HL Deb 17 June 1958 vol 209 cc986-1001

2.57 p.m.

Order of the Day for the Second Reading read.


My Lords, this Bill is concerned, first, with the Government's powers to use, or to authorise the use of, privately owned patented inventions and registered designs. It is concerned secondly, and chiefly, with the Government's power to authorise the use of privately owned technical information. The Bill also revokes the existing emergency powers in these two fields—a matter upon which your Lordships have been frequently exercised. In substitution, the Bill adds very slightly to the Government's existing permanent powers in connection with the use of patented inventions and registered designs for defence purposes. It also provides a new permanent power, more limited than the existing emergency power and subject to safeguards, to facilitate the use of technical information in defence contracts.

Your Lordships may, and I suspect probably will, recall that this is not the first occasion upon which the House has debated these matters. In December, 1953, the House considered the Inventions and Designs (Crown Use) Bill. But, in view of the criticism and doubt expressed on both sides of the House on that occasion, the Government withdrew the Bill. Since then the Government have carefully reviewed their needs for permanent powers in this field, in the light of experience in recent years. On the defence side the position is no longer overshadowed (as it was, of course, in 1953) by the Korean war. What is more, events have underlined the importance to our economic progress of avoiding any discouragement to the exchange of technical information at home or its flow from abroad. Both these developments have had some influence on the present Bill.

One of the main criticisms of the 1953 Bill was that it enabled the Government to require the disclosure, either to a Government Department or to a third party, of confidential industrial technical information required in connection with defence contracts—that is, the Bill sought to put the Defence Regulations on a permanent basis. In point of fact, those emergency powers have not been much used. The Government decided, therefore, not only that they would not seek permanent powers of this kind, but also that the emergency power was no longer justifiable or necessary. The regulation in question was revoked in 1954, and the present Bill does not provide for the disclosure of technical information: indeed, it specifically states that such powers are not held.

In the course of the debate in 1953 some of your Lordships emphasised the important contribution which the confidential exchange of technical information makes to industrial progress. Your Lordships suggested that there should be much closer consultation with industry before we took any final decision on the Bill. The Government have now had full consultations with industry and have received a report from an independent Committee of Inquiry about the Government's powers to authorise the use of technical information for defence purposes. The Government are grateful to Sir Harold Howitt and his two colleagues for their report. The Committee considered that the Government should have powers to authorise, subject to safeguards, the use by a manufacturer of technical information in defence contracts overriding any restrictions or conditions which might be placed on the use of that information by his commercial agreements.

The Committee, however, went on to suggest provisions designed to ensure that the power would not be abused by any Government and to give assurance to the owners of technical information, both here and abroad, that their rights and interests would be adequately safeguarded. All the Committee's main proposals are implemented in this Bill, as well as one or two others subsequently suggested by the representatives of industry. The Government believe that industry regards the present Bill as im- plementing the spirit of the Committee's recommendations. I should like to return to the recommendations of the Committee when I come to deal with Clauses 2 to 4 of this Bill.

Before I do so, I must refer to Clause 1. This clause is concerned with patented inventions and registered designs. In what follows anything I say about patented inventions and the Patents Act applies in substance to registered designs and the Registered Designs Act. The Patents Act, 1949Lord Lucas of Chilworth's Act—includes both permanent powers and powers which can be exercised in an emergency. The permanent powers enable the Government to use, or to authorise the use of, patented inventions for (to use the expression in the Bill) the "services of the Crown". In addition, the Act provides for the Government to exercise similar powers during a period of emergency for a wide variety of other purposes set out in Section 49 of the Patents Act. The present Bill provides in Clause 7 for the termination of the emergency so far as the 1949 Acts are concerned, and thus, until there is an Order in Council prescribing a further period of emergency, the Government will be left with only the permanent powers of the 1949 Acts by which such inventions can be used for the "services of the Crown".

The Government wish to increase the powers given by the Patents Act only in two minor respects, where the present provisions are not enough for modern conditions. The Patents Act does not cover the case of what is, in the current N.A.T.O. jargon, known as an "offshore purchase"—that is, where the purchase is to be made by one Ally for the defence of another—or the case in which the supply is to be made to armed forces acting under the authority of the United Nations. This Bill amends the Patents Act to provide for these two cases. It has, however, been suggested in previous discussion, both in your Lordships' House and elsewhere, that these powers should be conditional on reciprocal action by other Governments. We considered this point carefully, but the Government do not regard this suggestion as either appropriate or desirable. We have not experienced difficulty in purchasing defence materials abroad because of the absence of precisely similar legislation in the supplying country. If a condition of reciprocity were attached to the exercise of the powers in the two cases covered by this Bill, the most likely effect would be that orders for off-shore purchases would go to other countries and that we should not be able to supply equipment to forces acting under the authority of the United Nations. Logically, indeed, I think such a condition would have to be applied to any exercise of the powers under the 1949 Acts for supply to overseas Governments. The practical effect would be to encourage our Commonwealth and other friends to obtain their requirements elsewhere, because of the difficulty of defining what reciprocal treatment involves. This would be to the detriment of our export trade, and I can see no good reason for making such amendments either to the 1949 Acts or to the present Bill.

I should like to draw attention at this point to another of the main differences between this Bill and the 1953 Bill. When preparing the 1953 Bill, the Government considered the desirability of removing any doubt about whether certain borderline cases were "services of the Crown" for Which the use of patented inventions might be authorised under the Patents Act. The doubts arose because certain goods, although obtained and owned by the Crown, might be issued to the public or passed on to a local authority. Your Lordships may recall the specific cases of deaf aids, artificial limbs, civilian gas masks and fire service communication equipment.

Since 1953, the Government have carefully examined whether special provisions to cover these cases are really necessary and whether it is desirable to include them in this Bill. We have reached the considered view that they should not be specifically covered, after all—and for two main reasons. On the one hand, we have come to the conclusion that no harm is likely to be done, in practice, if such provisions are not included in the present Bill. On the other hand, experience has shown that, if they are included, there is a serious risk of misunderstanding, particularly overseas, as to the purpose and scope of the Bill, which would be likely to do harm to our national interests. In the Government's view, all these supplies, except certain fire service communication equipment, about which I shall have a word to say later, are in fact required for the "services of the Crown", and the use of patented inventions and registered designs in their manufacture is therefore currently being authorised under the existing permanent powers. The need for special provisons would accordingly arise only if the matter came before the counts and the courts decided that the Government's view was not correct in a particular case. If that occurred it would still not mean that the use of patented inventions and registered designs for those supplies would be prevented or subjected to unreasonable royalty payments. The 1949 Acts already provide for compulsory licensing, on, of course, reasonable terms.

If difficulty arose as to the use of patented inventions or registered designs for these purposes the Government could, and would, take immediate steps to deal with the situation, and, if they thought it necessary, would introduce legislation to deal with the particular problem which had arisen. They do not, however, consider it necessary or appropriate to include the provisions suggested in 1953 in the present Bill, which is concerned with the use in defence contracts of patented inventions, registered designs and, more particularly, technical information. There would indeed be a real risk of misunderstanding, especially among owners of technical information abroad, whom we do not wish to discourage from passing their knowledge on to British manufacturers, if this Bill, which takes certain powers to require that information to be used in defence contracts, also covered what might appear to be new powers as regards civil contracts.

In the case of fire service communication equipment not required for civil defence, the Government have come to the conclusion that it would not be proper, just because it is ordered centrally, as a matter of convenience, to extend the term "services of the Crown" to cover goods which are required by local authorities to carry out duties laid by Statute not on the Crown but on those authorities. The use of certain of the compulsory licensing powers in the Patents Act would be considered if there were any difficulty about the use of patented inventions in this equipment.

My Lords, I now pass to Clause 2. Subsection (1) gives the Government power to authorise the use; of technical information in defence contracts, notwithstanding the restrictions on its use imposed by its owner, by the manufacturer who is negotiating with the Government for a defence contract. The manufacturer, your Lordships will appreciate, already has the information. The Government have no need for powers to require the disclosure of the information to a Department since the information is, by definition, part of the production process for which the manufacturer is responsible. These two factors mean that the Bill does not contain the same element of compulsion as the 1953 Bill and there is, therefore, no need for penalties.

The Howitt Committee considered that the Government should have the power provided by this subsection, but considered that safeguards were necessary. They suggested both limitation of the field in which the power should operate and also certain obligations which the Government should undertake when exercising the powers. First, the Committee suggested that owners of technical information, here and abroad, should be reassured by a specific declaration that powers to require disclosures were not being taken. This is done in subsection (6) of Clause 2. The Committee also considered that the defence requirements for the production of which the power might be exercised should be strictly defined. This recommendation is fully implemented by the definition of "defence materials" in Clause 6 which governs the field in which the powers may be exercised. Indeed, by providing that the defence materials must be designed or adapted for the armed forces or for civil defence purposes, as well as required by the forces or for civil defence, the Bill gives a real basis for appeal to the High Court when an interested party considers that an authorisation is ultra vires as regards the goods covered.

The Committee recommended that the manufacturer should be allowed three months in which to negotiate with the person who licensed him to use the technical information, in the hope that they would be able to agree on arrangements acceptable to all parties for the use of that information in the production of the defence materials. This is provided for in subsection (1) of Clause 3. The Crown must also, the Committee proposed, notify any person likely to be affected if the negotiations failed and an authorisation was issued, so that any of these people could make a claim for compensation. Subsection (2) of Clause 3 covers this point. The Committee considered that, as in the 1953 Bill, there should be provision for compensation and for appeal to the courts about it by anyone dissatisfied. This matter is covered by Clause 4.

There are, in fact, only two suggestions on procedure on which we have not followed the Committee. The Committee suggested that the decision as to whether assessors should sit with the court should be taken by the parties. In the Government's view, however, that is a matter which must be left to the court itself. Again, the Committee proposed that the Minister, or the permanent head of the Department, should certify that he personally had considered each particular case when an authorisation is issued. We do not think that the exercise of the powers should be limited by Statute to a Minister personally, or that it would be right, in a matter of this kind, to single out one class of official from another. I am anxious, however, that there should be no misunderstanding as to the importance we attach to the views which have been expressed to us on this matter. I can give your Lordships an assurance that in normal times the decision to issue an authorisation will, in fact, he made by the Minister personally. I want to stress this point, so that any fear that authorisations might be issued without proper consideration will be removed.

Finally, my Lords, I should like to draw attention to one other respect in which this Bill differs from the 1953 Bill. In 1953 we sought permanent powers for all Departments to authorise the use of technical information for services of the Crown "generally and not just defence purposes. The Government have now decided that this went too far. This is partly because the owner of technical information, unlike the owner of a patented invention, seeks no privilege from the Crown, and any powers to make use of his property must be justified specially; and partly because the powers have not, in fact, been needed outside the defence field. By limiting the powers to defence the Government recognise the need to encourage the exchange of technical information in industry and its flow from overseas.

Indeed, we have looked at all the questions raised by this Bill in that light and I believe that the Bill does avoid both extremes. On the one hand, it provides permanent powers which the Government really need to ensure the use of all our inventive resources for defence purposes. On the other, it avoids taking powers just in case they might be useful. Your Lordships will probably agree that this would be likely to discourage the investment of industrial resources in research and the exchange of information within industry, which is vital to our industrial progress and economic prosperity.

Thanks to the suggestions made by your Lordships, to the advice of the Howitt Committee, to the willingness of industry to recognise the genuine needs of the Government for defence purposes and to the willingness of Parliament to renew the emergency powers until the matter was fully examined, I think that this Bill is not only a better Bill than its predecessor but provides the best solution of the complicated problems with which it deals.

The taunt is frequently heard that some Ministers seldom stay long enough in one job to learn more than the bare bones of their duties. This, however, has one great advantage: that if the Government have second thoughts about a problem, the Minister explaining the change can tacitly shift some of the odium there may be on to the vanishing shoulders of his predecessor in title. No such defence is, alas! open to me. For nearly six years now I have had the honour to be the spokesman in your Lordships' House for the Board of Trade and it was indeed (as your Lordships may by now have realised) who was responsible for presenting the Bill of 1953 to your Lordships for a Second Reading. Amongst the deaf aids and artificial limbs, the civilian gas-masks and fire service communication equipment, your Lordships may therefore have caught a fleeting glimpse of humble pie. I can only plead, in mitigation, that I have succeeded in making a speech of nearly twenty minutes upon patents, registered designs and technical information without once using the word "know-how". I beg to move.

Moved, That the Bill be now read 2a.—(Lord Mancroft.)

3.18 p.m.


My Lords, it falls to me to say a word on this Bill, as it did four and a half years ago. On that occasion we were confronted with a Bill which was strongly condemned from all sides of the House. The Government, through the instrumentation of the noble Lord, were wise enough to take that Bill back, and I must confess that I thought it had gone for ever. But here it is again, after all this time, and undoubtedly the Government have had ample opportunity for reconsidering the matter. And that they have done. They now present a Bill which, so far as I can see, is unobjectionable in principle. Admittedly, it overrides private rights—though with provision for compensation—but, if the noble Lord was right in his explanation, it does so only for the purpose of defence, and does not go beyond the requirements of defence. If that is so, and if proper compensation is paid and justice is done to those who are deprived of their legal contractual rights, then I feel that there is nothing more that could be said, because after all the interests of defence must predominate even over the rights of private individuals. So I would say to the House that, so far as the general principle of this Bill is concerned, we on this side are prepared to support it. As the noble Lord explained, it is a very complicated Bill which will require detailed examination, and if there are any points that require to be raised at a later stage that will of course be done. At this stage I think the least said about the Bill the better. It can go forward in principle, though we may have something to say at a later stage.

3.20 p.m.


My Lords, I wish to congratulate Her Majesty's Government most heartily on this Bill. It enshrines a major principle which as yet, has not been alluded to by any Government spokesman. I listened with interest to my noble friend's speech on Second Reading; I have read the speech of the Parliamentary Secretary to the Board of Trade in another place, and I have looked at the Explanatory Memorandum, and they all seem to have avoided saying anything about this major question of principle. I think that your Lordships ought to know something about it.

It is my daily task, as a member of the Patent Bar, to advise clients on the meaning and effect of the Patents Act, 1949. Ever since that Act has been passed there have been two sections which have been particularly repellent to me; the first is Section 49, and the second is a portion of Section 18. This Bill will completely sterilise Section 49 and make it, at least temporarily, of no effect. My noble friend has said that it can be resuscitated. I rather doubt that. I would much rather that it was taken off the Statute Book.

Section 46 of the Patents Act, which deals with the normal authorisation for Crown use of patented inventions, uses the words make, use and exercise only. Section 49, which this Bill sterilises, uses the words make, use, exercise and vend"— that is, sell— for any purpose which appears to the department necessary or expedient". There are a number of different purposes, of which these are some:

  1. "(d) for promoting the productivity of industry, commerce and agriculture;
  2. (e) for fostering and directing exports and reducing imports, or imports of any classes, from all or any countries and for redressing the balance of trade"—whatever that may mean, and—
  3. "(f) generally for ensuring that the whole resources of the community are available for use, and are used, in a manner best calculated to serve the interests of the community."
That section makes possible the following situation—I am not saying that the section has been used oppressively, but this could happen. An inventor manufacturer of refrigerators is exporting under his patent, let us say, 50 refrigerators a month to Venezuela. He is making them most carefully and he cannot make any more; they are good quality goods. Then Messrs. "Cheap and nasty" come along to the Board of Trade and say, You want to increase exports to Venezuela? "and the Board of Trade say," Yes". The firm then says, "We can export 500 refrigerators a month to Venezuela." The Board of Trade say, "Right. We will give you a licence under the refrigerator patent to use the invention of the firm of good repute and to export these refrigerators to Venezuela. "The" cheap and nasty "firm then export 500 refrigerators a month to Venezuela. Owing to its bad construction one of the refrigerators blows up and kills a few of the local inhabitants. Thus the reputation not only of the" cheap and nasty "firm but also of the firm of good repute is ruined. That is a situation which can arise under the present law, and this Bill seeks to make that impossible. The Crown will no longer be allowed to authorise any person for his own ends to use the patented invention and sell the goods to the general public either at home or abroad. That is a major point of principle, and for that reason I congratulate the Government on bringing forward this Bill.

It is with regret, however, that I see that the Government have not dealt with the provisions of Section 18 of the Patents Act, 1949. This section deals with secret patents. It was a new section in 1949 and it was enacted before the Crichel Down case and before Mr. Pilgrim's unfortunate death—in fact, at the height of the "smash and grab" era. The noble Lord who piloted it through this House has, I see, since then had second thoughts on this sort of thing, because when he spoke on the Copyright Bill, as the chief Opposition spokesman, he spoke of the natural property right of the creator in the works of his own mind. Some of the provisions of Section 18 read quite contrary to that. This section, Section 18, allows the Comptroller General to issue directions with reference to patents applied for in relation to inventions of a class notified to him by a competent authority as relevant for defence purposes, and the directions may prohibit or restrict the publication of information with respect to the invention, or the communication of such information to any person or class of persons specified in the directions. … All that means that the inventor has his invention completely sterilised; he can do nothing with it. And if he does tell anybody about his invention he may be punished for his disobedience with imprisonment not exceeding two years and/or a fine not exceeding £500.

The man's brain child is completely sterilised. What happens when it is completely sterilised? If the Government Department use this invention then he is paid compensation in accordance with the provisions of Section 46. But what happens if the Government Department do not use the invention, and merely want to keep it up their sleeve so that the enemy does not get it? Then you would expect some provision such as is found in Section 260 of the Customs and Excise Act to apply. That provision is to the effect that if an importer has a dispute with the Customs and Excise as to the value of his goods, the dispute shall be referred to a referee appointed by the Lord Chancellor who Shall not be an official of the Government Department.

What do we find in Section 18 of the Patents Act? This man has had his invention entirely sterilised and can do nothing with it. The Government are not using it. This provision applies: if it appears to a competent authority that the applicant for the patent has suffered hardship by reason of the continuance in force of the directions, that authority may,"— and your Lordships will notice that the word "may" is used here and not "shall"— with the consent of the Treasury, make to him such payment (if any) by way of compensation as appears to them to be reasonable having regard to the novelty and utility of the invention"— and so on. If an invention is worth suppressing then it is worth paying for. What on earth does "hardship" mean in the section? If the inventor, let us say, is an employee of Imperial Chemical Industries, Limited, that company may have spent half a million pounds on the invention. It is completely sterilised. The Government Department may well say, "A big company like that can well afford £500,000. They have not suffered hardship." It is not laid down at all what that word means.

I mentioned that there is no compulsion on the Government Department to pay any compensation, and there is no independent arbitrator whatsoever. Two Government Departments have to decide together whether the man is to get any compensation. I do not apologise for bringing up this matter, because it has rankled for a long time and it is germane to this Bill. But I do suggest that the Government should take note that it would be a good thing to amend this section, along with the other sections that they have amended already in this Bill, to abolish the means test for inventors and to appoint some independent person to assess what compensation the inventor whose invention is suppressed should get, and that that compensation should be as of right and not merely at the whim of a Government Department. Now, my Lords, I commend the rest of the Bill. It is an excellent Bill; but I suggest that that point should be borne in mind by Her Majesty's Government, either as an Amendment later to this Bill or in other legislation.

3.30 p.m.


My Lords, I welcome this Bill for several reasons. I find myself at a considerable disadvantage and in some trepidation as being the only non-lawyer who has spoken on this subject. The Bill is really very technical indeed. I have done my best to understand it, but it is open to very considerable doubt whether a layman, at any rate of my calibre, ever understands such a complicated Bill. I must admit that the point raised by Lord Cawley did not strike me. I thought there was provision whereby the patentee, if he could not come to agreement with the Government contractor in three months' time—I think it is three months; but it may be six—could then go to the High Court and have the matter adjusted there. However, that just shows how little one really knows when one is not a lawyer.

Nevertheless, the point that impresses me, and I think is of cardinal importance, is the recognition that is given to the provisions of secrecy. I think it is paramount that there should be no question whatever of the Government's being able to demand secret information, secret patents and the one word I may not use—"acquired skill" is an interpretation of it. American opinion showed itself at one time very touchy indeed on this subject, and I am sure that if we are to get interdependence, or the benefit of interdependence, in manufacturing to other people's designs in this country, complete and absolute belief on the part of the manufacturers that their secret information is safe and secure is essential.

I am impressed by how extraordinarily closely this Bill follows the Howitt Report. The point that strikes me, after the Howitt Report, is the great trouble to which the Board of Trade, or my noble friend the Minister, went in order to make sure that industry had a complete and full chance of discussing these problems. I know that meetings were held while the Bill was being drafted and the matter was gone through by representatives of the industry with a fine tooth comb—at any rate, their advice was sought on it. The people who were consulted were the Federation of British Industries, British European Airways, the Association of British Chambers of Commerce, the National Union of Manufacturers, the Trade Marks, Patents and Designs Federation, the Chartered Institute of Patent Agents and the London County Council. That gives a fairly good cover of general opinion, and all those bodies appear to have been at least satisfied, if not entirely enthusiastic. I think most of them were very enthusiastic.

A matter which to my mind is of greater importance than anything else is paragraph 21 on page 7 of the Howitt Committee Report. It is quite short, and with your Lordships' permission I will read it. They say: We regard it as of paramount importance that the proposed legislation should, expressly and positively, and not merely by inference, make it clear beyond the peradventure of a doubt that no disclosure is authorised by any person to any person ('person' in both cases including the Crown and its representatives), of any information which any person is by the relevant contract prohibited from disclosing. This, we understand, is acceptable to the Departments concerned, in the full realisation of its meaning and effect. If it had not been acceptable, our conclusion as to the desirability of granting the powers to the Crown might well have been different. Then I leave out a little bit. The Committee go on to say: It is, of course, at this point that the vital difference emerges between patented inventions and inventions or information which are not, or cannot be, patented. Where patents exist, the disclosure of the particulars of the invention is not harmful—indeed, it is necessary—but the disclosure is accompanied by statutory protection. In the case of unpatented inventions there is no such statutory protection. We assume that the Act will be binding upon the Crown, particularly as to the provisions forbidding disclosure of information. That seems to be very strongly expressed, and I think it is the key to the whole matter.

It is a courageous thing on the part of the Government to grasp the nettle, and I think they have done extremely well in producing—as a second shot, I might almost say—a Bill which seems to have answered all these difficult problems. I can only hope that a similar kind of legislation, negotiation, or whatever would be appropriate, will follow in Europe, where the seven countries in the Western European Union are continually being faced, when they start talking about standardisation or helping each other out, or manufacturing other people's weapons, and so on, with the problem that is always cropping up on the disclosure of information. There is the possibility which is at the back of all industrialists' minds, that their competitive position will be damaged by that. I think this is a good and courageous lead on the part of Her Majesty's Government, and I hope that something of the kind I have indicated, not tied on to it in any shape or form, will be forthcoming in the future.

3.38 p.m.


I will stand for only a few brief minutes between your Lordships and the Leader on the important statement to which we are looking forward. I should like to thank your Lordships for the friendly way in which this Bill has been received—a great deal more friendly than the reception which was extended to its predecessor in 1953. As to the kindly remarks which my noble friend, Lord Stonehaven, has just addressed to me, I must point out that in this case "B.E.A." and "L.C.C." do not mean the British European Airways and the London County Council but the British Engineering Association and the London Chamber of Commerce. We had better get that matter straight at once.

The noble Lord, Lord Cawley, raised a highly technical point about Section 18 (3) (b) of the Patents Act. The Act provides, as he has told us, for statutory compensation to be paid for the Government use of patents held secret for defence reasons; but by holding a patent secret the competent authority may in fact deprive the owner of the opportunity of exploiting his invention for ordinary civil use. It was agreed on both sides of the House in 1949, at the time of Lord Lucas of Chilworth's Act, that there should be statutory provision for an ex-gratiapayment to be made to the owner for any loss of a potential civil market. It was also agreed, however, that this was not a suitable place for statutory compensation; that is, settlement by the courts.

The power to have patents held secret has been most carefully exercised so as not to impair the owner's position. As I think the noble Lord, Lord Cawley, would agree—and no one knows better than he—every effort has been made, when the patent appears to have a civil market, either not to hold it secret or to remove the secrecy provisions as soon as possible. I am glad to be able to reassure my noble friend and to tell the House that, as a result, the Ministry of Supply and the Admiralty have not had a single claim made to them under Section18 (3) (b). That seems to me to be the best possible evidence that the power is being exercised with circumspection. I however, look carefully into the extremely cogent and closely argued remarks which my noble friend addressed to the House, and will take the expert advice which they certainly deserve. If there is anything further I can do to meet the noble Lord's point I will certainly do it, but I feel that I can assure the House that the fears he has expressed are not actually so prevalent as he might other-wise think. With those few words I ask your Lordships to give this Bill a Second Reading.

On Question, Bill read 2a, and committed to a Committee of the Whole House.