the House. When we come to Committee, I am sure that our proceedings will be greatly enhanced by the participation of the noble and learned Lord, Lord Walker of Gestingthorpe, who made very clear the distinguished background from which he comes. I am sure that with his participation in Committee the proceedings will be, in his words, a most interesting intellectual experience.
It would not be fair to say that this Bill—this pudding—lacks a theme. The themes of simplification, clarification, streamlining and the aligning of United Kingdom law with European Union law are consistently there and are desirable themes. If you put in your thumb, you will extract some very good plums: protection from infringement of private acts, experiments in teaching, the improvement in the right to prior use, the extension of the opinion service, the improvement in the small claims service, accession to the Hague agreement and the part of the Bill that deals with the unified patent court and its somewhat Solomonic partial presence in London. The provisions on the court are a real feather in the Government’s cap. They indicate, by the way, that colleagues in the European Union do expect the United Kingdom to remain as members of the European Union. If the Minister should suddenly withdraw Clause 16, we will know that the paranoia of his party in relation to Europe has entered an even more advanced stage. I trust that that will not happen.
I look forward to the Minister, in the course of our various proceedings, expounding more of his vision of what the Government’s role is in relation to intellectual property and what the principles are that should guide policy development—how we should seek to ensure that it contributes to the promotion of innovation, creativity and growth. The Government did very well to commission the Hargreaves report, which seems to me to be a masterly piece of work. We should also appreciate the recent NESTA report, one of the co-authors of which was Professor Hargreaves. That provides very helpful background to our thinking in this general area.
The Government recognised in their response to Hargreaves that intellectual property is a double-edged sword—that was not their phrase, but it was the purport. For my part, I consider intellectual property to be a necessary evil. The question for us as policy-makers and legislators is whether it is now right to continue to reinforce traditional approaches and build on traditional structures, as this Bill does; or has the time come when we need to rethink more radically how intellectual property policy and legislation should be formulated in the era of the digital economy, when knowledge can instantly, easily and costlessly be transmitted across the globe and when we are seeing that the conventional configuration of policies—not just in the IP field—is producing rising inequality with grievous consequences, not only in our own nation but across the world?
Of course, it is necessary to incentivise innovation and it is just to reward creative advance; there are pragmatic and moral reasons for enabling those who innovate to recoup their investment. The pharmaceutical industry, for example, faces colossal costs in development, not least in testing the safety of new products, and we all want the industry to be successful in producing a new generation of antibiotics. However, let us not forget that the protection of intellectual property is protectionism; it creates monopoly and restrictive practice and restrains trade. Therefore, it should be kept to the necessary minimum. How to establish what that minimum is must be based on evidence of the benefits of protection to the economy, to society and to culture.
I understand that there are now economists within the Intellectual Property Office. That might help their deliberations as they advise Ministers, but I wonder whether they are thinking additionally of recruiting philosophers or artists or people who work in developing countries as the judgments to be made are very difficult. Of course we want a strong pharmaceutical industry in this country; we want new drugs to make the lives of our people better. However, we do not want people who live in much poorer parts of the world to have to go without. There are moral and prudential reasons for seeking to prevent the immiseration of the poorest people in the world, sometimes known a little insensitively as the “bottom billion”.
During the passage of the Enterprise and Regulatory Reform Bill, we had some skirmishes on the subject of furniture design, and I wondered how appropriate it was that the present holders of design rights to Eames chairs should be enabled, for a further considerable period, to profit from that monopoly and prevent people in households with modest incomes having the pleasure of beautifully designed Eames chairs in their homes. We continue to need to reflect on these questions. Was it right that Bill Gates was able to patent his operating system on such terms that, through the iron grip that he had on that industry, he was able to make colossal amounts of money? Would $50,000 have been a good enough reward for his originality? Was it really right that it should have been $50 billion? After all, many others were nearly at the same point of development in that field.
It is a problem with monopoly that it will tend to snuff out other businesses and abort other potential. Would it not be better that we should have many more small and medium-sized enterprises rather than a few giant multinationals with the problems in connection with them that we have recently been reflecting on? We should be seeking a more equal diffusion of wealth and, with that, we will have a more rapid spread of ideas and, all in all, a greater increase in wealth. I agree on this with some of the thoughts that my noble friend Lord Borrie was advancing.
The default position of Governments in this country seems to have been to extend the term of protection. I would have wanted to have seen at least the same energy and emphasis on other aspects of policy development to assist the growth of businesses and the development of our culture, as they intend to do through policy on intellectual property: more emphasis on investment in research and development; more effort to get appropriate sources of finance available to entrepreneurs; more work in developing the necessary skills among our people; and faster creation of the infrastructure that we need. We have tended to rely perhaps too much on the protection of intellectual property.
The period for which intellectual property is protected should therefore be the minimum necessary to achieve the incentivisation of entrepreneurs and to enable them to recoup their investment. The object of policy should not be to enable people to get fat on monopoly profits, however charitable they subsequently may be. We in the West are at risk of adopting some hypocritical attitudes on this matter. The G8, the IMF and the World Bank impose free-market systems on the developing world—and not just on the developing world, but on great areas of the world that are in abject poverty and could not be said to be developing. Yet, historically, in our own economies, we were protectionist. We did not operate free-market systems in the early phases of the industrialisation of our economies. We continue to be protectionist in relation to intellectual property. It is perhaps no surprise that the growth of poor areas of the world—sub-Saharan Africa and elsewhere—has slowed and, indeed, failed altogether in the 30 years since the free-market orthodoxy has been imposed there.
Moreover, attempts at global protection of intellectual property risk being futile because they are unenforceable. Just as this country and other European countries did in the early periods of industrialisation, they show contempt towards the intellectual property rights of foreigners. We have seen the significant recent judgment on Novartis in India where the court took the view that a product that Novartis was claiming was new was not, in fact, new. In other parts of the world, protectionism is not masked, or even decently clothed, by legal formality.
The collapse of the neo-conservative economic model since 1980 has meant, ironically, that we in the West are depending increasingly for our growth on the performance of the emerging economies which are the most flagrant violators of intellectual property. We might mention China, for example; perhaps in some ways it is lucky that it is as cavalier as it is about intellectual property rights.
I do not condone theft, but hand-wringing does not amount to much of a policy. As digital technology becomes increasingly important in the global economy, so enforcement becomes more difficult still. We have seen the predicament of the music industry, the publishing industry and photographers. New digital industrial techniques are spreading fast into other areas of traded goods: 3D printing is clearly enormously ominous for many established manufacturers. So far, the handgun that has been made by 3D printing is only primitive, but it will not be long before those same furniture manufacturers will have to worry that it will be remarkably easy, with the use of a 3D printer, to replicate an Eames chair or anything else.
If our interest is to promote creativity and increase wealth, is it better to protect intellectual property? Or is it better to diffuse knowledge and to minimise barriers to downloading and to copying? Is it right therefore to criminalise the deliberate copying of a registered design for someone’s commercial advantage? Maybe it is, because we are dealing with theft. Perhaps it is a good thing to help an aggrieved businessman not to have to waste time and money going through civil court procedures. However, we worry elsewhere that we have a tendency rather blithely to create new criminal offences, and I am not sure that we should be creating new criminal offences here, particularly with the draconian penalties attached to this one.
Are there other ways in which we can provide the just reward that innovators and creators ought to have? With digital technology, the tensions increase between our desire to maximise profit and our desire to maximise the public benefit. Where the variable costs of replication fall very low—or, indeed, to nil—the greater is the opportunity cost of protection, of inhibiting the market, of postponing the day when the generality of people can enjoy the benefit of the new knowledge and of forgoing the earlier enhancement of human opportunities that the new knowledge could provide.
In debates on this matter at the beginning of the American republic, Thomas Jefferson opposed the protection of intellectual property. He argued that ideas are like air and no one should own them. He lost the argument. Alexander Hamilton, the first Treasury Secretary, inaugurated the tradition of protectionism in the US, and it is far from exhausted to this day.
There was an old view, however, that goods for which the marginal costs are close to zero are inherently public goods. Bridges and roads are cited in this argument: once the capital cost of creating the bridge or road has been incurred, it is to the advantage of society and the economy that as many people as possible should, as quickly as possible, be able to use those bridges and roads. Maybe creators should receive their reward not from a rigged market but from, in some instances, taxpayers or charitable funds on a national or international level—people negotiating to purchase intellectual property or access to it on behalf of the community. I know that that is countercultural and that it may seem entirely fanciful in the fiscal situation in which we find ourselves. We should at least be aware of the costs and disbenefits of protecting intellectual property.
In Committee we should assess the merits of the provisions of the Bill by reference to their practicality and the benefits that they will foreseeably confer on innovation and growth, but also by reference to a wider criterion: the net benefit to the economy and, more broadly, to culture, society and communities across the globe. The interests of the incumbent producer, legitimate as they are, are only one part of what we should properly consider. As the noble Lord, Lord Clement-Jones, said, when we are considering what the reporting duty of the Secretary of State should be, we may want to amend what the Government have so far written in Clause 20 to take his responsibilities beyond consideration only of the effect on,
“innovation and of economic growth in the United Kingdom”.
Baroness Brinton
My Lords, I will start by declaring an interest. My husband is a research engineer who works for Cambridge Consultants, which works with clients to develop patents and copyright protection. I also remind the House that in the past—it is not a current interest—I was a venture capitalist, helping mainly academics spin ideas out of university and into the commercial world. That was a long time ago, in the 1980s.
Before I start I will address the comment made by the noble Lord, Lord Howarth, who said that perhaps we have too much protection. I disagree with him very strongly. It is important that people who have designed items, whether that is electronic design, music or a creative work of art, should be recognised and should have any recompense due to them for that. We live in a world where the counterfeit and fake are commonplace, and they are a form of theft. One thing the Bill will do is to make it that much harder for those who want to go against the authorship and ownership of works. The noble Lord raised a valid point about monopoly and the issue of the Windows operating system. However, that is not a case of intellectual property but of competition law, which is a different matter.
I support the Bill—almost exclusively across it—but I will focus my remarks on three clauses, given many of the comments made by noble Lords earlier in the debate. I will address Clause 4 on the arrangements for teaching and experimentation not infringing design rights, Clause 16 on the unified patent court, and Clause 19, which provides qualified exemption from freedom of information requests for pre-publication research.
I will start with the last clause. I had hoped that we would not hear any noble Lords opposing the inclusion of this clause, so I was slightly concerned that my noble friend Lord Clement-Jones said that we would have to come back to look at this in further detail in Committee. We fought long and hard during the passage of the Protection of Freedoms Bill to have a review of this case. We argued that it was absolutely essential because those engaged in research, including universities and publicly-funded research centres, would be at risk from the increased access to information set out in the Protection of Freedoms Bill. Although we did not win the argument then, I was grateful that the Minister undertook to pass the complex and thorny issues to the Justice Committee’s post-legislative scrutiny committee in another place. As we know, it confirmed that there was a need for a specific exemption, and I thank the Government for the addition of Clause 19, which sets this out.
The clause makes it clear that the exemption requires that disclosure of the information would be prejudicial to the interests of the research programme, of the institution or even the individual undertaking it, or of an individual participating in it. Therefore it is not a carte blanche for those carrying out research to hold anything private longer term. It is also important to note that exemptions with similar effects exist in the Freedom of Information (Scotland) Act, and in Irish and US legislation. While I, too, am a unionist, I say to the noble Lord, Lord Browne of Ladyton, that Scotland got it right first on this one.
The key reason that this exemption is necessary is, as I have already mentioned, the risk of harm to the quality and reputation of UK research. Misleading information can enter the public domain before it has been cleaned, checked, and subjected to analysis and—importantly—to peer review. Researchers can be challenged on their approach or findings before they have had a chance to address flaws in their work. Very particularly, in relation to health-related research, individuals who get some information might misdiagnose or medicate themselves on the basis of misleading information that is gaining currency but is supported by incomplete research. That could damage the UK’s reputation for quality research.
As other noble Lords mentioned, it could also undermine the competitive position of UK research. University research is fundamental to our global competitiveness, and is considered second only to that of the United States. It is also a highly competitive field. Premature disclosure of research information will enable international competitors to profit from work undertaken in UK universities before the originators have had a fair opportunity to protect their ideas or secure grants for future research. I am sure that that is why the US legislated in this area.
It may also be difficult or impossible to secure publication opportunities in reputable journals if findings are already in the public domain. Publication records influence university income via the Research Excellence Framework, as well as universities’ ability to secure future grants and commercial contracts, and, importantly, to attract academic staff and students. This harms our universities’ competitive interests, if not necessarily their commercial ones.
Research at an early stage may have a potential but not actual commercial value, and it is worrying that without this clause it is possible to discourage research partnership with commercial and charitable bodies. We went through quite specific examples during the passage of the Protection of Freedoms Bill that showed that had this continued, the UK would not have been a good place to have a commercial arrangement. Universities were already beginning to have to draw up very complex contracts with their commercial partners to try to protect them from this.
I will give one example. In response to a freedom of information request, one university stated:
“Formal analysis of the data at individual-participant level is still being undertaken by the trial team. We believe releasing data at the individual-participant level would prejudice publication of future study papers. It would also inhibit”,
the institution,
“from maximising the output from the information obtained and could set a precedent that may affect our”—
the university’s—
“ability to attract research funding and participants in the future”.
Therefore, this is not hypothetical. It is likely to cause damage, and I welcome the inclusion of Clause 19 to provide protection.
I now move to Clause 4, on exceptions to the infringement of design rights. As others have already mentioned, we had considerable debate during the passage of the Enterprise and Regulatory Reform Bill on this very issue. I respect and understand the concerns put forward by my noble friends Lady Buscombe and Lord Clement-Jones in those debates and others, making sure that those who had designed things had the right to any recompense and recognition that came thereby. However, taken in the extreme, it has meant that institutions, whether colleges, specialist conservatoires or universities, would not be able to use examples of unregistered design to teach the next generation of brilliant designers in this country. That seems completely counterintuitive. I am therefore delighted that Clause 4 remedies that. The noble Earl, Lord Erroll, expressed a concern that this would not pick up the points that we discussed during the passage of that Bill. As I understand it, it does, but if I am wrong, perhaps the Minister will clarify that.
Finally, I turn to Clause 16, which establishes the unified patent court system. I am very grateful to the noble Lord, Lord Walker of Gestingthorpe, who in his maiden speech eloquently set out the difficulties of the old system, some of which I remember from the 1980s. Clause 16 will benefit UK businesses, especially, as has been mentioned, SMEs and researchers, but I will focus on individual entrepreneurs who do not necessarily have the support or the funding that companies may have, or that institutions have through researchers.
Comments have been made about saving money, which is absolutely critical. We absolutely must be able to protect inventions and designs and sell them to different markets overseas. What is worse, however, when there has been an infringement, is that the cost of having to sue through a number of courts to get justice has often killed the product itself. This has come at the worst moment for a patent holder, who may be trying to get the next round of funding to commercialise their product. It is not just individuals and small businesses. Dyson spends a very large amount of money rightly defending the patents on its products. Some of the reduction in costs here and the simplification through the unified patent court system will remedy this.
London is a natural home for such an institution, particularly with the strength of the legal market in the capital, which I understand adds £6 billion gross in value to the UK’s economy annually, as well as helping to offset any loss of existing business to the parts of the new court that are to be established elsewhere. I hope that it would certainly sit in session in Edinburgh, too.
It is important to make the most of the opportunity presented by the new court to reinforce London’s leading position in the provision of legal and financial services, all of which need to be around when developing patents and copyright designs. The Lord Chancellor’s Plan for Growth: Promoting the UK’s Legal Services Sector, updated in March, aims to,
“promote the UK as the global centre of legal arbitration and commercial law services”,
while the Unlocking Disputes campaign, led by TheCityUK and the legal professions, is also working hard to promote London’s dispute-resolution facilities to a worldwide audience. The placing of the universal patent court will give London real strength as a financial and legal centre as we start to move out of the difficult time of austerity. I welcome the EU-level agreement we have secured that the branch of the central division will be based in London, but the detail of how it will operate is critical.
Will the Government ensure that the fees for using the court are affordable for micro-businesses, SMEs and individual inventors? Will the Government take a central role in negotiations on the rules of procedure for the unified patent court to ensure that lower-value patent disputes are dealt with cost-effectively? What will happen when an invention encompasses multiple forms of technology and falls within the jurisdiction of different branches, whether one patent or a bundle of patents? Guidance will be critical, possibly even in regulation. Will the new unified patent court be included in the review set out in Clause 20? It clearly makes sense for this to happen.
In conclusion, the Bill has much to commend it. I believe it has the capacity to make it easier to register and protect designs and inventions while giving very specific protection to those public bodies undertaking research so that their work will not be compromised by freedom of information requests pre-publication. Finally, I join the many others who said that the successful negotiations regarding the unified patent court demonstrate once again that there are some real successes in our membership of the EU. I would like to hear the EU equivalent of, “What did the Romans ever do for us?” asked more frequently. In this case I believe that it will help business growth in both the UK and the EU economies, which is absolutely vital as part of our path to economic recovery.
Baroness Warwick of Undercliffe
My Lords, I join others in congratulating the noble and learned Lord, Lord Walker of Gestingthorpe. The clarity and pertinence of his maiden speech indicate what we have missed in the 10 years he served previously in this House when he felt that he must exercise restraint. I look forward to his further contributions to our debates.
At this Second Reading I want to speak on the same issue that I raised in the Queen’s Speech debate last week: that of Clause 19. I can be brief. I am delighted to see that Clause 19 contains provisions that will provide a new exemption under the Freedom of Information Act for information connected with research at pre-publication stage. I endorse and hope to reinforce the points so eloquently made on this issue by the noble Baroness, Lady Brinton. I note that the Clause 19 provision is a carefully worded and limited exemption that will be available for use in certain limited circumstances. It is worth noting, as others have said, that such an exemption already exists in the Scottish freedom of information legislation.
Many of us in this House, notably the noble Baroness, Lady Brinton, worked hard to persuade the Government of the need for such an exemption during the passage of the Protection of Freedoms Bill. We were not successful then, although Ministers gave us a very careful hearing. Subsequent post-legislative scrutiny of the Act confirmed that there is indeed a need to ensure that research that is still under way should be protected.
Universities UK argued consistently that existing exemptions are inadequate, but also made it clear that universities are certainly not hostile to the Freedom of Information Act, or to greater openness in research. Universities have in fact done a great deal to ensure that the majority of FOI requests are complied with. A recent survey carried out for Universities UK by Jisc showed that universities complied with 63% of FOI requests in 2010. There have also been real moves towards further openness in research through a commitment to open access. Most universities have a repository that could be used to showcase and share all their open-access publications, as well as doctoral theses and other material. Increasingly, such repositories are also used to support research management and reporting. UK universities, backed by the Government and funders, are leading the way internationally in providing free online access to research publications and data.
Having said that, universities are fairly unusual among the so-called “public authorities” that are subject to the Freedom of Information Act. As independent bodies that are decreasingly reliant on public funds, they also operate in a highly competitive environment. I do not believe that the Freedom of Information Act fully anticipates the complications that arise when dealing with FOI requests in the university context. This has been demonstrated to good effect by a number of recent cases involving university research.
Until now universities have had relatively few requests for information relating to research, but this appears to be changing. Recent high-profile instances illustrate how FOI requests can be used to intimidate researchers working in controversial fields or to gain competitive advantage. To give one example, during the passage of the Protection of Freedoms Bill, I understand that the University of Oxford received a request for research data from a large nationwide health study, submitted by a company with a significant commercial interest in it. Although the request was subsequently not pursued, the research group lost significant research time in attempting to rebut the request, and the university incurred significant legal costs in the process.
Universities UK has examples of academics who received FOI requests relating to ongoing research from people who they believed to be their academic competitors. Queen Mary, University of London, had a case where research data was requested while the analysis was still being undertaken. They feared that releasing the data would lead to their losing the chance to publish their own results in respected journals. Like all universities, it pointed out that publications are vital in the assessment of quality as part of the research excellence framework, and of course in attracting future funding. Universities argue that if research data are made public prematurely, before the normal scrutiny and challenge of the peer-review process, it could not only undermine an individual or an institution’s reputation for quality but lead to misleading information and data getting into the public domain.
I do not believe that this was how the Freedom of Information Act was intended to work, and I do not believe it is in our national interest that this situation should be ignored. I warmly welcome the fact that the Government are acting now to prevent such damage occurring.
Lord Young of Norwood Green
My Lords, I start by thanking the Minister and noble Lords from around the House for what has been an extensive and very interesting debate. As I look around I see that a number of the usual suspects have been rounded up. I was actually a bit surprised that the noble Baroness, Lady Buscombe, is not in her place, as she said that we had not done anything on it. I spent at least three months of my life, together with a few others, examining the sheer delights of the Digital Economy Bill. We might not have got it all right; it was an unfinished work, as it ended up being decimated in the wash-up. Nevertheless, we understood and recognised the importance of this area of policy.
I, too, congratulate the noble and learned Lord, Lord Walker, on his maiden speech. It is a reincarnation and a giving-up of a 10-year vow of silence. He has an advantage on me; he obviously has some O-levels. I did not have any. I can only reflect that I once came second in a chemistry exam, but the remark on my report was, “Amazing. His behaviour in class is not so good”. It has lingered with me for 60-plus years. I am sure that the noble and learned Lord will make a very powerful contribution, given his experience in the area of patents.
I think it was my noble friend Lord Stevenson who said that this is a slim Bill. My experience is that it can soon become obese, given the weight of amendments that it is likely to attract. It makes important changes to the UK design framework in line with some of what was proposed in the Hargreaves review. Measures that we have already heard about include changes to the scope of design, the protection and ownership of design, new routes of appeal against decisions made by the registrar relating to design, a power for the Secretary of State to provide for a non-binding opinions service—as a number of noble Lords have said, a very welcome provision—and provision for the inspection of documents. The Bill puts in place provisions to allow the UK implementation of the Geneva act of the Hague agreement. Most of these provisions are straightforward and positive and go some way towards strengthening and clarifying the framework, although we fear that they might not go very far in addressing the complexity of what the Hargreaves report referred to as a “patchwork of protection”.
The Bill amends the law relating to patents to enable patent owners to provide public notice of their patent rights; to expand the circumstances in which the IPO may issue an opinion in relation to patents; to allow the IPO to share information on unpublished patent applications with international partners; and to provide for the agreement establishing a unified patent court—a provision which seems to have met with universal approval around the House today and on we should congratulate the Government. An interesting question about whether there would be two courts was posed and I have no doubt that the Minister will pick it up. The noble Baroness, Lady Brinton, mentioned lower-value patents and keeping those costs down, which is also very important.
Finally, as we heard from the noble Baroness and from my noble friend Lady Warwick, Clause 19 introduces an exemption into the FOI Act in relation to research and a duty on the Secretary of State to report to Parliament on how the IPO’s activities are supporting growth and innovation, both of which we support. The idea of reporting on growth and innovation was commented on by a number of noble Lords, including my noble friend Lord Browne. Both the extent of the report and whether this idea could be extended were raised. I do not think that I need go any further on research and the FOI Act, because they were covered extensively by my noble friend Lady Warwick and the noble Baroness, Lady Brinton.
Much of what is proposed in the Bill is intended to simplify the law and to ensure that it is understood, enforced and better supports innovation. As my noble friend Lord Howarth said, an interesting balance needs to be achieved between the desire to reward creativity and innovation and ensuring that competition and further innovation are not stifled. That will be a difficult judgment for us to make, and probably one of the most crucial, as we take the Bill through its Committee stage. The devil will be in the detail and we will ensure that the Bill gets the scrutiny it deserves.
We will look at each clause in detail to see how the Bill may be improved, and I must admit that I have some sympathy with the Minister as he tries to deal with the range of issues that have already been raised. Another issue which came up in relation to innovation versus competition was the domination of Microsoft over the years. Of course, it has not been total domination, as open source software, Linux and other systems became available. The noble Baroness, Lady Buscombe, made a strong contribution to the debate on the power of the search engines. It was interesting, but I was not quite sure that I grasped what her solution would be to that world domination—no doubt that will emerge in Committee.
There was a significant difference of opinion on the key issue of whether to criminalise in relation to registered designs—the noble Lord, Lord Clement-Jones, wanted the offence to include unregistered designs as well. As I listened to the noble Lord’s comments on that, one thought occurred to me: why do we not do something about the cost of registering designs? I would welcome the Minister’s comment on that. In this day and age where most things are being dealt with online, it should not be beyond the wit of man to reduce costs in this area; and if we are serious about stimulating the creative industries then we should be able to do so. A number of noble Lords expressed concern about extending criminality in this area. At this stage, all we would say is that we will pursue this matter extensively in Committee to see whether there are clear definitions and whether criminality is capable of being limited to those few examples of deliberate attempts to pirate and then copyright the theft.
The Minister referred to the small claims track into the patents county court. We welcome that as a useful step forward.
We share the Government’s view about the importance of the creative industries. Although there has been a lot of government rhetoric on this topic, enough is still not being done to support this essential sector of our economy. The Bill will of course play a part, but we have to recognise that the creative industries account for 3% of the UK economy and provide some 1.5 million direct jobs. They are one of the great success stories of our country and a driver for jobs and growth, yet there are concerns that they could be left behind without a clear strategy and leadership on the part of this Government.
This is a broadly positive Bill which we will engage with constructively and seek to improve. However, on its own, it is not up to the task of rebuilding our economy and creating growth in our industries, although it will play a significant role.
Viscount Younger of Leckie
My Lords, I thank all noble Lords who have taken part in this debate. It has certainly been wide-ranging and interesting, and I particularly welcome the support for the Bill from all sides of the House. Many points were raised and I shall do my best to address them all. If I am unable to do so, I shall write to the Peers concerned.
I first pay tribute to the noble and learned Lord, Lord Walker of Gestingthorpe, for a splendid maiden speech. He clearly demonstrated to the House his long and distinguished legal experience and knowledge with the wise words that he spoke on the unified patent court. I am delighted that he has chosen the Intellectual Property Bill as a platform from which to relaunch himself into this House. We look forward to hearing more from him in Committee and onwards.
I thank my noble friend Lord Sheikh for his supportive comments on the purpose behind the Bill and how its provisions support that purpose. He raised the issue of an opinions service for designs and asked whether this might be extended to cover unregistered designs. I welcome his support to this effect. The law has been crafted in such a way as to allow this service to cover both registered and unregistered designs. As my noble friend will appreciate, details of how the service will operate will be set down later in secondary legislation. On this subject, the noble Lord, Lord Borrie, asked me to confirm that the cost of an opinion would be a “modest” £200. I welcome his positive comments about the opinions service. As he mentioned, the Government’s response suggested that a fee of £200 would match that for the existing and well used patent opinions service. This will be subject to consultation, as will other details of how the service will operate.
My noble friend Lady Buscombe, in giving broad support to the Bill, made some interesting points about some of the powerful players in our digital age—she referred to them as “content aggregators”. The clear message is the need, which I agree with, to improve the quality of the content. They should have a responsibility and a moral duty to run their businesses reputably.
In respect of the search engines and creators it is important to acknowledge the value of both. The Government are in discussions with the industries, with both groups, to tackle online infringement of copyright, including responsible online advertising. I therefore value the points that my noble friend Lady Buscombe made today.
I thank the noble Lord, Lord Browne of Ladyton, for his many comments. He made an important point about celebrating this IP Bill as an important area of law that affects the whole of the UK, and I welcome his comments about the importance of the union to Scotland. This Bill is UK-wide and the Government hope that people across the UK will welcome the benefits to business that it will bring.
The introduction of criminal sanctions for the deliberate copying of a UK or EU-registered design was mentioned, which resulted in a lively debate. The noble Lord, Lord Stevenson, raised the question of the rationale for criminalising design theft and asked why the existing remedies are not enough. Extending criminal sanctions to registered designs will give them the same level of protection as the infringement of copyright and trade marks. This will create a coherent approach to enforcement and protection and also recognises that the creativity of design is as important to the UK economy as music protected by copyright and brands protected by trade marks. Creating a criminal offence for the copying of a registered design could help to reduce the scale of design theft in the UK. It will do so by acting as a deterrent against those who deliberately copy the designs of others.
The Government recognise that this is finely balanced and that there are arguments on both sides. Indeed, the noble Lord, Lord Howarth, alluded to that balance in his fine speech. Nevertheless, we believe that the Bill as drafted will provide strengthened protection for the design sector but in a measured and clearly defined way that does not prevent follow-on innovation by those genuinely seeking to create new designs.
The noble Lord, Lord Stevenson, and my noble friends Lord Clement-Jones and Lady Buscombe asked about the rationale of the policy for not including unregistered rights. The offence covers registered designs because the existence of a registration certificate gives a particular starting point, including what the designs looked like, who they belong to and when the right started. That information is not so readily available, as noble Lords might appreciate, for unregistered designs, making it more difficult for the designer to prove and for the authorities to act on.
My noble friend Lord Clement-Jones raised a concern about the level of penalties for certain offences and asked why the Government had not addressed certain discrepancies in the level of financial payments available in magistrates’ courts for trade marks and copyrights. Sections 85 to 87 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 make provisions to raise the maximum fines available in magistrates’ courts. The Government are working to implement these provisions, which will take effect with regard to all offences.
My noble friend Lord Clement-Jones, supported by the noble Earl, Lord Erroll, raised the issue of 2-D and 3-D and asked specifically whether the Bill would mean that 2-D works would be treated differently from 3-D works. This situation arises because copyright protection, which is currently covered by criminal sanctions, applies to, for example, a design drawing but not to a design made from that drawing. In proceeding in the way that we have, we have recognised the difficulties associated with proving matters such as subsistence and in relation to those rights, but there are also other issues not associated with copyright that need to be considered. For example, unregistered design rights can be exploited legitimately subject to licensing agreements by third parties for the last five years of their existence. This could be jeopardised if criminal sanctions applied before that period. For example, we know that 2,097 applications to use designs in the last five years were filed in 2012.
My noble friend Lord Clement-Jones asked rather mischievously whether the motivation behind introducing criminal sanctions for registered designs was to increase the income from the Intellectual Property Office by encouraging registration. I reassure the House that that is not the case. The measures in the Bill will protect designs registered both in the UK and through EU Community-registered design.
The noble Lord, Lord Stevenson, raised the matter of the unified patent court and asked whether this would not be an area where my right honourable friend the Prime Minister would seek an EU opt-out. I suggest that the noble Lord, Lord Howarth, was encouraging me to give a broader view of our European position, but I will not be drawn on that particular matter. The unitary patent is an important part of the Government's internal market and growth agendas. The Prime Minister has made it very clear that he wants Britain in the EU and he wants to maintain our influence in shaping the debate on the things that really matter; for example, reducing burdens on business and encouraging growth. The unitary patent court agreement is an agreement negotiated by all member states that have chosen to be part of it. The Government have signed up to the agreement because we believe that it would be good for UK businesses—clearly, I have been drawn on that to a certain extent after all.
The noble Lords, Lord Stevenson and Lord Browne of Ladyton, raised an interesting point about Scotland and the unified patent court. I can assure them both that the Government are working very closely with the devolved Administrations to ensure that the needs of users throughout the United Kingdom are considered. Ensuring local access to justice is a key element of the unified patent court and that is why the agreement makes provisions for setting up local divisions of the court. These local divisions are in addition to the central division, part of which will be hosted in London. I believe that the noble Lord, Lord Browne, alluded to that in his speech. The UK could host a local division and it would be possible to host more than one if the level of case work is high enough to require it. The UK would be expected to pay for the facilities such as the building, IT equipment and administrative staff of any division that we host.
The noble Lord, Lord Stevenson of Balmacara, raised the question of copyright and root-and-branch reform. I want to address this particular question because it was raised by the noble Lord, Lord Howarth, as a broader, more overarching matter relating to our intentions for intellectual property. I am grateful to the noble Lord, Lord Stevenson, for his acknowledgement that the intellectual property framework must change to promote innovation and protect creators. In that important interest, he suggests that root-and-branch reform of copyright is needed with proper consideration of evidence. What he proposes, however, is a major undertaking and the Government, in the light of the Hargreaves review, have committed not to undertake any further major review into intellectual property in this Parliament. We want to make progress with the measures that we have already put forward.
My noble friend Lord Clement-Jones expressed concern over the Intellectual Property Office’s ability to revoke patents, which the Bill will allow through the patent opinions service. The power will be to initiate revocation proceedings against the patent if an opinion concludes that it lacks novelty or an inventive step. That does not mean that the patent will be revoked straight away, and a provision is made so that the patentee can request a review of the opinion as well as an appeal of any review. The patentee will also have the opportunity to make observations and amendments to the specification and any decision to revoke a patent will be appealable to the High Court. The power will mirror the power that the Intellectual Property Office already has to revoke patents under Section 73(1) of the Patents Act 1977.
My noble friend Lord Clement-Jones and the noble Lords, Lord Stevenson and Lord Browne of Ladyton, raised the issue of the annual report of the Intellectual Property Office, spoke of the proposals in the Bill for reporting and suggested that the scope for reporting is somewhat narrow. There were suggestions that the clause on the Secretary of State’s reporting duty could contain an explicit commitment that the Government will report on how the IPO's activities have supported IP businesses with a focus on growth. I can reassure noble Lords that the Government will report on how the IPO's activities have supported IP-owning businesses whether through legislative changes or the delivery of services to help businesses protect and exploit their IP more effectively. The annual report will need to have a wider scope than the support of IP businesses. This is why the clause refers in broad terms to innovation and economic growth in the United Kingdom. It will therefore be important to ensure that the scope of the report is not drawn too narrowly in legislation.
The noble Lord, Lord Browne of Ladyton, raised the question of the proposal to expand the reporting duty to other areas of policy and asked why assurances on copyright-licensing issues will not be in the report and not reflected in the Bill. The report will cover new legislation and policy developments in the field of intellectual property, as has been made clear. During the debates on the Enterprise and Regulatory Reform Act I gave an undertaking that the report will also cover policies and services that impact on the licensing of intellectual property. One example is the Copyright Hub which noble Lords will be aware is currently under development.
The noble Lords, Lord Stevenson and Lord Borrie, and my noble friend Lord Clement-Jones raised the question of responsibility for intellectual property policy across government. The issue of responsibility for the creative industries was also raised. I am, as noble Lords will know, the IP Minister, and I can assure the House that I take this role very seriously. I also work closely with my colleague in the other place, Ed Vaizey, who has responsibility for the creative industries and their funding, and we are working together closely to deliver support for all UK businesses.
The noble Lord, Lord Browne of Ladyton, asked what communication had taken place with the Scottish Crown Office and the Law Commission about the value of the criminal sanctions to Scotland. He also asked what level of consultation had taken place with the Scottish Government. I can confirm that my officials have been in discussions with their Scottish counterparts, particularly in relation to the important point made about criminal sanctions. The clause dealing with this issue makes specific reference to the position in Scotland, given the different legal systems there.
My noble friend Lord Clement-Jones raised an important point about the parity between sanctions in relation to online and physical goods. The Government recognise that there is a discrepancy between the two offences. However, as this is an economic crime, it is right that the emphasis should be placed on fines. The issue was addressed in the Digital Economy Act, which increased financial penalties on conviction for digital and physical copyright theft of up to £50,000 so that they are now the same. Prosecutors also now use fraud legislation to obtain convictions more effectively. Increasing sanctions under the CDPA is therefore unnecessary at present although the Government will certainly keep the issue under review.
My noble friend Lord Clement-Jones raised the issue of unfair contracts for creators. During the proceedings on the Enterprise and Regulatory Reform Act a commitment to look at this issue was made. On the issue of contract terms, I am happy to repeat the precise commitment that I made to the House then to discuss this important and complex matter further. To that end I intend to meet my noble friend Lord Clement-Jones and the Creators’ Rights Alliance.
The noble Lords, Lord Borrie and Lord Howarth, and the noble Earl, Lord Erroll, raised the matter of intellectual property and competition and asked whether the period of intellectual property protection was right and why there are differences between intellectual property rights. If the period of intellectual property rights is set correctly, the protection afforded can reward innovation and creativity properly without being anti-competitive. The Government believe that the various periods referred to for different rights are, on balance, the right ones. They reward creativity and innovation while encouraging the sharing of information. This allows others to innovate further, but in a fair and balanced way. This issue mirrors some of the points that the noble Lord, Lord Howarth, made.
The noble Lord also raised the question of whether the Government were focused too much on intellectual property rights and whether they should turn their attention to skills, research and business support. That is a fair point. However, this Bill is only one part of the Government’s agenda. I agree that it is just as important to focus on research, skills and other business support. It is a point well made.
My noble friend Lord Clement-Jones also asked about extending the public lending right to remote e-loans. It is a matter—I was in the Chamber myself—that was raised in an Oral Question in the House earlier today. I can reassure him that the Department for Culture, Media and Sport is giving careful consideration to the extension of the public lending right to onsite loans of audio books and e-books. This is following William Sieghart’s review of e-lending in public libraries. The department is considering, for example, the implications for public lending right funding in the context of the number of remote loans of e-books. The department is also awaiting the results of research led by the Society of Chief Librarians. As a result, and as my noble friend will be aware, no decisions have yet been made. I therefore hope that he will agree that it seems too soon to legislate on the matter now.
I would like to raise a point concerning the speech of the noble Lord, Lord Howarth, who raised a number of interesting and important points in relation to the Bill. As always he gave an engaging speech and I thank him. I agree with him that there is an important balance to be struck between the rightful benefits to owners of intellectual property and the impact on others in the economy and in society. I look forward to having further discussions with him on this matter.
In speaking to Clause 19, my noble friend Lady Brinton, supported by the noble Baroness, Lady Warwick, and the noble Lord, Lord Stevenson, raised the issue of a newly qualified exemption for pre-publication research in the Freedom of Information Act. I thank noble Lords for their clear and cogent examination and explanation of the purpose and benefits of Clause 19. The Government have always said that they would look carefully at the evidence. We recognise the strength of the case identified by the Justice Select Committee and have included this provision in the Bill as a result. We hope that it will provide reassurance and clarity, and to those working in the publicly funded research sector in particular.
Noble Lords may have raised some further points which I have been unable to address and of course I will write to them on those. We will have the Committee stage in a few weeks’ time, when, after a well deserved break for your Lordships over the Whitsun Recess, we can return refreshed to discuss the more detailed points. I look forward to that process. As your Lordships know, my door is always open, as is that of my officials, to listen and to provide as much information as possible. With that, I commend the Bill to the House.