Intellectual Property Bill [Lords]
The Committee consisted of the following Members:
Georgina Holmes-Skelton, Committee Clerk
† attended the Committee
The Chair: Good morning. I will give the usual reminder for members of the Committee and those watching: please would anyone with phones or other electronic ephemera ensure that they are running on silent or are turned off? I also have a few announcements to make before we begin our line-by-line consideration. If people want to take their coats off or do anything like that to make themselves more comfortable before the fighting begins, that is fine.
The selection list for today is available in the room. It shows how we have grouped the amendments for debate—they are generally in similar sorts of areas. Members who have put their names to the lead amendment in a group will be called first—I make that point now because although some Members are experienced, some are less experienced and this will explain to the public how we deliberate. Other Members will then be free to catch my eye to speak on the amendments.
At the end of a debate on a group of amendments, I will call the Member who moved the lead amendment to speak again. Before sitting down, they will need to indicate whether they wish to withdraw the amendment or seek a decision. If any other Member wishes to press any other amendment in the group, could they please let me and the Clerk know? I will obviously work on the assumption that the Government want the Committee to reach a decision on Government amendments. Please note that decisions on amendments do not take place in the order they are debated, but in the order that they appear on the amendment paper. Mr Turner, who will chair the Committee this afternoon, and I will use our discretion to decide whether we will allow stand part debates.
I know that was a bit long winded, but I hope it has helped the Committee, just to remind everyone on a Tuesday morning. Before we begin our line-by-line consideration, I also have two technical things to do. The first is to agree the programme motion and the second is to agree a motion to report the written evidence that has been submitted. Members will see from the selection of amendments and the structure we have chosen that clauses 13 and 20 are taken out of the general order. That is because we decided that they would be the things that the Committee would want to consider most. That is the order as set out in the programme motion.
(2) the proceedings shall be taken in the following order: Clauses 1 to 12; Clauses 14 to 19; Schedule; Clauses 21 to 24; Clause 13; Clause 20; new Clauses; new Schedules; remaining proceedings on the Bill.
‘in this section “qualifying country” means—
(i) the United Kingdom; and
(ii) another member state of the European Economic Area.’.
‘(5) The Secretary of State will, within a period of 12 months of the Act coming into force, undertake a review as to how the provisions within this section have—
(a) contributed to the advancement of the design industry in the United Kingdom; and
(b) helped to harmonise unregistered design rights between the UK and unregistered Community design right.
(6) The Secretary of State will report the findings of his review to both Houses of Parliament.’.
Mr Wright: May I welcome you to the Chair, Mr Havard? This is the first occasion on a Bill Committee that I have enjoyed your diligent chairmanship. I look forward to it immensely. I also welcome right hon. and hon. Members to the Committee. I think we will have an exciting time in considering the Bill. [ Interruption. ] “Exciting” is the right word—perhaps it will not be exciting, but it is important. The intellectual property regime that the United Kingdom operates under is part of a comparative advantage that we have. We must maintain that competitive edge as much as possible. The Committee is an important driving seat in ensuring that we maintain that edge.
The amendments stem from a theme that was raised several times on Second Reading. It was mentioned that the design industry is a massive contributor to the UK economy. It was stated that an estimated £33.5 billion is spent annually on design, which accounts for about 2% of UK exports and employs approximately 350,000 people. Both the Minister and I mentioned on Second Reading the fact that, according to the recent global intellectual property index by Taylor Wessing, the UK came top in the world for IP regimes. That is something important for the country. It should be a source of some pride and give the UK, as I have mentioned, a comparative advantage in attracting talent and foreign
There are, however, issues for the UK to address. As I mentioned on Second Reading, the gap between the top three nations—the UK, Germany and the Netherlands—was only 0.2%. Further, the report shows that the range of ratings, between top and bottom positions, has narrowed considerably over five years. The difference between us at the top and India, in last place, is 92 points. In 2011 the gap between top and bottom was 320 points. That reflects the fact that competition in the IP field is hotting up and that our competitors are getting wise to the importance of IP and trying to improve rapidly.
Finally, and most crucially for the consideration of the amendments—and the clause and part 1 in general—the Taylor Wessing report ranked us only fifth in the world for design rights and 12th for the cost-effectiveness of those rights. Perhaps you will allow me some indulgence, Mr Havard, in talking about design in isolation. At the moment, a designer can protect a design in law in myriad ways, which can often be bewildering. [ Interruption. ]
In his report, Hargreaves mentioned a patchwork of rights and responsibilities. There is registered design cover in the UK, available from the Intellectual Property Office. That approach protects a design for up to 25 years, although I understand that some sort of renewal process is needed. There is a registered Community design right—available from the Office for Harmonisation in the Internal Market, the EU’s trademark and design agency—which also provides protection for up to 25 years. There is an unregistered design right in the UK—I think that it will be discussed quite a lot, especially on clause 13—which includes the vast majority of designs in this country and provides protection for up to 15 years, with the last five subject to licence of right. There is also an unregistered Community design right, which offers protection against copying for three years. To complicate matters further, a design databank has evolved from Anti-Copying In Design, which designers seem to like a lot. We shall probably come back to that area on clause 13.
There are an awful lot of ways for a designer to protect a design in law, and it is often problematic. That is probably one reason for our being only fifth in the world for design. I am keen for the Minister to explain his vision of how design rights should be protected and how much more closely the UK’s domestic law should be aligned with Europe’s. Indeed, this is not the only point in the Bill at which a judgment is needed from Ministers about the balance necessary for protecting designers’ interests and encouraging innovation.
“there was little support from respondents to the Consultation for a change to the CDPA to, for example, make it consistent with the definition of design in both the UK Registered Designs Act 1949 (RDA) and the Community Design Regulation”.
Presumably the Minister agrees about that. What is the optimum time required to ensure that there is support for competition, consumer interests and innovation? Is a short period of protection a deterrent to innovation,
I do not want to do the Minister’s job. [ Laughter. ] Actually, I very much want to do the Minister’s job—I really want to be doing it in 2015—but our purpose today is to understand the reasoning behind part 1 of the Bill, including clause 1, in relation to protection of registered and unregistered designs. Amendment 15 is designed to ensure that the Government assess how the provisions in the Bill about simplifying and clarifying the current regime are achieving their objectives. The amendment would require the Secretary of State to undertake a review within a year of the Bill’s being enacted to see how it has helped or hindered the design industry, and how well the specified aims of harmonising unregistered design rights in the UK and Europe have been achieved. Amendment 15 would provide a way to monitor the achievement of the House’s shared aim, which was mentioned a lot on Second Reading, of ensuring that the UK is at the top of the design league in the next global IP index.
As I have mentioned, clause 1 is designed to clarify and tighten the definition of what would qualify for unregistered design rights. Subsection 1 removes from existing legislation the phrase “any aspect of” regarding the protection of unregistered design. That is to ensure that parties cannot say that a new and competing design infringes their own design by basing a claim on a very small part of an article. The consultation to which I have referred suggested a geographical delineation of what is commonplace in the European economic area. No consensus emerged from the consultation, but it highlighted the fact that the lack of a definition had raised factual questions and had been criticised by the Court of Appeal in the case of Dyson Ltd v. Qualtex (UK) Ltd.
Case law has determined that the 1988 Act is territorial and suggests that the relevant design field is limited to the United Kingdom. Clause 1(3) of the Bill tightens the definition further and states that the qualifying country should be within the European Union. Amendment 16 is designed to clarify whether that ignores the international dimension. What happens if something is classed as commonplace elsewhere in the world? Why is the Government’s approach not consistent with that contained in the Registered Designs Act 1949, which extends the concept of novelty, for example, to the whole of the European economic area?
“If the term ‘commonplace’ is retained, it is sensible to ensure that the area of prior art is the same as the catchment area for qualifying individuals. Otherwise a qualifying person from, for example, New Zealand, could get unregistered design rights in the UK for a design which was commonplace in New Zealand, which we think this would be irrational, since such a design would not really be original”.
Amendment 16 is a probing amendment designed to get the Minister to clarify how the Government intend to solve the issue of what is commonplace and to clarify the geographical extent of the legislation. Should it not go further than what is proposed in clause 1(3)? If not, why not, given the globalised nature of design in the 21st century? I would be interested if the Minister could set out his vision for how we can achieve simplicity, clarification and harmonisation, which I believe our amendments would help with.
The Minister for Universities and Science (Mr David Willetts): May I also begin by welcoming you to the chairmanship of this Committee, Mr Havard? We look forward to being guided by you today and on Thursday.
The previous contribution ranged rather more widely than the amendments that have been tabled, and I do not want to repeat all the issues that we debated on Second Reading. I will, however, confirm that the Bill carries forward another part of the original Hargreaves recommendations. The Hargreaves agenda is about simplifying and improving intellectual property in the UK, and it covers patent law. In the Bill, we focus mainly on improving protections for designers. As I said on Second Reading, designers are an important part of the British economy, and their designs are a key asset for many entrepreneurs and small and medium-sized enterprises.
Mr Gerry Sutcliffe (Bradford South) (Lab): On the general point about protection for designers, I have been contacted by furniture designers who say that there are still outstanding issues with the Enterprise and Regulation Reform Act 2013. At the time, the Government promised to introduce some secondary legislation. Will the Minister update us—either today or during the course of our proceedings—on what is likely to happen with that secondary legislation?
The first few clauses of the Bill are intended to improve and simplify unregistered design rights, before moving on to registered design rights. Clause 1 ensures that we have an improved regime for unregistered design rights and, in particular, that we cover the right geographical area for those design rights, so that they apply throughout a defined area. The hon. Member for Hartlepool suggested—we consulted on his idea—that the defined area where the rights apply should be the United Kingdom and the European economic area. That is certainly one option, but when we consulted, the clear view was that we should include countries with specific reciprocal arrangements with the UK, meaning that they offer broadly similar protection to UK businesses as the UK offers to them.
Let me explain the implications of removing the definition that we offer and instead taking the measure of the geographical area as proposed by the hon. Gentleman. The amendment would add three countries for which I am sure we all have great respect: Iceland,
The hon. Gentleman’s amendment 15 would introduce a requirement on the Secretary of State for a review within 12 months to report on the effectiveness of the clause, which amends the definition of design rights. I fully understand the Opposition’s right to table proposals for review as probing amendments, and it is important that we take that as an opportunity to debate the clause, but the last thing we need is an endless series of specific legal requirements to review various aspects of the legislation, clause by clause, after six or 12 months.
The improvements proposed by Hargreaves are important, so we will undertake a review of how the legislation is working—as we would in the normal course of events—and we understand the need to keep this area of legislation under review. We believe that the scope and timing of our proposed evaluation will allow time for the changes proposed in the Bill to take effect and that a formal requirement for review is unnecessary. I do not believe that one of the House’s first acts on a Tuesday morning should be to give offence to our friends in New Zealand, the Falkland Islands and Gibraltar, so I ask the hon. Gentleman to withdraw his amendment.
Mr Wright: The Minister seems to be a bit grumpy, and his response was rather churlish. Perhaps he did not have his porridge this morning. I fully understand his point about amendment 16, on which the Government have consulted. The intention was to have specific reciprocal agreements. I had rather assumed that the Falkland Islands and Gibraltar were British anyway and that it was an important consideration that we would want to keep them. However, he makes an important point and his logic is strong.
On amendment 15, the Minister referred to endless specific legal requirements—I think that was the phrase he used. I disagree. The purpose is to ensure that the House can scrutinise—our shared intention, as was clear throughout Second Reading—how we are doing on a key driver of economic activity and comparative advantage for the UK economy, namely the design industry. How are we making sure that we move from fifth in the global rankings to first, and how will clause 1(1) help to achieve those advancements? I do not want to rehash the arguments we have had, but one of the stated aims of this legislation, from Hargreaves onwards, is to harmonise, simplify and ensure as much co-ordination as possible between domestic and EU legislation, in order to drive forward cost-effectiveness. Amendment 15 helps to scrutinise that as well.
I think that the Minister is being rather churlish and somewhat grumpy this morning. I hope he will cheer up as the day goes on—the sun is shining. In trying to
(iii) this act has been in force for at least six months.’.
Clause 2 deals with ownership of design. Who creates a design and whether they own it should be a simple point, but very often it is not. Subsection (1) amends section 215 of the 1988 Act to change the initial ownership of unregistered designs that have been created on commission from a third party. The response to the Government consultation showed that this proposal, which would harmonise UK and EU systems, was received in a generally positive way. On the plus side, the change would improve consistency and reduce the likelihood of overlapping rights being held by different entities. This was rightly seen as helping to reduce complexity and therefore costs and legal disputes. That would help British designers and help to stimulate more economic activity in a more efficient way—all positive stuff.
However, the response also recognised a long-standing principle in the UK: that those who pay for a creation own it. I have some sympathy with that position and think it is important. The consultation also flagged up the problem that small and medium-sized entities often do not have the resources necessary to track changes in the law. Ignorance, of course, is not a reasonable excuse for failing to adhere to the law, but small designers and commissioners could be forgiven for stating that they were not fully aware of the change in legislation. Indeed, I had a response from Twitter over the weekend. I tweeted that I was writing speaking notes to the IP Bill, and a business from the north-east said, “What’s the IP Bill?”, and that business will be working in the design field too. Businesses are working hard, trying to win orders and expand and grow, and are often ignorant, in the best possible sense, of what is going on in the legislative framework. It is important that we consider that, which is what the amendment would help us to do.
The Government’s response to the consultation said:
“Some problems could be alleviated by long transitional periods and wide publicity”.
That, in a nutshell, is the purpose behind amendment 17: to help, at least in part, to allow the Government to achieve their stated aims. In moving the amendment, I am anxious to hear what steps the Government plan to take in terms of transitional arrangements and, more widely, publicity campaigns with the IPO and businesses to ensure that the change in the law is understood.
Let me briefly comment on the clause. The hon. Gentleman is right: the clause will make an important simplification by changing the presumptions about the ownership of a design. It will change the default ownership of UK-commissioned unregistered designs, so that the
The effect of the amendment would be to delay the change until six months after the law commenced. However, the clause as drafted does not apply retrospectively. A design created before the commencement date will not be caught by the change in the law. There is in practice a long running-in time, which is also the case for a design created after the commencement date, but under a contract entered into before the date of commencement.
The clause will protect existing contracts and give businesses currently entering into contracts adequate time to adjust to the law. In addition, the owner can be set in contract as either the commissioner or the designer, as the parties agree. It is only where no contract exists that the default position is relevant. We believe that the amendment is unnecessary and would reverse the clear intention of the Bill. I assure the hon. Gentleman that the Government will ensure that there is sufficient time to work with businesses to educate them about the change in law and what it means for them in practice. I therefore ask him to withdraw the amendment.
Mr Wright: The Minister is still grumpy. I have no idea what I have done to offend him at such an early stage of our deliberations; I am trying to be as helpful as possible. I am disappointed that he is in a grumpy mood this morning.
The Minister is right: we are not challenging the concept of changing ownership in clause 2. I acknowledge that the issue of whether the commissioner of a design has ownership of it can be sorted with a good, binding contract agreement. However, the Minister failed to address the points about the transition period and publicity. He said something vague about giving businesses sufficient time. The Minister in the other place mentioned a plain English guide to the Bill to help businesses. I have seen that, and it is welcome.
I want to press the Minister on this matter. What specific steps is he planning to take to ensure that businesses are aware of the Bill? Will the Government run publicity campaigns and have one-to-one discussions with businesses and the Intellectual Property Office to ensure that they are fully aware of the changes in clause 2 that could affect them and commissioners? I hope the Minister will be less grumpy and let us know what is happening.
Mr Willetts: I do not know what the hon. Gentleman’s definition of “grumpiness” is. Perhaps he means disagreeing with his amendments, in which case I will carry on being grumpy all morning, because we regard many of his amendments as misconceived.
I assure the hon. Gentleman that when it comes to guidance for business, the Intellectual Property Office has a range of outreach activities. We fully understand that it is important to intensify those outreach activities
Mr Willetts: I cannot immediately assure the hon. Gentleman on the exact timings for the roadshows. Perhaps I can inform him about that during the day. However, I know that we are planning and funding an increase in roadshow activity past this legislation.
Mr Wright: I still maintain that the Minister is grumpy. It is not just a question of disagreeing, but I understand what he says. It is important that businesses are made fully aware of changes that could affect them. I am disappointed that he did not take the amendment in the spirit in which it was intended, but given what he has said, I beg to ask leave to withdraw the amendment.
‘(4) For section 259 of the Copyright, Designs and Patents Act 1988 (joint designs) substitute— “Joint designs
(1) Where two or more persons have jointly developed a design, design right shall vest in them jointly.
(2) Where two or more persons are proprietors of unregistered design right or community unregistered design right, subject to the provisions of this section and subject to any agreement to the contrary—
(a) each of them shall be entitled, by himself or his agents, to do in respect of the design concerned, for his own benefit and without the consent of or the need to account to the other or others, any act which would apart from this subsection, amount to an infringement of the design right concerned; and
(b) any such act shall not amount to an infringement of the design right or unregistered community design right concerned.
(3) Subject to any agreement for the time being in force, where two or more persons are proprietors of design right or unregistered community design right one of them shall not without the consent of the other or others grant a licence under the design right or assign or mortgate a share in the design right or in Scotland cause or permit security to be granted over it.
(4) Where an article is disposed of by any of two or more proprietors of unregistered design right to any person, that person and any other person claiming through him shall be entitled to deal with the article in the same way as if it had been disposed of by a sole proprietor.”.’.
The Government’s consultation, which I keep mentioning, on reforming the UK designs legal framework, asked whether the Registered Designs Act 1949 should be amended to incorporate joint ownership provisions, similar to those in the Copyright, Designs and Patents Act 1988. The Government consultation stated in its case for change:
“This treatment of joint proprietorship in the CDPA is not mirrored by similar provisions in the RDA. This difference adds unnecessary complexity to the design IP framework. It may also result in other difficulties for businesses. For example, agreeing
In their initial consultation, the Government proposed that the RDA should be amended so that it mirrors the provisions for joint ownership for unregistered design. That seemed quite a good and clear case and most respondents in the consultation agreed with this proposal. The Government response stated that a specific problem had been given, however,
I do not understand why a Government proposal that was designed to simplify matters, to provide greater consistency within differing parts of legislation, to help businesses and that was supported by the majority of respondents in the Government consultation was therefore not included in the Bill. Amendment 18 is a probing amendment to raise this matter and scrutinise the Minister on the reasons why, despite their intentions, the support of the majority of respondents and the clear logic of the case, the Government did not take the proposals forward. I look forward to hearing why that was not the case, and expanding to the Committee on the problems that were raised in that consultation.
Mr Willetts: The hon. Gentleman is right. Our design consultation did ask stakeholders if the Registered Designs Act 1949 should be changed to include joint ownership provisions, which is essentially what his amendment is about. It inserts detailed requirements to cover the legal position for joint owners of designs, applying both to unregistered and registered designs.
Although most respondents agreed in principle that joint ownership should be recognised, there was a very mixed response when it came to the question of whether it was actually necessary in legislation and the specialist IP judges whom we consulted said that existing provisions were sufficient to allow for joint ownership. As a result of this consultation and the view of the IP judges, the Government therefore decided that it would not be necessary to change the law in this area, because it already adequately covered cases of joint ownership.
I must add that there is also a legal reason why the amendment proposed by the hon. Gentleman cannot be accepted. It seeks to amend EU design rights created under an EU regulation and under EU law that is not possible, as EU regulations directly apply here. I am nervous. There may be 95 members of my distinguished party for whom this is not a knock-down objection. However, we operate within the framework of EU law as it stands and on that basis it is not possible for amendments to an EU regulation to be applied in the way that the hon. Gentleman seeks. For the reasons that I have given, I ask the hon. Member for Hartlepool not to become the 96th member of this cause and to withdraw his amendment.
Mr Wright: I am tempted, though. We could have a wide-ranging discussion about Britain and the EU, bur perhaps not. I thank the Minister for his remarks, which have been helpful. I am interested in his point about existing provisions being adequate to carry out his intentions. I want to press him on the point I made about the response to the consultation and the specific
Mr Willetts: It is hard to comment on specifics. The general point is that design law already contains general provisions on joint ownership, so it is not as if there is a complete legal vacuum. When we looked at how we could prescribe in law exactly how joint ownership should work in more detail than there is currently, the concern we had was that we might tackle some anomalies but create others, and so we concluded that it was best left to the contractual relationships between parties—joint parties in these circumstances—within the overall framework of law. We could not find a way forward that did not create a whole host of further problems by being so specific. That was the general response among stakeholders.
Mr Willetts: This useful clause simplifies the qualification requirements relating to the UK unregistered design right, and removes overlapping requirements for finding who may qualify for UK registered design rights because of where they live. However, in response to sensible points made by leading British businesses, we have tabled amendments 3 to 5 to ensure that there are no unintended consequences as a result of that simplification that could disadvantage UK businesses.
The law currently specifies certain criteria, based loosely on nationality, that determine which individuals and bodies qualify for unregistered design rights in the UK. Those eligibility criteria are complicated. In response to the views of those replying to the Government’s designs consultation, the clause seeks to simplify the qualification requirements without removing them completely. The requirements are maintained because it
Stakeholder and industry groups raised concerns about the changes proposed in the clause to the qualification requirements. The issue was whether the proposed simplifications tipped the balance too far in favour of businesses in countries where UK designers cannot gain reciprocal protection. That issue was raised with myself and my noble Friend Viscount Younger after the Bill had left the Lords, and we set up a number of meetings specifically to hear views on the issue, which led to the amendments before the Committee.
I welcome the collaborative working between the IP Federation, the Chartered Institute of Patent Attorneys and the International Chamber of Commerce, as well as officials at the IPO, to find a solution to the issue. As a result of the positive and constructive discussions with business, the Government have now brought forward amendments to the clause.
The change simplifies the qualification requirements, but ensures that appropriate reciprocal arrangements remain in place, so that those designing outside the UK or in reciprocal countries are not given undue protection. In particular, it deals with concerns expressed by businesses about qualification for UK rights where a foreign company operates in the UK, and based on circumstances in which a foreign company has chosen to market its design in the EU first. The qualification criteria as amended will therefore apply to a designer, employer or person of any nationality doing first marketing, provided that they fall within the definition of a “qualifying person”, which is an individual who is habitually resident in a qualifying country, or a company that is formed under the law of a part of the UK or other qualifying country and that has in that country a place of business where substantial business activity is carried on. Also, in the case of first marketing, it must take place in certain designated jurisdictions—in essence, the EU.
Please forgive me, Mr Havard, for going into that in some detail, but the amendment is significant and I wanted to explain our thinking rigorously to the Committee. Our amendment is matched in intention by that tabled by the hon. Member for Hartlepool. Drafting differences between our amendments, however, favour the Government’s approach in dealing with the issue. Sorry, to be grumpy again, but that is the case.
First, the Government amendment reflects the fact that anyone should qualify, as long as they have legal personality. Secondly, it also follows more closely the existing drafting in the 1988 Act, which has the advantage of familiarity and a proven track record. I accept that, as a result, our formulation might lead to slightly more complicated wording, but it is more precise than that proposed by the hon. Gentleman. In that context, I hope that he will withdraw his amendment and accept that our amendments achieve the shared objective of both Government and Opposition in Committee. I hope that the Committee will agree to the sensible and pragmatic Government amendments.
Mr Wright: I rather thought that clause 3 and any associated amendments would take up a relatively large part of the Committee’s time, but I was pleased with what the Minister said on Second Reading about looking at the issue. I am pleased with what the Government have done with their amendments and with the Minister’s comments today. We will be able to dispense with the clause and consideration of the amendments relatively swiftly.
“extends the qualification of unregistered design rights to the functional designs of companies incorporated in countries that do not offer reciprocal protection for UK functional designs.”—[Official Report, 20 January 2014; Vol. 574, c. 48.]
The Minister today cited the IP Federation, which has been incredibly strong on the matter. On Second Reading, I quoted from the IP Federation, and I will repeat that quote, if you do not mind, Mr Havard, because it is important:
“Under the changes proposed in Clause 3 of the IP Bill, parity no longer exists and UK manufacturers are strategically disadvantaged with additional hurdles being introduced to the manufacture of functional designs in the UK. This will directly impact those engaged in general engineering because of the importance of functional designs which are covered by UK UDR.”
“The manufacturing facilities of both small and large UK-based engineering companies will be seriously impaired by extending UK UDR to foreign corporate entities. Careful consideration would need to be given to the location of manufacturing facilities as the manufacture of functional articles in the UK will be inhibited. It would become more attractive to move design and manufacturing offshore and to commercially source functional designs from businesses outside of the UK where the copying of functional designs is lawful.”
The whole House must share the view that manufacturing, especially high-value manufacturing, is a major part of what this country should be doing. I was interested in the Prime Minister’s comments on Friday about the intention to reshore a lot of manufacturing, which I welcome. Clause 3, as originally drafted, would inhibit that and would stop it taking place. The Government amendments help to rectify that.
I am pleased with what the Minister said. I understand his point about his amendments going further and possibly adding a bit more complexity into the arrangements. Perhaps he will mention how that will be effected and how he intends to mitigate that complexity. Generally, I am not grumpy this morning. I am pleased with what the Minister has done here. I am glad that he listened to UK-based manufacturers on this matter and changed tack. I will not press my amendment and I support the Government amendments.
Mr Willetts: I am grateful to the hon. Gentleman for agreeing not to press amendment 19. I assure him that we have listened to members of the IP Federation. I had an important meeting with them. When leading British businesses, such as Dyson, made the point that they feared that the clause, as originally drafted, would have not ensured proper reciprocity, of course, we listened. We are pleased that we listened; it was the right thing to do, for them and for other innovative British businesses.
I assure the Committee that, overall, the clause simplifies the law on reciprocity. Essentially, it ensures that a qualifying person consists of a business, which must be formed under the law of a part of the UK or other qualifying country, and properly ensures that countries that do not offer reciprocal recognition of design rights cannot benefit from recognition of design rights in the UK. I am pleased to move the amendments and grateful for the hon. Gentleman’s support.
‘(b) a body corporate or other body having legal personality which—
(i) is formed under the law of a part of the United Kingdom or another qualifying country, and
(ii) has in any qualifying country a place of business at which substantial business activity is carried on.”.’.
‘(a) in subsection (1)(a), omit “who is exclusively authorised to put such articles on the market in the United Kingdom”,
(b) in subsection (2), for “requirements” substitute “requirement”,
(c) in subsection (3), for “those requirements” substitute “that requirement”, and
(d) omit subsection (4).’.—(Mr Willetts.)
‘(2A) In subsection (1), after paragraph (a) insert—
“(aa) in pursuance of an assignment or licence made or granted by a person who is the proprietor of unregistered design right or unregistered Community design right in a corresponding unregistered design or unregistered Community Design.”.’
(b) in good faith in reliance on the registration and without notice of any proceedings for the cancellation or invalidation of the registration or for rectifying the relevant entry in the register of designs”
“In subsection (1) a ‘corresponding design’, in relation to an artistic work, means a design within the meaning of the 1949 Act which if applied to an article would produce something which would be treated for the purposes of this Part as a copy of the artistic work.”
Section 53 of the 1988 Act does not refer to designs registered at the EU design registry, which also covers the UK. Clause 5, as I understand it, will extend the existing defence contained in section 53 to cover registered Community designs as well as UK registered designs. That seems sensible, and Opposition Members do not want to stop the clause standing part of the Bill. However, why is section 53 not being extended to unregistered designs? As I have already discussed in relation to clause 1, the vast majority of designs in this country are unregistered, far in excess of registered designs from either the UK or the Community. Amendment 20 is therefore a probing amendment designed to tease out the rationale behind such an approach.
I appreciate that respondents’ views on the proposal were somewhat mixed. Some favoured the proposal as providing more consistency and because extending the measure to unregistered design rights would provide greater clarity; others thought that unregistered design rights and copyright were meant to be mutually exclusive. That is an important point, and I would like the Minister’s clarification.
What is the point at which a design is protected by copyright or unregistered design right? I understand, and perhaps the Minister will confirm this, that the distinction, as per section 53(2), is based on whether the design is for an “artistic work” or for something other than an artistic work. I mentioned “Star Wars” on Second Reading, and I will mention it again. I know that when the Bill was considered in another place there was an issue as to whether a “Star Wars” stormtrooper helmet is a work of art or could be copied. [ Interruption. ] I think I have woken up hon. Members, who can now talk about “Star Wars.” Is a stormtrooper helmet artistic and therefore protected by copyright, or is it functional and therefore protected by design rights? That question has been through the courts in Lucasfilm v. Ainsworth. The man who designed the helmets for use in the film began to reproduce and sell them worldwide without Lucasfilm’s permission. The UK Supreme Court decided that helmets made for use in a film are not sculptures or pieces of artistic work because their use is functional instead of artistic, presumably because their job is to protect the empire’s foot soldiers from rebel scum.
Lucasfilm v. Ainsworth illustrates the point about confusion and the complex relationships between copyright and design rights. Amendment 20 would provide greater clarity and consistency between the various forms of protection, and specifically between registered and unregistered designs. The amendment addresses the important balance between the rights of the assignee and the interests of the copyright holder. I want to tease out from the Minister whether the balance and the related inconsistency in clause 5 are appropriate and whether amendment 20 would help to address them.
Mr Willetts: I should explain to this particularly bright and breezy Committee that we have now moved from unregistered design rights, which was the subject of clauses 1 to 4, on to registered Community design rights. Registered designs will take us all the way through to clause 14. Clause 5 relates to the delicate balance in copyright between the rights holders and potential users and ensures that the owner of a copyright cannot be sued for infringement of design. Under existing law someone permitted to use a registered Community design which is valid in the UK could be sued for infringement of the associated UK copyright, whereas users of the equivalent UK registered design are protected from that possibility. The clause extends the existing exemption to include, alongside UK registered designs, their EU counterparts.
The Opposition amendment seeks to extend this protection even further, to UK and EU unregistered design. I think that there would be a serious problem and a risk of injustice if we were to extend it in the way the hon. Gentleman proposes. We are restricting this new exemption to registered rights because being on public registers they can be weighed up and challenged by anyone, including the copyright holder. In other words, they are clearly openly available information because they are registered. The same cannot be said of unregistered rights. Public scrutiny is much more difficult because there is no official register, so copyright owners are less able to check the rights that others are claiming to have. This makes any challenge much more difficult. Given these distinct differences in dealing with registered and unregistered rights, the Government do not believe it is appropriate to provide the same exemption for registered as for unregistered design rights, as proposed by this amendment.
I now turn to the interesting “Star Wars” question raised by the hon. Member for Hartlepool. There are two separate distinctions here. One is between design law and copyright law. In general, designs that have artistic appeal are considered under copyright and design law, but there has to be some aesthetic appeal. These are difficult and deep waters and I do not feel that there is much that a Minister could add, beyond saying that that is the crucial distinction. There is sometimes a related distinction between a 2D and a 3D work.
The argument goes that there is an anomaly for protection between designs and copyright because copying a two-dimensional drawing of a design or a design document can, via copyright protection, lead to criminal prosecution, but when this two-dimensional work is converted into a 3D design, copying the latter is not a criminal offence. So there is a distinction between 2D and 3D. It is possible that there may be cases where a
Mr Willetts: These are deep waters. I am very excited about the rise of 3D printing, but the issue will be artistic versus functional, which will be determined on a case by case basis. The 2D/3D distinction is not the basis for the law. Sometimes the shift from 2D to 3D will turn out to have been a shift between aesthetic and functional, but there is nothing in law that says that the 2D/3D shift always means that something has either ceased to be aesthetic or become functional. It is sometimes referred to in cases, but no more than that.
It might be helpful if I tell the Committee that 3D printing engages many different intellectual property rights. Manufacturers of 3D printers may apply for patent protection of particular components, and the items being printed might impact on existing design rights. The IPO has undertaken research on patents in the 3D field, which was published in November, and we are keen to hear from users, developers and observers of the 3D printing technology on the IP challenges, so we fully recognise that there are further issues that will need to be tackled.
Mr Wright: The Minister is being generous, rather than grumpy. The matter is an important part of what the future economy will look like in terms of design and manufacturing, especially when we have been talking about reshoring. Given what the IPO has done and the report that was published in November, does he think that the existing IP framework is appropriate and consistent for 3D printing, or does he think that further legislative changes will be needed to take into account the new technology?
Mr Willetts: There is more work necessary on 3D technology. That is why the IPO has commissioned research from Bournemouth university and Econolyst to examine the roles that IP plays in the consumer use of 3D printing and additive manufacturing. The research will provide a framework to describe the current state of 3D printing by analysing online platforms’ designs, illustrative case studies of the role of 3D printing and business, and the implications for UK IP law. There will be a report in 2014. I hope that the IP framework that we are developing and improving in response to Hargreaves will include issues arising from 3D printing. We are putting a flexible structure in place, and the Bill is part of it.
We will see what the research that has been commissioned says, and I will undertake to the hon. Gentleman and to the Committee to keep the House informed if there are areas where further changes to the law are necessary because of the arrival of 3D printing.
Mr Wright: I think I thank the Minister for his response. The matter is important and will have repercussions in future. Given what he has said, we have opened up a can of worms. Whether that is a 2D drawing or a 3D can, I am not entirely certain, but I want to reflect further on whether the appropriate balance is correct.
Mr Sutcliffe: I do not want to get into the details, but I read the other day that the new Doctor Who has got a new persona—I think he is the 12th Doctor in the series—in the sense of the outfits and the clothes that he wears. Does my hon. Friend think that the artistic design of the costume can be described as copyright? I assume there will be a new Doctor Who doll that everyone will want by Christmas, so there needs to be a further look at this. It is a contentious area and there could be issues in relation to design and copyright.
Mr Wright: Indeed, so what my hon. Friend said was important. I mentioned a stormtrooper helmet, but the TARDIS could have been included; it is about whether that is artistic or functional. The Minister’s response raised a wider question that needs to be considered still further.
Mr Willetts: I am about to give the hon. Gentleman, and indeed the BBC, free legal advice: Doctor Who is potentially a copyrightable image. I am sure that that will be tested in the courts, and I do not want to be cited, but there we are. Given the value of the Doctor Who image, that is something that makes clear sense.
Mr Wright: The hon. Gentleman makes an important point. I share the Minister’s view: I am excited not just by the Committee, but by the rise of 3D printing, which will revolutionise manufacturing, allow for bespoke, low-cost manufacturing and enable reshoring to take place. We have talked in recent years about how the rise of the internet and digitisation puts strains on the current IP regime, but, with the costs of 3D printers coming down, what impact will that have when everyone can print a Doctor Who doll or a David Willetts doll? I am sure they will be in the shops for Christmas—they will have two brains.
The point, however, is important and the hon. Member for Perth and North Perthshire is right. I want to reflect further and perhaps come back to this on Report. In the meantime, to make progress, I beg to ask leave to withdraw the amendment.
The Chair: Before we move on, let me say that that was useful, but I felt like I was going into the fourth dimension at some points. I am sure that the lawyers will develop the law in this area. I seem to remember the same argument about Campbell’s Soup cans, but I am sure that other soups and dolls are available, so I will make that point—before I get too grumpy. May I defend the Government Members? I think they were concentrating intently, rather than anything else. They can be as grumpy as they like as long as they are grumpy within the rules.
Mr Wright: As I understand it, the clause has a similar impact on registered designs to clause 2, which we discussed earlier, so in the absence of any specific contractual arrangement to the contrary, where a design has been commissioned, the designer would be the initial owner of that design. I think the Minister might say that that brings UK law into line with the way that commissioned works are treated under EU regulation and UK copyright law. We have not tabled any amendments to the clause, but the discussions we had on clause 2 often apply here.
What steps are the Government putting in place, such as an appropriate transition period or publicity campaigns, to ensure that the change in the law is understood by
Mr Willetts: The hon. Gentleman is broadly correct. The clause repeats for registered designs the proposals in clause 2 for unregistered designs. Clause 6 changes the default ownership of UK-commissioned registered designs, so that the designer not the commissioner will be the default owner, and removes the need for the applicant for a registered design to be the proprietor.
I can assure the hon. Gentleman—because the Government are business-friendly and do not believe in springing surprises on our business community—that we will work with stakeholders to ensure that businesses are aware of the change. A leaflet that outlines what the changes mean for businesses has been produced. Information is available on the IPO website. The leaflet has been distributed through third parties. We implement a policy across the piece of best practice on guidance for businesses, so whenever there is a change affecting them they are properly briefed and informed. I can assure the hon. Gentleman that there will be the kind of outreach activities that I described in answer to his question on clause 2.
Mr Wright: I have to rise to respond to the Minister and his grumpy way. The Opposition are also very pro-business. I hear from business that what they want more than anything are certainty and policy stability. In certain cases, such as copyright exemptions, that has not been the case. Therefore, I press the Minister to ensure that businesses are fully aware of the changes being put in place through clause 6, and that they are communicated with in an appropriate manner to ensure that adherence and compliance are carried out to the letter.
The Chair: Before I call Mr Wright, regarding the interesting discussion you had earlier, you will have, if you manage your time correctly, a substantial amount of time under clause 13 doubtless to return to some of the questions about appropriateness and enforcement. I just caution you now that you would do well to get to that point and allow yourself that time.
‘(3) The Secretary of State will, within six months of the Act coming into force, report to both Houses of Parliament on plans to publicise changes to the law introduced under this provision with the objective to educate holders of design rights.’.
Thank you, Mr Havard, your guidance is very helpful. We very much welcome clause 8, which will put in place powers to allow the UK to implement the Geneva Act of The Hague agreement. Presently, the UK is not a member and that puts British firms at a competitive disadvantage. UK designers are not able to gain protection at home through The Hague system and in specific overseas markets through a single application.
I understand from reading about the clause that one legal firm has estimated that the cost of registration in six countries is presently as high as £7,500, but the same number of registrations under The Hague system would cost less than £500. There is clearly a cost incentive to ensure that the measure is implemented as quickly as possible. UK designers will benefit from cheaper protection in overseas markets and a greater degree of flexibility for applicants and potential applicants.
As I mentioned on Second Reading, I am grateful to the Government for listening to the concerns raised by my noble Friends on the Labour Front Bench and the Delegated Powers and Regulatory Reform Committee on the precise order-making power that would be used to enact this part of the Bill. Whereas before it was planned to be through a negative resolution procedure, the Government have responded so that clause 8(3) now ensures that the affirmative procedures will apply instead. That is welcome and I thank the Minister for that.
Amendment 21 is designed to help the Government succeed in that aim and is similar in many respects to the amendments proposed to clauses 2 and 6. The amendment would ensure that, within six months of this part of the Act coming into force, the Secretary of State would report to both Houses on plans to publicise changes to the law introduced under this provision. The amendment would enable Parliament to take a view as to whether the proposals are sufficient to allow British designers the maximum possible benefit through education and publicity regarding the matter.
I have mentioned already that, in the summer, the Government published plain English guides to the Bill, which are welcome. Is that the sole means by which the Government intend to publicise the issue and educate businesses on it? The Minister has mentioned roadshows, but on clause 8 and in respect of The Hague agreement, which I hope will lead to substantial benefits for British businesses, what else is being planned?
I hope that the Minister accepts that amendment 21 is meant to be helpful and constructive, and pushes the Government on ensuring that they carry out their pledges made following the consultation. I look forward to hearing him say precisely how he intends to carry out the publicity regarding the matter and—this is important —how success or failure can be judged in respect of implementation of clause 8. I beg to move.
Mr Willetts: As the hon. Gentleman said, clause 8 creates a power enabling The Hague agreement, concerning the international registration of industrial design, to be brought into UK law by secondary legislation, while retaining the current ability to register in the UK as part of an EU-wide application. That makes it possible for businesses to obtain design registration in the UK and other specified countries through a single application with a single fee. We regard it as a welcome improvement to the regime. I think that is the hon. Gentleman’s view.
The hon. Gentleman’s amendment, which was discussed and withdrawn in the other place, would have placed a duty on the Secretary of State to report to both Houses of Parliament sixth months after the Bill commenced on educating rights holders about the changes that joining The Hague agreement will entail. It is important that businesses and consumers are made aware of changes to the law that may affect them. The Government have engaged with key stakeholders at every stage, via consultations on the Bill’s contents. Of course, as there will be an affirmative order, the Government will consult on the draft secondary legislation ahead of its becoming law. More widely, even the amendments that we have tabled today show that we continue to listen to the views of the business community and are in close contact with it.
On communication, we have produced a plain English guide to the legislation that is available in paper form or as an electronic download from the IPO website. The IPO continues to work with the design sector to ensure that people have the guidance they need on the law, if it is successfully enacted.
I mentioned earlier Government best practice, which we follow in the Department for Business, Innovation and Skills, which is to produce guidance for business at least 12 weeks before any new law takes effect. That is what we will do in this case. We are developing a strategy to educate business users about the changes under the clause, including producing guidance for business in advance of commencement. Of course, the necessary draft rules on the details of how the provision will work in practice will be the subject of further consultation.
The IPO already does a lot to report on the support and guidance that it provides to the design industry, particularly through its annual corporate report and a chief executive’s report. Given the activity that is already under way to ensure that we properly communicate with business on the legislation, we can hold our heads up high and say, “We are properly engaging with the business community.” Of course, it is important to monitor the effects of the legislation, as the hon. Gentleman said—I understand that point—and the right way to do that is through the IPO’s annual corporate report and the chief executive’s report.
If there are any issues or concerns, there is good joint working between the IPO and IP lawyer organisations, including seminars, panel discussions and webinars. Put all that together and there has been a high level of communication between the IPO and the people who use its services, which certainly must carry on and intensify as the legislation is brought to a conclusion. I hope that, through the IPO’s annual reports, we are able properly to see the work that it is doing for this purpose.
Mr Wright: I thank the Minister for his explanation. That is helpful. He sets great store by the IPO’s annual report. Later today we will discuss what should be included under clause 21. I look forward to probing him further on that. One of my questions when tabling this amendment was about how success or failure would be judged when it comes to the use of The Hague agreement. Does he think that will be best ascertained and then publicised by the IPO report or does he plan to put any other specific measures in place?
Mr Willetts: The IPO chief executive’s report will be the best device. There is an important point about the clause. It provides business with another option. It does not compel business to do anything. No UK applicant will be compelled to use The Hague to obtain a UK registration. This is about an extra flexibility. We will, of course, measure the number of applications. We will get feedback from users. But as it is offering a new option for business it would be wrong to assume, for example, that high volume is good and low volume is bad. The main thing is that we are giving businesses an extra, alternative means of protection to their intellectual property rights if it suits their needs. But it will be possible, through our annual reports and answers to parliamentary questions and others, to measure the number of applications under the clause provided that there is not an assumption that a high number is good and a low number is bad. It depends on the individual circumstances.
Mr Wright: That is very helpful. The Minister is right that this provides flexibility to businesses and an extra alternative. He has made a strong case about measuring the applications. I beg to ask leave to withdraw the amendment.
The amendment would remove the power of the Secretary of State to specify by rules cases or circumstances in which a document kept at the Patent Office in connection with the registered design may not be inspected and that those rules may confirm a discretion on the registrar. This is a probing amendment to ascertain the Government’s thinking and rationale here. Why does the Minister want to give quite broad and draconian powers to the Secretary of State to withhold the right of inspection? Are we not bordering on Henry VIII powers here? In what circumstances would the Secretary of State wish to prevent a registered design from being inspected? Will specific criteria be set out to make this as transparent and accountable as possible?
I can understand the rationale for the power if the inspection of documents electronically could make it easier for third parties to use them as a basis for new ideas which would infringe existing rights. However, as the Government’s response to the consultation made clear, the proposal does not increase the risk as searchable designs databases which make publicly available representations of the registered designs already exist. So my simple question is this: why do the Government wish to include subsection (5)? Is this not too draconian a power that should be withdrawn?
Mr Willetts: The clause simplifies the procedures for updating information held on the statutory register to ensure that records can be more easily updated. It allows for the inspection of registered design documents electronically, which will enable users to access information at a time and place convenient to them and will reduce delays in obtaining information for a formal request to the IPO. This is another step as part of the Government’s wider agenda for openness and use of online information wherever possible. It makes it easier than in the past to access this information online.
The hon. Gentleman is concerned about the power granted to the Secretary of State to specify the circumstances in which a document cannot be inspected online and the discretion that the Secretary of State has in such cases.
The clause is about ease of access to information, which benefits industry, and it allows for such access. It would be unreasonable for that power of access to be unconstrained in all circumstances. Notably, there may be cases in which information is commercially sensitive and it is in the interests of applicants to apply an exception. A second circumstance is where publication is potentially defamatory, for example, if material disparages any person in a way likely to cause offence or harm an individual’s reputation. There are therefore reasonable circumstances in which the power is necessary to ensure commercial protection or avoid defamation.
It might help the hon. Gentleman if I provide him with some assurances. First, the power in the Bill reflects that available in other IP law. We are not adding a Henry VIII power; patents and trade mark legislation already has such provisions and the report of the Delegated Powers and Regulatory Reform Committee made no recommendations for change in relation to the clause. None of us wish to see the powers abused, so, secondly, I assure him that the powers are not necessarily about keeping a design itself confidential, but could be used to keep confidential a particular piece of correspondence relating to a design application. We can limit the protection to perhaps a particular set of references that are defamatory and should not be released, but the overall information can be released. We completely understand that.
Finally, let me assure the hon. Gentleman that the regulations when first produced will be subject to the affirmative procedure, so full parliamentary scrutiny will be possible. In the light of those assurances and that explanation, I hope that he feels able to withdraw the amendment.
Mr Willetts: The current legislation applies to the inspection of documents and is based mainly on the Registered Designs Act 1949. The clause creates a new right, which has not previously existed in law in this context—the right to inspect documents in electronic form. That is why the right must be set out in primary legislation. There are no existing provisions. We are giving a new right, which is absolutely in line with the Government’s wider agenda of improving access to information. If we are creating a new right, we must at the same time set out the constraints. Unless they are in the same primary legislation, they will not exist. We are absolutely happy to set out guidance, so it will not be done purely on a case-by-case basis.
Amendment 23 is a probing amendment designed to push the Government further on why they did not take up their original proposal to include the patents county court as a potential route of appeal against IPO decisions on designs.
At the moment, the IPO can reject an application for the registration of a design. There should be—I think the Government accept this—an opportunity for a low-cost route of appeal. The question is what that route should be. Should it be, as it currently is, the Registered Designs Appeal Tribunal or should it also include the patents county court? Should it follow a similar procedure to that of trade marks, which allow for decisions made by
My understanding is that the Government’s preferred proposal in respect of appealing IPO decisions against design is to do so via the patents county court or the appointed persons. The consultation was not clear cut on this matter. Some respondents said that the PCC would be more suitable, while others preferred the High Court.
If the Government’s intentions are to provide the quickest, most cost-effective and flexible route to appeal the decision, the inclusion of the patents county courts seems reasonable. If not, will the Minister explain why not, given that it was the Government’s preferred option until a few months ago?
I have read the impact assessment on this part of the Bill and it seems to be a question of amending the evidence to suit the conclusion, rather than the other way around. The impact assessment states that several assumptions were made in calculating costs—first, that design disputes can be modelled on trademark disputes; secondly, the number of cases; thirdly, the length of hearings in court; fourthly, that the IPO continues to fund appeals to the appointed persons, and that a cost of £500 per case is reasonable; and lastly, that the costs to business of preparing for an appeal are different depending on the appeal route chosen. I think you could use those assumptions to bring about any conclusion that you require. Given that the appeals procedure has been used only twice in the past 10 years, how confident is the Minister about those assumptions?
I have already mentioned the global intellectual property index report from Taylor Wessing. In the section on designs, as I have already said, the UK scores relatively badly. We are in fifth place on designs and 12th on cost-effectiveness. However, interestingly, Taylor Wessing states:
“The still reasonably new, streamlined and cheap court process available through the Intellectual Property Enterprise Court (formerly the Patents County Court) is now similar to the systems in Germany and the Netherlands. It is well suited to most design cases and has decided a number already. It will be interesting to see whether people’s perceptions on costs change once that system has become more established and familiar”.
Given that and what the report said, would not the patents county courts be a useful and recognisable means by which appeals against IPO decisions could be heard? I will be interested to hear the Minister’s response to this probing amendment.
Mr Willetts: The clause provides a more ambitious legal route for appeals and a low-cost informal route. Appeals can be made to the courts for important cases and the appointed person route—a legal professional appointed by the Lord Chancellor—for a quicker, cheaper final decision. That is the system already used effectively for trade mark cases. It also, incidentally, equalises the financial remedies for innocent infringement of UK and European Community-registered designs, as they are currently treated differently.
The Government believe that this combination of an official legal route and the alternative of an appointed person is a workable, consistent approach which matches
Amendment 23 introduces the Intellectual Property Enterprise Court, or IPEC, formerly the patents county court. Perhaps legislation still refers to the patents county court, but I think it went out some time after “Bleak House”. We do not have a patents county court any more, so strictly speaking the amendment is defective.
Mr Willetts: I call a spade a spade. If an amendment is defective, I tell the hon. Gentleman it is defective. He needs to know. However, what he is really doing is trying to create a third, alternative appeals body, on top of the formal and less formal ones we have in this clause. He could argue that this increases the appeal choice that is available, but we think it is unnecessary to add another route of appeal. The Bill already provides a low-cost, quick route in the form of the appointed person route, and an alternative route through the courts for more important cases where further appeals may be required.
I can assure the hon. Gentleman that the appointed person route is already an effective and informal procedure. The costs of using the service are finite and low, and businesses are often able to represent themselves. They therefore avoid the additional cost of legal representation which may be incurred if going through the High Court or, indeed, his preferred route of IPEC. If a business has the time, money and inclination to go formally to court, then the High Court would probably be more suitable than IPEC.
However, we do not believe that bringing in IPEC would help in this context. We think that it would be an additional complexity for business, and would remove the consistency of approach with trade mark appeals. This would make the overall appeals system more complex for businesses to use, because they would have one model for trade mark cases and a different model for design cases. I therefore hope that the hon. Gentleman will accept that, as we have tried to deliver a low-cost, informal route, which is an objective shared by both sides of the House, then what could be called a third way—I am not sure that this phrase is still used by the Labour party—is no longer necessary on this occasion.
Mr Wright: I mentioned earlier that the Government’s initial preferred option was to have appeals against IPO decisions on designs going via the patents county court or whatever enterprise thingy it is now called—that is me being defective and using previous names. My question is what changed the Minister’s mind from that preferred option. What evidence compelled him to move to a different route?
Mr Willetts: We did consult, and this is a good example of consultation. Contrary to what the hon. Gentleman said earlier, it is not a matter of our having an agenda and just imposing it. He is right that we tried
Clause 11 introduces a power for the Secretary of State to provide for a non-binding opinion service for designs. It initially provides for registered designs, although there is scope for extension, and the majority of respondents to the Government’s consultation certainly wanted a design opinions service for both registered and unregistered rights. I was initially worried that secondary legislation subject to the negative procedure would set out the precise nature of the regime, but I am pleased that, following the recommendation of the Delegated Powers and Regulatory Reform Committee, the approach has changed and the affirmative procedure will be used instead. We therefore have not needed to table amendments to address that matter.
would be removed, as would provision on an appeal relating to an opinion. I tabled this probing amendment to clarify the precise nature of the Government’s intentions. Amendment 24 is certainly not designed to pull back from an opinion being given and the prospects of appealing that opinion. Rather, it is an attempt to tease from the Minister the precise difference between an opinion and a decision, and the extent to which either term can be subject to an appeal.
However, if the opinion is not a decision, how can it be subject to an appeal process? Is the opinion therefore not authoritative, meaning that its value is questionable? This line of inquiry was pursued in another place, but I do not think that the Government offered a sufficiently robust explanation, which is why I am having another go now. Will the Minister explain why an opinion is not a decision?
As always, I am in your hands, Mr Havard, as to whether this clause will require a stand part debate—your opinion definitely is a decision. However, the clause provides the power to make a considerable number of regulations. Given what happened with copyright exceptions under the Enterprise and Regulatory Reform Act 2013, which still has not been resolved satisfactorily—we will come on to that in due course during the Bill’s
Mr Willetts: I regard the clause as another example of how we are making the IP service accessible and useful to our business community and individuals. It enables the introduction of a new design opinions service, which will make it easier for businesses to make an informed decision about the strength of their case in a potential design dispute before, or instead of, embarking on more formal and costly litigation proceedings. The service will be low-cost, non-binding and impartial, and it will be similar to the well-regarded patent opinions service that the IPO already runs.
I am, of course, happy to give a full answer to the hon. Gentleman’s questions but, in brief, the crucial distinction between receiving an opinion from the opinions service and going through a formal procedure is that an opinion is just an opinion—it is not binding and does not have any impact on a party’s rights. We are trying to maintain a clear distinction between the non-binding nature of the new informal opinions service and the formal role of the IPO tribunal in determining whether a design may be registered.
Mr Willetts: Although an opinion is not binding, we understand that some form of review mechanism is needed. We think that that is a necessary safeguard if the Bill is to be human rights-compliant. If people have a very strong argument about why an opinion is defective, they have a right of review, but none of that relates to a legally binding decision. The hon. Gentleman’s amendment, however, would remove the distinction between the informal opinions service and the tribunal’s formal role, which we think is essential. Decisions by the IPO tribunal can be legally binding and have an impact on a party’s rights. In contrast, the opinions service is designed to be a low-cost means for businesses, especially small businesses, to assess the strength of their rights and the validity of the rights of others. It is therefore imperative that the views given by the opinions service are not legally binding nor linked to the formal decisions of the tribunal.
The second consequence of the hon. Gentleman’s amendment would be to remove the right of appeal to an appointed person regarding opinions given by the service. As we are trying to maintaining a distinction between the IPO tribunal and the opinions service, it is important that the latter has its own dedicated route to appeal. If someone is aggrieved by an opinion, they should be able to get a second view about whether it was arrived at correctly. The appeal under the opinions service, which will be independent of the IPO, is different from the legal route for legally binding judgments.
I reiterate my earlier point that, under the terms of the European convention on human rights—I do not wish to inflame the passions of Government Members—the right of appeal is considered to be an important safeguard. An adverse opinion could affect the economic value of a right, and hence the proprietor’s ability to make use of it in business. We therefore need some kind of appeals process for the informal route, but that is separate from the legally binding process that runs separately and in parallel.
Mike Weatherley (Hove) (Con): Will the Minister comment on the fact that although the opinion is not legally binding, it has some legal impact on costs and so forth? It is therefore right to get the opinion as correct as possible at the earliest possible stage.
Mr Willetts: That is a fair point. An opinion is not legally binding, but it is important advice that affects small businesses’ judgments about how to run their companies. If they have a reason to be concerned about it, they need some kind of right to “appeal”, but that should not be linked with a separate legal process, which would be the consequence of amendment 24. My hon. Friend is absolutely right.
The hon. Member for Hartlepool made a point about the secondary legislation, which was also discussed on Second Reading. We have prepared a document outlining what the regulations will contain, so hon. Members on both sides of the House can see what the subsequent secondary legislation will be. I am happy to write to the hon. Gentleman, send him that document and place copies in the Libraries of both Houses so that Members are informed about how we propose to move forward with the secondary legislation.
Mr Wright: I thank the Minister for his comments. His offer to write to me and the Committee about the secondary legislation is welcome. I understand the point he makes about a flexible, informal route, but I am keen to probe him further because he has not given sufficient explanation of the difference between the appeal processes for an opinion and a decision. I reserve the right to return to this issue later in the Bill’s passage, but I want to make progress, so I will not press the amendment to a Division.
The hon. Member for Hove made a wise intervention based on his knowledge of IP. An opinion can be a useful economic step for a firm that is considering the future economic impact of designs. However, given the distinction between an opinion and a decision, is it appropriate to have an appeal process for opinions? Is the Minister’s distinction between a decision and an opinion right and valid?
Mr Willetts: I understand the hon. Gentleman’s point. I do not want to repeat the distinction between the formal and the informal route, but perhaps he will be reassured if I say that the Bill essentially replicates the structure that already applies to patents, within which there is a clearly understood, non-binding opinion.
We will, of course, keep the mechanisms under review. We do not expect the appeal mechanism to be used frequently, but it will exist as a safeguard if a small or medium-sized enterprise has a real concern that an
Mr Wright: The Minister says that he does not expect the mechanism to be used frequently, but I would suggest the reverse. Is the approach not a low-cost alternative to getting legal advice and a binding decision? Will it not be used quite a lot as a first step when firms are thinking, “Where are we in relation to the process?”
Mr Willetts: We expect the design opinions service to be used a lot, but the question is how many appeals will arise. The experience with patents is that opinions are used a lot and reviews are used infrequently, but we will see whether things are different in this case.
Mr Wright: What sensitivity analysis have the Government carried out? If I were a firm that wanted an opinion on something that would affect my future business, but I did not like what that opinion said, I would appeal against it to get the opinion that would give me an economic advantage. Does not the Minister think that there will be a direct link between whether a decision is favourable and the use of the appeal process?
Mr Willetts: We will see. As I have said, on the basis of previous evidence, we think that that is not likely, but if there were a surge in the number of people using the new informal appeals mechanism, that would be exactly the kind of matter that would be published under the annual reporting processes we have in place for the IPO and chief executive. If the practice was used a lot, I would expect that significant and interesting piece of evidence to be brought to our attention in the annual report.
The Chair: Given our discussion on the amendment, during which we reassured ourselves that the mechanisms, rights and protections are all compliant with the Human Rights Act, we can move on to the decision on clause stand part.
The clause amends the Patents Act 1977 to extend the circumstances in which the IPO can issue an opinion in relation to patents. Subsection (4) gives the power to the Comptroller-General of Patents, Designs and Trade Marks to revoke a patent on his own initiative. During the Bill’s passage in another place, the Minister there stated that the clause allows
The extension does not seem especially “limited” to me; the power seems to be a wide ranging and unilateral one to grant. The intention of amendment 32 is therefore to question and scrutinise why the Government seek such a power.
“detail the benefits associated with the introduction of the design reforms and will include input from external stakeholders. The plan will also set out how and when the benefits will be measured, which will depend on the type of benefit, as some benefits will be measured by applications and take-up that can be measured from the first year of operation, whereas others will depend on information that will take several years. The evaluation strategy will set out the activities that will be undertaken in order to evaluate the policy, drawing on management information collected through the design system, as well as research that is commissioned in order to measure the benefits.”
I am no lawyer and certainly no expert in intellectual property, as is painfully obvious to the Committee. Stakeholders such as the Law Society and others, however, have said that the existing patents opinion service has been successful because it is voluntary, and costly and timely litigation is avoided.
The current opinions system for patents seems to be well respected, understood and supported, and it is functioning effectively, so what is the problem that clause 16, and specifically subsection (4), is trying to solve? Is there not a risk that the threat of revocation will make the whole approach more confrontational and less successful, and will ultimately mean that more costly litigation is entered into? If I were to see a particular patent as a threat to my business, would I not see clause 16 generally, and subsection (4) specifically, as a good opportunity to have patents that threaten my business revoked? The measure seems to help large and powerful businesses with substantial financial and legal resources to undermine smaller firms that will not have the opportunity or means to enter into costly or timely litigation, and so will see the protection of their inventions revoked. The purpose of amendment 32 is to ask the Minister what safeguards are in place to prevent that from happening.
There is also a question of resources. If large firms see the clause as a good way to get troublesome competitor patents revoked, will not the IPO be deluged with such requests? What proper analysis has taken place in the Department to ensure that the IPO has the resources to deal with such a situation? Is not the power too broad? I will be interested to hear the Government’s response.
Mr Willetts: The clause expands the scope of the existing patent opinions service by allowing the IPO to issue a patent opinion on a wider range of disputes. It allows the IPO to initiate revocation proceedings against a patent that is clearly invalid when an opinion has concluded that it is not new or inventive.
Amendment 32 would remove the power that allows the IPO to revoke patents when an opinion finds that a patent is clearly invalid. We have introduced that provision deliberately to help businesses that cannot afford litigation proceedings, especially small businesses and lone inventors. It is one of the many ways we are implementing proposals from the Hargreaves review to help small businesses, because that review specifically indentified that smaller businesses, in particular, can find the cost of resolving patent disputes prohibitive. Indeed, this is a long-standing issue that SMEs have raised with us.
One SME that responded to the consultation was quoted a cost of £100,000 to bring revocation proceedings against a patent that an opinion had concluded was invalid. The SME certainly could not afford to proceed with the action, despite the clear opinion. Our measure will remove that burden on business in cases in which an opinion has shown that a patent is clearly invalid. We regard it as an important part of the Bill’s wider agenda of making our intellectual property system more user-friendly, especially for small businesses, alongside bigger businesses. We believe that it is in the broader public interest to allow the IPO to seek the removal of clearly invalid patents from the register. Until a patent is actually revoked, the patent holder may be able to prevent others from trading, even if an opinion has shown that that patent is clearly invalid. Of course, the IPO is already able to start patent revocation proceedings in certain circumstances, so this will be an extension of its existing powers.
I understand the hon. Gentleman’s point that, as with the existing powers, there need to be safeguards to ensure that automatic revocation is not unfair. The patentee will have the opportunity to demonstrate that his patent is, in fact, valid, or to submit amendments to make it valid, and they will also be able to appeal against a revocation to the courts. We have consulted groups such as the Chartered Institute of Patent Attorneys, and I assure the hon. Gentleman that in the light of the explanations and reassurances that have been offered, especially by my colleague, Viscount Younger, the institute no longer has reservations about this change.
We believe that there are sufficient resources at the IPO to deliver this service. The office has more than 200 expert patent examiners, so it can handle any increase in the number of opinion requests. Although it is true that a patent holder might simply not pay a renewal fee if an opinion has gone against him, the evidence, sadly, is that very few patent holders choose voluntarily to amend or surrender their patent following an opinion that
Mr Wright: I appreciate that, as the Minister said, the Government are extending existing powers, but the question is whether the extension is necessary, appropriate and proportionate. He did not satisfactorily explore the possibility of a large firm with big legal and financial resources seeing a small competitor as a threat to its business and using the power to undermine that small business. Has he recognised that that could be a risk and, if so, what appropriate safeguards are being put in place?
Mr Willetts: The patent would need to be clearly invalid in such circumstances. I have to say that the balance of argument points the other way, because a large firm can easily use the legal process already. If a small company has an invalid patent that is stopping a big business, that big business can challenge it in the courts. The problem comes when it is the other way around—when the big company has an invalid patent but the small business cannot afford to challenge it in the courts. We envisage that these new powers will largely be used by small businesses for which the legal bill—I cited an example of a £100,000 bill—would be a real barrier. The courts and the IPO can already penalise parties that pursue hopeless or unreasonable arguments through the use of costs, so a party’s behaviour can be taken into account.
I hope that I have reassured the hon. Gentleman. The measure is an attempt, acting on recommendations from Hargreaves, to rebalance our patent law, if I may use that expression, so that it is rather more favourable to small businesses that cannot afford expensive legal costs.
Mr Wright: I thank the Minister for those reassurances. As a Member of this place, I certainly know all about hopeless and unreasonable arguments. What he said was important, and I beg to ask leave to withdraw the amendment.
The Chair: Order. Before you continue, Mr Wishart, it seems that Mr Wright was under the impression that we were finishing at 11 am. The disappointing news for him is that we have until 11.25 am to get to clause 19.
Pete Wishart: I am always disappointed to disappoint the hon. Gentleman on these issues. As I was saying, Mr Havard, I welcome your chairmanship of this important Committee and look forward to spending the next couple of days discussing these important issues.
The Minister knows that I have big concerns about clause 17. We debated the matter on Second Reading and he gave me a degree of assurance that some of the issues I am about to present would be addressed. The matter was also discussed fully when the Bill went through Committee in the other place, again without any conclusion about how the clause would work.
Clause 17 makes provision to confer, remove or vary the jurisdiction of a court in relation to dealing with the new unified patent court, giving the ability of the new jurisdictions to look over European patents and for the opting-out of the new regime. I think we all support the creation of a new unified patent court; in fact, some of us have been arguing for it for a long time. However, there are big issues for Scotland, because it could prevent Scotland from looking at the whole issue of patents. For decades, if not centuries, the Edinburgh Court of Session has had the ability and power to look after patents in Scotland. Scotland is a distinct legal jurisdiction; we have our own Scots law. With the new unified patent court, we may lose that ability to rule on patents. The UK Government will become one of the direct patent courts: they will be in London, Paris and Munich—all we need is New York for the pop song. London, of course, will be able to get one of the new unified patent courts.
The UK as a member state has the opportunity to designate four other divisional courts. All we are asking of the Minister is to ensure that the Edinburgh Court of Session is included, so that we do not lose the centuries of experience of looking at Scots patents that we have built up in Scotland. If we do not do that, it will have a massive impact on Scots inventors and creators. Scotland practically invented the modern world—everything from tarmacadam to television, from Dolly the sheep to the Higgs bosun came from Scottish inventors or were made in Scotland—and here we are at the point of losing our ability to deal with patents, which would be patently absurd.
We have so many IP-rich businesses in Scotland and so many sectors, including life sciences, renewables, particularly in the oil and gas sector. We need the ability for patents to be heard in Scotland. I can only imagine the cost and inconvenience for Scottish businesses if they had to travel to other jurisdictions to seek satisfaction in the courts with regard to patents. That is an inconvenience that small businesses can ill afford.
I do not think the Government meant to exclude Scotland when considering the divisional courts of the unified patent court. I think that, as with most things to do with Scotland, the Government just did not think about it. That is the theme of Westminster rule when it comes to Scotland. If we were a sole member of the European Union—which we would be—we would be able to do this anyway. The Minister has an opportunity to contribute to the constitutional debate and put aside any fears for the entire legal establishment in Scotland. He will have seen the letters from the Law Society of Scotland and the Faculty of Advocates in Edinburgh. James Wolfe, vice-dean of the Faculty of Advocates said:
“A divisional court of the UPC should be established in Scotland. Failure to establish such a court in Scotland would disadvantage Scottish-based businesses, would lead to an erosion of expertise in Scotland and would have an adverse impact on the Scottish economy.”
The Minister has an opportunity to put this right and contribute to the constitutional debate in his inimical style. I hope the matter is resolved on the basis of the whole of the legal community of Scotland.
I did not have an opportunity to present my amendments—I was given only 24 hours’ notice that I was a member of this Committee—but I will revisit the matter during the remaining stages. The amendments are on the amendment paper and I hope I can move them at a later date. If we do not get clarity from the Minister, we will have to put the matter to the House. When it comes to these issues, we will do all we can to ensure that the Scottish legal system is properly represented and gets satisfaction.
Mr Wright: I have a lot of sympathy with what the hon. Gentleman says. I have three broad questions about clause 17. As he said, the power set out in the clause confers jurisdiction or removes jurisdiction from a court, and the Secretary of State will be allowed to have that power. Before I ask my three questions, I have to say that getting the unified patent court is a coup in helping to ensure that we can remain the centre of excellence, certainly in Europe, when it comes to IP. I welcome that.
First, before the Secretary of State exercises the power, how will he consult with stakeholders? That is the purpose behind the hon. Gentleman’s amendment, which was not selected. Secondly, will one of those courts be in Scotland or any other part of the United Kingdom? There could be two courts: one in London and one somewhere else in the United Kingdom. On Second Reading I made a strong case for Hartlepool. I imagine that other hon. Members will want to press their own cases. Where else will that court be and how will the process be decided? My third question concerns a broad constitutional point—it also touches on the wider point about the integration and relationship of patents, designs and IP, and the relationship between UK domestic law, Scottish law and EU law. What happens to clause 17 in the event of independence? How will that work out and what will the Minister do? Those are my three concerns. I shall be interested to hear what the Minister has to say.
Mr Willetts: I welcome the speech by the hon. Member for Perth and North Perthshire. Like him, I regard the Scottish enlightenment as the intellectual origins of the modern world. At a time when Oxford and Cambridge were languishing, we looked to the universities of Edinburgh and Glasgow and thinkers such as Adam Smith and David Hume. I understand the points he makes about the excellence of Scotland’s intellectual and research life. To this day within the UK research budget, Scottish institutions—universities and research institutes—get more UK funding than Scotland would get as a percentage of UK GDP, because our sole criterion is excellence. If I remember correctly, Scotland generates about 8% of UK GDP and gets about 12% of the science and research budget, for which I am the responsible Minister, so when there is excellence, Scotland, as part of the UK, benefits from it, as we would expect.
The only point when the hon. Gentleman’s poetry about the Scottish intellectual life took him a bit too far was when he said that Professor Peter Higgs had invented the Higgs boson. I think he discovered it; indeed, he might interpret the suggestion that he invented it as a rather savage criticism. I had the privilege of being at the Nobel prize ceremony when this distinguished academic—born in England, educated at a secondary school in Bristol, but spending most of his career in Edinburgh—received his Nobel prize.
Let me clarify an important point. Although there is a separate Scottish legal tradition and separate Scottish law, there is not a separate Scottish body of patent law. We have a single UK framework in the area of intellectual property. As far as I am aware, not even the Scottish National party has suggested that there should be a separate body of Scottish law.
The clause enables the Government to give effect at a later date to the recently signed international agreement creating a unified patent court for Europe. Successive Governments in Britain have sought this unified patent court—which is part of a package of reforms of the European system—for a long time. I was grateful to the hon. Member for Hartlepool for acknowledging what an achievement that is. Having seen close up how tricky some of the negotiations were, I have to say that it was a testament to the personal negotiating skill of our Prime Minister that it was secured with a significant office in London—I do not mind being quoted on that.
Mr Willetts: It was certainly an example of what can be achieved with tough and effective negotiations in Europe: something that had not been achieved by previous Governments. We are doing this not because anyone in Europe is dictating to us, but because it is in the interests of business in Britain and across Europe to have a single EU patent regime instead of a fragmented system of 25 different regimes. Indeed, businesses will now have the choice of protecting their inventions in 25 EU countries with a single patent that they could defend in one court, instead of fighting their case in each European country. That will reduce the cost and administrative burden on businesses in need of Europe-wide protection. The clause, which is a key part of the Bill, will finally ensure that innovative businesses, which have been waiting for a single European patent system for more than 40 years, will be able to participate in that.
The concern of the hon. Member for Perth and North Perthshire is about where local divisional jurisdiction should function. It is not the case that the national
As to where local divisions of the unified patent court should be set up, the hon. Member for Perth and North Perthshire was eloquent on that. Let me assure him and the Committee that there is close engagement between the UK Government and the devolved Administrations—including the Administration in Scotland—who are participating in the work of the taskforce responsible for UK implementation of the unified patent court agreement. I cannot say today whether there will be a local court in Edinburgh, but we are committed to ensuring that all areas of the UK will have access to the court. I understand the powerful historic arguments for one such court being based in Edinburgh. Each local court comes with a cost, and I presume that the devolved Administration would be willing to bear that if there were to be one in Edinburgh. They are expensive, as there is the cost of the court rooms, the administrative staff and so on.
One possibility—which it would be wrong to rule out at this stage—is a travelling assize model. It might be that the best way to make the court accessible to as many businesses as possible is to have a model where it sits in different locations as the need arises. One reason why I cannot go as far as the hon. Gentleman would like is that we need to consider that option carefully in the consultations, which include the devolved Administrations. I assure him, however, that we understand the need, where there are concentrations of businesses, for them to be able to access local courts. We will look sympathetically at any proposal for a court to be located in Scotland—we do not want them to be located away from the action—and we will continue to consult closely to try to ensure that we secure easy access to the new process across the UK, and certainly in Scotland.
We heard it suggested that Mr Wishart’s amendment was not selected. Mr Turner and I had discussions with the Minister, and Mr Wishart agreed that it would not be taken this morning, but that other methods would be available to him. Certainly, he would have complied with clause 16, as there was no lack of novelty in his contribution.