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Lord Sainsbury of Turville: I shall deal first with the main point of the noble Lord's speech. The number of inventions made by serendipity—when people who are looking for one thing discover another—is a very large part of what is behind most patents. The technical answer to his question is that the invention is that defined by the patent. The claims of the patent say what it is. If the new use for the frying pan falls within the scope of the claims, it is covered, otherwise it is not. That is true under current provisions and will be under the new ones. If people find a totally new use, presumably a new patent will cover that, and it can be put in by the company and the employees who discovered it.

I shall explain a bit more about Clause 9, as it should stand part of the Bill. The Patents Act 1977 recognised for the first time in statute that an employee should have a right to compensation in relation to inventions made by him but exploited by his employer. The working of the employee compensation provisions were reviewed as part of the consultation exercise conducted by my department in preparation for the Bill. The results of the consultation process showed that there was little support for significant changes to the provisions, despite the fact that since they came into force there has not yet been a successful claim for compensation.

That apparent lack of success in the courts does not mean that the provisions have not been helpful in improving the situation for employees. On the contrary, it is clear from the responses that we received to the consultation that the mere existence of the

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provisions has encouraged employers to make their own corporate arrangements for rewarding employees, where they make a significant contribution to the success of the company.

There was more support, however, for the least radical of the five options for change presented in the consultation. Thus, Clause 9 will allow a modest increase in the scope of what an employee can put forward to meet the high threshold of "outstanding benefit". He will be able to put forward evidence of benefits flowing from the invention itself, as well as those flowing from the patent for the invention. However, in doing so, the employee will have to be aware that the contribution of others to the benefit derived from the invention will also have to be taken into account when deciding the issue.

For example, if the invention has required significant development work to produce a commercially viable product, any resulting benefits cannot be regarded as flowing solely from the invention itself. Similarly, if the invention is successful because the company has a very skilful sales and marketing team, that contribution will also have to be taken into account before assessing the benefits which are attributable to the original inventor.

The effect of the changes to the employee compensation provisions is limited in other ways, too. Subsection (7) makes it clear that only those benefits from the invention or the patent which arise while the patent is still in force can be taken into account. That is not, therefore, an open-ended commitment that employers might have to meet. Also, subsection (8) outlines the transitional arrangements for the coming into effect of the amendments. The new provision does not apply to existing patents, or even existing patent applications. It will apply only to patent applications made after this part of the Bill has come into force. That will give employers time to update any voluntary agreements covering compensation, where that is appropriate, although we believe that many of the agreements already cover the substance of what would be provided by the Bill.

Given that the onus is on the employee to prove outstanding benefit, we believe that that modest change is appropriate. It should not upset the careful balance that must be struck between the right of the employee to "just compensation" on the one hand, and the right of the employer to carry out business without facing an unjust financial burden on the other.

Earl Attlee: I am grateful for the Minister's patient explanation of Clause 9, but how will he measure the effect of the clause?

Lord Sainsbury of Turville: We hope that the matter will be taken account of in the compensation arrangements by the relevant companies. If it is not, we will expect to see some cases come forward that use the Bill to get fair compensation for employees. We would make a judgment on that basis.

Lord Lyell: I hope that I shall not weary the Committee, but can the Minister put to bed my worry?

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Did he cover totally the subject of the patent and invention being widened slightly? Also, I am still curious about serendipity, a word he used. Let us take the example of the frying pan. Did I hear him right in saying that the employer of the team that comes with the polytetrafluorethylene could use preventive measures on them? If it had any sense, it might well go to the ski manufacturers and say, "Will this be of use to you?".

Is there a method whereby the team that has patented polytetrafluorethylene could benefit from their product in a totally different area? Is there a break from the original employer? That might be covered anyway in an agreement on Clause 9 or Section 40. I was a little curious about that. Other than that, the Minister has been very kind and has answered pretty well all my queries on Clause 9. I apologise, and after this I shall certainly not delay the Committee.

Lord Sainsbury of Turville: There is a rather technical point here about what is covered by a patent. If I may say so, the point that we are debating is on where the benefits flow from, and the answer is simply that the benefits that flow from the invention as well as the patent should be considered. The question of what is covered in a patent is a more technical one that is not relevant to this discussion.

Lord Lyell: The Minister raised the subject of salesmen. Every sales section of large firms in, for instance, the pharmaceutical or aerospace industry will have carefully noted what he said. I am a little worried, if not suspicious, that the salesmen would say, "Section 40 or Clause 9 is going to help us". That was probably not the intention of Clause 9, let alone Section 40. I had visions of people in laboratories or working in a particular line of scientific patent, but the Minister broadened the matter to sales. My slightly suspicious mind began to think that salesmen would say, "Here is the gravy train", and leave on it.

Lord Sainsbury of Turville: I would not want any salesman to be misled. Salesmen have whatever compensation arrangements they have. I was simply making the point that, in determining what is the outstanding benefit, one must take account of the fact that if a product sells extremely well due to a clever marketing campaign, that outstanding benefit does not return to the inventor. The inventor receives the benefit coming from his invention; if there is a brilliant sales campaign, that is not relevant to the outstanding benefit to be determined.

Earl Attlee: I was very impressed at the speed with which the Minister answered my question about measuring the success of Clause 9. I hope that he was not suggesting that the measure of success would be the amount of litigation under Section 40.

Lord Sainsbury of Turville: No, I was careful to make the point that it is about the incorporation of that into the arrangements of particular companies. If that takes place and there is no litigation, we shall be

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quite happy. If it is not incorporated and there is some litigation, that will show that the legislation is working.

Clause 9 agreed to.

[Amendment No. 7 not moved.]

The Deputy Chairman of Committees: I should point out that there is an incorrect printing in subsection (1) of Amendment No. 8. It should read, "In section 61", not "16".

Lord Razzall: I thank the noble Baroness; I was about to make the same point. I would not want the noble Lord, Lord Lyell, in particular, to think that I did not know the difference between Sections 16 and 61 of the 1977 Act.

Again, this is a small amendment raising a big point. It addresses the question of whether, especially to benefit small and medium enterprises, the jurisdiction of the comptroller should be widened so that proceedings can be brought before him by one party, whether or not the other party agrees.

I understand that when the Patent Office undertook the consultation exercise, the proposal was that Section 61 should be amended to remove that requirement. Although the wording of my amendment is undoubtedly inadequate, it reflects the original intention of the Patent Office and the Government, which they later abandoned when they received the results of consultation. It is a probing amendment to see how far the Minister is prepared to go.

I do not really expect the Government to change their mind on the substance of the issue; the principle that I am trying to explore is what undertaking the Minister may be prepared to give to keep that area under review—especially in the light of concerns expressed on behalf of SMEs that the current procedures are expensive.

The Minister will expand on this, but from reading the summary of the consultation exercise, there were two main areas where the proposals did not meet a favourable response. First, there was the argument that were we to give the comptroller power to hear proceedings where both parties had not consented, it would then be necessary to give him wider injunction powers than he has under current legislation. I understand that point.

Secondly, there was an objection that that might add an unnecessary further tier of litigation, because if the comptroller found against one of the parties, there would be nothing to stop that party going through the appeal mechanism, judicial review and so on. Again, I take that point, but the most fundamental point was that SMEs were intended to be helped by the establishment of the Patents County Court. It is perhaps early days to suggest that the Patents County Court is not providing SMEs with the necessary, cheap protection that they seek.

When I say that the amendment is probing, I wonder how far the Minister is prepared to go. Is he prepared to say that the operation of the Patents County Court in that area will be kept under review? If, in a year or

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two, SMEs make the same objection, will the Government consider further legislation to deal with that point? I beg to move.

4.45 p.m.

Lord Lyell: I have one or two grounds for supporting the noble Lord, Lord Razzall. He put the case admirably, and I have nothing to add. We are concerned that legitimate constraints should not inhibit proper and bona fide attempts to negotiate a settlement to disputes, especially with regard to Section 70. The noble Lord, Lord Razzall, made the case beautifully, and I support it.

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