HC Deb 23 July 1965 vol 716 cc2227-34

Order for Second Reading read.

3.37 p.m.

The Minister of State, Board of Trade (Mr. George Darling)

I beg to move, That the Bill be now read a Second time.

This is a small but important Bill. Although I do not wish to minimise its importance in any way, I hope that we can make progress with it this afternoon. Its purpose is to restore the law governing the rights in employees' inventions to what it was believed to be before the case of Patchett v. Sterling Engineering Co. Ltd., which was decided in the House of Lords about 10 years ago.

Before that, in 1949 when the Patents Act which we now work on was enacted, the United Kingdom law contained no provisons to ensure that an employee had the right to obtain a just reward for inventions he made during the course of his employment. But there was a growing body of opinion, which was frequently expressed, that, in practice, the reward which the employee received in return for the exercise of inventive skill was in many cases inadequate and unfair.

The Swan Departmental Committee on Patent Law, in its final Report in 1947, felt that there was some foundation for this opinion as applied to an inventor who had not entered into any express agreement with his employer as to their respective rights in inventions which he might make. The Swan Committee accordingly recommended that in such cases the High Court and the Comptroller of Patents should be empowered to apportion the benefit of the invention or patent between the parties.

This recommendation led to Section 56(2) of the Patents Act, 1949, which became a dead letter as the result of the judgment of the House of Lords in the case I have mentioned. Mr. Patchett, who had made certain inventions, was employed by the Sterling Company, and he applied, under Section 56(2), for apportionment of the proceeds. This was refused by the House of Lords because the wording of this Section is such that it has no effect unless it can be shown that neither party is solely entitiled to the benefit of an invention.

This is where the trouble started, because—and I learned this only recently—according to the common law of the land, an invention, depending on the circumstances in which it is made, is always the sole property of either the employer or the employee unless, of course, this implication in the law is displaced by an express agreement to the contrary. In Patchett's case there was no such agreement, with the result that the employer was solely entitled to the whole benefit of the invention.

The Bill, as I have said, is designed to rectify this situation, and it does so in Clause 1(1) by giving both the employer and the employee a right to so much, if any, of the benefit of an invention or patent as may be just. Subsection (2) of Clause I then does two things. First, it emphasises the intention to reverse the common law rule that in the absence of a contrary agreement the whole benefit of an invention made by the employee in the course of his employment belongs to his employer.

Secondly, the subsection makes clear that the power to apportion does not affect the operation of any agreement between the employee and his employer expressly providing for the allocation of the benefit of the invention or patent.

As a result of the debate in another place, the Government have amended the Bill as first presented so that Clause I now includes a third subsection, which lays down some of the more relevant factors which must be considered by the court or Comptroller in determining what is a just share. The first consideration involves the court or Comptroller in considering, for instance, whether the employee was engaged to invent and how much he was paid for this purpose—the purpose of his employment.

The second is concerned generally with the help given to the employee-inventor by or on behalf of the employer. For instance, it is pertinent in this situation to inquire whether the invention resulted from specific instructions given by the employer to follow a certain line of research or development, what facilities to that end were provided by the employer, and, of course, what contribution to the invention was made by other persons in the employer's service.

The third is based on the consideration that the proportion of the benefit which the employee should be awarded is dependent, at least to some extent, upon whether or not the invention has resulted from something more than he was actually required to do. For instance, whether he has spent some of his leisure time on the job, some of his own money or used some of his own equipment in the making of the invention. I think that these are matters which most people would agree that the court or the Comptroller should look into. But, of course, there are other factors that might be applied and, therefore, the Bill makes this list of considerations non-exhaustive.

I must emphasise that the Bill does not give power to divide up the legal title to the invention or patent. If it did so, commercial dealings could be hampered by disagreements between the parties and the proper use of the invention might be held up. The Bill, as I have said, is limited to determining the just share of the invention or patent which should be given to the employer or to the employee. It does not provide for the making of cash awards, but the trust relationship which it imposes on the parties provides a mechanism by which the just share might be translated into money. For instance, if the parties do not agree between themselves about how the share is to be converted into cash terms, the employee can go to the court for an account of the profits derived from the invention and obtain an order that so much of the profits equivalent to his just share shall be paid over to him.

However, in response to undertakings and comments which have been made, I shall, before the Committee stage, table Amendments to provide that the court or the Comptroller may, in appropriate cases, make a lump-sum payment to the employee or award a royalty-free licence—which, I gather, is known in the jargon of the trade as a "shop right"—to the employer.

This is a short and desirable Bill with a limited purpose—to restore the law to what it was thought to be before the House of Lords decision to which I have referred. I hope that it will have a quick and easy passage. To facilitate its passage, I wish to assure hon. Members that we shall give appropriate consideration to any pertinent criticisms or constructive suggestions which they care to make about the terms of the Bill.

3.47 p.m.

Sir Lionel Heald (Chertsey)

I have no desire whatever to hold up the Bill's progress, but it must be pointed out that several difficult and complicated points are involved, which are, to some extent, technical points of law. I feel considerable doubt about whether, in a few minutes, we can deal with them in such a way as to ensure that Amendments are put down to meet them.

It is right to point out that this matter is not one of urgency. It is 10 years since this decision of the House of Lords was made and, so far as I have been able to ascertain, there have been no difficulties and no cases have arisen since then in which there has been a strong claim of hardship. Therefore, this is not something which has to be done to prevent injustice.

In the time available—other hon. Members wish to speak—I can indicate only briefly two or three points which I think we must be quite sure about when we come to the Committee stage of the Bill. We must provide the opportunity of seeing the Amendments and discussing them with those who are familiar with these matters. The first point, which has already been mentioned by the Minister of State, is the question of the legal title. We have here a remarkable attempt to arrive at some sharing-out of the benefit of a patent without affecting the legal title to it in any way. It is difficult to see—if the court comes to the conclusion that it is just that there should be some kind of arrangement—how it can be made in the form of an order, unless there is a decision which can be recorded in writing.

The words used are of the very widest character—"as may be just". There is a real difficulty in this matter. For 100 years, Chancery judges have been dealing with this subject matter and they have worked out a series of points and considerations which they regard as having to be taken into account in coming to a conclusion about what should be the equitable position as between employer and employee. Therefore, when one sees in the Bill that the share which he shall have shall be so much "as may be just", there is a possibility of difficulty arising, for the Chancery judges may say, "What is just is what we have been doing in the exercise of our jurisdiction for the last 100 years".

Is it intended that there should be any change? The language used is that this shall be divided in accordance with justice notwithstanding any rule of law or implied agreement". Nothing is said there about the principles of equity which have been applied in many of these cases for so many years. It therefore appears that judges will not be debarred from applying exactly the same principles as they have applied in these cases for many years. I have been engaged in half-a-dozen cases on this very subject in the last 25 years.

I understand that it is intended, or at any rate hoped, that the judges will not apply the principles which have been taken into account in so many of these cases. It may be right that they should not do so, but as the Bill stands I can see no reason why a judge should not say, "There is nothing in the Act which prevents me from following the established decisions which are well known, which have been given by very eminent and experienced judges in this field and which go back for many years". I can think of at least three or four decisions to which I could refer if there were time and if it were necessary to do so. This is a matter which we must consider quite seriously. I am, of course, assuming that the underlying principle which has been claimed for the Bill will be carried into effect.

There are two other matters which I can mention only briefly and which I believe require careful consideration. On the face of it a claim could arise under the Bill very many years after an invention has been made, no one ever having heard of any claim being made by the employee. It may be that he went away years before and then entered into service with somebody else. Such a position could be very difficult indeed. Another aspect of it is to what extent, if at all, are the arrangements to be retrospective? One has to think of the position of the employer. It may be that quite complicated and important inventions are involved in the circumstances envisaged by the Bill. It is contemplated that the employer should have to keep a careful and exact account not only of the figures and the statistics but also of all the circumstances so as to enable the court to deal with the matter many years afterwards?

Another difficult point concerns the trasitional provisions, which are matters always to be taken into account in these cases. The Bill does not indicate with any clarity what is intended to be the immediate effect. The last thing that I want to do is to appear to be in any way obstructive on a matter of this kind. But we cannot help asking the hon. Member to realise that this matter does not seem to have been the subject of very close consultation. I think that before the Bill was introduced in another place there was no consultation with one or more of the important bodies which are interested in this subject. I think it may well be that, as sometimes happens in these cases, the result has been that people and organisations who are greatly interested in the subject matter, and who would have liked the opportunity to offer suggestions and criticisms, have refrained from doing so rather on the lines of assuming that all that the Bill is intended to do is to correct something which went wrong years ago.

In fact, I think that it will be much more than that because, unless some of these difficult matters are cleared up, the vast majority of companies may say that the only safe way of dealing with the matter, from the point of view of their employees just as much as themselves, is to enter into express agreements laying down definite rules.

They would then say, "That is going to be the legal position between us. That will exclude the operation of the Bill, with all the difficulties it involves, and we will proceed in the way which we consider, in concert with our employees, their organisations and so on, to be just and proper". I am sure that that is not the intention of the Government and, therefore, further consideration is needed to prevent that result.

It is clear that by express agreement the operation of the Bill could be entirely avoided. It would be unfortunate if that became the regular, understood standard practice, leaving matters at large to be decided—as we believe they could be, and may certainly be in most cases—by a process of good will. While I will not occupy more time at this late hour, I suggest that this is a case where the Government may be doing considerably more harm than good by trying to get the Bill through so quickly.

3.57 p.m.

Mr. Michael English (Nottingham, West)

I support the remarks of the right hon. and learned Member for Chertsey (Sir L. Heald), although with some trepidation because I am by no means expert in these matters of patent law. However, having worked in industry in which many of the cases referred to in the Bill arise, I do know a little about the subject.

I should like some clarification about the exact meaning of Clause 1(2) because it seems, as the right hon. and learned Member for Chertsey said—and whilst I recognise that the Measure has a limited purpose—that the provision could have a much greater and more substantial purpose than is envisaged. If all that we do by this legislation is to return to a state of affairs which was not completely satisfactory even 10 years ago then we are not doing what we should be doing.

It is rare that one gets an opportunity to alter the law on a small point of this character. I suggest that an agreement providing for the allocation of benefit to avoid dispute is one thing whilst an agreement completely to exclude any benefit arising to an employee—which would appear to be within the purview of the Clause—is another, and this ought, I suggest, to be looked at in Committee.

3.59 p.m.

Mr. Peter Emery (Reading)

Like my right hon. and learned Friend the Member for Chertsey (Sir L. Heald), I am concerned about the Bill, for while it contains a considerable amount of good, it also contains a number of definite worries which are causing concern to many people.

It is surprising that there was no consultation about the Measure with either the Chartered Institute of Patent Agents or the Trade Marks, Patents and Designs Federation. While there may have been consultation with the F.B.I., I have not heard of any. It is normal practice in matters of this sort for close consultation to take place.

Having said that, may we be told why there is such urgency for getting the Bill through? Had there been consultations at an earlier stage we might have found that many of the problems which I am posing would have been cleared up. I cannot understand the urgency. It appears as though the Government are trying to rush the Bill through, but there are one or two queries of importance—

It being Four o'clock, the debate stood adjourned.

Debate to be resumed upon Monday next.