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Lord Sainsbury of Turville: I shall speak to Amendments Nos. 6 and 7. Perhaps I may say first that the purpose of Clause 9 is simply to expand in a limited way what an employee can propose as evidence of outstanding benefit. The employee bears the onus to prove that his invention, which is being successfully exploited by his employer, has been of outstanding benefit and that he is entitled to fair compensation. The slight adjustment proposed would allow the employee to include benefits flowing from the invention as well as those flowing from the patent. The benefits of the invention must accrue when the patent for the invention is in force, and it does not alter in any way the requirement to show that the benefit in question was outstanding. We have no intention of changing that threshold. The noble Lord, Lord Lyell, raised the question of teams of people. That important consideration exists now and nothing in the Bill changes the difficulty of being clear who was involved in an invention.

Section 40 of the 1977 Act describes the circumstances under which an employee can make a claim for compensation from his employer who has gained outstanding benefit from the exploitation of the invention made by the employee. Section 41 lays down how to calculate the level of compensation for such a claim. It states that all the circumstances must be taken into account so that, for example, the contribution of others, such as those responsible for marketing and sales or product development, can be taken into account before deciding the contribution made by, and appropriate compensation for, the employee. For example, where the success of a product in the marketplace that incorporates the invention is due to skilful marketing, that would have to be discounted when assessing the benefit from the invention.

Amendment No. 6, tabled by the noble Earl, Lord Attlee, and the noble Lord, Lord Lyell, would add a further requirement to Section 41 by insisting that the assessment of the benefit from the invention, taking into account all the circumstances, can begin only after there has been consultation with employee representatives with a view to reaching agreement. I cannot imagine any circumstances where that would make sense. If consultations between the employer and/or the employee and employee representatives are likely to resolve what would be appropriate compensation, a claim under Section 40 would be surprising. I would expect that discussions between employee and employer over the employee's claim for compensation would have already taken place internally within the company and that there is a claim under Section 40 because these have broken down. It

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makes no sense to make a further such discussion a requirement if disagreement is the inevitable outcome—which, in such circumstances, I think it would be.

The provision in the 1977 Act is about dealing with situations when such negotiations cannot happen. I am pleased that the very few cases that have emerged since the coming into force of the 1977 provision seem to indicate the success of voluntary agreements regarding compensation. Indeed, I understand that those are already likely to cover outstanding benefit from the patented invention as well as the patent itself. In other words, companies have already taken on board that point and have got their own compensation arrangements. They probably cover the new point that is in the Bill. The Government are unable to support the amendment. I ask the noble Earl, Lord Attlee, and the noble Lord, Lord Lyell, to withdraw it.

The new clause proposed by the noble Earl, Lord Attlee, in Amendment No. 7 is intended to require a review of the effectiveness of our changes to Clause 9 after five years. We would revert to the present regime if the changes that we are considering today were not confirmed within six years. Such a provision could, of course, be applied to any legislation but I doubt that any of us would wish to start legislating routinely in this way. It is simply unfair to apply it only to a provision that might favour slightly one interest group.

In the Bill, we propose a small adjustment based on 26 years' experience of how the system is operated. Parliament should now decide whether that change should go ahead without any uncertainty about the future. Such uncertainty helps neither employees nor employers. Nobody would know whether the goalposts would change or not in a few years. Employees would not be able to decide whether or not to update their own corporate arrangements for rewarding staff who contribute to the success of the company. That will thus work against the principal advantage of the current provisions: that their existence has encouraged corporations to put in place their own internal schemes for rewarding employees who contribute to the success of the company.

I trust that the reassurance that I have given about the limited scope of our amendments to the employee compensation provisions is helpful. We should leave no doubt that the changes are the right ones to make. I therefore ask the noble Earl, Lord Attlee, to withdraw the amendment.

Earl Attlee: I believe that Section 40 is useful only as a backstop. The evidence for that, of course, is that we do not frequently litigate on it.

Knowledgeable outsiders are opposed to the proposed amendment of Section 40. The purpose of Amendment No. 6 is to make advance agreements more usual; to encourage employers to seek advance agreements. The Minister pointed out that in many cases this already occurs. He almost seemed to argue

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that Section 40 already works fairly well, as evidenced by the lack of litigation. That makes me think "Well, why change it?"

The Minister opposed Amendment No. 7, not surprisingly, but his arguments could be applied also to oppose secondary legislation. Secondary legislation can be changed, so obviously it is not appropriate to use the amendment on this clause. However, it is a useful opposition tool to express displeasure at an amendment when one does not want to oppose the amendment outright. I beg leave to withdraw the amendment, subject to the usual caveat.

Amendment, by leave, withdrawn.

On Question, Whether Clause 9 shall stand part of the Bill?

Lord Lyell: I understand that this is the only device I can use to ask for clarification of Clause 9, which is based on Section 40 of the 1977 Act. We had quite a good canter around the course on Second Reading and in the debate on my noble friend's Amendments Nos. 6 and 7. However, I am curious about one particular aspect of an inventor—one must be careful—a patentee, an employee working for a company. I am interested in the definition in Clause 9 of "inventions" as opposed to "patents".

One or two mild fears have been expressed to me about the slight broadening of the word "inventions" as opposed to "patents", which has worked fairly well since 1977 and even before that. I have one query—and there is no reason for the Minister or the noble Lord, Lord Triesman, to answer today—and that is: what happens if an employee or a team in the course of their scientific experiments find, completely by chance, a different application for their patent from the one they set out to achieve?

I recall in 1977 the case of the non-stick frying pan. I believe that the surface for a non-stick frying pan was discovered totally by accident. However, I am not sure whether it was discovered as a result of people experimenting with cookware—the brown or white goods that go into stores—or because of another aspect, which unfortunately has left visible signs on me; that is, the winter sports ski industry. I should point out to the Minister and the noble Lord, Lord Triesman, that the fabrics, skills and technology used in a non-stick frying pan which ensure that food does not burn and eggs do not stick is exactly the same as that used by alpine and nordic ski manufacturers. I am told that the substance goes by the name of polytetrafluorethylene. I remember that we used to chant it at great length in 1977 and I have managed to get it out today.

The patent was filed completely by accident. The team was looking for one particular product and found another. Indeed, this second product was totally apart from the one intended by the company which was manufacturing the frying pans and it had no intention of heading off with it to the Alps and the ski industry. Indeed, there were translation problems, apart from with the Americans, and it was necessary to speak French, German and Italian. The invention has been of inestimable value and exists to this day.

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Can the noble Lord advise me on the position of the team or the patentee when they come across an invention totally by accident? Will their employers be able to say, "You cannot take this invention and sell it to another firm"? Would the original employer be able to have some control over them and say, "You will be able to use it only in connection with all the facilities that we have given you"?

Perhaps this is a rather naughty speech. The Minister might be able to reply or give me some advice today, or perhaps at a later stage. He indicated that Section 40 is a backstop, as my noble friend said, and has not been used that often.

Lord Razzall: Ever.

4.30 p.m.

Lord Lyell: The noble Lord, Lord Razzall, is a proper student of the legal documents; I am afraid that I do not spend all my mornings with the Times law report or the other law reports. Research that has been presented to me no doubt would have included such cases.

As the Minister said at Second Reading, he is convinced—as am I—that in almost all sections of British industry, with its excellent science backing, arrangements are in place for employers and employees to have a reasonable, decent and biting agreement. It is for that reason that I ask, politely, that Clause 9 not stand part of the Bill.

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