Patents (Amendment) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 14th January 2019 Grand Committee

[Lord Adonis]

In the want of a better solution, I shall recommend to the Government that my noble friend Lord Foulkes should take this on, because on the basis of the debate that we have had so far, we will not have confidence that this procedure will be conducted unless there is an impartial referee to see that it has taken place.

I turn to a new issue of substance in the regulations. Many Members of the Grand Committee will have been briefed, as has my noble friend Lord Warner, by those directly concerned by the issues raised in the regulations and whether, as the noble Lord, Lord Henley, said, they do indeed make minimal changes to the existing regime, allowing for the fact that we are in a no-deal situation. I draw the Grand Committee’s attention to and ask the Minister to respond to arguments being put before Members by Bristows, a law firm which specialises in patent law. It has raised a serious concern about the regulations, specifically the adjudication mechanism. I set that concern before the Grand Committee and hope that the Minister will respond.

Bristows states that the amendments have potential ambiguity in the following respects. They provide that a declaration of invalidity of a supplementary protection certificate may be submitted to the “comptroller or the court”, in the words of the regulation, with the court being the Unified Patent Court if the basic patent is subject to the Unified Patent Court’s jurisdiction under Schedule 4 to the Patents Act 1977. However, under Schedule 4, the UPC has exclusive jurisdiction for invalidity actions of a supplementary protection certificate based either on a unitary patent or a European patent. Therefore, Bristows argues, the court referred to in the context of the “comptroller or the court” in the draft statutory instrument, when interpreted in the light of the Patents Act 1977, will, for those supplementary protection certificates, be the Unified Patent Court.

Further, as stated in Schedule 4 to the 1977 Act, the Unified Patent Court should have exclusive jurisdiction in such cases. “However”, Bristows asks,

“what is the impact of the reference to ‘the comptroller’ in the expression ‘the comptroller of the court’? Does this leave this national UK authority … with jurisdiction as well as the UPC? The natural meaning of the Statutory Instrument … suggests that there remains additional jurisdiction in the hands of the Comptroller as well as the Court … even if this was not intended. In consequence, it may remain possible for SPCs based on unitary patents to be invalidated in the UK”.

This looks to be a serious concern. I freely confess to the Grand Committee that, not being a patent lawyer myself— my noble friend Lady Kingsmill is, so she may be able to add to this—I do not entirely understand the impact of this concern, but Bristows believes it may be serious. The Grand Committee would be very grateful for an answer to Bristows’ concerns when the Minister replies. If he cannot give one in detail today, perhaps he can include it in his written response to Members of the Grand Committee after the debate.

[Baroness Bowles of Berkhamsted (LD)]

Maybe I should start with the last thing; I understand the point but I have not investigated it myself, so I cannot say whether it is a concern or not. However, the gist of it is that if something is a unified patent it should go to the Unified Patent Court if and when that continues, and, if it is a UK matter, it should be a matter for the UK.

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[Lord Henley]

I think that the noble Lord would not expect me to respond quite as positively as he wishes. It might be an overuse of paper to write to every Member of the House. I will write to the noble Lord and other appropriate Peers, and make sure that a copy of my letter is, as always, available in the Library. The noble Lord and I understand that procedure well. A copy of this debate will be available in Hansard. Even if it is not the same Hansard in which reports of the Chamber appear, I understand that it is still Hansard and open to all noble Lords to read. If we want to be really modern about these things, it is also available for the noble Lord to read online.

[Baroness Bowles of Berkhamsted]

I have two points before the Minister sits down. First, I do not think he replied to my point about whether there was any intended alignment with the supplementary protection certificates and parallel import points. The Minister may wish to come back to me on that. Secondly, the unified patent court and its relationship to the ECJ has been mentioned. That is inevitable. The unified patent court is an international court. The European patent is not an EU invention—it is external to it—but it has been agreed under the convention to which the UK is a party that it recognises the judgments of the ECJ. As I understand it, our own Intellectual Property Office would therefore have to take those judgments into account. Whatever convolutions there may be, we will not get away from the influence of ECJ decisions, whether or not the unified patent court comes into being.

[Lord Henley]

My Lords, I will write to the noble Baroness on both those points.

Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 14th January 2019 Grand Committee

[Lord Henley]

What I am trying to deal with is the question about how we get a no deal. If there is to be no deal, we want businesses to be in as similar a position to their present one as is possible. I can speak only for the orders that I am dealing with today and tomorrow, but I imagine this will be true of a whole raft of orders coming from other departments. What we are trying to do is put those businesses in a position whereby they can cope as far as is possible with no deal. Meanwhile, as part of the ongoing, sensitive negotiations over the withdrawal agreement—and on this I can assure all noble Lords there will be consultation until the cows come home—we will try to make sure that all these matters can be dealt with. I give an assurance that the IPO has engaged with legal and business stakeholders as far as possible on the drafting of this statutory instrument and what it achieves, and will continue to do so on anything that is needed in the event of a deal—because in the event of a deal, I imagine we will be here again. I look forward to debating these matters with the noble Lords, Lord Warner and Lord Adonis, the noble Baroness, Lady Kingsmill, and others so that we can get it right.

These regulations relate to the no-deal option. We are trying to ensure that in the event of no deal, as with the technical notices we have put out, businesses know what the position will be. Obviously it will be slightly different from where we are at present. That is the inevitable result of no deal. But no deal is still on the table, and until we know that my right honourable friend’s deal has been accepted by another place, I am not in a position to go any further: that is why we want to prepare for the no deal.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I did not come to Grand Committee today expecting to speak on intellectual property. I am here to do financial services but, since I spent the best part of 40 years as a European patent attorney, it is hard not to intervene a little. I remember very well from when I started my training the famous Wella case on exhaustion of rights and parallel imports from the US, and what would happen when we had the single market and exhaustion of rights within the EU. It was a very complicated subject, a wonderful training ground and, I am sure, a huge earner for the lawyers who dealt with it. As patent attorneys, we tended to stay out of things.

[Lord Adonis]

My Lords, I thank the noble Baroness for giving way. Could she explain to the Grand Committee—some of us are not familiar with all the details of this—what parallel exporting is and where the additional costs referred to in the Explanatory Memorandum are likely to arise in a no-deal situation?

[Baroness Bowles of Berkhamsted]

The issue is where something has come from. You could export it under the terms of a licence, but you might have got it from some third country. In the Wella case, it was the US. It became very difficult to determine where the precise shampoo in question had come from and whether it had originated under a legitimate licence or in the US. It could become very difficult to tell when people took off the labels that said where it had come from. Those were the kinds of issues, and I can see that maybe BEIS is trying to avoid replication of some of that vis-à-vis the EEA.

However, the issue of symmetry and asymmetry—which I think is what the noble Baroness, Lady Kingsmill, is referring to—comes up time and again. As a member of Secondary Legislation Scrutiny (Sub-Committee A), I have seen it in, I guess, half the statutory instruments that have come before us. Sometimes you take the symmetrical option, which means you close things down. Where you think the EU’s logical approach will be to close down on it, we close down on it. Then there are asymmetrical cases—which I think this is, and which I think I have seen more of from BEIS—where priority has been given to continuity. The result is that businesses can benefit from knowing where they stand, at least from the UK side, but it may lead to a competitive disadvantage if their exports are not similarly protected. That is an issue.

I wonder why we have a single shot at correcting it in the event of no deal. You could have said that continuity of supply—especially of drugs and so forth—at the point of Brexit is important, and so you will make some provisional means for trade to continue. Then at some point you will have to analyse it and close it down. I have been reading it only very quickly here, but that does not seem to be the approach taken. It looks as if a single shot is fixed in our legislation now, and I think it would give businesses cause for concern. I would have been happier to see some kind of temporary provision put in there, maybe with a sunset clause after three years, by which time we could have sorted things out. Then it would come back in another statutory instrument or in primary legislation for us to say: “Well, okay, what are we going to do? What has the EU done? Have we got some kind of arrangement with them within that three years?” Or are we going to say, “Now we understand a bit better how things have sorted themselves out, we’re going to go for the symmetrical option, not the asymmetrical option”?

I am sure that it is possible within the powers that the Government have given themselves in primary legislation for them to come back and do that, but it would have made things clearer for business and others to have that message put out there in advance, partly to get negotiations going if those were necessary and partly to say, “This is something that you all need to be thinking about”. I would be interested to hear from the Minister how in this instance such arguments have panned out—what has been said on one side, what has been said on the other and whether something is already up the Government’s sleeve to say, “Well, actually, we’ve thought about this and we are going to be coming back in three years’ time”. It would be reassuring to hear that even if in the long term we ended up deciding that it was best to stay with the way this has been adapted now.

[Lord Adonis]

My Lords, with great consideration, the Minister took a number of interventions on his speech and covered quite a number of points. However, a lot of issues are raised by the Explanatory Memorandum and the Commission note of 6 September 2017, which is the position paper on intellectual property rights, including geographical indications, and which the Treasury made available to me for this debate. I want to press the Minister on a number of points.

The section on the general principles under which intellectual property will be handled in a no-deal scenario, on pages 2, 3 and 4 of the note, all the way through uses “should” rather than “will” in respect of the mutual recognition and enforceability of rights. Perhaps I may go through them because these are all very important points. Under the first general principle, which is intellectual property rights having unitary character within the European Union, the paper states:

“The holder of any intellectual property right having unitary character within the Union and granted before the withdrawal date should, after that date, be recognised as the holder of an enforceable intellectual property right … In the specific case of protected geographical indications, protected designations of origin and other protected terms in relation to agricultural products … this principle should also imply that the United Kingdom puts in place, as of the withdrawal date, the necessary domestic legislation … The implementation of this principle should include, in particular, the automatic recognition of an intellectual property right in the United Kingdom on the basis of the existing intellectual property right having unitary character within the Union”.


Under the second general principle, it states:

“Applications for intellectual property rights having unitary character within the Union … should be entitled to keep the benefit of any priority date in respect of such pending application”,


and that, in respect of applications for supplementary protection certificates for an extension of their duration,

“a person should continue to be entitled to obtain in the United Kingdom a supplementary protection”.

This carries on in respect of a whole number of further rights. The Grand Committee and the House would obviously wish to be assured that those rights will continue, but my understanding is that whether they will crucially depends on what our EU partners do in respect of those rights if we leave with no deal. In respect of all these reciprocal rights and their enforceability, I completely understand that the Government are putting in place the necessary changes to UK law for us to do our part to ensure that rights are enforceable and recognised, but where the EU paper uses “should” in respect of all these rights, can the Minister tell us what is likely to happen after the end of May? What situation does he believe will apply if we leave the European Union without a deal?

I am not an expert like the noble Baroness, Lady Bowles, who may indeed be able to give a view on this, but it seems that we have no control over that at all, and that, crucially and solely, that depends upon the action of the European Union itself. These aspirations—which are set out in the Commission paper of 6 September and in the statements the Minister has made to the Committee about there not being an interruption in the recognition and enforceability of these rights—absolutely crucially depend on what the European Union does after the end of March, not just on what we do. Therefore, a vital issue for the Grand Committee and for the House when it discusses these regulations is to know what we expect the European Union to do. If in fact we have no reason to believe that the European Union will continue to play ball in the mutual recognition of these rights and their enforceability, do not all the concerns that my noble friend Lady Kingsmill raised apply in spades? It does not matter whether we agree to all these regulations and do everything that the Government want; all that could be superseded by an inability to have these rights enforced or recognised because the European Union itself will not undertake to do so after the end of March.

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[Lord Henley]

I accept that the noble Lord is right that business would consider a no-deal situation to have major implications. In relation to this issue, I believe that what we have set out in our no-deal regulations will have very little impact. That is the type of clarity that we are trying to give business.

[Baroness Bowles of Berkhamsted]

The point about the impact assessment concerns me. The noble Lord, Lord Bates, who is eagerly awaiting our later exchanges, knows that I have been here before. Forgive me if I am paraphrasing the Minister, but what seems to have been said is that, when the impact assessments are done, they relate to the impact of the legal instrument. That impact is often deemed to be relatively minimal. However, if you deal with the consequences on business of the legal instrument, the impact is much larger. I always thought that the whole point of impact assessments was that they dealt with the predictable consequences. The regulations that we are dealing with may be simple to understand, because there is not anything for business to do, but their impact means that businesses may have to compete on an unlevel playing field. There is a direct consequence of the legal instrument but that would appear to be excluded. That does not really seem to be the right way in which to measure it.

Maybe as a relative newcomer, I cannot start saying, “You’ve got to do your impact assessments differently”, but this issue needs to be looked at in the round because it can be used in a completely disingenuous way. I know it has been churned out this way under pressure, but this could continue throughout every statutory instrument, whether it is to do with Brexit or not. It is a laughing stock, really. I think about how some MEPs used to criticise EU impact assessments, but I never found anything that was just to do with the assessment of the legal instrument; they always dealt with consequences. So why do ours not?

Trade Marks (Amendment etc.) (EU Exit) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 14th January 2019 Grand Committee

[Lord Adonis]

He has not sat down, in the sense that he is perfectly capable of answering a question before he concludes his remarks.

He again has not dealt with the question of consultation, which as he knows is of huge concern to the Grand Committee. We would be grateful if, before we come to our debate, he could set out what consultation has taken place, so that we can discuss whether we think that consultation has been adequate.

[Baroness Bowles of Berkhamsted (LD)]

One small point struck me, not having looked at this before we commenced proceedings. I fully understand the transfer of the pending applications and the ability to file a new application and have it allocated the earlier filing date that the European trade mark had. I do not see any legal difficulty with that, but I wonder if there is a legal difficulty in allowing that to claim the priority date of the EU trade mark, in the sense that it would operate under the Paris Convention, which we and many other countries are party to. I used to take great pleasure in reminding the EU that the Paris Convention of 1883 predated the EU treaties and that they sometimes could not do things. But I wonder whether there has been any advice on that, because there is a discontinuity.

To take a parallel example, in the United States, if you file a continuation in part, there are careful rules so that you can ensure that the priority claim can go all the way through in a continuous way. I wonder whether, through the changing from a European office to the UK office, there is a discontinuity here that would mean that priority date was challengeable. If there was a later priority date UK-only national application from an applicant not from the United Kingdom but from another country that was party to the Paris convention, would there be a clash of rights? It is a question that should appeal to lawyers looking at these things. I cannot answer it without having a longer think, so I am asking the Minister whether he can advise me what advice he may have had on that.

[Lord Clement-Jones (LD)]

My Lords, my noble friend has asked an important technical question, given her long-standing expertise in this area. As with the patent statutory instrument, this does appear to be a solution for trademarks, or to take advantage of the European community trademark. It appears to be a solution devised not just for a no-deal situation, but with a deal or the transition period in mind as well. Again that gives this particular statutory instrument a greater significance because it might be there for some considerable period of time in the event that a deal was reached. Moreover, as the noble Lord, Lord Adonis, has pointed out, similar issues regarding consultation and the impact assessment arise in connection with this statutory instrument as well.

It was interesting to hear what the noble Lord, Lord Deben, had to say about the difference in wording between the different Explanatory Memoranda. Asking a,

“small group of trusted individuals with expertise in trade mark law”,

almost means that the question is asked of people who are not going to give you the wrong answer.

Quite frankly, the really important aspect of this is the impact on business. On the impact assessment, the homework has been done in such a way that it answers the question by bringing the impact under £5 million. I cannot believe that that will be the total cost to business once you have added together all the issues such as the legal advice that will need to be taken and the red tape involved. I know this is a solution that is designed to be constructive but there are inevitably going to be costs. Frankly, the importance of brands being what it is, the actual costs involved to business are going to be quite high. I cannot believe that the figure is not going to be higher than £5 million.

The same issues apply to this statutory instrument as much as they do to some of the earlier ones. However, there are other technical questions. My noble friend has asked one set about the priority date, but another important question is which court will have jurisdiction if the validity of the original EU trademark is challenged in the future. We cannot leave business in a state of uncertainty. Then of course the UK trademark comparable right will be a stand-alone right. Does that mean that in those circumstances an applicant will have to challenge a trademark’s validity both in the UK and in the EU? What is the answer to that? One right derives from another. As a result of that, does someone wishing to demonstrate the invalidity of a trademark have to go to two jurisdictions? If that is not an additional burden on business, I do not know what is.

There are a number of questions to be asked here. We have come back again to the circularity of a quick fix that could have long-term consequences and where the procedure, process, consultation and impact assessment have been grossly unsatisfactory.

Companies (Miscellaneous Reporting) Regulations 2018

Baroness Bowles of Berkhamsted Excerpts

Monday 9th July 2018 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I welcome any attempt to raise the reputation of business and to increase the trust and confidence in business in the eyes of the public, so I very much welcome these regulations, but I wonder how effective they will be.

These regulations require public companies and large private companies to publish pay ratios and other data to show that the directors are taking into account the broader interest of customers, employees and communities, as the Minister has explained. These data are useful to provide more information to enable shareholders to question the directors and, if necessary, to vote at shareholder meetings. But who are the shareholders? Many shares are held by institutions, which are reluctant to act as long as the financial returns are as expected. Frequently they have a limited and sometimes short-term interest in the company. Also, much share trading is carried out by algorithms—and who knows on what formula they base their decisions? There are still many day traders active, and their trading, again, is based purely on numbers. As I understand it, this is the way the majority of shares now change hands.

I ask the Minister: even if the published data leads to naming and shaming, how effective will these regulations be in changing behaviour? I know there is a lot of concern about misleading comparisons between companies, but perhaps we should ask for other data to be published, such as benchmarking data on productivity so that shareholders can compare how well their company is doing in comparison with competitors.

Surely, there must also be concern about the reliability of the numbers. The big four accountancy firms almost exclusively audit for the large companies that are the subject of these regulations; they are also their financial advisers. In their role as financial advisers to these companies, I am sure that they will have lots of schemes to make the ratios look a lot more attractive. This joint relationship has come in for a lot of criticism recently. Is there any sign of any change so that these regulations will become more effective?

I welcome the rules applying to large privately held businesses. Most respondents in the consultation wanted to see more data about these companies and I hope that these regulations will produce it. Generally, I welcome these regulations, but would like to see them widened and made more effective.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I first apologise to the Minister for being caught out—

[Baroness Vere of Norbiton (Con)]

Is it really appropriate that the noble Baroness speaks, given that she was not here for any of the Minister’s introduction of the statutory instrument at all?

[Baroness Bowles of Berkhamsted]

I apologise: I got caught out because I was advised of a rather different timescale. With the permission of the House, may I speak?

[A noble Lord]

Yes, I think you had better.

[Baroness Bowles of Berkhamsted]

Thank you. I notice that I am not the only one who had to run in. I declare my interests, as in the register, in particular as a non-executive director of London Stock Exchange plc. I welcome the provisions in these regulations and will speak mainly about the Section 172(1) report and stakeholder engagement.

Recent events surrounding BHS and Carillion have reminded us, yet again, that it is not just share- holders but the public purse, ordinary workers and pensioners that bear the brunt of corporate failures and misdemeanours. Incorporation and limited liability is a bargain with society, meant to encourage entrepreneurism and growth for the common good. The public-interest side of that bargain has to be upheld. That is the message from the Green Paper responses: 86% and 85% respectively of respondents agreed with steps to strengthen stakeholder voice and governance for private companies.

In fact, looking after the public interest has always been the majority view. I took the time a couple of years ago to go through the evidence in the Law Commission consultation leading up to the Companies Act 2006. It was a minority—a concerted one—who supported “one master, the shareholder”, which then became “enlightened shareholder value”. The majority wanted a more express public-interest requirement, but lost out as they were not co-ordinated around a single suggestion. So here we are again, just as with the creation of the strategic report, trying to fix it again.

I am not sure whether it counts as an interest, but I was the author of the Liberal Democrat response to the Government’s Green Paper, in which I put a long— 32-paragraph—section on interpretation and enforcement of Section 172 of the Companies Act 2006. It included a call for legislation to correct the distortion that has occurred in practice to the intentions of the so-called enlightened shareholder value and for the discharge of the duty in Section 172 to be susceptible to checking and challenge. That is a regulator’s job: they look after the public interest on behalf of the Government, and that matter needs some revision and upgrading for companies.

I doubt that all the deficiencies in Section 172 could be dealt with by secondary legislation, but these regulations are a decent attempt to remedy the fact that the “have regard to” formulation is weak, to the point of being non-existent. I sincerely hope that the 172(1) reporting proves, as I put it, “susceptible to checking and challenge”, and that the perfunctory statements which, in effect, say “we thought about it and dismissed it” are not left unchallenged. I say this also with regard to the requirements in paragraph 13 of Part 3 regarding engagement with employees, suppliers, customers and others. These clarify that there must be not only an explanation of the engagement with employees and wider stakeholders, but statements explaining how directors have performed the “have regard to” requirements and a summary of the effect of that regard on principal decisions. These statements must not be allowed to say “no effect” without substantive reasoning—no getting away with the sort of simplistic, “we take the best person for the job” explanations that have been prevalent on gender equality.

In paragraph 9.2 of the Explanatory Notes, it says that the FRC has agreed to include guidance on how companies should make a Section 172(1) statement. The forthcoming revised corporate governance code will have a “comply or explain” requirement concerning the mechanism of employee engagement, choosing from the three options of a designated non-executive director, a formal employee advisory council or a director from the workforce. I have no problem with having options, and suggest that again, this has to be a “comply or say what you are doing instead that is just as effective” type of comply or explain, not a “we didn’t think it suited our business” type of explanation. Indeed, a weak explanation would seem to offend against the employee involvement provisions in Part 3 of these regulations.

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[A noble Lord]

Too long!

[Baroness Bowles of Berkhamsted]

The time shown on the timer is not all mine.

With regard to employee engagement, I take this opportunity to suggest that it is worth looking at employee-owned businesses—that is, businesses where, alongside some share ownership, employees have a significant say through various different mechanisms. I commend to noble Lords the report The Ownership Dividend, launched at the end of July, which followed a year’s inquiry and, for the first time, substantial collection of UK data. I had the honour to chair the inquiry so I declare an interest. The inquiry showed that many governance problems are solved, including those around wider stakeholders, and that productivity increases when there is employee ownership. So embracing the formal involvement of employees is nothing to shy away from, even if it is not within a formal employee-owned structure.

I have spent some time on the Section 172 and stakeholder matters because they are key to culture. The fact that these regulations need more pages dedicated to executive pay than the other governance matters is itself a sad reflection on corporate and executive culture. I welcome the additional transparency and ratio comparisons; the truth needs to be told, and unfairness and mechanistic escalators exposed. Hopefully, some rebalancing will happen, whether that be through shareholders or shaming.

[Baroness Neville-Rolfe (Con)]

My Lords, I declare my interests as set out in the register, and as a director of companies over a number of years and as a chartered secretary. I will not delay the House, but I am doubtful of the value of some of these changes, which represent micromanagement and/or bureaucracy, and there is a decidedly mixed level of support for some of them, as can be seen on pages 49 to 51 of the impact assessment.

I am a huge supporter of good governance, but it should be geared towards long-term value creation, and in a responsible way. Good companies create value, and the tax-take from such companies—not only company taxes but all the taxes they collect: VAT, rates and income tax—finances our schools, hospitals and public services.

There is no sunset clause but perhaps the Minister can confirm that there will be a review of these arrangements in five years’ time. Further, does he agree that creating long-term value and companies’ contribution to our economy, including productivity, which was mentioned by the noble Lord, Lord Haskel, should form part of that review?

Nuclear Research and Technology (Science and Technology Committee Report)

Baroness Bowles of Berkhamsted Excerpts

Tuesday 17th October 2017 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I congratulate the committee on the report and its apt subtitle, Breaking the Cycle of Indecision. There are excuses for that indecision—public opinion features large—but it resulted in having to make decisions about electricity generation while staring in the face of concerns about a “lights out”, as well as global warming.

The Economic Affairs Committee report on the electricity market is referenced in Chapter 3 of the report we are discussing and, as a member of that committee, it is fair to say that that the effect of indecision played a part in our putting greater emphasis on reliability and security of supply. Nuclear power normally fits into the reliability slot; I say “normally” because of concerns that still flow around Hinkley Point C. The Hinkley build demonstrates all the frustrations that arise from buying in technology. We have analysed and reanalysed Hinkley C, looking at cost penalties and financial risk, while always having to take promises about delivery. Being on the outside of development and intellectual property makes that evaluation very difficult, as well as cutting us out of spinoffs and significant construction jobs.

I have some small personal experience of spinoffs in the nuclear industry. At the start of my career as a patent attorney, I drafted some of the very first European patent applications ever filed. I thought it was neat that they were in the name of Euratom. They were for things from the JET project, but one reason for seeking patents was their technical relevance well beyond nuclear fusion. For other clients, I drafted patents for robotics and communications in the nuclear environment—again, all with spinoff relevance for use in other industries. The combination of ability to evaluate, security of supply for electricity, supply chain and spin-off potential leads me to conclude that there is a strong case for the UK to be a nuclear technology maker, not a nuclear technology taker. That includes the case for SMRs.

The UK already has extensive nuclear commitments, and there have been several debates on the effect of leaving Euratom. At this late hour, I will not revisit the things that I have spoken about before, but we have been told that various options might be negotiated with the EU—perhaps associate membership or something more—although those options might require freedom of movement commitments, as was the case for Switzerland.

I welcome that the Nuclear Safeguards Bill has been published to establish a new nuclear regulator. Can the Minister update us on how preparations are going for the actual setting-up of inspection regimes, given that inspection has to involve international bodies? Having those inspections in place is required before we can make nuclear co-operation agreements.

Finally, as with all things Brexit, businesses want to know what is going to happen. Some cannot wait until 2019 to find out and are making plans to establish themselves in other countries. There was a report just last week on “Sky News”, the gist of which included that, although the Government said there would not be restrictions, industry said there would be. Reasons include, of course, that even where nuclear regulations do not interfere, customs delays and other considerations come into the mix, such as delay for short-lived isotopes trying to get over the border. Unfortunately it is not in the Government’s gift to provide any guarantees other than that they will negotiate hard, and that makes it all the more important to remove uncertainties that the Government can control and show that there are things worth hanging on for. Earlier rather than later commitments to a substantial nuclear sector deal would be valuable. Regrettably, I am not reassured by the 22 February minutes of the Nuclear Industry Council, which record the Government’s high-level expectations for the potential nuclear sector deal as:

“Many important issues such as skills, exports and technology should be considered, with the overarching objective of cost reduction across the industry firmly in mind”.


After mentioning short, medium and long-term objectives and opportunities to enhance the supply chain outside the nuclear sector—it is good that that is there—the minutes end with another call for ideas for cost reduction. Competitiveness is yet again emphasised in the Government’s response to the relevant part of today’s report. While understanding competitiveness, I sincerely hope that the Minister is able to give something a bit more visionary about a nuclear sector deal than the expectation management that these comments suggest.

Euratom

Baroness Bowles of Berkhamsted Excerpts

Thursday 20th July 2017 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I have previously argued that the separate Euratom treaty gave the Government an opportunity and useful alternatives for transition by not triggering Article 50 simultaneously with Euratom. I know that left some institutional untidiness to sort out, but it would have meant both sides looking for the solution, and it is still an option. They are, however, two treaties, so another contingency plan could be to negotiate a Euratom exit independently, especially if there is no main agreement.

Today we are debating, among other things, continuing access to medical isotopes. My noble friend Lord Teverson has explained that the observatory role of the Euratom Supply Agency has been enlarged to cover supply of medical isotopes, with a particular objective of securing supply of molybdenum-99 and technetium-99 —the material used for some 700,000 diagnostic procedures per annum in the United Kingdom—across the EU. We obtain our supplies, as has been said, from several EU countries. We do not have our own reactor facilities or any plan for them, and this gives rise to various considerations.

First, will we still get equal treatment in EU supplies after Brexit, especially if there is an international shortage, which happened before, hence the observatory role? Secondly, past incidents such as the fire in the Channel Tunnel and disruption at Calais have hindered supplies. If we are not in the customs union, delays may be more common, and isotopes are the ultimate “just in time” materials because if they are not delivered promptly they cease to exist. A moly cow generator lasts only two weeks, with material halving every 66 hours, so long delivery times are wasteful. That is why we do not import from faraway places such as Australia or Korea. We are signatories to the international high-level group, but is that enough? Will we try to stay in the EU observatory to secure the EU supply?

Turning to the position paper on Euratom withdrawal, it says that we will negotiate a new voluntary offer agreement with the IAEA to replace those aspects done via Euratom. Has there already been an exchange of documents with the IAEA about the content of that agreement? Are there aspects other than replicating or taking over Euratom safeguarding procedures? Is the transfer of accounting straightforward, and what happens if ownership agreements with Euratom are unsuccessful?

On Monday, we debated the electricity market report from the Economic Affairs Committee, which gives prominence to security of supply—that was without any Brexit consideration. Given that a nuclear fleet is part of our energy future, have discussions started on replacing the nuclear co-operation agreements that presently run via Euratom, in particular with the United States, from where we get a lot of our supplies? Is there a break clause in the EDF contract if any nuclear technology is denied to the UK by France, Euratom or the Commission during the building of Hinkley Point C?

Finally, will the UK fund JET from 2018 to 2020 if the extension to Euratom funding that was being negotiated does not now happen? What would be the effect of not funding that extension on the UK position in international fusion technology?

Intellectual Property (Unjustified Threats) Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Report stage (Hansard): House of Lords
Wednesday 23rd November 2016 Lords Chamber

[Lord Lucas (Con)]

My Lords, we had some extraordinary things on this committee: a Saville committee that ran to time and a Minister who listened, took her conclusions back to her department and the Law Commission, and achieved a most satisfactory series of amendments. That is an achievement that ranks with the dervishes breaking a British square. That the Law Commission should have given in to suggestions from the House of Lords really shows what a fine Minister we have and what a fine job she has done on this Bill. All of us who sat through the committee—who thought we might be doing it all to achieve nothing—are enormously grateful to her.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I also thank the Minister and must declare my interests as a retired chartered and European patent attorney, former fellow of the Chartered Institute of Patent Attorneys and former representative before the European Patent Office and European Union Intellectual Property Office; and that my husband has residual income from our former practice, and that we are proprietors of a registered trademark. That all means that I have had to send and receive the sort of correspondence that the Bill is all about.

The Minister has proposed amendments in this group and elsewhere that touch on most of the points on which I tabled amendments and spoke in Committee. The only points not touched on at all concern the proposed new section defining actionable threats, and I have not tabled similar amendments again, as these were perhaps overly substantive for this stage of a Law Commission Bill. That is a pity but, nevertheless, I have had the opportunity to elaborate on those points in Committee for the public record, and people can take note of what will remain problems.

With regard to Amendments 1, 2 and 4 for patents and the corresponding changes to the clauses for trademarks and designs, I agree that the deletion of “solely”, and clarifying the examples, make the safe harbour that is intended for permitted communications clearer and the accidental triggering of threats provisions less likely. I need say no more on that. I am grateful for the other drafting amendments on numbering and with reference to pending rights, which I raised.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am sure we will find when we examine the fine print that there is probably a prohibition in the Companion on making the sorts of speeches we have been hearing. That makes me even more determined to make them. It is right that we should record that the special procedures we went through for the Bill, although recognisably a labour—no pun intended—have generated a very successful outcome. I join others in congratulating our chair, the noble and learned Lord, Lord Saville of Newdigate, who got us through some interesting and tricky evidence sessions with great expediency and, as was said, on time.

I also congratulate the Minister, whom I recall making her first appearance at the Dispatch Box on an intellectual property Bill—“flustered” is perhaps too strong a word, but it certainly was not her natural habitat. But the feathers have grown and the plumage has become much more sleek and groomed, and now we have somebody who is fully equipped to deal with all matters of intellectual property. As has been said, those of us who have been involved with intellectual property Bills before have had not much success in getting changes, but she has come back with a raft of improvements to the Bill. Against the Law Commission, as has been said, you can say no finer than that.

It was a pleasure having an expert member on the committee, the noble Baroness, Lady Bowles of Berkhamsted. It is always a bit of a worry when you see somebody on a committee who knows a lot about the subject, because you think they may dominate it. She was indeed very powerful in her contributions, but they were to a point and finely judged. We all learned and benefited from that.

We have done extremely well, and the Minister has achieved a great deal and kept us informed. We had a letter only this week explaining what the proposals were and how they fitted into her thinking, and I am happy to support them.

--- Later in debate ---

[Lord Hope of Craighead]

My Lords, I am sure the noble and learned Lord, Lord Saville of Newdigate, would wish me to thank the Minister for moving these amendments.

Two simple words are on the paper in front of us—“necessary” and “or”—but they are constraining words and to remove them from the Bill is a significant step to take. I am particularly interested in the extent to which the noble Baroness is prepared to increase the width of the discretion given to the judges. I can think of many cases where Acts of Parliament have sought to restrict the discretion of the judges because they were not trusted. However, in the area of intellectual property, the cases that come before the courts are in the hands of expert judges and I am sure that taking out the word “necessary” and giving them greater discretion is entirely justified and greatly improves the nature of the legislation under consideration.

I join the noble and learned Lord, Lord Saville, in thanking the Minister for taking this step.

[Baroness Bowles of Berkhamsted]

My Lords, I again thank the Minister for these amendments. I welcome that “necessary” has been removed from the judge’s discretion provision by way of Amendment 3 and its family of amendments. It was a feature of our discussions with witnesses and in Committee that the court’s ability to exercise discretion was important and that the flavour should be that the judge can do what is reasonable in all the circumstances. This is reflected in the simple words “in the interests of justice” without what might have been an unusually high or inflexible hurdle of “necessary”.

On Amendment 6 and its corresponding family, we had significant discussion during evidence sessions relating to the status of take-down notices that are sent to digital platforms and then by the platforms on to vendors. Case law had left a bit of a limbo as to whether these are threats and, if they are, whether the defence that “all reasonable steps” have been taken to find the primary infringer is too high a hurdle, especially in the digital environment, where vendors may be in remote places and it is effectively impossible to trace who may truly be the primary infringer and the customer is, in effect, the importer. Did every lead have to be pursued or, if not, how many?

There is some assistance through the Minister’s amendment that deletes “all”. This makes the defence, if it is needed, a little easier, and the word “reasonable” still retains aspects of proportionality, so the test has not been made too light in other circumstances and can adapt.

However, the amendment does not solve the lacuna of whether a take-down notice is or is not a threat, with two interim judgments—Quads 4 Kids and then Cassie Creations—indicating it was an arguable point but not deciding. This is left, as I said, in limbo.

This is a substantive point—again, too substantive for this stage of a Law Commission Bill—and there is an opportunity to pursue issues relating to digital platforms in the Digital Economy Bill. On these Benches, we are interested in doing that for the status of take-down notices, among other things. I know the Minister can give no promises now but at least it, and how it originated, will be no surprise when the issue returns.

[Lord Stevenson of Balmacara]

My Lords, I want briefly to follow the noble and learned Lord, Lord Hope—my noble and learned kinsman—in expressing my thanks for the way in which these points have been taken, but perhaps I may add a little a gloss to what he said. The way he expressed it was that this is going to aid the generic judge in doing their job more efficiently than would otherwise be the case. However, it is worth recalling that the discussion we had in Committee on this—it was prompted by the evidence we received—turned on the fact that this is quite a key point in trying to perceive within the Bill the evolutionary steps that the Law Commission said existed, as this Bill provides a route forward from where we were in previous times to where we might be in the future in the possibility of establishing a more general tort in relation to business ethics and business behaviour, of which it is arguable that unjustified threats are a very unjustifiable part of the business environment. I know that the Minister shares my thinking on this and I agree with her that this is not the Bill in which to take these issues forward, but I think we both hope that there will be an opportunity to come back to this issue in some future legislation.

The point is an important one. If we see this piece of legislation as a step on a journey towards an alignment that is closer than is currently the case with the Paris convention 1883, we will be in a more satisfactory place to understand and perhaps plan forwards on how these things might happen. Whether that should be in the Digital Economy Bill, which is soon to arrive with us, we do not know, because it is not being dealt with in the Minister’s department any more. However, I am sure that she will take a close interest in it, particularly if the words “intellectual property” are flashed around. I am sure that she will be like a moth to the flame coming back to support us. In the interim, we support these amendments.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, for joining me in tabling this amendment and its parallel amendments in later parts of the Bill. I am sure that the Minister, when she comes to respond, will point out that, as phrased, the amendment does not achieve what I hope to draw out from her in the discussion. In that sense it is a probing amendment, which is probably inappropriate, but nevertheless it was the only way we could think of to get this thing up at this stage.

As the Minister said in Committee, the tactic of suing a professional adviser for making a threat has been used to disrupt negotiations and hamper legitimate client-adviser relationships. A professional adviser should not have to become personally involved in a threats action when they act only on behalf of their client. I accept that the Bill as drafted restricts the protection available to professional advisers to those who are regulated by a statutory regulatory body or entitled to legal professional privilege, but we already have in the Bill provisions under which the professional adviser may rely on the safe harbour provisions to avoid personal liability. Maybe there are other ways that other safeguards could be built into the Bill, such as when it is clear that the threat is speculative and when the principal and the adviser are clearly adopting a game of bluff with the alleged infringer, and so should, by rights, be at risk. I would certainly be happy to engage in discussions with the IPO and the Minister on this point if there was willingness to take it further.

I accept that exempting professional advisers from the threats provision has long been called for and that it would help stop game playing. However, to my mind this is a step too far. The Bill delivers an exemption that provides for the first time in English law that an agent would not be liable for following the specific instructions of his or her principal. I beg to move.

[Baroness Bowles of Berkhamsted]

My Lords, I tabled the amendment with the noble Lord, Lord Stevenson. I have a few additional comments that bear some relationship to what the effect of the word “specific” would be in this position.

The fact that advisers could themselves be liable has been, at least in some circumstances, a gatekeeper to check on the appropriateness of communications concerning infringement of intellectual property rights. It has also created other problems, hence the exemption that has been put forward in the Bill. We took evidence to establish that at least in the UK there are disciplinary provisions for wayward professionals, which assists in that gatekeeping, but here we are exempting advisers worldwide. I remain a little concerned as to whether the definition of “exempted adviser” is too widely drawn, but it seemed that there was another way to ensure some element of the gatekeeping is there to make sure the instructions to the adviser are specific.

An adviser overstepping the mark or not warning their client of the consequences of an unjustified threat could well be on the receiving end of a negligence action, but it is a bit grey as to what that instruction might need to be. Could it be a blanket instruction to “go get ‘em”, or to be trigger-happy without discussion about a whole portfolio of rights? The amendment aims to make it clear that specific, conscious instructions are needed, and that due care and attention to that takes place whoever and wherever the adviser may be. It also carries with it the flavour—this needs to be said and recorded—that the exempting of advisers is a particular exemption, not a “get out of jail free” card. Care still has to be taken over the composition and sending of letters or notices that allege infringement.

Intellectual Property (Unjustified Threats) Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Wednesday 9th November 2016 Other Business

Moved by

[Baroness Bowles of Berkhamsted]

1: Clause 1, page 2, line 9, at end insert—
“(c) commissioning a product for disposal.”

[Baroness Bowles of Berkhamsted (LD)]

Let me redeclare my interests, as this is a recorded and public hearing, that I am a retired chartered patent attorney, a former fellow of the Chartered Institute of Patent Attorneys, a member of the European Patent Institute and a representative before the European Patent Office and European trademark and design office. My husband still has residual income from the practice, which we have sold on, and I am a co-proprietor of a registered trademark. For the avoidance of doubt, I should also say that I took no part in any of the discussions that the Chartered Institute of Patent Attorneys had concerning its submissions to the Law Commission or indeed to this Committee.

I move amendment 1 and will speak to all the amendments in this group. All the amendments except Amendment 20 are the same content and are about commissioning, or causing another person to do something, and for the person doing the causing to be treated the same as a manufacturer that they commission to make a product according to the commissioner’s specification. There are nine amendments in this set, because I had two goes at positioning the same point in Clause 1—so the same point appears in two different places, in Amendments 1 and 4, whereas in the three design clauses it is in the Amendment 1 position. Amendment 2 and its counterparts in the other clauses are just consequential numbering changes.

These amendments have been made in respect of patents and the three design types. They are not made in respect of trademarks, because such provision already exists. For trademarks, a person is a primary infringer if they cause the mark to be applied, which is what someone commissioning a product is doing. This point—that it only appears in trademarks—has been discussed in evidence sessions, for example with the representative from the IP Federation; there is a brief reference on page 4 of the transcript of our meeting with them. It is a well-known concept in the field of intellectual property and I would argue that, without this amendment, there is not the consistency on the different rights that is being sought by this Bill.

But it is not about neatness. The scenario that concerns me is that of the SME, especially the “S”—the small manufacturer who gets a new commission, possibly from a large company or even a large retailer, to make some products. They may be told that the specification is the large company’s own particular design. It is possible that the manufacturer may manage to include indemnities for themselves in the contract, but it is often the case that small manufacturers get “take it or leave it” contracts. In the event that the product turns out to be an infringement of a patent or a design, the manufacturer is in the direct firing line. I am saying not that they should always get off but that the situation should be the same as it is for trademarks. Those causing—through their commissioning—should be in the same position as the manufacturer when it comes to being able to write to them freely, without fear of a threats action resulting. It is inequitable, if they are the commissioner, and quite probably the retailer and the person behind it all, that they cannot be approached.

The situation—and anomaly, without this amendment —can be explained with a hypothetical example. I could commission a small manufacturer to make me some interlocking plastic children’s bricks and tell the manufacturer to make them so that the word “Lego” is embossed on them. Putting aside counterfeiting and passing off, which are not in this Bill, and assuming for the sake of argument that all the patent and design rights had not expired, what would be the situation? The brick might well infringe the patent. The manufacturer is a primary infringer in the sense they can be freely written to but I, as commissioner and prime mover, cannot be written to without fear of a threats action. The same is true for the registered design and/or design right. Again, the manufacturer can be written to but not the commissioner—the true perpetrator. But, when it comes to the trademark, I have caused it to be applied, so you can write to me as a primary infringer. Indeed, you might do that and say nothing about the design or patent infringement, which might come as a nasty surprise later on—who knows?

There is an unfair situation that the manufacturer always gets dragged into it and any letter to the commissioning party concerning infringement is limited to trademarks. When it comes to litigation on the merits of the infringement, the commissioner—the causer—can be brought into it, but there is always the possibility that, by then, the threats trap has somehow been triggered and the rights holder has to contend with the additional problem of a threats action, potentially including the loss of right of initiative as the plaintiff in the action.

To close on the causing point, for better consistency with the existing placement of the wording in the section on trademarks—where it appears on page 5, line 24—the provision for patents sits best where I have put it in Amendment 1, rather than where I first put it in Amendment 4, which is the amendment that I think the noble Lord, Lord Stevenson of Balmacara, supports. If need be, the wording could also be adjusted to reflect more closely the “causing another” language that is used in the section on trademarks.

I will briefly move on to Amendment 20, but I will not say much other than that I support it in principle. This is not a new point to be drawn to our attention; it appears in the first consultation response to the Law Commission from the Chartered Institute of Patent Attorneys, on page 9 of its first submission, where it says:

“For example there is case law in relation to the criminal offence of trade mark infringement that ‘applying’ the mark means physically affixing it to the goods, and does not include selling the goods, for example on an Internet web site, by reference to the mark, even where the Internet ‘branding’ is the first time that the mark is used in relation to the goods”.

This goes against what we have been told by the Minister in response to the point about whether you need something to deal with electronic marking.

I further note that, in respect of registered designs, Clause 27 of the Digital Economy Bill—in Part 4, page 27—introduces the notion that an internet link constitutes marking of a product. Therefore, it seems eminently reasonable that the marking of a product electronically should be clarified in this Bill and not merely be a matter for an Explanatory Memorandum.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

If I may, I think that in the kind of scenario where there is a commissioning person and a manufacturer and you can find them both, you would take action and the commissioner could be brought into it as a joint tortfeasor. If the commissioner was the big guy and the manufacturer was the small guy and you could take action just against the commissioner, as you could with a trademark, you might leave the small guy out of it. They become the prime person in the action, with the other person potentially joined in, but the issue is that you cannot write to the source of the problem.

It is true, as the Minister said, that there is a missing link in “causing” in everything except trademarks. When the Law Commission started its review in preparation for this Bill, it asked whether the law was working properly in various places and was told that it was not working as well as it could, including in relation to the amendments that had been made to Section 70 of the Patents Act following the Cavity Trays case. That has been rolled out with no change, not taking account of suggestions of areas where there could be improvement. Given that such suggestions have been made, it is appropriate that policy discussions and decisions take place. I can accept that the Law Commission does not have that power, but the legislature does. Therefore, I lay those points before the legislature.

I must quibble slightly with the suggestion that the point about unjustified threats is about getting at people who try to threaten you under an invalid patent or where there is obviously no infringement. Those are actions that, by and large, cannot be caught with a threats action; that is what the more blanket tort is needed for, or you have to go to different things, such as declarations of non-infringement or declarations of invalidity, because the threats action is not there. The law says that if you are the manufacturer or the importer anyway, you can threaten to your heart’s content.

If I may paraphrase Judge Pumfrey, as he then was, in the Quads 4 Kids case, he said that unjustified threats actions are about a rights holder who tries to keep enforcing their rights with the threat of going to court but never intending to go to court. That is why you are not allowed to threaten the customers, because that would be a soft option for doing that. However, that does not mean that people who are selling things are not infringers; they are—you do infringe if you are selling, but one is supposed to go for the person at the core of it, the manufacturer.

What I am saying, and have been supported in, is that in this day and age the notion of causing is far more relevant. Historically, it was always relevant for trade marks, because you got somebody else to mark the carton—that is where it all started—but now that we are into remote access, commissioning in one country and selling over the internet, there is definitely a missing link that is being made use of, particularly in respect of designs as well as trade marks, and probably patents to some extent as well.

That is where I stand on this. I think that I would like to test the level of support in the Committee.

[Baroness Neville-Rolfe]

Before the noble Baroness sits down—I say that for the cameras—I should say to her that this is obviously a Law Commission Bill. The extent of that has been explained to us as a Committee from day one. We are getting here almost into a treatise on the general law of infringement. The threats Bill needs to match the existing law, which it does. I have explained why I think the amendments go beyond that and have potentially perverse consequences.

The noble Lord, Lord Lucas, was essentially right in what he said, so I thank him for that. I think that the right thing for us to do is to stick with this wording, which the Law Commission has spent a lot of time clarifying, rather than move into these new areas.

[Baroness Bowles of Berkhamsted]

I would still like to test the opinion of the Committee. We do not have to do it for all the amendments; we can test on Amendment 1.

--- Later in debate ---

Moved by

[Baroness Bowles of Berkhamsted]

3: Clause 1, page 2, line 15, after “do,” insert “or claims to do,”

[Baroness Bowles of Berkhamsted]

My Lords, as well as moving Amendment 3, I shall speak to all the other amendments in the group. Although this group involves another load of 10 amendments, there are two basic amendments, which would be applied in the five relevant clauses.

The amendment in what I might call the Amendment 3 family of amendments is similar to suggestions made by CIPA in the form of “purports to do”, to which the Minister has already responded in writing. The Law Society, in its most recent evidence, supports the idea that one who holds themselves out as a primary infringer should not be able to rely on that misrepresentation. I can share a little of the concern expressed by the Minister in her written response on the CIPA suggestion that ambiguous statements should not lead to threats, but I am not so naive as to think that the retailers always overclaim their role by mistake; it can be done to gain commercial advantage over other retailers by making a product out to be special or exclusive.

However, “purports” is perhaps a word that carries with it suspicions that it is not necessarily true, rather than that you are being wholly taken in. But a clear “holding out”, a positive claim, should not lay traps. For that reason, I suggest the stronger, assertive wording of “claims to do”. I would be happy with the Law Society’s alternative wording of “holding out”, if that were felt to be better. So the relevant provision would then say that a threat is not actionable “if the threat is made to a person who has done, or intends to do, or claims to do, an act mentioned in subsection (2)(a)”, and so on.

In his oral evidence, Sir Robin Jacob thought that the “purports” amendment was acceptable, and in their subsequent written reply Sir Robin and Sir Colin Birss said that they did not consider satellite litigation a risk, which was another point that had been made in the Minister’s earlier written response. Sir Robin and Sir Colin did say that the amendment—here they were talking about the vaguer “purports” wording—could risk blurring the distinction between primary and secondary infringers. That line, if it is blurred, is less blurred, or blurred less often, using the stronger formulation of “claims”—or, if you prefer, “holding out”.

In the event that the claim is false, the true status of the retailer is soon revealed, because the letter that would be written on behalf of the rights holder would indicate the basis on which they thought the person was the manufacturer or importer. Including such a statement is desirable for the letter to make sense as well as for guarding your back. After saying who you are—and, if you are a professional adviser, who has instructed you—the letter would then say, “We understand that you are the manufacturer/importer of the product”, and it would quite probably cite the reason for making that assertion, which might be simply because it is what it says on the tin. The reply letter might then say, “Well, actually, we don’t really make it—we got it from so and so”, and the line is then no longer blurred. In my view, a letter exchange like this is fairer than the innocent, misled rights holder also being on the receiving end of a threats action. Indeed, you can imagine circumstances—I have come across it once—in which some devious operatives might suggest to the retailers that they could say it was their own product.

It is important to recognise that the amendment does not change what happens to the retailer. The fact is that the first letter from the rights holder will be sent if there is a clear claim by a retailer that they are the manufacturer or the importer. It will be sent with the law as it is now and with the law as proposed in this Bill. The retailer, being a retailer, will still be concerned. They will still reply saying, “Oops, sorry, it’s not really like that”, or something stiffer if the letter in reply is from their lawyer. The difference that this amendment makes is not blurring; it is the false claim that makes the blurring.

--- Later in debate ---

[Baroness Bowles of Berkhamsted]

Thank you. I am sure that the Minister will not be surprised to learn that I do not quite agree with her summary. I think we have to go back again to what threats actions are all about, which is stopping the rights holder from being unfairly oppressive about their rights. They are not about protecting secondary infringers at all costs—in particular, they are not about protecting secondary infringing acts simultaneously performed by somebody who is a primary infringer.

The relevant section that we are talking about is not about a secondary infringer; it is about a primary infringer who makes something for disposal—previously, prior to Cavity Trays, you wold be in this rather stupid position where you could say, “You can’t make that anymore”, but you could not tell them not to sell it. That is a rather difficult letter that you have to write when trying to sort out the case and make sure all the ends are tidied up. If somebody holds themselves out, or claims—“purports”—to be something, that is very strong; maybe it is accidental. Actually, retailers should have a certain amount of clarity about whether they are telling the truth about their product. If they claim that they are making it and they are not, that is probably wrong under trades descriptions. I do not see why they should mislead somebody and then avail themselves of an action that was really meant to stop the rights holder being unfair. You end up with the situation where a primary infringer is able to have a bite back at the rights holder through the unfortunate accident of the relevant clause relating to the secondary acts done by the primary infringer. That is a situation that is no better than the situation prior to the Cavity Trays case.

If I talk about,

“having the same features so far as is material to the alleged infringement”,

you may think that it is vague but it will be in every undertaking that is ever agreed to and that has gone through the court, or that is done when agreeing not to go through the court but to withdraw the action. Therefore, to force things to go to the court in order to get a satisfactory undertaking will not make things any better. It will make things very bad for SMEs, in particular. I do not think the wording is vague at all. It talks about,

“so far as is material to the alleged infringement”—

that is very tight. But if you wanted it that, having pursued somebody, they could paint it blue instead of red and you have to go all the way round the loop again, it will not resolve the action. It is not saying a completely different product; it is essentially—as far as the court would perceive it—exactly the same infringement. I just think it is wrong that one cannot utilise again these sorts of letters.

Again, I would like to find out what level of support there is—there is perhaps a bit more support verbally than there might be in a vote. We only need to test on one amendment.

[Lord Stevenson of Balmacara]

The noble Baroness is making some very good points on this issue, but I am sure that she is aware of the situation—if we vote on this amendment and she is unfortunate enough to lose it, she will not be able to bring this back on Report. Might she reflect on that before she pushes the matter?

[Baroness Bowles of Berkhamsted]

I hear what the noble Lord says; if he is advising that it might be better to think about my wording a little more carefully, then I may be prepared to accept his advice.

[Lord Stevenson of Balmacara]

I think on this occasion that may not be sufficient. You will need to withdraw it, I think.

[Baroness Bowles of Berkhamsted]

Okay, I will withdraw the amendment.

Amendment 3 withdrawn.

--- Later in debate ---

Moved by

[Baroness Bowles of Berkhamsted]

6: Clause 1, page 2, line 29, leave out “contains information that”

[Baroness Bowles of Berkhamsted]

In moving Amendment 6, I will speak to all the amendments in this group, and will try to plot a careful course through them. They interrelate with one another to some extent, so it makes sense to talk about them all at once. They all concern how permissively or not various parts of the wording in the sections on permitted communications should read. There are four places in each of the relevant clauses where minor adjustments to the language are proposed. In two of those places, there are alternative wordings.

I will start with the first position, which is new Section 70B(1)(a). It states that,

“the communication, so far as it contains information that relates to the threat, is made solely for a permitted purpose.”

Amendments 6 and 7, and their counterparts, can go together, although each makes sense standing alone. They suggest respectively the deletion of the words, “contains information that”, and the deletion of “solely”. The word “solely” was first brought to our attention in evidence by the Law Society and others, so I will start with that. I find myself in a slightly strange position because it was argued that “solely” brings in the state of mind of the writer of the communication, although in their written response the Government suggest that it does not.

I am somewhat in favour of the state of mind or intent being an issue, as it would be in a wider tort in order to limit abuse. I think that including the word “solely” has a ring of that. So, why am I suggesting deleting it? I also found myself so tied up in words in this whole subsection and the one following it, which seemed to repeat itself more than once, and that is confusing. Repetition leads to inventing reasons why something is said more than once—that it must mean something different or extra, but the main thing that we want in this whole threats actions arena is clarity.

Thus it seems to me that subsection (1)(a) should be left simply as saying,

“the communication, so far as it … relates to the threat, is made … for a permitted purpose”.

There is no need for “solely”, nor for the words, “contains information”. I am not sure in this context what a communication without information is, or whether a communication without information can be seen as a threat, although we did have a client who was threatened in Texas with six shots fired into the ceiling and the taunt, “That’s what we are going to do to you in Scotland”. I suppose that is a communication, and, I think, a threat, although I am not so sure about the information.

I am also quite partial to the engineer’s definition that information is initial ignorance minus final ignorance. Apart from giving counsel lots of potential entertainment opportunities in court, I concluded that there were a few too many words here that were confusing, so I sided with the IP Federation suggestion to go for maximum simplicity. I think it is best to have both deletions.

The Law Society and others have suggested or agreed with deleting “solely”. We did not put to them the deletion of the words, “contains information”, because that came in with the last batch of evidence as a late suggestion, but it seemed to me sensible.

I shall now speak to the Amendment 8 family. This refers to the subsection which reads,

“all of the information that relates to the threat is information that … is necessary for that purpose (see subsection 5)”.

Rather as with “information”, I began to dislike the word “necessary” in this whole section because every time it came up I felt it needed some qualification. It comes up again in subsection (3) and again in subsection (5). In each instance I found the direction and reason for wanting qualification to be different.

As it is used in this first instance, it sets a high standard for what can be put in the communication, and I have no problem with it in that context. But here we are talking about letters to retailers which may be for a variety of reasons. If the purpose is to try and find the primary infringer is it right to send a communication to every single retailer, for example? That might be an effective deterrent to them continuing to sell and is just the sort of thing that threats actions are about preventing. Or should you deliberately select the weakest retailer and make an example of them? So I felt that the word, “necessary” here needed to have some qualification, and that the information should be both “necessary” and “proportionate”. There are other words that could have been used, such as “appropriate”, but proportionate and disproportionate are words well used in the context of legal actions.

If I am completely honest about the occurrence of “necessary”, I think it should also say “sufficient”. Those are the usual ways to define something mathematically; for example, the conditions that are necessary and sufficient to define a positive, real and rational function—we could do with a few more of them in some of this legislation. The word “necessary” does not mean you have said everything that is needed to be said but choosing to include “proportionate” helps out a little with saying the things that should be said.

In a way, the problem is similar to what comes later in subsection (3), where we had more discussion about the court being able to have flexibility. The wording of subsection (3) allows extra things to be treated as a “permitted purpose” and it might, possibly, allow them to be discounted as was suggested by Professor Sir Robin Jacob when he was before us. We get into that again in the context of the word “may” in subsection (5).

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[Baroness Bowles of Berkhamsted]

I beg leave to withdraw.

Amendment 6 withdrawn.

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[Lord Lucas]

I am very sympathetic to these amendments. The internet is an international community, it has developed an international and agreed method of dealing with infringements and it would be daft of us to try to insist on a separate method of dealing with them just for the UK, even if we may be in that sort of mood as a country at the moment. This is a moment to try to swing behind an international system that works.

[Baroness Bowles of Berkhamsted]

This is the last long intervention I shall make, but I have some additional points that I would like to share on this. The idea of making a take-down notice into a permitted communication evolved during the course of our hearing with the BBC and eBay. The BBC suggested that one could utilise wider words than those I chose to use. I used “digital platform”, and it used wording from the electronic commerce directive, which refers to,

“an information society service provider”.

It is quite useful to be reminded that the electronic commerce directive has an impact upon the way take-down notices have developed over time. As the noble Viscount, Lord Hanworth, said, there are two reported cases where courts have declined to make an interim decision about whether a take-down notice constitutes a threat because it is an issue of substance that would need to go to full trial. In its last submission, the BBC referred to the Cassie Creations case. That case refers to the earlier case and, in particular, to the Quads 4 Kids case. I know we like to have judgments and case law in order to evolve law, but we have now got into an area where, even if we had a full trial decision interpreting the law as it stands, we would still be faced with having to look at the policy intent for the world we live in.

Relevant to that are also the bits of law that are being taken away by the Bill. It removes the right a rights holder has at the moment that mere notification of a trade mark or design registration or design right is not a threat. Of course, as soon as you put the word “infringement” into the notification, you bring in the notion that it might be a threat, although in the context of a take-down notice, it is not a threat of litigation because take-down avoids there being litigation most of the time. EBay told us that it happens some 97% of the time, and even the other 3% does not all go to court, as that figure includes when counterproposals are made.

I am trying hard not to get into arguing the case that has not gone to full trial, but the situation is that platforms are not liable for infringements until they are put on notice of an intellectual property right—that is the effect of the e-commerce directive. At the moment, you can put a platform on notice, at least for trade marks and designs, without using the word “infringement” using the safe harbour mere notification provision. That was the case for patents as well prior to the 2004 revisions.

When it comes to take-down notices as they are being used, to make the procedure sensible, the notices use infringement terminology, but in general platforms do not feel that they are being threatened. At least, that is what eBay said in evidence. It said that threats were more likely to arise in the few cases where there is further correspondence. However, as the BBC pointed out, threats and the suggestion that a take-down notice is a threat have been raised and have twice been considered to be a substantive point that would need a fair trial. In the Quads 4 Kids case, Judge Pumfrey, as he then was, said it was an arguable case needing full trial, and that precedent of leaving it for a full trial—which did not happen—was followed in the Cassie Creations case.

However, to stop being liable, once they have been put on notice, platforms take action and take down infringements without the matter going to litigation or even the threat of litigation—unless the take-down notice constitutes a threat, which has not been decided. You also need to consider which leg is a threat. Is it both legs, the first leg from the rights holder to the platform, the second leg from the platform to the vendor or a pass-through transmission from the rights holder to the vendor via the platform? All this is going to go on and be uncertain until there is a judgment in a yet-to-come case that makes it beyond the interim stage. Often there are other things that enable a decision to be made, so this point still does not get decided.

Meanwhile, the Bill is taking away the mere notification right, which is at least theoretically useful as a defence in such instances—and some say that it is more than that— and replacing it with the all reasonable steps defence and permitted communications, but permitted communications have new limitations as well as new possibilities. There is nothing quite so broad as the existing right under mere notification when all you are saying is, “This is the patent number”, “This is the design number” or “This is the trade mark number”— I should correct myself as it was taken away for patents, but some people have said it should come back. We have something here where a safe harbour right is being taken away and a less comprehensive defence is being put in its place. In the context of a digital platform, that may be a very significant change, so the basic suggestion in all these amendments is that a take-down notice should be a permitted communication.

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[Viscount Hanworth]

Amendment 15 is a trivial amendment. It says,

“leave out ‘person who made the threat (T)’ and insert ‘person (T) who made the threat’”.

I have observed that, in the subsequent text, T denotes a person rather than a threat. It occurs to me that it would have been better to denote the person in question by a capital P instead of a capital T. Even a capital C might be used to denote the complainant who makes the threat. This is a rather clumsy piece of illogic in the text, and I think it brings it somewhat into disrepute. These remarks apply also to Amendments 32, 50, 68 and 84, which are absolutely identical in their content. It is not the threat T that is instanced in the subsequent text; it is the person T that is instanced, and therefore there is a piece of illogic in the Bill. I think that should be expunged. I beg to move.

[Baroness Bowles of Berkhamsted]

I agree with the noble Viscount. I think it would have been less ambiguous if you had used P for person, but that might be used in another part. However, I observed that in the Digital Economy Bill, where there was the same kind of phrasing, they put the person, followed by a letter, who did something or other, so I think that the noble Viscount, Lord Hanworth, is right.

[Viscount Hanworth]

I have to say that mathematicians instantly spot this, so there are three of us who hold that opinion rather strongly. Others, who are of a different culture, cannot see what we are driving it.

The other amendment in the group is Amendment 16, which is replicated in Amendments 33, 51 and 85. We have already been over this ground, but I repeat that the amendment seeks to leave out “all”. This amendment relates to the requirement that the person T, who has made the threat, should take all reasonable steps to identify those who are ultimately responsible for the infringement, before they can claim that their threat is justifiable. It is argued that this places an onerous burden on a rights holder, who is subject to an infringement of e-commerce. Therefore, the word “all” should be deleted. We have been here before because it has been suggested that, instead of the phrase “all reasonable steps”, we should allow only steps that are practicable. I think the basic point is that the onus falls too heavily upon the claimant, in the case of e-commerce, of infringement.

[Lord Saville of Newdigate (CB)]

I entirely agree that the word “all” sets too high a test and should be removed.

[Baroness Bowles of Berkhamsted]

I also agree that the word “all” should go. As regards new Section 70C and new Section 70C(3), a lot of technical people agree that it should be looked at again, so I ask the Minister to do so.

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Moved by

[Baroness Bowles of Berkhamsted]

17: Clause 1, page 4, leave out lines 1 to 3 and insert “statutory regulatory bodies or entitled to legal professional privilege.”

[Baroness Bowles of Berkhamsted]

This is the last group to move, and I can be relatively brief. The amendment speaks for itself. I have harvested suggestions from the chartered institute and the Law Society with the intention of making this wording a bit less clunky but also international. During hearings we looked at what duties regulators had when people were behaving badly. I have not gone so far as to name just the club of advisers envisaged in the CIPA amendment, but I thought it would be good to say that they should be regulatory bodies that were authorised by statute. I did not mention a statute because even one statute did not fit the whole of the United Kingdom. “Statute” is well understood in other jurisdictions. I thought the words “entitled to legal professional privilege” that the Law Society suggested was useful. I have done it in one line instead of three, so at least it is brief. I beg to move.

[Baroness Neville-Rolfe]

I am grateful to the noble Baroness, Lady Bowles, for her very brief introduction. We have debated this issue through the oral evidence. Not least for the benefit of people who feel strongly about this, I will set out why we are not inclined to accept these amendments.

The tactic of suing a professional adviser for making a threat has been used to disrupt negotiations and hamper the legitimate client-adviser relationship. We heard that convincingly from several people who gave evidence. Exempting professional advisers from the threats provisions has long been called for, because it stops game-playing.

The Bill delivers an exemption in a carefully limited way. The amendment seeks to restrict the protection available for professional advisers to just those who are regulated by statutory regulatory bodies or entitled to legal professional privilege. It is right that a professional adviser should not become personally embroiled in a threats action, when they were acting only on behalf of their client. I do not agree that this principle should apply to only a limited category of particular professional advisers. Neither should the law on threats be the place to define which regulatory bodies are considered appropriate to oversee exempted advisers. As we were discussing, it is an increasingly global market. The definition must capture the different types of foreign and domestic IP legal practitioner, who may risk facing a threats action under UK law. The current draft does that.

The first limb of the amendment would seek to restrict protection to those whose services are regulated by a “statutory” regulatory body. The term is unclear, leading to uncertainty about the exact scope. In addition, the requirement of statutory regulation would exclude international lawyers with a system of professional self-regulation, such as the American Bar.

The second limb provides that, as an alternative to being regulated by a statutory regulator, professional advisers might fall within the exemption only if they are entitled to legal professional privilege. We all know that the law on privilege is complicated and inconsistent in different jurisdictions. An adviser may not be able to be sure whether they can rely on legal professional privilege in particular circumstances. Again, that could restrict options available to business and advisers might therefore—this is always the problem—continue to seek the indemnities we heard about in our evidence sessions.

We have delivered a careful, limited exception that requires the legal adviser to be regulated but is not overly prescriptive or complicated. I therefore ask the noble Baroness and the noble Lord not to press their amendments, as I think we have found a way forward.

[Baroness Bowles of Berkhamsted]

I beg leave to withdraw the amendment.

Amendment 17 withdrawn.