Intellectual Property (Unjustified Threats) Bill [HL]

Lord Lucas Excerpts

Wednesday 9th November 2016 Other Business

[The Senior Deputy Speaker (Lord McFall of Alcluith)]

My Lords, before the start of today’s proceedings on the Intellectual Property (Unjustified Threats) Bill, it may be helpful if I say a word about the procedure that we will follow. In nearly all respects, our proceedings will be identical to those of a Grand Committee. Any Member of the House may attend and speak, Members should stand when speaking and Members may speak more than once to each amendment or Motion. I will ask the Committee to agree to each clause standing part of the Bill.

The main difference from a Grand Committee is that the Committee may vote on amendments or on the question that clauses stand part of the Bill. If, when I collect the voices, it is clear that there is no agreement, I will call a Division, which will take place straightaway. Only Members of the Committee may vote; the Clerk will call out each name in alphabetical order and Members should reply, “Content”, “Not Content”, or “Abstain”. I will then announce the result and call the next amendments or Motion. If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bell rings and resume 10 minutes thereafter. Do any Members wish to declare any interests that have not already been declared?

[Lord Lucas (Con)]

Since this is a recorded proceeding, I think that I should declare that I own a trademark, which I defend from time to time with entirely justified threats.

[The Senior Deputy Speaker]

The noble Lord, Lord Lucas, has reminded the Committee that we are sitting in public and it is being recorded.

[Lord Lucas]

Before we begin, do I understand that we will follow the standard rules; that is, if we make an amendment here, the Government would not seek to reverse that amendment on Report—and that there is a full Report stage on the Floor of the House after this?

[The Senior Deputy Speaker]

Yes, there will be a full Report stage on the Floor of the House and I think that it needs a unanimous vote. Are there any other comments?

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[The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)]

My Lords, on interests, I am the Intellectual Property Minister, and I have the pleasure today of speaking on behalf of the Government.

I am very grateful to the noble Baroness, Lady Bowles, for her comprehensive introduction to this large group of amendments. I am also grateful to my noble friend Lady Wilcox for her support for the Bill as whole and for the good work done by the Law Commission.

It is common ground, I think, that Section 70A and its equivalents set out the definition of an actionable threat. The sections replicate the existing exception whereby a threats action cannot be brought if the threat refers to a primary act of infringement. The existing statutory definitions of what is an infringing act lie at the heart of the threats provisions.

The amendments in this group would mean that threats to someone “commissioning” another person to carry out a specified primary act cannot trigger a threats action. Commissioning infringing goods is not an infringing act within the meaning of any of the existing statutory definitions. This is a key point. Treating commissioning as if it were infringement, for the purposes of the threats provisions, would be a highly significant change to the law. It would introduce a novel concept and create confusion in the law of threats and more generally.

Unjustified threats are those threats which are made in respect of invalid rights, or where there has been no infringement. Amendment 1 and its equivalents would remove any protection from unjustified threats for a particular class of people who are not actually infringers at all—that could easily include the SMEs we are concerned about, on which I will come back to my noble friend’s comments at the end—and, to me, that cannot be right.

The amendment would also have other unwelcome consequences. For example, there is the defence which is available to the threatener, if they can show that the infringement did in fact occur. That defence is made unworkable in these circumstances.

I am concerned that, as with Amendment 3, there is a risk that the amendment would have unintended consequences on the interpretation of IP provisions more widely—specifically, the provisions which define infringement. Furthermore, the meaning of what amounts to “commissioning” a primary act would only become clear after a substantial body of case law had been built up. I do not think that that would be acceptable or welcome to business.

I shall now move on to Amendment 20—with many thanks to the noble Viscount, Lord Hanworth, for his explanation—which relates to use of trade marks in an online environment. I do not agree that there is an inconsistency in the threats regime. The noble Baroness, Lady Bowles, suggested that infringement law could be aligned better for the rights, but that is a wider question, as we discussed, that relates not just to threats or this particular Bill. If the amendment is intended to ensure that “applying” a trade mark in an online environment is covered more explicitly as a primary act, then in my view this is unnecessary when the threats provisions are read in the wider context of the parent Act.

This Bill will insert the individual threats provisions into the existing framework for the relevant rights. While the provisions appear in isolation in this Bill, they must be read—as I have just said—in their wider context.

The relevant sections of the Trade Marks Act 1994 do not expressly require a sign to be in physical form. It is accepted that services may be offered online under a sign in electronic form, and this applies whether the sign is included in a listing or as an AdWord. Nor do they require that the sign must be physically applied to physical goods or their physical packaging. Where goods themselves are electronic, then it follows that the sign applied must also be electronic.

That is a long way of saying that changing the provisions in the Bill to set out expressly that the online application of a sign is covered is unnecessary and, as we discussed in some of the hearings, could cast doubt on an already settled view.

I turn finally to the position of small businesses, which was so well expounded by my noble friend Lady Wilcox. I do not think that a champion is a matter for this Law Commission Bill, although she and I had a good discussion about it. I believe, as I have said several times, that this will benefit smaller-sized businesses by helping them to gain access to justice at reasonable cost in order to enforce and make best use of their IP in the sort of circumstances that she was talking about.

I hope noble Lords will allow me to enlarge a little on the measures that government has taken to help SMEs, as I think that might help my noble friend. We heard in the evidence sessions from Mr Justice Birss about the benefits to SMEs of using the Intellectual Property Enterprise Court. Recent reforms made to the IPEC—in particular, the small claims track—help to level the IP playing field for SMEs that previously struggled with cost. The Government are fully supportive of the IP pro bono initiative, launched last month, which is designed to help small businesses and individuals who are involved in a dispute about IP. The IPO also undertakes a wide range of activities that are aimed at SMEs—partly as a legacy of the time when my noble friend was Minister—and geared to promote understanding, such as: the government-funded IP audit programme; the IP for business tools; and the IP finance toolkit. I make no apology for taking this opportunity to explain that.

Regarding the guidance on the Bill, the IPO has committed to publish business guidance 12 weeks before the new provisions come into effect. In addition, the IPO will implement a full communications plan, update the online tools, make presentations at outreach events—many of which are aimed at SMEs—update stakeholders who have signed up to receive updates and use social media channels to try and ensure that we take this opportunity to raise awareness of the changes. Actually, this is a good opportunity to expound the importance of IP. The IPO works tirelessly to increase awareness of IP and to provide guidance and education at every level. I am happy to commit the IPO to communicating to SMEs in a helpful way about the changes and benefits that will be brought by the Bill.

An important point is that we will ensure, as we did for the Consumer Rights Act, that the material is pitched at the right level. I have asked the IPO to road-test the guidance in draft with small business representatives. So we will have material suitably targeted for SMEs, but also communicate to the people who provide advice and support to these businesses, such as the patent library network, growth hubs and professional IP advisers. As IP Minister, I have tried to make sure that people understand IP a bit more and, with my noble friend’s assistance, I think that this Bill is an opportunity to do a bit more of that.

Coming back to the amendments, I believe that they would in fact complicate what is currently, as drafted, a clear and consistent definition, developed by the Law Commission, of what is and is not an infringing act. I therefore ask the noble Baroness to withdraw the amendment.

[Lord Lucas]

My Lords, I apologise for being backward when it comes to IP law, but I am surprised that the “commissioner” is not committing anything actionable. In this internet world, if I commission a product that infringes a patent, it is easy to get it made somewhere that is hard for the patent owner to get at and then arrange to sell it over the internet so that the importer is actually the final customer, rather than anyone who can be got at. That leaves the patent owner with no sensible place to go to enforce their patent. Is it really the case that “commissioning” a manufacturer to infringe a patent is not in itself actionable, or did I misunderstand the Minister?

[Baroness Neville-Rolfe]

These are quite fine points of law, but that is a fair question. Are there any other points, while we try to ensure that we answer your question accurately?

[Lord Lucas]

I thought that the Minister was saying to the noble Baroness, Lady Bowles, that she was seeking to introduce something new by saying that “commissioning” was not an infringement and, therefore, one could not make a justified threat to someone who was not doing anything that was actionable.

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I am sorry to have gone on at length, but this is yet another example of where, after asking in the consultation process whether there were any problems with the law that was intended to be rolled out, and after having been provided with example where it does not quite work, those seem to have got lost in the process. Therefore, I think that it is right that we consider them and consider the merit of them. I beg to move.

[Lord Lucas]

I want to ask a question, so that I understand things better. In the case of a box of Tesco own-brand cornflakes, is Tesco the primary infringer, or must the person who thinks that their patent is infringed write to Tesco to ask who the manufacturer is? In other words, must they ask who Tesco has commissioned to make the cornflakes for it?

[Lord Stevenson of Balmacara]

Luckily, I do not have to answer that, but we have expertise beyond parallel at the Minister’s end of the table.

I just want to support the points made by the noble Baroness, Lady Bowles of Berkhamsted. The question here is not so much whether this is an issue that we should take into account ab initio, which was slightly the case with the previous amendment, although I supported that as well; the support here comes because there was clear evidence from those whom we consulted that this issue needs further attention, and the noble Baroness has made that case very well. If we have gone to the trouble of taking evidence but then do not consider it and take it forward, that seems to be a slightly casual way of approaching things. I hope that we will take this point very seriously.

I also take the noble Baroness’s point that, if we were to amend the Act in the way that she suggests, this would reduce the impact on small and medium-sized enterprises and other organisations, because there were would be fewer court actions and more such matters would be dealt with in the right way, which is directly between the participants. So I support these amendments.

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[Viscount Hanworth]

I shall move Amendment 9. To continue, Amendment 11 relates to permitted communications, namely,

“giving notice to or by an information society service provider of the infringement of a patent”.

The amendment has been provided by the BBC and by BBC Worldwide Ltd at the instance of the Committee. The problem that it addresses was also recognised by the Chartered Institute of Patent Attorneys. It provided an amendment to new Section 21A(2), which had the same purpose as the present amendment. However, it was agreed that the text of its amendment was tortuous and that amendments to the same end were required in other places in the Bill, which is why we find them in five places. To that end, the BBC has provided five amendments that are to be placed throughout the Bill. They concern, respectively, patents, trademarks, registered designs, design rights and community designs. The wording of these amendments is virtually identical and so it is appropriate for me to speak to all of them together. As we proceed through the list of amendments, it should be clear which ones these are.

I should briefly describe what the problem is. It arises when a rights holder contacts an internet service provider, such as eBay, to assert that there has been an infringement of its rights. Someone may be advertising goods for sale using its trademark or infringing its brand. An example that was provided by the BBC concerns the sale of bespoke “Doctor Who” birthday cards, but there are many other similar cases that one can imagine. The action of the brand owner or the rights holder would be to contact the internet company—eBay, for example—requesting that it takes down the offending advert. The internet company would do so, while contacting the party responsible with information concerning the putative infringement and providing it with an opportunity to contest the action. In a contested case, it would encourage the parties in dispute to open negotiations.

A point that has to be stressed concerns the huge volume of such incidents. They have to be handled in a routine manner by dedicated teams within internet companies, which would be severely constrained if they were liable to the charge of making unjustifiable threats. Moreover, it is unclear in many cases whether the putative infringer would be regarded as a primary infringer, to whom it is legitimate to send a threatening letter, or a secondary infringer, to whom it would not be legitimate to send the letter. The Bill makes an allowance for this in cases where all reasonable steps have been taken by the claimant to determine whether the infringer is a primary infringer or a secondary infringer. However, in the cases that we are considering, which concern high volumes of low-value trades, the requirement to take all reasonable steps to determine the matter seems to be excessively onerous. We will come to this point on a later amendment.

The question of whether a notice issued by the complaining rights holder or by the internet company can constitute an unjustifiable threat is still undecided in law. These amendments attempt to clarify the matter. There has been some pushback from the Law Commission, which seems to be loath to allow any interference with its handiwork. Its comments have been addressed to the amendment of the Chartered Institute of Patent Attorneys rather than to the offerings of the BBC, which it may not have seen. It has made two arguments. First, it has suggested that the matter can be dealt with adequately in the Explanatory Notes that accompany the Bill. It has also proposed, more generally, that any outstanding matters can be settled by case law. I do not regard these as adequate responses to the genuine difficulties that are arising. I beg to move.

[Lord Lucas]

I am very sympathetic to these amendments. The internet is an international community, it has developed an international and agreed method of dealing with infringements and it would be daft of us to try to insist on a separate method of dealing with them just for the UK, even if we may be in that sort of mood as a country at the moment. This is a moment to try to swing behind an international system that works.

[Baroness Bowles of Berkhamsted]

This is the last long intervention I shall make, but I have some additional points that I would like to share on this. The idea of making a take-down notice into a permitted communication evolved during the course of our hearing with the BBC and eBay. The BBC suggested that one could utilise wider words than those I chose to use. I used “digital platform”, and it used wording from the electronic commerce directive, which refers to,

“an information society service provider”.

It is quite useful to be reminded that the electronic commerce directive has an impact upon the way take-down notices have developed over time. As the noble Viscount, Lord Hanworth, said, there are two reported cases where courts have declined to make an interim decision about whether a take-down notice constitutes a threat because it is an issue of substance that would need to go to full trial. In its last submission, the BBC referred to the Cassie Creations case. That case refers to the earlier case and, in particular, to the Quads 4 Kids case. I know we like to have judgments and case law in order to evolve law, but we have now got into an area where, even if we had a full trial decision interpreting the law as it stands, we would still be faced with having to look at the policy intent for the world we live in.

Relevant to that are also the bits of law that are being taken away by the Bill. It removes the right a rights holder has at the moment that mere notification of a trade mark or design registration or design right is not a threat. Of course, as soon as you put the word “infringement” into the notification, you bring in the notion that it might be a threat, although in the context of a take-down notice, it is not a threat of litigation because take-down avoids there being litigation most of the time. EBay told us that it happens some 97% of the time, and even the other 3% does not all go to court, as that figure includes when counterproposals are made.

I am trying hard not to get into arguing the case that has not gone to full trial, but the situation is that platforms are not liable for infringements until they are put on notice of an intellectual property right—that is the effect of the e-commerce directive. At the moment, you can put a platform on notice, at least for trade marks and designs, without using the word “infringement” using the safe harbour mere notification provision. That was the case for patents as well prior to the 2004 revisions.

When it comes to take-down notices as they are being used, to make the procedure sensible, the notices use infringement terminology, but in general platforms do not feel that they are being threatened. At least, that is what eBay said in evidence. It said that threats were more likely to arise in the few cases where there is further correspondence. However, as the BBC pointed out, threats and the suggestion that a take-down notice is a threat have been raised and have twice been considered to be a substantive point that would need a fair trial. In the Quads 4 Kids case, Judge Pumfrey, as he then was, said it was an arguable case needing full trial, and that precedent of leaving it for a full trial—which did not happen—was followed in the Cassie Creations case.

However, to stop being liable, once they have been put on notice, platforms take action and take down infringements without the matter going to litigation or even the threat of litigation—unless the take-down notice constitutes a threat, which has not been decided. You also need to consider which leg is a threat. Is it both legs, the first leg from the rights holder to the platform, the second leg from the platform to the vendor or a pass-through transmission from the rights holder to the vendor via the platform? All this is going to go on and be uncertain until there is a judgment in a yet-to-come case that makes it beyond the interim stage. Often there are other things that enable a decision to be made, so this point still does not get decided.

Meanwhile, the Bill is taking away the mere notification right, which is at least theoretically useful as a defence in such instances—and some say that it is more than that— and replacing it with the all reasonable steps defence and permitted communications, but permitted communications have new limitations as well as new possibilities. There is nothing quite so broad as the existing right under mere notification when all you are saying is, “This is the patent number”, “This is the design number” or “This is the trade mark number”— I should correct myself as it was taken away for patents, but some people have said it should come back. We have something here where a safe harbour right is being taken away and a less comprehensive defence is being put in its place. In the context of a digital platform, that may be a very significant change, so the basic suggestion in all these amendments is that a take-down notice should be a permitted communication.

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[Baroness Neville-Rolfe]

New Section 70C and equivalents set out remedies in the case of a successful threats action and the defences available to those who have a threats action brought against them. Subsection (4) sets out a defence if it has not been possible for the threatener to identify the primary actor.

As has been said, the first amendment would amend the subsection to reflect a drafting preference by moving the location of the reference letter T. That may relate to the person who made the threat, which begins with T, but I will discuss the wording with parliamentary counsel in the light of the Digital Economy Bill to see whether we feel that it is right. I do not think that anybody thinks that it is a material point.

The second group of amendments under discussion relate to the defences available for someone who is faced with a threats action. The 2004 patents reform introduced a defence for a person making a threat to a retailer or the like. The defence applies if their efforts to find the trade source of the infringing patented goods were unsuccessful. The Bill extends this limited but useful defence to trade marks and designs. The provisions clarify that the person making the threat must have used “all reasonable steps” to find the importer or manufacturer of the product in question before they are safe to approach the retailer.

The phrase “all reasonable steps” was carefully chosen in response to stakeholder feedback, discussions with the Law Society and the Law Commission’s working group. Stakeholders thought that the previous phrasing used in the patents defence, “best endeavours”, carried too much legal baggage, as it has a special meaning in commercial contract law. In addition, it was felt that this could require disproportionate efforts by a rights holder attempting to identify a primary infringer. “All reasonable steps” therefore strikes the right level. It requires the person making the threat not just to do something which is reasonable but to do everything which is reasonable. The wording is fair; it does not require the person making the threat to go beyond what is reasonable.

Amendments 18 and 19 and equivalents seek to deal with pending rights. It is well established that threats to sue for infringement of an IP right, when an application for that right is still pending, are nevertheless subject to the threats provisions. New Section 70E for patents, and equivalents for other rights, ensure that there is no change to this principle—the threat will be interpreted as a threat to bring infringement proceedings once the right has been granted.

The effect of the amendment is to state explicitly that the issue of whether there has been an infringement will be determined on the basis of the granted right. It would add words in respect of the justification defence at new Section 70C(3) to state that a reference to the word “patent” means, in the case of an application, “patent as granted”. It would also make similar changes in relation to the other rights. The amendment is unnecessary. The threatener has a defence that the acts were in fact infringing ones. It is already the case in law that he must be able to show that the acts are infringing at the point of trial. If, at that time, there is not yet a granted IP right, there is no valid right to infringe and so the defence is not available to the threatener. That is the right outcome.

It is only where an IP right has been granted by the time of the trial that the defence is available. The new threats provisions do not change this legal principle. They fit into the relevant Acts, which themselves make clear at what point and in what way infringement of an IP right can occur. Let us take patents as an example: to understand references to infringement of a pending patent, it is necessary to refer to Section 69 of the Patents Act 1977. This makes it clear that you will not infringe a patent until it is granted and explains how infringement works for pending patents.

I have tried to explain why the provisions are drafted in this way. I will look again at our friend T. I ask the noble Viscount to withdraw the amendment.

[Lord Lucas]

My Lords, I would be grateful if, between now and Report, the Minister could write to me with some examples of cases decided on the basis of “all reasonable efforts”, so that I can get a real grip on what that means. It is a very uncertain phrase in English. If I wrote to Tesco asking, “Who made the cornflakes?”, and it said, “It’s not our policy to divulge that information”, would that be “all reasonable efforts”, or should I ask five or six times? If I cannot find a way on the website to communicate with somebody who appears to be selling products off a platform, are no efforts “reasonable efforts”? Particularly in the context of being asked to give way on Amendment 11 or whatever comes back on Report, knowing that, for example, the things that we are asking the BBC to do in defence of “Doctor Who” are actually reasonable and are not a ridiculous burden in defence of a 20p commission on a Doctor Who birthday card is something that we as a House should do. I would be grateful for an opportunity to see the sort of evidence that a court will see, against which it will judge whether a particular course of action involves all reasonable actions rather than just reasonable actions.

[Viscount Hanworth]

Yes, indeed, in my perception, “all reasonable” goes far beyond reasonability. I think that is a substantial point, although we are talking about just one word. I beg the Minister to take this matter away and consider it. I shall withdraw the amendment, but assure her that I shall raise it on Report if we cannot find any better way of phrasing this onerous demand.