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Lord Sainsbury of Turville: I hope I made it clear that the general view is that this can be done using the resources within the Patent Office. Moreover, if it were carried out on the basis of the simplified procedure that I suggested, the cost of that would be significantly less, which would be most advantageous. However, the amendment seeks to explore the basic question of whether people should have the opportunity to go to the Patent Office and obtain a simple view on whether their patent is valid, and whether that view is helpful to them in taking the matter forward.

At Second Reading I suggested that opinions would cost a few hundred pounds, but we shall consult before details of the procedure are set out. It would not be an expensive procedure on that basis and it would enable people, before they went any further, to see what was the likelihood of progress on the basis of that decision.

Earl Attlee: I remain unconvinced because I am of the view that the only use would be as a sanity check. However, subject to the usual caveats, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 14 to 19 not moved.]

On Question, Whether Clause 12 shall stand part of the Bill?

Earl Attlee: Following on the arguments to leave out "infringement" from Clause 12, we come to the issue

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that there is already a procedure for assessment on validity. Why do we need to set it out again in another new clause? Is this just excessive legislation?

Once again, I highlight the fact that subsection (4) of the proposed new section 74A states that an opinion under this section,

    "shall not be binding for any purposes".

That means that big businesses and infringers will not be deterred. There is also a concern that the Patent Office could end up granting a patent on which it later gives an opinion that it is not valid. Can the Minister say how the Patent Office will be resourced to carry out these opinions—although to an extent he has done so in response to a previous amendment—and who will end up paying for them?

I agree with the sentiment behind the clause, but I would like to highlight the fact that the Patents County Court was developed to do exactly what this proposed section would do.

Groups such as the IPI have argued for a more radical approach to thinking in terms of enabling affordable litigation. Can the Minister comment on Section 74(2)(d)? This suggests that a person might not have a right of appeal, which could be contrary to TRIPS and perhaps Article 6 of the ECHR. If so, that is in itself a reason why Clause 12 should not stand part of the Bill.

There is a danger that we will swing too far towards the protection of small businesses if decisions are not appealable. I look forward to the Minister's comments, but I appreciate that he might have to write on one or two points.

Lord Sainsbury of Turville: Deciding the best way to exploit one's intellectual property assets, such as patents, is increasingly becoming a key objective for UK companies. One such decision that is becoming increasingly common is how best to enforce patents when faced with challenges to their validity or evidence of possible infringement emerges. In that situation, litigation is not always the best option, as it is time-consuming and expensive. Other solutions, such as agreeing licensing terms, may be more beneficial in the long run. The wrong decision at that time can have serious consequences for the future viability of the company, whatever its size.

In order to assist companies faced with such important decisions, Clause 12 provides for a new procedure whereby any person can request the Patent Office to provide an opinion on issues related to the infringement and/or validity of a patent. Such issues are those that are most likely to arise in patent disputes. We consider that a procedure such as that proposed will give interested parties a realistic assessment of their chances of success or failure in possible future litigation. Thus, it can be a very useful tool in helping a company to make sensible decisions about how best to exploit its intellectual property rights.

The outcome of the opinion would not be legally binding, but it would be an assessment based on a consideration of both sides of the argument that would

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be delivered in a timely and cost-effective manner. Opinions would therefore be available as aids to decision-making. They are not compulsory: if they are helpful, people will use them; if they are not, people will not. At the very least, the situation is no worse than without opinions. At best, people will have an additional tool to help with their decision-making.

The crux of the issue is that this is an alternative thing that people could do if they find it helpful. Its impact on others seems rather little. It would simply enable a person asking for an opinion to have some more helpful information before taking it forward. However, the possibility of seeking an opinion will not prevent any party who is determined to enter into litigation from doing so. An opinion would not be required before beginning litigation. It is an option only. It is designed to help resolve disputes and not to prolong them.

Provision is also made under Clause 12 for a review procedure so that patent proprietors who are not satisfied with the outcome of the opinion and who cannot make use of existing procedures under the 1977 Act can seek to have it overturned. I think that I have dealt with the issue of resources already. Of course, the basis is that use could be made of resources already within the Patent Office and there would not need to be a large number of extra resources.

Earl Attlee: I am grateful for the overview that the Minister has given of Clause 12. Touching on resources, my next amendment will suggest a better use of resources. I am still not convinced. I am sure that we will have to return to the matter. In the mean time, I look forward to the Minister moving his amendment.

Clause 12 agreed to.

[Amendment No. 20 not moved.]

Earl Attlee moved Amendment No. 21:

    After Clause 12, insert the following new clause—

After section 71 of the 1977 Act (declaration or declarator as to non-infringement) there is inserted—
(1) The Secretary of State may by order make a scheme for assisting proprietors of a United Kingdom patent when faced with the circumstances mentioned in subsection (4).
(2) The order may make provision for a levy as part of the filing fee charged under section 14 of the 1977 Act (making of application), and the levy may not exceed 1.5% of the filing fees.
(3) Any money raised by the levy under subsection (2) shall form a special litigation fund, and the comptroller may allocate sums from this fund or assist a party or parties in cases of contested infringement in the circumstances mentioned in subsection (4).
(4) The circumstances referred to in subsections (1) and (3) are that—
(a) the proprietor's opponent has access to vastly greater financial resources than the proprietor;
(b) the proprietor has not recently acquired the rights to the patent;
(c) the proprietor has had a favourable opinion from the Patent Office under section 74A of this Act;

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(d) the party to whom the comptroller proposes to allocate funds or assistance has a case which is likely to succeed but for the patentee's lack of financial resources;
(e) the case is one of general public importance to the United Kingdom; and
(f) the proprietor is alleging infringement of a United Kingdom or foreign patent that the Patent Office recognises.
(5) No order may be made under subsection (1) unless a draft of the order has been laid before and approved by both Houses of Parliament.""

The noble Earl said: While studying the background to the Bill, I gave some thought to what was to be done about predatory infringers. At Second Reading, I referred to the Bill promoted by Mr Liddell-Grainger, but that solution has its difficulties. That Bill sought to make exemplary damages available against flagrant infringers. But there are two main difficulties. First, every claim would include for exemplary damages. Secondly, and even worse, it would be necessary to show that the other party had acted improperly or badly. It seems that divorce lawyers try to do that all the time, but it makes amicable agreements almost impossible to secure.

In the patent world, it would be easy for one side to suddenly see the technical strength of his opponent's case. However, no one would admit that they had behaved badly during proceedings. It often happens that an SME is faced with an opponent with vastly superior financial reserves, perhaps a multi-billion dollar conglomerate with few scruples. On top of the cost of legal advisers, it is often necessary to pay very considerable sums into court as security for costs. An examination of the SME's accounts would readily reveal his financial ability to do that. The amendment would insert a new clause to allow the Secretary of State to set up a special litigation fund to assist in certain cases.

Subsection (2) places a limit on the levy. The fund should be limited in size, because there is no intention that every case meeting the criteria laid out in subsection (4) should be given assistance. The idea is that the mega-conglomerates should always run the risk that, instead of teasing a small, weak SME with a brilliant patent it could face the wrath of the Patent Office. Suddenly it is not a cheerful chappie from Victoria Street in Thoroton having a valiant go on behalf of his client; it is Clifford Chance, and counsel will be Mr Floyd QC.

In other words, it is a deterrent not a solution to every instance of wilful or flagrant infringement. The Patent Office would not be obliged or even able to pursue every case that met the criteria. This is not a patents legal aid scheme for all. At present, there is little risk at all for a financially strong infringer. Some cases involving disproportionate resources might be resolved very rapidly following the intervention of the Patent Office.

Of course, it may not be legal to discriminate in favour of British or even European patent holders. There should be no intention to do that, since it may well be desirable to provide assistance in a purely domestic case.

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I have now calculated that a 1.5 per cent levy on search and examination fees would raise only about 40,000 per annum. That would clearly not be enough to make any difference at all. In some cases it may be necessary to put 1 million US dollars into court as security for costs.

However, it is worth remembering that the Patent Office runs a substantial financial surplus. When he was speaking to Clause 12, the Minister suggested how he would like to use that surplus. But can the Minister explain what is currently happening to the surplus? Where does the money go? If it is to support innovation, how does it do so? The important point on funding is that the litigation fund should not be paid for through general taxation. The taxpayer has enough problems as it is.

It is significant that the Patent Office would act independently in this area. It would not be a case of the Secretary of State picking winners.

A number of other conditions that have to be met before assistance can be given are suggested in subsection (4). I will not weary the Committee by describing each one in turn.

Certainly the amendment is aimed at security of court costs, but other assistance could be provided. The Patent Office may even pick up the whole case on behalf of the proprietor. I beg to move.

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