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Mr. Ian Taylor (Esher and Walton) (Con): We have had a most learned debate on this modest Bill. Indeed, the speech by the hon. Member for Newport, West (Paul Flynn) was learned and emotional in waxing lyrical about the decision of the then Conservative Government to provide his constituency with its glamorous offices and employment prospects back in 1991. I much enjoyed my visit to those offices in the dim and distant days when I was the Minister with responsibility for science and technology. I found much enthusiasm for the work being done with such expertise.

I am delighted to take part in this debate, although I must make a declaration of interest. I am involved with one or two companies that apply—often successfully—for patents, so I have business interests in the area, including with a merchant bank called Interregnum that encourages companies to exploit their intellectual property.

That experience, allied to my ministerial experience, has reinforced my view of the importance of patents, but they are not the sole solution in the need to advance intellectual property, many aspects of which are not even patentable. In this modern knowledge economy, businesses will have to find ways to increase their competitive advantage by identifying not only their
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intellectual property but the IP that they need to acquire from elsewhere. They often need to move speedily in doing that, which is not always the way that the patent process works.

When I was responsible for the research councils, we used to talk about ways in which both they and the university sector could exploit intellectual property. People often asked why universities did not hold more patents. The answer was often complicated and taught me that a good benchmark for showing whether a university was really exploiting its knowledge base and getting involved in technology transfer was not always that it had ratcheted up a high number of patent applications. I use that point as background, because although the discussion of patents is obviously the reason for our being here this afternoon, patents are not the only guideline for the exploitation of intellectual property. I certainly hope that companies do not assume that that is the only benchmark they should use either for their evaluation by the City or other possible investors or for the way in which they want to be seen by their peers. Ultimately, the benchmark is commercial success, which in many cases means rapid translation of a good idea into a good product that sells.

The difficulty with patents is that by the very process of application one often makes public the invention or the original process—a point that has already been mentioned. For many companies that is a disadvantage. Some of the Government's work—in the Department of Trade and Industry, the innovation report published at the turn of the year and the Lambert report commissioned by the Treasury to look into our university business links—shows that the danger of a patent is that it actually discloses an interest to possible competitors, which, for many companies, creates the problem of how to protect that knowledge. As I pointed out earlier, exploitation is often the best way to protect and take advantage of an invention.

Often, the public are not really worried about patents until they seem to be threatened by their existence. The hon. Member for Weston-super-Mare (Brian Cotter) pointed out that when there is debate about some of the pharmaceutical cases, such as whether DNA sequencing should be public or private, the public prick up their ears. Sometimes, however, such debate is dangerously misguided. In many cases, pharmaceutical companies take out patents to protect the terrific investment needed for new drugs to come to market. We are slightly in danger of assuming that the pharmaceutical companies are somehow an evil influence because they possess those patents. There is debate about whether one should move to generic products and whether we should forcibly reduce the length of patent coverage and try to abolish the taper at the end of the process. Those questions can be rather emotional when applied to continents such as Africa. I understand that, but the danger in that public debate is that the patent can be regarded as an obstacle whereas in fact the whole process of encouraging companies to invest in research and take out a patent to protect their commercial advantage is important.

That gives rise to another issue that has not been a focus for our debate: it is a mistake to believe that all patents are taken out by individuals or small companies. Some of the most important patents are in large companies and those companies can be very innovative.
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We should not believe that the whole process is about small companies in big battles to try to protect themselves. An analysis of the litigation shows that we are dealing with the exceptions; the problems tend to be at the margin. Most patent processes—applications and renewals—tend to go through smoothly and are not subject to great debate.

Nevertheless, I recognise that individuals and inventors take out patents. I dealt with them as a Minister. It was sometimes difficult because they thought they had discovered the full benefits of alchemy and that the gold to be produced thereby should come to them; the manufacturing process for turning their invention into something worthwhile was of no concern to them. I do not of course include Trevor Baylis in that category; he used to phone me regularly on Sunday mornings to tell me his latest thoughts. He had great success with many products, not least the clockwork radio, and I fully compliment him. The difficulty often is to get individual inventors to work together, which is, as I am sure the Minister has discovered, not an easy task—to put it mildly. I pay tribute to inventors, but we should not be under the impression that they are the only people concerned with inventions—there are many others.

There is a challenge for the European Union. My right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot) mentioned the Lisbon agenda somewhere in his excellent speech. He pointed out that the need for us to make Europe the most competitive place in the world to do business was paramount. Of course we hope that Britain is the most competitive place within that wider European space. The Library has produced an excellent document from which I quote the definition of intellectual property given by Ian Harvey, the chief executive of the British Technology Group. He said:

That is a key point. However, Charles Oppenheim, professor of information science at Loughborough university said:

That, too, is obviously important. The European patent convention has been a reasonably successful provider of broader patents for Europe; it has been effective in bundling together, over 27 countries, a national patent that has wider application.

The difficulty is that, in the spirit of the Lisbon agenda, we have not actually been able to convert the work of the European patent convention into the implementation of an EU patent. That is a continuing problem in the Council of Ministers. The process has been stalled by a variety of things. Language, which was mentioned by my right hon. Friend, is not only prohibitive but emotional. The fact that we in this country think the provisions should be in English—I share that belief—is not necessarily fully appreciated, not least by the French. There are also complications arising from justice systems in Europe. There is obviously a need for a court to enforce the patents, but that challenges each of the national courts.
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Over the years, I have also detected resistance from national patent systems and national patent offices, many of which are profit-based and feel that they will be bypassed. In some countries they have an almost disproportionate influence on the Government. I hope, however, that, in the spirit of the quinquennial meeting of patents Ministers, the Minister will be able to get the scheme back on the road. It is absurd that the European single market has no court capable of implementing an EU-wide patent and relies only on the convention itself.

The point behind the Bill is to try to find new ways of clarifying some of the arguments. We have heard the detail, and I shall not bore the House by going back over that. The conflict between employees and their employer is genuine, and it is very difficult to determine. I hope that the Minister has got the draft of the Bill right. It has been tested in the Lords, and I am sure that it will be tested in Committee. Nevertheless, part of it relates to contract law and what an employee was doing under his or her contract. Was he or she expected to develop new ideas? Any sensible company would certainly wish to compensate someone who had come up with ideas that were capable of being patented. Many universities have wrestled with similar problems.

I return to an earlier point that I tried to make. The difficulty for an individual is that it is no good just having a patentable idea as though that was Mecca. Having a patentable idea is a means of enabling a good idea to be translated, through protection, into a public good, a consumable product, an advancement in science or whatever. The original idea may be laudable, but it is not the end product. An end product uses a patent in order to give the process time to provide competitive advantage, and many employers will not necessarily fully appreciate that the process of exploitation is as important as the idea itself.

When I was a Minister, I was involved with an award—I believe that it continues—that specifically related to bringing together the great ideas, although not necessarily patentable ideas, produced by small companies with the big companies that were capable of exploiting them. I remember the ultrasound technology that was applied to valves used in the North sea to ensure their accuracy and reliability over many years. That required huge engineering skills—of, I think, British Gas—to attain perfection in the manufacturing process even though the idea originated with an individual or a small group of individuals.

I will give the Minister the benefit of the doubt on another aspect of the Bill that I hope will work. I refer to the process of judging infringement and, although clause 13 has its merits, it will have to be tested in Committee. I shall not do that on the Floor of the House, but I mentioned the costs of protecting and renewing a patent. The issue of infringement is difficult. We live in a competitive world and people want to take advantage of ideas. Many companies often go through a parallel process that enables them to say that they have not technically infringed the existing patent, but merely provided something that was remarkably similar. That can involve subjective and objective judgments, and clause 13 may assist with the objective assessments.

I underline the need for the Bill to be effective when it is converted into law. In 2002, it was estimated that expenditure on research and development as a share of GDP in the European Union was 1.99 per cent. The only
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comparisons that I have are with Japan, where the figure was 2.98 per cent. in 2000, and with the United States, where it was 2.8 per cent. Those gaps are significant and continuing even though Treasury Ministers and the European Commission have set the target of improving total R and D spend in the EU to 3 per cent. of GDP. I am afraid that we are still a long way short of that. For those interested, in 2002 the share of R and D expenditure in the United Kingdom was 1.84 per cent. of GDP.

In the period between 1997 and 2001, however, the EU recorded a rate of European patents per unit of business R and D expenditure as equal to 0.6 per cent. It was followed by Japan, where the figure was 0.31 per cent., and the United States, where it was 0.26 per cent. Those figures are slightly more heartening bearing in mind my earlier point that patents by themselves are not the only benchmark for intellectual property exploitation.

The Bill has merit. I do not believe that the worries expressed by some professional organisations are necessarily well founded, but they should be aired in Committee, and I am sure that they will be. I certainly wish the Bill good speed. We should make sure that we comply with the European convention and constantly update patent law. We should also continue to try to bring down the costs of applying for patents and the time in which they are granted. Good ideas need to be out there in the marketplace very quickly. We live in an increasingly competitive world not only among companies in this country or within the European Union, but internationally. We cannot be left behind. The Bill had better make effective law.

6.26 pm

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