§ 2.59 p.m.
§ Order of the Day for the Second Reading read.
§ THE PARLIAMENTARY SECRETARY, BOARD OF TRADE (LORD RHODES)
My Lords, this Bill, of which I now rise to move the Second Reading, is a technical but a very short Bill. It has the simple purpose of restoring the law governing rights in employees' inventions to what it was believed to be before the case of Patchett v. Sterling Engineering Co. Ltd. Was decided in this House in 1955. Before 1949, when Section 56(2) of the Patents Act was enacted, there was no statutory or other provision under which an employee-inventor in private industry had the chance of obtaining some reward for the exercise of his inventive skill. For many years, inventors in the employ of the Government have had the advantage of adequate machinery, in the form of the Central Awards Committee, for the ventilation of their grievances and of ensuring fair treatment at the hands of their Departments. Inventors in private industry have not this advantage, and the view was frequently expressed that the reward or benefit which an employee receives in respect of the inventions he makes is in many cases inadequate and unfair.
A Departmental Committee was set in 1944, under the Chairmanship of Sir Kenneth Swan, to consider what changes were desirable in the Patents and Designs Acts, and they had this to say:—Where there is no written agreement, it is often a very difficult matter to decide whether the employee or his employer is entitled to the beneficial ownership of an invention made in the course of employment. The decision depends entirely upon the nature of the employment and on all the circumstances of the case. There are three possibilities. The beneficial ownership may belong wholly to the employee as, for instance, where the invention he makes is quite unconnected with his duties and is in no way attributable to his employment. There is the opposite case where the employee is expressly engaged and paid to exercise his skill in solving a particular problem. These are the two aspects of the matter which are most commonly presented when a dispute about the ownership of an invention comes before the Court, the employer claiming that he is entitled to the whole benefit of the invention and the patent, 507 and the employee claiming that he, the inventor, is entitled to the invention as his exclusive property. But there is a third possibility which, owing to the uncompromising attitude which the parties in such cases normally adopt, is seldom, if ever, fairly presented to the Court, namely that both the employer and the employee may be entitled to share in and derive benefit from the invention.The Swan Committee thereupon recommended that the High Court and the Comptroller of Patents should be empowered to apportion the benefit of an invention or a patent between the employer and the employee who made the invention in circumstances where it could be said that neither party was exclusively entitled to the whole benefit of the invention or patent.
This recommendation led to Section 56(2) of the Patents Act, 1949, which lays down that the court or the Comptroller of Patents may apportion between the parties, in such manner as seems just, the benefit of the invention or patent made by the employee.unless satisfied that one or other of the parties is entitled, to the exclusion of the other.May I read the subsection in question so that it may be better understood:In proceedings before the court between an employer and a person who is or was at the material time his employee or upon application made to the comptroller under subsection (1) of this section the court or comptroller may, unless satisfied that one or other of the parties is entitled to the exclusion of the other to the benefit of an invention made by the employee, by order provide for the apportionment between them of the benefit of the invention and of any patent granted or to be granted in respect thereof in such manner as the court or comptroller considers just.In 1955 the case of Patchett v. Sterling Engineering Co. Ltd. came before this House on appeal from the Court of Appeal. Mr. Patchett had made certain inventions whilst he was employed by the Sterling Company, and he applied under Section 56(2) for some share of the proceeds resulting from his invention—a natural thing to do, and one would have considered it a fair thing. But his application was refused because, under the Common Law of the land, every invention, according to the circumstances in which it was made belongs wholly either to the employer or to the employee, in the absence of an express 508 agreement to the contrary. Since this House was satisfied that in that case the circumstances were such that the invention belonged wholly to the employer, it was held that Section 56(2) was of no effect, because Mr. Patchett had no such agreement with the Sterling Engineering Company.
Since then Section 56(2) has virtually become a dead letter. This Bill, as I have said, is intended to rectify this, because the same criticisms that were advanced before could well be advanced now; in the absence of the validity of subsection (2) of Section 56 the employee is at a disadvantage and could be treated unfairly. This Bill, we contend, does so by giving, in Clause 1, subsection (1), both the employer and the employee a right to so much, if any, of the benefit of an invention or patent as may be just. Subsection (2) of Clause 1 then changes the law, as laid down in the Patchett case by stating, in effect, that the court or Comptroller of Patents shall not be bound by any rule of law or implied agreement under which the benefit would belong exclusively to one of the parties. It follows from this that, although the Common Law rule which vests the ownership of any invention made by an employee in the course of his employment in the employer is still good law, this shall not prevent the employee from being awarded a just proportion of the fruits of his invention. What is just will depend on such things as the employee's salary, the relationship of the inventor to the work he was employed to do, et cetera.
It is, however, important to note that the power to apportionshall not prevent effect being given to the express terms of any agreement".That means to say that if employers and employees come to an agreement as to who shall have the benefit, financially or otherwise, from an invention, they can be assured that their agreements will be respected after the passing of this Bill.
Section 56(2), the only part of the Act which is repealed by the Bill, refers to an invention made by an employee but is otherwise silent as to the circumstances surrounding the making of the invention. In order to give the tribunal some further 509 guidance on this matter, this Bill therefore states that it deals with inventions madein the course of employment or in circumstances connected therewith".I suppose that many noble Lords are not unfamiliar with the hallowed phrase "in the course of employment". In all probability they know far more about it than I do. But may I point out that most inventions made by an employee in the course of his duties will, by the Common Law, belong entirely to the employer; and in these cases the Bill will operate to take something away from the employer and give it to the employee. But there might be some cases where an employee makes an invention in circumstances which would make the law hold that he was the rightful owner but which nevertheless suggests that the employer is fairly entitled to some reward. The Bill, therefore, caters for this possibility, too, by the inclusion of the phrase "or in circumstances connected therewith".
It will be noted that the Bill does not give power to apportion the legal title to an invention or patent. If it did so commercial dealings could be hampered by disagreements between the parties, and the use of the invention might well be held up, and third parties could never be sure that they were contracting with the true owner of the legal rights. For this reason, the power of the court and the Comptroller of Patents is limited to stipulating the reward to be given. This means that the legal owner is left free to exploit the invention as he thinks best. But, in order to ensure that an employer does not, by the exercise of bad faith, deliberately defeat the employee's right to benefit, the Bill, in Clause 1(3), places the legal owner in the position of a trustee for the other party. By placing the legal owner in the position of a trustee, the Bill does not impose any undesirable handicaps on third parties. A third party who happens to acquire an invention or patent and has paid a fair price for it can be quite assured that he will not be accountable to the person (whether he is the employer or the employee) who may have the right to some reward from the patent. To summarise, this Bill will restore the legal position to what I believe Parliament in 1949 intended it should be, and I commend it to your Lordships in the hope that I have said enough to satisfy your Lordships 510 that the Bill should now receive a Second Reading. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Rhodes.)
My Lords, may I from this quarter say that we welcome this Bill? It seems to be a fair and a just Bill which will rectify a situation that has obviously been unjust in the past. There is one question I should like to ask the Minister, if I may. I may have been slow in following him. At the end of Clause 1(1) the inventor gets remuneration such as may be just. Can the Minister tell us, or should we know, who decides what is just? Who apportions it? What is the tribunal to which he referred? And, if there is one, should it not be mentioned in the Bill?
§ 3.14 p.m.
§ LORD CAWLEY
My Lords, I must first declare an interest. I am a practising member of the Patent Bar, and the legal profession stands to benefit considerably from ill-thought out and woolly legislation, and a crop of litigation which is likely to arise from it. This Bill is certainly woolly. It is also full of good intentions with which none of your Lordships could, I think, possibly quarrel. This Bill is a lineal successor to the provisions of Section 56(2) of the Patents Act, 1949, which the noble Lord, Lord Lucas of Chilworth, so ably piloted through this House. That section was obviously defective, as was shown in the case of Patchett v. Sterling Engineering Company, in which it was held that at the Common Law rights as to the ownership of inventions made by employees had not been abrogated.
However, the wordsprovide for the apportionment between them of the benefit of the invention and of any patent granted in respect thereof in such manner as the court or comptroller considers justdid occur in that Act. Even though the matter was strictly irrelevant, the noble and learned Lord, Lord Reid, said in his speech in this House that some very cogent reason would be required to justify an inference that Parliament intended to take the most unusual course of subordinating the legal rights of the parties to the discretion of the court or Comptroller, particularly as there is no indication of any consideration as to which the tribunal 511 should have regard in exercising its decision. The Bill makes it clear that Parliament has taken this most unusual course now.
It is true that the court has been called upon, in the Inheritance (Family Provisions) Act, 1938, to decide rather similar matters; but here it was given some assistance in that it must provide reasonable provision for the maintenance of that dependant as it thinks fit. In this case Parliament is substituting palm tree justice with no yardstick for the rule of law; but we are, in addition, inviting judge-made precedents which may turn out to be foreign to the wishes of Parliament, and which might entail the unfortunate necessity of the promotion of an amending Bill.
I should like to remind your Lordships of the Promissory Oaths Act, 1868, in which a judge's oath is set out in Section 4. It is as follows:I do swear that I will well and truly serve our Sovereign Lady Queen Elizabeth in the office of"—and then the office is set out—and I will do right to all manner of people after the laws and usages of this Realm, without fear or favour, affection or ill-will. So help me God.It is not fair to the judges merely to pass an Act telling them to do justice. It is our duty to give them some idea of the way in which we desire justice to be administered. We are running away from our duty in this field.
I now turn to Clause 2. I fully agree that it is most desirable to exclude specific terms in contracts. It would be most disastrous if in a research department each research worker was looking round to see what inventions he could make and neglecting routine work which did not involve invention. I believe that in certain Government Departments during the war there were people who were looking over their shoulders to the Royal Commission on Awards to Inventors. That was not very desirable.
I should also like to ask the noble Lord, Lord Rhodes, whether matters under this Bill will be assigned to the Patents Judge—namely, Mr. Justice Lloyd-Jacob; and, if it is intended to do so, whether his advice will be taken. I should also like to ask whether it would 512 not be better to wait until this whole matter has been threshed out at the international congress of the International Association for the Protection of Industrial Property which takes place at Tokyo later this year, rather than rush in now and pass this Bill into law without knowing what the other countries are going to do on the same matter.
I will conclude by saying that I have no desire to divide the House, because I think the Bill is right in theory; but I do ask the noble Lord to consider whether, at a later stage, the Government could introduce some Amendments to give the Judiciary at any rate some indication of the factors they have to take into account when coming to their decision. The noble Lord himself suggested several, and possibly they could be put into the Bill. It would not be necessary to give any very specific indication of what was needed in order to give the Judiciary a general idea of the grounds upon which they should work.
§ 3.20 p.m.
§ LORD DRUMALBYN
My Lords, the noble Lord, Lord Rea, has welcomed the Bill on behalf of the Liberal Party. I am bound to say that we cannot do otherwise where an effort is being made to reenact a section of a previous Act which has not proved effective. That is what the Bill seeks to do. However, the Bill has been criticised by my noble friend Lord Cawley on the ground that it gives the courts no guidance as to what is just in the circumstances of a case.
The noble Lord, Lord Rhodes, mentioned one or two examples of the bases on which he thought the courts would be likely to make the decision—that is to say, if I understood him aright, in accordance with the employee's salary and the relationship of the invention to the work which the employee was paid to do. In more general terms one could say, I suppose, that the apportionment would be made on the basis of the contribution, in the broadest sense, which each side, the employer and the employee, had made to the invention. We certainly shall not oppose this Bill at this stage, but we shall wish to examine it in order to see whether it is possible to give a little more guidance to the courts on the way in which they should carry out the duty that is now being laid upon them.
513 I should like to ask one or two questions. The noble Lord, Lord Rhodes, referred to the Central Awards Committee. Am I right in assuming that the Crown is excluded from the Bill? I take it, on the other hand, that I should be right in assuming that the nationalised industries are not excluded from the terms of the Bill—that is to say, that if an employee in a nationalised industry makes some true invention he will be entitled to the benefits of the Bill. The noble Lord, Lord Rea, asked who will decide what is just. I hope that the noble Lord, Lord Rhodes, will be able to tell us. I take it that one of the purposes of the Bill is to exclude the jurisdiction of the Comptroller General of Patents, Designs and Trade Marks. That would appear to be the case when one compares the terms of the Bill with what is said in section 56(2) of the 1949 Act.
The noble Lord referred to agreements between employees and employers made before the invention takes place and said that they will certainly be respected by the court, as one would expect to be the position. But what happens if that agreement explicitly excludes the employee from getting any benefit from any invention which he may make in the course of his employment? These are some of the preliminary questions which we should like to ask. I would only say again that, in so far as this Bill seeks to do what the 1949 Act failed to do, we support it; but we shall certainly want to examine it closely in Committee.
§ 3.25 p.m.
§ LORD BROWN
My Lords, I would add just one other question to those which have already been asked of the Minister. I would ask whether the term "employee" in the Bill can be construed to include professors, senior lecturers and lecturers in universities. This is an important point because the present situation in the universities is very confused. In some universities the teaching staff, whilst being paid to do such work and having very extensive equipment supplied to them, frequently receive the full benefit of the invention. In other universities the situation is quite different, and the staff receive a fairly small proportion of the benefit. This Bill may turn out to be important, in view of the increasing degree of research carried out in our universities. Therefore I would ask 514 whether the term "employee" can be construed to include the teaching staff of universities?
§ 3.27 p.m.
§ LORD RHODES
No, my Lords. This Bill does no more than restore the position as we understood it under the 1949 Act. In answer to Lord Rea's first question (and may I say that if I am inadequate in answering all these questions to-day I will answer them on Committee stage), the tribunal which decides what is just, will be the Comptroller of Patents or the High Court. That is also an answer to the noble Lord, Lord Drumalbyn, who suggested, from his reading of the Bill, that in some way or another the Comptroller of Patents was ruled out. But he will work under Section 56(1) of the Patents Act, 1949. Or cases will be dealt with by the High Court, because in some circumstances the Comptroller can refuse to deal with a case.
§ LORD RHODES
My Lords, I cannot answer that question at this stage. In answer to the question put by Lord Drumalbyn, as to whether the Bill applies to the Crown, the answer is that it does not; but it will take in those who are employed in nationalised industries.
May I say to the noble Lord, Lord Cawley—for whose intervention in the debate we owe our thanks, as he is an expert on this subject and has devoted his life to it—that his remarks will not go unnoticed with regard to the guidance which is necessary. We have introduced into the Bill the phrase:in the course of his employment or in circumstances connected therewith …which covers quite a number of directions, as the noble Lord will probably know.
§ VISCOUNT DILHORNE
My Lords, when the noble Lord says that my noble friend's observations about guidance will be noted does he mean that he is contemplating making a specific provision for guidance in the Bill?—because unless it is in the Bill it will obviously be ineffective.
§ LORD RHODES
No, my Lords, I cannot promise that at this stage. I suppose there will be an opportunity for debating this question later. May I say 515 to my noble friend Lord Brown, in regard to the question about the professor and the university, that the Bill does not affect the nature of the relationship between the professor and the college. With regard to the noble Lord's question about what is to be referred to Tokyo, in the international field, may I say that this really does not come under the scope of this Bill. It is a very small alteration but a very important one, and I hope that noble Lords will now grant the Bill a Second Reading.
§ LORD CONESFORD
My Lords, may I put one point in support of my noble friend, Lord Cawley? I think we are all agreed that this Bill should certainly get a Second Reading but, as I understood my noble friend, the words he criticised were not the words "or in circumstances connected therewith". The words he criticised for inadequacy are the final words of that subsection "as may be just". It simply throws the whole burden upon the court without giving it any guidance at all as to what matters ought to be considered. I hope very much that between now and the Committee stage the Government will consider carefully the criticism of the inadequacy of the first subsection, not because of any inadequacy in the Government's intention, but because of the impossible task they are throwing upon the courts in simply hurling these words at them without any indication of the considerations to which they should devote their minds.
§ LORD RHODES
My Lords, in answer to that point, may I say that we are not starting from scratch with this Bill. There is a vast amount of knowledge and information, not only in the Comptroller's department but also in the High Court.
§ LORD CONESFORD
My Lords, may I add just a word, before my noble and learned friend Lord Dilhorne intervenes? I think my noble friend Lord Cawley mentioned a passage in the speech of the noble and learned Lord, Lord Reid, which had, I think, a direct bearing on the matter we are now considering. The impression left on my own mind is that, admirable though the intentions of this Bill are, Clause 1 as it stands is unnecessarily vague.
§ VISCOUNT DILHORNE
My Lords, I rise to the support of my noble friends 516 Lord Cawley and Lord Conesford, and ask the Minister to give this matter very careful consideration between this and the Committee stage. I do not seek to press him to give an undertaking now, but while welcoming the Bill for what it seeks to achieve I must say I think the wording of the end of subsection (1) is not at all satisfactory. I know that it practically repeats the wording of Section 56(2) which ends:in such manner as the court or comptroller considers just".I think we ought to see whether we can give some more guidance to the court or the comptroller by indicating what matters ought to be taken into account. It is no answer to say that it is dealt with by the words in lines 5 and 6. It may not be easy to set out the criteria which ought to be taken into account, but I think it could be done, and I would ask the noble Lord to give careful consideration to that between now and Committee stage, because I am sure if it can be done and is done it will be an improvement to the Bill.
§ LORD RHODES
My Lords, may I say that I listened very carefully to the remarks made by Lord Cawley, and between now and the Committtee stage we will give consideration to them.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.