§ Order for Second Reading read.
§ 7.10 p.m.
§ The Parliamentary Secretary to the Board of Trade (Mr. Niall Macpherson)
I beg to move, That the Bill be now read a Second time.
This is not a major Bill but, though short, it is, I fear, a little complicated to explain. The last major legislation on patents was introduced by the right hon. Member for Huyton (Mr. H. Wilson) the evening after an all-night sitting in summer, 1949, and the debate was wound up by the right hon. and learned Member for Newport (Sir F. Soskice)—if I may say so, with his customary lucidity—and I am glad to see him in his place today. In the same year the Patents Act and the Registered Designs Act, both of which were consolidation Measures, were passed. These are the two Acts which this Bill seeks to amend.
Amendments are necessary for three reasons. The first is to enable this country to ratify the new text of the Industrial Property Convention on Patents, Designs and Trade Marks, which was agreed at a diplomatic conference held at Lisbon in October, 1958. The second reason is to amend the law regarding late applications for renewal of designs, so as to make it what all concerned seem to have thought it was. The third reason is to enable higher fees to be charged for patents than the maximum permitted under the 1949 Act.
I come, first, to Clause 1 of the Bill. There is only one change in our existing law necessitated by the Lisbon Convention. That in itself is very satisfactory from our point of view and may be taken as quite a feather in our national headgear. The change relates to the time allowed for the payment of renewal fees for registered patents and designs.
At present, if the yearly renewal fee for the patent is not paid by the due date, the applicant has three months as of right in which to pay, but he must also pay a fine. If he fails to pay within three months, his patent ceases to have effect, although he may have it restored 112 if he can show that his failure to pay was unintentional.
There are important differences in this respect between patent and design cases, to which I shall refer in a moment, but there are similar provisions in the designs legislation for the late payment of renewal fees. The new text of the Convention demands that this three months' period of grace for the payment of fees be extended to six months in each case. These extensions are provided for in Clause 1 (1).
I come now to the second amendment. While the Bill was being drafted a discrepancy between the provisions for the late payment of renewal fees contained in the two Acts governing patents and designs came to light. Designs are protected initially for five years, but it is possible, on payment of a renewal fee, to obtain protection for two further periods of five years each, making a total of fifteen years. Until 1949, three months was allowed in each case in which to make late applications for design renewals, but there was no power to levy a fine for being late. One of the amendments introduced in the 1949 Registered Designs Act gave such a power.
That amendment, however, was so worded that although the renewal fee could be paid late, the actual application for renewal had to be made before the end of the five-year period. In practice, the renewal fee is paid by means of stamps impressed on the application form.
As our existing obligations under the Convention require that we should allow three months' grace for the payment of renewal fees, it is only sensible that the renewal application itself should be allowed to be made within this period. In any case, it is desirable that the renewal provisions relating to designs and patents should be the same in this respect as it used to be before the 1949 Act.
Clause 1 (2) restores the pre-1949 position by providing that applications may be made during the period allowed for the payment of renewal fees. This particular effect of the 1949 design legislation was not, I am sure, intended by the Government of the day, and it passed unnoticed by the designs registry. In consequence, the old practice was continued, except for the fine for late applications.
113 Indeed, practitioners as well as officials have worked on the commonsense assumption that a valid extension could be obtained if the application itself were made during the three months' grace allowed for the payment of the fees. As a result, about 300 designs have been renewed on application made after the current period for protection had expired, but within the subsequent three months allowed for the payment of fees. I am sure that the House will think it right that the protection which it was thought had been afforded by these designs should be validated. Clause 1 (3) has, therefore, been inserted in the Bill to validate the extensions which have already been made.
The third main purpose of the Bill is to provide a procedure whereby the first Schedule to the Patents Act, 1949, which specified the maximum amounts chargeable in respect of certain fees, can be varied with a view to enabling those fees to be raised to meet the increased costs which are facing the Patent Office. The Bill itself does not vary the fees. It provides a procedure for varying them.
The fees were last raised, after many years, in 1955, but that increase has not sufficed to meet the rising costs. For 1960–61, it was estimated that there will be a deficit of £132,000 on the operation of the patents, trade marks and designs services. This was estimated a year ago, and the figures will be reviewed again before actual increases are proposed.
As those conversant with these matters will know, to obtain a patent one has to pay a fee of £1 on filing the initial application; a fee of £4 on filing the complete specification; and a sealing fee of £3 on the grant of the patent. After the first four years of the life of the patent, yearly renewal fees are payable, varying from a fee of £5 in the fifth year to a fee of £20 in the sixteenth year.
By far the greater part of the expenditure of the Patent Office is incurred in the process of examining patents before they are granted. On the other hand, about 70 per cent. of its receipts come from renewal fees and 10 per cent. from fees for sealing. That has long been accepted as right, and there is no intention of shifting the burden.
It is undoubtedly in the public interest that the fees payable on application for 114 a patent should not be too high, and that those payable for renewal should increase progressively as a patent gets established on the market. At the same time, the fee of £1 for initial application has remained unaltered since 1884, while the fee of £4 for a complete specification is only £1 more than it was three-quarters of a century ago. As I have said, the deficit figure I have quoted was estimated a year ago, and a final review will be made before actual increases are proposed.
Section 99 of the Patents Act, 1949, provides that the fees may be prescribed by rules made by the Board of Trade with the consent of the Treasury. Such rules are Statutory Instruments which are subject to negative Resolution in either House of Parliament. Indeed, that has been the procedure since 1883, but Section 99 contains the proviso that certain maxima laid down in the First Schedule to the Act shall not be exceeded.
With two exceptions, these maxima are the same as were laid down in the Patents Act, 1883, the exceptions being the fee on filing a complete specification—which is £1 more than it was in 1883—and the sealing fee—that on granting a patent—which was first introduced in this century.
Some of the renewal fees, as well as the two initial fees are standing now at the maxima provided for in the Act. If they are to be raised—and we would be departing radically from long-established policy were we not to raise them—we have to consider how best to do it. It would be cumbersome to have to pass legislation each time it became necessary to raise one of the scheduled fees, and I doubt whether any hon. Member would advocate that.
As introduced in another place, the Bill originally simply repealed the Schedule altogether, leaving the necessary Parliamentary control to be exercised by means of the negative Resolution procedure. But the general tenor of the views expressed there was that the Government of the day should justify the maxima by moving an affirmative Resolution in each House. My right hon. Friend accepts and shares that view. It will give more flexibility than do the present somewhat rigid provisions of the Act.
115 The Bill thus provides in Clause 2 that the First Schedule to the Patents Act may be varied by Order in Council after an affirmative Resolution of both Houses. When the maxima have been fixed in that way, to the satisfaction of bath Houses, the actual fees chargeable will continue to be prescribed, as they are now, by rules Which are subject to negative Resolution in either House.
I hope that I have succeeded in explaining this somewhat abstruse little Bill and I commend it to the House.
§ 7.21 p.m.
§ Sir Frank Soskice (Newport)
The Bill has only three Clauses, but anybody acquainted with the proceedings of the House will know very well that the measure of intricacy of a Bill is in no sense to be regarded as correlative to its length, and when one sees that this is a Bill which deals with patents and designs one can well understand the fullness of the explanation which the Parliamentary Secretary gave us. I think that he very clearly explained what the Bill was designed to do, and I express my gratitude to him for doing that.
I myself would have no comment to offer about Clause 1. My only observation, hardly to be dignified as comment, is that I was somewhat embarrassed by the finding of this error which had eluded if not the vigilance then the negligence of the Solicitor-General of 1949 when the 1949 Act was passed. I am very glad that the Government have taken steps to put that error right, and I feel comforted to think of the many experts in whose company I find myself in having failed to detect the error to which the Parliamentary Secretary addressed himself.
However, I would like to say a little about Clause 2. The Government have made the Bill very much more satisfactory by acceding to an Amendment proposed in another place to the effect that the maxima to be charged in relation to patents should be subject to affirmative Resolution. The procedure theretofore envisaged a negative Resolution, which was not really satisfactory. Inventors generally can be said to be naturally fearful at the prospect of the removal of the Schedule to Section 99 of the 1949 Act, without some adequate safeguard in its place. The Government propose 116 as a safeguard that there should be a procedure by way of affirmative Resolution and so far I agree with the Government and think that the safeguard is not unsatisfactory in all the circumstances.
However, the change proposed in Clause 2 is justified by the Parliamentary Secretary on the ground that it is necessary to derive an increased revenue from patents, and, incidentally, from designs, because of the growing expenditure in the conduct of the Patent Office. No doubt when the affirmative Resolutions come before the House, in the event of there being an actual increase in the maxima proposed, the case will be very fully canvassed as to whether there is any need for the additional revenue which will be provided by the increased maxima. But at this stage, since the Government's justification is the increased expenditure of the Patent Office, I would like to put one or two questions.
First, does the hon. Gentleman think that it is wholly justified that the Patent Office should be regarded, as it were, as a self-paying unit? In other words, does he think it is justifiable to expect that, from some of the general revenues of the State, there should be some assistance in the running of the Patent Office, in view of the extremely important functions which it has to discharge nationally in according protection to patents? In other words, should not some tax revenue be used to make up the deficit in expenditure, if there is a deficit?
No doubt it is the case with the great majority of patents that it is the very large concerns whose scientific departments have thought out the inventions which give rise to the applications for patents, but over the years—and presumably it will be the case in the future—industry has been considerably enriched by inventions discovered by private people, often people of very limited means, who give their whole lives to the investigation of some aspects of industrial machinery and who at long last light upon some new and valuable invention.
Everybody knows how formidable is the task of such a private inventor if he wishes to turn his invention to account. The Parliamentary Secretary will agree that up to the time when the inventor files his complete specification and 117 patents his patent, he is in a very vulnerable position. He cannot disclose it. It is extremely difficult for him to assemble the finance necessary to exploit it without disclosing at any rate some of its function and he may easily lose it.
Generally speaking, those persons who are gifted with the power of invention are not people who are good in business negotiations. One has frequently come across people who have no understanding of business matters and who are possibly somewhat indifferent to the financial reward which may accrue to them as a result of their inventions. However, after years of close application to the study of some particular type of industrial machinery, such a person may have lighted upon something which, if turned to account, will benefit and enrich the economy of this and other countries, and it is right that he should be accorded some reasonable reward for the invention which he has encompassed.
That sort of person is often a lone operator and finds it extremely difficult to turn what is a mere idea in his mind into something which can be capable of practical operation in an economic sense. When I speak of the possibility that the Patent Office ought to be assisted out of the general revenue of the State, I have in mind very much the situation of that sort of person. He ought not to be unduly deterred by any unnecessary financial burden, which could be removed from his shoulders, when he seeks to turn to account the invention which he has discovered.
Secondly, does the Patent Office stand in need of further finance? The Parliamentary Secretary said that there was a deficit in the current year of some £132,000. I think that I caught him as saying that that deficit arose not merely from the operation of the patent department, but from the operation of the Register of Designs and so on. Can he say how much of that deficit is attributable to the patent department, as a patent department, if the patent operations are isolated?
Am I not right in supposing that the Government also intend to derive an additional income from the registration of designs? I have been told that the kind of figure which the Government have in mind as the additional income to accrue from designs is about £50,000. 118 I am told by an interested member of the public who was good enough to communicate with one of my colleagues that if one isolates patent operations the deficit is not £132,000, but much less, about £74,000.
Is it not further correct that for about 100 years, at any rate up to about 1952, with the exception of only one year when there was a loss, the Patent Office made an annual surplus which was sometimes quite substantial? My information is that from 1851 to 1952, with the exception of only one year, the Patent Office derived a surplus over expenditure from the fees it earned.
If that is right, what has happened to the surplus? I suppose it has gone to the general revenue of the State. If that is the position, cannot the Patent Office, or the State which stands behind it, afford, at any rate for a little longer, to carry some loss rather than put an additional burden on the lone operator who discovers an invention which he wishes to turn to account? As I said, when we see the actual additional burden to be put on the inventor, no doubt we can discuss in more detail exactly how much the Government may require in consideration of the affirmative Resolutions which will be put before the House.
This further question arises on the terms of the Bill. The Minister pointed out that the work entailed in the granting of a patent relates more particularly to the stage in which the complete specification is lodged and the patent granted. If I understood the Minister's argument correctly, which I think I did, it was that it was therefore not unreasonable that at that stage there should be an increase. I think it was said in another place—I do not think that the Minister said it—that the increased fee for the lodging of the complete specification was to be increased from its present maximum of £4 to a new maximum of £8. It does not follow that the maximum will be charged, but it is at that stage that the private inventor will find that he is carrying the heaviest burden.
I submit to the Minister that the Government are wrong in thinking that it is at that stage that the additional burden should be imposed. The patent runs for four years before it has to come 119 under the annual renewal process. As the Minister said, it goes on for a total life of sixteen years, and there is an ascending scale of fees chargeable on the annual renewal. If there is to be an increase, I would have thought that it could be related more directly to the later stages in the life of the patent when presumably the inventor was in a much more stable position because he had got it going. It will have been exploited by him, or by somebody on his behalf under his licence, and a revenue would be accruing to him out of which the renewal fees could be paid annually. It seems open to question whether it is right that at this initial stage, when the final specification is lodged, that the maximum should be increased from £4 to £8.
It may well be said that an increase of £4 is not a gigantic increase, but it is, after all, an accumulation of expense which the inventor has had to undergo, perhaps over a period of years when he has been working all out on exploring his idea, very often neglecting his other means of obtaining a livelihood, and also having to shoulder the expense of providing himself with the various implements he finds necessary to perfect the invention. At that stage any additional expenditure is something which matters. I ask the Minister why he thinks it is desirable to impose the additional expense at that stage.
Those are considerations which I urge on the House as being worthy of being taken into account at this stage. I cannot advise my right hon. and hon. Friend's to oppose the Bill. Obviously Clause 1 introduces useful and necessary changes, but I put a query against Clause 2. I can see that there is perhaps a case for substituting the affirmative Resolution procedure for the existing Statutory maxima, but when the Minister says that it will be very cumbersome to keep on having to increase the maxima by Statute, that conjures up fearsome pictures of endlessly ascending scales of fees. I hope that legislative intervention will be rare in any event, but the additional flexibility introduced by the procedure which the Government have chosen has perhaps something to be said for it. I would therefore not advise my right hon. and hon. Friends to oppose the Bill, but I think that those questions 120 need answers and I would be grateful for the answers in due course.
§ 7.36 p.m.
§ Sir Lionel Heald (Chertsey)
I will not delay the House for more than a few moments. I would not have risen but for the remarks of the right hon. and learned Gentleman the Member for Newport (Sir F. Soskice) about the general management of the Patent Office. I respectfully agree with him that we have had an extremely clear and concise explanation of the Bill, and we are very grateful for that.
What I am concerned about is that my hon. Friend and his Department might be misled by the seductive and attractive argument of the right hon. and learned Gentleman into perhaps taking rather hasty action with regard to the arrangement of the business of the Patent Office. The time may come when there is room for a considerable debate on that matter, but I am a little apprehensive about what the right hon. and learned Gentleman suggested about the conduct of the business of the Patent Office from the financial point of view.
I would have thought that there was rather a dangerous aspect of the right hon. and learned Gentleman saying, "Never mind. If a bit more money is needed just dip your hand into the pool and get on with it". I should have thought that there was a slight inconsistency about his argument. One would have thought that if for 100 years, apparently since the date of the Great Exhibition, it had been making a good thing out of patents, and one suddenly found a deficit of £132,000, which is not yet explained, one might have thought that there was some argument, not for doing the thing haphazardly, but for applying more business methods to it.
For instance, the ideas suggested with regard to the Post Office might be applied, but we are not in a position to discuss that this evening. I ask my hon. Friend to be a little cautious about this suggestion and perhaps tell us that sometime in the future we might have the opportunity to discuss the business of the Patent Office, rather than change the system at the present time.
As regards the fees paid by inventors, of course, one would be very anxious not to place any burden on them. But when 121 we appreciate this astonishing position it makes us think that the taking out of a patent and the matters connected with it must be about the only thing the cost of which has not increased enormously in recent times.
It is a very doubtful proposition that we should subsidise matters of this kind, especially when we are dealing with only very small figures. There it is. We must not dilate on these matters tonight, but I thought that I would give my hon. Friend a word of warning against the rather dangerous kind of argument that we have heard from the right hon. and learned Member for Newport.
§ 7.40 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I, also, am worried about the sliding scale of charges and fees payable by persons wishing to register designs or patents. I am concerned mainly with mechanical devices. After a device has been patented it can sometimes lie unused for years. I remember one which was lying around for twenty-four years. The inventor made several new designs, all evolving from the first one, and even under the old scale of charges this became a very expensive process. The machine that I am thinking of is used all over the country today in its final style, and it is now made by a large engineering company. I also knew a mechanic in Newport who started an idea in about 1913 and kept in going as long as he could, but in the end the expense involved in renewing the patent was too much. His device is known even today, I believe, as a "Billy fairplay."
A mechanical engineer with an inventive mind may have an idea from which he evolves even better ideas. Although a mechanical idea may be very good it is often impossible to get it into manufacture for ten or fifteen years. The mere fact that it has been patented and registered does not automatically mean that there will be someone to manufacture it. I know of several cases in industry where, after new devices have been invented, it has been quite impossible, for various reasons, for manufacturers to use them in their processes of production. I remember that some years ago I and other tried our hardest to get in invention manufactured, but we could not do so. The young inventor 122 kept the patent going for about ten years, but after that he had to let it lapse. Now it is a common product on the market.
I do not say that this happens regularly, but it can happen if the scale of renewal fees is too high. An inventor may have three or four evolutions of his primary idea all developing at the same time. In four years he may have mechanically evolved his primary idea, and he then has to register his new idea. A series of processes can be built up in that way. All those engaged in engineering have seen this happen. A man may be pushing his idea for all he is worth, but it is very often almost impossible to get a manufacturer to take it up in its initial stages. Under the old scale of charges such a man could be involved in the payment of £40 or £50.
We must, therefore, be careful that we do not prevent the mechanical engineer with a creative and inventive genius from being able to develop his ideas from his basic design. Anyone who works in engineering knows that the first crude concept is often useless, and not acceptable to anybody, but by its development over the years it can eventually become a first-class device or product. We must not alter these scales and charges so as to make them too heavy for the individual who has to look for a market for four or five years. We do not want to rob that man of his opportunities. I hope that the Minister will consider that point. It is very important that we should be sure that we are not penalising progressive inventiveness.
§ 7.46 p.m.
§ Mr. N. Macpherson
With the leave of the House, I should like to reply to the debate. I was grateful for the way in which the right hon. and learned Member for Newport (Sir F. Soskice) received the Bill. I was glad that he agreed that the Bill has been improved by altering the procedure laid down under it from the negative to the affirmative Resolution, in the fixing of maxima for the fees. The right hon. and learned Gentleman queried the proposition that it was desirable to obtain increased revenue, and he asked whether the Patent Office should be regarded as a self-paying unit. He wondered whether it would not be better to subsidise the Patent Office in some way. My 123 right hon. and learned Friend the Member for Chertsey (Sir L. Heald) advised me to be careful of these seductive arguments.
I want to say a little about the trend of expenditure. In reply to a Question from the hon. Member for Edmonton (Mr. Albu), I set out the full trend. Generally speaking, until 1939 there probably was a surplus in most years. Latterly, however, there has not been a surplus, even deducting expenditure on the library, the industrial property department and in connection with other miscellaneous items. The figures of deficit have been rising in recent years, owing to increased expenditure and the greater number of examiners employed—and we need still more if we are to keep up with the registrations now being made. The position is better than it has been for some time, but we still need more examiners.
For these reasons it is likely that we will continue to run a deficit, and we believe that we ought to cover it. The right hon. and learned Gentleman asked why we should do so. One reason is that it has always been policy to do so. Another is that most other countries make it a policy to cover deficit expenditure. This philosophy has an exception in the United States, where the payment of a fairly high initial fee results in the grant of a patent. No renewal fees are payable. But in the world as a whole the expenses of the patent offices are covered by the fees payable.
There is, I think, a reasonable argument for that. After all, those who make application for patents are getting a very valuable protection and it is not unreasonable for them to have to pay for that protection. I believe the amount they now have to pay, in terms of costs in 1884 when the application fee was first fixed, is 4s. 6d., which seems an extraordinarily modest application fee.
The hon. Member for Dunbartonshire, East (Mr. Bence) dealt with the cost of renewal fees. In my opening speech I argued that it was desirable to keep down the cost of the initial fees. There is a good reason for this. The number of small independent inventors is relatively few, I understand that it is certainly not more than 10 per cent. of all registrations. In the initial period between the 124 application for the patent and the lodging of complete specifications, which is a year, they can approach other firms to take up the patent. If another firm is licensed for that patent, it will be the firm which will be paying for the protection. So this is not likely to be any great burden on the small inventor.
Where the small inventor has to pay the initial fee of £1, I think it an extremely modest fee. Where he has to go on and develop the product himself, a fee of £4 for the complete specification is extremely small in relation to his other expenditure, and even were it doubled, it would remain an extremely small percentage of the amount he would have to spend to develop his invention himself. He may sell it. He may make arrangements with a firm to develop it. But if he proposes to develop it himself this represents a very small percentage indeed, and as I say, it represents a very important protection to him.
One of the reasons why we wish to have a growing fee for renewal each year up to a maximum of £20 in the sixteenth year is we wish to urge inventors to develop and market patents, and the higher the renewal fee the greater is the incentive to find somebody to develop the patent. It is not generally desirable that anybody should register a patent merely in order not to develop it, and under the present law it is possible for someone else to apply for a compulsory licence so that the patent shall not lie unused. I do not think there is a strong case for reducing or for not increasing the renewal fees. Some of these renewal fees are already at their maximum and I think it highly desirable that they should be increased.
The right hon. and learned Gentleman asked how much of the increased fees are attributable to the patent department. Broadly speaking, the deficit in the patent department out of the £132,000 is £74,000. The deficit on the trademark section is £38,000, leaving £20,000 on the design section. It is proposed to make increases in the charges for application for a trademark application such as to yield about £46,000 in the year. At present, there is a committee considering the design section which is barely covering half its cost, and when we receive the report of this committee we shall consider whether 125 it will be appropriate to increase the fees for designs also.
On the question of patents, one has to remember that it is not only the patents of inventors in this country which cost the Patent Office money. Most of the cost involved comes from examining whether or not an invention is new. That has to be done when a patent which comes from abroad is registered as well as from this country. Each patent is fully examined whether it comes from abroad or whether it originates here, and rather more than half of the total registrations come from abroad. So, were we subsiding the Patent Office, we should be subsiding foreign as well as British inventors.
As to whether Clause 2 should stand, the right hon. and learned Gentleman said that he did not object to increases in the renewal fees, and I would merely observe that were we to cut out Clause 2 altogether, there would be no means of increasing the renewal fees beyond the existing maxima provided for in the 1949 Act, and some of them are already hard up against this maxima. I hope that I have answered all the questions, and for all these reasons I hope that the House will be prepared now to give the Bill a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House—[Mr. Peel.]
§ Committee Tomorrow.