PATENTS BILL [Lords]

HC Deb 25 May 1977 vol 932 cc1435-77

Order for Second Reading read.

4.56 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot)

I have to inform the House that Her Majesty, having been informed of the purport of the Bill, has consented to place her Prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

4.57 p.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

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

After listening to the hon. Member for Chingford (Mr. Tebbit), I feel a little sensitive about moving the Second Reading of the Bill. However, this is an important and timely Bill, very much desired by industry, and it deals comprehensively with the patent system.

For me and, I am sure, for many others, the subject of patents and inventions is something of a journey into the unknown, filled with mystery and even eccentricity. One recalls how an inventor is described in "Gulliver's Travels", in one instance, as having been eight years upon a project for extracting sunbeams out of cucumbers, which were to be put in phials, hermetically sealed and let out to warm the air in raw inclement summers. The patent world is not of course, exactly like that. However, one thinks of the multitude of inventions which pass through the Patent Office which have brought a great deal of benefit and, in some cases, pain, to mankind.

British inventions have had a substantial part to play in all this—the development of the magnetron, polyester fibres, the hovercraft and disc brakes, to name just a few. I know not whether the ladies' high heel was a British invention, but I think that it must have been invented by a lady who had been kissed on the forehead. However, when one looks at some of the patents, one finds that it is a very remarkable sort of product.

I have nothing but admiration for those who are engaged in these activities. The patent system was born of the desire to introduce new manufacture into this country. It has its roots in the Statute of Monopolies of 1623, which excepted from the general abolition of private monopoly rights those which are necessary for the encouragement of innovation and investment in industry. It is well recorded by Dickens, in "A Poor Man's Tale of a Patent", that obtaining a patent in days long ago was a very chancy and expensive business.

It is interesting to reflect—at the same time, it is appalling to think about it—that at one time, each patent applied for was to be the subject of debate in this House. On 14th May 1712 a petition of John Hutchinson was presented to the House and read, setting forth, That the petitioner having invented and brought into practice a portable movement to measure time; which, instead of the several cross motions, hollow wheels with teeth, parallel to their axes, used in former movements, hath all the axes parallel and straight; all the wheels, plates and the balance, parallel and flat; all the teeth straight in the lines of the diameters of the wheels; the axis or spindle of the balance, moved by two wheels alternately, and traversing equal distance in equal time, without pause, in such sort, that none of its moving parts can move nearer to, or farther from, each other; whereby, in the opinion of the greatest mathematicians and best judges of such movements, it is capable of moving more equally, and less liable to be disturbed by external motion; so that it may be of great use to the public for finding the longitude and in several other aspects; and praying leave to bring in a Bill to secure these inventions, and the improvements therein, to the Petitioner. It was ordered that leave be given to bring in such a Bill. I hesitate to think what the hon. Member for Chingford would have thought if he he had been in the House at that time.

Since Dickens' days, there have been very many developments in the inevitable progress of the patents system. It was put on a firm base by an Act of 1883, which established the Patent Office, and this Act has been followed by a succession of amending Acts, each of which introduced some special features into the system. Today the patent system is based on the Patents Act 1949 and there is, I believe, general agreement that this has served the country well.

However, the Patents Act 1949 retains several concepts which are now outmoded and there is a need for substantial reform of our patent system as the 1975 White Paper clearly established. This is required for two main reasons. First, there is the need to give effect to new ideas and to provide a system which is more attuned to the present-day requirements of industry and inventors. Secondly, there is the need to take fully into account the results of the largest upsurge in international activity that the patents world has ever experienced. The British Government have played a highly significant part in this activity, in the realisation that there is obvious benefit to our industry and our inventors in simplifying the task of obtaining patent protection for their inventions in the different countries of the world.

These aims were strongly endorsed by a committee which, under the able chairmanship of Sir Maurice Banks, carried out a complete appraisal of our patent system in 1967–70. The Bill gives effect to these aims. It is designed to serve both those who are not concerned to use one of the new international routes to protection and those who are anxious to do so. It not only provides a radical reform of our domestic law and procedure but grafts on to the new domestic system the legal framework necessary for patents obtained by one or other of the international arrangements that will, in the near future, become available for use by export conscious British industry.

I do not doubt that hon. Members will find that this is a long and highly technical Bill. I find that myself. I can do no more at this stage than lightly sketch in its main features.

Parts I and III set out the new domestic code, while Part II gives effect to our obligations under international agreements. I shall mention all these later, but for now I shall refer only to the European Patent Convention, which defines a European patent law and procedure. It will enable an applicant to obtain through the European Patent Office, and by means of a single application, a European patent having effect as a national patent in as many of the contracting States as he desires. This Convention rationalises the method of obtaining patent protection in Europe and should provide significant advantage to our industry and our inventors. It is a most important development, and it was with a view to becoming a founder member, when, as expected, the Convention enters into force in the summer months, that, in March this year, the Government ratified the Convention with the approbation of all parties.

In formulating the new code, the Government were concerned to align it as closely as possible with the European Patent Convention. This is necessary in order to avoid any duality of standards as between British patents, on the one hand, and on the other, European patents which will be effective here, thereby avoiding confusion as to the patent situation and inhibiting commercial activity. This, we feel, is a strong reason for following European law. But there is yet another reason for doing this, because it will obviously assist practitioners to adopt substantially the same practice whether they are seeking a British patent, a European patent or some other patent under one of the other international agreements that we intend to ratify. Because of these needs the Government have responded to several requests in another place to produce closer alignment between the provisions of the Bill and the Convention and, to this end, a number of useful amendments have now been incorporated in the Bill.

In Part I of the Bill, basic patent law concepts are, indeed, closely modelled on provisions of the Convention. This is exemplified by the conditions of patentability, set out in Clauses 1 and 4, which, among other things, introduce the concept that an invention will not be patentable if it has become public knowledge in any part of the world, whereas the present law relies only on disclosure in the United Kingdom itself.

Clause 5, concerning priority date, is designed to give the same effect as the priority provisions of the Convention. It provides much more flexibility than the present law in that, like the Convention, it enables a single British application to attract the priorities of both an earlier British application and an earlier foreign filing.

Clause 22 reflects the patent term of 20 years which the Convention provided for European patents. This is four years longer than is the case now. I believe that this increase in length of the monopoly term is justified by the longer development time which has resulted from more complex technology and the adoption of more stringent safety and other standards.

Clause 69 reduces the existing grounds of revocation of patents to those important grounds on which European patents may be revoked. These are the grounds which are of practical importance and, although it will no longer be possible for a person to seek revocation of patent for an invention on the ground of his own secret prior use of that invention, this does no harm because Clause 61 introduces the new personal right to continue to use that invention.

Clause 119 is concerned with the fundamental question of the extent of the protection which is conferred by a patent. It refers expressly to the Protocol on the Interpretation of Article 69 of the European Patent Convention so as to ensure that British patents and European patents are interpreted here in substantially the same way as European patents are to be interpreted under the terms of the Convention.

Many amendments have been made with a view to closer alignment. I believe that these accord with the views and the needs of our industry and our inventors. But it remains true that the wording of the Bill does not, in all respects, adopt the wording of the Convention. This has been criticised in another place, but I believe that the House will accept that the wording of the Bill should be exact in terms of what is required by the law of the United Kingdom, but, moreover, I believe that the Bill does faithfully reflect the meaning and intent of the Convention provisions with which we need to be aligned. Apart from this, I should like to draw the attention of the House to the rather novel device adopted in subsection (7) of Clause 124, which is specifically intended to ensure a harmonised interpretation.

Another theme of the Bill is to provide for stronger British patents. Patents of doubtful validity result in uncertainty and can unfairly deter a competitor. This could work particularly harshly in the case of a small firm, which is not in a position to evaluate the strength of others' patents and does not wish to engage in expensive litigation.

This situation cannot be allowed to persist into the future when strong European patents will be effective here, and the Bill supplies the remedy by means of Clauses 16 and 17, which strengthen the search and examination carried out by the Patent Office. The search is no longer to be restricted to the determination of the novelty or otherwise of an invention; it is extended to the discovery of documents which are of relevance in assessing whether or not the invention is an obvious follow-up to what is already public knowledge, and this matter will be fully considered during the substantive examination which is provided for under Clause 17. This is a major breakthrough in patent practice in this country and should serve the best interests of industry and inventors.

As recommended by the Banks Committee, the Bill also seeks to remove delays. At present the information contained in a patent specification is not made available to the public until the legal requirements for the grant of a patent have been met. This can take up to three-and-a-half years. It can inhibit the activities of others, working in the same area, or it can result in a wasteful duplication of effort. As is the case for the European system, the Bill therefore provides, in Clause 15, for publication at a much earlier point in time. Recognising that this might result in piracy of an invention in the period between publication and grant, the Bill also attaches rights to the early publication which, once a patent has been granted, can be exercised against a person who infringes in the interim.

The Bill also speeds up the granting of patents in the interest of dispelling uncertainty as soon as possible. It preserves the existing feature of a maximum period, within which an application must comply with requirements or be treated as refused, but Clause 17 and other clauses also provide for a general tightening up of procedure, so as to avoid unnecessary and undesirable delays. Third party opposition proceedings prior to a grant have also been abolished in view of the delays and uncertainty which they introduce. But Clause 20 compensates for this by enabling third parties to bring their observations on patentability to the notice of the Patent Office so that they can be taken into account during the examination stage.

Another feature of the Bill concerns the enhancement of the powers of the Comptroller. As strongly recommended by the Banks Committee, and reflecting the confidence in this country of the Comptroller's court with its relatively cheap and easy procedure, Clause 69 removes existing differences in jurisdiction between the High Court and the Comptroller in revocation proceedings. Applications for revocation may in future be made to the Comptroller at any time during the life of a patent and on the same grounds as are available before the court. This removes the present unsatisfactory state of affairs whereby an applicant for revocation before the Comptroller may attack the patent only on limited grounds, and the Comptroller is obliged to refuse the application not, withstanding the fact that, if he had been able to consider the wider grounds available before the court, he would have revoked the patent.

In addition, following amendments proposed in another place, which the Government were happy to accept, the Comptroller, provided he has the agreement of the parties, has power under Clause 58 to deal with the question of patent infringement. He may also under Clause 68 assist industry by making declarations of non-infringement in appropriate cases. All these provisions, and other provisions, like Clauses 7, 11 and 34, which give a broad power to the Comptroller to determine disputes as to the rights in patents, should help to meet the frequently expressed desire to keep down the costs of settling disputes, without, of course, affecting the basic right of all citizens to take their troubles to the High Court.

In connection with litigation, I should refer to Clauses 93 and 94 of the Bill. These provide for a new Patents Court to be constituted as part of the Chancery Division of the High Court. This court will have first instance jurisdiction over actions for infringement and other matters and will also hear appeals from the Comptroller. Under the present law, appeals from the Comptroller are dealt with by the Patents Appeal Tribunal. This is technically of lower status than the High Court and its decisions, therefore, lack the same authority. The change of status provided by the Bill is justified by the need for finality of decision and the avoidance of uncertainties in the interpretation of the law. I believe that the change is welcomed on all sides.

Before leaving this brief review of the new domestic situation, I should mention Clauses 36 to 40, which represent an important development in British law. They concern inventions made by employees, the rights of ownership of which are at present regulated by the common law. This branch of the law has frequently been criticised as being difficult to ascertain, depending, as it does, on the law as enshrined in judicial precedent.

Additionally, the present law leans too heavily in favour of the employer, particularly since it allows the employer to require his employee to sign away any rights that he may have in all inventions that he subsequently makes. Furthermore, it gives no right enabling the employee-inventor to seek a reward for his endeavours over and above his usual remuneration—although the Civil Service and a number of firms operate ex gratia schemes for the benefit of their employees.

We believe that it is desirable to do more for people who invent in the course of their work, while respecting the need for employers to be free to decide whether to take up and exploit inventions made by their employees and to avoid administrative and other difficulties, which inevitably increase overheads. I believe that the scheme embraced by the Bill, which in its essentials was worked out with the help of representatives of industry and the TUC, provides a fair and just balance between the differing interests of the employer and his employee-inventor.

Clause 36 defines the rules for determining the ownership and the purpose of the clause is to introduce clarity into the law. Where, under the terms of Clause 36, the invention belongs to the employer, Clause 37 enables the employee-inventor to seek an award only when the employer has taken out a patent which has proved to be of outstanding benefit to him.

In other words, only the employer will usually derive benefit from the patent, and we think this is right since, in cases where the invention belongs to the employer, the inventor is doing no more than the job for which he is being paid. But if the patent turns out to be a real winner, we think that it is equitable to give the inventor some prospect of an award. That is what the Bill provides.

On the other hand, where, under the terms of Clause 36, the invention belongs to the employee, Clause 37 provides that he can obtain an award if the employer has taken rights in a patent for the invention and the benefit obtained by the employee from the transfer of his rights to the employer is inadequate in relation to the benefit which the employer obtains from the patent. This provision recognises that an employee and his employer have a special relationship and that it is only equitable that the employee should have a right to a review of the transaction entered into with his employer.

Jurisdiction over disputes is given to the court or the Comptroller and it will be for the plaintiff employee to choose where to lay his legal claim. He cannot be compelled to enter into protracted and expensive litigation before the High Court and it is right that he should have that option.

However, if there is in operation a collective agreement negotiated between management and the trade union, that jurisdiction is ousted. Indeed, it is expected that in most cases disputes of this kind will be settled sensibly at factory level like any other industrial relations matters, and will not proceed along the lines which would be possible.

Any award made by the court or the Comptroller has to correspond to a fair share of the benefit derived from the patent and, for guidance, Clause 38 refers to certain factors which should be taken into account. Clause 39 prevents for the future an employer taking advantage of the weak bargaining position of his employee by requiring him to sign away any rights that he may have in inventions that he later makes. As I have said, that is one of the defects of the present law which the Bill removes.

Certain changes were made to Parts I and III in another place, but although they were numerous the basic structure of the Bill remains largely untouched. Only in a very few cases were they made necessary by second thoughts on policy issues. The bulk of the amendments—not all moved by the Government, by any means—were concerned with detailed improvements and refinements in an exceedingly complex mix of substantive and procedural law.

However, the Government are concerned about the removal, on the insistence of noble Lords in Opposition, of the clause relating to inventions the publication of which is prejudicial to the defence of the realm or the safety of the public. This leaves the Bill gravely weakened. Without that provision, the protection of inventions in the defence field would be impossible, and the Patent Office would be obliged to publish the inventions the knowledge of which could do great harm to the public. Therefore, we propose at a later stage to reinstate that provision in the Bill.

Also we have doubts about the changes that have been made concerning the term of 1949 Act patents, and this is being urgently considered by the Standing Advisory Committee because the relevant provisions were firmly based on recommendations of that Committee.

After reflecting further on the debates in another place, we have decided to take powers to enable the comptroller to make rules to enable him to be assisted by outside advisers when dealing, for instance, with disputes about employees' inventions or compulsory licences under the provisions of Clause 45.

As well there is a small number of outstanding points, some of which are purely drafting, which may need attention in Committee.

Mr. John Lee (Birmingham, Handsworth)

Before my hon. Friend comes to his peroration, will he say a word about the powers of the Crown to take over proprietary rights? I think that the provisions of Clause 62 of the Bill are most applicable here, but the equivalent provisions in the 1949 Act were rarely used. I can think of instances where they might have been used, for example in regard to proprietary medicines. Will it be Government policy, if these provisons are repeated, and not whittled down, to use them rather more extensively than in the past?

Mr. Davis

My hon. Friend does me a great service by thinking that I had a peroration in a speech about patents. I do not know how this will operate in practice. Certainly we have inserted the provision in the Bill. Maybe my hon. and learned Friend will have some wise words to say about that when he winds up the debate, because I can think of none at present.

Mr. Richard Wainwright (Colne Valley)

Will the Minister enlarge just a little on the thoughts that he gave the House about the Comptroller being able to have outside advisers? Are these to be more than scientific advisers or can they come from the general area of business? Will they always sit with the Comptroller or will the Comptroller call on advisers when he thinks fit?

Mr. Davis

I understand that they will not be scientific advisers. There is power for scientific advisers to be recruited in certain circumstances under the rules of court, but in this instance they are not scientific advisers.

Before closing I must mention briefly Part II of the Bill, which contains an important group of clauses desgined to give effect to our obligations under international arrangements. I have already referred to the European Patent Convention and indicated its significance, and I need only say now that Clauses 75 and 76 are the main provisions for giving effect to our obligations under this convention.

There is also the Patent Co-operation Treaty of 1970, the Community Patent Convention of 1975 and the Council of Europe or Strasbourg Convention of 1963. The latter provides for harmonisation of certain basic concepts of patent law. It is Part I of the Bill that implements our obligation under this agreement, an agreement which is not only the foundation on which the other international arrangements have been constructed but also serves the interests of those who may still wish to obtain patent coverage in Europe by the national route.

Then there is the Patent Co-operation Treaty which provides for a potentially worldwide system for sharing the work of processing national applications. This promises substantial benefit for patentees and a reduction in the burden on national patent offices. Clause 86 is the main provision for giving effect to this treaty.

Finally, Clause 83 makes the provision of the Community Patent Convention part of our national law. This convention goes further than the European Patent Convention in that it provides for a single patent to be obtained via the European Patent Office, a Community patent having a unitary and autonomous effect throughout the Common Market.

As explained in the 1975 White Paper, the Government intend in due course to ratify all these conventions. They are closely interlinked and also bound up with the new domestic code set out in the Bill and, when they enter into force, they should greatly benefit both industry and inventors in the United Kingdom and elsewhere in the world.

In dealing with something as complex and esoteric as this subject perhaps my speech may be likened to the situation in court when after half-an-hour's peroration of convoluted arguments on behalf of his client, during which no one had the faintest idea what he was talking about, counsel became aware of a growing restlessness. He said to the judge "Is your Lordship following me?" The judge replied "Only just, but if I thought I could find my own way back, I would start right now."

There have been times when I have felt like that myself in trying to speak on this complicated subject briefly and in terms that I hope are comprehensible to the House. I hope that I have shown that it is a worthwhile and indeed a necessary measure. I commend it to the House.

5.27 p.m.

Mr. John Nott (St. Ives)

This Bill, which the Under-Secretary described with considerable eloquence, is a very important item of legislation.

I congratulate him on managing a little joke at the end of his speech, given that he did not feel able to have a peroration. Of course, this is not a subject that easily provokes a joke. Nevertheless we were glad to hear one in the Under-Secretary's speech.

In speaking in this debate my purpose is limited and twofold. First of all, I want to congratulate the House of Lords on the remarkable task that it has performed in examining the Bill, and I think that in doing so it has greately improved it. Secondly, I want to draw attention to aspects that need to receive greater study in Committee.

It is our purpose on this side of the House to further the progress of the Bill to Royal Assent in every possible way. I cannot see much purpose in reopening a number of matters of a slightly contentious nature that have already resulted in a compromise agreement between parties outside Parliament. Clearly, though, some of the contentious matters will be touched upon in Committee.

Nor do we need to have a complete repetition of the many debates that have already taken place in the House of Lords. It is possible for Parliament to drown itself in an orgy of words. This is the first year in my 11 years in this House that I have not served on the Finance Bill Committee and the House will know, when it thinks of the Finance Bill Committee, what I mean by an orgy of words. In this case, perhaps we can swim peacefully towards Royal Assent, although there will be some points that we shall wish to raise in Committee.

If the Minister can restrain himself from jumping up and down and being provocative during the course of this measure, we shall help him to get his legislation with the minimum of fuss. If, on the other hand, the Government decide to open up one end of any package agreement made in another place, we shall feel free to open up the other end. But as things are, I think that we can probably agree to the packages as they stand.

My first task is to comment briefly on the work of the House of Lords. I know of no other recent measure about which we can say so emphatically that their examination has been thorough, detailed and conducted with considerable knowledge.

Governments have tried to reform the House of Lords—normally unsuccessfully. Indeed, some noble Lords are not devoid of a passion to reform themselves. One must wonder a little at their reasons, because the other place in its recent behaviour has acted both as an excellent constitutional safeguard and, in the case of the Patents Bill, as a first-rate legislative Chamber. I wonder why we need to reform it at all. I appreciate that some Labour Ministers who pose as libertarians wish to abolish the House of Lords. Whatever criticisms Labour members may have of the House of Lords, on this occasion noble Lords have shown their undoubted experience and knowledge in an esoteric and specialised field.

Throughout the passage of the Bill several noble Lords with a lifetime of experience in patents tabled amendments and made excellent speeches. I wish to refer particularly to the noble Lords, Lord Belstead and Lord Lyell. They commenced the passage of the Bill with only a limited knowledge of patents, but they impressed their friends with their application and dedication. Indeed, they astounded favourably many experts by the manner in which they conducted themselves in the debates on the Bill.

The Bill is now before us, and I should like to make one cri de coeur. It is a simple admittance that the House of Commons seems, not unnaturally, to be rather devoid of the expertise that existed on this Bill in the House of Lords. Until last Thursday I was only vaguely aware of the world of patents—a specialised, complicated and technical subject. I regret to say that those of my hon. Friends who are competent in this subject are embroiled in the Criminal Law Bill and the Finance Bill, both of which are being dealt with upstairs. I hope that we may have the Government's co-operation—because we are anxious to hasten this Bill to Royal Assent—as to the starting date of the Bill in Committee, which is most important because we have a great deal of preparation to carry out. It will save a great deal of time if we are well prepared for the Committee Stage. Secondly, it would be helpful if some of the lawyers on this side of the House were free to give some assistance on this measure, which at the moment they are unable to do. I am not sure that the assistance of lawyers helps any measure to Royal Assent, but we could do with their presence just the same.

Mr. Clinton Davis

Is the hon. Gentleman thinking of putting an advertisement in a local firm of stationers?

Mr. Nott

We might try that as well. That kind of intervention is perfectly acceptable, and I am sure that it will not delay the Bill.

I was tempted to embark on the history of this measure and its undoubted importance, but I shall not do so in view of the limited number of people who will read this debate—and those who do so will probably know all about the history of patents already. Therefore, as the Minister went through the history of the subject, I shall launch straight into the details of the Bill.

It has become a matter of considerable urgency in the past few years for our patent law to be rewritten in such a way as to enable the United Kingdom to ratify the European Patent Convention. The entire private sector in the patent system—the chartered patent agents, members of the Patent Bar and solicitors operating in patents—have been pressing for prompt legislation. In the United Kingdom, which has for many centuries been the cradle of the patent world, there has been strong concern that we should be the founder members of a European patent system.

Those concerned with patents in many areas of activity have been deeply concerned that the United Kingdom should be party to the European system so that we could satisfy existing clients and potential new clients, especially those in the United States and Japan, that we would be able to act for them in securing European patents. If that were to happen, it would not be necessary for Americans and Japanese to channel their European patent work through patent professionals in Munich or elsewhere in the Federal Republic of Germany.

The fact is that, despite some delays, we now have the Bill before us and there is little point in jobbing backwards. We are delighted that the Bill is in sight of becoming law. Undoubtedly, when it came to legislation those involved with drafting have been concerned with matters of tremendous complexity. There were the interwoven webs of four separate but inter-related patent systems; the national patent system, which was undergoing its greatest revision ever; the international system, under the Patent Co-operation Treaty, which was signed by about 46 countries in Washington in 1970; the European system under the European Patent Convention, which was eventually signed by 14 States in Munich; and the Community system, which the Nine had signed in Luxembourg in 1975.

Clearly, the original drafting of the Bill had to be rushed. Rightly, it has been considerably rewritten during the first part of its parliamentary journey. It spent 11 days on the Floor of the House of Lords and involved 37 hours and over 16 weeks of work in the Upper Chamber. I am told that it earned the dubious honour of being the most amended Bill ever to have passed through that House in modern times.

I was not entirely happy that we were expected to deal with this Bill today, Wednesday, when up to Monday morning, at least, the interested people outside the House of Commons had not seen a print of the Bill as introduced into this House. I am not even sure that they have now seen it.

Mr. Clinton Davis

Yes, they have.

Mr. Nott

The Minister says that they have now seen a print, but that was certainly not the case the other day. It has not been circulating for more than a short period of time, and it has caused difficulties for interested parties outside the House because over 200 amendments were made in the upper House. However, I shall not dwell on that matter now.

There is one problem which arose because of the inadequate initial drafting of the Bill. The measure which has now emerged from the other place is in very much better shape than when it was first published. Certain noble Lords were not entirely satisfied on some occasions when they tabled amendments that the Government tended to take the view "We wish you to withdraw the amendment because we are not happy with the drafting", but Government spokesmen in the other place did not, at the time say precisely what the Government wished to put in place of the withdrawn amendment. Therefore, in Committee we shall inquire in a number of cases involving complaints made in the other place about drafting, where no reason was given as to why the Government wished to withdraw the amendment and no explanation as to what was to be substituted.

One such occasion arose when Lord Nelson sought to add a reference to the "marketing" of the product. The amendment was taken away for consideration by the Government, who came back at the next stage with the explanation—not that they took a certain view of the matter but that the parliamentary draftsman did so, namely that "marketing" was already subsumed within the reference to "working" in the Bill. We may want to consider that matter again. It is a drafting point perhaps, but there are a number of items of that sort which bother us and on which we shall wish to touch in Committee.

Before I turn to other matters which we may want to look at in Committee, there is one more general point that I wish to make. It concerns the ratification and the eventual coming into operation of the European Patent Convention. We sent off the instrument of ratification on 3rd March. I believe that that made us the third country to send in such an instrument, only the Federal Republic of Germany and the Netherlands having done so before we did. That is satisfactory. We are founder members, as befits our traditional position in the development of patent systems; and, unusually, ratification in this case was effected without our first bringing our domestic law into accord with that of the treaty we were ratifying. Instead, it was done on the strength of the Second Reading in another place.

I hope that it is widely known and recognised that the official Opposition gave their agreement to this procedure, presuming that the eventual enactment would tie up with the ratified Convention. We are glad to have done so, but we are anxious to see total ratification as soon as possible. Perhaps the Solicitor-General can tell us when he thinks the European Patent Convention is likely to come into operation.

I have some matters which I propose to raise in Committee, all of them arising out of points put by my noble Friends. Two of them in particular were directed to facilitating the obtaining of relatively inexpensive rulings on patent disputes. We were anxious that there should be, as far as possible, effective machinery available for disposing of matters in dispute without the necessary intervention of full dress High Court proceedings.

In the Lords, there was the matter of res judicata or issue estoppel, which was raised in Committee, on Report, and on Third Reading, Ministerial acquiescence being secured only at the last of those three stages. Our provision permits someone sued for patent infringement to defend himself even though he may earlier have unsuccessfully run his defence in an attempt to secure the revocation of the patent in proceedings at the Patent Office. This is important, for a prospective infringer of a patent which he believes to be invalid ought to feel free to attack that patent at the Patent Office level without fear of being left defenceless in High Court proceedings. In the event, as I have pointed out, the Government accepted on Third Reading the proposals my noble Friends had made on this point.

The other point added to the Bill at my noble Friend's instance is the provision for infringement disputes to be taken to the Patent Office for settlement, on the agreement of both parties and without limitation as to the amount of damages that may be awarded to a successful patentee. There was a similar provision in the 1949 Act but there there was an upper limit of damages of £1,000 and it was not much used, probably due to that limitation on the amount of damages. This, again, is something to which we want to stick, and I believe that the Government will be happy that that should be so.

There is, however, one aspect of that change at which we may wish to look in Committee, and that is whether it should not perhaps be extended so as to become available not only to patent owners but also to those who hold exclusive licences. I do not understand the procedures clearly as yet, but I believe that they are somewhat similar for those who hold exclusive licences as for those who hold patent rights.

One of the greatest worries of my noble Friends, which was, indeed, equally a concern of the Government, was to see that there was no duality of standards as between the patent protection in the United Kingdom, which could be obtained by the national patent route, and that which could be obtained through other conventions.

What has emerged on this occasion is the principle of legislating in a United Kingdom statute, not by writing in provisions which it is hoped will be found to correspond to those of a treaty but rather by incorporating by reference some of the words of such a treaty. The Under-Secretary of State said that we must draft our law in accordance with British law, but it will be interesting to see, in this somewhat novel procedure, if we draft details of foreign treaties into our law, using almost the same words, whether our courts are likely to find in a similar way to the courts overseas, because where the question of duality is concerned this is an interesting and important issue.

I must apologise to the House, because this is not the most exciting speech that I have ever made.

The Solicitor-General (Mr. Peter Archer)

That is understandable.

Mr. Nott

I am glad that the Solicitor-General understands it, because I must confess that sometimes I am a little concerned whether I do myself. But I have not far to go. I come now to rather more general issues.

We are glad that the Government are not to seek to reintroduce the provision for the compulsory licensing of pharmaceutical patents, which was struck out of the Bill in another place. The Banks Committee had recommended clearly and unanimously that that discrimination against one of our industries should be repealed. The Conservative Government accepted that recommendation in November 1970, but, as we know, the present Government initially thought otherwise.

My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and I—and, I think, the pharmaceutical industry—were pleased indeed when the pharmaceutical industry was put on the same basis as other industries. We think that the Government are wise to have accepted the recommendation that Section 41 of the existing Patents Act should be repealed on the basis that Section 46 of that Act—the provision which the right hon. Member for Down, South (Mr. Powell) invoked when he was Minister of Health—gives the Government all the protection they need against the abuse of patent rights by a private company in face of Government interests.

My right hon. Friend the Member for Wanstead and Woodford stated in November last that the Government had no need to retain Section 41, which I am sure was seen by the industry as a very severe threat to the integrity of a patent which it might wish to register. Since there is enormous investment in research by the pharmaceutical industry, I am sure that the agreement that has now been reached—I have been given the details of it today—is a happy one, and I hope that there will be no attempt in Committee to dislodge it. I am sure that that will not be attempted.

There are many other points on which our views elsewhere were accepted, and as they are a matter of record and as time is limited, I shall not go into all of them now. Suffice to say that we are glad to have secured a right of appeal from decisions of the Patent Office in regard to the dates to be attributed to patent applications, to have secured a right of privilege for clients' communications with their Scottish patent agents or other representatives in Scotland, and to have secured some protection for agreements between employers and employees regarding the protection of the confidentiality of inventors and other information which might be available within companies.

It is extraordinary that the Bill as originally drafted should have allowed employees to reveal secrets of their own firms, and we are relieved that Lord Nelson's amendment putting the matter right was incorporated in the Bill. I imagine that the omission was an oversight in the first place rather than anything else.

There are one or two other matters about which we may want to look in Committee and which may, in the minds of the Government, lie within the realm of controversy. The official Opposition in the other place forced only one Division—on the question of whether an applicant for a patent may continue, as in the past, to feel free to publish or use his invention as disclosed in his patent application just as soon as he has lodged his patent application. I know from my business experience that the ability to carry on as soon as a patent is lodged is a most important issue and I am glad that my noble Friends divided on the matter. Again, I imagine that the Government will not seek to change the position back.

There is the whole area of statutory codification of the law governing the ownership of inventions made by employees and the provision of a statutory award system. I believe that Banks recommended against any statutory scheme and in favour of voluntary schemes. I am aware that there have been differences of views with regard to employees' inventions, but in my view what has emerged is probably a reasonable compromise. It is in the nature of a package agreement, and although we shall wish to have a debate in Committee, I personally would not wish to open up one part of this package and to throw the whole rather controversial subject into debate again. The view seems to have got about—I have been asked to say this—that the statutory provisions in the Bill on employees' rights were recommended by the Standing Advisory Committee on Patents. My information is that the Standing Advisory Committtee did not favour a statutory scheme but that a working party selected from among its members was asked to try to agree what should be contained in such a statutory scheme on the basis that the Secretary of State for Trade, following Cabinet discussions, had laid down that there was to be a statutory provision notwithstanding Banks.

Perhaps I need only say that the compromise arrangements look susceptible to misunderstanding and possible disagreements within firms and that the proposal will probably have to be looked upon as somewhat on a trial basis. Although we shall wish to debate this, we do not want to open up the whole area again. But I am told by people who work within the industry—I know there is concern among employers—that conflict could be set up within firms. We therefore must regard this proposal as being on somewhat of a trial basis.

Upstairs we may also want to look at the clause dealing with the termination of patent licences on the termination of the patents with which they are concerned. We are not satisfied that if such a clause is retained at all it should extend not only to terminate the licence under the expired patents but also to terminate any know-how licence and any licence under corresponding foreign patents which may continue in force. That does not mean much to me, but I hope that it will mean something to the officials when they read it in Hansard tomorrow morning. It is purely a warning of what we intend to raise in Committee when we understand it.

Another matter that we shall need to raise is whether the provision regarding restrictive covenants in patent licences should or should not permit a licensor to require that for quality purposes any un-patented ingredient of a stipulated purity or other specification should be employed notwithstanding that for the time being that raw material can be obtained only from the licensor or among United Kingdom suppliers. That is obviously crystal-clear to the House and I need not elaborate any further.

I now turn to an important point on which there is some disagreement. Some of my right hon. and hon. Friends may want to take up the question whether chartered patent agents qualified to practise before the European Patent Office should be better enabled by legislation to call themselves European Patent Attorneys in parallel with the usage in Germany and elsewhere. I know that the Solicitor-General will be saying a few words at the end of the debate. I want to express my own personal prejudice in this regard. I happen to be a qualified barrister never having practised, which is worse than not being one at all. I personally would not wish to see professional bodies—I am referring to the Law Society—which are understandably conscious of their members' interests and seeking to protect them, use their position to restrict the activity of other professionals. I refer to patent agents who by calling themselves attorneys thereby might more easily obtain business to compete with overseas patent agents, because it is in everyone's interests that our patent agents should obtain the maximum amount of foreign business.

It seems to me that it will help them if they can call themselves European Patent Attorneys. I understand that the legal position is relatively clear—that there is no exclusive right held by others which prevents them from calling themselves attorneys. That seems to be the legal position. But there has been uncertainty about it and, of course, we are talking about them calling themselves attorneys when practising abroad.

We shall listen carefully and sympathetically to what the Government spokesman may say with regard to the possible reinstatement of clauses concerning information prejudicial to the defence of the realm or the safety of the public.

I now turn to the most difficult of all the matters still outstanding and that is the whole question of the two and five year periods. The Opposition will want to see whether the Government decide to put forward a modification to the latest proposed for the life of old patents—patents granted under the old Act. Assuming that some of these should be given the possibility of continuing for up to 20 years, instead of up to 16 years, should this apply only to those having five or more years to run, or to those havink two or more years to run, or to some other tranche of old Act patents?

In the Lords the Government came forward rather abruptly with an amendment to insert a five-year period, but the Liberal peer, Lord Lloyd, forced an amendment and we now have a two-year arrangement in the Bill. There is a difference of view on this matter. There are some interests in industry that would like to see a return to five years but there are other interests that would like to leave the Bill as it now stands. I understand that the Under-Secretary will have a meeting about this to try to resolve the conflict. I do not know whether it is resolvable, but for my part I shall be happy if some compromise agreement can be arrived at which satisfies all parties. It may be the case that agreement cannot be reached outside the House but for the time being the Opposition will retain an open position on this matter.

I opened with a passing reference to the haste with which this legislation had to be prepared. I close by expressing the hope that the formulation of the rules to be made under this legislation should not be correspondingly rushed. They will also necessarily be very complex and the authorities will want to consult the expert practitioners outside as they have done to such good advantage with this legislation.

I apologise to the House for going on for rather a long time. I have not covered all the points. There are a number of other matters that we may wish to touch upon in Committee, but, as I have said, we shall try to narrow down the amendments that we table to relatively few. We are not seeking to have any very lengthy debates in Committee. We do not wish to go over all the old ground again. It really will be very much in the Government's hands as to how long we have to spend upstairs, because I would anticipate that the Government are likely to table many more amendments than we ourselves.

So, on this important and extremely technical and complicated piece of legislation, we shall do our best to master the outstanding issues by the time it reaches Committee, and I hope that there we can discuss in greater detail some of the points that I have touched on today.

6 p.m.

Mr. Laurie Pavitt (Brent, South)

After the erudite and able way in which the hon. Member for St. Ives (Mr. Nott) wove his way through the 126 clauses of the Bill, I regret to have to disappoint him on two counts. First, I intend to return to the contentious aspects of the Bill. Secondly, I have to tell him that he overrates his colleagues in the House if he believes that we are all experts in patent law. I am not an expert in patent or any other law. I find the whole process of wading through Acts of Parliament formidable and scaring at times, and I am grateful for the way in which my right hon. and hon. Friends on the Front Bench can from time to time put me right on matters which I find it difficult to understand.

Perhaps I may say one thing in mitigation. The hon. Gentleman asked that we should not indulge in an orgy of words, and I can assure him that I am not one of the most loquacious Members of the House.

I wish to refer to the missing clause, Clause 49, which was deleted in another place. Hon. Members will know that my interest is mainly in the provision of health care under the National Health Service. Clause 49 was simply a replacement of Section 41 in the original Act. That dealt with the whole way in which the pharmaceutical industry and others engaged in making similar products could be protected. The pharmaceutical industry has a large research and development programme and there has to be some protection for the investment that companies put into that.

It is 10 years since the Banks Committee was first set up. It takes some time to get legislation through this House. Those of us who concern ourselves with health matters were naturally interested to know what would happen to Section 41 in the new Bill. My anger at the elimination of Clause 49 by the other place has been tempered somewhat by the voluntary agreement reached between the industry and my right hon. Friend the Secretary of State for Social Services. But I am still not entirely satisfied. I have had a great deal of experience of voluntary agreements in industry. It goes back over a long period and covers the voluntary price regulation scheme for pharmaceuticals and the schemes that preceded it. Under such schemes those who are seeking to negotiate a good deal for the taxpayer always seem to come off second best.

I have a love-hate relationship with the pharmaceutical industry. Look at the way in which modern drugs kill pain and heal the sick. We should consider the classic case of the elimination of tuberculosis. Without drugs that would never have happened. Consider the part that drugs play in any major operation. Consider also the fact that 46 per cent. of hospital beds are occupied by those suffering from mental illness or disability and the part played by drugs there. Consider how, for example, the whole scene on epilepsy has been transformed. All this is due to the research carried out by the pharmaceutical industry. That is the love side of the relationship.

When an industry has done so much good, however, there is inevitably a reaction against what appears to be excessive profit-making by that industry. I fear that as a result of eliminating Clause 49, excessive prices might be charged. The hon. Member for St. Ives touched on the subject and pointed out that the Secretary of State for Social Services had other weapons in his armoury. Only last Sunday, however, there was a report in the Observer describing how the taxpayer was paying three times the correct price for a particular drug. I hope that we shall look further into this matter in Committee. I concede that the Banks Committee recommended that the provisions of Clause 49 should go.

Various Ministers of Health have sought over the years to contain the drugs bill in the National Health Service. Strangely enough, the only Minister to have any marked success was the right hon. Member for Down, South (Mr. Powell) who invoked the Patents Act and succeeded dramatically in reducing excessive profits on drugs. Since then, Ministers on both sides have been asked to do something to contain the £500 million that the taxpayer pays for drugs. I am convinced that, good as the agreement with the Association of the British Pharmaceutical Industry has been, it is not good enough. Often the taxpayer has had to pay out large sums as a result of the way in which research has been used, not to find a new drug to do a new job but to produce a new variation of an old drug which enables another company to enter the competition and make a profit.

I think that I am alone in this House in believing that health care should be taken out of the market place. People who do the research should be paid an adequate reward for their services, as should the doctors, nurses, consultants and others. Perhaps I am a little puritanical in believing that it is not right at any time to make a profit out of those who are sick or disabled, any more than it would be right to make a profit from selling white sticks to blind men.

We therefore have a commercial situation on the one hand and the compassionate care of the sick on the other. Therefore, the Government should have the strongest possible weapons for dealing with profiteering. Although the Government might not be anxious to use Clause 49, it should be at their disposal, because without it the pharmaceutical industry has another advantage in the negotiations.

I am concerned about another point relating to Clause 2 and its effect on the pharmaceutical industry. Before the Banks Report there was the Sainsbury Report. That first report stated—the situation has not altered a great deal since then—that of all the drugs purchased by the NHS, 49 per cent. were produced by American companies and only 23 per cent. by companies based in Britain. Therefore, the way in which the Bill will operate on the international scene and the new arrangements provided in Clause 2 will have a special bearing on the price we are likely to pay for drugs.

The voluntary price regulation scheme partly provides that in fixing a price attention must be paid to the price which is charged overseas. Therefore a strengthening of the patent arrangements which exist between this country and others could benefit British users of drugs which are produced by the multinationals.

During our Common Market debates it was suggested from both sides that the EEC might enable us more effectively to contain multinational companies—some of which have bigger budgets than some member countries of the United Nations—than individual States were able to do. Clause 2 extends some of these powers and therefore I welcome it.

I hope that the fact that this concession has been given to the pharmaceutical industry and that their Lordships' amendment has been accepted will not encourage their Lordships to think that they have been given the green light to interfere with legislation from this House whenever they like. Secondly, I hope that it will not mean that the arrangements being made, recently announced by the Secretary of State—which will be closely scrutinised by many of us—will be affected by the elimination of the original Clause 49.

In the main, I commend the Bill to the House. It makes a long-overdue reorganisation of the original Act. I do not envy the lawyers who have had to draft it or those who will have to interpret it. As I have said, I shall be grateful to those of my colleagues on both sides of the House who have far more knowledge of these matters than I shall ever have if they will take on their shoulders the responsibility for everything save the matter in which I am interested, since I am totally incapable of taking it on myself.

6.11 p.m.

Mr. David Crouch (Canterbury)

It is always a pleasure to follow the hon. Member for Brent, South (Mr. Pavitt) in debate. He has often followed me in debate and has made the same kind of smooth and happy remark, but it is a genuine pleasure. So often we follow each other in fundamental disagreement, but never in any spirit of animosity. I have great respect for the hon. Gentleman's views on health care.

Mr. Pavitt

That respect is reciprocated.

Mr. Crouch

I thank the hon. Gentleman very much.

I declare an interest at the outset. As the hon. Gentleman and, I think, most of the House know, I am very much involved in the pharmaceutical industry.

The Under-Secretary and my hon. Friend the Member for St. Ives (Mr. Nott) have made this rather dry Bill as interesting as any two Front Bench speakers could have done, and I congratulate them both. Several times during their speeches I found occasion to smile, but I do not think that the House will burst into laughter on many occasions during my speech. I recognise that I am treading on rather thin ice. When I first came to the House, I was often asked by the Whips to come and speak on any subject. I was told that I could learn what to say by studying what their Lordships had said in another place. It was only after I had been a Member for some time that I realised that the Whips thought that I was a lawyer and that I was therefore able to pick up a brief at the drop of a hat. However I am not a lawyer, and I find this a difficult subject to which to address myself.

I listened to the debate in the Lords on a number of occasions, and I was interested in the Lord Chancellor's speech on Second Reading, because part of what he said touched on my own experience. He spoke about the importance of the Bill and generally about industry in this country, which is highly innovative and which relies heavily on patents for protection so that firms can enjoy the benefits of innovation and invention. The Lord Chancellor explained that this was why it was necessary to upgrade the patent law, which had become somewhat out of date; hence the need for this Bill.

The Lord Chancellor mentioned the man-made fibre industry, in which I used to work many years ago. He said that this was an industry that had benefited greatly from the operation of the Patents Act as a result of inventions that had earned a great deal of money for this country and had enabled a number of firms to invest hundreds of millions of pounds in certain developments, such as nylon and particularly terylene, which is polyester fibre, the product with which I used to be associated.

I am interested to see that certain clauses relate to the question of who owns a patent or invention. Under the 1949 Act—and as is still proposed by this Bill—it is the employer who has the right to an invention developed by a research chemist, research physicist or anyone else in his employ. Some new light is shed on this problem—perhaps light at the end of the tunnel—to help employees who have the job of seeking out inventions and finding new projects. There is now some promise of reward for people who do such work and who often make remarkable discoveries.

I worked in the early 1950s with one of the most distinguished inventors that we have ever had in this country. He invented an entirely new product. He did not regenerate something but created a new molecular structure, polyester fibre, which was a British invention. He did this whole working in Accrington, Lancashire, for a company called the Calico Printers Association.

He had been working for 20 years in pursuit of this development. He told me that he had the idea of developing a new structure and a new fibre because he had worked after the First World War with one of the original inventors of viscose rayon. Many people claim to have invented viscose rayon, but he had worked with the firm of research chemists in High Holborn which had done it.

He did this after coming down from Cambridge, where he had had a distinguished career, and he was so excited at having worked with some chemists who had succeeded in breaking such a barrier in the early 1920s that he decided that he would like to do the same. Exactly 20 years later in Accrington he created a new molecular structure, which we call terylene and which is known throughout the world as polyester fibre.

Investment in this one invention has totalled thousands of millions of pounds. It has been of great benefit to this country, not merely to the company concerned and others associated with the original company. The royalties coming in as a result of patent protection have been very great, and of great benefit to this country in bringing in money from overseas.

The name of that man, who is now dead, was John Rex Whinfìeld, who was well known in Lancashire and in the synthetic fibre industry. The patent rights in this country for his invention were obtained by ICI, for which I used to work. I remember the occasion when we launched the product and had a great Press conference attended by 200 or 300 journalists. I cannot remember whether it was Marjorie Proops or some other well-known Fleet Street journalist, but someone asked Mr. Whinfield "Well, what have you got out of this?" He held up his glass and replied "A large pink gin". He was not ill-treated by his company. In fact, he was generously treated, and he had the satisfaction of doing an interesting job and knowing that he had created something of such a worthwhile nature. However, I was very struck by his remark and the fact that he had nothing out of his invention except the way of life that he was able to enjoy, which was not that of a rich man.

I am glad that in Clauses 36 to 40 there is some recognition of the need to upgrade the relationship between the employee and the employer in this matter of innovation and reward. What I have just said was purely by the way. I do not want to detain the House, but I thought that it was rather an important byway.

I suppose that I am treading on ground that is not really my own. Today is an occasion for the experts and the patent lawyers, but the House is thin on patent lawyers, although not so thin on learned Members in general. However, although my hon. Friend and the Under-Secretary may say that the Bill is dull and dry, it is not a Bill only for patent lawyers. It affects all of us. It concerns health care. It affects everyone in the country, because it is an essential part of sustaining industry and protecting people.

I wish to say something on a matter touched upon by my hon. Friend the Member for St. Ives, the 20-year term proposed in the Bill to replace the present 16-year term. It is absolutely right that the term of a patent should be increased by four years. How the figure of 20 years rather than 16 years arose is neither here nor there. It is an arbitrary figure, but it is right. It is in line with the European period for the life of a patent. I maintain that the 20-year period is one of the major planks in the platform on which the Bill rests.

In the other place the Government wanted to limit the opportunity of existing patent holders to enjoy the benefit of this advance to 20 years in a way which I shall describe. It is known as the five-year rule.

The Bill was amended by an amendment proposed by Lord Lloyd of Kilgerran, a distinguished patent lawyer who played a great part in steering the Bill through its interesting passage in the other place. I believe that he corrected this error, again with an arbitrary figure.

The noble Lord removed the parsimony with which the Government had treated existing patent holders by saying that it was not right to deny the benefit of this decision to those who already had patents that had been running for some years. The Government suggested that new patents should last for 20 years but that existing patent holders should not enjoy that benefit if their patents had been running for a certain number of years.

Lord Lloyd of Kilgerran removed that element of parsimony to some extent by proposing and having accepted an amendment permitting existing patent holders to enjoy the extra four years provided that their patents had not been running for more than 14 years of the present 16-year life of patents. I think that I have it right. The Government originally wanted to limit this benefit to patents that had not run for more than 11 years. There was an age gap of three years between the Government's original intention and the amendment and the Bill as it now is. Their Lordships wisely recognised the need to bridge that gap. They did not go all the way—there is a reason for that—but they granted another three years' patent life.

This is an important point. Perhaps we should not make this protest. Methinks that I "doth protest too much" about it. It may be that I am pushing at an open door. However, Second Reading provides the opportunity to express a welcome for the Bill and to go over some of the interesting arguments in the other place.

The Bill establishes the term of a patent as being 20 years. It is a recognition of the need for a longer period in which to work a patent. I think that point is universally accepted. It applies particularly to areas where research is expensive and long. One such area—there are others—is the area of which I have particular knowledge—the pharmaceutical industry.

I listened most carefully to the hon. Member for Brent, South and I made some notes. The hon. Gentleman is anxious that the Government—they are 95 per cent. the customer of the pharmaceutical industry—should have the ultimate weapon to hold down prices. Rightly, he cannot stomach any more than I can profits being made out of the sick.

In politics and in Government there are many difficulties. Logic does not always apply. However, there must be a moral judgment. There can be no question of making profit out of the sick. But, as the hon. Gentleman rightly said, the pharmaceutical industry must advance if it is to continue.

Britain has one of the most advanced, innovative and inventive pharmaceutical industries in the world. We are lucky. It is a young industry, but it has developed rapidly. Many of the participants in the industry in this country are not British. They come here to enjoy the enormous background and back-up of a scientific and medical base that enables the complicated science of pharmaceuticals to develop.

We do not have a lot of copyists. We have an innovative and expanding industry that is contributing considerably to our export earnings. In this country drugs are carefully monitored by the Medicines Commission. They go through Government controls of absolute strictness. That is essential, as we have learned during recent years. Having gone through those controls, a drug is seen to be a successful breakthrough, a cure for disease, and it can find markets all over the world, whether it be for animal or other general health care.

Mr. Pavitt

I agree that is in our own self-interest and to the advantage of our balance of payments for every industry to export as much as possible. However, has the hon. Gentleman seen the results of exports of pharmaceuticals to developing countries in the Third World? Some of the effects have been disadvantageous. They have been advantageous to us because of the exports, but disadvantageous to people there because of the consequences for their health.

Mr. Crouch

These features must be carefully watched. I should be the first to subscribe to the argument that they should be watched. Drugs should not be misused.

I do not want to go into another type of debate, but I have usually seen drugs being misused only in countries which can afford to over-prescribe. There are many countries, even in the developing world, where the top echelons of society tend to over-prescribe. That is a waste of valuable drugs. Strangely enough, it does not happen in this country.

It was wrong in the past to have a sword of Damocles hanging over the industry by virtue of Section 41 of the Patents Act. It would have been wrong to leave the original Clause 49 in the Bill. There is a better, though not necessarily more comfortable, way for the Government to exercise the control that they obviously need to have over the pharmaceutical industry because, as I said, they are the major customer. That is by negotiation between the Minister and the industry. It is called voluntary negotiation. But, let us make no mistake about it, it is voluntary if one wants to stay in business.

The Government have control over the prices that can be charged. They can encourage the development of a drug and its use by general practitioners, hospitals and pharmacists. There are many levers of control in the Government's hands which are understood and recognised by the industry. However, the industry is saying that, if the Government hold the threat above it of a clause which provides that, at the drop of a hat or the whim of a Minister, they might open the gates by making patents available to others who can come in and enjoy the big market, the innovative side of the industry will pack its bags and leave this country.

Many pharmaceutical companies are multinational. It is as easy to develop research in Calais as in Dover. It is easy for them to go to Germany, where there is just as good an educational back-up as in this country. Indeed, in some smaller countries—the Netherlands and Denmark, and even Belgium—there is a sufficiently good educational back-up to encourage the taking of a complete research department of several hundred scientists and establishing it there.

The company in which I am interested is an American one. It has recently shown confidence in Britain by enlarging its research base in this country. It has become the second biggest research department in the world, including those of all the multinational companies. It is second in size to only an operation in the United States and it employs about 500 people in this country, 75 per cent. of whom are graduates.

That shows a respect for the opportunity that exists in this country to develop products that will be sold world-wide, and it also shows respect for the fact that there is sufficient patent protection in this country to make it a worthwhile investment. This is not meant to be a commercial break but I wanted to answer the point.

In connection with this industry I want to refer to the extension of patent life in Schedule 1 of the Bill. Perhaps I am nit picking, but the pharmaceutical industry is much concerned with the length of life of a patent. With many products, once one has filed one's application for patent, one may go into production within a year, but that is not so in the pharmaceutical industry. The average time is six years and it may be as long as 10 years before a product is on the market, because it must be tested by the Government and pathological and scientific tests must be completed before such a product may be sold.

Even if the average is only eight years, that means that eight years of patent life are lost before the company has a chance to start earning and selling its invention in this country or abroad. The adoption of new inventions in pharmaceuticals is often slow and properly cautious. The real length of time during which the patent owner can enjoy and receive the benefits of his achievement and recoup his vast expenditure must be far less than the total 16 years, and it is probably more like half that period. The Government have now said that when the Bill becomes law all patents should be extended to 20 years.

The expenditure on pharmaceutical research today is staggering. I have looked at figures and they are measured not in tens of thousands of pounds but in millions of pounds. It is impossible to give exact figures, because they vary between different places and products. However, in the United States in 1972—and that was some time ago—it was estimated that the research and development cost of a new drug was about £14 million. Even if we spend only half of that, the sum is £7 million or £8 million. For all those reasons existing patents should be allowed an extension of up to 20 years or as near as possible to that.

The Bill provides some fairness for the licensees of existing patents. Schedule 1(2)(b) states clearly that the licensee will not be required to pay for loyalties for this extended period. I am glad about that. Schedule 1(4) says that any person who feels that he may suffer loss as a result of the extension may apply to the court for relief. I welcome that. A person may have provided the capacity and plans for a project, anticipating a 16-year life for it, only to have his efforts frustrated by that life being extended to 20 years. It is right that such people should be so protected.

The Bill is a most valuable measure as it has been amended by the Lords and I hope that we shall not tamper with the decisions of the Lords in this respect.

6.35 p.m.

Mr. Richard Wainwright (Colne Valley)

I shall not follow the hon. Member for Brent, South (Mr. Pavitt) and the hon. Member for Canterbury (Mr. Crouch) in speaking about the former Clause 49, which was dropped while the Bill was in the Lords. I hope that that matter will be ventilated in Committee.

The Minister in a concise speech has eloquently described the two separate labours that combined to produce the Bill. There was an attempt to harmonise our patent law with the European Patent Convention. There was a separate task—which it was almost Herculean to combine with the first in the same Bill—of making substantial and welcome reforms in our domestic patent law, especially with regard to the rights of employees. Therefore, from the Liberal Benches, I generally welcome the Bill.

However, there is a danger that is always associated with terrific tasks. It is that in attempting so much there may be some failures. While I do not wish to adopt a crabby tone to the Bill, I am sure that the House will understand that I wish to concentrate on the issues that have given rise to some concern in my party.

It is unfortunate, but thoroughly understandable, that this substantial measure does not substantially simplify the elaborate and extremely expensive legal procedures associated with the operation of our patent law. As a result of inflation, the costs of patent litigation are quite horrific and they are usually counted in tens of thousands of pounds. We are not satisfied that appeals before the Comptroller-General instead of a court will necessarily be cheaper. They may be cheaper than appearing before the full panoply of the court, but we still await firm evidence that these procedures will really be cheap.

As long as patent law remains extremely expensive to bring into operation on behalf of an innovator or inventor, there will be substantial discouragement of something that is urgently needed in this country—the spirit of innovation. There is undoubtedly much advice that is soundly given by' patent lawyers to innovators—pointing out that the whole legal procedure is so expensive and cumbersome and that there are few robust decisions handed down in this sphere.

Innovators are told that they are better off to trust to secrecy and to exploit their inventions quickly before the rest of the world catches up. For that reason the tremendous efforts that have been put into the reform of the law will not be brought into fruitful operation in a sufficient number of instances.

I was disturbed by the hints which I understood the Minister to be giving about the amendment successfully moved in the Lords on Third Reading by Lord Lloyd of Kilgerran. It would reasonably extend the concept of the 20-year life of a patent to patents already in operation before the appointed day. The Minister seemed to be suggesting that the Government were having second thoughts about keeping that amedment in the Bill. We would strongly resist any attempt to tamper with the wise decision made in the Lords. I am glad to have the support of the hon. Member for Canterbury in that.

I now wish to refer to the protection given to employee inventors. Clause 36 to 41 represent a notable advance and the Government are to be congratulated on telling the working party the attitude that it should adopt, instead of tamely waiting for outside bodies—in what has increasingly become the corporate State in this country—to tell Parliament what they want to be enacted.

The cart has at last been put behind the horse, and that is welcomed. Employee inventors, especially those who are not required by their contracts of employment to give their minds to inventing but who happen to be interested in what they are doing and who hit upon a bright practical idea in the course of employment not in the research department, should be provided with expeditious and reasonably inexpensive procedures so that the whole of their life savings are not put at risk in litigation.

About three-quarters of all patented inventions come from employees. Many are employed for the purpose of making inventions, but there is in our skilled work force a great pride in devising something new, and anyone who represents an engineering constituency cannot fail to be aware of that element, which is still very much alive in this country.

Neither the Comptroller-General of Patents nor judges qualify by temperament or training to adjudicate compensation in these matters. Through no fault of their own they are almost invariably unable to put themselves into the shop floor situation that is the essence of these cases.

It has to be decided how far an invention is a result of the surroundings and equipment provided by the company and how far it is because of the sheer application, skill and imagination of the employee. The sort of questions upon which the Bill requires the court or the Comptroller-General to adjudicate are not matters well suited to judges or the Comptroller-General.

For example, the court has to decide whether an invention is of outstanding benefit to the employer. I doubt whether the word "outstanding" means very much anyway, but I am sure that this is not a matter that judges should be left to assess. The court will have to decide whether, by reason of all the circumstances of the case, it is just that the employee should be compensated. This is a matter on which business men and trade unionists, who have been involved in these matters all their working lives, are competent to hand down robust and prompt judgments, instead of an employee having to wait months for a laborious judgment to come from the Comptroller-General leaving both sides thoroughly dissatisfied.

We hope that a development at which the Under-Secretary hinted but which he did not elaborate fully, namely, the establishment of a panel of outside advisers with working experience in this area, will be introduced into the Bill. If it is considered that the Comptroller-General must be retained in an adjudicating position, we hope he will always sit with the outside advisers and that they will constitute an assessment panel.

I doubt whether this is a job for the Comptroller-General at all and I should prefer the chairman of the panel to be recruited from one of the legal professions. Whatever happens, there must be outside advisers and they must have an expeditious procedure. We see no reason to allow an appeal on points of fact, and the advisers will be able to hand down prompt and robust decisions.

The precedent that I cite is the Royal Commission on Awards to Inventors, which sat so successfully for some years after the war to deal with the claims of war-time inventors. That Commission sat without full judicial procedure and there was no appeal from its judgment. It handed down decisions that were generally acceptable and certainly robust and it enabled business to be transacted expeditiously.

There are a number of other subjects that we should like to discuss in Committee and I shall not follow the example of the hon. Member for St. Ives (Mr. Nott) in outlining them now. We wish the Bill well. We are glad that the TUC has made representations along similar lines to those that I have tried to express in great haste, and I hope that they will receive fair attention in Committee.

6.45 p.m.

The Solicitor-General (Mr. Peter Archer)

This has been a good debate. Inevitably it has been a technical one and, for that reason, I suspect that its merits may not be widely acclaimed. I have always hoped that in debates that tend to be dominated by lawyers there would be contributions, such as those that we have had today, from our lay colleagues with expertise in the matter being discussed.

When lawyers discuss reform of the law, they are not doing it for their own benefit, but for the benefit of their clients—the public. But not every provision in the Bill necessarily lends itself to sturdy generalisation and our lay colleagues who may serve on the Committee that considers the Bill have my sympathy.

There are some matters on which opinions differ, but it is clear from the debate that there are some on which there is no difference between us. I think that we all agree on the value of having a system of patents to provide incentive for research and invention. We all agree that the problem is in preserving a balance between an adequate incentive for those who invent and a protection of the proper interests of the public.

I take the point made by the hon. Member for Colne Valley (Mr. Wainwright), that if one seeks to be fair to everyone in these complicated matters, that will inevitably lead to provisions that are somtimes slow and expensive to administer. But we have to try to get a balance in that respect, too, and that will be our aim in Committee. Incidentally, I am grateful to the hon. Member for Colne Valley for confining his remarks within so narrow a compass and thus allowing me time to reply.

I hope, too, that we all agree that everyone will benefit if we can harmonise the system of patents in our domestic law with the systems in other commercial countries, particularly in Europe. I welcome the assurance of the hon. Member for St. Ives (Mr. Nott) that there is no division between us on the need to steer this Bill on to the statute book at the earliest possible moment.

The hon. Gentleman said that it was a much amended Bill, and I take his point that we have reason to be grateful for the attention that it received in another place. I shall follow him no further along the road he travelled after saying that, except to note that when the account is finally made up, the proceedings on this Bill will be chalked on the credit side.

It was much amended for the reason he gave. It was necessary for us to ratify the European Patent Convention as soon as possible and I am grateful for the assistance the Government received from the Opposition in doing that. This was why the consultations that normally precede such a Bill were necessarily briefer than usual, and for that reason it was necessary for the Bill to receive the detailed attention devoted to it in another place.

The hon. Member for St. Ives asked when the convention was likely to be operative. We are awaiting only the ratification of France, and it is hoped that that will be given shortly and that the European Patent Office will be established by the autumn and be receiving applications by June 1978. The House will be pleased to know that a number of important posts in the Patent Office have been assigned to personnel from the United Kingdom. The vice-president in charge of examination and opposition will be Mr. W. W. Wallace, who is a distinguished member of our Patent Office. We are pleased to see him here today.

I hope that the House will forgive me if I do not reply to all the issues raised in the debate. Some hon. Members said that they were simply giving notice that they would raise certain matters at a later stage.

There are four obvious reasons why I cannot reply in detail. First, this has necessarily been a brief debate. I have less time left to me than some hon. Members have taken. Secondly, I have discovered from experience that when lawyers take up the time of the House on technical matters, the reaction of other hon. Members includes a certain amount of irritation. Thirdly, if we do discuss technical matters, we must get them right. I claim no expertise in this branch of the law. The House does not share the expertise available in another place, and I do not claim to remedy that defect. Fourthly, much attention was given to these matters at an earlier stage of the Bill. Hon. Members will already be aware of the arguments.

The hon. Member for St. Ives spoke of the problems of draftsmanship when legislating to bring United Kingdom law into accord with the law of the European Community, with an international convention—as we are here—or with that of other countries generally. I pay tribute to the way in which the draftsman has approached that task.

He has achieved the result in three ways: first, where possible by adopting the terms used in the convention; secondly, by giving guidance to the courts about the intention of the draftsman—an example of that is in Clause 124(7)—thirdly, he has incorporated some of the provisions of the convention directly into United Kingdom law, as in Clause 83.

I commend the way in which the draftsman has approached the problem. I accept that he might have given some problems to the courts, but they will not be beyond the capacity of the courts to solve.

A matter which occupied much of the time of the debate was the five-year rule on the extension of the period of validity. Obviously, it is a matter in which we must balance the interests of the inventors against those of the public. The solution originally in the Bill was that proposed by the Standing Advisory Committee. I appreciate that there may be commercial companies that plan their arrangements on the basis that a patent will terminate on a certain date and invest accordingly. I admit that we are proposing to legislate retrospectively, and that might have an adverse effect, not upon the inventors, but on others. And of course, it takes longer these days to recover development costs.

I understand that there will be a meeting tomorrow with the Standing Advisory Committee. The Government's concern is simply to see that the solution reached is regarded as satisfactory by as many as possible of the interests concerned.

We have had a mini-debate between my hon. Friend the Member for Brent, South (Mr. Pavitt) and the hon. Member for Canterbury (Mr. Crouch). The House and the public owe a great deal to the expertise and the attention that they have given to this subject over a number of years.

The 1949 Act provided a procedure for the compulsory grant of licences in respect of patents for medicines. That was disliked by the pharmaceutical industry, and the Banks Committee recommended its removal. But, after consultations, Clause 49 of the Bill was included. It was removed in another place and agreement has now been reached with the pharmaceutical industry, so the legislative history will rest there. That may not satisfy my hon. Friend. It is a matter of judgment whether one acts more effectively by including something in a statute or by reaching an agreement. I cannot say more than that.

My hon. Friend the Member for Brent, South mentioned a case in which excessive prices were charged. If it is the case I have in mind, they did not result from a patent problem. The case was concerned with people who were buying up and repackaging someone else's inventions, and selling them at an inflated price.

I turn now to the question of employee inventors. There is a great deal I should like to say on that subject, and I can no doubt return to it in Committee. It is a matter on which I feel more emotional than on some of the other questions, because my father was a victim of the present law on more than one occasion.

I welcomed the confirmation by the hon. Member for Canterbury that the present law is unsatisfactory and that something must be done. I appreciate that it will always be possible to improve on a package. But I hope that the hon. Member for Colne Valley will appreciate that it is a package that takes account of the interests of all those concerned.

As the hon. Member for St. Ives said, if we start removing particular bricks from the package we might reopen it to a point where it may not be acceptable to many of those who have indicated agreement. Obviously, the package is not sacrosanct, and it can be reconsidered in Committee. But we should be reluctant to reopen something—

Mr. Richard Wainwright

Can the the Solicitor-General confirm that the judges are not one of the interests involved?

The Solicitor-General

The method of assessing these matters may include some of the elements involved. But I do not wish to discourage the hon. Member from commenting on these matters.

I turn to the title "European Patent Attorney". The question is whether, on the one hand, the public are likely to be misled by the use of the term, bearing in mind that what is proposed is only the use of the word in the complete phrase, "European patent attorney". If so, does the danger outweigh the difficulty of the patent agents' profession in not being able to take advantage of a term the equivalent of which is in use in other countries? The Law Society is still considering the matter. But I am told that its provisional view is that it is a question of balancing the interests, and that it is prepared to leave it to those who debate the Bill to see where that balance lies.

I should have liked to have said a great deal more. I shall not conclude with a peroration, not even with a funny story. My greatest contribution will be to attempt clarity on the legal issues. We may not find that we have written a chapter in parliamentary history, but it is a Bill, as the hon. Member for Canterbury said, that affects everyone, that will be of real benefit to commerce, and that benefit will be reflected in better living standards for the public as a whole.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40(Committal of Bills).