§ 4.16 p.m.
§ Lord Sainsbury of Turville
My Lords, I beg to move that this Bill be now read a second time.
The future strength of the UK economy will increasingly be dependent on how effectively it can exploit its knowledge resources to answer the challenges of rapidly changing global-scale markets. In mature economies such as ours, generating new business will depend on being able to add unique value to solve business problems, whether through the application of new ideas or the innovative application of existing ideas or both. Such economies cannot compete in terms of the costs of labour or of production with the emerging economies in the Far East. For example, in China, wages are less than 5 per cent of those in the UK, and in South Korea, which has almost the same proportion of graduates in its workforce as the UK, the wage costs are half of ours. The future success of the UK economy will be dependent on adding knowledge value, for example by making effective use of research and development to develop new business.
Patents, along with other intellectual property rights, play an important role in helping an individual person or company to protect what is often their most important asset: the unique value added when developing new products or processes. It is therefore timely that we should be looking at a Bill that updates patent law when it comes so soon after the publication of the Government's Innovation Review. Appropriate and fair protection for the results of UK business's investment in innovative activity can encourage only more innovation for the benefit of us all.
33 Patents are, unfortunately, not well understood by many businesses. The Innovation Review has recognised the need to increase awareness about all intellectual property and this is something that we are pursuing in parallel to this Bill. Patents provide the holder, who may he the inventor or the company for whom the inventor works, with the statutory right to prevent someone else using the invention without his permission. The practical effect of this is that the patent holder has the exclusive right, for up to a maximum period of 20 years, subject to the payment of an annual renewal fee, to recover the investment he has made in the invention that he has patented. This recovery may take a number of forms. For example, the patent holder may license the right to exploit the invention to a third party and receive a licence fee for doing so. Alternatively, he may decide to work the invention himself and so manufacture the product, or carry out the process, protected by the patent.
UK businesses operate in national, regional and global markets and thus will want to ensure that they can protect their valuable intellectual property assets in all types of markets. The Patents Act 1977 has served us well in this respect. It had two key objectives: first, to reform and modernise UK domestic patent law and, secondly, to permit the UK to ratify a number of international patent agreements and thus ensure that UK businesses could obtain similar patent protection for their inventions regionally, in other countries in Europe, and globally.
The most important of these international patent agreements was the European Patent Convention of 1973 which allows a UK applicant to obtain, using a single application and granting procedure, a patent which will be effective in any of up to 27 European countries, including the UK as well as all our EU partners. This European patent is in effect a bundle of national patents that all become effective in the country in question upon payment of a fee and filing a translation of the patent in the official language of that country.
In November 2000. at an intergovernmental meeting in Munich, a large number of changes to the 1973 European Patent Convention were discussed and agreed by representatives from all the contracting states which had ratified this convention. All the states which attended this conference undertook to implement the agreed changes as soon as possible.
The first objective of the Bill is therefore to amend the Patents Act 1977 to implement, in UK law, the changes to the 1973 European Patent Convention that were agreed in 2000. Failure to ratify the revised version of the European Patent Convention would result in the UK having to leave the European Patent Organisation, the body set up under the convention to carry out all the tasks involved in the granting of European patents. The consequences for UK business would be significant.
By bringing UK patent law into line with these revisions to an international treaty, we will ensure that UK businesses can continue to use the single application and granting procedure to obtain 34 European patents valid in the UK. In 2002, UK businesses were the third largest user of the European patent system after Germany and France, both in terms of patents applied for and patents granted. Were we to leave the European Patent Organisation, UK businesses would experience increases in red tape and the costs of obtaining patent protection. They would have to file separate applications and pay separate fees for patent protection in the UK and in other European countries under the European Patent Convention.
Moreover, as one of the original signatories to the convention, it is important that the UK maintains the active role it has played in the development of the European patent system since its beginning. It is only by meeting our obligations under the revised European Patent Convention that we can continue to be a contracting party to it, and so influence future developments for the benefit of all UK interests. The Bill is therefore crucial if the UK is to remain a key player at the centre of the European patent system.
Clauses 1 to 5 make the necessary changes to the 1977 Act to take account of the changes agreed to the European Patent Convention in 2000. Clause 1 achieves two things. First, it makes it much clearer that any method of medical treatment—for example, a new surgical technique—cannot be patented. Secondly, it provides a much less complicated way of obtaining patent protection when a new use is found for a medically active substance which already has a known use or uses.
Clauses 2 to 4 cover various issues arising from the new limitation procedure provided by the revised version of the European Patent Convention. Clause 2 ensures that when the courts, or the comptroller of the Patent Office, exercise their discretion on whether or not to allow an amendment of a patent—such as a limitation—they will do so having regard to any relevant principles under the European Patent Convention. In the situation where a European patent in force in the UK is found to be partially invalid during infringement or revocation proceedings here in the UK, Clauses 3 and 4 ensure that the new central limitation procedure will be available to the patent holder as a remedy. He will be able to limit—that is, reduce—the scope of his European patent in one step at the European Patent Office and this will have effect in all the countries in which this European patent is in force, including the UK.
Clause 5 introduces Schedule 1 which deals with the remaining amendments to the Patents Act 1977 required to fulfil our international obligations. While the majority of these changes flow from the streamlining of the European Patent Convention in 2000, this schedule also makes some minor changes in respect of the relationship between the Patent Co-operation Treaty and UK domestic patent law. This treaty permits a single application for patent protection in up to 123 countries worldwide. It provides an alternative route for UK businesses requiring protection at a global level.
This brings me to the second part of the Bill which is concerned with other amendments to the Patents Act 1977—which will make improvements to the current 35 arrangements for handling disputes over patents, including the creation of a new opinion procedure to provide an early and rapid assessment of issues relevant to validity or infringement of a patent; and make the UK patent system more responsive to the needs of customers.
The Patent Office can hear a wide range of disputes over patents on questions such as should a certain patent have been granted; in other words, is the patent a valid one? Does a certain act fall within the scope of a patent: in other words, is the patent infringed by this act? Has an employee who made the invention received just compensation from his employer who owns the patent? Are all those listed as applicants for the patent entitled to be so?
The Patent Office has built up considerable experience over many years in addressing the issues that could arise in disputes, but we do not believe that this experience is fully utilised. Moreover, we have recognised the changing needs of users of the patent system in the UK and a growing concern in some quarters with regard to the enforcement of patent rights. Much of this concern currently focuses on the cost of patent litigation. For example, a recent case at the Patents Court concerning infringement of a patent reportedly involved costs of £850,000 for a four-day hearing. The result of this is that for many companies, especially those in the small and medium enterprise sectors, enforcement of their patent rights may involve costs, but also time pressures, that are difficult to bear.
The Government have therefore taken the opportunity presented by the Bill to make a number of improvements relating to the handling of disputes and utilising the expertise in the Patent Office. In an effort to help patent holders and others determine as early as possible what is the likelihood of success when considering or facing possible litigation, Clause 12 of the Bill would provide a new procedure under which the Patent Office would issue, on request, an opinion on certain matters that might be relevant to a patent dispute.
Opinions would be possible on whether or not a specific act is an infringing one with respect to a particular patent, or whether some new evidence—for example, a published article not previously considered—brings into question the validity of a specific patent. Although the opinion will not be binding on any party, it will provide a rapid and affordable assessment of the particular issue of validity or infringement in question, based on a consideration of both sides of the argument. Such a timely and affordable assessment will, we believe, be extremely helpful to any party, but perhaps particularly so to a small or medium-sized enterprise trying to decide how best to enforce its patent rights.
Clause 12 sets out certain substantive issues relating to the new non-binding opinions on validity or infringement, including a mechanism to review such opinions where appropriate. However, many of the details of the opinion procedure and review will be laid 36 down in secondary legislation after further comprehensive consultation with stakeholders on how best to implement this new procedure.
Further improvements in the area of infringement disputes are provided for in Clauses 10 and 11. Clause 11 would make it easier for a patent holder who is genuinely interested in settling a dispute to make an approach to those who are believed to be the source of the infringement, such as those making or importing an allegedly infringing product. In situations where such a person is not easy to identify, this clause would also permit a retailer to be approached to find out who, exactly, is the source of the suspected infringing matter at issue. As long as this approach is made in an appropriate way, the patent holder will not be subject to an action from the retailer for making a groundless threat to launch infringement proceedings. Thus, it will make it easier for the patent holder to find out the true source of the alleged infringing matter and hence encourage settlement of the dispute with that person.
Clause 10 makes it simpler for a patent holder to enforce an award for damages following successful infringement proceedings before the Patent Office.
I should like now to consider the improvements in the Bill which relate to patent litigation on issues other than infringement and validity. The Patents Act 1977 recognised for the first time that an employee should have certain statutory rights in relation to inventions made by him, but being exploited by his employer. A wide-ranging review of the effectiveness of these rights under the 1977 Act was conducted as part of the public consultation which preceded the Bill. The conclusion from this exercise was that these provisions of the 1977 Act have provided a strong incentive to companies to make their own corporate arrangements for the effective reward of employees who make important contributions to the business. Despite suggesting a number of options for reform, there was sufficient support for change on only one issue.
Clause 9 will allow an employee to include benefits that flow from the invention itself, and not only benefits flowing specifically from the patent, when required to show that a patented invention is. in the words of Section 40, of "outstanding benefit" to the employer. This will allow the employee a limited increase in the scope of what can count towards meeting the high evidential threshold of outstanding benefit, without upsetting the careful balance that must be maintained between the rights of the employer on the one hand, and those of the employee on the other.
Clause 6 makes an adjustment to the handling of disputes over who is rightfully entitled to be named as the applicant for a patent. It prevents the unsuccessful party in such a dispute from being able to reduce the patent protection available to the successful party.
The final improvement in this area is made in Clause 13, which concerns the circumstances in which a party is required to provide a security for any costs that it may be ordered to pay at the end of proceedings before the Patent Office. The change will bring the law on 37 patents into agreement with the law on trade marks, and will enable the rules to be aligned with those governing civil procedure in the courts.
As I have already mentioned, the second part of the Bill also makes a number of changes to the 1977 Act to ensure that the UK patent system continues to be responsive to the practical needs of users. Clause 7 would permit the date by which renewal fees must be paid in order to keep a patent in force to be altered to the end of the month. This will make it simpler for UK businesses to manage their patent portfolios and has the added advantage that it brings us into line with practice in other European countries.
The second improvement in this area is that in Clause 8. This makes clear the relationship between co-owners of a patent in certain situations where they may not have made any agreement between themselves on how to act.
Schedule 2 contains a number of more modest changes which would also permit an improvement in the Patent Office's responsiveness to its customers. Measures included here will make it easier for the Patent Office to vary its hours of business, and to alter the layout and content of its application forms in response to customer feedback. The remaining measures in Schedule 2 deal with minor and consequential amendments to the Patents Act 1977.
This is a small but important Bill, which is essential if we are to meet our international obligations under the European Patent Convention. Furthermore, in doing so, we will ensure that the UK maintains the role in the development of the European patent system commensurate with the important position of UK industry as its third largest user. At the same time, by improving the mechanisms for resolving disputes in this Bill, we will assist all who obtain patents to gain the fullest benefit possible from their most important asset—their intellectual and knowledge resources. I commend the Bill to the House.
Moved, that the Bill he now read a second time.—(Lord Sainsbury of Turville.)
§ 4.33 p.m.
§ Lord Lyell
My Lords, your Lordships may wonder why I put my name down to speak on this somewhat esoteric Bill. The Minister will appreciate that 27 years ago—I think to the day—I was sitting exactly where my noble friend Lord Attlee is sitting, with my noble friend Lord Belstead. We started debating the Second Reading of the 1977 Patents Bill, as it then was. I seem to recall that the Bill finally passed through all the stages in your Lordships' House on 15 July of that year. In spite of the fact that the Minister referred to the Bill as relatively simple, I commend and admire him for covering all aspects of the Bill, together with other aspects relevant to it, in 16 minutes. I hope that I shall he much briefer.
I worked on that Bill with my noble friend Lord Belstead and with Lord Elwyn-Jones, the then Lord Chancellor, the noble and learned Lord, Lord McCluskey and Lord Horam, together with two other patent barristers on the Back Benches and the late 38 Lord Halsbury. We discussed various aspects of that particularly important Bill late into the night. That led me to admire inventions and industry such as that referred to by the Minister. It also led me to make contacts that I have maintained to this day, and to have great admiration for one of the leading industries that I know is admired by the Minister—the pharmaceutical industry.
In 1977 we had lengthy discussions and obtained some valuable amendments concerning the licences of right. This was non-controversial and the Government gave us considerable assistance. On this occasion, we have had some briefing, including the Department of Trade and Industry brief, and some helpful words from the Minister about "need to know" and above all how invention and novelty are of particular importance.
Will the Minister or his assistants be able at some stage to advise me on Clause 2? That clause adds some slight amendments to three sections of the 1977 Act—Section 58, concerning references of disputes as to Crown use, Section 62, concerning restrictions on recovery of damages for infringement and Section 63, which concerns relief for the infringement of partially valid patents. Clause 2 makes minor amendments to all those sections about relief being sought "in good faith". Will the Minister be able to advise me as to whether there has been a difficulty over the years or recently in this area? I understand that we have plenty time before we come to further stages of debate on the Bill and that we may take a relaxed attitude. However, if at some stage the Minister or his team could give me some advice on that I would be grateful.
I come to three more clauses in the Bill on which I hope the Minister will be able to give me some advice during the coming weeks—I hope that it will not be months. Clause 9 deals with Section 40 of the 1977 Act. It inserts into that section a new subsection (1)(b), which includes the phrase:having regard among other things to the size and nature of the employer's undertaking".The provision goes on to refer to "outstanding benefit". I hope that I am not as much of a cynical so-and-so as a chartered accountant, but I wonder whether there is any limit to that term.
If I may I shall digress briefly to speak about a Swiss company that is now part of a large group—Novartis. About 10 years ago, as I recall—I shall get confirmation of this information and I apologise for not having it for the Minister this afternoon—the chairman of the company allowed two or three research projects to go ahead even after they had passed their sell-by date. In one case, the researchers discovered a product called Sandimmun—the company was called Sandoz and they added something else on. That product had a particular and more than outstanding benefit in terms of that company's profits for three successive years. I would certainly have more information on this matter if we were able to discuss it in Committee. It was of particular interest. I do not know whether there are 39 other, similar examples in British industry, let alone in the pharmaceutical sector. I wish to know how this quality of outstanding benefit is to be defined.
Such a discovery, particularly in the pharmaceutical industry, is due not to one employee, but to a team or group. There may be a team leader, but three, four or more people will be involved and, as a result of their collective endeavours, a particularly valuable invention or process may be identified, which could be patented. The advice that I have received relates to what to my mind is a dreadful word—competition—but which is very much approved of by the Minister. Any company that does not adequately reward a team—let alone an employee, as drafted in the Bill—will soon find that that team, invention and knowledge goes elsewhere. I should be very grateful if—over the next week or so, if not today—the Minister could advise me how "outstanding benefit" will be defined.
Clause 11(4) is about the use of "best endeavours". Is the Minister able to give me a steer on how that can be defined? Has there been a difficulty over the 27 years?
The noble Lord tried to be persuasive—and probably was quite persuasive—about Clause 12 and the opinions of the Patent Office. He suggested that there should be simplicity for small and medium-sized firms. I much admired the Patent Office in 1977 and much admire it now. However, giving opinions can be perilous or even dangerous, and certainly somewhat difficult. The Minister drew attention to the fact that Clause 12 states that:An opinion under this section shall not be binding for any purposes".I look forward to that provision being used if anything comes before the courts. No doubt it was written with good intention, so perhaps the Minister will be able to assist me further in the days to come.
A percentage of GNP is for business research and development in the United Kingdom. As the noble Lord pointed out, in those terms the United Kingdom is about average for the European Union, but it is well below the United States, let alone Finland, France and Germany. However, the average could be rather crude. I understand that the pharmaceutical industry—I hope that I am not basking in its glory or buttering it up overmuch—is virtually second to none so far as concerns Europe and, I believe, on the world stage. Therefore, I suspect that the figures for that industry and other sectors may well be much more flattering and encouraging.
I apologise for taking half the time that it took the Minister to talk about the Bill, but it is important. It is particularly important to one special and very successful industry in the United Kingdom that employs lots of young, competent and very intelligent scientists. I approve of all that the Minister said and wish the Bill a speedy passage through the House. I hope that the Minister can clear up some of the matters raised today and that we will have plenty of time at the next stage. I thank him for his comments.
§ 4.42 p.m.
§ Lord Razzall
My Lords, the noble Lord, Lord Lyell, said that the Bill was extremely esoteric, which it clearly is politically, considering the sparse attendance in the House this afternoon. He also ended up saying something with which I absolutely concur; namely, that the Bill is important for large sectors of British industry.
It is apparent to those of us who have studied the background to the Bill that an extensive consultation exercise has been undertaken on possible changes to the Patents Act 1977. However, one problem—it touches on the problems that the Minister often seems to have with Department of Trade and Industry Bills—is that large numbers of very worthwhile suggestions have come forward in the consultation procedure that either his department or his lords and masters who control the legislative programme have felt inappropriate to put into the Bill. Because of the esoteric nature of the subject and the exigencies of the legislative programme, I suspect that we will not have an opportunity to look at a number of those issues for some time.
I understand that the consultation exercise indicated quite considerable support for a new designs Act, the jurisdiction of the Patents County Court being widened to cover trademark matters, a number of parts of the Copyright, Designs and Patents Act 1988 being amended, and taxation laws in relation to damages and costs in legal proceedings being amended. That is a big mouthful for the Minister to chew on, let alone swallow. However, it is regrettable, with the pressures of legislative time and the government programme these days, that when an opportunity has been taken for such extensive consultation the legislation that comes forward is limited.
I want to raise a number of questions for the Minister. I suspect that he will not necessarily answer them when he responds, but as we move into Committee we on these Benches will look for answers to them. In the consultation exercise, answers came in on a number of issues and the Government took a whole series of policy decisions that did not necessarily meet the views of a number of the parties consulted. I shall highlight those and, either today or when we go through the issues in Committee, I hope that the Minister will satisfy us that the correct policy decisions have been taken.
A number of the people consulted believe that we should bring the UK into line with the European Patent Convention, which allows an inventor, if he or she is not the applicant, to have his or her name and address kept confidential. The Government have not seen fit in their proposals to agree to that. Either today or in Committee, the Government need to justify that decision.
There were considerable cross-currents of views in the consultation process in relation to employee-inventor compensation for inventions of outstanding benefit. The Minister indicated that the Government proposed to make no change to the existing 41 procedures. He will be aware that Section 40 of the existing Act has never been used, because either employers have generally chosen to settle anything but the most hopeless of cases rather than face litigation, or the balance between the interests of the employee and the employer is weighted too heavily in favour of the employer. When we get to look at the Bill in detail, Her Majesty's Government need to justify whether and why they think no change is necessary to Section 40.
The next point that caused some controversy was in relation to discretion being removed from post-grant amendment. The general view was that the Government's policy was correct. However, some justification is necessary from the Government about whether, if discretion is removed from post-grant amendment so that the conduct of the proprietor is no longer a factor, the facility to oppose amendments should also be removed.
There is a brief and technical point regarding licences of right and Section 46(3)(c). In the consultation process, the Patent Office suggested,extending the concession that no injunction and only limited damages will be available as remedies in infringement proceedings, provided the defendant agrees to take a licence of right. This concession is currently only available to those who import into the UK from within the European Economic Area".Following the consultation process, the Government do not propose to extend that concession, but they need to justify that.
Next, and probably my main point, is that in the original consultation it was proposed that,section 61 be amended to remove the existing requirement that if infringement proceedings are to be brought before the comptroller both parties must consent to this happening".There was considerable consultation on that because, if the requirement that both parties must consent was withdrawn, a considerably cheaper alternative to litigation would be available, taking into account the expertise of the Comptroller. Could the Government explain why, following the consultation, they have chosen not to remove that existing requirement?
Finally, there is the thorny issue of threats; it is an issue which took up a large amount of the consultation process, with considerable disagreement among those who were consulted. First, the Government asked whether the provisions on threats needed improving generally to facilitate genuine attempts to settle infringement disputes prior to litigation—which would be in the spirit of the reforms of the noble and learned Lord, Lord Woolf.
Secondly, the Government proposed a specific change to Section 70(4), so that where someone was alleged to be a primary infringer, and a threat was made that included an allegation of secondary infringement, proceedings for unjustified threats would no longer be able to be brought by the alleged infringer. The Government are proceeding with that specific change, but have not chosen to deal with the general improvement of provisions which would facilitate attempts to settle threats disputes. It is also an area where we will seek further explanation. A number of respondents suggested going further than 42 the Government propose by allowing a patentee to be free to notify a potential infringer of a patent, identify alleged infringing products and the relevant claims and provide reasoning that repeated assertions should give rise to possible threat actions. The Government have not seen fit to go that far.
Thirdly, the Government have not seen fit to introduce an equivalent provision to Section 132 of the Australian Patents Act to protect legal representatives and patent agents from threats of litigation in proceedings. Will the Government also justify why they have not chosen to take that step?
In conclusion, these Benches welcome the Bill. We will not be difficult over ensuring its passage. Most of the provisions are technical and essential. It is a pity that the Government have not taken the opportunity to amend Section 61 to allow the Comptroller to offer an informal and cost effective alternative to litigation. It is also a pity that the opportunity has not been taken for a wider review of the whole area.
§ 4.53 p.m.
§ Earl Attlee
My Lords, I am grateful to the Minister for explaining his Bill. He said that patents were not well understood by business. I have the same problem, but I am learning. The Bill is non-controversial, highly technical and important, as all noble Lords agree. However, it appears that the Bill's importance is inversely proportional to the size of the list of speakers. That makes me all the more grateful to my noble friend Lord Lyell for his contribution. In his press release of 16 January, the Minister said:The Government is committed to improving the environment necessary to support and encourage innovation. Effective, flexible and up-to-date patent law is essential to help businesses turn bright ideas into successful products and processes.I could not have put that better myself.
The 1977 Act, now well over 20 years old, has stood the test of time well, as the Minister observed. It has obviously had much benefit from the attentions of my noble friend Lord Lyell. As the Minister explained, the Bill implements EPC 2000. I have little problem there and I strongly support the assertion that there should be no discernible difference between EPC 2000 and UK domestic law. There will no doubt be some minor matters to be clarified during later stages of the Bill.
As a complete Euro-sceptic, I hope that the Minster has a long-term aspiration that we should have a single European patent convention covering all EPC states. It is clearly a single market issue. The cost of translation of patents is stupendous and we need to have one language for them all. There is an obvious difficulty for the Minister when negotiating with other European states. English is the technical language of the world—85 per cent of patents are published in English and nearly all of them are initially published in English. I am confident that the Minister is on the job. Can he give us a progress report when he replies?
The noble Lord, Lord Razzall, raised a number of points about the consultation. I expect that we shall sing off the same song sheet more often than not. The Bill introduces new measures to assist the enforcement 43 of patent rights and to help resolve patent disputes. Clause 9 extends compensation to employees to inventions and not just patents, as the Minister explained. Like my noble friend Lord Lyell, who expressed some caution, I am worried about that. Is the new provision too wide or too general? We will have to look closely at that in Committee.
Clause 11 concerns the issue of threats under Section 70 of the 1977 Act. The new provisions may be helpful, but we detect concerns from larger organisations. We will have to balance the needs of large organisations with the needs of small ones or even individuals. I suspect that a difficulty that all noble Lords will have with the Bill will be the need to avoid the perils of regulation and bureaucracy.
Clause 12 provides for the Patents Office to give an opinion on validity and any infringement of a patent. I share the concerns of my noble friend Lord Lyell about the clause. I can see the mischief regarding the extremely high cost of litigation—one reason for that is that patent lawyers need to be technocrats as well. I can understand how the Patent Office, because of its wide experience, can give an opinion on the validity of a patent, but infringement will be a new area of activity for the Patent Office. The new procedure is designed to save the costs of litigation and I have been told that it might cost in the order of £150 to £300. But one would be lucky to have an hour of the services of a good patent lawyer for that much money, so I am not quite convinced that the new procedure will help. Will the Minister give some idea of the costs and the time scale involved in the Patent Office giving an opinion? That opinion may be useful as a sanity check to parties in a dispute, but the Minister will have to convince the House that there is further utility in the clause.
Regarding intellectual property rights in respect of computer software—another highly complex area—we certainly do not want to follow the American route of being able to patent a business plan. What is the Government's position on computer software?
Finally, I turn to the thorny issue of exemplary damages in the event of a flagrant breach of a patent. The noble Lord, Lord Razzall, thought that the thorny issue was threats, but I think that it is exemplary damages. A Private Member's Bill was introduced in another place in 2002 by Mr Liddell-Grainger under the 10-minute rule procedure. Currently the only remedy available in cases of infringement is an injunction over the royalties lost. That might not be a significant deterrent to a large organisation to prevent it abusing its position. Triple damages are available in the US. But there is a difficulty with the Liddell-Grainger Bill: it contains no definition of "flagrant". Without tight drafting of the Liddell-Grainger provision on exemplary damages, every claim for infringement could also incur a claim for exemplary damages, which is not desirable. Perhaps something could be inserted into Section 70, for example. The jury is out on exemplary damages at present. I would be very interested to hear the Minister's views, and I hope that we can carry out a careful examination in Committee.
44 We welcome the Bill, although there may be room for improvement. I hope that the Minister can reassure us, where we have concerns, but I do not think that he need lose any sleep over the Bill.
§ 5 p.m.
§ Lord Sainsbury of Turville
My Lords, ever since James I introduced the Statute of Monopolies in 1623, the law relating to patents has not been the most straightforward legislation. That is partly because the law must go to some lengths to maintain a careful balance. It awards exclusive rights to those who create genuinely innovative products and processes, but the system must encourage the exercise of those rights in a manner that is beneficial for all and must provide ways for others to challenge those rights.
Furthermore, patent law is not straightforward, because it combines difficult legal issues with complex matters of science and engineering. Fortunately, this House has expertise in both legal and technical fields. I look forward to the Bill being subject to further analysis and detailed scrutiny.
I shall now reply briefly to the main points made. The noble Lord, Lord Lyell, raised the question of outstanding benefit and how it is defined. I can only offer the following comment from the leading court case on the issue: the word "outstanding" denotes something special and requires the benefit to be more than substantial or good. It would be unwise to try to define the word "outstanding" in more detail. Courts will recognise an outstanding benefit whenever it occurs. That is probably the wisest approach rather than trying to define it in detail.
The noble Lord, Lord Lyell, also raised the question of good faith. There is an issue concerning whether a patent-holder who knowingly maintains an invalid patent claim can later amend his patent. When a court or the Comptroller is deciding whether to allow or refuse an amendment of a patent, Clause 2 would retain their discretion to take account of such covetous behaviour, but only if it is consistent with the relevant principles under the European Patent Convention. If it is considered that the principles under the EPC clearly rule out covetous behaviour from being taken into account, the Comptroller or the court would not be able to take such behaviour into account either. However, Clause 2 would prevent a covetous patent-holder from winning damages for any infringement committed when the patent claim was restricted by amendment to its proper scope. The provision would therefore protect the public from the action of covetous patent-holders, but differently from the past.
The noble Lord, Lord Razzall, said that more changes should have been made to the Bill on employee invention. We looked at the matter in great detail. The argument put forward is that it is difficult to show that an employer has gained outstanding benefit from the employee's invention. However, the vast majority of respondents to the consultation on the proposed changes to the provisions agree that the threshold should remain at its current level. It was considered more appropriate to allow the employee to 45 include more material that might demonstrate outstanding benefit rather than to reduce the threshold. Hence respondents were prepared to accept that the best approach was to allow benefits arising from the invention itself to be included, in addition to the benefits arising from the patents. So we enabled the inventor to produce more evidence but did not change the threshold.
The following question will arise in further debates: if you have outstanding benefit from a patented invention, will that create difficulties as regards the contribution made to it by others in the company? If you can establish what was due to the quality of the patent and the invention and what was due to the quality of the others involved, such as marketing and production staff, it will ring clear. I certainly agree with the noble Lord, Lord Lyell, that competition between companies will mean that they reward employees properly for invention, but it seems right to have that as back-up.
The noble Lord also asked about the R&D position. He is right that on average our R&D is roughly the same as the EU's. Two startling contradictions to that are the pharmaceutical industry and the aerospace industry. The pharmaceutical industry has an extraordinary record on R&D in this country; it is way above the international average, which is undoubtedly why it is so successful. Without the pharmaceutical industry's input to our figures, they would not even look average. We should not be too sanguine about the fact that our position is average.
The noble Lord, Lord Razzall, asked why the Bill would not allow inventors to remain anonymous when a patent application was published. We consulted on whether inventors should be allowed to remain anonymous. The majority of respondents to our consultation were against it, for a variety of reasons. We are aware of concerns that scientists who develop controversial technologies are sometimes targeted by activists. However, on patent applications, employees have always had, and will retain, the option of giving their employer's address rather than their own if they fear for their personal safety. Moreover, we intend to change the patent rules to prevent an inventor who is not the patent applicant keeping his address confidential. Thus it is not necessary or appropriate to include anything in the Bill.
The noble Earl, Lord Attlee, asked about the Patent Office's opinions on validity or infringement. I think that the matter will be debated in Committee. It will help to speed up negotiations, but of course participation is entirely voluntary. It will be useful only if it is seen as a way whereby people who genuinely wish to negotiate can take things forward at a lower cost than otherwise.
The noble Lord, Lord Razzall, and the noble Earl, Lord Attlee, asked about the threats provision. Genuine attempts at pre-litigation settlement of a patent infringement may have been hampered in the past by the existing provisions on threats in Section 70 of the 1977 Act. Clause 11 makes several changes intended to address that. The change to Section 70(4) 46 is one of those. However, that is now subject to the second change made by Clause 11, which was in response to concerns raised during the consultation. Under current provisions, a patent holder who, for example, has failed to find the manufacturer of an allegedly infringing product cannot risk contacting the retailer of the product to resolve the dispute for fear of a threats action against him.
Clause 11 would, therefore, allow the patent holder freely to approach an alleged secondary infringer, but only in the limited circumstances where he has unsuccessfully used his best endeavours to locate the alleged primary infringer first. Furthermore, it clarifies the way in which a patent-holder may contact an alleged secondary infringer as part of his best endeavours. I believe that it is therefore a modest adjustment to the balance between the rights of a patent holder to chase infringers and the need to provide alleged secondary infringers with protection from unjustified threats. It is an adjustment that should address concerns about the inability of patent holders to make genuine attempts to settle disputes.
The noble Earl, Lord Attlee, raised the question of the situation regarding the single European patent and the proposed language regime. I note what the noble Earl said about the single European patent. In order to avoid confusion with a European patent, which is a bundle of national patents and is currently granted under the European Patent Convention, it is more helpful to refer to a single European patent as a Community patent.
Negotiations are currently under way in Brussels on a European Community regulation to establish the Community patent. They are currently focused on the issue of a centralised Community jurisdiction for resolving disputes. The final form of the regulations has not been agreed, but a single language regime based on English, which is favoured by many—and which is the entirely rational way to do this because so many companies that want a patent will automatically transfer it to America—is not one that we have been able to get everyone to agree to. We will continue our efforts in these negotiations to obtain the best possible agreement for the UK.
In due course, we will elaborate on the costs and timescale of opinions issued by the Patent Office. However, we expect opinions to be delivered in a few months at most from the request being made. We expect costs to the requester to be a few hundred pounds at most. It will be important to make sure that both timescale and cost are commensurate with the fact that opinions are not full blown proceedings. Opinions can serve a useful purpose, as we have identified. Moreover, as has already been said, procedural details will have to be decided in the light of the views of the stakeholders and, in this respect, we will be consulting widely.
I am afraid that I have not dealt with all the issues that were raised. Most of the others can be taken in Committee in more detail. I hope that I have dealt with the more major issues. The current situation on computer software is that we are not changing the law, 47 we are merely seeking clarification of the current position. We have no desire to go in the direction that the American law has taken.
This Bill may be modest in size and technical in nature, but it nevertheless contains a number of important measures. It ensures that our law remains in line with international agreements, particularly the revised European Patent Convention, and so ensures that the United Kingdom can remain a major player at the heart of the European patent system. It tackles the difficult area of patent enforcement, by providing improvements to help parties to resolve disputes over patents without resorting to litigation. The Bill improves the patent system, so that it may be more flexible in response to the needs of its users.
I look forward with interest to the deliberations on these measures in Committee. I look forward to working with your Lordships to ensure that the patent system is responsive, flexible and accessible, so that it will meet the needs of tomorrow's innovators for the benefit of all.
§ On Question, Bill read a second time, and committed to a Grand Committee.