Clause 14 - Security for costs

88.     This clause substitutes a new section 107(4) which makes new provision in respect of the comptroller's power to award security for costs (or expenses in Scotland). Although the new power is expressed in more general terms than the existing one, it is made subject to "prescribed conditions" being met. In prescribing those conditions, it is intended to align the position of the comptroller as far as possible with the position of the court under rule 25.13 of the Civil Procedure Rules 1998 (as amended). In particular this will mean that due account can be taken of the ability to enforce judgments in other jurisdictions under the Brussels and Lugano Conventions, and under Council Regulation (EC) No.44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. The condition related to residing or carrying on business in the United Kingdom is removed from section 107(4), as is the specific list of proceedings in which security for costs can be sought.

Clause 15 - Amendments, repeals and revocations

Schedule 2 paragraph 5

     89.     Paragraph 5 amends section 16 of the 1977 Act. This section requires the comptroller to publish a patent application, and (in conjunction with section 118) allows the public to see all the relevant papers on the file of a patent application. The amendment made by paragraph 5 enables rules to be made setting out the circumstances in which an inventor's name and address can be withheld from the publicly-available patent application file. Rules may also be made setting out the circumstances in which an inventor's name may be withheld from the front page of the specification of a published patent application (the 'A-specification').

Schedule 2 paragraphs 6, 22

90.     The RRO inserts new provisions into the 1977 Act to provide for the reinstatement (section 20B) or resuscitation (section 117A) of patent applications in certain circumstances. The provisions protect third parties from being sued for infringement if they have, in good faith, started to use the invention between termination or withdrawal of the patent application and its subsequent reinstatement or resuscitation. Paragraphs 6 and 22 ensure that the Crown is not liable for payment to the patent proprietor if the Crown has, in good faith, started to use the invention between the patent application being terminated and reinstated (under section 20B) or between the patent application being withdrawn and resuscitated (under section 117A).

Schedule 2 paragraph 7

     91.     The effect of paragraph 7 is to update some terminology in section 22 of the 1977 Act, and to address an anomaly caused by removal of duties from the United Kingdom Atomic Energy Authority. Section 22 concerns information in patent applications which might be prejudicial to the defence of the realm or the safety of the public.

92.     Sub-paragraphs (2) and (3) substitute the words "national security" for "defence of the realm" in the heading of section 22, in section 22(1) and in paragraphs (a), (c) and (d) of section 22(5). This update of the terminology ensures that the comptroller can make directions in any circumstance where there is a need to protect the national security interests of the United Kingdom.

     93.     Sub-paragraph (4) amends section 22(6), essentially to maintain the existing requirements, but to remove references to the United Kingdom Atomic Energy Authority (UKAEA), which no longer has particular responsibility regarding patent applications relating to atomic energy. The existing provision permits the Secretary of State to seek a report from the UKAEA in order to decide whether publication or communication restrictions should continue to apply to sensitive information. Sub-paragraph (4) replaces references to the UKAEA in section 22(6) with references to a government body with responsibility for the production or use of atomic energy or research.

Schedule 2 paragraph 8

     94.     This paragraph adds a new subsection (4) to section 24. When a patent is granted, existing section 24(3) requires the comptroller to publish the patent as granted, and (amongst other things) also to publish the inventor's name. The new section 24(4) makes clear that the comptroller will no longer be required to publish the inventor's name, where the inventor has waived his right to be mentioned.

Schedule 2 paragraph 10

     95.     This paragraph makes a minor amendment to section 41(10), which concerns the enforcement in Scotland of an order, made under section 40, for compensation for an employee-inventor. The wording of section 41(10) is thereby brought into conformity with the existing wording in sections 93(b) and 107(3). It is also made consistent with the wording of new section 61(7)(b), as provided in clause 11.

Schedule 2 paragraphs 13, 15, 16, 27

     96.     Paragraphs 13, 15 and 16 replace the obsolete word "plaintiff", which appears in sections 61, 63 and 70, with the modern term "claimant" now used in civil proceedings in England and Wales. The new section 70(2) and (2A), provided by clause 12, introduces the term "claimant" into the 1977 Act for the first time, and these paragraphs make corresponding amendments to ensure consistency. The Scottish term "pursuer" is left unchanged. Paragraph 27 takes account of the fact that, in Northern Ireland, the term "plaintiff" is still current. It amends section 131 (which deals with the interpretation of the 1977 Act in Northern Ireland) in order to make clear that "claimant" includes "plaintiff" when the Act is applied in Northern Ireland.

Schedule 2 paragraph 14

     97.     This paragraph makes a minor amendment in order to correct the reference in section 62(2) to the period which is specified in section 25(4).

Schedule 2 paragraph 17

98.     This paragraph clarifies the position in relation to revocation of a patent by the patent proprietor. It makes explicit that the reference to "any person" applying for revocation in section 72(1) does include the proprietor of the patent in question. The proprietor would have to show that the patent should be revoked on one or more of the grounds set out in section 72(1). The amended provision will operate in conjunction with the proposed amendment to section 36(3) by clause 8 above, which makes clear that, unless co-owners agree that it should be possible, one co-owner may not seek revocation of the patent against the wishes of the others.

Schedule 2 paragraph 18

99.     This paragraph amends section 75 in order to allow a patent proprietor to propose amendments during the course of any proceedings in which it is possible for the validity of his patent to be put in issue. Therefore it will no longer be necessary for validity actually to have been put in issue before the proprietor can apply to amend under section 75.

100.     This amendment removes uncertainty in the situation, which arose in Norling v Eez-Away [1997] RPC 160, where a proprietor who is involved in proceedings where validity could be, but has not actually been, put in issue seeks to amend his patent under either section 75 or section 27. The proceedings in which validity may be put in issue are set out in section 74(1): infringement proceedings, proceedings concerning groundless threats, proceedings to obtain a declaration of non-infringement, revocation proceedings and disputes over Crown use.

Schedule 2 paragraph 23 and paragraph 25, sub-paragraph (3)

101.     Paragraph 23 amends section 120 in order to give the comptroller the power to give directions regarding certain procedural matters. In consequence of the amendments made by paragraphs 23(1) to (3), the Patent Office's hours of business and excluded days (in relation to patents matters) are no longer to be prescribed by rules made by the Secretary of State. Instead, the comptroller will specify these matters in directions. This will include the ability to give different directions for different classes of business; for example, varying the hours of business which apply to the filing of patent applications. However, the manner in which such directions are to be published will be prescribed by rules. It is the intention that such directions will be published by means of electronic notices, in official journals, and on the Patent Office website.

102.     Paragraph 25(3) inserts a new subsection (2A) in section 123. This will enable the comptroller to specify in directions the content and layout of the Patents Forms, so that the forms will no longer need to be prescribed by rules. Again, it is intended that the comptroller will be required by rules to publish such directions by means of electronic notices, in official journals and on the Office's website. Rules will continue to require the use of forms when prosecuting a patent application, and when dealing with the Office in other matters.

Schedule 2 paragraph 24, sub-paragraphs (a) and (b)

103.     These sub-paragraphs amend section 121 in order to clarify the position with regard to the laying before Parliament of the comptroller's annual report. The effect of article 6 of the Patent Office Trading Fund Order 1991 (SI 1991 No.1796) is that the requirement of section 121 is satisfied if a report for each financial year is laid on or before 30th November of the following financial year. This requirement will now be on the face of the 1977 Act, and article 6 is revoked by clause 15(3).

Schedule 2 paragraph 25, sub-paragraph (2)

     104.     This sub-paragraph modifies one of the existing powers to make rules in section 123(2) of the Act. Section 123(2)(i), as amended by paragraph 25(2), will allow rules to set out the way in which an inventor may be identified in respect of a patent or patent application. The new section 123(2)(i) will also enable rules to be made subjecting the waiver of the inventor's rights to be mentioned (in section 13(1) of the 1977 Act) to acceptance by the comptroller.

Schedule 2 paragraph 25, sub-paragraph (4)

105.     Paragraph 25(4) repeals section 123(4) and (5). The effect is that the Treasury's consent will no longer be required for the making by the Secretary of State of rules prescribing Patent Office fees or for the determination by the Secretary of State of the remuneration of advisers appointed to assist the comptroller in proceedings under the 1977 Act. Rules prescribing fees will continue to be made by the Secretary of State and be subject to annulment in accordance with a resolution of either House of Parliament.

FINANCIAL EFFECTS OF THE BILL

106.     The financial effects on the Patent Office as a result of the Bill are expected to be broadly neutral. The Patent Office operates as a trading fund and all its costs are met out of fee income - see the Patent Office Trading Fund Order 1991 (SI 1991 No.1796). There should be some additional fee income from those who request opinions on validity or infringement, but the number of requests is not expected to be significant and is likely to roughly balance some expected reductions in fee income, for example as a result of fewer renewal fees being paid with a late payment addition as a result of simplification of the dates for payment of renewal fees. Currently patent disputes may end up before the courts, but the changes relating to enforcement in the Bill have been designed with the intention of encouraging settlement of disputes without referral to the courts. There may, therefore, be a reduced financial impact on the courts as a result of this Bill, but, given that patent disputes comprise a very small proportion of civil cases, the overall impact of such a reduction would be insignificant.

107.     Any benefits for businesses flowing from the Bill would apply equally to public sector interests that take out patents, for example universities, and these benefits can be financial, such as royalties for licensing patents. However, benefits for patent proprietors are to a large extent counterbalanced by an altered impact on non-proprietors and this will apply to public sector as well as private sector interests. Thus, although there may be some transfers in the financial effect from one interest to another as a result of the changes to patents legislation arising from the Bill, it is expected that overall there will not be a significant financial effect on public sector interests.

EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER

108.     Requests to the Patent Office for infringement or validity opinions as a result of the Bill could require an increase in the complement of patent examiners, although this effect is not expected to be very great as the number of opinions requested is likely to be relatively small in comparison to the number of patent applications that are examined. However, other changes to the 1977 Act made by the Bill, particularly simplifications such as for payment of renewal fees, would lead to a reduction in the manpower needed in the Patent Office. To at least a certain extent, these positive and negative changes to manpower arising from the Bill could be achieved by reallocating duties rather than taking on additional staff and making others redundant. Planning for changes in Patent Office staffing as a result of the Bill would therefore be absorbed in the normal planning process, with staff costs being met out of fee income.

109.     For the same reasons indicated above for the financial effect, there is likely to be an insignificant overall effect on manpower within the court service. Also, for the same reasons as indicated above for the financial effect, there is likely to be a broadly neutral effect on public sector interests that either benefit from patents or are affected by others' patents.

SUMMARY OF THE REGULATORY APPRAISAL

110.     The Regulatory Impact Assessment explains that seeking patent protection for an invention is optional as is participating in activity that would either infringe a patent or need a licence from the patent proprietor. Thus, any changes delivered by the Bill that change the balance between these interests is a transfer rather than a new burden. However, the Assessment identifies the steps that have been taken to ensure a fair balance is retained by supplementing additional benefits for patent proprietors with extra protection for third parties where appropriate.

111.     The Assessment explains the serious impact on UK interests if there were a failure to comply with the changes to the EPC agreed in 2000 and that there is no sensible alternative other than to give effect to the necessary changes to UK law to comply with the EPC 2000 changes. The impact of these changes is, moreover, assessed to be generally beneficial to UK business as is the impact of related changes that are not essential but which ensure greater compatibility between UK and European patent law and the changes that bring about some modification and simplification of patents law. The Assessment also explains the benefits to the UK's innovative industries from the changes to the framework for enforcement of patents, which are intended to encourage settlement of disputes over patent rights without recourse to expensive and time-consuming litigation.

112.     The Department of Trade and Industry (DTI) has placed a Regulatory Impact Assessment in the Library of both Houses of Parliament. Copies of the Assessment are also available from the Intellectual Property and Innovation Directorate of the Patent Office (an executive agency of the DTI), Concept House, Cardiff Road, Newport, South Wales, NP10 8QQ.

EUROPEAN CONVENTION ON HUMAN RIGHTS

113.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement, before second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). Patricia Hewitt, Secretary of State for Trade and Industry, has made the following statement:

     "In my view the provisions of the Patents Bill [HL] are compatible with the Convention rights."

114.     The only issues with respect to Convention rights which may be raised by the Bill concern Article 1 of the First Protocol (protection of property). The provisions of the Bill which may raise such issues are clause 10 (compensation of employees for certain inventions) and clause 13 (opinions by Patent Office as to validity or infringement).

115.     As regards clause 10, an award of compensation to an employee-inventor in respect of benefits enjoyed by the employer (whether arising from a patented invention or from the patent itself) can be justified as a proportionate measure in the public interest, namely the encouragement of innovation and the fair reward to inventors.

116.     As regards clause 13, to the extent that the issue of an opinion by the comptroller regarding the validity or the infringement of a patent may affect the peaceful enjoyment of property in the patent, the power to issue such an opinion can be justified as a necessary control in accordance with the general interest. In particular, there will be available a sufficient opportunity to obtain a review or reconsideration of the matters addressed by an opinion, either under the existing provisions of the 1977 Act or under the review procedure which may be established under section 74B.

COMMENCEMENT

117.     The provisions of this Act will come into force in accordance with the provisions of one or more commencement orders made by the Secretary of State. The aim would be to bring the provisions which align the 1977 Act with EPC 2000 into force at the same time as the coming into force of that Convention. The provisions relating to the RRO will come into force with the commencement of the RRO.

          ANNEX TO EXPLANATORY NOTES

     PATENTS BILL: AMENDMENTS TO THE PATENTS ACT 1977

     Section 2 - Novelty

     (6) In the case of an invention consisting of a substance or composition for use in a method of treatment of the human or animal body by surgery or therapy or of diagnosis practised on the human or animal body, the fact that the substance or composition forms part of the state of the art shall not prevent the invention from being taken to be new if the use of the substance or composition in any such method does not form part of the state of the art.

     Section 4 - Industrial application

     (1) Subject to subsection (2) below, An invention shall be taken to be capable of industrial application if it can be made or used in any kind of industry, including agriculture.

     (2) An invention of a method of treatment of the human or animal body by surgery or therapy or of diagnosis practised on the human or animal body shall not be taken to be capable of industrial application.

     (3) Subsection (2) above shall not prevent a product consisting of a substance or composition being treated as capable of industrial application merely because it is invented for use in any such method.

     Section 4A - Methods of treatment or diagnosis

     (1) A patent shall not be granted for the invention of -

     (a) a method of treatment of the human or animal body by surgery or therapy, or

     (b) a method of diagnosis practised on the human or animal body.

     (2) Subsection (1) above does not apply to an invention consisting of a substance or composition for use in any such method.

     (3) In the case of an invention consisting of a substance or composition for use in any such method, the fact that the substance or composition forms part of the state of the art shall not prevent the invention from being taken to be new if the use of the substance or composition in any such method does not form part of the state of the art.

     (4) In the case of an invention consisting of a substance or composition for a specific use in any such method, the fact that the substance or composition forms part of the state of the art shall not prevent the invention from being taken to be new if that specific use does not form part of the state of the art.

     Section 8 - Determination before grant of questions about entitlement to patents, etc

     (3) Where a question is referred to the comptroller under subsection (1)(a) above and -

     (a) the comptroller orders an application for a patent for the invention to which the question relates to be so amended;

     (b) any such application is refused under subsection 2(c) above before the comptroller has disposed of the reference (whether the reference was made before or after the publication of the application); or

     (c) any such application is refused under any other provision of this Act or is withdrawn before the comptroller has disposed of the reference, but after the publication of the application (whether the application is refused or withdrawn before or after its publication)

     the comptroller may order that any person by whom the reference was made may within the prescribed period make a new application for a patent for the whole or part of any matter comprised in the earlier application or, as the case may be, for all or any of the matter excluded from the earlier application, subject in either case to section 76 below, and in either case that, if such a new application is made, it shall be treated as having been filed on the date of filing the earlier application.

     Section 11 - Effect of transfer of application under section 8 or 10

     (3A)     If, before registration of a reference under section 8 above resulting in the making of an order under subsection (3) of that section, the condition in subsection (3)(a) or (b) above is met, the original applicant or any of the applicants or the licensee shall, on making a request within the prescribed period to the new applicant, be entitled to be granted a licence (but not an exclusive licence) to continue working or, as the case may be, to work the invention so far as it is the subject of the new application.

     (4) Any such licence A licence under subsection (3) or (3A) above shall be granted for a reasonable period and on reasonable terms.

     (5) Where an order is made as mentioned in subsection (2) or (3A) above, the person in whose name the application is to proceed or, as the case may be, who makes the new application or any person claiming that he is entitled to be granted any such licence may refer to the comptroller the question whether the latter is so entitled and whether any such period is or terms are reasonable, and the comptroller shall determine the question and may, if he considers it appropriate, order the grant of such a licence.

     Section 12 - Determination of questions about entitlement to foreign and convention patents, etc

     (6) In the following cases, that is to say -

     (a) where an application for a European patent (UK) is refused or withdrawn, or the designation of the United Kingdom in the application is withdrawn whether before or after publication of the application but before a question relating to the right to the patent has been referred to the comptroller under subsection (1) above or before proceedings relating to that right have begun before the relevant convention court;

     (b) where an application has been made for a European patent (UK) and on a reference under subsection (1) above or any such proceedings as are mentioned in paragraph (a) above the comptroller, the court or the relevant convention court determines by a final decision (whether before or after publication of the application) that a person other than the applicant has the right to the patent, but that person requests the European Patent Office that the application for the patent should be refused; or

     (c) where an international application for a patent (UK) is withdrawn, or the designation of the United Kingdom in the application is withdrawn, whether before or after the making of any reference under subsection (1) above but after or the publication of the application;

     the comptroller may order that any person (other than the applicant) appearing to him to be entitled to be granted a patent under this Act may within the prescribed period make an application for such a patent for the whole or part of any matter comprised in the earlier application (subject, however, to section 76 below) and that if the application for a patent under this Act is filed, it shall be treated as having been filed on the date of filing the earlier application.

Section 16 - Publication of application

(1) Subject to section 22 below and to any prescribed restrictions, where an application has a date of filing, then, as soon as possible after the end of the prescribed period, the comptroller shall, unless the application is withdrawn or refused before preparations for its publication have been completed by the Patent Office, publish it as filed (including not only the original claims but also any amendments of those claims and new claims subsisting immediately before the completion of those preparations) and he may, if so requested by the applicant, publish it as aforesaid during that period, and in either event shall advertise the fact and date of its publication in the journal.

[ Subsection (2) is unchanged ]