Intellectual Property (Unjustified Threats) Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

Wednesday 15th June 2016 Grand Committee

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am a lay man. As a lay man, seeing this rather daunting title, and glancing through the Explanatory Notes and the Law Commission’s background paper—number 360—underlines the technical nature of much of what is proposed. Furthermore, I see that my fellow speakers include two distinguished noble and learned Lords and, now I understand, an equally distinguished retired patent attorney who has made a very incisive speech. I have the sense that the ice may crack beneath my feet at any moment, but I want to persevere because the safeguarding of the proper use of intellectual property provides an important element in the future prosperity of this country. In doing this, I pray in aid my career in helping, advising and financing small and medium-sized enterprises.

Before I go any further, I will briefly divert to add to the remarks of the noble and learned Lord, Lord Hope, and give a word of thanks to the Law Commission for its work. I had the pleasure of working with the commission quite a lot, following the review I carried out for the Government on the Charities Act. A further Law Commission Bill is on the stocks, updating some of the more technical aspects of charity law. I will not say that I always agree with all of the Commission’s conclusions, as that would be going too far. However, one cannot but admire the intellectual rigour with which it takes issues apart, and it often does so in a way that brings clarity to pretty dense topics. The Bill before us today is no exception.

One of my regrets is that a lot of the Commission’s excellent work is dissipated because Bills get stuck somewhere at an early stage of drafting. Since we are discussing a Law Commission Bill, I wonder if, in due course, my noble friend could write to the noble Lords who participated in the debate today to give us all a progress report into where the various Law Commission Bills are—whether they are in draft form or still in consultation. I know, for example, that there is an extremely important consultation finishing on electoral law, which is an area of considerable interest. It would be good to know where the Government have got to in their thinking on the various proposals before the Law Commission so that the terrific work in what it does is not wasted because time passes.

I turn to the Bill itself and its policy background. My noble friend on the Front Bench will have heard me on this issue before, but whatever the outcome of the referendum, for the next quarter or half a century this country will have to watch an irreversible shift of relative wealth from the West to the East. One way to mitigate the impact of this trend will be for us to be smarter and more innovative—not just to make the discovery but above all to develop and exploit it successfully. A vital part of that process will be an appropriate legal framework for intellectual property.

Noble Lords may be aware of the new use of the name “unicorns”. A unicorn in modern financial speak is a start-up company now valued at more than $1 billion. Last year, 11 unicorns were created in Europe—over half of them in the UK. Before we become complacent, I should say that the US created 22 unicorns in the same period. These larger early-stage companies represent competitive threats to many established players, who can react violently to the threat. This is where I am interested in exploring how the Bill could be of assistance.

Not just unicorns need protection and support; in many ways they are reasonably resourced to deal with the litigious, the unruly or the obsessive. Small and medium-sized companies are more vulnerable to unreasonable behaviour. In part this is because they may lack access to expert legal advice—not for them the expertise and the associated invoice of the magic circle firms. I am pleased to see that in paragraphs 1.32 and 1.42 the Law Commission placed special stress on the importance of and the vulnerability of small business rights holders. It will therefore be important in due course to publicise these new provisions—of course through legal channels so that smaller firms of solicitors away from London can advise their clients in confidence, but also through trade bodies, chambers of commerce, and so on.

For example, if the safe harbour protection afforded by the “reasonably regarded” test—an important development, as I read it—is to have a real commercial effect, it will need a commercial interpretation and approach as well as a legal one. Matters which seem so open and shut in the calm deliberation of a court-room, often with the added advantage of several years of hindsight, do not always seem so clear in the hurly-burly and time pressures of day-to-day commercial life.

Just in passing, on the power of the court to add to the list of permitted purposes in proposed new Section 70B(2), is this a normal conventional power? It seems to be a legal Henry VIII power, but I may be wrong, and no doubt I shall be put firmly in my place shortly. I rang a solicitor to ask him and he told me that he had not come across it anywhere else, but I will be interested to hear what my noble friend has to say about that.

I will follow the noble Baroness, Lady Bowles of Berkhamsted, on forum shopping. I have an interest in extradition—I am a trustee of Fair Trials International—and in extradition cases there have been attempts by one side or the other to manoeuvre the case into the courts seen as most likely to reach a favourable answer. This issue is addressed in 3.12 of the Law Commission paper, but could it happen in IP cases under the provisions of the Bill? As I read it, I think not, but perhaps my noble friend will give some further clarity in due course.

Sadly, however, the Bill does not—perhaps cannot—address one of the major causes of inequity in IP cases: the time it can take to get cases to court and to a decision. It is not so much the time it can take as the ability of one side, particularly a large company, to obfuscate and delay so that the smaller company runs out of cash and/or energy to prosecute or defend its case. The Law Commission is clearly aware of this, because it says at paragraph 1.19:

“Sometimes, the risk of facing costly litigation may prevent a small enterprise from asserting its intellectual property rights where these have been infringed by a larger competitor with greater resources”.

That addresses the issue of money but not the issue of time passing and its associated costs—not just financial but, for a small company, the diversion of inevitably scarce senior management time and expertise.

The noble and learned Lord, Lord Hope of Craighead, referred to the issue of the approach that has been taken in drafting the Bill. I find it slightly strange that, at paragraph 4.4, the Law Commission reached the conclusion that a,

“standalone measure could easily go unnoticed by this group”,

and instead decided in its drafting to amend three existing Acts of Parliament. I would have thought that a stand-alone provision was less likely to be overlooked than amendments to existing pieces of legislation, but I leave that to more experienced and wiser heads than mine.

I conclude with a sad, real-life example of why this Bill is necessary but also why I fear it cannot provide a complete answer. A company with which I was involved developed a new chiller cabinet, familiar to Members of your Lordships’ House from every supermarket and grocery store. Imagine the company’s delight when a major supermarket chain bought six of the new models. Imagine its dismay when, a few months later, a whistleblower who had left the supermarket on bad terms revealed that the six chiller cabinets had not been purchased to be used, but to be taken to pieces and re-engineered to get round the IP and the patent. It proved exceptionally difficult for the smaller company to discover what was going on. The supermarket chain was not intending to sell any of the new-style cabinets, merely to use them internally.

In due course, enough evidence was found to build a case against the larger company. It naturally denied any patent infringement. More importantly, it took the opportunity to tell the smaller company that its legal advice was that, given the time needed to obtain technical advice and so forth, it would take at least two years for this case to get to court and that, before it started, it should be prepared to allow for that time lapse and build it into its cash flow. In a “just so you know” add-on—the chilling phrase used in the box on page 10 of the papers before us—the supermarket gave the smaller firm notice through its solicitors that it would inevitably wish to consider launching a counter-claim to protect its position.

There is only one winner is such circumstances. If the provisions of this Bill can do anything to reduce the inequality of arms in these sorts of cases, it will be well worth while. I therefore very much support it.

--- Later in debate ---

[Baroness Neville-Rolfe]

My Lords, I am very glad to hear such a welcome for the provisions in the Bill. It is based on careful and detailed recommendations from the Law Commission, which worked very closely with stakeholders to develop the proposed approach and the Bill itself. However, as I said in my opening remarks, this is a very complex area—“highly specialised”, in words of the noble and learned Lord, Lord Hope of Craighead. I therefore welcome the expertise in the Room and the experts we have in this discussion. That will be helpful when we come to Committee. I am especially grateful to the noble Baroness, Lady Bowles of Berkhamsted, for bringing her enormous experience to this area and for illustrating her comments with telling examples, which I am sure we will come back to when we come to the next stage of proceedings.

I also agree with the noble and learned Lord, Lord Hope, and my noble friend Lord Hodgson of Astley Abbotts, that we should thank and congratulate the Law Commission for and on its work. The debate shows what tough and specialist judgments it has to make all the time in the work it does. I agree with the noble and learned Lord that the Law Commission gives us ample reasons for supporting this reform—it seems to be of the right kind. I am obviously very aware of Sir Robin Jacob’s views, which do not, as he said, tally with those of most stakeholders, and I was glad to hear from the noble and learned Lord, Lord Brown of Eaton-under-Heywood, and was pleased that he was struck by the quality of the Law Commission report. I also take this opportunity to thank my noble friend Lord Hodgson for the work he has done with the Law Commission, which I know it values. On his comments on the dissemination of better information on the Law Commission’s wider work, we will see how we can progress that, and if it would be helpful I will write to noble Lords.

[Lord Hodgson of Astley Abbotts]

It is not so much the dissemination of the Law Commission’s work but the question of where the individual reports have got to. It is not that nobody knows it is happening—its electoral law report is excellent—but it needs to be followed through, and if it is not, we need to be told why. Frankly, asking about this was a way to put pressure on the Government to make sure that this very good work is not dissipated. I understand that what the commission does may not always be acceptable—that is fine—but let us make sure that we either bring it forward and use it or kill it off and say that we do not want it. That is why I hope that the Minister will be able to tell us—not now; I quite understood that she could not do that, but perhaps she could write to those of us who have interests in this—the situation with regard to the tremendous work that the Law Commission has been doing on individual projects, not just this one.