EXCLUSIONS FROM TRANSFERS IN RESPECT OF PATENTS AND OTHER INDUSTRIAL PROPERTY (Hansard, 15 January 1971)

§ Mr. Airey Neave (Abingdon)
Before the Committee agrees to the Clause, I should like to raise one or two points and ask a few questions on the general aspects of the provisions of the Clause which exclude patents and other industrial property.
It is generally accepted that the value of a patent, or licence, or industrial property agreement depends on the flow of information on improvements and new developments that can be presented. This was previously done by the Atomic Energy Authority in regard to the patents that it held or still holds, and which will not be transferred under the Bill. The generation of new developments and new 390 improvements will become the responsibility of the fuels company being set up under the Bill. If the fuels company wishes to grant an additional licence to another company, what will happen? Will it need to sub-license the Atomic Energy Authority's patents which are excluded under the Clause, other than for those things which are transferred?
These patents will be excluded. Will the company need to sub-license atomic energy patents, because there is no provision in the Bill for that? Is there anything else that my hon. Friend would like to say about the position of industrial property excluded under the Clause?

§ Sir Harry Legge-Bourke (Isle of Ely)
Perhaps I ought to declare a mild interest, in that I am a vice-president of an organisation called the Institute of Patentees and Inventors. It does not bring me in any money, but I take a great interest in the whole question of patent law.
What I am a little uncertain about is whether the Report of the Banks Committee—which has yet to be debated, and we have yet to know what the Government's policy is about it—which has looked into the whole question of patent law will eventually, in any way, affect the Clause. I think that we have to read the Clause also in the light of Clauses 7 and 11, in that in Clause 7 we have a valuation of what is transferred, and in Clause 11 we have the provision about shares in the companies, and that harks back to some extent to the discussion that we have just had.
I feel that a situation could arise in future—and this is what I asked the Minister to consider—in which it might be in the national interest for the sale of the patent rights to take place but, as I see the Clause as drafted, it could happen that that would be forbidden. It is therefore worth considering that we may have to amend the Clause when we have fully considered the Banks Committee's Report and when we have a better idea of how the new independent company will operate. I put this to the Committee as a possible future warning, rather than as a demand this morning.

§ Mr. Ridley
My two hon. Friends have touched on a very complicated part of the 391 Bill, namely, the treatment of patents and other industrial property rights as dealt with in the Clause. This is one of the more difficult parts of the Bill. Unlike nearly all the other activities of the Authority which have to be divided between the new companies and the authority, there are no separate holdings of patents which can be identified as belonging to the trading fund. It has proved impracticable to divide the authority's patents between it and the new companies because it has been found impossible to devise a system of allocation. It has therefore been decided that for the present the best solution is to leave all the patents with the Authority, but to require it to make available to each company such facilities and information relating thereto as is considered necessary to carry on effectively the undertakings transferred under the Bill.
My hon. Friend the Member for Abingdon (Mr. Neave) will realise that this gives the Authority the job of conducting considerably tricky negotiations, and the A.E.A. will license to companies on the usual licensing terms any patent which it thinks to be necessary to pass on to the two companies. It will, however, retain ultimate control of the patents or industrial rights, and therefore whether a patent can be sold or leased by one of the companies to a third company which is not concerned in the Bill will be a matter for the Authority which still owns the property. It will be possible for that to happen in the case where the Authority considers that there is no other patent being sold or leased to a third party but, on the other hand, control will remain with the Authority if it is thought to be necessary.
My hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) referred to the Banks Report. The Government have not completed their consideration of this report, but I accept what he says, that depending on the conclusions on the report it may be necessary to look at this matter again. Perhaps I might leave the matter by telling my hon. Friend that I am grateful to him for his warnings, but that at the moment I do not think that any action arises, and that we shall continue to watch the point that he has made.

§ Mr. Benn
In some cases the patents involve extremely sensitive technologies. There is a worldwide anxiety about the spread of nuclear weapons, and centrifuge technology is part of it. I hope that the Minister will not want to leave the House with the impression that it is simply a matter of patent law that remains to be settled. This is really a central question involving our relationships with Governments with whom we have had dealings in the nuclear field, notably the Americans, and our new partners, the Dutch and Germans.
I appreciate that the hon. Member for the Isle of Ely (Sir H. Legge-Bourke) has taken much interest in patent matters. I would point out that this moves into a separate and more sensitive area. Since important public comments have been made about the centrifuge arrangement which suggest that it has raised public anxiety, perhaps the Minister will say something before we pass from the Clause.
My other question arises from the fact that we cannot know the value of the patents in respect of the arrangements with the Dutch and the Germans until we have compared our methods. I know nothing about the way in which they are operating their centrifuge. This is a kind of dance of the seven veils, where gradually each veil is removed as we get closer. The valuation of patents can be properly completed only after the centrifuge has reached its final stage of development. If the A.E.A. patents are the best ones it means that our input into the centrifuge arrangement is much more valuable than anybody else's. If the Dutch ones are better the question will be looked at differently.
Under the centrifuge arrangements public money will be put into research in connection with new patents. Nobody thinks that the new company can survive on its own without public money, but research is very expensive, and therefore we have agreed internationally that there will be a diminishing subsidy until the company becomes liable on its own. Assistance can be given in respect to certain patents which will lead to the further patents, but that assistance will have to come from the taxpayers' resources. Therefore, the Minister should say more than he has said in response 393 to his hon. Friend the Member for the Isle of Ely, who talked properly in terms of patent law.

§ Mr. Ridley
I believe I said that the control of these patents rested with the A.E.A. My hon. Friend the Member for Abingdon (Mr. Neave) might have been thinking of patents which have no security or nuclear significance, but those which have will remain in the control of the A.E.A. I have already given an assurance that extremely sensitive information could not get out of the hands of the A.E.A., and into the hands of persons who should not possess it, through this means.
The right hon. Member for Bristol, South-East (Mr. Benn) is right in saying that the evaluation of patent or any other property rights is an extremely difficult matter. That is why, at the beginning of my reply to the first Amendment, I said that all these factors must be taken into consideration, and that the Government's intention was to place a valuation on the whole bundle, as opposed to trying to evaluate the various aspects of it. It is impossible to say at present what will be the value or the success of any given process, including the gas centrifuge. Although we are all hopeful and optimistic, it is not possible to say that in 10 years' time it will have earned such-and-such a profit or will have shown such-and-such a return. Therefore, any valuation of the process in this way must be speculative, and extremely difficult.
Furthermore, from a valuation point of view it would be wrong to try to separate out the gas centrifuge from the other activities of the fuel companies. Therefore, our only means of tackling the question is to value the total bundle of activities of the fuel company—and that will depend upon what people are prepared to pay for it as well as what we are prepared to sell it for. Therefore, in this matter there is great need for independent assessment, as far as possible, from the merchant bank.
I take the right hon. Gentleman's first point, that new research may be done by the A.E.A. which will lead to new patent rights being exploited by this or some other company in some other field of the A.E.A. 's activity. One would expect that in that case suitable agreements would be negotiated between the 394 A.E.A. and the company using the patent rights. But it is asking me to crystal gaze too much to predict what inventions will be made, what they will be worth, who will be exploiting them, and how they will be valued at some future date. The intention—and there is a later Amendment dealing with this—is that any facilities or research or further services provided by the Authority to any of the companies in the future will be paid for on a proper arm's length relationship, and on a basis of true valuation. We do not intend that the public should in any way lose the investment that it has put into research, provided that that research turns out to be successful. With those assurances, I think that the right hon. Gentleman may feel that his points have been met.