Select Committee on Trade and Industry Eighth Report


VI COPYRIGHT AND PATENTS

92. We have focussed largely on trade marks during the course of our inquiry. We do, however, have some sympathy with the view expressed by the City of London Law Society Intellectual Property Sub Committee that the law in relation to parallel imports has developed separately in relation to each type of IPR and "such a piecemeal development leads to uncertainty and a more consistent approach to parallel importation would be welcome".[264]

Copyright

93. The issue of interpretation of the principle of exhaustion was raised in relation to copyright some time ago. In the Communication from the European Commission, The follow-up to the Green Paper on copyright and related rights in the information society in November 1996, the point was made that: "at least in certain cases, some Member States provide for no exhaustion (limitation) of the distribution right at all, whereas others apply exhaustion even when the first legal act of distribution has occurred in a place outside the Community ("international exhaustion"). The latter concept which allows for parallel imports originating in third countries might entail major difficulties for the operation of the Single Market."[265] The proposed Directive on Copyright and Related Rights in the Information Society confirms that there should be no international exhaustion of the distribution right and that exhaustion of rights should not occur for on-line dissemination.[266]

94. The proposed Directive sets out to harmonise basic rights and exceptions in the field of copyright, particularly as they affect the information society, including on-line transmission and electronic copies. The UK Government broadly welcomed the draft Directive but expressed concern over a proposed exemption for temporary electronic copies such as occur in Internet services.[267] The Amended Proposal for a Directive incorporated, amongst others, the European Parliament's amendment that established an exception for temporary copies which are an integral part of a technological process.[268] The proposed Directive also aims to implement a number of the wider international obligations arising from two WIPO treaties agreed in December 1996.[269]

95. It is estimated that the so-called 'copyright industries' together represent between two and six per cent of the GNP of most OECD countries.[270] The Publishers Association noted that "the real benefits of Intellectual Property Rights accrue to nations which have creative and innovative industries supported by strong copyright regimes".[271] British Music Rights stated that "a local climate that encourages innovation and creativity rather than imitation depends upon strong copyright efficiently enforced both as to pirates and in respect of its territorial nature".[272] They go on to comment that if international exhaustion was permitted then returns to publishers and creators would fall as more music was sourced or licensed through no-royalty paying countries. We are aware of no particular demand for changes in the copyright regime towards international exhaustion. Given the importance of the copyright industries to the UK, we would recommend the exercise of great caution before proceeding down this path.

Patents

96. Patents can be obtained nationally from Member States or by a single application for a 'bundle' of national patents from the European Patent Office. This 'bundle' is, in essence, a set of individual national patents that are valid in those designated Member States and subject to the national laws and practices of that State. The European Patent Office was not a European Community institution but an organisation created by intergovernmental agreement - the European Patent Convention in 1973. By contrast, a European trade mark, valid in all states of the EC, may be obtained from the Office for the Harmonisation of the Internal Market in Alicante. Patents can also be applied for through WIPO under the aegis of the Patent Co-operation Treaty (PTC). The United Kingdom and 76 other countries are parties to the PCT. If a company files a patent application under this treaty it will (if granted) be effective in each country listed on the application.

97. In 1975, the then Member States signed a Community Patent Convention to provide for a unitary Community patent but this has never entered into force. The European Commission now intends to bring forward a draft Regulation establishing a single unitary patent across the EC. It is proposed that this Community patent should, at least for a transitional period, coexist with the national patents and the European patent.[273] The main problems with the original proposal for a Community Patent were those that still exist today- the cost of translations and the intricacies of the litigation system. The DTI told us the Government is "supportive" of the Commission's intention to bring forward the draft regulation and that: "United Kingdom industry is broadly in favour of the introduction of a Community patent but believes that such a system should exist alongside the existing systems at least until it can deliver against industry's two main demands, that it should be inexpensive to obtain and enforce and should command legal confidence".[274] For example, under the proposals, any invalidity decision taken over a patent would stand for the whole Community. CIPA stated to the Committee that it would be "very nice if we could have a single court of first instance to try for infringement rights as well as for validity" and cited the Epilady case as an example of current weaknesses in the system.[275] In that instance, on an identically worded claim no infringement of the Epilady patent was found in the UK but infringement was found in the German courts.[276] Mr Watson of the Patent Office told us in oral evidence that currently there were also a "lot of cultural and other political issues behind it, so I think it is going to take some time and quite a few difficulties have to be overcome".[277]

98. The US currently operate a 'first-to-invent' process for patents rather than the 'first-to-file' process that operates in the rest of the world. The first-to-invent requirement "places additional burdens on inventors in the UK who seek patent protection in the US since they will be required to maintain notarised records of all their laboratory and field work".[278] The system produces an unnecessary and expensive level of litigation and uncertainty. The IPR Action Plan in the Competitiveness White Paper included the objective to: "press the US to introduce a 'first-to-file' patent system in line with the rest of the world".[279] The Government "is taking every opportunity to persuade the US authorities to conform".[280] However, the Minister told us that he was not sure if the US were "open to persuasion" and they would be "very loathe to give up what they perceive to be great advantages. But I think that they understand also that the name of the game now is incremental developments in almost every single area".[281]

99. The Competitiveness White Paper set out an IPR Action Plan which included a number of objectives for patents- for example, to push for an EC patent which is affordable and easy to enforce, to ensure harmonisation of 'petty' patents, and to press the US to introduce a 'first to file' system. These are in broad terms admirable objectives: we will be tracking progress in their implementation together with the other objectives of the White Paper.


264  Ev, p205 Back

265  COM (96) 586 Final, p17 Back

266  COM(97) 628 Final (18-19) Back

267  Ev, p147, paragraphs 5.4-5.6 Back

268  COM (1999) 250 Final Back

269  Ev, p149, paragraph 5.18 Back

270  Patents and Innovation in the International Context, OECD (OECD/GD(97)210) Back

271  Ev, p161 Back

272  Ev, p255 Back

273   COM(1999)42 Final. Promoting innovation through patents; the follow-up to the Green Paper on the Community Patent and the Patent System in Europe, p12 Back

274  Ev, p148, paragraph 5.13 Back

275  Q419 Back

276  It should be noted that on appeal a different result was reached in both countries. Back

277  Q592 Back

278  Ev, p150, paragraph 5.21 Back

279  Our Competitive Future. Building the Knowledge Driven Economy. The Government's Competitiveness White Paper, p56 Back

280  Ev, p150, paragraph 5.22 Back

281  Q598: Q599 Back


 
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Prepared 8 July 1999