§ Order for Second Reading read.
§ 9.23 p.m.
§ The President of the Board of Trade (Mr. Harold Wilson)
I beg to move, "That the Bill be now read a Second time."
This Bill is a technical one. It is not a very readable one, but it is one of great importance in the industrial development of the country. Its purpose is to improve the existing law to meet modern requirements, though it does not change radically the principles of our patent system. The first known patent granted by the Crown for a new invention was dated April, 1449, a process for making stained glass windows, and so this Bill in a sense marks 1409 the quincentenary of that event. The foundations of the patent system, however, were laid over 300 years ago by the Statute of Monopolies, 1624, which established the fundamental principle that patents should not be granted in respect of manufactures already used in this country but only in respect of new manufactures and then only if they were notmischievous to the State or generally inconvenientand only for a limited period of years. In fact, the existing Patents Acts still define "invention" by reference to the provisions in the Statute of Monopolies, 1624, and, subject to a small enlargement, the Bill proposes to retain this definition.
The system of granting patents as we know it today came into being in 1883 when the Patent Office was established for the purpose of granting patents for inventions, and registering trade marks and industrial designs. In 1907 the law of patents and designs was generally revised and consolidated by the Act of that year. Since then the Act has been amended on eight occasions, but none of the changes have been fundamental in character.
There have been a number of changes since 1907, and as it was thought desirable to examine whether the law as it now stands, after that amendment is adequate to meet modern conditions, the Board of Trade decided in 1944 to set up a Committee to make a comprehensive review of patents and designs law and procedure. The Chairman of the Committee was Mr. (now shortly to become Sir) Kenneth R. Swan, K.C. I should like on behalf of His Majesty's Government to express our warmest thanks to the chairman and other members of the Committee for their arduous labours which extended over more than three years. In all, the Committee presented three Reports containing a large number of recommendations which, with one exception, were unanimous. The First Interim Report of the Committee was published in 1945 and made recommendations for granting extensions of the normal term of patents which could not be worked owing to war conditions. Effect was given to these recommendations by Section 1 of the Patents and Designs Act of 1946. The Second Interim and Final Reports of the Committee were published in 1946 and 1947 and the present Bill is based substantially 1410 upon the recommendations made in those Reports. It does, however, contain a number of other proposals.
As I have said the basic principle of our system of patent law will remain unaltered, under the present Bill. Perhaps it would be of assistance to the House if I quoted what the Swan Committee said in paragraphs 9 and 11 of their Second Interim Report.The theory upon which the patent system is based is that the opportunity of acquiring exclusive rights in an invention stimulates technical progress, mainly in four ways: first, that it encourages research and invention; second, that it induces an inventor to disclose his discoveries, instead of keeping them as a trade secret; third, that it offers a reward for the expense of developing inventions to the stage at which they are commercially practicable; and fourth, that it provides an inducement to invest capital in new lines of production which might not appear profitable if many competing producers embarked on them simultaneously. The history of industrial development seems on the whole to have justified this theory.The Committee goes on to say:… We are in favour of the retention of the present system in this country, and this view is supported by witnesses who have appeared before us, representing both inventors and the commercial users of inventions. Some witnesses also expressed concern at the harm that would be caused to our foreign trade if, by any radical change in our patent system, we rendered ourselves ineligible for continued membership of the International Convention for the Protection of Industrial Property.His Majesty's Government concur in the view of the Committee, and the Bill does not, therefore, propose any fundamental change in the system.
The Bill is rather lengthy, containing as it does 52 Clauses and three Schedules. I am sure it would be wearisome to the House were I to embark on a detailed explanation of the very large number of changes of a purely technical character made in the existing law. I propose, therefore, only to give a brief explanation of the more important provisions contained in the Clauses of the Bill. These Clauses, in effect, do six things. First, there are changes in the procedure in connection with applications for patents and in the system of dating patents; secondly, the Bill improves and widens the existing provisions about the abuse of patent rights or insufficient use of inventions; thirdly, it extends the provisions about the use of inventions and designs for the services of the Crown, and 1411 about secrecy in connection with inventions related to matters of defence; fourthly, it provides means to cheapen and to speed up legal proceedings on patents; fifthly, it gives additional rights to the holders of exclusive licences under patents; and, finally, there are a series of changes in the procedure on the registration of designs.
I will deal first with alterations in the procedure for patent applications and in the system of dating patents. The operational Clauses here make a change which will be of considerable benefit to persons who acquire the rights in an invention from the inventor. Under this Bill it will be possible for such persons to apply for a patent in their own names, and the inventor need not be a party to the application, although his name must be disclosed in the application. It may happen that an inventor, having sold his invention to another person, loses interest in the application, or for some other reason is not available to sign the documents. Under Clauses 3 and 4, important changes are made in the dating of patents, and a system of priority dates is set up.
This alteration in procedure will bring the Patent Office practice substantially into line with that of most of the foreign countries of the International Union. It will also result in some temporary loss of revenue, since the dates of payment of renewal fees for keeping patents in force, which may at present be calculated from the date of the provisional specification or in Convention cases the date of the foreign application, will in future be calculated from the date of filing the complete specification which may be up to a year later. But this again will remove a sense of grievance which has been expressed in the past by other countries, parties to the Convention, and will apply to the nationals of such countries the same date for calculation as those countries already apply to British nationals. These changes will have a number of advantages which I hope will encourage better and fuller disclosure of inventions and of the best way of working those inventions, and thus be to the ultimate benefit of the public in general.
Clauses 16 to 24 of the Bill make provision for the grant of relief where the monopoly rights under a patent are being abused or insufficient use is being made 1412 by the patentee or by the licensees of the patented invention. Clause 16 retains the existing grounds upon which application may be made to the Comptroller for the grant of a compulsory licence, but includes additional grounds to meet cases where there are demands for the patented article which remain undeveloped or unfulfilled: and in respect of which the patentee refuses to grant licences on reasonable terms to persons who are both able and willing to meet such further demands. For example, the patentee may meet the home demand adequately but neglect opportunities for export to foreign markets; or a subsequent inventor may have made an important advance on a patented invention but be prevented from working his invention because he cannot do so without infringing the existing patent, and cannot obtain a licence on reasonable terms for doing this.
These provisions are supplemented by the additional powers to be given to Government Departments under Clause 19. A Government Department can apply for a licence under Clause 16 where it proposes to exploit the patented invention, for instance in a Government factory. But there may be cases where an invention is not being exploited and the Department is of opinion that such exploitation is in the national interest, but where no manufacturer is able or willing to apply for a licence under Clause 16 and the Department itself is unable to manufacture. So under Clause 19 the Department may apply, on any of the grounds mentioned in Clause 16, either for the grant of a licence to a specified manufacturer, or for the indorsement of the patent "Licences of Right," in which case any manufacturer will be entitled as of right to a licence to use the patent on terms which, failing agreement between the parties, will be settled by the Comptroller.
Further, where a report of the Monopolies and Restrictive Practices Commission as laid before Parliament under the Monopolies Act indicates that restrictive conditions or practices exist in respect of the granting of licences under a patent, and where the House of Commons passes a Resolution that such restrictive conditions or practices are operating or may be expected to operate against the public interest, the Board of Trade, or other competent authority, may apply to the Comptroller for cancellation or modification 1413 of the restrictive conditions, or for indorsement of the patent "Licences of Right."
The right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) will remember that when we passed the Monopolies Bill a year ago we took that view, and I think he endorsed the view, that monopolistic practices in relation to patents were best dealt with, not under that Measure, but as the subject for fresh legislation. I hope he will agree that in this present Bill we have given effect to what both of us wanted. These changes will give increased assurance that patent rights are not abused and that patented inventions are being fully used.
Then there are the provisions of Clauses 27 to 29 relating to the use of patented inventions for the services of the Crown. For the most part they continue the provisions of Section 29 of the existing Act. As the House knows, it is a condition of the grant of the patent that the patentee shall supply the Crown with the patented article on reasonable terms. So, where a Government Department orders a patented article from the patentee himself, his remuneration is covered by the price paid for the articles, and the Bill provides that the terms of any agreement between the patentee and any other person which might prevent or restrict such a supply are to be set aside. But where a Government Department itself makes the patented article, or authorises persons other than the patentee to make it, then, according to the existing law and the proposals in the Bill, any agreement entered into by the patentee with other persons is inoperative in so far as this authorised use of the invention is concerned and the patentee is paid a sum for the use of the patented invention to be settled by agreement, or, failing agreement, to be settled by the court.
Clause 31, which follows up this, makes permanent provision for ensuring secrecy concerning inventions of military significance. The proposed procedure follows the general lines of the procedure which has been in force since 1939 under the Defence Regulations and it replaces the somewhat rigid procedure of Section 30 of the existing Acts. It provides that, where an invention is kept secret, payment shall be made to the inventor or to anyone assigned by him to receive payment if it is used by the Crown and, if 1414 it is not so used, there is provision for ex gratia payment in certain cases of hardship.
One of the most frequent complaints arising out of the establishment and working of patent rights is the high cost and complexity of patent actions. The Swan Committee, in their Second Interim Report, gave a great deal of attention to this, and they made a number of recommendations, which are now embodied in the Bill, for facilitating, cheapening and improving the procedure for such actions. For instance, Clause 33 provides for the appointment of scientific advisers to assist the court in patent actions. They would have an expert knowledge of the art involved, and their function would be to assist the court not in the trial of matters in issue but in elucidating the technical aspects of the case. Then again, Clause 36 (2) will enable a manufacturer who is proposing to make a new article but is uncertain whether such manufacture would infringe patent rights to apply to the court for a declaration that any action he is taking in respect of the making, using or selling an article will not constitute an infringement of the patent, and so enable him to avoid the trouble and expense of a speculative action for revocation of the patent, or possibly for infringement proceedings at a later date.
Clause 37 enables a dispute between a patentee or an exclusive licensee and another person as to whether the patent has been infringed to be submitted, if the parties agree, to the Comptroller for determination, instead of as at present to the court. Again, in Clause 38 provision is made under which disputes between employers and their employees as to the ownership of inventions made by the employee can be referred to the Comptroller by either party, not necessarily by agreement between the parties, instead of going to the court, since it often happens that an employee is unable to face the cost of a court action. Clause 47 proposes that in future all appeals from the decision of the Comptroller shall go to the Patents Appeal Tribunal. This Tribunal is a Judge of the High Court and proceedings before it are much cheaper than those in the court.
Clause 48 contemplates the appointment of an additional puisne Judge. The Bill does not expressly state the qualifications 1415 necessary for this appointment, as was recommended by the Swan Committee, and it is left to the Lord Chancellor to make a suitable appointment.
A number of provisions are included in the Bill for the benefit of the exclusive licensee apart from those already mentioned. Thus under Clause 9(2) he may apply for an extension of the term of the patent on the ground of war loss, and under Clause 35 he may institute proceedings for infringement of the patent, rights which hitherto could only be exercised by the patentee. Finally, there are the Clauses relating to registered designs. At present designs are registered in one or more of 15 classes, defined by rules. The copyright in a registered design covers the application of the design to every article in the class or classes in which it is registered. This classification we now consider somewhat out of date, and instead of attempting to set up a new classification, we thought it preferable to provide in Clause 41 that in future designs shall be registered in respect of articles or sets of articles.
I hope that this Bill, giving effect to the main recommendations of the Swan Committee, while maintaining the basic principle of our Patent Law intact, will commend itself to the House as a reasonable reform. But, as the House will have observed, the law as regards both patents and designs will still be spread over a series of separate enactments, and possibly it will be of assistance to the House to know that I hope, when the present Bill has become law, as I trust it will, to introduce Bills for the purpose of consolidating the law of patents and designs in separate Acts. A White Paper showing the shape of the proposed consolidating legislation is already in the hands of hon. Members. I hope that this House will endorse the general welcome which I think I can say has been given to this Bill. It will, I hope, improve the protection of the rights of inventors in their inventions. On the other hand, the extended provisions dealing with the abuse or insufficient use of patents may be expected to encourage a fuller exploitation of inventions already in use, and the working of inventions in the national interest, which had not so far been developed.
1416 In moving the Second Reading, I confidently commend the Bill to the House as one which will bring our patent system more into line with modern requirements and will enable the process of invention, which has done so much for our industrial development, to proceed unchecked, and to the greater benefit of the community.
§ 9.44 p.m.
§ Major Sir David Maxwell Fyfe (Liverpool, West Derby)
On behalf of my hon. and right hon. Friends and myself I welcome this Bill which the President of the Board of Trade has so lucidly placed before the House. I agree with the right hon. Gentleman that it is not a Bill that so pulsates with human interest that it draws hordes of hon. Members to the Chamber on a day after an all-night sitting. But nevertheless it is a Bill of great importance, and one from which several facets of our national life will benefit.
I should like first of all to join in the tribute which the right hon. Gentleman has paid to the Swan Committee and the work which they have done. April, 1944, seems a long time ago now, and yet we know that from that time they have worked hard. They paid great attention to the diversity of views placed before them, and they have issued two valuable interim reports before the final report which is the substratum of this Bill. I think there is another tribute which should be paid in regard to this Bill. As you, Mr. Speaker, are aware, it is introduced from another place, and limiting myself most severely within the rules of Order I repeat what the Government spokesman there said, that it left another place something better than it was when it was introduced. That was the result of some 40 Amendments which were made to the Bill, mostly at the instance of my noble Friend Lord Simon; but let me say at once also due to the spirit of co-operation which the Government showed in accepting the Amendments and discussing them before they were introduced into the Bill.
I mentioned that point not only for its importance, but because the course which I have just described has greatly lightened out labours tonight and in the future stages of the Bill. The approach which was then taken, and which I suggest should be the approach 1417 of this House to this Bill, was, first, that no one denies or controverts that the inventor of a patent invention should be recognised as having special rights, but at the same time consideration should be given to the fact that the general interests of the country are properly served and supplied on reasonable terms in this regard.
It is a striking fact that a Socialist Government in their fourth year of office have reaffirmed the basic principle of patent law and have rejected the theory that patents are a capitalist ramp. This is an important matter and I submit that it will have a useful and invigorating effect on individual initiative and enterprise in this country. I specially call attention to the fact that it used to be suggested quite frequently—now it is seldom, if ever, suggested by anyone except the right hon. Gentleman the Minister of Health—that a number of patents are suppressed for the benefit of various industrial interests. It is important, as we are trying to get a new approach from the party opposite, an approach which will be shared by the country as a whole, to this important matter of invention and its encouragement, that one should drive the last nail into the coffin of that canard by recalling what the Swan Committee, to whom such universal tributes have been paid, said in that regard. In paragraph 22 of their Second Interim Report, the Committee drew attention to the fact in these words:Allegations have frequently been made that, in spite of these provisions of the law, patents are used in a restrictive sense, or in various ways contrary to the public interest. In particular:(1) the owner of patent rights may fail to make any use at all of the patented invention, though it has potential uses and though others would be willing to develop and exploit it.The Committee examined that point most carefully, and it was very right that they should because it is an allegation which has had great publicity. They came to this conclusion, in paragraph 24:It is impossible for us, with the means of investigation at our disposal, to attempt an exact estimate of the prevalence or importance of these various types of restrictive uses of patents.They dealt with another six as well as the one I have mentioned—Popular attention has been mainly concentrated on the first type—the deliberate 1418 suppression of inventions. Rumours of this practice are frequent but, in spite of our endeavours to obtain it, no satisfactory evidence of particular examples has been forthcoming. Several persons who had made public statements about the suppression of inventions were invited to give evidence before us but did not accept the invitation. We have formed the opinion that this type of restriction has been much exaggerated. It is true that, for various reasons, evidence on this matter is not easy to obtain, and cases may have occurred which have not been brought to light. But we think it possible that unfounded allegations in regard to deliberate suppression of inventions may arise from the unfulfilled expectations of an over-sanguine inventor, or from failure to realise that the non-adoption of an invention may be due to practical difficulties in manufacture or application, or perhaps to lack of enterprise, or pre-occupation with other matters.I think it is only right that the result of an obviously careful examination and attempt to get evidence by this very responsible Committee should be made clear at the present time.
§ Sir D. Maxwell Fyfe
That, of course, is a different matter, and the hon. Gentleman must realise that the point with which I am dealing is a very well-known allegation that patents are suppressed. I think it is of great importance, and I want to develop this point, and, if possible, take the whole House with me, because it is important that, when allegations like this are made, we cannot do better than have them examined by an impartial Committee, and, when they come to that conclusion, that point goes. With regard to the point he has raised, the hon. Member for Elland (Mr. Cobb) knows that it is a point which we have fully discussed on the Monopolies Bill, and I do not want to re-cover the ground. It is also dealt with in the Report, and, again, there are difficulties in coming to an exact conclusion or estimating the extent, but I do want to nail that particular canard which I have mentioned.
§ Mr. H. Wilson
If the right hon. and learned Gentleman will excuse me, it is important that this matter should be considered by the House and the right hon. and learned Gentleman has in fact said that he wants to carry the whole House with him. I think he will agree that, in order to put this very difficult 1419 question of patents in the fairest way, it would be right that he should quote paragraph 26 as well as the paragraph he quoted. Neither can be conclusive, because of the difficulties about evidence, but I do not think a speech should go out from this House as representing only one part of the findings of the Committee, and I hope the right hon. and learned Gentleman will give the House the benefit of paragraph 26 as well.
§ Sir D. Maxwell Fyfe
Paragraph 26 deals with a special point, which, as the right hon. Gentleman knows, is itself in the history of the patent law, and I will deal with that in one moment. It is correct, as the right hon. Gentleman says, that in dealing with the suppression of production by patents in the sense which I have mentioned, and when dealing with a special point, they say:Cases of the prohibition or discouragement of production in this country of the patented commodities in order to preserve the British market for articles made abroad have been brought to our notice.and then they quote one or two examples of that having taken place. But I think the right hon. Gentleman will agree that that particular point—I will deal with the history of it in a moment—does not affect the general conclusion which they state on the general allegation in paragraph 24 which I have read.
§ Mr. Blackburn (Birmingham, King's Norton)
Will the right hon. and learned Gentleman allow me? The substance of the findings was not that this practice does not exist, but that its prevalence has been greatly exaggerated.
§ Sir D. Maxwell Fyfe
The hon. Member for King's Norton (Mr. Blackburn) obviously has not read the Report and has not been listening carefully to what I am saying.
§ Sir D. Maxwell Fyfe
If the hon. Gentleman will not object to my giving him a little advice, it is important, on a matter like this, dealing with allegations made about other people, to get to the original source. I quoted the whole paragraph. I welcomed the intervention of the right hon. Gentleman when he asked me to make an addition, but I entirely disagree 1420 with the hon. Member for King's Norton that he has correctly summarised the paragraph. It says that they appealed for evidence, that they could not get it, and that they have come to the conclusion that it has been grossly exaggerated for the reasons I have stated. I do not for one moment accept the gloss on the paragraph which the hon. Gentleman suggested.
As I have said, I want to take the whole House with me on this point, and to ask hon. Members to remember what having patents in existence really means. The ownership of patents enables research to be undertaken much more easily and effectively because information can then be freely shared since secrecy is not relied upon. Let me take an example which was sent to me by a member of the Patent Bar the other day. He said that a company which he mentioned had just held what he termed a three-day conversazione. If I might digress for a moment, I would like to say that I was very interested to learn that scientists used the term "conversazione." I pursued the point, and was informed, as hon. Members may be surprised to know, that the reason was that scientists disliked the connotation of the word "symposium" as giving a quite false idea of the main activity of their gathering. I am sure that no one in this House would suspect that drinking was the main activity of that gathering, but, since the word had that connotation, they preferred "conversazione." But the interesting point is that that gathering lasted for three days, and that during that time they laid open all their patent processes to industrialists, scientists and representatives of Government Departments. It was possible to do that because, as I say, with patented processes there is no trouble about secrecy, and no need to maintain it.
The other point I would like the hon. Gentleman to appreciate is this—and the right hon. Gentleman the President of the Board of Trade impliedly made it very clear—that what is now in Clause 16 of the Bill with regard to the matter of dealing with abuses of monopoly right is not modern. When one considers the history, as the right hon. Gentleman said, one finds that as early as 1883, now 66 years ago, there was a provision in the Act of that time that if by reason of the refusal of the patentee to grant licences on reasonable terms, and if the patent was 1421 not being worked in the United Kingdom for the reasonable requirements of the public and the invention could be supplied, steps could be taken against the patentee. These steps were widened in 1907, which, after all, is 42 years ago, and they were left substantially the same, although the drafting of their provisions was improved, by the Acts of 1919 and 1932.
If one takes Clause 16 of this Bill, I think everyone would agree that this was a fair summary of the detailed provisions as to what are the evils for which action may be taken. Four out of the six provisions go back in identical effect, though in slightly different terms, to the Act of 1907, one goes back to 1919, and the other goes back to 1932. The only reason that I have elaborated this point at all is because of the intervention of the hon. Member for King's Norton, to which I hope he will not think I object in any way, since I know he would only have made it because he was interested in the point, and I wanted to deal with that point and meet it. I think he will appreciate that if in the twentieth century there had been any substance in the suggestion of the suppression of patents, there has been the power for such attempts at suppression to be resisted in practically all the important cases for 40 years. If one takes one of the best known cases, the inextinguishable match, had there been anything in the suggestion, there would have been plenty of time for anyone to test whether the match could be put out since 1907. I believe that it is a good thing that the right hon. Gentleman the President of the Board of Trade and the Government have maintained the position as it exists and have not accepted the suggestions which were made to the Swann Committee but which were rejected by that Committee, that every patent should be made subject to a licence of right.
The right hon. Gentleman mentioned the Monopolies Commission. I again commend the approach that has been made, because after the Monopolies Commission has reported or this House has passed the resolution, then the Government still have to make application to the Comptroller before action can be taken. I commend in this instance, as in every instance, that when a person has a complaint to make he should, 1422 whenever possible, allow an independent tribunal to consider and adjudicate on that complaint. That is done in this instance, and I welcome it.
I have dwelt rather more lengthily than I intended with the main point which I desired to make, and therefore in compensation I shall be very short with my remaining points. With regard to the position of the services of the Crown, I would only say to the right hon. Gentleman that some of my hon. Friends will probably want further information on the position of the patentee-contractor and the payments made, but I shall not go into it in detail. I appreciate the complexity of the point, and we shall have other opportunities of discussing it if necessary. I am very glad to see the Secretary of State for Scotland on the Government Front Bench, because his knowledge of patent law is one of the facts with which we are all very familiar in this House, and he will be able to deal with the Scottish complexities with his usual ability and distinction.
The point I want to make is one about which there is a certain amount of feeling in Scotland; I do not ask for an immediate reply, but I do invite consideration on the point. The procedure under the Bill is by means of the Comptroller to the tribunal, and in certain cases from the tribunal to the English Court of Appeal. In one limited class of cases—that is, where there are matters between employers and workmen—if the matter arises in Scotland it can go to the Court of Session instead of the court or the tribunal.
There is some feeling in Scotland that it should be possible to have proceedings in Scotland in other instances. What I suggest for consideration is that the Comptroller might sit in Scotland in cases where there is a Scottish internecine fight on a patent matter and that the question of appeal in such cases might be reconsidered. I am well aware that there are arguments both ways, because one wants uniformity of practice, but, on the other hand, the Secretary of State will appreciate very much that in Scottish patent matters there is always a feeling in Scotland that they would like to have them North of the Tweed and the Solway.
There is one other point I should like to make. I received only a short time ago 1423 a letter of complaint which was handed to me from an inventor who says, "Will you, ask the President of the Board of Trade why we charge four times as much for a patent as do the Americans." He gives me some figures which show that our figure is £126 and the American figure is £36. Let me say at once that I have not had time to check this, but obviously if complaints of that kind are made it is right that they should be ventilated and an answer given.
There are two points which I have to make in conclusion. I welcome what the right hon. Gentleman has said about consolidation. The last point is the broader one which I attempted to foreshadow to the House—that whatever our views and whatever our approach be to the methods under which industry should be run, we all agree that the human brain and human intelligence is one of the great assets of our country which we can never despise and which we must always encourage. I look back with some reassurance and cheerfulness to one of the most difficult periods in the economic history of our country. After the Napoleonic Wars we faced grave problems of adjustment and psychology and also were in a period of transition. Terrible though these difficulties appeared in the decade after Waterloo, in another few years after that the light was appearing. In a few years still later the country had come through the darkness entirely, simply because of the inventive faculty of Scottish and English minds.
§ Sir D. Maxwell Fyfe
I was born in Scotland and I sit for England and so I took it in the order of time. But that is the fact: that was the quality and that was the power which took us out of that period of depression and difficulty, and I see no reason to distrust the same quality and power in the minds of my own contemporaries. I hope that we shall receive similar assistance from them, and it is because this Bill wisely and constructively seeks to give that assistance that I welcome it on behalf of myself and my hon. Friends who sit with me.
§ 10.10 p.m.
§ Mr. Henry Nicholls (Stratford)
It is quite true that the Bill is one that will 1424 go quietly through the House without causing very many ripples. It is not the kind of Bill that raises religious or ideological differences; and there are no great financial difficulties involved; and so it should possibly have a quiet passage. I have had the advantage, thanks to the facilities available to hon. Members of this House, of hearing in another place the quiet competency with which the Bill was introduced and handled by the Government spokesman, and I was greatly impressed by the Bill.
However, I have to admit that on reflection, I find it does very little indeed for the inventor. It may do something for those who help to exploit patents, but very little for the inventor himself. As I understand it, the basis for the granting of a patent is that the inventor, in return for disclosing his novelty, should have a monopoly limited in time and scope on the understanding that, at the end of the period, the idea becomes the property of the people and the State. That, broadly, is the arrangement. That is the intention.
Like many other intentions, however, it does not work in practice quite so well. The inventor quite frequently—in most cases, indeed—has to share his secret with someone else even to test it, and when it comes to putting it on the market he has to have assistance from somebody, and usually the inventor finishes up quite poor, while those who exploit the invention get away with it quite comfortably. So far as the people, as represented by the State, are concerned, before the patent has run its life it has usually been superseded by a more novel idea, and so there is nothing left to give to the public. If the idea still has value at the end of, say, 16 years, it is usually wrapped in manufacturing rights and trade contracts and the like, so that no new entrant is likely to be able to obtain a share of its value.
It seems to me that the inventor at the one end and the public at the other do not get away with quite as much as was originally intended. If the idea behind the Bill, which, I think, is clear, is carried into effect, I think that both the general public and the inventor should have their interests at least as strongly preserved as they were before. I do not think that will be so in this particular case. It 1425 seems to me that the patent will be harder to get, that it will take longer to get, that it will be more expensive, and that it will be much easier for anyone else interested in the invention to exploit it, provided he has more capital than the inventor himself. If I am wrong, perhaps I can be disabused before the Debate is concluded.
§ Mr. Nicholls
Oh, yes. I am sorry I have not my notes with me. Perhaps, I shall not put the case quite as well as I might have done if I had had them with me. It seems to me that the fact that the inventor has to convince an expert before he gets his patent is one most serious reason why it will be harder to get a patent granted. Generally speaking, experts are orthodox people. Novelties do not come from orthodox people. No new idea comes from a completely orthodox person. I think that the inventor will find it much more difficult to get an idea accepted unless it is a very small advance on what has been done before. One can imagine the difficulty. I believe it is on record that when Westinghouse tried to get people interested in his air brake, he found great difficulty, and a very prominent person is reputed to have said, "Do you mean to tell me you are going to stop a railway train with wind?"
It is difficult for the man with the orthodox business mind to think in the terms in which the man with the inventor's mind thinks in conceiving his idea and in trying to translate it into practice. Most inventors are not too well off, and it is true to say, in more senses than one, that necessity is very often the mother of invention. The inventor needs quick and easy cover and protection for his novelty in the early stages, so that he can disclose it for a reasonable period and have an opportunity to try it out in practice, rather than trying to sell the article. That early protection should be not only quick but efficient and cheap. Without that we shall not do much to encourage inventors.
Inventors are very often under-rated. Their actual and potential value to the country is enormous, especially in a world craving for novelty, quite apart from the constant and increasing demand for new ideas to improve efficiency. These men 1426 are a very big asset, and should be encouraged wherever possible. If they find it necessary to accumulate a fortune before it becomes worth their while to present new ideas, the country is likely to lose. I hope that whoever replies to this Debate will give some indication that the Government are examining that aspect, to see whether early cover, which is cheap, efficient and easy to obtain, can be given. If I can have some assurance on that alone, I shall be satisfied that some effort is being made to help inventors.
§ 10.18 p.m.
§ Mr. Erroll (Altrincham and Sale)
This Bill, which is receiving a welcome from all sides, and which has already been welcomed in another place, represents the biggest change yet made in our law, and is a very considerable step forward. The Bill is well drafted, and clears up a number of former drafting uncertainties which were the cause of trouble and difficulty to inventors and patent agents alike. I need hardly add that the presentation of this Bill by a Labour Government marks their conversion to a full belief in, and understanding of the rightness of protecting inventive ability and giving it due financial reward—a reward which they nevertheless insist on taxing at altogether penal rates at the present time.
This Bill, which is the outcome of the Swan Report and the interim reports, also serves to provide an opportunity for dealing, we hope for once and for all, with the myth of the suppressed invention. That myth keeps on re-appearing, and is often referred to by Ministers of the Crown at the present time. The most recent example was at the Labour Party Conference at Blackpool this year, when the Minister of Health made easy play with the allegation that many firms suppress good inventions in order to live on the profits of their existing manufactures. Such polemics might be expected at a party conference, and I was much more disturbed to read of a statement in similar vein made by the Lord President of the Council at a public and informed meeting at Letchworth Garden City in the autumn of 1947.
§ Mr. Erroll
With great respect, I submit that it is particularly relevant to the 1427 Bill that on the one hand His Majesty's Ministers should be making public statements about the suppression of inventions, and on the other should be bringing in a Bill which deals with the matter in a very adequate manner.
§ Mr. Erroll
In that case I must continue with the next part of my remarks. There are several Clauses devoted to the question of non-manufacture. I was trying to lead up to that part of the Bill when I had rounded off my opening remarks. If I turn now to that part of the Bill, I hope I shall not be deemed out of Order if I make a passing reference once again to the remarks of the Lord President of the Council.
§ Sir D. Maxwell Fyfe
As this is a rather important point, I should be glad of your assistance. Mr. Speaker. As the President of the Board of Trade said, Clauses 16 to 24, which is one of the most important parts of the Bill, deal with the abuse of the monopoly rights. They deal with it in a manner which shows that the present method of protecting patent rights must be maintained. Is it not in Order for Members to draw attention to the fact that His Majesty's Ministers who introduced this Bill have suggested there is an abuse?
§ Mr. Speaker
The right hon. and learned Gentleman drew attention to that, but he did not do so by going into quotations and speeches in the past. I should have thought there was a limit to that.
§ Mr. Erroll
I was naturally anxious not to prolong the proceedings, and I was not proposing to quote from the speech made by the right hon. Gentleman on that occasion. I informed the right hon. Gentleman that I hoped to raise this matter in this Debate. I wrote to him, after he made that speech, for specific cases, but he was unable to support his contention. He was quite unable to produce any cases at all. I hope, therefore, that these allegations will be buried once and for all. I hope that the adequate provisions in this Bill will be quoted by Members opposite when the lie appears again in the future. If anyone feels that inventions are being 1428 suppressed, let him take the necessary steps under Clause 16 and the following Clauses to bring the matter out into the open. Anyone who makes these allegations in future should produce evidence which is both sound in practice as well as in truth.
The President of the Board of Trade drew attention to certain possible restrictions which will be taken care of by Clause 16. There was the possibility of a firm or manufacturer exploiting a patent to the full on the home market but failing to do so for the export market. There was also the possibility of a patent not being worked because the licensee or the owner could not get a licence in respect of a previous patent. I should like to know whether there are any examples of such directions, or whether provisos have been included in this part of the Bill purely to meet possible contingencies in the future, because if abuses exist at the present time the sooner they are brought into the open the better. I suggest that these are theoretical considerations which do not apply at present.
In an otherwise excellent Bill there are two Clauses, to which a good deal of exception could be taken. The first is that which gives certain additional powers to the Comptroller in relation to applications. Clause 6, in effect, empowers the Comptroller to endorse a patent application in respect of any patent which is likely to infringe. That, I believe, is one of the recommendations of the Swan Committee's final report; nevertheless, I think it was a mistake to include it in the Bill. It may be all right if the right endorsements are made, but the possibilities of error are great, and the consequences of such error are even greater still.
First of all, we have in any case the Patent Office involved in questions of infringement and of validity. Surely, ipso facto, if a patent must be valid until it is found to be invalid, it is going to impose a great deal of additional work on the Patent Office if they have to pronounce upon the validity of claims as they come in to them. Indeed, the Clause in this respect represents a major inconsistency, because the comptroller may not pronounce on the validity of a claim before a patent is granted. Nevertheless, under this Clause he has to 1429 pronounce on the validity of a patent if granted, and has, indeed, to pronounce upon possible infringements. If he makes the decision correctly, the consequences may not be serious, but in respect of any error the consequences might be quite important.
Before a patent application is so endorsed, if he insists on making an endorsement or has a mind to, the applicant is involved in arguing his case, and the possible infringement of a prior patent with the comptroller and his staff. Indeed, the task may be so great as to cause a patentee to desist from pursuing an application, and he may prefer to manufacture in secret rather than bring his invention into the open. If a patent has been granted and an endorsement has been carried out, if the endorsement is good, it will be difficult for the patent holder or the patentee to dispose of his invention, because it is unlikely that anyone will take it up. Equally if an endorsement should have been made, everyone interested may be lulled into a sense of false security. I hope we may have some reply to that point which is wholly inconsistent with the spirit of the Bill.
With regard to Clauses 27 and 28, we come to certain important matters affecting the patentee-contractor. The State has always retained the right to make use of patents so granted without paying anything by way of compensation, although in practice it has in the past paid what may be considered by some to be fair compensation and by others not so fair compensation. However, we are not discussing that at present. But these two Clauses, 27 and 28, take away from the patentee contractor any legal right whatever to secure compensation for a patent which he has secured. The patentee contractor as distinct from a mere contractor operating under licence, will not in future be able to obtain any profit for the development of his invention. He will get only a profit on the manufacturing costs.
It may be said, of course, that the costs as worked out by the Government Department placing the contract with the patentee contractor will include an element of profit in respect of development, but we know from experience that that is not always the case. Now that the patentee contractor has no legal claim to such profit it is extremely unlikely that the State will in fact make such allowance; 1430 but that he is indeed entitled to such compensation or profit is accepted by all as equitable. It is most unfair that he should be denied it by the operation of these two Clauses.
The situation is rendered the more absurd by the fact that if the article is manufactured by a third party the State pays, in the price of the article, for the profit on the manufactured cost and pays for the profit on the patent itself by reason of the royalty which is paid by the third party for the use of the invention. So we have the anomalous situation of the man who makes the invention and patents it getting no profit for the development of the invention, and a third party, who does not take the trouble to develop and bring forward new ideas, getting the benefit himself, or at least getting the full profit on the mere manufacturing costs without having to worry himself about development and inventive work on his own premises. Such a development will tend to discourage original invention and will encourage high manufacturing costs so that the patentee contractor may thereby get back what he believes to be his legitimate right, namely, the proper compensation and proper royalties in respect of his invention.
It has to be borne in mind, too, that in the case of those inventions in which the State is primarily interested, it is not possible for the patentee contractor to go in for the free bargaining of the open market. It is possible that only the State can be interested in his invention, but in those cases where the public may be interested as well, the action of the State may be distinctly prejudicial, and it is surely only fair that the patentee contractor should get from the State the equivalent of the full commercial royalties which he would get if his invention were exploited solely in free, normal and commercial markets.
I hope that we may deal with these points and with others during the Committee stage of this Bill, and I will delay the House no further than to add my humble accord to the successful passing of the Bill through its Second Reading.
§ 10.34 p.m.
§ Mr. Palmer (Wimbledon)
Like other hon. Members who have spoken, I also pay my respects to the Swan Committee. In fact, I had the interesting experience 1431 of appearing before that Committee as a witness for one or two trade unions and associations which were interested in the work of the Committee. I was impressed by the devastatingly thorough way in which the Committee dealt with evidence, and I was also impressed by the kindly, if penetrating, way in which it dealt with witnesses.
In view of the shortness of time this evening, I am anxious to make only one or two short points upon those parts of the Bill which deal with the employee-inventor. It is a well-known fact that great numbers of inventions are not made by isolated scientists working alone in obscure laboratories, but by engineers, mechanics, and craftsmen in the course of their daily employment. I do not suggest that every employer or firm is unfair or unscrupulous in the policy adopted towards its inventor-employees who work at new ideas, but the employee, by the very nature of his position, is always bound to be in the weaker position; and, therefore, it is necessary that progressive patent legislation should safeguard the employee in two ways.
He should be safeguarded against the shelving of his invention by the employer, either as a result of lack of enterprise or, in some cases, by deliberate suppression; and the potential inventor should be also safeguarded from inadequate reward or even theft of his idea. There is in the Swan Report approval of the Civil Service procedure by which inventors in Government employment may approach the Central Awards Committee. It is said that the procedure has worked well on the whole.
But the position in privately-owned industry was not found to be so satisfactory. The Report did not like the not unusual arrangement by which the potential inventor signs away his right to benefit from any invention he may make bearing on his employer's business. Sometimes the employer agrees to certain conditions to assist the inventor and encourage others, but the Patent Office, under the present procedure, do not regard it as part of their duty to inquire whether the terms of such an agreement with the employee have been fulfilled before granting the application to the employer. There is an interesting paragraph—No. 23, on page 6 of the Report: 1432We are informed that it is the normal practice of the Patent Office on receiving an application on Form 1E to accept an omnibus agreement of this character as a sufficient warrant for allowing the patent to issue in the name of such an assignee, without inquiry as to whether he has fulfilled his undertakings. It is the practice of the Patent Office to inform the inventor by a letter addressed to him at the address already given by him for official communication, but there is no guarantee that he himself always receives the letter.The report goes on to condemn, by implication, the undesirability of the omnibus agreement procedure. In the case where there is no written agreement, the Swan Report points out that often both parties can claim to share in the results from an invention. Since a dispute cannot at present be resolved except by recourse to the High Court, the Swan Committee recommended the procedure which is embodied in Clause 39 of the Bill we are discussing. The Comptroller, if an application is made to him by either party, should have the power to determine the respective rights of the parties. Where necessary, and desirable, the Comptroller may arrange for the apportionment of the benefit between the parties.
On this procedure I want to put two points to my hon. Friend who is to reply. First, does the decision by the Comptroller invalidate or over-ride any private agreement already made or would such an agreement be taken into account by the Comptroller in making his assessment? Second, what is exactly meant by apportionment? Is it a percentage division of the proceeds from an invention, a lump sum payment or some kind of royalty? I join with other hon Members in welcoming this Bill.
§ 10.41 p.m.
§ Mr. John Foster (Northwich)
It is a sad thing that an interesting subject like patents should lead to such dull law and such a dull Bill—I will not say dull speeches, because I think that would be wrong of me. When one considers inventions like the wheel, the safety pin, the yo-yo, the rubber hand, the tank, and so on, and one finds them translated into any Patent Act, one wonders what lawyers are about.
An hon. Gentleman opposite said that he thought the inventor at the present time was badly treated and could easily be "gypped." He wanted the Solicitor-General to answer that point, and I feel 1433 sure that when he does so the Solicitor-General will disagree, and will say that there is no evidence that inventors are being swindled through the operation of the law and that there is no need for the Bill to take any extra precautions on their behalf.
It is also a good thing that my right hon. and learned Friend drew attention to the fact that there was no evidence before the Swan Committee that valuable inventions had been bought up and squashed because they were a danger to vested interests. He referred to the old story of the match that never stopped lighting, or never stopped burning—I forget which—when it was struck. There is also the old story of the oil companies who were supposed to have bought up a patent which turned water into petrol, and the story of the petrol which was a non-inflammable solid which the oil companies bought up. The Swan Committee found that there was no truth in these allegations.
Sometimes a story arises from the fact that the layman is confronted with an invention which does seem to be a marvel. I remember that when I was in Paris an inventor turned up with a car which was supposed not to run on petrol but on water, and it really did. The man had a big battery which split the water into oxygen and hydrogen. He then ignited the mixture and drove the car. Quite well-known scientists would not believe it. They got into the car and it went. It was, in fact, true that the accumulator did divide the water and that the gases were ignited and off went the car. But it was not very difficult to see the fallacy on which the whole thing was founded, namely, that it was against the second law of thermodynamics, that more power was used by the battery to split the water than would have been used by the battery to drive the car. Yet people in Paris to this day say that the petrol companies bought up that invention and it was never heard of again. That is the sort of story that gets about.
I have only two questions to ask. Am I right in thinking that the Bill does not provide for specifications, when they are published, to have published with them the prior applications for patents and the prior literature which has been cited by the Patent Office against those specifications? In the U.S.A., specifications are published with the prior literature 1434 and prior patents cited by the Patent Office, and that is very beneficial to industrialists. Here one must pay a fee to the Patent Office and they take time to answer one, or else one goes and makes a search oneself, and it takes a long time. It may be that somewhere in the Bill, this is provided; I do not know. I may well have overlooked it.
§ Mr. Foster
I wondered whether the experts think it would be worth doing and whether it would be desirable to have the benefit of United States practice.
The other point is this. Does not this Bill perpetuate the situation—or make it worse, perhaps—whereby the Comptroller can amend a claim to make it valid and so leave the state of our law in its present confusion? There have been decisions, difficult to reconcile and follow through, where an invalid claim can be made valid only by what is called "using scissors," cutting it out without adding any phrases. There is another line of case where specific claims can only be held to be valid on amendment. The practical effect is that it is very hard for consultants or patent agents to advise an industrialist whether he is safe in going on with a certain process, because while they can say there are some invalid patents, they cannot tell whether those invalid patents cannot be made good by amendment. Therefore, they are in a difficulty.
I ask the Solicitor-General whether there is any point in that, and whether the power of amendment of a claim should be more closely defined so as to prevent this difficulty and prevent invalid claims from acting as a threat over what might be a process which is in public demand and which does not, in fact, infringe any valid patent.
§ 10.48 p.m.
§ Mr. Blackburn (Birmingham, King's Norton)
I intervene only because the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe), who I regret has now left the Chamber, was so terribly touchy when I pointed out what the Swann Committee said. Their exact words on the subject of the suppression of patents were:They have formed the opinion that this type of restriction has been much exaggerated.1435 They did not say that it did not exist. They had formed the opinion that it had been much exaggerated. The Committee went on further to point out that it was most difficult to obtain evidence on the subject. They were not appointed to inquire into this matter. They were appointed to amend the law of patents, and it is really quite unnecessary for the Opposition to be so touchy on the point unless they have something they want to cover up.
I entirely agree that the real trouble does not, in general, arise from the deliberate suppression of patents, but there are probably far more rogues in the world than many people think. I should like to give two basic reasons why patents are not properly developed when they ought to be. The first reason is when they ought to be developed for uses other than those in which the owner of the patent is concerned. Lord Maugham, in another place, gave not one but several instances in this matter. The zip fastener was one, but we all know so many that it would be a waste of time to refer to them. The second reason is when the owner has insufficient funds to develop the patent to the full.
I want to make a point of substance to the President of the Board of Trade. The real answer does not lie in the suggestion of the hon. Member for Altrincham and Sale (Mr. Erroll) that somebody—I do not know who—should bring proceedings against somebody who is deliberately suppressing a patent, or in the far more frequent cases where the person concerned has not developed it to the full. Generally the fellow who has failed has done so for reasons which are proper to his point of view. The way to deal with them is for the National Research Development Council to make application to take up the patent and develop it to the full. It is a way which would not involve people in litigation.
I should like to answer another point made by the right hon. and learned Gentlemen the Member for West Derby. He asked why in these circumstances, more people have not brought patent actions. I am not speaking as one who professes to know much about this subject, although I have been engaged in it. The first reason is that patent actions are extremely expensive. We all know the briefs which the Chancellor of the 1436 Exchequer used to get. I used to read that he had five figures marked upon them. The second reason is that generally it was far better for the person concerned to get round the patent in one way and another and put the onus on the other fellow to bring procedings against him. However it may be, let us forget about the past. Why should we be absorbed in the past? Let us hope that this Bill, when it becomes law, will be so administered, in conjunction with the National Research Development Council, that all these evils will cease to exist.
§ 10.54 p.m.
§ The Solicitor-General
The right hon. and learned Gentleman the Member for West Derby (Sir D. Maxwell Fyfe) began his remarks by reminding us of the diligent search he had made in connection with this Bill to find what was called "a human pulsating element." I made a similar endeavour, but I am afraid I was less successful than him. I believe the House will not regard it as a discourtesy if I do not attempt to deal with the many questions rightly asked, because I think the majority of them—I do not say all of them—are points which could be more fully and more conveniently explored during the Committee stage of the Bill. I hope hon. Gentlemen will not think me discourteous if I limit myself to the two or three points of principle which have emerged from the speeches made.
The right hon. and learned Gentleman, looking for his human, pulsating element, put his finger straight on Paragraph 24 and tempted a great many of us to follow him into a discussion of whether there was suppression of patents and what exactly it was that the Swan Committee had said with regard to it. I do not want to follow him into a discussion as to the precise effect of that paragraph, but to remind the House that it is very incomplete unless one considers what Paragraph 26 says. Paragraph 24 is one side of the picture; paragraph 26 is the other side. Paragraph 26 contains a good deal of information which I hope hon. Gentlemen will bear in mind when they consider the overall picture as to how far it is necessary that drastic powers should be taken to intervene to prevent the use of patents in a way which does not conform with the general public interest.
1437 I could not agree more with the hon. Member for Altrincham and Sale (Mr. Erroll), who said that if there is suppression and misuse of patents, why not use the powers given in Clause 16 and Clause 19. That is exactly why those two Clauses are in the Bill, and they will most certainly be used for that purpose if the need arises. Those Clauses embody the first matter of principle to which I would like to make reference.
The Bill does mark an important departure from the structure of the Patents Acts in that it empowers the Board of Trade to take the initiative with a view to preventing the unconscious use of, or the ability to use patents, in a manner which is injurious to the public interest. Clause 19 confers upon the Board of Trade the power to intervene upon the grounds set out in Clause 16 with a view to having a patent marked "Licensed as of Right" or having a licence given to a particular manufacturer. It can in that way take the initiative where it does appear that there is really something in the nature of an abuse, or a failure to make proper use in the public interest of the inventive skill of an inventor.
One has to consider this Bill in its context with two others. One is the Monopolies Act, 1948, and the other is the Act which the hon. Gentleman has just mentioned. Those two Acts and this Bill are designed to march together and to form a kind of comprehensive code. The Monopolies Act deals with the monopolies and restrictive practices in the larger sense. By Section 10 (5), however, it excludes application to patents and leaves the question of patents to be dealt with by this Bill. This Bill, therefore, taken together with the Monopolies Act, gives the Government power to see to it in the public interest that there is no misuse of patents as distinct from monopolistic practices in the wider sense. The other Act really completes the trio and enables help to be given through the medium of the statutory corporation with a view to the general development of patent rights.
I think that the first matter of principle, therefore, is that the Government have the power to take the initiative to prevent abuse; the power to intervene and act as a kind of watchdog in the public interest. This provision in the realm of patent law is not dissimilar to 1438 the power vested in the President of the Board of Trade to act in a similar capacity in regard to the inquiries which can be instituted under the Companies Act, 1948.
I should like to refer to a second point of principle, mentioned by the hon. Member for Altrincham and Sale. It is the application of this Bill to the Foster-Wheeler decision. That is a highly complicated and intricate matter to the effect that Section 29 of the Patents and Designs Act, 1907, did not authorise a State Department to license a patentee manufacturer, with the result that any contracts entered into with him would be invalid. The way in which the Bill deals with the decision is to enable a Department to require a patentee to supply on reasonable terms the goods manufactured under a patent.
The provision in Clause 14 enables a Government Department to buy them at a reasonable price. The hon. Member complained of that. We think it right that the State should be on the same footing as any ordinary member of the public and should be able to purchase, as members of the public, at a reasonable price. The hon. Member asked if there was any way of testing or disputing a price at which the State sought to acquire an article. There is. The effect of Clause 14 is that application can be made to the court to revoke a patent if a patentee will not supply an article on reasonable terms. It will be for the court to determine what in a particular case are the terms on which an article should be supplied.
There were other incidental matters of detail to which reference was made. For example, we have endeavoured to assist the employee-inventor. We have given him a more expeditious and cheap way of protecting his rights in so far as he may fear that they are being infringed by an unscrupulous employer. There are other changes, but I do not think that the House will desire me to go into further detail at present in the case of this Bill, which is so singularly lacking in what the right hon. and learned Member for West Derby described as human, pulsating elements. With those remarks, I would respectfully suggest that the House might give this Bill a Second Reading, and defer further detailed examination until the Committee stage.