Viscount Younger of Leckie
Main Page: Viscount Younger of Leckie (Conservative - Excepted Hereditary)Intellectual Property Bill [HL]
Viscount Younger of Leckie Excerpts
Lord Howarth of Newport
My Lords, consistency is not necessarily a virtue and I think that we should be very careful in the field of intellectual property. We legislate not simply out of tidy-mindedness or a desire to achieve a satisfying consistency by transferring rules and regulations that may have applied relatively successfully in one area to another. However, it seems that the noble Lord, Lord Clement-Jones, has made a strong case for consistency in the treatment of registered designs and unregistered designs in terms of the proposed criminal offence. I would be grateful if the Minister could give us his explanation.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, before I begin, I hope noble Lords will allow me to take the opportunity to correct a reference made in my closing speech at Second Reading. In the context of wider points about infringement and the copying of designs, I spoke briefly about the right to license certain intellectual property rights. This is where rights become available to third parties for exploitation under certain conditions. As an example, I cited a figure of 2,097 applications to use designs in this way, but the example in fact referred to patents.
Now that that formality is out of the way, I shall turn to the substantive points that have been debated about the Government’s proposal to introduce a criminal sanction for the deliberate copying of a registered design. I begin by reminding noble Lords of the purpose behind the Bill, which is pertinent to the points that have been raised in the debate. Our objectives, as set out in the consultation on the designs legal framework, are: simplification; improving the services offered by the IPO; strengthening rights, including enforcement; and improving how disputes are resolved. There is clearly a balance to be reached in some of these objectives. Simplification cannot be achieved at the expense of loss of protections in the marketplace. Equally, strengthening rights cannot be at the expense of follow-on innovation.
Lord Clement-Jones
My Lords, I found the Minister’s reply absolutely fascinating, although the intellectual logic of many parts of it escaped me. He gave a very helpful response to Amendment 23. It just shows that you can trawl through the Registered Designs Act and not find what you are looking for. However, I am impressed that the department found the relevant passages in there. I appreciate that an overlap exists except with regard to partnerships. It is very interesting that there is no reference to partnerships in the existing legislation. Partnerships are interesting bodies. Some of them have unlimited liability whereas others are limited liability partnerships. Therefore, some interesting drafting needs to be done in that regard because LLPs are quite akin to corporate bodies.
Therefore, how does the legislation work? If I divined from what the Minister said that there is intent to come forward with an amendment on Report, I would be extremely happy with that response.
Viscount Younger of Leckie
To clarify, we will give this very careful consideration but I cannot guarantee that we will move an amendment on Report.
Lord Clement-Jones
My Lords, guarantees in Committee are a luxury that Ministers cannot afford. I appreciate the words that he said.
It is a very different kettle of fish with Amendment 24. It is almost difficult to know where to start because the skittles of the argument fall in almost every single case by reference to copyright. On the problematic starting point, the registered design right is of course quite straightforward to prosecute because of the registration but copyright is not so easy. There are relatively few prosecutions for breach of copyright. There would be relatively few unregistered design right prosecutions if my amendment was accepted.
The important thing is the factual basis and establishing the facts. Of course, those prosecuting have the burden of proof on their arguments. That is where it starts from and it is analogous to copyright. There is no register of copyright. There may be one in the States but there is not one here. On the difficulty of knowing when something came into existence, not every 2D document has the date on it saying exactly when it was created and so on. There are matters of fact to be established. Again, it is very similar in copyright to unregistered design rights.
On the point about the inhibiting effect, that is absolutely splendid but I cannot see that that is any greater than would be the case with copyright in 2D. In some respects, you could argue that because 2D is more thematic than 3D, 2D has a much greater inhibiting effect because you can extrapolate from 2D into 3D to a much greater extent. When you spin off and think about software or things of that sort, much of which is covered by copyright, establishing the date, genesis and all those aspects of software creation is fraught with difficult issues but nevertheless people are entitled to the protection of criminal law. That means that those who cynically exploit copyright or design—copyright certainly and trade marks sometimes—are prosecuted.
The fashion industry is not much different from that. I feel quite strongly about this. The Minister mentioned that the fashion industry uses unregistered design but one must think about the economic issues associated with copying of designs in the fashion industry and the cynical way that rip-off retailers take advantage of the original designs by fashion houses and so on. That is an absolutely clear-cut area where the protection and deterrent effect of the criminal law would be extremely useful. I did not make the claim that the voluntary register with ACID would be the killer argument but this is all about evidence. Will it be possible to mount prosecutions using evidence of copied designs or infringement of unregistered designs? The evidence of a register, albeit a voluntary one, would still be extremely useful.
Finally, I am sure that the Minister can recognise that I am somewhat frustrated by the rather circular argument being employed here. The Minister said that this should not apply to unregistered 3D because 2D is not the same, being closer to theft—that is an entirely circular argument. I do not quite see that theft of a 3D design and theft of a 2D design are morally different. In many ways they are not different factually. Why should either of them be closer to theft? I find that a rather interesting argument to mount.
I hope that the Minister will reconsider this issue. It is a matter of huge importance to 350,000 designers, who would cheer the Minister in the streets and bear him aloft through Westminster if he acceded to this, which I am sure would be a great attraction to him. I very much hope that between now and Report he will reconsider but, in the mean time, I beg leave to withdraw the amendment.
Viscount Younger of Leckie
My Lords, Clause 13 will introduce a criminal offence for the deliberate copying of a UK or EU registered design. This should help to reduce the scale of unlawful design copying in the UK while increasing the level of protection that is available for holders of registered designs. The Government believe that they have achieved a fine balance in the substance of the clause to ensure that the criminal offence targets only those people who deliberately steal someone else’s ideas and creativity. As we have already discussed today, there are a number of reasons why this clause applies only to registered designs, and this decision forms part of the fine balance of protection that it achieves.
The focus of the offence being on registered designs rather than unregistered designs also reflects the majority of responses to the designs consultation. As with other legislative changes, the Government plan to evaluate the impact of the change within five years of implementation. The offence gives registered designs the same level of protection as copyright and trade marks, creating a coherent approach to enforcement and protection. It also brings design rights in the UK to a level with other European design leaders such as Denmark, which noble Lords will know is noted for design in its furniture manufacturing industry, as well as Italy and Germany.
Criminal sanctions already exist in these countries and are considered necessary as a deterrent and to punish those who deliberately copy for commercial gain. For example, in Germany in 2011, a total of 12 trials were held concerning a criminal charge based on design copying. In three of the cases, the charges were dropped during the trial. In eight out of the nine cases in which a sentence was passed, the court issued a fine. In one case, a prison sentence of nine months to one year was imposed. These figures show clearly that the offence is brought forward only selectively, but that a need for the sanction does exist. This may help to reassure the noble Lord, Lord Howarth, in his concerns over the criminal sanctions. He alluded to the fact that they might be a little too draconian.
On the same subject, the noble Lord, Lord Howarth, raised the issue of the costs to this country. In their impact assessment, the Government have estimated a cost of £8.18 million over the course of 10 years. This figure was arrived at by estimating the costs to the police, the Crown Prosecution Service, Her Majesty’s Courts and Tribunals Service, and potential legal aid costs. However, it is difficult to estimate the benefit of the offence to business. The organisation Anti Copying in Design has estimated that the cost of infringement to the design industry is around 5% of the total value of design to the UK economy. Based on the most recent estimates from NESTA of £15.5 billion as the value of design investment in the UK, this equates to an annual cost of infringement of £0.775 billion.
In relation to costs, the noble Lord, Lord Howarth, also asked what the provisions are for maximum penalties. As the noble Lord may be aware, the Ministry of Justice is currently bringing Sections 85 to 87 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 into force. These provisions will increase the fines for all intellectual property related offences in the magistrates’ courts in England and Wales. This work needs to be allowed time to be implemented before further increases in penalties can be considered.
The noble Lord also asked a plain question: can the justice system cope with this? We do not believe that the offence will create a burden on enforcement agencies. Trading standards departments have the resources to pursue only a certain number of intellectual property cases each year. As a discretionary power, it will be up to each department to balance the importance of pursuing a design case against the other kinds of intellectual property crime in which it is interested. This is in keeping with many other statutory provisions under which local authorities have no duty to enforce, but can and frequently do, instruct trading standards departments to take action. The Crown Prosecution Service will treat any new offence with the same approach it does for the other forms of intellectual property, using its usual discretion and margin of appreciation, including such factors as evidential sufficiency and the public interest in pursuing a conviction.
Lord Howarth of Newport
Perhaps the noble Viscount will allow me to intervene. Does the figure of £8.18 million over 10 years include the costs to local government as well as to central government; namely, the costs of trading standards officers? Whether or not it does, the public expenditure cost of £8.18 million that is already cited is a multiple many times over that of the expected cost of infringement per annum. We are going to spend more on enforcement than we will lose on the costs of infringement. On the face of it, that does not seem to be good value for the public purse or for the economy.
Viscount Younger of Leckie
My Lords, the noble Lord has cited certain figures and I think it would be wise for me to give him a fuller answer than I have before me. Although I would say this, I believe that our arguments are robust. However, I will follow up his points and write to him.
Clause 13 specifies that various conditions must apply in prosecuting the offence. In particular, it must be established that the person accused of the offence should, first, have copied a registered design; secondly, knew that the design they copied was a registered design; and thirdly, copied the design without the consent of the registered design holder. Under the clause, it is also an offence knowingly to use a copied design in the course of business activities in order to profit from that copying. This would include acts such as marketing, exporting, using or stocking the design in the course of business. A prosecution will be successful only if the evidence is sufficient to satisfy the criminal legal burden of proof; that of being “beyond all reasonable doubt”. This is a high standard to achieve and will help to ensure that the offence does not affect innovation or legitimate and competitive risk-taking within business. The offence will not apply if the defendant can show reasonable grounds for believing that the design in question was invalid or where the person charged with the offence shows that there was no infringement of the registered design.
The clause provides that a trial may be on summary trial in a magistrates’ court or trial on indictment in a Crown Court. Of course, this will depend on the severity of the case. In a magistrates’ court, conviction could result in a term of imprisonment of up to six months in England and Wales and Northern Ireland and 12 months in Scotland, or a fine up to the statutory maximum, or both. In the Crown Court, conviction on indictment could result in imprisonment for up to 10 years, or to a fine, or both. The offence in this clause will be applicable only to designs registered prior to infringement, not to those registered after the copying has taken place. Under the clause, trading standards departments will have the power to enforce registered design copying, as they do now for trademark and copyright offences. They will also have powers of forfeiture.
Noble Lords raised a number of points. The noble Lords, Lord Stevenson and Lord Browne, raised the issue of the “chilling effect” of criminal sanctions. I reiterate that the clause is not intended to have a chilling effect on innovation or legitimate and competitive risk-taking within business. This is something that we were very much mindful of during the drafting of the offence as our policy intention was to target only those people who deliberately use somebody else’s ideas and creativity. Further, the offence depends on the infringing product having been made “exactly or substantially” to the registered design, and this should catch only those who set out to copy a registered design, not those who make distinguishable follow-on designs. This is why the offence requires the defendant to have known or have reason to believe that the design he or she copied was registered by someone else. Furthermore, this will have to be shown to the criminal standard of proof of “beyond all reasonable doubt”, which is an exceptionally high standard for prosecutors to meet in court.
As I mentioned earlier, this chilling effect has not been seen in Germany and the assertion of a chilling effect does not appear to be borne out by the experience of other jurisdictions that retain a criminal sanction for design copying. Germany is renowned for having a highly effective design system and it retains both civil and criminal sanctions. Although it is difficult to draw direct causality between Germany’s use of criminal sanctions and its successful system, we know that Germany has 10 times as many registered designs as the UK and it is unlikely that the criminal sanction has had an adverse effect on the number of registered designs or on the strong innovation performance of German SMEs, which is so evident to us all.
The noble Lord, Lord Stevenson, asked whether it was fair to prosecute those who unknowingly stock or sell copied designs and cited the examples of Apple and Samsung. The innocent use of a copied design in the course of business would not be caught by the offence; for example, a retailer would be protected if a third party had manufactured the copies and sold them to the retailer as their own. In this case, the retailer would not be acting with the knowledge that the design was a copy and would not be found guilty of committing the offence. The activities that constitute using a design under the offence reflect the definition for “use of a design” contained in Section 7 of the Registered Designs Act 1949. Innocent acts are protected, therefore, under the clause because it contains the test of,
“knowing, or having reason to believe”,
that a design is copied.
Lord Howarth of Newport
I am most grateful to the Minister and apologise for intervening on him again. I just wonder whether the chilling effect may not work in another sense. As the Minister says, there is no evidence from the German experience that the existence of criminal sanctions has had any chilling effect on the registration of designs. But what evidence does he have to reassure us that people who might be uncertain as to whether the design that they wish to develop was so close to another design that it could be proved in court to be sufficiently similar to incur a penalty, they would therefore decide not to bother? Given the difficulties of definition in this field, is it not possible that the chilling effect may be to deter innovation and enterprise on the part of people who are worried that they would be moving too close to a design that was already registered?
Viscount Younger of Leckie
It is not the case that that would never happen but overall it may be of some reassurance to the noble Lord that much consultation has taken place on this. If there were clear indications that the examples he gave were to lead to a chilling effect, that would certainly have arisen during consultation. However, the noble Lord made a fair point and we will review the consultation. I will write to the noble Lord again if we can furnish him with some extra, new information. It is not the Government’s intention to criminalise businesses that use products based on copied designs incidentally in the course of their business but do not profit from any trade in those particular products.
The noble Lord, Lord Stevenson, raised the issue of applying Bugs Bunny to various products and how the law would work. This is probably the first time that anybody has said that Bugs Bunny is a complex issue, but he is and it would be best if I wrote to the noble Lord on the details of that particular point. The noble Lord also asked why it is a proposed offence to copy “exactly or substantially”. It is our intention that very minor modifications—possibly imperceptible ones—should not excuse deliberate copying and the sanctions that would follow. The noble Lord asked if the offence was “appropriate and proportionate”—I think he used those words. We recognise the concerns about proportionality and that is why the defence has been carefully crafted. We do not believe that it will lead to countless people being placed in custody, as can be seen by my previous references to Germany in this particular debate.
In fear of pouring fuel on the fire of the points made on the last amendment by my noble friend Lord Clement-Jones, making comparisons between unregistered designs and copyright and its criminalisation, I will reiterate our position on this. A comparison to copyrighted material, which is also unregistered but attracts criminal sanctions, is unhelpful because the protection for copyright lasts 70 years plus the lifetime of the author. This makes it unlikely that copyright will have expired, and infringement is therefore much more likely to be the result of copying. The shorter period of protection for unregistered design, together with the difficulty of knowing when those design rights came into existence—a point that I made earlier—means that it is more difficult for third parties to be sure they are not infringing. The introduction of criminal sanctions for unregistered rights could lead to a negative effect on business and innovation.
Furthermore, copyright protection is denied to the shape and configuration of industrial designs by Section 51 of the Copyright, Designs and Patents Act 1988. Applying criminal sanctions to an unregistered design right would criminalise some copying that would not be caught under the law of copyright. I am sure that the noble Lord will have some further points to make on this matter but I thought it wise to raise the subject again.
The noble Lord, Lord Stevenson, asked whether the issue of criminalisation was too complicated for magistrates and juries. Provided that it is limited to registered designs, we believe that the criminal courts can decide whether a design has been copied exactly or substantially. Similar issues arise in copyright, as the noble Lord will be aware. The noble Lord also asked why new Section 35ZA includes community designs and asked whether this would cover designs from the European Union. It does, because EU designs have effective rights here in the UK.
The noble Lord, Lord Stevenson, asked whether it is right that the use of a copied design is caught by the provision. The activities which constitute using a design under the offence reflect the definition for use of design contained in Section 7 of the Registered Designs Act 1949. Innocent acts are protected under the clause because it contains the test of knowing, or having reason to believe, that a design is copied.
The noble Lord, Lord Browne of Ladyton, was particularly concerned about those he described as “rich and powerful people” using the threat of criminal sanctions against small businesses. That is a fair point, but I draw on the UK’s experience in relation to other intellectual property rights, which have also been retrospectively subject to criminal sanctions. Although there is no quantitative evidence, the introduction of criminal sanctions for piracy and counterfeiting provides no indication of a chilling effect on creativity, copyright or brand development—trade marks—in the UK. They are generally acknowledged to be in robust health, with the number of trade mark applications at a historic high according to unpublished figures from the Intellectual Property Office.
Finally, I think it would be useful to provide a further response to a point made by the noble Lord, Lord Howarth. He asked how the Government defend setting up more criminal offences. I certainly do not propose to start discussing the wider criminal justice system today—I hope the noble Lord will forgive me for that—but the important point is that there are compelling reasons why we believe this new sanction is right, which I trust I have set out in my response.
I reiterate to the Committee that we believe it is right that deliberate, wide-eyed copying of registered designs is punished.
Lord Browne of Ladyton
Before the Minister concludes, will he remember Scotland? At this stage, I only seek an answer about whether this requires a Sewel Motion. All the consequential questions would arise if it does not.
Viscount Younger of Leckie
The noble Lord is quite right. I think it is best if I write to him on a number of the points that he has raised about Scotland. I could say something now, but I think a full answer is required. The noble Lord raised a number of questions, and we should give a holistic response.
The Government have sought to create a balance between protecting the rights of design owners and ensuring that innovation is not restricted. We believe that in this clause we have drawn the right balance. I commend the clause to the Committee.
Lord Stevenson of Balmacara
My Lords, I thank all noble Lords who have spoken on this topic, in particular my noble friends Lord Howarth and Lord Browne. Between us, including one or two of the points made by the noble Lord, Lord Clement-Jones, we have raised a sufficiently significant question about the desirability of this step being taken by the Government for us to think again before we return to this on Report. On the one hand, there is the question about whether the right approach to protecting the desirable end of making sure that those who design are able to proceed to the manufacture and exploitation of their designs without being ripped off by others is by some simplification of the overall system that might arrive at a better system or whether the criminalisation element will provide the necessary bulwark.
The argument is finely balanced. My noble friend Lord Browne said that he is uncertain about which is the right way, and I join him in that. I was not taking horses out for a trot on this point. I was, to change the metaphor, casting a fly on the water and seeing what would come up. I went fishing last weekend, which is why it is in my mind. I caught myself with my own fly and fell in, which was not a very successful outcome, but I was struck by the efforts of those with rods make to attract unwilling objects, such as fish, to come to the surface and bite the fly. You have to be careful what you are casting for sometimes, and my unease is that the simplicity of the central point—whether to introduce criminal sanctions—is becoming obscured by the complications of what might emerge if it happens. There is the question of the cost of the engagement of the police, trading standards and prisons and the impact on public spending, which my noble friend Lord Howarth raised. My noble friend Lord Browne was supportive in the sense that the criminal courts can easily take this on, as they have taken on many other things that Parliament has opined should be criminalised in the past several hundred years. On the other hand, it is a real change—from a specialist court dealing with well rehearsed topics, with practitioners who are knowledgeable in this area, to the hurly-burly of a magistrates’ court, or a sheriff’s court in Scotland, and then coming up through the system.
This is all quite a big step and I do not feel that the arguments have been as well marshalled as they could have been. The Minister brought forward some evidence but there may be more in his letters. I am looking forward to having many of those as we proceed through this, particularly my one on Bugs Bunny, which I can hardly wait for as the excitement is so intense. Germany is not necessarily the right model for this. We would have been happier if we could have seen more evidence from right across the design community. It is not a small community—we know the numbers, and there are lots of them. The danger in consultations of the type the IPO has carried out is that you hear from those who shout the loudest but do not hear from those who are going to have to make the thing work when the dust is settled. With those reservations in mind, we might have to return to this on Report.
Lord Howarth of Newport
I am grateful to the noble Lord for that clarification. Given that clarification, I have to say that I find myself profoundly opposed to what it is that I think he is seeking to achieve. While of course it is right that designers from the Bauhaus stable—Wagenfeld, Corbusier or Eames, although he was not from the Bauhaus—deserve to be recognised and to enjoy the protection of their intellectual property for a reasonable length of time, we are talking about a period that goes back to before 1957, half a century ago. I cannot see how it can be in the public interest that a monopoly should continue to be held in those designs. That is not least because no protection is being given to the designers themselves. The design rights have been sold on and inherited. Surely it must be desirable to limit the term of monopoly so that more people are able to have the benefit of iconic artefacts created according to these very beautiful and important designs at reasonable prices. The protectionism that the noble Lord is seeking to perpetuate through his amendment is not in the interests of our society, of our culture or, indeed, of our economy.
Viscount Younger of Leckie
My Lords, I turn now to Amendments 24A and 24B. I am grateful to my noble friend Lord Jenkin for the constructive spirit in which he has offered them and indeed that he has agreed to wait for the results of the meeting to which he alluded. These amendments are related to the repeal of Section 52 of the Copyright, Designs and Patents Act 1988 through the Enterprise and Regulatory Reform Act 2013. For the benefit of the Committee, and indeed of the noble Lord, Lord Howarth, I ask noble Lords to let me summarise briefly the reasons for the change.
The Government wish to ensure that all categories of artistic work enjoy the full term of copyright protection; that is, the life of the creator plus 70 years. Some artistic works that were industrially produced had 25 years’ protection. Once the repeal comes into force, which will take place after the consultation on the timing of the repeal and publication of a new impact assessment, these works will have the same term of protection. If a particular type of table is an artistic work protected by copyright, one will not be able to make a physical replica or reproduce an image of that table in a book without permission. Similarly, one will need the rights owner’s consent to make wallpaper that reproduced an artistic work, such as a print. Designers and companies that own rights in classic design furniture have been supportive of this change. As my noble friend Lord Jenkin said, next week my officials are meeting representatives of one such company as part of the Government’s ongoing dialogue with interested parties. We shall see what comes of that.
I am grateful that my noble friend Lord Jenkin continues to pay such close attention to the details of this change and for the intervention from the noble Lord, Lord Howarth, but I am not convinced that any further changes are necessary or desirable until the consultation has been completed.
Lord Jenkin of Roding
My Lords, I am most grateful to my noble friend. Perhaps I may respond very briefly to the noble Lord, Lord Howarth. A month or two ago I was approached by, as it happens, a British company which complained bitterly about Section 52 extending the period from 25 years to life plus 70 years. I took the matter up with my right honourable friend and discussed it with one or two other people. They said, “Ha ha. Yes, of course. They use nothing but Chinese-manufactured fakes. They are simply importing imitations of these hugely important artistic designs. Of course they are cross about it because it is their business”. The fact is that that company has been behaving rather disreputably. The repeal of Section 52 is intended to give the designs the protection that my noble friend has indicated is the intention of the Government. We will have to have this debate later. In the mean time, I am grateful for what the Minister said and beg leave to withdraw the amendment.
Viscount Younger of Leckie
My Lords, Amendment 25 would place a requirement on businesses to provide the complete trade designation of the product, alongside the product’s associated patent numbers, on their websites. It is helpful that my noble friend has raised this issue, as it will allow me to set out some more information about how the Government are expecting the marking of products with the web address to work.
The Bill aims to reduce burdens on patent holders by modernising the ways in which they can provide public notice of their patent rights. Allowing patent owners to mark their patented product with a web address will lead to cost savings for business while making it easier for the public to access up-to-date patent information. Under current UK legislation if, in the event that a patent is infringed, a patent holder wishes to be in with the best chance of being awarded damages or other financial remedies, it must mark its product with the word “patent” or “patented”, together with the number of the patent. It is, therefore, in a patent holder’s interest to ensure that it is straightforward for the public to ascertain which patent or patents apply to a particular product. Doing so will ensure that the public is put on notice about the patent rights, making others think twice before infringing that patent.
Clause 14 requires that, if an internet link is used, it must direct the reader to a web page which clearly associates the product with the number of the patent concerned, as is the case under United States patent law. This means that providing an internet link to the home page of a company website will not suffice unless on that home page there is a clear association between the product and the relevant patent number. It also means that the product must be clearly identified and associated with the relevant patent.
Just to be frivolous, I suspect that noble Lords’ mobile phones are switched off; I hope that they are. However, if you were to take them apart you may find—if the manufacturer operates in the United States—a website address with the patent details is provided. I particularly noted that it appears on my battery. Many hundreds of patents are likely to be associated with a single mobile phone, and listing them on a web page rather than on the mobile phone itself is therefore far easier for the manufacturer.
Amendment 25 would add an additional requirement that the web page must provide the “complete trade designation” of the product. I understand this to mean an identification of the exact product concerned, including, for example, any relevant model numbers and variants that exist. This is entirely the intention of the clause, which I believe already caters for this. The clause requires the provision of a web page address that,
“clearly associates the product with the number of the patent”.
The patent holder must therefore clearly identify the product and which patents apply to it. Currently, the Bill allows businesses to do this in a manner that best suits their circumstances to avoid placing an undue burden on business. Again, I remind noble Lords that it is in the patent holder’s interest to ensure that clear information is provided that makes it easy for the public to ascertain which patent or patents apply to a particular product. Doing so will ensure that they can benefit from the maximum protection available during any legal proceedings. In light of this, I ask that the noble Lord withdraws the amendment.
Lord Clement-Jones
My Lords, I thank my noble friend for that useful clarification. I am sure that it will be carefully noted by all those concerned. Given that it is the patent agents and patent lawyers who are heavily involved in this field, he will appreciate that their concerns are worth taking seriously. However, I take my noble friend’s clarification seriously, too, and I am grateful. I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, although we come at this matter from a slightly different angle in trying to amend the clause to bring out a particular point, our intention is very similar to that of the noble Lord, Lord Clement-Jones. The points I would make on the narrowness of our amendment would rather duplicate what he is doing. It is better to simply say that we associate ourselves with what he said. I agree with what he is trying to do here to unpick a wrong turning proposed by the IPO. Where we are in terms of opinions on patents is well respected, understood and supported across the industry. To add this additional function, or change one of the existing pillars of the operation, would in fact change all the natures of the way it operates and is not to the benefit of where we are. With that, I support the amendment.
Viscount Younger of Leckie
My Lords, Amendments 25A and 25B relate to the patent opinions service. Amendment 25A, tabled by my noble friend Lord Clement-Jones, seeks to remove the power that will allow the Intellectual Property Office to initiate revocation proceedings where an opinion concludes that the patent is invalid. Amendment 25B, tabled by the noble Lords, Lord Stevenson and Lord Young of Norwood Green, seeks to insert the word “clearly” into the clause so that revocation will be initiated only when novelty or inventive step is clearly not satisfied.
Clause 15 allows a limited extension of the IPO’s existing powers to initiate revocation proceedings. It will help in particular SMEs and lone inventors who may simply be unable to afford to bring revocation action themselves. More broadly, it will be in the public interest to allow the IPO to seek the removal of certain invalid patents from the patents register. I reassure noble Lords that the IPO will only initiate such proceedings in clear-cut cases—where there is no reasonable argument to be made that the invention is new or not an obvious replacement of what has gone before. However, in those cases which are not clear cut there will be no revocation action.
I also wish to clarify that initiation of action will not always result in revocation. The patentee can submit observations that may demonstrate that his patent is valid. Alternatively, amendment may reduce the monopoly afforded by the granted claim. The patent holder will also be able to appeal any decision to revoke to the courts. The Explanatory Notes accompanying the Bill make it clear that the power to revoke will be exercised only in the most clear cut of cases. Therefore, I do not feel it is necessary to insert the word “clearly” into the legislation itself, as suggested by noble Lords in Amendment 25B.
Inserting the word “clearly” into the legislation may also lead to argument about what that word means, thus adding an unnecessary further strand to the dispute. For example, if the patent holder disagrees with the revocation and appeals to the courts, the court should not have to decide whether a patent is “clearly invalid” but should instead be free to decide the core question of whether the patent is or is not valid. The IPO is already able to seek revocation of a patent under certain circumstances. Experience shows that its officers would be well placed to assess whether revocation proceedings should be initiated following an opinion that concludes that a patent is clearly invalid.
Before answering a number of questions, I will finish by sharing with you the story of one SME which responded to the consultation in support of the government position. Shortly after it was set up, this SME became aware of a competitor’s patent for a similar product to that which it intended to sell. The SME requested an opinion on the patent, which concluded that the competitor’s patent was invalid. However, despite this alleged invalidity, the competitor continued to contact potential customers of the SME, warning them of possible infringement of their patent, and as a result customers stopped placing orders with the SME. The SME was therefore faced with the stark choice of either closing down or bringing revocation proceedings against the patent. It was apparently told it would cost £100,000 to bring such proceedings, and it simply could not afford to do so. In the end, the SME was fortunate in that it received backing from a much larger company, which enabled it to carry on trading and, indeed, to significantly grow the business. However, I am sure noble Lords can appreciate that such support cannot be guaranteed for all SMEs. As the example demonstrates, it is important that intellectual property does not become the preserve of only those with deep pockets. The clause as it stands, limited as it is and with the necessary safeguards to protect legitimate patent holders, will, I believe, further help to ensure that does not happen.
In his usual perceptive way, my noble friend Lord Clement-Jones raised a goodly number of questions. I will attempt to answer them all. First, he asked whether the procedure was TRIPS-compliant. The proposed legislation mirrors legislation already in place for revocation under Section 73(1) of the Patents Act 1977. The process of revocation will also mirror the process of revocation under Section 73(1). This process means that the revocation will also be considered by a more senior official than the examiner who issued the opinion. He will look at the details afresh and will not be bound by the conclusions of the examiner’s opinion when deciding whether revocation proceedings should begin. The patentee will then have the opportunity to address the alleged invalidity by way of amendment of his patent or by argument. He will also be able to appeal any decision to revoke his patent to the High Court. Further appeals are still possible, and this ensures that the procedure is TRIPS-compliant.
Lord Stevenson of Balmacara
The noble Viscount has just misquoted the section of the Act to which he was referring. If I heard him correctly—I will check Hansard—he referred to the comptroller issuing an opinion under Section 74A that Section 1(1)(a) or (b) is not clearly satisfied, which, indeed, was the intention behind our amendment. I take the point that the noble Viscount said earlier that the notes clearly say that it is envisaged that this additional power to strike off a patent will be exercised only in the clearest of cases where it is indisputable that the patent invention lacks novelty or inventive step. We are not very far apart on this. As I and the noble Lord, Lord Clement-Jones, said, the industry argues that the current phrasing is too bland to get across the sentiment which I think the noble Viscount is expressing—namely, that there has to be a clear exceptionality about the nature of the opinion. I hope that the noble Viscount will reflect on that matter and come back to it at a later stage. We need to get across the concept that the power will be exercised only in the clearest of cases where it is indisputable that the patent invention lacks novelty or inventive step. It is fine in the notes, but the notes are not the law, and the law needs to be right.
Viscount Younger of Leckie
It may be helpful if I clarify for the noble Lord that I was speaking in relation to the IPO’s practice and policy, as stated in the response to the consultees’ comments, in other words, as part of the consultation. However, I will reflect further on the need to tackle the point that he has made, as he has asked me to do.
Finally, my noble friend Lord Clement-Jones asked why patentees cannot recover their costs. If the patentee appeals to the court following a revocation by the IPO and is successful, he may be able to recover costs, but only if the court thinks that that is right.
I hope that I have managed to answer all the questions. If I have not, I will certainly follow up with a letter. I thank my noble friend Lord Clement-Jones for putting so much effort and thought into his range of questions on this important subject. I hope that in the light of my comments, the noble Lord will not press the amendment.
Lord Clement-Jones
My Lords, I am very grateful to the Minister for his very full and careful response. However, the noble Lord, Lord Stevenson, has put his finger on the point. I thought that what the Minister said was entirely reasonable. I heard what he said about TRIPS and two steps. However, when I read the actual wording of the Bill, I do not see that. I see a kind of blancmange where the IPO and the comptroller can take this over and revoke a patent after an opinion without a very clear step between the opinion and the revocation procedure. I am not an expert patent lawyer, and I shall consult a number of organisations, including the Law Society and the Chartered Institute of Patent Attorneys, but it seems to me that they are entirely right to be concerned about the Bill’s wording.
I entirely accept that the Minister, absolutely in good faith, has read out how he and the IPO believe that this is meant to operate. However, we operate on the basis of the rule of law. The Minister, in a way, has made a Pepper v Hart statement whereby, if we were to have a judicial review of the IPO when revocation had taken place and everything had gone pear-shaped for a patentee, the patentee could rely on the Minister’s statement. I would much prefer to amend the Bill, and I cannot for the life of me see why if it is the intention to have revocation proceedings only in clear-cut cases where a patent is invalid for various particular reasons, it cannot be expressed in the Bill.
The bit of the Minister’s response that I found somewhat disingenuous was somewhat like political jujitsu, when he said that this is all for the benefit of SMEs. I thought that that was a cunning reversal of the arguments because, if we are not careful, SMEs will be faced with the power of a determined major company that wants to make sure that it gets opinions in place. It could then bring revocation proceedings that could be extremely threatening to some small patentees. That is not entirely helpful to the SME.
We need to chew over the Minister’s words, but this is a very serious issue for the professionals involved. They really understand the steps that need to be taken. They understand, as I do not, all the intricacies of TRIPS, they recognise novelty and they have to advise on such issues on a daily basis. They are extremely concerned that this is a woolly area that gives the comptroller too much power. However, we will no doubt come back to this on Report. In the mean time, I beg leave to withdraw the amendment.
Viscount Younger of Leckie
My Lords, the amendments tabled by the noble Lords, Lord Stevenson of Balmacara and Lord Young of Norwood Green, relate to the unified patent court. I will address each amendment in turn.
Amendment 25C seeks to ensure that the Secretary of State takes account of the views of the courts services and any other appropriate body when using the power to confer or amend the jurisdiction of a court. These bodies are already closely involved in the implementation of the unified patent court. Establishing this court is an enormous task that requires resources and expertise from across government. It is for this reason that the Government have set up a task force responsible for UK implementation of the unified patent court agreement. This task force is a joint endeavour between the Department for Business, Innovation and Skills and the Ministry of Justice, and I can assure noble Lords that Ministers and senior officials from each department are fully engaged in this matter.
Officials from Her Majesty’s Courts and Tribunals Service are leading on work to establish the UK-based divisions and on the discussions with European partners through the preparatory committee of the unified patent court. Similarly, officials from the Ministry of Justice are leading the work for the UK on the selection and training of judges for the unified patent court. The devolved Administrations in Scotland and Northern Ireland and the courts services in those jurisdictions are represented on the steering board which oversees the work of the task force. Noble Lords may be interested to learn that the Chancellor of the High Court and the patents judiciary in England and Wales are also involved in the work of the task force. The judiciary is represented on the steering board of the task force, and officials meet the judges on a regular basis.
I can confirm that the Government are consulting the Administrations in the crown dependencies and the British Overseas Territories on whether they wish the unified patent court agreement to apply to their territories. This forms part of the usual procedure for ratifying the agreement.
Given this close engagement across government departments and with the devolved Administrations, I trust that noble Lords will agree that the views of all concerned will be taken into account when implementing the unified patent court agreement.
Amendment 25C also seeks to ensure that local divisions of the unified patent court will be set up in each jurisdiction of the UK. I appreciate the arguments in favour of setting up a local division in England and Wales, Scotland and Northern Ireland. Ensuring local access to justice is a key element of the unified patent court, and this is why the agreement makes provisions for setting up local divisions. Let me be clear that no decision has yet been made about how many local divisions the UK will host and where those divisions may be located. Contracting states of the unified patent court agreement are not obliged to host a local division. Local divisions can be set up and disbanded upon request by a contracting state. These requests will be considered by the body that will govern the administration of the unified patent court. Noble Lords may also be interested to learn that it will be possible for a local division to sit in different locations as the need arises. A travelling local division could provide an alternative to hosting more than one division. This amendment would fix in primary legislation the number and location of any local divisions the UK may host. It is undesirable and unnecessary to be prescriptive in this case as it would restrict the UK in the administration of any UK-based local divisions in a manner not provided for in the unitary patent court agreement.
Amendment 25D raises a number of points. First, the amendment would require the Secretary of State to consider the need for “reasonable” access to courts across the United Kingdom. As I have already said, the Government are working closely with the devolved Administrations in Scotland and Northern Ireland to ensure that the needs of users throughout the UK are addressed.
Secondly, this amendment places a limitation on how the power may be used to require the payment of a fee. As it stands, Clause 16 is intended to account for various circumstances where a fee might be required. The Government do not currently anticipate that fees for the court will be paid directly to any government department. However, the details of the financial arrangements of the court are still being negotiated through the preparatory committee that has been set up by the contracting states of the unified patent court agreement. It is anticipated that court fees will be paid directly to the unified patent court. A change to UK law to facilitate the payment of a fee to the court, as proposed by Amendment 25D, is not required. The agreement sets out high-level principles for how the unified patent court fees will be decided, but it will be for the members of the preparatory committee, including the UK, to agree the level of court fees. In agreeing the level of fees for the court, the preparatory committee will need to balance the need to ensure that the court is accessible to users with the requirement that the system will eventually be self-financing. Ensuring the system is accessible and eventually self-financing is a priority for the UK, and the final details will be carefully considered before we ratify the agreement.
Thirdly, this amendment raises the issue of how the power may be used to align UK law with sections of the unified patent court agreement. As it stands, Clause 16 is intended to ensure that provisions of the Patents Act which relate to national patents may be aligned with equivalent provisions in the unified patent court agreement should this be necessary. For example, it may be desirable to align the law on infringement so that the same provisions apply for European bundle, unitary and national patents. This may be necessary to avoid a situation where patents valid in the UK will be subject to different infringement laws depending on whether they were national patents granted by the IPO or European rights granted by the European Patent Office. The unified patent court agreement does not make any provisions for national patents so it is necessary to ensure that the power conferred specifically allows for this eventuality. This amendment would not allow such an alignment to be made because the power would be restricted to giving effect to the provisions of the agreement.
Finally, this amendment would remove the ability to use the power conferred to amend any enactment other than the Patents Act. This would be an important omission from the scope of the power to ensure that the UK can fully implement the unified patent court agreement, which must be avoided. In light of all that I have highlighted, I ask noble Lords not to press their amendments.
Lord Young of Norwood Green
I thank the Minister for that very comprehensive and constructive response. He has shed light on a number of areas that we were concerned about, especially the inclusion of Scotland on the steering board. He talked about judges being trained. Do we have a figure for that yet or are we still determining the need? Other than that, the Minister certainly covered the waterfront, so to speak, and we will obviously read his response carefully. I welcome his openness and the range of the response. Given that, I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, Clause 17 relates to the exchange of information with other patent offices. The idea behind this provision is, we suppose, to allow the exchange of search and examination results for unpublished applications, as information about published applications is already exchanged. The current exchanges increase efficiency, save duplication and unnecessary work, and are in every way admirable. Perhaps such exchanges are contemplated only with major offices, such as the USA, Europe, Japan and Korea.
The effect of the proposals is much less clear. The new power given by the section is extremely broad. Any information that the other patent office requests may be sent subject to the working arrangements made with the other patent offices, of which only protecting confidentiality is said to be essential. Any patent office, which is quite broadly defined, may request the information. Possibly in the case of smaller countries the information provided from the UK could substitute for a local search or examination, which is not unreasonable, unless such requests would make too much extra work for the UK office.
The working arrangements are completely at the discretion of the comptroller. They do not have to be approved by Parliament, unlike many other powers proposed under this Bill. There is no limitation on the type of information that may be exchanged or the form in which it might be requested. For example, a request might be for details and copies of all applications in the name of company X relating to technology Y. Our amendment suggests that the provision should be substantially limited, in the following ways. Information to be exchanged should be limited to search and examination results. Information should be provided about UK applications only, designated by a UK filing number, from which priority has been claimed in the country of the patent office seeking information. No information should be provided earlier than one year from the date of the UK filing unless the applicant agrees otherwise. The UK applicant should be informed of the request and the information provided. Information should be provided to patent offices of countries on an approved list only, to be added to from time to time by statutory instrument. I beg to move.
Viscount Younger of Leckie
My Lords, Clause 17 will allow the Intellectual Property Office to share patent information on unpublished patent applications with patent offices outside the United Kingdom on a confidential basis for their use in processing similar patent applications filed with them. This will help speed up international patent processing. I hope that noble Lords will bear with me, as I have much to say in speaking to this amendment.
Amendment 25E would place various restrictions on the circumstances in which information may be sent to a patent office outside the United Kingdom. First, the amendment would introduce a requirement that the other patent office must quote the application number of a UK patent application when it requests information. It is absolutely the intention that information will be shared with other offices only where they have specified what information is required and in relation to which patent application, identified by the application number. It is for this reason that Clause 17 applies to such information as that office requests and only in accordance with the agreements made by the Intellectual Property Office. This is the approach taken when the IPO provides information to the European Patent Office in accordance with Section 118(3)(a) of the Patents Act and the European Patent Convention.
Secondly, the amendment would restrict the arrangements so that information could be shared only when an application had been filed abroad following a UK application. In practice, it is only when the other office is dealing with an application, which follows on from a UK application, that it will be able to gain any benefit from seeing the results of the UK work.