Intellectual Property Bill [HL]

Lord Clement-Jones Excerpts

Wednesday 22nd May 2013 Lords Chamber

[Lord Clement-Jones]

My Lords, I thank the Minister for his characteristically careful exposition of the Bill and for the amendments to legislation briefing that he provided beforehand. I am also very much looking forward to the maiden speech of the noble and learned Lord, Lord Walker of Gestingthorpe, a fellow alumnus of Trinity College, Cambridge. I am sure that we are all looking forward to it.

I shall not re-rehearse some of the points made on the Enterprise and Regulatory Reform Bill, when we had a full canter through the intellectual property policy issues. As the noble Lord, Lord Stevenson, said, later in the year we will have the statutory instruments bringing forward further policy recommendations of the Hargreaves report. I agree with him, however, that the separation between the DCMS and BIS in terms of intellectual property and the creative industries is unfortunate. It was not done by the previous Government. It is not being done by this Government, but a common intellectual property and creative industries Minister is much to be desired.

I broadly welcome the changes in the field of patent and design law made by the Bill. As the Minister says, it is particularly technical in nature. The setting-up of a new unified patent court is an essential ingredient of the new unitary patent, which is effectively the realisation of a long-standing, six-year ambition by the IPO, strongly supported by successive British Governments. There will be a branch of the central division of the court in London. Here I must declare an interest as a partner in a global law firm. I hope that the parties will have the freedom to choose which branch of the court to litigate in. I welcome many of the other provisions relating to patents, which will benefit small business in terms of simplification and cost. I hope that the Minister will confirm that court fees in particular will be affordable to small business.

There is, however, clearly confusion between the Government’s press release, which estimated some £200 million of benefits, and the Explanatory Notes, which put them at £2 million per annum over 20 years—yet another demonstration of the benefits of EU membership. Generally, doing away with the need for validation in every country should mean that the cost of protecting inventions for the whole of the internal market will be much reduced. However, my noble friend will be aware of considerable concern about the changes to the opinion service under Clause 15(4), which gives power to the comptroller to revoke a patent after issuing an opinion. This, it is strongly argued, would be a deterrent to using that service.

I welcome many of the detailed measures in relation to registered and unregistered design right which, as the Alliance for Intellectual Property says, has long been a forgotten IP right. It is also one which Anti Copying In Design, or ACID, has been pressing for. In particular, there is: the change in ownership of unregistered designs commissioned by a third party so that the designer will be the initial owner of the design, not the commissioner; clarifying the meaning of “qualification by first marketing”; the introduction of a non-binding opinion service for registered designs; and enabling UK SMEs to gain protection, in addition to the EU, through territories covered by the Hague agreement.

However, the scope of the Long Title provides an opportunity to extend some of the provisions of the Bill relating to designs and to correct some anomalies within existing IP law. I would like to outline those today and I hope we will be debating them on further stages of the Bill. On measures relating to design, Clause 13 introduces a new criminal offence of deliberate infringement of a registered design right. While this is a welcome move—and I do not agree with some of the points made by the noble Lord, Lord Stevenson—to be of any benefit to the vast majority of designers in this country, the Bill needs amending so that criminal sanctions will also apply to the deliberate infringement of unregistered designs.

Design is of key importance to the UK economy. It is estimated that there are in the region of 350,000 designers in the UK, as has been mentioned, and that UK businesses spend some £35.5 billion on design each year. The majority of the UK’s design community are lone, micro or small and medium-sized enterprises. Eighty-seven per cent have fewer than 10 employees and 60% have fewer than four. Yet there are only approximately 4,000 designs registered annually in the UK. Each year, between 18,000 and 25,000 unregistered designs are lodged with ACID’s data design bank by its approximately 1,100 members, so it is reasonable to assume that the majority of the UK’s designers rely on unregistered design rights and copyright.

The introduction of criminal sanctions for deliberate registered design infringement is of course a progressive step, as this is the first time that criminal sanctions will mirror those for copyright and trade marks, but why is this new criminal offence limited to the infringement only of registered designs? Surely, criminal sanctions need to apply to unregistered design rights, as they do to copyright, to have any real and lasting benefit to UK designers. I plan to make the case in greater detail in Committee, but criminal sanctions have been available for copyright infringement since 1862, and for trade mark infringement since 1994. Criminal prosecutions have been used sparingly, sensibly and appropriately. Copyright, trade marks and unregistered design rights are all property rights, and so is a registered design. But whereas persistent copying of the first two constitutes a serious criminal offence punishable by up to 10 years’ imprisonment, persistent copying of designs is currently not a criminal offence at all. This is completely anomalous.

Persistently copying a two-dimensional drawing of a design or a design document can therefore give rise to criminal liability. Yet when this 2D work is converted into a 3D design, unless it is protected as a work of artistic craftsmanship—and we have many happy memories of discussing that on the enterprise Bill—copying that 3D version would not be a criminal offence. I fail to understand the reason for the policy decision behind that. How do the Government justify giving a higher level of protection to a 2D design than is given to the 3D manifestation of that design?

Civil action is often very difficult, given the inequality of arms between designer and infringer. I will give further examples of that in Committee. In some cases we have a designer with a turnover of £50,000 a year versus an £8 billion-turnover company. It is grossly unequal when one considers the possibility of taking civil action. One might argue that this was an attempt to incentivise design registration and increase revenue for the IPO, which, of course, we should be reminded is a trading body. I hope that the Minister will confirm that financial considerations have not been elevated above the needs of the majority of UK designers who rely on unregistered rights. Finally on the new criminal penalties, why have Section 110 of the CDPA and Section 101 of the Trade Marks Act, which ensure that company officers are liable if conniving or consenting, not been replicated here? Surely that is a crucial omission.

I turn to Clause 20 and the content of the annual report. The clause contains a very welcome requirement for the Secretary of State to report annually on the activities of the Intellectual Property Office and how it has supported innovation and growth. The clause is, in part, a response to the recent consultation on the role of the IPO. Overall, this is a positive step and provides a much-needed focus for the IPO’s activity. However, it is at the moment limited in scope and needs to be expanded. During the consultation, UK Music argued that there should be a requirement to report on how the activities of the IPO have maximised growth and innovation arising from the creation and exploitation of intellectual property. The Government accepted this point in their response to the consultation, while acknowledging that such a requirement cannot be restricted to existing industries and business models. However, the commitment is not currently explicit within the clause. Committee stage presents us with an opportunity to incorporate a clear reference as to how the IPO’s activities have supported IP businesses.

Similarly, paragraph 91 in the Explanatory Notes that accompany the Bill suggest that the report will cover new legislation and policy developments, including those related to copyright licensing. The music industry made a voluntary commitment, as part of Richard Hooper’s Copyright Works report last year, to report annually on progress around joint licensing. This is a welcome step and I believe that we can expect the first such report from the industry via UK Music later this year. But the Minister gave an assurance at Grand Committee stage of the Enterprise and Regulatory Reform Bill in January that this would be included in the annual report. This is reflected in the Explanatory Notes. However, it is not included in the clause in the Bill. Why not?

On Report, the Minister encouraged us to think that the report would also include updates on the state of protection of metadata and of cross-border co-operation. The noble Lord, Lord Howarth of Newport, was keen for the report to contain discussion about how the Intellectual Property Office seeks to balance its defence of the interests of intellectual property holders with the interests of the dissemination of knowledge. I am sure that he will expand on that today. Will the report also review the operation of the unified patent and the court? I very much hope that the Minister can confirm these specifics, either now or in Committee.

There are other areas where there is the opportunity to correct anomalies in intellectual property law for potential inclusion in the Intellectual Property Bill: first, to increase the maximum penalty for digital copyright theft to match that available for physical copyright theft. Criminal offences for online copyright theft have maximum penalties of two years’ imprisonment. However, criminal offences for physical copyright theft have maximum penalties of 10 years’ imprisonment. This discrepancy came about because the new offences were introduced by secondary legislation, using the European Communities Act 1972, as part of the UK’s implementation of the copyright directive in 2003. Penalties for new criminal offences, introduced by secondary legislation via the ECA, are limited to two years’ imprisonment. That was also after my right honourable friend Vince Cable’s Private Member’s Bill, which increased penalties for criminal copyright offences to harmonise them with those available for trade mark offences at 10 years. I very much hope that I have a receptive audience. Surely, criminal sanctions should not be dependent on whether the offence is taking place in an online or physical environment. Intellectual property is being stolen whatever format is being used.

Secondly, the discrepancies in the level of financial penalties available in magistrates’ courts should be addressed. Thirdly, a deterrent element to UK civil damages should be introduced for IP infringement by providing for the awarding of exemplary damages. This was recommended by the Gowers report, the report of the Culture, Media and Sport Select Committee in 2007, and so on.

Fourthly, the Government should use the Bill to extend the public lending right to remote e-lending. Over the past few months, William Sieghart and a distinguished advisory panel have reviewed myriad issues and concerns around the subject of e-lending in libraries. It is a very good report that I very much hope will be implemented. The Government have now committed to pursuing the legislation, and it seems that the Bill is a good instrument for doing so.

Finally, the Minister is exploring the question of unfair contracts, which he undertook to do on Report on the ERR Bill. I very much hope that this will happen during the passage of this Bill, which would provide a useful vehicle for any such changes.

There a number of other issues in the Bill relating to Clauses 1, 7 and 19, which I will raise in Committee, but I hope that the Minister will answer at least some of the questions that I have raised.