The
Committee consisted of the following
Members:
Chair:
Hugh
Bayley
Blenkinsop,
Tom (Middlesbrough South and East Cleveland)
(Lab)
†
Campbell,
Mr Alan (Tynemouth)
(Lab)
†
Dakin,
Nic (Scunthorpe)
(Lab)
†
Davey,
Mr Edward (Parliamentary Under-Secretary of State for Business,
Innovation and Skills)
†
James,
Margot (Stourbridge)
(Con)
†
Johnson,
Joseph (Orpington)
(Con)
McGovern,
Jim (Dundee West)
(Lab)
†
Marsden,
Mr Gordon (Blackpool South)
(Lab)
†
Morris,
James (Halesowen and Rowley Regis)
(Con)
†
Mowat,
David (Warrington South)
(Con)
†
Newmark,
Mr Brooks (Lord Commissioner of Her Majesty's
Treasury)
†
Reckless,
Mark (Rochester and Strood)
(Con)
Simpson,
David (Upper Bann)
(DUP)
Stride,
Mel (Central Devon)
(Con)
†
Swinson,
Jo (East Dunbartonshire)
(LD)
†
Tomlinson,
Justin (North Swindon)
(Con)
†
Watts,
Mr Dave (St Helens North)
(Lab)
†
Wood,
Mike (Batley and Spen)
(Lab)
Adrian Jenner, Committee
Clerk
† attended the
Committee
Second
Delegated Legislation
Committee
Tuesday 3 May
2011
[Hugh
Bayley
in the
Chair]
Draft
Patents County Court (Financial Limits) Order
2011
4.30
pm
The
Parliamentary Under-Secretary of State for Business, Innovation and
Skills (Mr Edward Davey):
I beg to
move,
That
the Committee has considered the draft Patents County Court (Financial
Limits) Order
2011.
It is a
great pleasure to serve under your chairmanship, Mr Bayley. I am not
sure whether you are responsible for the musical entertainment that we
have in the background, but I am sure that it will not delay our
proceedings.
The
order is part of a package of measures to improve the patents county
court. As my colleague in the other place has explained, the
Government’s purpose is to make it easier for small firms and
entrepreneurs to navigate legal processes, giving them more time
to concentrate on business activities. We often hear that
intellectual property litigation is expensive and time consuming. For
many small businesses, that can be a barrier to justice. Indeed, a 2006
study for the European Patent Office found that the cost of IP
litigation for UK small and medium-sized enterprises was roughly three
times higher than elsewhere on the continent. If it costs too much for
small businesses to litigate, they will be unable to defend their
rights, and we cannot have a legal system with such
barriers.
A
reliable IP enforcement regime must be accessible in the truest sense,
not simply in terms of access to finance. Lord Justice Jackson
recognised as much in his comprehensive and independent review of civil
litigation costs last year. His report, which was commissioned by the
previous Government, recommended that we should improve access to
justice, reduce the cost of civil litigation, and ensure that costs and
remedies are
proportionate.
The
patents county court was established in 1990 to provide a
cost-effective forum for IP cases. It has jurisdiction over disputes in
relation to IP rights and should hear less complex and lower value
cases, and offer an alternative to the High Court. Until recently, the
procedures and the costs it awards have been the same as in the High
Court. The damages it awards remain the same as in the High Court, and
it is that that we wish to change. The order will set a maximum limit
of £500,000 that can be awarded in the patents county court.
Without that limit, an SME with a legal case worth less than
£500,000 may face litigation in either the patents county court
or in the High Court and not know the financial risk it faces. However,
the order means that the same business will have certainty that the
patents county court is the appropriate forum and that there is a limit
to its financial risk.
The principle
of a damages limit has been examined through numerous consultations,
including Lord Justice Jackson’s review. The patents county
court judges and senior judiciary are eager to see that limit
introduced, and legal practitioners and court users recognise its
usefulness. A host of businesses and associations support the move. A
recent Intellectual Property Office consultation found that 77% of
respondents supported the £500,000
limit.
I
reassure the Committee that, assuming the order is passed, we will
monitor the effectiveness of the damages cap, with a formal review in
2014. The order addresses the need for a damages limit for patents and
design cases within the jurisdiction of the patents county court.
Similar work is in hand to take forward comparable changes to other IP
rights, such as trademarks and
copyright.
The
measure is consistent with our broader reform effort. For example, we
have already simplified procedures for cases heard in the patents
county court and introduced a recoverable costs cap of £50,000.
In a court where litigants can represent themselves, those changes have
been warmly welcomed. As Lord Justice Jackson recognised, a further
possible positive consequence of these reforms is that they may
increase the availability of IP insurances to SMEs. At present, they
are not widely available at affordable
prices.
We
all recognise that litigation around intellectual property is complex.
These changes on their own are no panacea, but they will help
businesses and entrepreneurs who are seeking to innovate, providing
clarity about legal processes, certainty over risks and giving them
confidence that they stand on an equal footing with financially
stronger companies. The bigger picture, of course, is that innovation
is essential to economic growth, which is the abiding goal of this
Government. I commend the order to the
Committee.
4.34
pm
Mr
Gordon Marsden (Blackpool South) (Lab):
It is a great
pleasure to serve under your chairmanship, Mr Bayley, and to
see you for the second time today during such proceedings. I thank the
Minister for his clear, specific and precise comments on the
order.
We
do not intend to divide the Committee. As the Minister rightly said,
the process and the report were initiated and commissioned by the
previous Government, although members of the Committee looking through
the explanatory memorandum will see that the order has had a lengthy
gestation period. It follows the 1987 Oulton committee report and the
1996 Woolf reforms, coming through to 2010. Although not quite of
“Bleak House” proportions, we should nevertheless try to
bring the process to some sort of conclusion. I hope that that will be
entirely possible through what is said
today.
Labour
Members strongly support any initiatives that will reduce the burden on
SMEs. We commend the Federation of Small Businesses for the very strong
role it has played in that area. The need to reduce such pressures was
reinforced by my right hon. Friend the Member for Doncaster North
(Edward Miliband), the Leader of the Opposition, at the FSB conference.
As the Minister rightly pointed out, the measure is warmly welcomed
across the board in the legal profession and all across the
block.
Although I do
not intend to divide the Committee, I would like to press the Minister
on the principle behind the order. Edison’s famous quote was
about invention being 99% perspiration and 1% inspiration. I hope that
there will not be too much perspiration caused by the questions that I
put, but I would like to ask one or two. How do the Minister and his
officials see the review process working in practice? I have one or two
specific questions on
that.
The
order is delegated legislation, and there was considerable discussion
about the level at which the financial limits are set. The current
limit of £500,000 seems to be strongly acceptable to the broad
majority of respondents. However, time and inflation wait for no one,
and although we have been in a period of historically low inflation,
what mechanisms or procedures does the Minister envisage for uprating
the limit? Will the consumer prices index or the retail prices index be
used? At some point, that might become a significant factor—who
knows?
I
would like to ask a little more about the review process and what
opportunities there will be to involve the industry in the monitoring
process. Does the Minister plan to have a standing committee of the
organisations involved in the review process? We all know that
legislation, whether considered on the Floor of the House or by a
Delegated Legislation Committee, cannot always have the effects, and
not always the speedy effects, that we might wish it to have. It would
be appropriate, and in keeping with the spirit of what the Government
and the Opposition have said about the involvement of business, for
industry to be closely involved in the process, so I would like more
detail—if not verbally today, then perhaps in writing—on
how he intends to involve
it.
The
Minister referred specifically to the initiatives of small firms and
entrepreneurs, which brings me to another question: how will those
entrepreneurs who do not constitute a small business, but are
self-employed or part of an unincorporated business, fit
in?
Finally,
to what extent will the impact assessment be looked at again when the
review takes place, which I think the Minister said will be in 2014?
With those comments, I repeat our broad endorsement of the aims of the
order and ask the Minister to respond to my specific
points.
4.40
pm
Mr
Davey:
I thank the hon. Gentleman for offering the support
of the official Opposition for the order. As he said, the order
developed over a long period, but as I mentioned, it results in
particular from the review by Lord Justice Jackson, which was begun by
the previous Administration. I hope that we will reach the end of the
line and that we will not have to continue through the corpus of
Dickens novels before we arrive at the
end.
The
hon. Gentleman was correct to say that the order is part of our agenda
of reducing burdens on SMEs. It is a modest part, but the Department
for Business, Innovation and Skills is taking a range of measures to
meet that agenda. We are grateful to the FSB for its support in that
process.
The
hon. Gentleman wanted to know about the process of review, which is
something about which we
asked during the consultation. The respondents and the judiciary were
keen for us to have a review, and they liked the proposed three-year
period. I mentioned that we intend to hold a review in 2014. That is
the minimum deadline expected under Better Regulation Executive
guidance. We are not delaying it, so we will not have a repeat of the
“Bleak House” process. We will have the review at an
early juncture, which deals with the thrust of the hon.
Gentleman’s other remarks. Although we very much expect and hope
inflation to be low during that period, a three-year review would be
timely.
The
hon. Gentleman asked how we will involve people in that review.
Clearly, the judiciary will be involved. As active participants,
members of the judiciary have been extremely helpful in the process of
reform and consultation. We will want to monitor closely the effect of
the limit with the judiciary, not least because judges might push cases
to the High Court, and we will want to know how they feel the system
works in practice. That will not in any way exclude business
organisations from making their voice
heard.
I
am not sure whether we will set up a standing committee, as the hon.
Gentleman invited us to do. Given the time that we spent reaching this
point and the level of consultation, we need not engage less over the
next three years. People will at least know that a review is not far
off, so we can see whether the £500,000 limit is right. The hon.
Gentleman was gracious enough to confirm that the value of that limit
was widely supported by
respondents.
The
hon. Gentleman asked where entrepreneurs, unincorporated businesses and
sole practitioners fit into the regime. They fit in precisely and they
will not be excluded at all, so that is not a problem. On the impact
assessment, he will understand that the order is deregulatory. There is
not a huge amount in it, in the sense of scrapping regulations, but it
will help small businesses because they will not face the risk of
financial exposure should they take up such cases, and we hope that
they will be more active in doing
so.
Before
the sitting, I tried to get a feel for how active SMEs are in member
states that do not face the high-cost regime that we have in this
country and whether they are more active in pressing their rights. We
have to exercise a degree of caution about any such figures because it
is difficult to make exact comparisons between different jurisdictions
and traditions. I am told, however, that in 2007 the German EU
presidency had a working party on intellectual property that indicated
that, in the lower courts in Germany, on average 600 or more patent
cases were filed each year, and in France 450 or more, whereas the
corresponding figure in the UK was around 75. That indicates that the
high-cost regime prevented small firms from finding justice and being
able to enforce their
rights.
In
the consideration of the importance of competition and driving
innovation for growth, the order can be seen as modest but important.
On that note, I commend it to the
Committee.
Question
put and agreed
to.
4.45
pm
Committee
rose.