Intellectual Property (Unjustified Threats) Bill [HL]

Lord Hope of Craighead Excerpts

Wednesday 15th June 2016 Grand Committee

[Lord Hope of Craighead (CB)]

My Lords, I add my words of welcome for this Bill and for the use of the special procedure, which will enable detailed scrutiny to be conducted in a more appropriate setting for a Bill of this kind than on the Floor of the House. Considerable thanks are due to the Law Commission for the care it has taken in the formulation of the proposals, and to the Government for initiating the process in the first place and agreeing to take the legislation forward in this way.

By way of background, though it may be an obvious point, intellectual property is a highly specialised area of the law. The problems that it gives rise to are often complex and difficult to resolve. In the case of patents, for example, which I had some experience of in practice when I was at the Bar—though nothing like the distinguished practice that the noble Baroness, Lady Bowles of Berkhamsted, has had—I found that construing and understanding the patent specification in itself can be a time-consuming and difficult exercise. One must understand the subject matter of the patent as well. What may appear at first sight a fairly simple matter will very often turn out to be far from simple once you get down to the detail of the design or the process that is protected. Specialist advice is almost always needed both as to the law and the technology. Advice of that kind tends to be expensive because the intellectual effort required is so demanding and so time-consuming. Anyone who is drawn into legal proceedings in this area of law has to face up to that fact, and that is why threats are so compelling in this field. For the same reason, those who have taken the trouble to register their rights will usually have had to spend quite a lot of money in taking that step.

As the Minister has properly recognised, it is essential that those who go to the length of registering their patents, trademarks or design rights should be able to enforce the rights that registration gives to them. The law must allow those rights to be enforced. Those whom the law in this area regards as the primary actors—those who make things or affix signs to their goods or packaging, for example—must accept that there may be others who do such things who have taken steps to protect themselves against infringement of their rights and have a legitimate commercial interest in doing so. They must take the risk of proceedings against them if they do not do their homework first to see whether there are any relevant intellectual property rights that must be respected. Registration is designed to give notice to those who need to know, because they are primary actors, that these rights exist. In that respect, as I understand it, the system across all these IP rights works well.

But—and this is the area we are really concerned with here—there are others, as the noble Baroness has explained, whom the overzealous or unscrupulous may see as competitors, and they are not in that category. These are the secondary actors, whom the law has long sought to protect against misuse of the right that has been protected. The noble and learned Lord, Lord Mackay of Clashfern, told me yesterday about a case which he had when he was at the Bar in which his client was unashamedly seeking to drive his competitors out of the market by making threats of infringement proceedings against them. The competitors were simply using, not making, equipment of the same kind—it happened to be cranes—as that over which his client had a patent. He told me that his client was one of those people who would not take no for an answer—I suspect that the noble and learned Lord was the person saying no—and he was not to be put off what he was doing. As the impact assessment for this Bill puts it, people such as users, retailers, wholesalers and customers ought not to be and, under the law as far as it is, cannot legitimately be threatened with proceedings of this kind. I think that the noble and learned Lord was rather relieved when at the end of the day the overzealous patentee, when taken to court under the previous legislation—that is before the 1977 Act—lost his case. Situations of this kind are not confined to that one experience. They are, as has been explained, not uncommon, and that is what this Bill is all about.

Two questions need to be answered at this stage. The first is whether the protection provided by the existing law is sufficient and proper and needs to be reformed at all. The second is whether the reform proposed here is the right kind of reform. As to the first, it seems that there are ample grounds for believing that reform is needed. I do not think that the noble Baroness, Lady Bowles, disputed that point. Section 60 of the Patents Act 1977, which Clause 1 of the Bill will replace in relation to patents, looks relatively simple and satisfactory at first sight. However, we will have to see how it works in practice. The provisions in this Bill are longer and more elaborate. One might wonder whether it was wise to depart from the simple approach. However, the present approach in the statute suffers from major defects, among which are a failure to distinguish clearly between those threats that may be made legitimately and those that may not. The defences which may be advanced if proceedings are taken need to be clarified. The existing law fails to set out clearly what communications will not amount to an unjustified threat and, as has been pointed out, says nothing either about the position of professional advisers acting on the instructions of someone else. The result is a situation that, despite its apparent simplicity, has been shown to be unduly complex as the boundaries between what is permissible and what is not are unclear, resulting in unnecessary costs.

As the Minister explained, the arguments for reform were fully explored by the Law Commission in an impressive series of studies in its report of April 2014 in the light of the responses received to its consultation paper of the previous year, and in its further report of October 2015 in response to the Government’s request for a draft Bill. For my own part, I think that the arguments advanced for reform are compelling, and it seems to me that a strong case has been made out. I was particularly struck by an observation by the Scottish Law Commission in the course of its examination of the same issue. It made the point that a Scottish rights holder may prefer to issue proceedings for infringement in Scotland against a potential infringer rather than simply write a letter because it risks ending up in the High Court in London, which is the last place that a Scots infringer would wish to be taken, facing an action for groundless threats. This is the “sue first, write later” culture which seems to exist under the present law and which the Bill seeks as far as possible to eliminate. As the Law Commission put it in its October 2015 report, the current law tends to drive cases to court.

As for the question of whether this is the right reform, the Law Commission acknowledged in its report of October last year that one of those who responded to its consultation paper, Professor Sir Robin Jacob, a former judge with much experience in this field, said that the solution which had been adopted here was not the right solution and that it should be scrapped. The paper does not elaborate in great detail on Sir Robin’s points but it looks from what we are told that his complaint was that the Bill is excessively elaborate and complicated—I do not think he was making quite the same points as the noble Baroness has made—and that there is no hurry and therefore one should take more time to devise a more satisfactory reform. However, so far as the people who responded to the Law Commission are concerned, he seemed to be out on his own. Those who have taken a different view include a variety of professional bodies, including the Law Society of England and Wales, the intellectual working party of that society and the City of London Law Society Intellectual Property Law Committee. They also include the Law Society of Scotland, which in a communication I received earlier this week said that it welcomes and is supportive of the Bill.

It looks as though there was a clear choice whether to create an entirely new remedy to deal with the problem, such as something based on tort, or to build on the existing structure instead. The advantage of the latter, which was chosen, is that it makes use of a system with which those who work in this field are fairly familiar. That seems to be an advantage. The defects in the system are known, have been identified and can be addressed now without the need for further research and consultation, which a redesign would certainly need. Yes, Sir Robin is right, the Bill’s provisions are more elaborate and complicated than the legislation that exists at present but that is the price that has to be paid for clarification. If a more fundamental solution is needed, it can wait until later.

Detailed scrutiny is for the next stage, of course, but I will mention one point in passing, which I simply picked up when comparing the draft Bill, which the Law Commission set out in appendix C to its October 2015 report, and the Bill before us. The Bill before us is almost exactly the same as what was drafted by the Law Commission. There seem to be only two differences apart from a change to the headnote of Clause 3. One is the very proper addition to Clause 1 of provisions to ensure that protection against unjustified threats will be available in the unified patent court—which I think will become a reality next year—as well as in the UK courts. That does not require any explanation other than that one might observe that issues of infringement and the validity of a unitary patent, which might be raised by a defence of justification by a patentee to a threats action, will be in the exclusive jurisdiction of that court and cannot be brought to the UK court.

The other point that struck me as requiring some explanation is the omission in regard to each kind of intellectual property of the provision in the Law Commission’s draft. It seems designed to clarify what is meant by the references in those clauses to infringement in relation to proceedings for an order for delivery up or disposal. It may be that, on further consideration, clarification was thought not to be necessary. If that is so, then that is a perfectly good explanation. I am not searching for an answer now but, if one is available, I would be interested to know why that bit was taken out.

On the issues of principle, I fully support this Bill. I believe it to be uncontroversial, on the whole, and I agree that it should receive a Second Reading in the terms of the Motion.