Second Reading Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)
My Lords, before the Minister moves that the Bill be considered, I remind noble Lords that the Motion before the Committee will be that the Committee do consider the Bill. I should perhaps make it clear that the Motion to give the Bill a Second Reading will be moved in the Chamber in the usual way, with the expectation that it will be taken formally.
Intellectual Property (Unjustified Threats) Bill [HL]
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)
My Lords, it is pleasing that a number of technical and uncontroversial reforms have in recent times gone through the special procedure before this House which is reserved for Bills arising from the great work of the Law Commission. The most recent example was the Insurance Act 2015, which this House scrutinised towards the end of the last Parliament.
The Bill before your Lordships’ House today is similarly concerned with a complex and specialist area of law. It concerns a particular aspect of our intellectual property framework, and I am very grateful to the Law Commission and to legal, IP and judicial stakeholders who have worked together so effectively to produce these reforms. I hope my explanations today will help noble Lords to appreciate their efforts.
In my two years as the Minister for Intellectual Property, I have come to appreciate how important IP is to this country. The UK’s investment in intangible assets protected by IP rights has been estimated at more than £60 billion, equivalent to approximately 4.2% of total UK GDP. IP-intensive industries have been estimated to generate 37% of UK GDP. This Government also understand that a well-functioning IP regime is a vital foundation for economic growth. This is reflected in our manifesto commitment to make the UK the best place in Europe to innovate, to patent new ideas and to set up and expand a business.
To be successful, our intellectual property system needs to strike a balance. On the one hand, the law must reward innovators and ensure that their IP rights can be enforced. On the other, it is crucial that threats to sue for infringement are not abused, stifling new ideas and distorting competition. This concern is a real one, and the Bill before us today is designed to counter these risks. The costs of IP litigation are such that many businesses, understandably, wish to avoid it at all costs. The consequence is that the mere threat of proceedings for IP infringement is capable of driving customers away and causing significant commercial damage, especially if the threat is issued by someone with deep pockets and the other party is less favourably placed.
A threat to sue where there has been no infringement, or where the IP right in question is actually invalid, is known as an unjustified threat. Such threats are, I regret to say, not a new phenomenon. As long ago as the 1880s, unjustified threats were misused to damage trade rivals. In an early example, threats of patent infringement were made to the customers of a steam engine manufacturer by one of its competitors. The intention was simply to drive those customers away, and it worked. Parliament intervened in 1883 and provided a remedy for the person abused. Since then, similar statutory remedies have also been introduced in respect of trademarks and registered and unregistered design rights. These “threats provisions” offer much needed protection and provide remedies to those whose commercial interests have been affected by an unjustified threat.
But time moves on and new difficulties arise. Business and IP professionals have told us that the existing provisions do not work as well as they should, partly because they are overly complex. Experts can exploit loopholes in the law, while the unwary can find themselves unintentionally caught up in litigation. In addition, the provisions have developed in a piecemeal fashion across the different IP rights. Consequently, there are plenty of inconsistencies to further muddy an already complex area of law. This is particularly problematic for small businesses, which are disproportionately affected by the cost of any legal advice they require. They are a particular concern to this Government and to me personally.
A further problem arises over who should be approached when a question of infringement arises. Not all infringers are the same. Some, such as manufacturers and importers of infringing products, do more commercial damage than others and are better placed to determine whether a threat of infringement proceedings is justified. The threats provisions must differentiate between different types of infringement. This encourages rights holders to approach the most appropriate person or business, while protecting others, such as retailers, from unfair approaches and unreasonable threats.
In 2012, against this background, we asked the Law Commission to review the existing law of unjustified threats. The Law Commission consulted extensively in 2013 and made detailed recommendations for reform in 2014 and 2015. The Bill reflects those recommendations. The provisions in the Bill are essentially the same for patents, trademarks and designs—both registered and unregistered. For each right there are five main parts which deal, first, with the test for what constitutes a threat; secondly, with which threats are actionable; thirdly, with the safe harbour of permitted communications; fourthly, with the remedies and defences; and, finally, with exemptions for professional advisers.
It may be helpful to noble Lords if I briefly set out what each of those parts aim to do. The first is the definition of a threat. There are three elements to the test, which are to be understood from the perspective of a “reasonable person” receiving a communication such as a letter or email. Would a reasonable person, knowing what the recipient knows, understand from that communication that an IP right exists, that a person intends to bring proceedings for infringement of that right, and that the alleged infringement relates to an act done—or to be done—in the UK? If the answer is yes to all three aspects, then the communication can be said to contain a threat to sue for IP infringement. The test is taken from existing case law, with one change that provides the necessary link between the threat and the UK market. It also allows the provisions to apply to the forthcoming Europe-wide unitary patent, but not to apply outside the UK.
The second part sets out which types of threats trigger the threats provisions and which do not. The provisions set out that threats may be made freely to manufacturers or importers and their equivalents and they will not trigger the provisions. This allows rights holders to approach the trade source of a potential infringement, which could cause the most commercial damage. Manufacturers and importers are likely to be able to assess whether a threat to sue is justified and, having invested in the product in question, will be more willing to challenge the threat if it is not justified. In contrast, retailers, stockists and customers are unlikely to be able to make an informed decision about whether a threat to sue is justified. They are likely to be risk averse and want to avoid being taken to court and, as a result, they will probably simply stop stocking or buying the product in question without investigating further. Clearly, this is potentially unfair and damaging to a legitimate business. For that reason, threats made to businesses and people such as these are generally not allowed. Of course a rights holder may legitimately need to speak to such businesses, so the third part of the provisions gives guidance on what can safely be said to retailers or customers, and for what purpose. It clarifies the existing law by introducing the concept of “permitted communications”.
The fourth part of the Bill sets out remedies available in the case of a successful threats claim and the defences available to a defendant—the person who made the threat. The range of remedies available will be unchanged by the Bill. Damages may be awarded for commercial damage done by the threat and the claimant may seek an injunction to stop the threats, as well as a declaration that the threats were unjustified. I should stress that the threats provisions are not intended to stop rights holders being able to protect their assets, but to prevent the unscrupulous use of unjustified threats to manipulate the marketplace and prevent fair competition. Consequently, the ability to prove that the threat was in fact justified because an infringement occurred will remain a defence. An additional defence was introduced by the 2004 patents reforms. A person making a threat to a retailer or the like would have a defence if their efforts to find the trade source of the infringing patented goods were unsuccessful. This Bill will extend that limited but useful defence to trademarks and designs. The provisions also clarify that the person making the threat must use “all reasonable steps” to find the importer or manufacturer of the product in question before they are safe to approach the retailer.
The fifth part of the Bill prevents threats claims being brought against regulated professional advisers acting on instructions from their client. Currently, liability for making threats is not limited to the rights holder; any person who issues a threat will risk a threats action being brought against them. This means that professional legal advisers, such as solicitors and registered patent or trademark attorneys, may be held personally responsible for making threats even though acting on client instructions. This disadvantages rights holders as well as the legal advisers themselves. Threats actions can be used as a tactic to disrupt relations between adviser and client and may result in advisers asking for indemnities or telling clients that they can no longer act for them. The Bill therefore provides an exemption for professional advisers in relevant situations, but the instructing client will still remain liable for making the threat.
I hope that this explanation of the Bill’s provisions has been of assistance. I very much look forward to hearing what noble Lords have to say and to taking the Bill through the special procedure before the Committee, which I have not had the pleasure of using before and to which it is very well suited. These are worthy and important reforms, which will make a real difference to UK innovators, inventors and designers. I beg to move.
Baroness Bowles of Berkhamsted (LD)
I thank the Minister for that explanation. I declare my interests in the register as a retired UK and European patent attorney and a former fellow of the Chartered Institute of Patent Attorneys. As a consequence of that interest I have experience of the issues behind this legislation, stretching back to practice under the Patents Act 1949 as well as the Trade Marks Act 1938 and others.
I am afraid that I confess to being underwhelmed by the Bill because there are missed opportunities. But the Bill is here, so I can agree with making good on the 2004 promise to align the threats provisions in other IP rights with those of patents and to add some clarity to what can be communicated, to reduce likelihood of threats actions and to allow more permitted communications. However, not enough has been done to ensure that the Civil Procedure Rules or alternative dispute resolution are followed or to ensure that a recipient understands their full position and that such procedures should be followed. This should apply to exempted threats and, where relevant, to permitted communications.
The Bill does not capture the kinds of abuses that can and do happen nor even all the loopholes mentioned in paragraph 34 of the original consultation document. The first loophole was issuing proceedings merely as a negotiating tactic; that can still be done, and done repeatedly. The second was careful drafting around threats; drafting may be easier but wider exemptions will no doubt open new loopholes. The third was threatening on related matters such as passing off—that is still available, with no need to be comprehensive about all rights—and finally, forum shopping remains, apart from any commensurate reduction with any reduction in actionable threats.
The Bill also relieves regulated legal advisers of the risk of being liable as a threatener. Paragraph 7.65 of the original consultation suggests that smaller, non-specialist lawyers are at risk even though it is also acknowledged that threats actions against lawyers are very rare. My own experience is that, although actions may be rare, aggressive threats are alive and well. And just as highly qualified advisers have a hand in other walks of life to dream up aggressive and even egregious strategies, so too have some IP specialists. Overaggressive strategies should not be exempt and I will come back to that.
There is also the issue of not having fulsome compliance with the Paris convention. I seem to recall that one of the section heading quotations in Blanco White—a popular tome for practical advice, at least when I first qualified—was:
“Agree to the resolution and say that British Law already conforms”.
The fact is that the more we have allowed exceptions from the original threats provisions, no matter how logical, the further away we are from compliance, and the tapestry of available other torts does not fill the gap, as has been elaborated in the consultation and background documents.
The current law, and the proposed revisions, continue with the presumption that a manufacturer does not need any protection against unjustified threats of proceedings for infringement, that the attitude of the rights holder is irrelevant and no good faith or belief in validity requirement applies, even though it does—or, at least, something called truth does—to the new permitted communications. Experience shows that this presumption leaves small manufacturers, and “start-ups” in particular, open to oppressive behaviour by larger entities. I will turn to some anonymised real life examples.
US corporation X threatened small British manufacturer M with proceedings for infringement of a British patent. The products made by M were within the scope of the claims of the patent. However, investigation showed that all the claims of the patent were clearly invalid in view of a document of which corporation X had demonstrably been aware for at least seven years, it having been cited in proceedings for amendment of X’s United States patent. There was no intention to litigate because of the vulnerability in the US legal position and the motive behind the threat was apparently to produce adverse publicity for M, and consequentially depression of its share price, making M cheaper for X to purchase.
Nothing in the new law would help the manufacturer M in what was a threat under an invalid patent. If aggressively repeated and publicised, the only remedy is still an action for revocation and even if successful there are merely costs and not damages. In similar situations where the patent is valid but there is not infringement, a threatened manufacturer might need instead to seek a declaration of non-infringement, which is even worse protection with merely costs and a declaration and no damages nor an injunction against future threats under the continuing patent.
SMEs cannot be going back to court asking for additional injunctions, even if that is the lesson of Apple v Samsung. In the absence of being able to claim an unjustified threat, the rights holder gets away with it. Here I point out that the purpose of legislation is not just about what happens in the small number of cases that get to court; it is about the deterrent to bad behaviour. It is about the speed limit, not just the speeding fine.
A second example: patentee A threatened small British manufacturer B with infringement proceedings. B commissioned an independent report which demonstrated beyond doubt that A’s patent was not infringed and offered to share that report with A. A refused to consider the report, but each year for four years—always just before a trade fair—A used a different lawyer to repeat the threat and publicised it. Using trade fairs in this way is a common ploy mentioned among the consultation documents. The Bill does not provide a defence for a manufacturer, so it is back to the non-infringement declaration, again with no injunction to stop future and repeated threats and publicity. In this case, A’s fourth solicitor then proceeded to threaten one of B’s distributors, C, on the alleged basis that C was an importer. Since the solicitor was already aware that the products were made by B in the UK, because of their own previous correspondence to the manufacturer and the replies, the threat to the distributor was plainly oppressive.
In subsequent correspondence the solicitor, somewhat smugly, said that a threats action was not applicable because the letter referred only to making and importation, which do not allow proceedings to be brought. That of course was simplistic, and a demonstrable ruse that it would have been interesting to see being explained to a judge. This was a circumstance when I consider it would be appropriate to pursue the solicitor in a threats action for the seemingly deliberate strategy of a deceitful letter in which they must have been complicit, and potentially the deviser. This was not a non-specialist firm.
What can we do? Other countries take the tone and circumstances into account when looking at the issue of liability. Paragraph 6.27 in the consultation says that the law in the Netherlands provides that,
“even a ‘justified’ threat may be unlawful if it is unnecessarily offensive or unnecessarily public”.
That comes from a tort which a senior Dutch colleague described to me as,
“violation of what has to be regarded as proper social conduct”.
The wording in the consultation document would be a useful addition to the Bill, not as a separate tort but as both a general requirement and one applicable to lawyers or advisers. It would enable bringing back lawyer or adviser liability for egregious behaviour without damaging the more general exemption and deal with the “copy and distribute to customers” tactic at trade fairs.
The wording could be extended for the purpose of other abuses—for example, along the lines of the Paris convention that any exempted or permitted threat becomes unlawful if it is contrary to honest practices in industrial or commercial matters; after all, that is what we are meant to comply with. Alternatively, to make a more homegrown version, one could use the tests from the Broxton abuse of process case, which refers to conduct of proceedings,
“designed to cause the defendant problems of expense, harassment, commercial prejudice”,
or for “collateral” reasons.
It is most unfortunate that the Bill only helps rights holders and does nothing for the threatened party, when a significant part of the consultation was about abuses by rights holders. However, infringing manufacturers can be sneaky too and seek a new source, or there may be a commissioning party as the economic actor. I would be interested to cover those situations by allowing wider undertakings to be sought from manufacturers that cover selling from any other unlicensed source and more generally treating those commission acts as primary actors.
I will not elaborate in detail now, but I flag up concerns over new Section 70C(3) and possible ambiguity in the burden of proof for validity, and over whether the position of notice and takedown notices under Article 14 of the electronic commerce directive should be referenced. We could greatly improve the Bill, and I hope I have whetted appetites to help all SMEs with the anti-abuse measures that I have outlined.
Lord Hope of Craighead (CB)
My Lords, I add my words of welcome for this Bill and for the use of the special procedure, which will enable detailed scrutiny to be conducted in a more appropriate setting for a Bill of this kind than on the Floor of the House. Considerable thanks are due to the Law Commission for the care it has taken in the formulation of the proposals, and to the Government for initiating the process in the first place and agreeing to take the legislation forward in this way.
By way of background, though it may be an obvious point, intellectual property is a highly specialised area of the law. The problems that it gives rise to are often complex and difficult to resolve. In the case of patents, for example, which I had some experience of in practice when I was at the Bar—though nothing like the distinguished practice that the noble Baroness, Lady Bowles of Berkhamsted, has had—I found that construing and understanding the patent specification in itself can be a time-consuming and difficult exercise. One must understand the subject matter of the patent as well. What may appear at first sight a fairly simple matter will very often turn out to be far from simple once you get down to the detail of the design or the process that is protected. Specialist advice is almost always needed both as to the law and the technology. Advice of that kind tends to be expensive because the intellectual effort required is so demanding and so time-consuming. Anyone who is drawn into legal proceedings in this area of law has to face up to that fact, and that is why threats are so compelling in this field. For the same reason, those who have taken the trouble to register their rights will usually have had to spend quite a lot of money in taking that step.
As the Minister has properly recognised, it is essential that those who go to the length of registering their patents, trademarks or design rights should be able to enforce the rights that registration gives to them. The law must allow those rights to be enforced. Those whom the law in this area regards as the primary actors—those who make things or affix signs to their goods or packaging, for example—must accept that there may be others who do such things who have taken steps to protect themselves against infringement of their rights and have a legitimate commercial interest in doing so. They must take the risk of proceedings against them if they do not do their homework first to see whether there are any relevant intellectual property rights that must be respected. Registration is designed to give notice to those who need to know, because they are primary actors, that these rights exist. In that respect, as I understand it, the system across all these IP rights works well.
But—and this is the area we are really concerned with here—there are others, as the noble Baroness has explained, whom the overzealous or unscrupulous may see as competitors, and they are not in that category. These are the secondary actors, whom the law has long sought to protect against misuse of the right that has been protected. The noble and learned Lord, Lord Mackay of Clashfern, told me yesterday about a case which he had when he was at the Bar in which his client was unashamedly seeking to drive his competitors out of the market by making threats of infringement proceedings against them. The competitors were simply using, not making, equipment of the same kind—it happened to be cranes—as that over which his client had a patent. He told me that his client was one of those people who would not take no for an answer—I suspect that the noble and learned Lord was the person saying no—and he was not to be put off what he was doing. As the impact assessment for this Bill puts it, people such as users, retailers, wholesalers and customers ought not to be and, under the law as far as it is, cannot legitimately be threatened with proceedings of this kind. I think that the noble and learned Lord was rather relieved when at the end of the day the overzealous patentee, when taken to court under the previous legislation—that is before the 1977 Act—lost his case. Situations of this kind are not confined to that one experience. They are, as has been explained, not uncommon, and that is what this Bill is all about.
Two questions need to be answered at this stage. The first is whether the protection provided by the existing law is sufficient and proper and needs to be reformed at all. The second is whether the reform proposed here is the right kind of reform. As to the first, it seems that there are ample grounds for believing that reform is needed. I do not think that the noble Baroness, Lady Bowles, disputed that point. Section 60 of the Patents Act 1977, which Clause 1 of the Bill will replace in relation to patents, looks relatively simple and satisfactory at first sight. However, we will have to see how it works in practice. The provisions in this Bill are longer and more elaborate. One might wonder whether it was wise to depart from the simple approach. However, the present approach in the statute suffers from major defects, among which are a failure to distinguish clearly between those threats that may be made legitimately and those that may not. The defences which may be advanced if proceedings are taken need to be clarified. The existing law fails to set out clearly what communications will not amount to an unjustified threat and, as has been pointed out, says nothing either about the position of professional advisers acting on the instructions of someone else. The result is a situation that, despite its apparent simplicity, has been shown to be unduly complex as the boundaries between what is permissible and what is not are unclear, resulting in unnecessary costs.
As the Minister explained, the arguments for reform were fully explored by the Law Commission in an impressive series of studies in its report of April 2014 in the light of the responses received to its consultation paper of the previous year, and in its further report of October 2015 in response to the Government’s request for a draft Bill. For my own part, I think that the arguments advanced for reform are compelling, and it seems to me that a strong case has been made out. I was particularly struck by an observation by the Scottish Law Commission in the course of its examination of the same issue. It made the point that a Scottish rights holder may prefer to issue proceedings for infringement in Scotland against a potential infringer rather than simply write a letter because it risks ending up in the High Court in London, which is the last place that a Scots infringer would wish to be taken, facing an action for groundless threats. This is the “sue first, write later” culture which seems to exist under the present law and which the Bill seeks as far as possible to eliminate. As the Law Commission put it in its October 2015 report, the current law tends to drive cases to court.
As for the question of whether this is the right reform, the Law Commission acknowledged in its report of October last year that one of those who responded to its consultation paper, Professor Sir Robin Jacob, a former judge with much experience in this field, said that the solution which had been adopted here was not the right solution and that it should be scrapped. The paper does not elaborate in great detail on Sir Robin’s points but it looks from what we are told that his complaint was that the Bill is excessively elaborate and complicated—I do not think he was making quite the same points as the noble Baroness has made—and that there is no hurry and therefore one should take more time to devise a more satisfactory reform. However, so far as the people who responded to the Law Commission are concerned, he seemed to be out on his own. Those who have taken a different view include a variety of professional bodies, including the Law Society of England and Wales, the intellectual working party of that society and the City of London Law Society Intellectual Property Law Committee. They also include the Law Society of Scotland, which in a communication I received earlier this week said that it welcomes and is supportive of the Bill.
It looks as though there was a clear choice whether to create an entirely new remedy to deal with the problem, such as something based on tort, or to build on the existing structure instead. The advantage of the latter, which was chosen, is that it makes use of a system with which those who work in this field are fairly familiar. That seems to be an advantage. The defects in the system are known, have been identified and can be addressed now without the need for further research and consultation, which a redesign would certainly need. Yes, Sir Robin is right, the Bill’s provisions are more elaborate and complicated than the legislation that exists at present but that is the price that has to be paid for clarification. If a more fundamental solution is needed, it can wait until later.
Detailed scrutiny is for the next stage, of course, but I will mention one point in passing, which I simply picked up when comparing the draft Bill, which the Law Commission set out in appendix C to its October 2015 report, and the Bill before us. The Bill before us is almost exactly the same as what was drafted by the Law Commission. There seem to be only two differences apart from a change to the headnote of Clause 3. One is the very proper addition to Clause 1 of provisions to ensure that protection against unjustified threats will be available in the unified patent court—which I think will become a reality next year—as well as in the UK courts. That does not require any explanation other than that one might observe that issues of infringement and the validity of a unitary patent, which might be raised by a defence of justification by a patentee to a threats action, will be in the exclusive jurisdiction of that court and cannot be brought to the UK court.
The other point that struck me as requiring some explanation is the omission in regard to each kind of intellectual property of the provision in the Law Commission’s draft. It seems designed to clarify what is meant by the references in those clauses to infringement in relation to proceedings for an order for delivery up or disposal. It may be that, on further consideration, clarification was thought not to be necessary. If that is so, then that is a perfectly good explanation. I am not searching for an answer now but, if one is available, I would be interested to know why that bit was taken out.
On the issues of principle, I fully support this Bill. I believe it to be uncontroversial, on the whole, and I agree that it should receive a Second Reading in the terms of the Motion.
Lord Hodgson of Astley Abbotts (Con)
My Lords, I am a lay man. As a lay man, seeing this rather daunting title, and glancing through the Explanatory Notes and the Law Commission’s background paper—number 360—underlines the technical nature of much of what is proposed. Furthermore, I see that my fellow speakers include two distinguished noble and learned Lords and, now I understand, an equally distinguished retired patent attorney who has made a very incisive speech. I have the sense that the ice may crack beneath my feet at any moment, but I want to persevere because the safeguarding of the proper use of intellectual property provides an important element in the future prosperity of this country. In doing this, I pray in aid my career in helping, advising and financing small and medium-sized enterprises.
Before I go any further, I will briefly divert to add to the remarks of the noble and learned Lord, Lord Hope, and give a word of thanks to the Law Commission for its work. I had the pleasure of working with the commission quite a lot, following the review I carried out for the Government on the Charities Act. A further Law Commission Bill is on the stocks, updating some of the more technical aspects of charity law. I will not say that I always agree with all of the Commission’s conclusions, as that would be going too far. However, one cannot but admire the intellectual rigour with which it takes issues apart, and it often does so in a way that brings clarity to pretty dense topics. The Bill before us today is no exception.
One of my regrets is that a lot of the Commission’s excellent work is dissipated because Bills get stuck somewhere at an early stage of drafting. Since we are discussing a Law Commission Bill, I wonder if, in due course, my noble friend could write to the noble Lords who participated in the debate today to give us all a progress report into where the various Law Commission Bills are—whether they are in draft form or still in consultation. I know, for example, that there is an extremely important consultation finishing on electoral law, which is an area of considerable interest. It would be good to know where the Government have got to in their thinking on the various proposals before the Law Commission so that the terrific work in what it does is not wasted because time passes.
I turn to the Bill itself and its policy background. My noble friend on the Front Bench will have heard me on this issue before, but whatever the outcome of the referendum, for the next quarter or half a century this country will have to watch an irreversible shift of relative wealth from the West to the East. One way to mitigate the impact of this trend will be for us to be smarter and more innovative—not just to make the discovery but above all to develop and exploit it successfully. A vital part of that process will be an appropriate legal framework for intellectual property.
Noble Lords may be aware of the new use of the name “unicorns”. A unicorn in modern financial speak is a start-up company now valued at more than $1 billion. Last year, 11 unicorns were created in Europe—over half of them in the UK. Before we become complacent, I should say that the US created 22 unicorns in the same period. These larger early-stage companies represent competitive threats to many established players, who can react violently to the threat. This is where I am interested in exploring how the Bill could be of assistance.
Not just unicorns need protection and support; in many ways they are reasonably resourced to deal with the litigious, the unruly or the obsessive. Small and medium-sized companies are more vulnerable to unreasonable behaviour. In part this is because they may lack access to expert legal advice—not for them the expertise and the associated invoice of the magic circle firms. I am pleased to see that in paragraphs 1.32 and 1.42 the Law Commission placed special stress on the importance of and the vulnerability of small business rights holders. It will therefore be important in due course to publicise these new provisions—of course through legal channels so that smaller firms of solicitors away from London can advise their clients in confidence, but also through trade bodies, chambers of commerce, and so on.
For example, if the safe harbour protection afforded by the “reasonably regarded” test—an important development, as I read it—is to have a real commercial effect, it will need a commercial interpretation and approach as well as a legal one. Matters which seem so open and shut in the calm deliberation of a court-room, often with the added advantage of several years of hindsight, do not always seem so clear in the hurly-burly and time pressures of day-to-day commercial life.
Just in passing, on the power of the court to add to the list of permitted purposes in proposed new Section 70B(2), is this a normal conventional power? It seems to be a legal Henry VIII power, but I may be wrong, and no doubt I shall be put firmly in my place shortly. I rang a solicitor to ask him and he told me that he had not come across it anywhere else, but I will be interested to hear what my noble friend has to say about that.
I will follow the noble Baroness, Lady Bowles of Berkhamsted, on forum shopping. I have an interest in extradition—I am a trustee of Fair Trials International—and in extradition cases there have been attempts by one side or the other to manoeuvre the case into the courts seen as most likely to reach a favourable answer. This issue is addressed in 3.12 of the Law Commission paper, but could it happen in IP cases under the provisions of the Bill? As I read it, I think not, but perhaps my noble friend will give some further clarity in due course.
Sadly, however, the Bill does not—perhaps cannot—address one of the major causes of inequity in IP cases: the time it can take to get cases to court and to a decision. It is not so much the time it can take as the ability of one side, particularly a large company, to obfuscate and delay so that the smaller company runs out of cash and/or energy to prosecute or defend its case. The Law Commission is clearly aware of this, because it says at paragraph 1.19:
“Sometimes, the risk of facing costly litigation may prevent a small enterprise from asserting its intellectual property rights where these have been infringed by a larger competitor with greater resources”.
That addresses the issue of money but not the issue of time passing and its associated costs—not just financial but, for a small company, the diversion of inevitably scarce senior management time and expertise.
The noble and learned Lord, Lord Hope of Craighead, referred to the issue of the approach that has been taken in drafting the Bill. I find it slightly strange that, at paragraph 4.4, the Law Commission reached the conclusion that a,
“standalone measure could easily go unnoticed by this group”,
and instead decided in its drafting to amend three existing Acts of Parliament. I would have thought that a stand-alone provision was less likely to be overlooked than amendments to existing pieces of legislation, but I leave that to more experienced and wiser heads than mine.
I conclude with a sad, real-life example of why this Bill is necessary but also why I fear it cannot provide a complete answer. A company with which I was involved developed a new chiller cabinet, familiar to Members of your Lordships’ House from every supermarket and grocery store. Imagine the company’s delight when a major supermarket chain bought six of the new models. Imagine its dismay when, a few months later, a whistleblower who had left the supermarket on bad terms revealed that the six chiller cabinets had not been purchased to be used, but to be taken to pieces and re-engineered to get round the IP and the patent. It proved exceptionally difficult for the smaller company to discover what was going on. The supermarket chain was not intending to sell any of the new-style cabinets, merely to use them internally.
In due course, enough evidence was found to build a case against the larger company. It naturally denied any patent infringement. More importantly, it took the opportunity to tell the smaller company that its legal advice was that, given the time needed to obtain technical advice and so forth, it would take at least two years for this case to get to court and that, before it started, it should be prepared to allow for that time lapse and build it into its cash flow. In a “just so you know” add-on—the chilling phrase used in the box on page 10 of the papers before us—the supermarket gave the smaller firm notice through its solicitors that it would inevitably wish to consider launching a counter-claim to protect its position.
There is only one winner is such circumstances. If the provisions of this Bill can do anything to reduce the inequality of arms in these sorts of cases, it will be well worth while. I therefore very much support it.
Lord Brown of Eaton-under-Heywood (CB)
My Lords, it was with some considerable diffidence that yesterday I put my name down to speak in this Second Reading debate. I would not have done so had not my noble and learned friend Lord Walker of Gestingthorpe been tied up as chairman of the HS2 Bill Committee and unable to take part today. He is a great expert in this field, and I certainly am not. Realistically, I am virtually as much of a layman as the noble Lord, Lord Hodgson, who has just spoken.
As it happens, my only direct experience in this particular area of the law was sitting with my noble and learned Friend, Lord Walker of Gestingthorpe—Lord Justice Robert Walker, as he then was—in the Court of Appeal in 1999 in a reported case called Unilever v Procter & Gamble, which concerned more particularly the interrelationship between the jurisprudence on intellectual property threats and the without prejudice rule. My noble and learned friend Lord Walker gave the lead judgment, while I gave an altogether shorter concurring judgment, which I began thus:
“Coming as a stranger to this arcane world of patent infringement threats actions, I am struck by the initial difficulty in understanding just what is the policy underlying section 70 of the Patents Act 1977”.
I then turned to examine some of the preceding and subsequent law, continuing:
“I must say that I find the position today”—
this of course was 1999—
“most curious and unsatisfactory. Although, essentially, I take the policy to be … that rival manufacturers may threaten each other but should not threaten each other’s customers with the objective of inducing them to cease dealing with their rivals … it cannot be pretended that the legislation is this narrowly confined”.
In that context, I then referred to the Cavity Trays case, which is one of those discussed in the Law Commission’s 2015 report and which, in 2004, led to an earlier change in our law.
However, as recorded in paragraph 1.23 of the Law Commission’s report, that change has not yet been extended—as it certainly seems to need to be—from patent law to the law of trademark and design. I confess at once that in truth I remain a stranger in this arcane world of unjustified threats in intellectual property cases, but I read the Law Commission’s report with considerable interest and no little admiration. It has certainly persuaded me that changes in the law are now required and that the Law Commission’s own proposed Bill is indeed the right way of seeking to achieve these changes and reforming this undoubtedly problematic area of our law.
I do not intend at this stage to comment in detail on the present problems and their proposed solution. I recognise of course, as another noble Lord did, that Professor Sir Robin Jacob—another great expert in intellectual property law, with whom, again, I used to sit in the Court of Appeal—fundamentally opposes the evolutionary model of reform which is now advanced. One only has to look at paragraphs 1.44 to 1.48 of the report to see his quarrel with that. However, I find the Law Commission’s response to this view, which is backed by the great majority of consultees, to be convincing. By all means let further work be done hereafter on the possibility of substituting for the existing, somewhat elaborate and complicated statutory scheme a new general tort of false allegations. But in the meantime let us deal with the identified, specific problems, which require an altogether more immediate solution.
I am struck not only by the quality and cogency of the report but by paragraphs 4.8 and 4.9, under the heading, “Stakeholder comments on the Bill”. They indicate that it commands the substantial support of a host of experts, including not least two Lord Justices—both specialists in this field—a High Court patent judge, others to whom the noble and learned Lord, Lord Hope, referred, the Law Society, the IP committee, the Chartered Institute of Patent Attorneys, the Intellectual Property Office and of course in Scotland that most distinguished academic, Professor Hector MacQueen of the Scottish Law Commission.
Above all, I make the point that, as we all know, this is a Law Commission Bill and as such I suggest that it deserves to be supported unless compelling arguments are raised against it. We often complain—in my view, rightly—that generally speaking there is not enough pre-legislative scrutiny in our parliamentary process. But Law Commission Bills par excellence have manifestly enjoyed pre-legislative scrutiny. Plainly, there has been here an exhaustive process of progressive consultation and analysis. The Law Commission itself is an admirable body which I strongly support. Only the very best lawyers serve upon it and presently they serve under the expert guidance and chairmanship of that most estimable member of the Court of Appeal, Lord Justice Bean. I echo what my noble and learned friend Lord Hope of Craighead and, indeed, the noble Lord, Lord Hodgson, have just said about this topic generally and Law Commission Bills. With them, I welcome the Government’s response to this report.
I, too, therefore wish the Bill a smooth and swift passage, with or without the sort of tweaking which the noble Baroness, Lady Bowles, suggests. I support the Motion to give it a Second Reading.
Lord Lucas (Con)
My Lords, I am not going to differ from anyone who has spoken before in welcoming this Bill. It seeks to deal with an acknowledged mischief of unjustified threats and, to my mind, follows related improvements that we made to the law of defamation a couple of years ago. I hope—as I think the noble Baroness, Lady Bowles, does—that this is a direction in which the Government will continue. There are clearly other opportunities for improving our national life in this direction. It is therefore a puzzle to me that the Government appear to be going in the opposite direction on copyright.
The repeal of Section 52 of the Copyright, Designs and Patents Act 1988 opens up any and every photographer and reproducer of photographs of interior or exterior views to threats of legal action from the copyright holders of any designed object depicted in those photographs. All the defences that exist now are to be swept away. There was no need for the Government to do this. There is nothing in the underlying EU legislation or court judgments that requires this. It appears to have been done for ease and tidiness. However, we will find ourselves in a position where if you publish a photograph of a London street scene, you will be actionably infringing the rights of the manufacturers of cars, clothes, traffic lights, lamp-posts—anything designed that can be identified in them, except for sculptures, which alone are exempted under Section 62. The threat applies to historic images, too, so any reproduction of any image taken some while ago is actionable in the same way. Because we do not have in this country an artistic merit restriction on copyright, the ability to take action does not apply just to the designers of an object but to anyone making a design drawing preliminary to the object. Do the Government really believe that in a world flowing with lawyers and collection societies no one will buy up the rights of some former designer of everyday objects, say Douglas Scott who designed the Routemaster bus, and start suing anyone who depicts them? The world is sadly full of people who like to play a junior version of the game that this Bill addresses.
A few years ago, I had a small role in the demise of ACS Solicitors, which were thankfully sacked by the Law Society after some long delays. They were shaking down internet users for allegedly infringing copyright on pornography and other low-grade media. Their evidence was extremely suspect but was never tested in court. ACS made its money from the threats and never took anyone to court, although it used the courts to target its victims via Norwich Pharmacal orders. Now some careless person has dropped blood on to the ashes of ACS and the same scam is alive again with the same thin evidence. The relevant body has an IP address. It has not revealed how it got it. But, given that IP address, it is going through the same old pharmacal procedure, but this time, to avoid the vulnerability that ACS experienced, the solicitor involved—Wagner & Co—withdraws after obtaining the Norwich Pharmacal order, so it is not involved in the threat processes, which are undertaken by shell companies. There does not seem to be any redress for people threatened or for ISPs which are asked to comply with Norwich Pharmacal orders.
If anybody comes across the names of Hatton and Berkeley, Ranger Bay, Golden Eye International, Mircom International, TCYK—all of them well known in the correspondence about what is going on—I urge them to put this thing in the bin. The current scammers are not pursuing anyone: they are just after threats and extortion and shaking people down. If you really feel you need to talk to a solicitor, there is a firm called Lawdit which has hundreds of these cases on its books and is consolidating them.
I applaud the Government for helping our businesses avoid unjustified threats but I would like to know what they intend to do to help the granny in the Clapham nursing home who is being threatened by their smaller, nastier cousins with allegations that she has been downloading pornography illegally. Surely it is not acceptable to the Government that that should continue. These villains are laughing at and abusing the system, just as ACS did until it was closed down, just as the people that the Bill addresses are doing. Could we not, for instance, allow citizens and those acting for them to send a sue or desist letter and then make any further threats short of action liable to penalty, as is done in the Bill? Would that not be a good right for citizens who are being threatened in any circumstances? Also, what do the Government intend to do to mitigate the mischiefs that they are unleashing by the abolition of Section 52? Could they not, for instance, extend the protection given to sculpture in Section 62 to all objects incidental to a 2D or virtual production? That would be very similar to the protection which exists at present.
The Bill shows an admirable intention to protect businesses and citizens from the parasites who live by making unjustified threats against them and from those who seek to use very important and well-meaning legislation, intended to protect those who create in this economy, to unjustified advantage. I hope that the Government will look at their own actions and at what is happening at a lower level and consider going further than they have in the Bill.
Baroness Wilcox (Con)
My Lords, I am delighted today to be speaking under the guidance of my Minister here: after all, she has had experience of large companies and food companies, mine being a tiny one and hers being a very large one. She was a very senior civil servant when I first worked with her. She was working in No. 10 and we were trying to sort out how to write complaints systems for all sorts of other businesses. It is very nice to be talking with a Minister who knows what it is to be a Minister, to be a civil servant and to work in business. I feel that I will be very well led by her on this.
I have also had experience of large companies and trademarks. My own company was getting ready to put together a whole new range of foods. We had had our own experience of trademark registration: we had just started doing this registration when suddenly, one day, I got a telephone call from a very large company saying that it thought I had made a mistake, that I was attempting to put something through, that it had not gone through and that I should stand back, because this company had gone ahead and decided on its new product. It had got all the paperwork, packaging and everything done. I was very fortunate to be able to phone the civil servants who had been guiding me that far and who had told me that, once I had started to make this registration for what was then a trademark, I was safe and that I should tell them to go somewhere else. The answer was, “Oh dear, we have made a terrible mistake. We would like to give you lots of money to not go forward with what you are doing”. As it happened, we had not even started properly and were looking to build a new factory. The outcome was that the company paid us enough money to build it. I encourage any small company that gets threatened by anybody else to immediately assume that it is in the right and not, as most small companies do, automatically assume that it might have got it wrong.
I will move forward to other people who have spoken. My noble friend Lord Hodgson talked about unicorns—the larger, earlier-stage companies—and I was very interested in what he had to say. The Law Commission emphasises how vulnerable SMEs are, and I am only too delighted to support this here today. I will not say much more, as there will be plenty of other times for us to do that as we go forward, but I will just say thank you very much indeed for bringing forward something which is going to be such a help to small and medium-sized businesses. Whether we vote to stay in or vote to stay out, our patents are our patents.
Lord Stevenson of Balmacara (Lab)
My Lords, unlike the noble Lord sitting on my left who admitted he got into this with only 24 hours’ notice, or slightly more, I have seen this coming for some time. However, that did not help ease my nerves or concerns, particularly when I saw the notable list of those who are speaking, including—I am able to say this for the first time—my noble kinsman, the noble and learned Lord, Lord Hope. It is a very distant relationship but it is very nice to be able to say that. The noble Baroness, Lady Bowles, speaks from detailed experience, and my nerves did not settle as I listened to the debate. However, fortune favours the brave and we must make progress on this important issue before us. I want to make it absolutely clear from the start that Her Majesty’s Opposition do not wish to oppose the Bill in any sense, although we might wish to see it improved. My main point will be that there is a wider context, and I hope some of the points that have been made today might be brought forward, in particular as we have evidence sessions—a point I will come back to.
I thank the Minister for her very good introduction to the Bill, which covered all the ground needed to get us into the debate. I also thank her for the helpful pre-meeting which we had with the Law Commission and the official Bill team, which certainly helped to set us up for this. As the Minister said, we are in a relatively new process, which is being used for only the second time here. As I have already hinted, the key to the way forward on this—because it does not apply to many Bills that we see in your Lordships’ House—is that we will have an opportunity to ask for evidence to be presented to us before we get into the detailed scrutiny. Given that we are not opposing the Bill, my points today will therefore be largely about suggesting areas where we might receive some additional information which will help us as we move forward.
The first point is one that has been picked up in a couple of speeches today, and appears every time we have an intellectual property Bill in your Lordships’ House. It may be that we do not have enough intellectual property Bills, which therefore feeds this desire for a wider and broader discussion—I can see the Minister quailing slightly at that, but I think that is broadly a good thing. After all, she started her work in this House with a robust defence of an issue, I think with the Enterprise and Regulatory Reform Bill—I forget, as it was two years ago when she first joined us. That was a bit of a baptism of fire, but she survived that and is now able to bring Bills before us with great confidence and skill.
However, I do not think we have ever really had the chance to debate the assertion made in some of the documents we have seen today, which I think was picked up by the noble Lord, Lord Hodgson, in his remarks. The reason for having an IP regime is precisely because it encourages a flow of wealth, employment and rewards based on the ability of those who have innovation at the heart of their work to develop that and bring to the market material, objects and things that can be sold for reward.
I wonder whether the links between the incentive needed to encourage innovation and the rewards are slightly out of sync, particularly looking across the range of rights. The design right regime is still being changed slightly. Today we are mostly talking about registered design rather than the huge amount of unregistered designs, which I believe are orphans in our discussions about IP rights. Patents and copyright are moving in slightly different directions, particularly in relation to the timescale in the licensing arrangements following the granting of such rights, and the way in which competition can be encouraged. This is not the occasion to do this but, as a context for the debates we are having today, it would be interesting to get a broader discussion. Maybe the evidence sessions could do that.
My second point was raised by the noble Baroness, Lady Bowles. It is an important point and I hope that we do not lose it. At a time when, as a country—or perhaps more in terms of the broader thrust of consumer rights—we are moving to an alternative dispute resolution system, it seems a little strange that we do not see much of that in the Bill. I therefore wonder whether it would be interesting to get more context for how Civil Procedure Rules and the rest would apply if there was a more vigorous and appropriate ADR system. I think that would be a helpful and useful part of what we are doing.
We owe a great debt of gratitude to the Law Commission for its work on this. I have read right through its reports and appreciate the considerable amount of work that was involved in getting us to this stage. The main reason for changing the law is that the present arrangements are complex and inconsistent. We are responding to that, and the Bill clearly takes a line on this, which the Law Commission calls “an evolutionary approach”. Part of its argument for that approach is that there is less cost and uncertainty, which is a point that I think was picked up by the noble Lord, Lord Hodgson. I agree with that in the sense that it is a sensible path through and we can do it. However, as we have heard—a number of noble Lords mentioned this—there is another much more radical approach that would bring the UK into line with how threats are dealt with in mainland Europe. As we heard, most countries deal with groundless or unfair threats as an aspect of the general law on competition, in particular by producing a tort which would reflect that. Where there is a specific tort, this brings us back to the Paris Convention for the Protection of Industrial Property, where signatory states are required to offer effective protection against unfair competition and specific acts are prohibited. It also goes much wider in relation to false allegations in the course of trade and some of the points that we have heard about needing to bring back a sense of the proprieties of business practice, which seem to have come a bit detached from the rather technical approach that we are taking in this Bill. Therefore, I would like to hear evidence in Committee around where this debate might go. Assuming it goes through in broadly the same form in which it is before us, is there a horizon that we can look to over which will come a cavalry charge bringing in the new tort that might bring a broader and better solution to the issues we face today?
Fourthly in my list is the question of client and professional adviser relationships, which has been touched on, in particular in the comments by the retired judge, Sir Robin Jacob, who thought that this was a rather bad idea. I think his words were that there were too many cowboys out there. He would argue that the provision that is now in the Bill appears to be in response to special pleading by solicitors to avoid liability and get more work while writing more letters to scare SMEs. That may be an extreme position. Indeed, the number of responses has already been quoted in respect of the general support that there appears to be for the Bill as presently drafted. However, it seems to me that, by taking a step down this route, the Government may be attacking the whole basic common-law position on the liability of agents acting on the instructions of their principals. We should perhaps hear a bit more about this before we take this step because, once it has happened here, it may have an impact somewhere else. Why is it, for example, that we are choosing to cover US lawyers and others, not those based in the UK, on this matter? Are there not other ways in which those who might be threatened by this could take cover within either their own professional organisations or through insurance? I do not have any expertise in this area at all but I have received representations on it, and we should have a bit more understanding before we go into it.
That is an agenda for how Committee might be prefaced by an information stage. This is a small and important Bill, which we can get through relatively quickly, but the processes and procedures are important. It should be borne in mind that when embarking on this process, we in your Lordships’ House are largely taking the responsibility for ensuring that the material that goes forward to the other place has been properly looked at and explored, and obviously we need to have the sort of scrutiny that would give credence to that approach. But having said that, I am happy to support the Bill, and I wish it well.
Baroness Neville-Rolfe
My Lords, I am very glad to hear such a welcome for the provisions in the Bill. It is based on careful and detailed recommendations from the Law Commission, which worked very closely with stakeholders to develop the proposed approach and the Bill itself. However, as I said in my opening remarks, this is a very complex area—“highly specialised”, in words of the noble and learned Lord, Lord Hope of Craighead. I therefore welcome the expertise in the Room and the experts we have in this discussion. That will be helpful when we come to Committee. I am especially grateful to the noble Baroness, Lady Bowles of Berkhamsted, for bringing her enormous experience to this area and for illustrating her comments with telling examples, which I am sure we will come back to when we come to the next stage of proceedings.
I also agree with the noble and learned Lord, Lord Hope, and my noble friend Lord Hodgson of Astley Abbotts, that we should thank and congratulate the Law Commission for and on its work. The debate shows what tough and specialist judgments it has to make all the time in the work it does. I agree with the noble and learned Lord that the Law Commission gives us ample reasons for supporting this reform—it seems to be of the right kind. I am obviously very aware of Sir Robin Jacob’s views, which do not, as he said, tally with those of most stakeholders, and I was glad to hear from the noble and learned Lord, Lord Brown of Eaton-under-Heywood, and was pleased that he was struck by the quality of the Law Commission report. I also take this opportunity to thank my noble friend Lord Hodgson for the work he has done with the Law Commission, which I know it values. On his comments on the dissemination of better information on the Law Commission’s wider work, we will see how we can progress that, and if it would be helpful I will write to noble Lords.
Lord Hodgson of Astley Abbotts
It is not so much the dissemination of the Law Commission’s work but the question of where the individual reports have got to. It is not that nobody knows it is happening—its electoral law report is excellent—but it needs to be followed through, and if it is not, we need to be told why. Frankly, asking about this was a way to put pressure on the Government to make sure that this very good work is not dissipated. I understand that what the commission does may not always be acceptable—that is fine—but let us make sure that we either bring it forward and use it or kill it off and say that we do not want it. That is why I hope that the Minister will be able to tell us—not now; I quite understood that she could not do that, but perhaps she could write to those of us who have interests in this—the situation with regard to the tremendous work that the Law Commission has been doing on individual projects, not just this one.
Baroness Neville-Rolfe
I think I have already said I will write. In his inimitable way, my noble friend has pressed me on details. I am delighted to say that I will look into his points and write.
We can encourage the Government to do more to take up the Law Commission’s good work and progress it into Bills, if this Bill has a smooth passage. We need to resist the temptation to make it too much of a Christmas tree. I think that others have said the same thing. As the noble and learned Lord, Lord Brown, said, the Law Commission is a model of pre-legislative scrutiny, and we obviously should have proper regard to that.
As noble Lords have said, getting the IP framework right is key to supporting business, especially small business, entrepreneurs and the economy and society. I was so glad to hear from my noble friend Lady Wilcox from her own experience of pressing ahead and having success in defending her own inventions—a role model, if I might say.
We also need to prevent the misuse of threats to sue for IP infringement as a way to distort competition, so getting the IP threats provisions right is important for supporting our creators, innovators and businesses large and small.
The noble Baroness, Lady Bowles, had a number of questions on the Bill which I will seek to address. I suppose there is a flavour of being underwhelmed. I would say that the Law Commission made 18 detailed recommendations across the whole area to tackle the problems that stakeholders had identified. The Government have accepted all these recommendations, and so have brought forward changes across the whole scope of the Law Commission’s work. I think the noble Baroness felt that there might have been a missed opportunity to change the Civil Procedure Rules. The Law Commission has at all times been mindful of fitting the new provisions into the framework of negotiation and settlement set out in the Civil Procedure Rules. That was a good point to make.
The noble Baroness also asked about compliance with the Paris convention, which I am sure we shall hear some more about. This was a complex point which the Law Commission discussed in its report. However, I do not accept that the Law Commission would, after its careful work, put forward reforms which were somehow non-compliant with international obligations. That is not the case.
The noble Baroness and the noble Lord, Lord Stevenson, looked forward to a more dramatic reform—a new tort. Of course, the Law Commission’s wide public consultation received responses from lots of different stakeholders. It ranged from rights holders and industry bodies to IP professionals and members of the judiciary, and explored the possibility of a wider new tort. But it has to be said that, by a large majority, the consultees—not just the legal stakeholders who you might expect but also organisations like the BBC and Qualcomm—preferred the model which this Bill will implement. Furthermore, as has been said, the introduction of the long-awaited Unitary Patent and Unified Patent Court means that change is needed. I think that makes it more urgent. Without question, protection against unjustified threats should apply to unitary patents. However, that is not going to be possible under the existing framework that we have. If we do not make the reforms that we are proposing today, we will, I fear, leave a loophole which might allow threats to be made freely regarding the unitary patent infringement.
As the noble Lord, Lord Stevenson, said, there are some wider issues here. I am keen to keep on the straight and narrow to progress this Bill but I am sure that there will be wider debates on these subjects here and, indeed, on other occasions.
The noble Baroness, Lady Bowles, also said that the Bill did nothing for threatened parties. Our businesses tell us that the problem is not that the existing threats provisions are too weak but that they are unclear, inconsistent and do not allow proper pre-litigation talks. Therefore, the measures in this Bill make it easier for all parties involved in a dispute over IP infringement to negotiate a settlement and avoid litigation. They provide a much clearer framework within which innovative businesses and third parties can operate, giving more certainty over what approaches can be made legitimately to potential infringers. I was especially interested in her US example because, in about 10 years of being head of legal affairs at a major retailer, the only time I experienced disturbing threats from an attorney was when I was engaged in an antitrust case in the United States. You cannot believe—or perhaps you can—the aggressive nature of the call I took, not that it changed my position. The noble Baroness also said that under the legal adviser exemption you should still be able to pursue extreme or abusive behaviour. I understand her sentiment, but malpractice will remain an issue for professional regulatory bodies. The exemption applies to regulated professionals. Lawyers who go beyond their instructions will still be personally liable, so I am not convinced that a complex exception to the new legal adviser exemption is right.
I should take this opportunity to respond to the point that the noble Lord, Lord Stevenson, made at the end of his contribution when he questioned whether there was a case for an exemption for legal advisers. There are two problems. One is that suing the adviser is used simply as a tactic to play games and disrupt negotiations. That also means that the clients have to indemnify their legal adviser to cover any damages or legal costs that the adviser may face when pursuing potential infringement, which means that the client ends up paying, rather than the adviser. Industry figures say that this is a worry for small businesses and makes them reluctant to tackle alleged infringers which, as we know from my noble friend’s experience, is right for them to do. The new exemption deals with this and will therefore benefit rights holders as well as professional advisers. It exempts only advisers who are acting on their clients’ instructions in a professional capacity and are regulated in the provision of the services they provide. Where the adviser is exempt the instructing client will remain liable for making the threat, as they are now. Therefore, as we see it, no loophole is created.
The noble Baroness, Lady Bowles, also said that she felt the remedies were not sufficient. I was interested to hear her remarks, but I do not believe that there was evidence in the Law Commission’s extensive consultation —the working group discussions—for extending the remedies, which we believe are effective, clear and well understood.
My noble friend Lord Hodgson, in a wide-ranging intervention, reminded us of the problem of Henry VIII powers and asked about the situation in the Bill. Stakeholders were keen that law on permitted purposes could evolve, so it is not a wide power. The courts must have regard to the exemptions that already exist, and the Bill sets out limits regarding what may not be a “permitted purpose”. He was also concerned that it addresses bullying of small firms by big business and the provisions provide a much clearer framework within which businesses and third parties can operate. We believe that this clarity helps SMEs to navigate the law. Less complicated provisions also mean that less complicated legal advice is required, so there is a proportionately bigger saving for SMEs. The new provisions are clear that the rights holders must be sure that the right is valid before making threats. They cannot just bully people, and the threats provisions exist to ensure that threats of infringement action are not misused. ADR was also mentioned by a couple of noble Lords, and I am sure that people will want to understand the context with regard to ADR at the next stage.
I was glad that my noble friend Lord Lucas joined the discussion today. He added the issue of copyright to our debate, and I am very grateful to him for sharing his own experience in such detail. It is of course outside the scope of the Bill, but it might be helpful if I make a few observations. We needed to repeal Section 52 of the CDPA to give the full term of copyright to artistic works, whether industrially manufactured or created as one-offs, and to meet legal obligations, which have been made very clear. Guidance has been published for effective businesses and this is a living document, which we can refine to explain terms such as works of artistic craftsmanship, as the need arises.
We cannot speculate as to what individual companies will do in terms of threats of legal action, but I do not agree that all defences have been swept away by this appeal, as he perhaps suggested. A range of copyright exceptions still apply—indeed they were the subject that we debated on my first day as Minister. Photographers can rely on Section 62 if their work of artistic craftsmanship is in a public place, so that is not restricted to sculptures. It is also not the case that a photograph of a painting of a street scene will now infringe the rights of creators in all cases bar sculptures.
We have put transitional provisions in place for those who had pre-existing contracts, so they have a little more time to adjust, but I am of course happy to provide further clarification if my noble friend would find that helpful.
My noble friend asked what we are doing about aggressive invoicing. I am aware that there are some firms of solicitors who are still in the habit of contacting alleged copyright infringers with a financial offer to settle out of court. We must remember that when carried out properly this approach is legal. The Solicitors Regulation Authority has shown itself able to act effectively where firms repeatedly step over the line and we support their efforts in that regard. The IPO has published guidance on what its users should do if they receive a notice alleging that infringement has taken place using their internet connection. The Government remain a great supporter of the Get it Right from a Genuine Site campaign, which sends out notifications which never ask for money but instead educates the internet user about the consequences of infringement and where they can access content legitimately. This work is very important in upholding respect for IP and ensuring that our creators get the return on their inventions.
My noble friend Lord Hodgson asked about guidance on the changes. There will of course be extensive guidance on them. He suggested that perhaps this should be a standalone measure, but the Law Commission has decided to include the provisions in the relevant parent Acts. I suppose this is, again, a point about good regulation. Not only is it less likely that changes are missed that way but it ensures that the parent Acts remain a one-stop shop for relevant law on each right. I hope I have understood correctly what my noble friend was asking.
I believe that reform of the threats provisions is long overdue and I am delighted that we have been able to find some parliamentary time to progress this important Law Commission Bill. It will deliver the changes desired by stakeholders. It will help business negotiate fairly over IP disputes, while protecting those businesses which can be most harmed by unjustified threats. It will provide clarity and bring much-needed consistency across a complex area of IP law. As a result, the reforms in the Bill will help us, in some measure, to deliver our manifesto commitment to make the UK the best place in Europe to innovate, to patent new ideas and to set up and expand a business.
As the noble Lord, Lord Stevenson, said, the provisions of the Bill will be subject to a special procedure—a new one for me—and I very much look forward to taking advantage of your Lordships’ considerable expertise in carrying forward the debate. I look forward to constructive and helpful scrutiny in this interesting area, of the kind which I know, from working with your Lordships previously, we can certainly expect. I commend the Bill.