PATENTS RULES

HC Deb 10 February 1970 vol 795 cc1202-16

9.38 p.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I beg to move: That an humble Address he presented to Her Majesty, praying that the Patents (Amendment No. 2) Rules 1969 (S.I., 1969, No. 1706), dated 1st December, 1969, a copy of which was laid before this House on 8th December, be annulled. This debate is about the Patent Office and the increase in fees proposed in these rules. The history of the matter is that in November, 1967 the Patent Office fees were increased by 6 per cent. to yield about £200,000. In June, 1969—only two years later—they were increased again by a further 6 per cent., yielding about a further £200,000. So it was a matter of considerable surprise that a further order was laid in December 1969—only six months later—to increase the fees by a further 12 per cent. bringing in another £420,000 or more, on top of the increase which took place in June and, in some respects, in April of the same year.

The present rules bring the fees that can be charged under the Statute up to the legal maximum, and that in itself will mean that no further increases can be made without further legislation. As the Government and their subordinate bodies should set an example to others in keeping costs down and in maintaining their productivity increases, I think it is a little surprising on the face of it that a further increase of 12 per cent. in the fees was required at this stage.

I do not blame the Patent Office for wishing to cover its costs. Indeed, it is right that, the non-revenue-earning aspects of the Patent Office work aside, the Patent Office should balance its books. What I criticise the Government for is having allowed an increase to go through in the early part of last year on the assumption that it would last until 1972, and then being proved so wrong in their forecast they have had to come back to the House for more at the end of the same year, six months later.

In December I asked the hon. Lady why that had come to be so, and she replied: The increases in the fees payable to the Patent Office in respect of patents, designs and trade marks matters that came into operation generally on 21st June, 1969, but in April, 1969 in respect of certain renewal fees paid in advance, were designed on the information available at the time when the relevant estimates of costs were made, to enable the Patent Office to meet the cost of its fee-earning branches over the period of four years from 1969 to 1972 inclusive."—[OFFICIAL REPORT, 19th December 1969; Vol. 793, c. 491.] I think the hon. Lady should tell us why the estimate made in June of last year was so wildly amiss, because quite clearly to expect an increase to last for four years and then to be told that it has lasted for only six months is not a very satisfactory state of affairs.

In answer to a Question the hon. Lady was good enough to supply me with the increased costs which were not foreseen. They were £150,000 for extra wages. There was a 5 per cent. increase in wages and salaries. But surely that was, on the whole, foreseeable in these inflationary days when everybody is getting 5 per cent., if not more. It surely would be prudent to include a contingency for increased wages.

Second, S.E.T. and increases in National Insurance contributions have added another £51,000 to the annual bill of the Patent Office. These are within the Government's control, and it seems unfortunate that one half of the Government did not tell the other half that it was about to increase S.E.T. These unforeseen reasons added another £201,000 to the annual costs of the Patent Office.

But what about the other £200,000 expenses which are not included in these costs? How came it that in June increases in fees were allowed which were thought to last for four years, and then £200,000 extra expenses were admitted which had not been foreseen but which should have been? Why must we have an extra £200,000 added, for which no explanation has been given?

I think that the handling of this whole matter has not been particularly happy. I do not think that the estimates were made properly on the last occasion when the fees were increased or we would not have been put into this strange position when a large increase is proposed at short notice and within a short interval after the last increase.

As I said, we on this side of the House entirely agree that the Patent Office should cover the full cost of the fee- earning practice which it provides. Some services which it provides are subsidised directly by the Government, and this is right and proper, and no change is suggested in those arrangements. But it seems curious that the state of affairs should have been allowed to arise in June of last year that no provision was made to cover the obvious increases which were coming at a time when fees were last increased. It is worth reflecting what would have happened if the fees had not been increased on this occasion. The Patent Office would have gone into a pretty serious decline financially, and one wonders how such miscalculations could have been made.

I think it is clear, and I entirely accept, that the fees, even after this round of increased charges by the Patent Office, are not out of line with the basic fees charged by other countries for their patent services. I have a comparative table here, and certainly we are not the cheapest, but, on the other hand, there are a large number of countries—particularly Holland, Norway and Sweden—which are considerably more expensive than we are. The United States, too, is certainly more expensive. Some countries are cheaper, but there can be no complaint from the point of view that the basic level of charges made by the Patent Office is excessive, and that is not part of my case tonight. I have made the first complaint, that there was not proper estimating at the time of the last increase in fees.

The second main point that I want to make concerns consultation. On this occasion there was no consultation whatsoever with the users of the Patent Office, who are, of course, principally the patent agents, about the proposed increase in fees. In the last case, early in 1969, there was some consultation, some warning, and the result was that there was no Prayer in this House against the Order. On the occasion before that, in 1967, there was no consultation again, and the result was that there was a Prayer. So I can tell the hon. Lady that for the very short time which remains to us to be in Opposition there will be a Prayer on every occasion that she increases the Patent Office fees without due consultation and notice.

There are some special factors this time which make it different from the last time Patent Office fees were increased. I would like to dwell in some detail upon them because I have heard from patent agents that the present method of increasing Patent Office fees is no less than uncivilised and is barbaric in the extreme.

Take, first of all, the sealing fee. This is a fee which is paid when the patent has gone through all its stages of certification and proving and when the inventor is finally told that the patent will be granted. He has a period of four months during which the completed patent is on display, so to speak, to the world at large and during which time he must pay the final or sealing fee if the patent is to become effective.

In this case there was no notice whatsoever, and the sealing fee was increased quite a lot when several thousand patents were awaiting sealing. This has caused the patent agents considerable financial loss because in their contract with the inventor or developer of an invention they undertake to provide the full service, including the sealing fee, at a specified rate, and if in the course of that time the Patent Office increases the sealing fee the patent agents have to meet the increase out of their own pockets. So there has been considerable loss here.

The Patent Office, for some reason, has been unable over the years to devise a system of increasing the sealing fee without causing personal loss to the patent agents, who are, of course, under contract to complete the patents without increase for their clients. So far as I can see, there is no reason why those patents which are before the Patent Office and which have got into the four-month period should not be exempt from increases in the fee. In that case, all new patents which came forward after the date of the announcement of the increase could carry the higher rate whereas all patents which were within their four-month period of inspection could carry the lower rate.

By these means nobody would be penalised, the total amount of new money could be raised, albeit a little more slowly, and there would be none of the bunching of patents; that is to say, the early payment of patent fees, which is the reason given by the Patent Office for behaving in this uncivilised manner. It is perfectly possible to devise a way of increasing the sealing fee, without causing considerably heavier demands upon the Patent Office staff during the period of an increase, simply by exempting all patents which are within the four-monthly period at the time of the increase. This has been the major complaint about the present round of increases, and it has caused severe financial loss to many patent agents. Perhaps "severe" is too strong a word, but there is no reason why this should not have been done; it is a question of maladministration and was quite unnecessary.

Secondly, I refer to the renewal fees. Eight weeks' notice was given this time that the renewal fees would be increased. In the case of renewal fees which have to be paid each year if a patent is to be renewed, the patent agent writes to his clients at intervals of three months, two months and one month to remind them to pay the renewal fee. The amount of the fee is specified in the reminder. It would save loss to the patent agents if three months' notice were given of a decision to increase the renewal fee.

This would mean that no reminders would be sent out asking for renewal fees which were subsequently increased, the difference having to be paid by the agent. I see no reason why it should not be possible on all occasions to require the Patent Office to give at least three months' notice of its intention to raise renewal fees. That would fit in with the practice in the trade and save hardship and financial loss to the agents.

I am told that nearly always in countries abroad three months' or, sometimes, six months' notice is given when the Patent Office decides to increase fees, and persons with patents in foreign countries have thereby been protected from this small abuse. I do not want to magnify the scale of this. I know that not large sums of money are involved in each individual case, but for a patent agent with several thousand patents it can become a major item of expenditure if he has a fixed contract with his inventor and the fees are increased without warning.

My two points on the sealing fee and the renewal fees are directly attributable to this round of increases. There could have been consultation, there could have been warning, there could have been notice, and ways could have been devised of helping the patent agents over these two problems.

I believe that it is foolish of us to allow our patents to expire after 16 years and for there to be no means of renewal other than by application to the court. Nowadays, with the immense amount of research and development which goes into patents, there is need for an extension of the date of the patent, and many inventors and companies would be happy to pay for it.

Mr. Deputy Speaker (Mr. Sydney Irving)

Order. I think the hon. Gentleman is now going beyond the scope of the Prayer.

Mr. Ridley

I can demonstrate that this is highly relevant. If you will bear with me for one moment more, Mr. Deputy Speaker, I believe I shall convince you that I was in order in what I was trying to say.

If fees were worked out which would allow patents to have a longer life, with perhaps a £100 a year renewal fee, or even more, many inventors and companies would jump at the opportunity of being able to pay this extra charge to protect their invention for a further period. There is no limitation in international law about the length of time of a patent. It now takes so long to make technological inventions and to do the research into new developments that it is often ten years or more before a patented invention comes on the market and is a commercial success, and it runs out of its patented life after 16 years. Here is another major source of revenue which could be tapped by the Patent Office if the rules were so changed that it could make charges on longer-term patents than the 16-year period.

I would ask the hon. Lady what effect the imposition of S.E.T. has had on the Patent Office. This is one of the major items of cost involved in these new charges. Has the cost of S.E.T. been passed on in this round of fees increases, or has it made an improvement in the efficiency of the Patent Office?

When I visited the Patent Office recently, and I am sorry that the hon. Lady could not join me, I was most impressed by the standard of hard work, knowledge and devotion of all those who work there. What has been the result of this tax which was intended to increase efficiency? It is wrong that we should be operating only on the revenue side of the Patent Office. There is great scope for mechanising some of the processes, for installing capital equipment which would make the filing and mechanical handling of the patents much more efficient.

I also believe that it is quite wrong to leave the Patent Office in a building which the hon. Lady's predecessor—

Mr. Speaker

Order. With respect to the hon. Gentleman, I think that we are talking about an increase in fees for the various patents.

Mr. Ridley

With your permission, Mr. Speaker, I should like to make the point that one of the reasons why these fees increases are necessary is that insufficient attention has been given to the capital investment. We have now a situation in which the Patent Office is asking for greater and greater fees, whereas many of the answers to its financial problems could be met by a new building and new methods of mechanical handling.

Mr. Speaker

Order. I am not questioning that they might be met by a new building, but we are now discussing whether the fees should be increased.

Mr. Ridley

I bow to your judgment, Mr. Speaker, but it is very difficult to agree to a set of new fees when one feels that those new fees would not be necessary if other aspects of the work of of the Patent Office were taken into account since the ancient Victorian setup, in the Patent Office, as described by a previous Minister, is, clearly, out of date. I feel that the set-up should be hived off into a new public corporation with responsibility both for the revenue and for the capital side of the account so that value judgments could be made of what is the most efficient way of carrying out the work and what is the most efficient place in which to do it.

The whole way in which the story has unfolded makes me feel that the Government should take a new look at the organisation of the Patent Office as a whole. I understand that one of my hon. Friends has referred the question of these increases to the Parliamentary Commissioner. I do not know whether it has been accepted, but my hon. Friend has accused the Government of maladministration in regard to this round of fees increases.

Although I suppose we shall pass these Rules providing for increases, the occasion should be taken to remark that perhaps the Government should think a little more about the organisation of this whole sphere of activity, which we acknowledge has been well performed, but we feel that the time has come to overhaul the arrangements for running the Patent Office.

Mr. Speaker

Order. The time may have come. It has not come on this Statutory Instrument.

Mr. Ridley

I had concluded my remarks, Mr. Speaker.

10.0 p.m.

Sir Lionel Heald (Chertsey)

I want briefly to support my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who has put the case very clearly. My object in intervening in the debate is to deal with a much more limited aspect of the matter and to speak about it rather more in sorrow than in anger.

As my hon. Friend said, there was an extraordinary lack of consultation before this new Statutory Instrument was made, resulting in a surprising addition to the costs involved in a patent application. My object is to make a plea to the Board of Trade for more consultation when increases are proposed in the future.

I am sure that it will be agreed that there is the closest and most amicable co-operation between the Patent Office and the patent agents, whose task is particularly difficult when foreign applications are involved. I am sure, too, that the hon. Lady will agree that it is most important that those who come from abroad and wish to protect their inventions in this country should not be upset. A sudden increase of this kind causes great disturbance when it is introduced without prior consultation, especially when previous increases have been preceded by consultation.

I am anxious not to say anything to cause inconvenience to anyone, but this increase has created great upheaval. I am not engaged in the business of a patent agent but, through my professional work, I have close contacts and friendships with a number of them. No fewer than five or six telephoned me on the one day saying that this increase had come as a tremendous surprise. In one case, there were some important foreign applications to be made. For some reason, certain of these matters are dealt with in cash. The clerk who went to the Patent Office found that he had not enough money to pay the fee.

That may be regarded as a humorous matter, but it is not right, and I hope that the Government will ensure that there is consultation on future occasions. As I have said, the Patent Office and the patent agents work together in a harmonious and friendly way. Indeed, they could not do their work unless they did. It may be that the Board of Trade does not enjoy such close relationships. I hope that the hon. Lady will try to see that it does.

10.4 p.m.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dunwoody)

This has been an interesting debate because it is, after all, about a very important part of the work of the Board of Trade.

I find it difficult to accept some of the arguments which have been put forward from the benches opposite, and I think that it is wise for me to start by refuting allegations of maladministration and of refusal to understand the situation involved by increasing the patent fees.

If I may just give a little background information, the increases in patents, designs and trade mark fees made in March and April, 1969, were made with the original aim of generating enough income over the period 1969–72 inclusive to cover the costs of the fee-earning branches over that period. The estimates which led to those increases were based on 1967, the only actual figures then available, and envisaged salary increases in 1968 and 1969 of 7 per cent. in each year resulting from a pay settlement in 1968. This settlement was a complicated one, the effect of which varied from one staff establishment to another, according to the distribution of grades and the position of the individual members of those grades on the incremental scales, and of which part only had been negotiated at the time of the estimates. We were forced, there fore, to make assumptions about the remainder, which turned out to be an underestimate, and the full effect became apparent only in the course of 1969. It was realised—I will give the hon. Gentleman this point—at the time that the Orders were made in March and April, 1969, that there was this degree of underestimation, but it was decided to go ahead with those Orders on the basis that the original hope that the increases would last until 1972 would probably not be realised.

After the Orders had been made, further unforeseen increases incurred in costs. The hon. Gentleman has made much of the fact that these should have been foreseen. However, wages and salaries were increased by 5 per cent. from 1st July, 1969, and this had a consequential effect on superannuation costs. Selective employment tax was increased by the Finance Act, 1969. Although the hon. Gentleman has said that one half of the Government did not know what the other half was doing, I think that he would be the first to complain if the Treasury had given prior notice only to one part of the Government of consequential tax changes. Employers' National Insurance and graduated pensions contributions were also increased with effect from November, 1969.

These increases are estimated to increase the current annual costs of the fee-earning branches by £201,000. It now became clear that the deficit for 1969 for the fee-earning branches would be about £200,000 and that the shortfall on the fees, as raised earlier in the year, was such that an immediate further increase was necessary to maintain the aim to cover costs over the period 1969–72. Since patents account for most of the Office costs, steps were taken to provide for a further increase in patents fees and the Patents (Amendment No. 2) Rules, 1969, were therefore made on 1st December. 1969.

It is still the intention to break even over the period 1969–72. It is estimated that this fees increase, which is limited by the fee ceilings of the Patents (Fees Amendment) Order, 1961, should ensure that costs are covered by income for 1970 probably with some margin to offset loss in 1969. Whether they will continue to be covered for a longer period remains to be seen, but the position will be kept under close review in 1970.

As regards considerations which should influence us when we next consider an increase of fees, I would only mention the following. First, there is obviously the need to make sure that there is a suitable contingency allowance, having regard to experiences in 1969; secondly, the continuing increase of patents work of the order of 5 per cent. per annum; and, thirdly, the recent welcome successes of the recruiting campaign for examiners—still 8 per cent. under strength—and the need to continue recruiting.

The hon. Gentleman said that S.E.T. was brought in to improve efficiency. This was certainly one of the side aims. The real aim of any Chancellor of the Exchequer who brings in a new tax is to raise money. I can assure the hon. Gentleman that the Patent Office, far from being over staffed, faces a constant problem of not having trained patent officials capable of doing this highly detailed, skilled and specialised work. One of the constant problems is the need to recruit more people in this sphere. I hope that the hon. Gentleman's remarks cannot be said to imply any suggestion that S.E.T. in itself could have contributed to a greater degree of efficiency of that kind. Far from getting rid of people, in this instance the Office is constantly looking for more skilled staff—

Mr. Ridley rose—

Mr. Speaker

Order. Whether it could contribute to efficiency is a matter for argument. We are talking about raising certain fees. I hope that the Minister and the Opposition will speak about the Statutory Instrument itself.

Mrs. Dunwoody

I beg your pardon, Mr. Speaker.

I will go on to other points raised by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and by the right hon. and learned Member for Chertsey (Sir L. Heald). First, on the lack of prior consultation, they said that interested organisations, such as the Chartered Institute of Patent Agents, were not, as they had been on previous occasions, consulted about the increases in fees before the Order was made. The amount of revenue needed left no room for choice as to which patents fees should be increased or by how much. All the main revenue-producing fees which remained below the maximum prescribed by Parliament had to be raised to the maxima. In these circumstances consultation does not become consultation, and although I accept that this may in many cases—

Mr. Ridley

It is dictation.

Mrs. Dunwoody

I will not accept that it is dictation, because the House has a right to expect the Patent Office to balance its books. There is no point in expecting this of them, if we are not prepared to say that when it faces an immediate crisis it will not have the right to raise its fees to the maxima prescribed by Parliament—

Mr. Ridley

Would the hon. Lady counsel a company in the private sector to increase its prices by 6 per cent. in June and by 12 per cent in December in the same year? Is that within the Government's prices and incomes policy?

Mrs. Dunwoody

The Government's prices and incomes policy takes into account the fact that companies will do everything they can to absorb costs. But the hon. Gentleman himself said that this is a highly skilled service which we provide for the community. It is therefore essential that it should be paid for at an economic rate without subsidy from the taxpayer. This is a point worth emphasising.

Because costs were currently exceeding income, it was necessary to act without delay. This must be underlined. Consultation would have meant a longer lapse of time before the fees could have been raised. These exceptional circumstances demanded exceptional action and in future there is every intention to consult the Chartered Institute of Patent Agents.

But the criticism of hon. Members opposite that patent agents were given no notice of the increase in fees is one which I should like to answer. It is claimed that because of this, patent agents are involved either in the administrative difficulty of notifying clients, particularly those overseas, who may have been quoted at the previous rate of the need for additional payments, or of bearing the increase themselves. In fact, although the order came into operation on the day after it was laid before Parliament and published, the effect of paragraph 4 of the order is to give nearly two months' notice of the increased renewal fees by making them payable only in respect of years beginning after the 31st January 1970.

I am puzzled why patent agents feel that they should have to pay the increase themselves. Surely their clients know that fees are liable to rise, and that this increase falls to be paid by the client rather than by the agent.

Mr. Ridley

Perhaps I can help the hon. Lady. The reason is that they circulate their clients three months before the fee is due and they state the amount of the fee in that circular—so if, two months before the fee is due, it is increased, they must stand the difference themselves.

Mrs. Dunwoody

But the hon. Gentleman will also have taken into account the fact that I am saying that the eight weeks' notice which is given of renewal fees is almost exactly the same notice as was given before. The reason for bringing all the increases into operation as soon as possible is very simple. Costs were currently substantially exceeding income. Apart from the obvious need to rectify this position without delay, there is also the consideration that current costs should be borne by current users as nearly as possible.

In the case of the sealing fee, about which the hon. Member for Cirencester and Tewkesbury waxed most eloquent, which after all is the focus of these complaints, there was an additional reason. As the hon. Member said, this fee can be paid at any time after application for a patent, and when the Board of Trade last increased it, in 1955, we gave three months' notice. He has said that the failure to do so now has made us uncivilised, barbaric and bad administrators.

When the Board of Trade gave three months' notice, this resulted in the payment of some 30,000 sealing fees during that three months period, and the full numbers received in each whole year, 1953, 1954, 1955 and 1956, were 16,899, 19,825, 49,979, and 7,984 respectively, with the consequence that not only was there a considerable loss of revenue but much time and labour had to be expended in refunding sealing fees on those applications which had not proceeded to grant.

The handling and storage of this concentrated mass of applications raised administrative problems. There appeared to be no way of avoiding a repetition of this occurrence if we gave notice of the increase. These are the reasons why the increase in the sealing fee and the fee on filing a complete specification came into force straightaway.

It was recognised, with considerable regret, that patent agents would suffer some administrative inconvenience as a result; but the likely alternative—a spate of advance payments at the old rate—seemed also likely to carry with it great administrative problems apart from a disproportionate loss of revenue.

Everything possible was done on the publication of the order to draw it to all patent agents' attention. Each of the organisations representing industry and practitioners who are normally consulted on patent matters received letters, on that day, from the Comptroller-General of Patents explaining the increase, and an information slip was sent by the Patent Office to each firm of Patent Agents practising before the Office.

It has been represented that steps could have been taken to mitigate the inconvenience to patent agents by framing the order differently. We could not at the time think of any way of doing so which was free of other objections. The Comtroller-General has, however, invited the Chartered Institute of Patent Agents to discuss whether any satisfactory way of mitigating the inconvenience can be devised for adoption if and when another fee increase of this sort has to be made.

No applicant for a patent will suffer loss of rights by reason of having paid a fee lower than that prescribed by the order, provided that, in a reasonable period, he pays the difference. If he prefers to withdraw his application, he can do so and the money already paid will be refunded to him.

The Patent Office is a very efficient set-up that is facing a continual rise in the amount of work that it must deal with each year, and this is bound to create for it certain administrative problems.

The debate was taken much wider than this by hon. Gentlemen opposite, and I have no desire to go into all the points that were raised, many of which had little to do with the Instrument.

Mr. Speaker

Order. The hon. Lady must not reflect on my predecessor in the Chair.

Mrs. Dunwoody

I apologise, Mr. Speaker.

Many of the points made by hon. Gentlemen opposite would call for a much wider examination of the entire problems of the Patent Office, and this we shall undoubtedly undertake. This is an efficient unit and I was glad that tribute was paid to it. It is providing a useful and specialised service and I hope that it will continue to do so as successfully in the future as it has done in the past.

Question put and negatived.

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