§ 3.10 p.m.
§ Report received.12
§ Clause 139 [Supplemental]:
Lord Lloyd of Kilgerran moved Amendment No. 1:
Page 125, line 36, at end insert ("including activities relating to the recording of such knowledge").
§ The noble Lord said: My Lords, with the leave of the House, in moving Amendment No. 1 I shall speak also to Amendments Nos. 2 and 3 which stand in my name. As a prologue to my presenting these amendments to the House I should say that at the last meeting of the Joint Parliamentary Select Committee on Consolidation Bills I expressed anxiety that matters relating to capital allowances on patents and know-how were not consolidated into the present Bill but had to remain in what is known as the principal Act; namely, the Income and Corporation Taxes Act 1988. The evidence given suggested that capital allowances for the important matters of patents and know-how should be dealt with under that Act. I did not understand the arguments in favour of that.
§ I had considerable support at the Joint Select Committee from Members of another place and also from Members of this House for my view. It seemed to me odd that a Bill entitled Capital Allowances with a separate section, Part VII, on scientific research should not include references to capital allowances on patents and know-how. Patents and know-how are obviously the direct products, assets and property, known as intellectual property, arising in the course of scientific research. It seemed to me therefore that at least for the convenience of practitioners in the field of patents and know-how and intellectual property rights, such as lawyers, research workers, research organisations and advisers of all kinds, there should be a reminder that the provisions of the Capital Allowances Bill do not apply to patents and trade marks.
§ After that introduction, I presume to refer to the relevant principles involved in the law as regards the consolidation of Bills. That is to be found in Erskine May. I am not yet sufficiently presumptuous to say that I am trying to bring Erskine May up to date in this field, but most of the cases cited in Erskine May to justify the propositions to which I shall refer have dates of nearly 70 years ago. I am obliged to Mr. Keith in the Public Bill Office for providing me with the relevant pages of Erskine May which deal with Consolidation Bills. The principles that I shall apply in submitting my amendments are the following.
Erskine May states on page 494:
Where the title of a Bill is only to consolidate the law on a particular subject, it is out of order to amend the provisions of the statutes which by the bill are to be consolidated and fused together".
§ I accept that there should be no change of law in consolidation. However, if Members of the Joint Select Committee are satisfied by the circumstances—I stress the word circumstances—relating to the Bill in question, amendments may be excepted from that rule and may be moved to such a Consolidation Bill. That is the first proposition that I shall apply. There may be circumstances in relation to the other matters which will follow which would justify my amendments.13
My second proposition arises directly from Erskine May, which states that an amendment would be allowed,
which would make the words of the bill express more clearly the law as it stands
§ —that is to say, the law as it stands in 1990 and not the law as it stood in 1921 when most of these matters were decided upon.
The third proposition from Erskine May which I shall pray in aid to support my amendments is as follows:
An amendment which seeks to bring the bill into conformity with the existing law, if the Chairman is satisfied that the bill, as reported from the Joint Committee, would nevertheless effect an alteration of the law".
§ We had a long discussion in the Select Committee. Although the chairman did not record that he was satisfied that the Bill, as reported from the Joint Committee, would nevertheless effect an alteration of the law, the general opinion of the committee was that some clarification of the present position in relation to patents and know-how on capital allowances should be considered.
My first amendment is to Clause 139 of the part of the Bill which relates to scientific research. Clause 139(1)(a) states:
'scientific research' means any activities in the fields of natural or applied science for the extension of knowledge".
I have tabled my amendment for the purposes of clarifying the present position of the law. The amendment suggests that there should be added to line 36 of page 125 the words,
including activities relating to the recording of such knowledge".
That seems to me a commonsense and simple proposition to put forward. Scientific research is usually recorded. However, the word "activities" in this part of the Bill and the reference to applied science bothers me as regards their meaning. Therefore the words,
activities in the fields of natural or applied science",
§ must mean that there should be some recording of those activities and of the knowledge that has arisen from them. Therefore it seemed to me that by way of clarification a definition of scientific research should include the recording of the knowledge gained from it in some way or other. Once it is recorded it becomes generally known, usually in the form of know-how. Therefore, I submit that that amendment would be helpful as regards the definition of scientific knowledge.
§ Some people may think that the words "natural science' that appear in the definition are odd. However, having had considerable experience of the natural sciences triposes at Cambridge and having consulted the Oxford Dictionary I can declare that the world "natural" includes not only biological matters but also physics, chemistry and mathematics.
The words "applied science" in the definition also suggest that scientific research has some practical and perhaps industrial application. Therefore it seems to me necessary to clarify what is meant by,
activities in the fields of natural… science
by including the words,
including activities relating to the recording of such knowledge".
With the leave of the House, I turn now to Amendment No. 2. The amendment proposes the addition of the words "including exploitation thereof at the end of Clause 139(1)(c). The rather lengthy paragraph (c) states that:
references to expenditure incurred in scientific research do not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research, but, subject to that, include all expenditure incurred for the prosecution of, or the provision of facilities for prosecution of, scientific research".
§ Therefore one cannot obtain money under that definition for applying for patents and creating intellectual property rights.
In this context the word "prosecution" has quite a different connotation from the one that we heard earlier this afternoon. Therefore, if expenditure includes:
expenditure incurred in the prosecution of, or the provision of facilities for the prosecution of, scientific research",
§ it seems to me that the word "facilities" must include funds available for the scientific research. It should not include merely the apparatus or the staff employed in the laboratory. The facilities must include some kind of funding. Often funding can result from exploiting the scientific research in ways of which many noble Lords will be aware. Therefore the intention is to clarify that the facilities for the prosecution of scientific research must include facilities for the exploitation of scientific research in the related trade or trades.
I turn now to my third amendment which concerns paragraph (d) which defines:
references to scientific research related to a trade or class of trades".
§ In my view those words support my argument in favour of the previous amendment that exploitation of scientific research is relevant.
The paragraph continues:
(i) any scientific research which may lead to or facilitate an extension of that trade or, as the case may be, of trades of that class".
I suggest that the words,
whether by its exploitation in the course of trade or otherwise",
should be added to paragraph (d). The paragraph would then read:
references to scientific research related to a trade or a class of trades include—
§ (i) any scientific research which may whether by its exploitation in the course of trade or otherwise lead to or facilitate an extension of that trade or, as the case may be, of trades of that class".
§ I have presented rather circuitous arguments. I am glad that from a sedentary position once again the noble Baroness agrees with that observation. However, these are important matters and I am trying to bring us up to date as to the significance of scientific research and what the term should include. I am relying upon the proposition in Erskine May that it is proper when consolidating a Bill to introduce words which would clarify the existing law. I beg to move.
§ The Lord Chancellor
As the noble Lord, Lord Lloyd of Kilgerran, has pointed out, the Bill is a pure consolidation. It makes no change in the law. The Bill has been examined by the Joint Committee on Consolidation Bills, of which the noble Lord is a 15 member. The committee unanimously agreed to lay the report before your Lordships.
The committee has considered the Capital Allowances Bill which was referred to it. It has heard evidence on the Bill and made the amendments set out in the annex to the report to improve the form of the Bill. The amendments have already been given effect to. The committee is of the opinion that the Bill as amended is pure consolidation and represents the existing law and that there is no point to which the attention of Parliament should be drawn.
The noble Lord, Lord Lloyd of Kilgerran, has suggested three alterations to the existing Bill. The effect of the first amendment would be to make into scientific research the recording of the results of the research. Clearly the necessary recording of experiments is part and parcel of research. That does not need to be mentioned. However, the amendment appears to be wider, and since it changes the existing wording in Section 94(1) of the Capital Allowances Act 1968 it could be expected to go wider than the scope of the existing provision. In those circumstances I feel that I cannot accept the amendment in a consolidating statute.
The effect of the second amendment would be to bring into the definition of expenditure on scientific research in Clause 139(1)(c) the exploitation of the results of scientific research. We all know that once something has been discovered in the course of scientific research it is very often exploited. However, the exploitation of the results of scientific research need have nothing to do with the scientific research itself. It is an activity consequent on that research. Again the amendment would appear to alter the existing law.
The effect of the third amendment would be to make clear that the references to scientific research related to a trade included scientific research which might lead to or facilitiate an extension of that trade. The trade might well be extended by way of exploitation of the results of scientific research, but I cannot accept that an express reference to it in the Bill is desirable.
Clause 139(1)(d) was orginally enacted in Section 31(1) of the Finance Act 1944 in the same words. There is a risk that any alteration would be read at least as an attempt to change the law. So far as I know there is no evidence that anyone has ever had any difficulty with the existing provision. I believe that to be true in relation to the other matters which the noble Lord's amendments seek to change. I agree entirely with him about the importance of patents and know-how. However, I urge him to accept the joint committee's view that its amendments were the appropriate amendments and that the Bill as it now stands is a satisfactory consolidation which states the existing law.
§ Lord Lloyd of Kilgerran
My Lords, I am very grateful to the noble and learned Lord for his clear exposition of the matters. He has introduced references to certain Acts which were not before the committee when I was present. Having heard what he has said I shall consider his remarks. In those 16 circumstances I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 2 and 3 not moved.]
Lord Lloyd of Kilgerran moved Amendment No. 4:
Page 126, line 4, after ("includes") insert ("patents and know-how and").
The noble Lord said: My Lords, the amendment refers to the definition of an asset in Clause 139(1)(e). As paragraph (e) now stands:
'asset' includes part of an asset".
What is meant by an "asset?" The word appears in Clause 136 and 137 onwards and appears prima facie to refer to apparatus or, for example, a building to contain the experimentation. However, in my view, on a proper reading of Clauses 136 onwards, the word "asset" includes those assets arising from scientific research; namely, patents and know-how. I confess at once that I am therefore in difficulty in my amendment, in that it states that the words "patents and know-how" should be inserted after the word "includes" so that paragraph (e) would read:
'asset' includes patents and know-how and a part of an asset".
§ On the question of know-how, the answer given earlier by the noble and learned Lord the Lord Chancellor helps me. He said that, whenever scientific research takes place, it is usual to record the results of that research. As soon as that scientific research is recorded, it becomes know-how. It is the know-how in relation to that research. I therefore ask the noble and learned Lord to have regard at least to that aspect of the amendment. I beg to move.
§ 3.30 p.m.
§ Lord Williams of Elvel
My Lords, at the risk of intruding unnecessarily into the learned discussion, perhaps I may say that, if the expression "know-how" is to be included in a capital allowances Bill, it should also include registered designs and the new design right created by the Copyright, Designs and Patents Act. I suspect that that extension of the law would be outside the remit of a consolidation Bill.
§ The Lord Chancellor
My Lords, with respect, the noble Lord, Lord Williams of Elvel, is right on that point. Sections 520 to 533 of the Income and Corporation Taxes Act 1988 provide for allowances and charges to be made to taxpayers in respect of capital expenditure on the acquisition and disposal of patent rights and know-how. On the other hand, Part VII of the Capital Allowances Bill concerns expenditure on scientific research, not on the disposal of patent rights or know-how. Scientific research might lead to patentable discoveries or might result in know-how, but, whether or not it does, Part VII covers expenditure on scientific research.
The noble Lord's amendment would bring into Part VII of the Bill expenditure on the acquisition or disposal of patents and know-how. If the amendment were made, one consequence would be that disposal 17 of patent rights would then fall within Clause 138, which would be entirely wrong. The same is true of know-how. I hope that having raised that point, which I agree is extremely important, the noble Lord may think it wise in the circumstances of this consolidation Bill to leave the provisions as they are.
§ Lord Lloyd of Kilgerran
My Lords, I am grateful to the noble and learned Lord for that exposition. I also thank the noble Lord, Lord Williams of Elvel, for his helpful intervention. However, with great respect to both the noble and learned Lord and the noble Lord, I cannot agree that the phrase "know-how" must inevitably include copyright, designs and trademarks. Know-how is the written record of research. How can it possibly be said, in the case of a chemical experiment, that a design arises from that research? One is making a new product. There is no question of copyright or design.
It is rather difficult to proceed, given the fact that the noble and learned Lord has told the House that to introduce patents and know-how into the Bill at this stage would be contrary to the provisions of Clause 138. In those circumstances, I shall read what he said. I thank him for his kind observations. After all, it is an important matter. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ In the Title:
Lord Lloyd of Kilgerran moved Amendment No. 5:
Line 2, at end insert ("other than certain enactments relating to patents and know-how").
§ The noble Lord said: My Lords, this amendment raises the matter of the Title to the Bill. As it now stands, the Bill seeks, "to consolidate certain enactments relating to capital allowances.
§ In my view and the view of many Members of both Houses at the recent meeting of the Joint Committee on Consolidation Bills, there should be a further reference in the Title to the fact that the Bill does not include matters relating to patents and know-how.
The reason for that view reflects the common-sense approach to the matter. In these days of advanced technology and the advancement of science: generally, patents and know-how are often the life-blood of comparatively small firms. Such firms do not have large legal departments and their accountants may not be familiar with matters of importance to their business; namely, patents and know-how. If they consulted the Capital Allowances Bill—
An Act to consolidate certain enactments relating to capital allowances"—
they would have to search through over 142 pages to see whether it applied. They would then see that Clause 161(11)—a reference which the Committee decided should be included—on page 143 states:
Chapter 1 of Part XIII of the principal Act (which relates to patents and know-how) contains further provisions relating to capital allowances".
§ In order to assist persons who are interested in the problem of capital allowances, patents and trademarks, it seems to me common sense that the 18 Capital Allowances Bill should immediately put them on their guard that they must look elsewhere if they wish to deal with the important question of patents and know-how. They would have to plough through over 142 pages to find just three lines relating to the matter. That does not seem to be the way to assist persons in industry.
The amendment to the Title of the Bill which I suggest in my amendment would cover the position. The Title would therefore read:
An Act to consolidate certain enactments relating to capital allowances other than certain enactments relating to patents and know-how".
The word "certain" appears to have crept into my amendment. From a drafting point of view, perhaps the word "certain" should not be included and the Title should include a clear statement that the enactments relating to capital allowances in the Bill do not include enactments relating to patents and know-how. I apologise for that slight error in the amendment. I am sure that it is my fault. With the leave of the House, I should like to delete from the amendment the word "certain" so that the amendment would read,
other than enactments relating to patents and know-how".
§ I beg to move.
§ Lord Mishcon
My Lords, we entirely appreciate that the noble Lord, Lord Lloyd of Kilgerran, speaks with authority on behalf of the certain section of practitioners among whom he has always been a leading light. Perhaps I may speak for practitioners generally who ask not to be misled by consolidating statutes which seek to help understanding and not to create misunderstanding. If a Bill which seeks to consolidate certain enactments relating to capital allowances does nothing else, it tells the practitioner that it relates only to the consolidation of certain enactments. The practitioner is warned that there may very well be other enactments relating to capital allowances which have not been consolidated in this Bill. I cross out the word "certain" in view of the remarks of the noble Lord, Lord Lloyd. But if we add the words,other than enactments relating to patents and know-howthe immediate impression created for the practitioner is that there is only one exception to the rule in regard to a consolidating statute relating to capital allowances—the exception that relates to patents and know-how—and therefore he can rely on this consolidating Bill to cover every other enactment and every other aspect statutorily in relation to capital allowances.
On behalf of general practitioners—not on behalf of the specialist practitioner for whom the noble Lord, Lord Lloyd, speaks with such authority—I ask that this amendment be disagreed to.
§ The Lord Chancellor
My Lords, the interest and expertise of the noble Lord, Lord Lloyd, in this matter are known to all noble Lords. I join with the noble Lord, Lord Mishcon, in acknowledging it freely. On the other hand, it is important to bear in mind that there are people other than such experts who have an interest in this 19 consolidation. It is to deal with the concerns of what I might call the constituency that the noble Lord, Lord Lloyd, represents that the Joint Committee decided to insert Clause 161(11), which states:Chapter I of Part XIII of the principal Act (which relates to patents and know-how) contains further provisions relating to capital allowances".I think that that is entirely accurate. I believe that it would be not helpful to seek to elaborate the Title. The fact that these are not all enactments relating to capital allowances is emphasised by the use of the word "certain" in the Title as it stands. In fact, if and when this consolidation goes through, as I hope it will, the standard works will have an index in which those concerned with patents and know-how will quickly be directed to the provisions of Section 161(11). That was the course taken by the Joint Committee in order to deal with the concerns raised before it very properly by the noble Lord.
I hope therefore that in the light of all the considerations heard, noble Lords might feel that his work has been well done and recognised by the Joint Committee in this way, and that the House has already given effect to that.
§ Lord Lloyd of Kilgerran
My Lords, I am very much obliged for the kind words said about me by the noble and learned Lord the Lord Chancellor and the noble Lord, Lord Mishcon. There is another expert on intellectual property rights in this House at the present time. The noble Lord, Lord Cawley, is sitting opposite me and his splendid work in that field has been known for many years.
The intervention of the noble Lord, Lord Mishcon, emphasises the difficulties that people find in obtaining information on simple matters without going to vast expense—in this case, the capital allowances for patents and know-how. The noble Lord, Lord Mishcon, is a most distinguished practitioner with a large solicitor's office. I am speaking of the small solicitor in the country. He may be asked for advice by the directors of a small firm that has produced good inventions—the lifeblood of the firm must be good inventions. The solicitor says, "Yes, there is an Act—the Capital Allowances Act. We shall get a copy of that and study it." To his horror he finds that he must search through the whole Act. Meanwhile the machine that counts the time that he spends goes ever upwards and in no time at all hundreds of pounds go forth in legal fees.
Therefore, in my simple approach to these matters I felt that the Title, despite the erudite objections raised by the noble and learned Lord the Lord Chancellor and the noble Lord, Lord Mishcon, should include something to the effect that this Bill does not include anything about patents and know-how. I had hoped that the noble and learned Lord would have been sympathetic. I fully realise that my amendments are not perfect and I had hoped that by the next time the Bill comes forward the noble and learned Lord himself might be able to suggest something in the Title to warn off people so that they are aware that this Bill has nothing to do with capital allowances for patents or know-how and 20 thus save the time and expense of small firms in particular of finding out about these important matters.
In these circumstances, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.