HC Deb 30 November 1967 vol 755 cc783-97
Mr. Charles Fletcher-Cooke (Darwen)

I beg to move,

That an humble Address be presented to Her Majesty, praying that the Patents (Amendment No. 2) Rules 1967, dated 29th July 1967, a copy of which was laid before this House on 4th August, in the last Session of Parliament, be annulled. I understand that we may debate, at the same time, the following Motion standing in my name and the names of my right hon. and hon. Friends: That an humble Address be presented to Her Majesty, praying that the Trade Marks (Amendment) Rules 1967, dated 15th September 1967, a copy of which was laid before this House on 22nd September, in the last Session of Parliament, be annulled. Both these Motions deal with the white hot technological revolution we are now engaged in. I suggest, as a I pray against these Rules, that we discuss whether it is wise to raise the fees in the way they are raised by the Rules if we are to encourage our inventors in the way we should. I suppose that the defence of raising the fees in the Patent Office and Trade Mark Registry will be that these offices should pay their way, and I do not dissent from that, although in fact Parliament has never said that they should.

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

Oh, yes.

Mr. Fletcher-Cooke

Government spokesmen have said that they should, but Parliament itself has never said that they should. However, I am not challenging that tonight. All I am saying is that there is quite an intellectual case, which has been put forward in the United States, for saying that there should be a subsidy for these agencies in order to encourage inventors, and I could quote at length on that, although I will not. I will assume that these offices should pay their way and not be a charge on the Exchequer.

Therefore, the only question which we have to discuss tonight is whether the increase, a rather serious increase, in these fees has been put at the right point in this very delicate question of patents and trade marks. Do these increases jeopardise and intimidate the inventors upon whom we depend? This has been a matter which has concerned Parliament for many years from 1884 onwards, including the latest legislation in 1961. I suggest that the trade mark increases even more than the patent increases rely on timely notice, and I am not at all satisfied that timely notice in the case of the trade marks was given.

Why have the Government decided that increases are necessary? I suppose that 50 per cent. of the increase in costs in the Patent Office and the Trade Marks Registry has been due to the Selective Employment Tax. The figures justify that assertion, and I do not think the Minister will deny it. I should like to know whether there is here an element of double recoupment. This was suggested at Question Time by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), but I should like a strong explanation of the extent to which quite serious increases in these fees have been rendered necessary by the Selective Employment Tax.

First, does the Patent Office and the Trade Marks Registry in the end recoup itself from the Exchequer? We have been told many times that although internally the Government pay the Selective Employment Tax on their very extensive membership in these offices, they eventually get it back, and I would like to know whether in raising the fees to the public the Patent Office is getting it back twice.

Paragraph 19 of the White Paper on the Selective Employment Tax, Cmnd. 2986, says: The tax will be charged on civil employment by the Central Government. The cost of staff of Government Departments and other Central Government agencies, as shown in the Estimates and elsewhere, will therefore include the tax. From the point of view of the Exchequer, however, the transactions will be self-balancing. The words "self-balancing" imply that within the very complicated internal financing of the Government, even though the Patent Office may pay the Selective Employment Tax, it will get it back. Otherwise, the words mean nothing.

If that is so, why is it necessary to raise to the public the fees which inventors and others are required to pay to the Patent Office and the Trade Marks Registry to compensate for the Selective Employment Tax, because on the face of it, although I may be wrong, it seems to me that there is an element of double recoupment? They will get it back from the Treasury, but also from the public.

These Rules raise the fees very considerably. The fee on filing complete application is raised from £10, which was fixed in 1961, to £14—a 7 per cent. increase. It is a net increase of £192,000 on the fees for filing complete application. In the case of trade marks, two fees are raised. There is the £1 increase for applications—from £4 to £5—and there is the £3 increase on renewals—from £10 to £13. Although that is only £56,000 as opposed to the Patent Rules increase of £192,000, it is a very considerable increase of 20 per cent. on the total fee. These increases should he justified. They have not been justified.

The serious aspect of this—and I do not wish to labour the point because we all have a tremendous regard for the Patent Office and the Trade Marks Registry—is that we are not convinced that it has been put at the right point. There is no parliamentary sanction for the theory that the Patent Office and the Trade Marks Registry should be self-supporting, although I think it should be. Indeed, there is a case for subsidy and for saying that the Library, in particular, which is not a fee paying agency, should be subsidised and open to the public. I do not dissent from the view that the Patent Office should pay its way. I am, however, very concerned to discover from the Minister of State whether he is totally persuaded that these increases in fees are at the right point in the complicated matter of a patent.

Is not the rise in the burden falling on a patent applicant during the stages before the grant too much? The applicant for a patent is often very poor, very odd and very dotty and has no money, but in the history of inventions he frequently produces the goods. Is it not putting too great a burden on him? Is it not done perhaps because at that stage it will discourage the filing of complete patent Specifications? The examination of a complete patent specification is very expensive, laborious and onerous. I can well understand that it is expensive to the Government. Nevertheless, it should not be discouraged.

My question—and I have been asked to put it by my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), who is very concerned with technology in this country—is whether it would be better to spread these increases in fees over the whole range of the history of a patent rather than load them at an early stage, as the Rules attempt to do.

I have a great deal of documentation about this, with which I shall not weary the House at this late hour. It is quite clear that, over the last 80 years since the Act of 1881 was passed, there has been an increase in the loading of fees on the early stages of patent applications. Putting it broadly and no doubt inaccurately but, nevertheless, understandably, what we fear is that, because the later stages of examination of a claim to a patent are so laborious and expensive, it has suited the bureaucracy to load the fees necessary for the economic and financial viability of the Patent Office on the early stages, even though subsequently that may not be for the advantage of the country.

I do not wish to over-emphasise this because I may be wrong, but I should like an answer on the point. I should like to know whether the spread should not be more widely over the later stages after the grant of a patent, by which time the inventor may have had some financial advantage from his invention, rather than the early stages.

My second question is this. It may not be possible, but here again I should like to know. Is it somehow possible to give the individual inventor—this dotty, crazy figure who works in a backyard by himself, but who nevertheless has produced a great deal of our national wealth—an advantage over the corporate applicant? Cannot the individual, either by way of subsidy or weighting of the fees, be allowed to pay less than the great industrial complex? At present, they are in exactly the same position about fees.

I do not wish to argue the merits of increasing the fees, though there is no Parliamentary sanction, in my view. I do not challenge the premise that the Patent Office and the Trade Marks Registry ought to pay for themselves. Rather, I question the incidence of the fees which have been loaded too early in the process of patenting an invention.

In the case of trade marks, I am rather worried about whether sufficient notice has been given. All the arguments which I have advanced so far do not apply to trade marks. There have been no Parliamentary ceilings for fees relating to trade marks. But those who are concerned with trade marks think that the timely notice upon which trade mark protection depends has not been properly observed in this case. It may be that there are administrative reasons. I have had complaints about it, not from what one might call obsessive quarters, but from serious quarters, that the notice given for the raising of the fees in the case of trade marks was totally inadequate. I should like to hear from the Minister of State, whom we all respect, why such very short notice was given in the case of trade marks.

10.15 p.m.

Sir Lionel Heald (Chertsey)

I would like to make it plain at once that I am supporting this Prayer from the same point of view as my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke); that is to say, for the purpose of eliciting some information and guidance on this subject for the House.

In these days I am sure that there will be general agreement that the Patent Office, which includes the Trade Marks Registry, should be highly efficient and should certainly not be starved of the necessary funds. It has a very difficult job to do. Those of us who have anything to do with the result of its work know that it does difficulty work extremely well and that it requires increased funds on which to do it.

That is generally accepted, but I think that it will be generally agreed that, before we approve of the increase in charges, the House is entitled to certain information. After all, if one looks at these documents, one sees nothing in them to give any indication of what it is all about, except, as has been pointed out by my hon. and learned Friend the Member for Darwen, the inventor, who, in 1961, it was thought should pay £10 on filing his complete specification, has now got to pay £14, which is a very substantial increase. Therefore, I feel justified—and I am sure that the Minister will be prepared to help us about this—in asking certain questions.

The first question is: is there any kind of balance sheet or accounts relating to this very important Office? We have never seen any. It may be that there is no such thing. However, this is public expenditure and usually one is entitled to have some information about the cost in relation to the increase in charges which is required.

My hon. and learned Friend the Member for Darwen spoke about a self-balancing organisation. One cannot help being reminded of the Post Office. It has always been assumed that the Post Office must be self-balancing. We know that in the last year or two everybody has come to the conclusion that the only possible way of the Post Office doing that is by getting itself out of the hands of the Government. That is apparently what is going on now.

Is the Patent Office supposed to be self-balancing? Is it self-balancing? If so, what are the respective figures on the two sides of the account? Is it impossible for us to know, or is it a case that no attempt has been made to deal with it on that basis?

I suppose that there might be another question as to what investigation, if any, there has been in recent years on the basis of organisation and methods to see whether the Patent Office could be made more efficient. I say at once that I have every possible sympathy with the people who work in the Patent Office, because they have a very difficult job. For a number of years I have had some experience of the output of its work and I have the greatest sympathy with them. However, the fact is that an enormous number of these documents are dealt with every year and we can see, if we start applying £14 instead of £10 a time, that there will be a great deal more money available.

How is it to be spent? Has there been any real effort to produce a more modern and efficient system? Are modern methods and apparatus being used to bring it up to date? What is being done?

I sincerely hope, Mr. Speaker, that you would not think I was in any way out of order, but I would have thought that, as a condition of having this substantial increase put upon the inventor and trade mark user, we are entitled to know to what extent that money is being efficiently and economically spent.

I would not like to delay matters by going into any more detail, but I think that this subject is of considerable importance. I feel, very often, that the work done in the Patent Office does not get nearly enough credit, and that people do not appreciate what is being done. I feel that there could be no harm in showing what the work is, and satisfying everyone concerned, if it can be done, that it is being done efficiently and economically.

I support my hon. and learned Friend the Member for Darwen on the question of the timing, that is, putting the increase of £4 at that stage. The small man has a very difficult time with these matters, because he has to put in a specification which may well be opposed by some large organisation. There are often difficult proceedings at the Patent Office Court, and the matter may go to the High Court. If he has to spend an extra £4, in addition to the possibility of having to take legal advice, it will be a serious matter for him.

Without being hostile in any sense, I feel that we are entitled to a substantial explanation on this matter.

10.22 p.m.

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

I sincerely hope that my voice will last out to enable me to give the right hon. and learned Member for Chertsey (Sir L. Heald), and the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) the information which they want. I think that they have presented their arguments about the increases very moderately indeed.

I can tell the right hon. and learned Member for Chertsey that the balance sheet for which he is asking is presented in the annual report of the Comptroller-General of Patents, Designs and Trade Marks. The report is rather a full document. Perhaps this is why it is not frequently read. It contains a mass of figures which tends to put people off.

I do not know whether the right hon. and learned Gentleman appreciates it, but I have the report of the debate on the Bill which was introduced in 1961, which gave the Government authority to alter fees. The right hon. and learned Gentleman almost repeated the speech that he made on that occasion, including his reference to the Post Office. As he has not changed his views on these matters, perhaps I might ask him to explain to his lion. and learned Friend why we should not subsidise this service, because he made a great point about it on the last occasion.

The hon. and learned Member for Darwen said that there was no Parliamentary sanction for this principle of making the Patent Office self-supporting. I do not know how Parliament sets about determining a principle of this kind. If the hon. and learned Gentleman looks at the report of the debate on the 1961 Bill, he will see that the then Parliamentary Secretary to the Board of Trade, the present Lord Drumalbyn, said: …it is likely that we will continue to run a deficit, and we believe that we ought to cover it".—[OFFICIAL REPORT, 12th December, 1960; Vol. 632, c. 123.] He referred to having been asked why this should be so, and he said that it had always been policy to balance the accounts. He said that it must be at least a Government principle that the accounts should be balanced, and the point that I am making is that nobody on either side of the House then, or since, has challenged the principle laid down, I agree by the then Government, that the accounts should be balanced.

It was in 1961 that the Government enunciated the principle that the Patent Office should balance its books. We think that this is a sound policy and should continue. The increases that we propose in the Rules are very modest compared with those made in 1961. The filing fee was then increased from £4 to £10 at one go, and was not criticised.

I was on that side of the House at the time, and I remember that we considered among ourselves whether we should criticise the increase. Having looked at the accounts of the Patent Office and listened to some of the arguments in the debate on the Bill, before the Rules came forward for the increases, we thought that they were justified and, therefore, did not oppose them. But the increase in the filing fee alone was 250 per cent.

The 40 per cent. that we now propose is relatively modest. I do not want to make too much of that, but that is an answer to the pertinent question put forward by the hon. and learned Member for Darwen. In parenthesis, I should point out that his picture of all inventors working in the backyard, and in poor circumstances, is very far-fetched. About 90 per cent. of patents come from industry, or what the hon. and learned Member referred to as large organisations.

Anyhow, the fact that the number of patent applications from all sources has greatly increased and is still increasing—going up by 5 per cent., 6 per cent. and 7 per cent. a year—is sufficient argument against his view that the fact that the inventor will now pay £15 to get the specification examined and registered will stop people applying. I do not think that it will. When the fee was raised from £4 to £10, a few years ago, it did not stop inventions coming along, which is sufficient justification for the view that I am putting forward.

The hon. and learned Member asked why we had to put the increase at this point, if we had to balance the accounts. There are several reasons why, but I will mention the two most important. Let us consider the case of the inventor about which the hon. Member has been talking—the man working on his own, who has something to register. He has had to work out the specification, and that fact means that he has already spent some money on the job. He is not so poverty-stricken, or he could not have had the specification brought forward. In many cases he quite rightly uses a patent agent. We will not discuss the question whether patent agents' fees have increased. I do not want to make a flowery speech. The inventor to whom I am referring has already spent some money, and he now spends his £1 which has been there since 1884, for the initial application.

He now brings forward his specification, and it is at this point that the Patent Office incurs its great expense. The average cost of looking at the practicality of a specification, and searching to make sure that it is a novel idea and not a copy of something that has gone before, is £55. If we could take this operation by itself, what it means is that we are giving something that costs £55 as a public service to the applicant, who at this stage pays only £15.

The second substantial argument is that 70 per cent. of all applications come from overseas. If there is to be any element of subsidy at this stage, 70 per cent. will be paid by the British taxpayers for applications from overseas. I was involved in this because submissions came up—the hon. and learned Member knows what happens in those corridors of power—and we were asked to examine all the advantages and disadvantages of every conceivable choice. Weighing everything, and for the major reasons which I mentioned, we agreed that this was where the increase should take place. This was the argument in 1961—although it was not spelled out so specifically—for putting up the fee so substantially from £4 to £10.

One of the other reasons—I would call it a minor one—is that 20 per cent. of the specification applications are not proceeded with, but, even so, the Patent Office has spent on average £55 each on solving the difficulties—

Mr. Fletcher-Cooke

That is its job.

Mr. Darling

Yes, but it is the element of subsidy which we do not want here. It is a minor argument, but it must be considered. After much discussion and examination, we decided, as did the previous Government, that this is the point where a fee increase should take place.

The hon. and learned Member raised the question of S.E.T., and I should like to give the figures. Leaving trade marks aside for the moment, in 1965 the deficit on patents was about £170,000, which was smaller than the deficit in 1961. This year we reckon that it will be about £150,000. It went down to £110,000 last year, but the reason that it rose so much in the previous year was that delayed salary increases were brought forward.

I do not know whether the hon. and learned Member will allow me this argument, but that deficit could be reckoned against the total cost of running the patents side of the office and the fees paid. If the fees and expenses were in balance, there would be a "turnover" of roughly £3 million, of which about £65,000 is accounted for by S.E.T., so that it is between a third and a half of the cost which we expect this year. If I could take that as a proportion of £3 million. it would be about 2 per cent. but I do not think that the hon. and learned Gentleman will allow me that argument.

The right hon. and learned Member for Chertsey asked whether there had been any examination of the economies and methods. There have. This was, rightly or wrongly—I believe rightly—one of the purposes of S.E.T.: to make industry face up to operational costs and see if it could get economies by improving its methods. To what extent the economies and the examination of the introduction of new methods is absorbed in S.E.T. I do not know, because, as he appreciated, all this is absorbed in the total figures and cannot be separated. If we leave out S.E.T., the current deficit will be a little under £100,000.

This means that we require an increase of £3, leaving out S.E.T., to cover it because we must, with the very large proportion of applications that come from overseas, go in multiples of £1. In the Patents Journal—which is published weekly and which contains the applications and descriptions—will be found a price list for applications in every currency in the world. We would find ourselves in trouble if we were to increase it by, say, £2 17s. 3½d., and we therefore work in multiples of £1.

The cost of S.E.T. for 80 per cent. of the applications is £1 in a total expenditure running over a 16-year period during which the patent goes on; in other words, £1 in £230. If we were to stick to the minimum filing application fee, which we were asked to do, I would be willing to go for the whole £230 if need be, but it is really £1 in £15, an increase which brings the fee up to £15, rather than £14, and that is the cost of S.E.T.

The hon. and learned Member for Darwen asked about this dual arrangement. In the debate on the Selective Employment Payments Bill, as it then was, the then Financial Secretary to the Treasury said: Where Government establishments are engaged in manufacturing, they have been instructed to calculate their prices as if they received the premium. The Royal Ordnance factories are an example of this. On the other hand, where a service is provided and a charge made, the tax is to be taken into account as a relevant staff cost."—[OFFICIAL REPORT, 4th August, 1966; Vol. 733, c. 864.] In other words, one adds it to the cost of the staff.

Bearing in mind the large number of applications from overseas, I am sure that this is the right way to deal with it. We are treating this as if it were, in a sense, not a Government Department. The S.E.T. is added as a staff cost and we then raise the charges by £1 to cover that. That is what the customers must pay, and they get a very good service for it.

Mr. Fletcher-Cooke

What is meant by the sentence, to which I referred, in Cmnd. 2986: From the point of view of the Exchequer, however, the transactions will be self-balancing."? Does that mean that the agency which we are discussing, the Patents Office, gets a refund from the Exchequer—

Mr. Darling

indicated dissent.

Mr. Fletcher-Cooke

—and, if not, why not? What do the words "self-balancing" mean?

Mr. Darling

That refers to services inside the Government set-up, where S.E.T. has to be paid but where outside people are not paying charges for those services in the way that they are in this case. I admit that I have not looked at this matter very closely. There may be something in the hon. and learned Gentleman's argument. I will look into it and discuss it with him later.

The hon. and learned Gentleman then talked about our not having given sufficient notice of these changes, particularly on the trade marks side. As I understand, the 1961 Act and the previous legislation lays down certain rules which must be obeyed. They provide for a period of two months between the date of publication and the coming into operation of the Rules. In the case of trade marks, the notice to raise fees must be advertised, and it was advertised.

Whether the period of notice was insufficient is a matter of opinion. Some of the representations suggested that we should have given seven months' notice of our intention to raise these fees. Although I quite agree that we should consult the convenience, particularly, of the trade mark agents, we have also to consult the taxpayer's convenience. Having made a decision, we are not entitled to delay implementation for five, six or seven months, and so keep the taxpayer's subsidy going—because the subsidy must be paid by him.

I am sorry if there have been difficulties. Quite frankly, there have been very few complaints, although I imagine that the hon. and learned Gentleman must have had most of them. It was generally understood, even before we advertised, that increases would be put forward as soon as the period of severe restraint ended. We made no secret of that in the previous year, and at that time discussed what the increases would be. We made changes in the original increases on the trade mark side. Those which eventually appeared were not our first proposals. We listened to representations, and made changes.

It should, therefore, have been obvious to all concerned that as soon as the period of severe restraint was over we would advertise the increases and, within the period provided by the rules, apply the increases by Rules. This is what we have done. As I say, there have been very few complaints, and I suspect that the hon. and learned Gentleman has got the lot.

It was also suggested that the increases should be applied only to big corporations and not to the little inventor. We looked carefully at that suggestion. The right hon. and learned Member for Chertsey has laid down two principles for us to follow: that we should make the place as efficient as possible, and that we should have no subsidy. The hon. and learned Gentleman's proposal would have involved us in staff increases and a great deal of staff trouble.

If we had have laid down Rules—and the hon. and learned Member can appreciate how it has to be done—we would somehow have had to say in legal language that there was a dispensation for the individual. Then—and I do not want to exaggerate—quite a large number of institutions could have made our applications in the name of the individual who had done the actual work, and the Department would have had to sort out those applications.

For the reasons I gave originally, I am convinced that these Rules will not stop the flow of patent applications from anybody, and because we would have been involved in a lot of trouble we decided against the suggestion.

I want to pay tribute, as the hon. and learned Gentleman and his right hon. and learned Friend have done, to the efficient service which the Patent Office gives. It is the most efficient agency of its type in the world. We should be proud of it, and say so—

Mr. Fletcher-Cooke

And, thank goodness, it is still in central London.

Mr. Darling

It has excellent and devoted staff, who deserve our praise. Compared with the position in patent offices in the major industrial countries, the position here is quite remarkable. The United States office was hopelessly behind in dealing with applications and has turned to the optional system, under which a search is made only if a patent is questioned, and a charge then made for the search. The arrears in Japan are enormous. The West German office has almost collapsed. It has thrown in its hand and it, too, is turning to the optional system of charging. I believe that the Dutch have given up the struggle altogether, or so it appears.

But the British Patent Office has a very high international reputation, and we do not want it to founder. I should like to get it out of its present premises, because I am convinced that it can work more efficiently when it is out of that ancient Victorian set up. I will not say where I think it ought to be. But we cannot afford to run it at a loss and, on examination it will be seen that these are modest increases which will help to keep up the reputation, the standard of work and the flow of work in response to the increasing number of applications, and the increasing number of applications from abroad.

I am sure that the hon. and learned Member will join with me in paying tribute to the Patent Office, and will agree to withdraw the Prayer.

Mr. Fletcher-Cooke

The Minister of State has given a very good reply. I do not wish to pick away at details, particularly as regards the Selective Employment Tax. He was very fair to say that he would look at any question of double recoupment. I totally endorse what he said about the Patent Office. In view of the encomium he gave it, I hope that he will keep it in London, the capital where it should be. I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.