Product Regulation and Metrology Bill [HL]

Lord Lansley Excerpts

Committee stage
Wednesday 27th November 2024 Grand Committee

Any further specification would limit our ability to ensure that enforcement authorities can be equipped with necessary powers to enforce their areas of responsibility. Relevant authority and inspectors’ functions are outlined within Clause 3(3), 6(3), 3(4) and 6(4).

[Lord Lansley (Con)]

I apologise for interrupting the Minister, but Amendment 60 asks who the relevant authorities are. Paragraph 3 of Schedule 5 to the Consumer Rights Act 2015 tell us in statute, as things stand, who the domestic enforcement authorities are. That is not in subordinate legislation—it is in primary legislation. The Minister appears to be taking a list that is in primary legislation, which is amendable by regulation, and turning it into something that is a power to specify by subordinate legislation. What was wrong with retaining the enforcement authority list in Schedule 5 to the Consumer Rights Act and adding to or subtracting from it as necessary?

[Lord Leong (Lab)]

I thank the noble Lord for that point. As I said earlier, as it stands the relevant authorities are exercising public functions—that is, the Secretary of State or the Health and Safety Executive, in the examples that I gave earlier. However, because of the evolving and changing nature of the new products on the market, we may need more people with specific technical knowledge. We do not want this Bill to straitjacket us so that, every time we need to appoint somebody, we have to come back with new primary legislation.

[Lord Lansley (Con)]

But can the Minister tell us why the list in primary legislation under Schedule 5 of that Act, which has been amended from time to time since 2015 by regulation, is not a suitable basis for proceeding in future? What is wrong with using that list?

[Lord Leong (Lab)]

Personally, I do not see why there is anything wrong with it—but in this Bill itself, I am trying to say that we need the flexibility. I just have to continue.

Further clarification of powers and functions would restrict the ability for enforcement regulations to provide powers needed to enforce new product and metrology regulations. We must enable flexibility so that we do not create gaps in enforcement powers now or in the future. We intend to plug the gap in enforcement by making regulation applicable at the border, so that enforcement can take place before unsafe or non-compliant products are sold.

I understand the good intentions behind these amendments but, equally, I hope that I have resolved the concerns that led to them. The Bill provides simple, flexible powers that will help enforcement authorities to fulfil their roles. I submit that we have balanced parliamentary scrutiny with the necessary flexibility in a way that best serves the rule of law. It is for these reasons that I ask the noble Lord to withdraw his amendment.

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[Lord Fox (LD)]

My Lords, I also support Amendment 35 in the name of the noble Lord, Lord Lansley. As opposed to the last group, which focused on a large number of slightly different issues, these two amendments focus on one area and, given that they are only in the names of the noble Lord and myself, you can be sure that they will be technical in content.

I am sure the Minister has often wondered why his mobile phone can operate on Bluetooth in any country of the world, and why the automated vacuum cleaner that my noble friend Lord Foster so ably described in the last session can pick up wireless instructions no matter where it is working. The answer is that sitting underneath all of those are things called standard essential patents, or SEPs. They are patents that are necessary to the implementation of a collectively-agreed technical standard—5G, wifi, Bluetooth and so on. Standardisation across communications technologies makes it possible for devices to work with one another wherever they are.

Connectivity is increasingly a part of the products that the Bill seeks to regulate, as we have heard. UK industry is at the forefront of developing connected products that aim to address some of the biggest issues that we face, including healthcare and climate change. The Bill is about ensuring product compliance with technical standards. Compliance or conformance with the technical standard can often be premised on the implementation of a particular technology; as I have said, wifi is an example. For a product to use the wifi logo and technology, its technical performance with the chip set has to be tested and certified. Bluetooth and other wireless technologies used for power management in the context of electric vehicle chargers and smart metering are all examples of where the technical standards of operation are underpinned by these SEPs.

I realise that the Bill is not about intellectual property, but it is about regulating the properties of things. Unless the situation of SEPs is fixed, those properties can be in a state of flux. SEPs should be treated differently from other patents, which is why we are introducing them into this debate.

Of necessity, as a result of a dominant market position, the SEP holders have to voluntarily commit to license their technologies on fair, reasonable and non-discriminatory terms. The licensing of SEPs is important in ensuring that UK businesses are able to use the most modern and effective versions of these technical standards. In practice, SEP holders often evade their voluntary commitments to license their patents fairly because of a lack of clarity over what constitutes fair, reasonable and non-discriminatory, caused by weaknesses in the UK’s legal framework. SEP holders can abuse their position as gatekeepers of these technical standards by using the threat of costly court action and injunctions to force potential licensees to accept excessive royalty demands or quit the market. That can effectively prevent smaller companies from entering into, and being able to operate in, a market. In the previous group, the noble Lord, Lord Sharpe, asked whether the Bill was pro-innovation or anti-innovation. Unless we round up this issue on SEPs, I have to say that it is absolutely stifling innovation.

In most cases, SEP holders are well resourced and aggressive, while many licensees, especially SMEs, lack the knowledge and resources to defend their rightful position in court or push back against the mere threat of litigation. Increasingly, there is a third sector of people who buy up the rights to these patents and treat them as a revenue stream, whereby they go after and literally squeeze the people who have to use these SEPs. In essence, it becomes a secondary market for these things, without the necessary protections.

There are two issues. First, the availability of injunctions to the UK’s current SEP framework means that both small and large technical innovators who operate downstream of the primarily foreign SEP holders can be forced to accept excessive SEP licensing fees because they want to use this technology. The second problem is the lack of transparency: they quite simply do not know who holds these patents until they get an injunction through the mail. That is the problem. With the threat of injunctions and lack of transparency, UK manufacturers are frequently faced with a no-win situation. They have to either pay these fees or get out of the market, because they cannot afford to defend them at an injunction. This is in spite of the SEP holders making a voluntary commitment to license the SEPs on fair terms as part of the standard-setting process. So there is a problem.

The situation creates significant cost and uncertainty for some of the most innovative UK firms, it stifles innovation and, importantly, in the context of this Bill, it challenges the efficiency and effectiveness of products that rely on SEPs and are regulated by this legislation. That is why it is appropriate to have this discussion here today. The UK IPO is aware of issues concerning the licensing of such technology but to date has done nothing, or has insufficiently acted, to protect UK businesses that must use these technologies. This amendment is an opportunity for the Minister to commit to legislative action on SEPs to address the critical issues of products being threatened with exclusion from the people who need them, the imposition of unfair royalties and SEP licences being refused to companies that need them. I beg to move.

[Lord Lansley (Con)]

I am most grateful to the noble Lord, Lord Fox, for explaining so expertly what standard essential patents—SEPs—are and how important they are to the use of legislation in specifying product requirements, which of course are directly linked to the standards that we will go on to talk about. We have previously talked about the importance of standard-setting, but there is no point in setting standards if they cannot be fulfilled, turned into product requirements and brought to the market—that is what we are talking about. In particular, the noble Lord was absolutely right to stress that we should be thinking in this legislation about how we can promote innovation. Addressing this issue is one of the central ways in which we can do that.

Our two amendments serve the same purpose. The only distinction is that I was trying to suggest, in this particular instance, the importance of taking a power and not attempting in the primary legislation at this point to specify precisely how that power should be structured, because it is necessary for there to be a full consultation about the changes that would need to be made—not least, probably, to the Patents Act itself. When we come back on Report, if we go down this path there may be a need to have a power to amend the Patents Act as well.

The point here is that, as the Intellectual Property Office itself said, SEPs will be

“of growing importance to the UK economy”.

This is not a small matter, and it is becoming more important because of connectivity, the internet of things and the multiple range of SEPs associated with many of these standards. The noble Lord, Lord Fox, is absolutely right about the problems that can emerge for companies, particularly SMEs, in understanding the visibility of SEPs and who holds them—and, for that matter, in being absolutely clear about which ones are essential and which are asserted to be so, but which are not in fact essential to the standard.

I shall not delay the Committee now, but I want to focus on the question of why we need a power. First, the Intellectual Property Office is trying to do its best within the powers available to it. In July, Ministers announced the establishment of the resource hub, which gives guidance in relation to SEPs and enables companies to understand the SEP ecosystem. However, that does not change some of the fundamental issues to which the noble Lord, Lord Fox, referred. There are licence holders who are delaying access to their patents, and who are using that as a mechanism to get terms that are not fair, reasonable and non-discriminatory. SMEs are finding it very difficult to know what FRAND terms look like in relation to many of these products.

There is another issue: not only the individual royalties that must be paid in relation to these licences, but the global royalties that need to be available. Although there is case law that can be looked at, it is very difficult for SMEs in particular to understand how that may be applied to them. Of course, there are global royalties being established through large cases, which delay access to this intellectual property for some of those who need to use it; they are therefore unable to know how viable their product may be.

These issues have been addressed in the European Union. At present, there is a regulation agreed between the European Commission’s proposal and the European Parliament, and it is awaiting the conclusions of the Council of Ministers. Let us just focus on that for two seconds. What does it do? It sets out that there needs to be transparency, a mandatory register, and the ability for an official body to undertake a reality check asking, in essence, whether something is actually essential to a standard. It facilitates fair, reasonable and non-discriminatory terms. It also delays for nine months the point at which any licence holder could go to court to secure an injunction for these purposes while there is a requirement for a negotiated process; indeed, it entertains the possibility that, under the regulation, this may relate not only to individual royalties for licences but to the aggregate of those royalties for licences. So there is a legal structure in the European Union for these purposes, in order to overcome what is otherwise, for SMEs in particular, an extremely difficult set of circumstances arising from case law for them to understand and interpret.

This is not a small problem for some SMEs. For example, I have been talking to Tunstall Healthcare, which I know well from its role in providing connectivity, particularly for people who require care at home; it looks after more than 100,000 of them. In order to access licences for 4G and wifi connectivity, it needs to negotiate many licences and to identify where they exist. A company called Bullet was trying to develop and market highly resilient smartphones, but it ceased trading, owing millions of pounds to SEP holders, which contributed to its inability to continue trading. So I think we need to act.

The IPO has said that it will respond to the consultation at the end of 2024—so any minute now. I am told, however, that that will not now happen in 2024. What I really want to hear from the Minister is, first, that this is a suitable Bill and a suitable opportunity to take a power—without specifying all the details of that power—to make provision in relation to SEPs. Secondly, I want to hear that the IPO and Ministers will undertake to respond to the consultation in the early part of next year, putting forward proposals for how the new power is to be used and inviting responses.

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Moved by

[Lord Lansley]

38: Clause 2, page 3, line 37, at end insert—
“(7A) Provision made in reliance on subsection (1) may (among other things) identify product requirements by reference to international agreements or standards relating to the marketing or use of products, including agreements or standards as they have effect from time to time.”Member's explanatory statement
This amendment would enable product requirements to by met by reference to international standards.

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[Lord Lansley (Con)]

My Lords, there was a substantial debate on a previous day and earlier group on whether product requirements should, from time to time, be set by reference to the European Union standards to which they should be aligned dynamically or, as my noble friends Lord Frost, Lady Lawlor and Lord Jackson of Peterborough argued, set by reference to standards in other jurisdictions. “Relevant foreign law” was the term that they used.

I think that we should lift our eyes beyond that debate and say that we want not simply to arrive at a point where we set our standards by reference to those determined in other jurisdictions, but that we should maximise the opportunity for international standards to be the basis on which standards and product requirements are set in all these jurisdictions. I say this not least because in June, before the election, when regulations were going through for the temporary effect to which this Bill gives a permanent basis, there was some legitimate concern about whether the competencies inside our standards-making organisations would be retained in this country if the UK conformity assessment is little used relative to other conformity assessment processes.

I have two amendments in this group by which I want to do two things. First, I want to be clear in the Bill that product requirements may refer directly to international standards. Secondly, I want to promote through a new clause a strategy, which I am asking the Office for Product Safety and Standards to lead, for the United Kingdom to lead in the further establishment of international standards.

I mentioned in some detail at Second Reading how I do not think we are doing this in any way contrary to the thrust of thinking in other jurisdictions. The European Union strategy for standardisation in 2022 pointed directly towards the importance of the greater use of international standards:

“Traditionally, the EU has been a strong leader in international standardisation activities but needs to take account of a changed geopolitical situation, as other countries start to approach international standardisation more strategically”.


So, the European Union is working in that direction. Mario Draghi’s report to the European Commission emphasised the importance of international standards as a means of promoting regulatory harmonisation and reducing trade friction and said that the European Union should lead in framing international standards. We are not alone in this process.

On Monday, my noble friend Lady Lawlor referred to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Article 8.5 states:

“The Parties recognise the important role that international standards, guides, and recommendations can play in supporting greater regulatory alignment, good regulatory practice, and reducing unnecessary barriers to trade”.


I hope that with the Ministers and the Government I am pushing at an open door and that international standards are at the heart of how we want to proceed. I have been given an estimate that something like 80% of standards in some form or to some extent derive from international standards. That would be the case, not least if one includes many that are part of a process in which they are incorporated into existing European Union standards. It is not that this is something we do not presently do; it is something we do at present, but we want to do more and to make it a clear priority.

Why do we need it in this legislation? One expert to whom I talked said that the Secretary of State has the power to designate standards and that it is frequently used in relation to international standards. That is fine, but let us remember what this Bill does. Later on, the Bill contains the power to repeal Section 11 of the Consumer Protection Act. Unless I am missing something, it is Section 11 of the Consumer Protection Act that gives the Secretary of State the power to designate standards in that way, so we do not know how the Government intend to use the powers that the Minister has explained are going to be taken and used flexibly in relation to Section 11. How is that power going to be used in future? If it is to be effectively recreated under this legislation, it is important for this legislation to state that the power should reference international standards wherever appropriate and effective.

I am supported in that view in that, in 2021, Ministers—the noble Lord, Lord Hunt of Kings Heath, was a participant in those Committee and Report debates—took medical devices out of Section 11 of the Consumer Protection Act and put them into the Medicines and Medical Devices Act and created a power to regulate medical devices in the same way as this Bill creates a power to regulate many other products. In the Medicines and Medical Devices Act particular language was used, which is the language that is reproduced for the purposes of this Bill in Amendment 38:

“Provision … may (among other things) identify product requirements by reference to international agreements or standards relating to the marketing or use of products, including agreements or standards as they have effect from time to time”.


I have not invented that language. It is the same as is in the Medicines and Medical Devices Act 2021. If we do not include that language in the Bill, people will wonder why, when making similar new legislation, we did not use the language in relation to other products and standards setting that was used in 2021 in relation to medical devices. I think it is best that we use the same language.

Secondly, for the reasons I have just explained, I do not know whether the power to designate standards by reference to international standards might be diminished in some way by the future repeal of the Consumer Protection Act. I want to make sure that, in so far as new powers are used, they are used to deliver a strategy of using international standards wherever appropriate and effective. I beg to move.

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[Lord Leong (Lab)]

My Lords, I thank the noble Lord, Lord Lansley, for tabling Amendments 38 and 43. I know from when I was on the Opposition Benches that he brings great expertise to this House, debating legislation as varied as the Trade Act 2021, the Procurement Act 2023 and the Bill before us today. His amendments raise important points about the role that international standards can play in domestic product regulation and in ensuring a strategic approach to their delivery and implementation.

Regarding Amendment 38, I reassure the noble Lord that Clause 2(6) enables product regulations to continue to reference international standards to support regulatory compliance, as is the case for medical devices. Provision is already made in current product regulations for the ability to designate a standard adopted by an international standardising body.

We work closely with all departments, including the Medicines and Healthcare products Regulatory Agency, and will continue to work with them to ensure the supply of safe and compliant products. However, each responsible department must individually consider the best approach for its own area.

Before the Secretary of State designates the standard for products regulated under the Bill it is assessed by government. The standard may be designated fully, with restrictions or not at all, depending on how far the standard ensures the relevant product requirements. Therefore Clause 2(6) sufficiently addresses the noble Lord’s concern. There is also no need to specifically reference the ability to designate international standards because that provision is already covered in product safety sector-specific legislation already on the statute book.

[Lord Lansley (Con)]

Which legislation is the Minister referring to? Is it not Part 2 of the Consumer Protection Act, which is able to be repealed by this legislation?

[Lord Leong (Lab)]

I have been told by officials that it is a specific product regulation.

[Lord Lansley (Con)]

Where is the power? Is it in the Consumer Protection Act?

[Lord Leong (Lab)]

I will write to the noble Lord on that.

On Amendment 43, the Government published a memorandum of understanding with the British Standards Institution on 16 September, of which there are copies here available to noble Lords. This sets out in respect of its activities as the UK’s national standards body its role in supporting government policy and acting in the UK’s national interest in the international standards-setting arena. This includes supporting UK policy to strengthen the global approach to standardisation and maximise UK influence.

Within the international standards system the UK already occupies a strong leadership position through the BSI’s membership of international and non-EU private sector European regional standards organisations. The BSI also manages a significant number of important committees in those organisations. In its role, the BSI systematically adopts international and European standards that representatives of UK stakeholders have influenced and withdraws standards that are no longer relevant. This includes internationally agreed standards designed to support regulatory compliance to UK product legislation.

In Articles 2 and 3 of the memorandum of understanding, the Government and BSI agree on the primacy of international consensus and that the two parties will co-operate with each other on international standards policy, while Article 4 ensures that the BSI provides the necessary standards the Government require for UK regulations. The Government are in the process of finalising a document entitled “The UK Government’s Public Policy Interest in Standardisation”, which is referenced in the MoU with the BSI, that explains why standards are a key factor in support of a number of government policies. It also reinforces the policy of influencing international standards and the importance of maintaining a constructive relationship with the BSI.

Given the close collaboration and the mechanisms in place, I believe that the objectives of Amendment 43 are already being met on the points I have just outlined. I hope that I have been able to provide sufficient reassurance to the noble Lord that what he seeks to achieve is not only already possible through the Bill, but also common practice across a range of sectors. If helpful, I will ask my officials, following Committee, to provide further information on the important role that international standards play in the UK system. With that in mind, I respectfully ask the noble Lord to withdraw his amendment .

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[Lord Lansley (Con)]

I am grateful to the Minister for his response. He has obviously taken some trouble to think about it quite carefully.

First, I do not dispute that current powers enable international standards to occupy a central role in our standards-setting process, and I share the Minister’s admiration of the British Standards Institution as our national standards body in doing that, although I note that many of its experts are now in Amsterdam. Let us leave that on one side as noble Lords know which side I was on in that argument and that it was not the same side as my noble friend Lord Frost.

However, not least with the way the European Union is moving and the commitments we are entering into with the new ratification of the CPTPP, would it not be useful to take language such as where Article 8.9 of the CPTPP says the parties should seek

“greater alignment of national standards with relevant international standards, except where inappropriate or ineffective”?

There is language of that kind to which we are party, which in my view it is suitable to incorporate into legislation where we are setting out new legislation that is intended to say how powers should be used in future. That is the point I make. I am not arguing in any sense in a way that is at odds with the intentions of the Government, but I think they have to look and say, “Well, legislation sometimes must be very clear about how people should think and act in the future”. I hope Ministers might think more about this before Report. However, on the basis of the discussion we have had, I beg leave to withdraw the amendment.

Amendment 38 withdrawn.