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Standing Committee D
Tuesday 15 June 2004
(Afternoon)
[Mr. David Amess in the Chair]
Clause 10
Compensation of employees for certain inventions
Question proposed [this day], That the clause stand part of the Bill.
2.30 pm
Question again proposed.
The Chairman: For the convenience of the Committee, I have decided to select starred amendment No. 15 to schedule 2.
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): We were discussing clause 10 and the issue of employee compensation. The right hon. Member for North-East Hampshire (Mr. Arbuthnot) queried the need for provision for employee compensation and asked why it is limited to patented inventions.
Existing law on employee compensation has its basis in the Banks report of 1970, which came to the conclusion that to create more successful UK businesses provision should be made to encourage and motivate employees to be more innovative. Provisions in the Patents Act 1977 were decided by Parliament following a long period of discussion and consultation involving, among others, trade unions and employers' representatives.
If the employee compensation provisions were not limited to an invention that has been patented, we would expect many disagreements about when compensation might arise. It is clear what a patented invention is, as the scope of the invention must be clearly defined in the patent claims. What constituted a non-patented invention would, by contrast, not be clear.
We would not want to stand in the way of any employer who sets up a scheme for rewarding employees for any contributions in the workplace, however measured. However, it is not the place of patents law to cover what approach should be taken for inventions that are not patented, or for any other contributions in the workplace. In any event, the practical effect of the current provision has been to encourage businesses to put in place broadly based reward schemes for their employees.
Mr. James Arbuthnot (North-East Hampshire) (Con): I am grateful to the Minister, but that was completely unconvincing. I castigated the hon. Member for Weston-super-Mare (Brian Cotter) for
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attempting to introduce an innovative change to the Bill without consultation. The logic of what I was saying was that one would have to change the 1977 Act to get rid of the whole of the employee compensation provisions, which I would ideally like to do. The Bill is not the place to do that, however, so I am content not to divide the Committee on the clause.
Question put and agreed to.
Clause 10 ordered to stand part of the Bill.
Clause 11 ordered to stand part of the Bill.
Clause 12
Threats of infringement proceedings
Mr. Arbuthnot: I beg to move amendment No. 5, in clause 12, page 6, line 35, leave out from beginning to 'for' and insert 'Relief under subsection 3(b) or (c) above (injunction, interdict or damages) shall not be granted'.
This is a rather complicated issue, and I apologise for perhaps giving the impression of not entirely understanding my own amendment—let me work through it.
The threats action was first introduced as a result of a case in the chancery division in 1881 involving the Halcyon brotherhood. In that case, the Court of Appeal ruled that in common law no action lay to recover the damage caused by threats of patent infringements proceedings that turned out to be unjustified in the absence of malice. Enormous commercial damage can be done by such threats, especially if they are directed against the customers of a competitor of the patentee. The customers will not be interested in getting mixed up in a patent action and will stop buying the goods. That lacuna in the law was addressed by Parliament in the patent and design legislation of 1888.
The statutory threats action was carried forward into successive Acts. It covered threats made to anyone, not just customers, and included, for example, threats made by a patentee direct to his manufacturing competitor—although in practice such a threat is unlikely to cause damage in the same way as a threat to customers
The 1977 Act narrowed the threats action by excluding threats made in respect of importing or manufacturing a product or using a process. The intention was that threats made to principal alleged infringers would be excluded from the action, but threats made to customers would be covered. However, in 1996, in the case of Cavity Trays Limited v. RMC Panel Products, the Court of Appeal said that people would still be covered by the threats action if they sent a letter to a manufacturer saying that they would sue him for infringement for manufacturing and selling. That is a bit illogical because people would almost always want to sue a manufacturer for selling the alleged infringing products as well as making them. The Bill would amend section 74 of the 1977 Act to correct that anomaly.
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There are other anomalies. In the case of patents for processes or methods, the customer is often the primary infringer—for example, where a machine that operates in a particular way is sold to customers. It can be essential for a manufacturer to get the problem of infringement resolved once an allegation is made against him. Sometimes he can use section 71—a declaration of non-infringement. I suspect that the Minister will refer to that in his reply, but that can be an unsatisfactory method because it is cumbersome and requires the applicant to furnish full particulars in writing of his proposed act and to wait for a period until the patentee responds. In practice, patentees almost always respond to such requests by asking for further nit-picking details.
Dealing with the key practical point in disputes where one party is abroad and another is based in the UK is the effect of article 5(3) of the Brussels convention—now known as the Brussels regulation—on civil jurisdiction, which requires that cases are brought either in the defendant's country of residence or, in the case of tort, in the country where ''the harmful event occurs''. That would include a person abroad who sends a threat to a British manufacturing company to sue for infringement of a British patent or a European patent (UK). Under the Bill, such a company would be unable to sue for threats and might be unable to get the infringement determined at all in the British courts until the threatener chooses to take action.
It is not unknown for threateners to be happy to make threats that cause commercial damage and then take their time in going to court. The amendment would allow the British company to go to court in Britain and seek at least the declaration. The drawback is that it is possible that huge costs would still follow the event. There is a balance to be drawn.
Mr. Sutcliffe: I am grateful to the right hon. Gentleman for carefully explaining the purpose of his amendment, which would allow any alleged infringer to launch proceedings for groundless threats and to get a declaration from the courts that they were unjustified. The threats would be unjustified if no infringement had taken place. The alleged infringer would essentially be launching proceedings to ask the court to consider an infringement and, where appropriate, to declare that it was not taking place.
I agree that it is desirable for an alleged infringer to be able to ask that question of the courts or the comptroller of the Patent Office. Fortunately, Parliament also thought that that was desirable when it considered the provisions of the 1977 Act. If the right hon. Gentleman looks at section 71, which he suggested I would refer to, he will see that anyone can ask the courts or the comptroller for a declaration of non-infringement. That provides the sort of mechanism that the right hon. Gentleman seeks.
The inclusion of a procedure for a declaration of non-infringement counterbalances a patent holder's right to bring infringement proceedings. Without it, an alleged infringer who wanted the court or comptroller
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to determine whether an infringement was occurring would have to wait for the patent holder to launch infringement proceedings. Section 71 avoids that problem by providing the alleged infringer with a route to launch proceedings to resolve the problem.
Before the alleged infringer launches such proceedings, he must have approached the patent holder to attempt to get an acknowledgement that infringement is not occurring. If that is not forthcoming, the alleged infringer is entitled to ask the courts or the comptroller to resolve the issue. It is right that the statute encourages the parties to come to an agreement before proceedings are launched. As an aside, it is worth noting that the new opinions procedure, which we will come to later, will also help in this regard.
I took note of what the right hon. Gentleman said about the European position and will reflect on that. However, I am satisfied that there are provisions in the 1997 Act that meet his concerns, and, with the assurance that we will look at this matter on Report, I ask him to withdraw the amendment.
Mr. Arbuthnot: The Minister has helpfully set out that he will consider further the overseas position and the Brussels convention. On that basis, I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 ordered to stand part of the Bill
Clause 13
Opinions by Patent Office as to validity or infringement
Mr. Arbuthnot: I beg to move amendment No. 6, in clause 13, page 8, line 1, leave out from 'below' to end of line 3 and insert'the proprietor and any exclusive licensee of the patent, and such other persons as may be prescribed who appear to have an interest in the matters to which the request for an opinion relates, shall be entitled under such conditions as may be prescribed to be parties to the proceedings before the comptroller under this section'.
The Chairman: With this it will be convenient to discuss the following amendments: No. 8, in
clause 13, page 8, leave out lines 4 to 19.
No. 7, in
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