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Lord Lyell: I wish to give the reason that I think the noble Earl, Lord Attlee, has tabled the amendment. It very much finds favour with the Minister; indeed, he mentioned the case of Goliath versus David at Second Reading. The amendment seems to support small teams of inventors—those about whom I always think—such as biotech companies with four or five employees, against giant corporations. It is not that I always quote the Old Testament, but in this case my noble friend's amendment is more than practical. I wonder why the wording we have suggested in Amendment No. 11 would not find favour with the Minister. What loopholes will it present regarding the effectiveness of the Bill? I look forward to hearing the Minister's response, particularly in the light of what he said at Second Reading.

Lord Triesman: I am afraid that it will have to be me rather than my noble friend from whom the Committee hears today. I shall start with a quick comment to situate what I want to say. We are trying to balance a sensible, prudent approach to the question of who the infringer is with the interests of those who, for financial reasons, do not want to get into a David and Goliath contest. Such concerns must be balanced; I hope that I will be able to express that. The best way of doing that is to try to set out how the Government see the provision, and why we believe that it, rather than the amendments, will work in this context.

The Government believe that patent-holders should, where possible, focus their attempts to resolve a dispute over infringement on the alleged primary

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infringers of their patent. That will generally mean approaching the person manufacturing or importing the products under dispute or using the process under dispute. That must surely be the first port of call. Where the dispute is over a product or process, the primary infringer is the source of the dispute, so it is right that reasonable attempts should be made to negotiate a settlement and direct those attempts at that primary source, where possible.

As I believe that that is generally the right approach, the Bill contains two important changes to the threats provisions that are consistent with the approach I have outlined. First, in subsection (2) of Clause 11 we attempt to ensure that, once the patent-holder has found the source of the dispute, there will be no barriers to his raising with that person any alleged infringing behaviour. The current situation is that the alleged acts of secondary infringement, such as selling the product, cannot be raised with the alleged primary infringer, thus making it more difficult for the patent-holder to approach that person. Our proposed change has been strongly welcomed by users, perhaps for self-evident reasons.

Secondly, Clause 11(4) is designed to enable a patent holder to approach a retailer or other secondary infringer only in rather limited circumstances. These limited circumstances are defined to be those where the patent holder has unsuccessfully used his best endeavours to locate the alleged primary infringer.

In the light of that background, which I hope expresses our approach to the matter, I turn first to Amendments Nos. 10 and 11. Amendment No. 10 would have the effect that an action for threats could not be brought in respect of a communication which is intended to be an effort in good faith to negotiate the settlement of an infringement dispute and which contains sufficient detail to support a "reasonable apprehension" of infringement. This would seem to allow the patent holder to approach a retailer or other alleged secondary infringer saying, "You are infringing my patent", even when the identity of the primary infringer is well known. It strikes me that it could not possibly be right that the retailer should generally be expected to deal with an infringement dispute over a product that they stock when the manufacturer or importer of that product is easily identifiable and contactable. That is the case whether or not there is some evidence that the patent has been infringed.

One question raised by the amendment is whether an approach to an alleged secondary infringer could be considered to be in good faith if no prior attempt had been made to approach the alleged primary infringer. Arguably it could not be, given that serious negotiations in good faith might be expected to begin with the manufacturer and not with the retailer. But that result is achieved in a much clearer and more direct way by the existing text of Clause 11, which has the effect of requiring the patent holder to focus his efforts on the alleged primary infringer, thus starting the process at source. It is a matter of good principle to try to resolve the matter as close to the source of the issue as can be achieved.

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It may be that the noble Lord who moved the amendment and I are aiming for a similar outcome, and I hope that I have been able to reassure him that the current provisions in Clause 11 should achieve that outcome. That is certainly what they are intended to do. In the light of my remarks, I would ask him to withdraw the amendment.

Amendment No. 11 proposes to lower the "best endeavours" threshold to,

    ""reasonable endeavours in all circumstances"

as an alternative threshold. However, in a case which concerned the duty under contract of a purchaser to obtain planning permission, the Court of Appeal stated that "best endeavours" was interpreted as meaning that of the purchasers, who are,

    "bound to take all those steps in their power which are capable of producing the desired results . . . being steps which a prudent, determined and reasonable owner, acting in his own interests and desiring to achieve that result, would take".

That is the test that is involved here. Thus "best endeavours" is not an unattainable threshold, nor is it one that is achievable only by those with deep pockets. It rightly maintains a high standard, but it also preserves the aspect of "reasonableness", since the definition given by the court requires that the determined and reasonable patent holder will take all steps within his power—not beyond that point—to find the alleged primary infringer. It does not ask the impossible of anyone.

On the other hand, I think there is a risk that,

    "reasonable endeavours in all circumstances,

the alternative wording, may mean that the patent holder has only to make less determined efforts to find the alleged primary infringer before being allowed to chase the retailers. Furthermore, as a standard of duty, it seems less clear than the arguably more precise requirement to make "best endeavours", one that the courts have defined as I have said.

It is important to maintain the correct balance between the rights of a patent holder to chase infringers and the need to provide alleged secondary infringers with protection from unjustified threats. Lowering the threshold from "best endeavours" may mean that retailers are too exposed to unjustified approaches from patent holders. I hope that I have been able to convince noble Lords that the amendment should be withdrawn on that point.

Finally, Amendment No. 12 proposes exempting a legal practitioner or a registered patent attorney from the threats provisions if they are acting on behalf of a client. Making an unjustified threat of patent infringement is a tortious act. Generally, when an agent commits a tort on behalf of a client, both the agent and the client are liable. That does not seem an unreasonable principle as applied in general terms. I am not convinced that it is right to create a statutory exemption to this general principle when it comes to unjustified threats over patent infringement.

I should add that the changes we are making to the threats provisions will bring greater certainty to the legal adviser who makes an approach to an alleged

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infringer on behalf of the client. The changes to subsection (4) of Section 70 will clarify what can be said to an alleged primary infringer. Changes to subsection (5) clarify what communications cannot be regarded as threats at all. The new subsection (6) would provide a defence where the primary infringer cannot be identified. Those changes, therefore, make it possible for a legal adviser to get involved in sensible pre-litigation discussions without fear of a threats action being launched against him or his client and so reduce the need for advisers to have special protection from threats actions.

We are aware that the Australians have made a provision exempting professional advisers from being sued for making unjustifiable threats. The noble Lord, Lord Razzall, asked, "Why not us as well"? We are aware of the provision in Australian law. The amendments that we have proposed to the provision on threats does, as I hope that I have explained, give professional advisers, as well as their clients, greater scope for dealing with alleged infringements without the risk of having a threats action launched against them. An unqualified exemption for professional advisers, as proposed by the amendment, is therefore hard to justify. It goes beyond what could be justified.

However, in the light of the argument, we are certainly prepared to consider whether we might be able to make a more limited amendment regarding professional advisers. We will look at that. Therefore, I ask the noble Lord, Lord Razzall, to withdraw his amendment.

I apologise for the length of the response, but this is a complex set of matters. In conclusion, the changes made by Clause 11 address concerns about the inability of patent holders to make genuine attempts to settle disputes while maintaining reasonable protection for retailers and others who should normally not be exposed to unjustified threats. The changes are strongly supported by business. I hope that noble Lords opposite will feel that they are able to do the same on this occasion.

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