HC Deb 19 April 2000 vol 348 cc243-52WH 1.30 pm
Mr. Patrick Nicholls (Teignbridge)

The events that I am about to describe go from the bizarre to the outrageous. Anyone who did not know that what I am about to say is entirely factual could be forgiven for thinking that they were listening to the plot of a John Grisham novel. It is a story about how a small west country business has been ripped off by one of the world's largest computer companies, while others pitch in at the same time.

Before I go into detail, I should say that the story includes the all-too-familiar tale of anti-competitive behaviour, of which the Microsoft case is the best-known current example. On this occasion, however, the behaviour is aimed against a United Kingdom company. As if that were not enough, the story also includes an almost incredible example of procrastination by the United States judiciary, which damages existing and future UK innovation at the expense of the British taxpayer. As a result, a west country company, which should now be a multi-million-pound operation pouring money into further innovations and creating wealth for the entire UK, is struggling for its existence.

AllVoice Computing plc develops computerised speech recognition products. Computer speech recognition allows a person to dictate into a microphone connected to a computer, with the result that the recognised words appear on the computer screen. No less a figure than Bill Gates has said that speech recognition is not just the future of Windows: it is the future of computers. AllVoice did not invent speech recognition any more than Trevor Baylis, who is famous for inventing the clockwork radio, invented the radio or clockwork. However, it made the application of voice recognition a practical reality.

IBM and Dragon Systems Inc. dominate the relevant market. Dragon is a US company founded and owned by two long-serving IBM employees. When it first produced speech recognition—a facility for converting speech to text—there was no option to play back the audio on a word processor or through any other standard computer application. In effect, the dictator had no choice but to try to remember what was said in order to make corrections. Consequently, users had to interrupt their dictation and train of thought. Dragon's system required more time and effort than using a traditional dictating machine. In effect, it had invented a car that could never move out of first gear.

AllVoice's crucial innovation was to invent an error correction capability. That was done by linking the original spoken words to the text in the user's word processor, which meant that the user could freely dictate without pausing to correct the errors that inevitably occur. Furthermore, the provision of an option for storing the text with its linked audio meant that users could delegate the entire correction process if they preferred to do so. AllVoice also offered users an ability to record an audio note to accompany a delegated or deferred correction document. In 1996, the company received a prestigious Confederation of British Industry award for those inventions. Following the release of its inventions, AllVoice's sales rose dramatically and further sales and development staff were employed.

In January 1996, IBM informed AllVoice that it was seriously considering incorporating AllVoice technology into its products under a worldwide agreement. IBM urgently requested AllVoice to submit the software, including unreleased features, to IBM's speech research and development groups in Vienna and Florida. In February 1996, AllVoice was invited to Florida, at IBM's expense, to discuss the arrangements. Of course, promises of confidentiality were made, and IBM insisted that it had no intention of writing similar software. There was an understanding that should the evaluation of the products be satisfactory, some form of partnership would be entered into. Instead, in April 1996, after a satisfactory evaluation, IBM wrote to say that it was now working on the same functions. Over the next few weeks, IBM also tried unsuccessfully to trick AllVoice into signing away its intellectual property rights.

In June 1996, having clearly decided to exploit AllVoice's products for itself, IBM announced to the world that it would be delivering a new product with similar features in the following November. Pre-announcing a product is a well-known tactic of predators, which is designed to undermine competitors who would otherwise sell competing products in the time between the announcement and the release of the predator's product.

IBM slipped up temporarily in January 1997 by introducing a low-price product that had all AllVoice's features missing, no doubt thinking by then that AllVoice would be dead in the water. AllVoice responded by adding its features back in and then undercutting IBM's more expensive version by nearly 30 per cent. Once again, AllVoice's sales climbed dramatically, so in retaliation IBM resorted to anticompetitive actions against AllVoice. As the anticompetitive actions increased, AllVoice eventually filed a formal complaint with the European Court in December 1997—case No. IV/36 824. AllVoice is waiting on the European Court to take action.

In 1996 AllVoice decided to try to produce a complete British speech system by involving unique developments in natural speech from the University of Cambridge. AllVoice had by then discovered that it could apply for patents in the United States for some of its crucial features that had been pirated. UK patents were also applied for on previously undisclosed innovations and were obtained in May 1997.

Dragon Systems also invited AllVoice to the United States to discuss collaboration and was made aware of the imminent announcement of UK patents and applications for US and worldwide patents. Dragon wanted AllVoice to disclose all its details, without a confidentiality agreement, which of course AllVoice declined. However, Dragon by then had access to the UK patent public disclosures less than one month later, and its next version included the audio playback features previously missing from all its earlier products. Needless to say, that was in clear breach of patent, but having a right of action is one thing and successfully prosecuting it through the American judicial system is something else entirely.

AllVoice was awarded its first US patent on 25 August 1998. By then, its products were being pirated on a grand scale. I understand that it is a feature of American business practices that if a little guy has a patent that he is in all probability not in a position to enforce, all the big guys get in on the act. Therefore, all attempts by AllVoice, short of litigation, to stop the breach of its patent had no effect at all. Reluctantly, AllVoice had to resort to litigation in the United States. As an official complaint is currently outstanding against IBM, a patent infringement suit was filed in Boston on 12 February 1999 in the US District Court of Massachusetts against Dragon Systems. The court case number is CA No.99-CV-10436, and the judge allocated is the honourable Douglas P. Woodlock.

At this stage, as might be expected, AllVoice filed a motion for preliminary injunction against Dragon Systems. The purpose of a preliminary injunction is to prevent further harm from being done to the patent holder until the case can be dealt with. In any judicial system where injunctive relief is available, it is the very essence of the matter that the hearing be held swiftly. AllVoice's injunction hearing was held on 26 May 1999 and, incredibly, that is where matters rest. The judge has reserved to himself whether he will grant immediate relief—immediate relief after nearly a year. I am told that even AllVoice's American lawyers, practised as they are in the vagaries of their own litigation procedures, are stunned by the delay. All attempts to get the judge to move on it have failed. It is, frankly, bizarre.

Normally such motions are decided within a month. After a month had passed without a decision, AllVoice's US attorney, Sullivan and Worcester, started to make telephone calls to the court, to inquire about the status of the opinion. After six months of such contacts and still without a decision, Sullivan and Worcester wrote formally to the court in November 1999, pointing out that the inaction was an implicit endorsement of Dragon's patent infringement and urging the court's attention to the case. When that correspondence received no response, a motion was filed the following month for a status conference. The judge denied the motion on the same day, saying that it was "unnecessary".

That is where matters rest, except that AllVoice has had to scale down its operations in an attempt to stay in business, while Dragon includes AllVoice's patented features at no extra cost. The attorneys are analysing whether other companies include the same features. That cuts out any realistic possibility of AllVoice making sales; yet it has to fund the entire litigation because, subject to what I shall say in a moment, no Government help appears to be available to it.

Lest anyone thinks that this extraordinary inactivity by the American judicial system affects only a private company and not the taxpayer, let me disabuse them at once. In 1996, AllVoice received a Department of Trade and Industry SPUR award to assist with the development of natural speech recognition systems. That project cost nearly £200,000, of which the DTI funded 30 per cent. Indeed, part of the funding has been invested in taking forward intellectual property protection through US and UK patenting.

It is difficult to describe in a few words the magnitude of what has been done to AllVoice or, indeed, the advantages that the United Kingdom would have gained had AllVoice been able to proceed. I have reminded the Chamber what Bill Gates said about speech recognition. Every computer has a keyboard, which is a cumbersome barrier for most users. Speech control and dictation is increasingly being used as a better alternative. As more innovations are made, the keyboard will, almost certainly, disappear. AllVoice's invention can, therefore, be applied to virtually every computer. The value of the speech recognition market has been estimated at £2.1 billion for this year alone. Speech recognition packages, mostly with AllVoice features, have been among the top-selling software packages in the world since January 1998. Obviously, IBM is one of the bestsellers, but even Dragon's product is said to be the 10th best-selling software application of all time.

To date, AllVoice has spent more than £275,000 on outside intellectual property costs, including patent filing fees, patent attorneys, legal counsel in the United Kingdom and the United States and, probably, other US associates. That is more than the current reduced turnover of the entire company. Patent fees continue to mount up, as do the company's legal costs. On top of that, AllVoice's has had to devote daily resources to litigation for lengthy periods, at great additional cost.

The sickening thing is that we have seen it all before. James Dyson, inventor of the bag less vacuum cleaner, has been involved in patent litigation with numerous American corporations. He has spoken of being "shafted" by the Americans, in their efforts to put him out of business. They nearly succeeded. He was saved from a considerable debt for legal fees by a fortuitous Japanese licensing arrangement. Dyson is a major UK success story, but only after going through American litigation, with the help of Japanese funds.

Even closer to home, as it were, is the case of Rodime, a Scottish-based company that made a quantum leap forward by inventing a smaller computer disc drive, which was wiped out in US patent litigation. Six hundred and twenty jobs were lost in the fight against the two main protagonists, IBM and Seagate Technology. Seagate's name will be familiar to those involved in these matters, and well it might—Seagate is Dragon's main outside investor. After years of litigation, including revelations of attempts to interfere with the US Patent Office and anti-competitive behaviour, Rodime had to settle for just $45 million gross from Seagate, a mere fraction of what it would have got if it had received a proper percentage of all the disc drives that use its invention.

The way in which American industry has rallied round to carve up AllVoice makes a pack of sharks look like a convention of nuns. It is an utter disgrace. For reasons that are impossible to fathom, the American judicial system, instead of protecting the innocent, has played into the hands of the guilty.

The Minister, as a fair-minded person, will, I am sure, be as concerned as I am. Knowing how such things go, I can predict that her civil servants are already preparing to advise her that she has no standing in the American judicial process. I hope that, if she receives that advice, she will reject it. If the big battalions, in the form of Her Majesty's Government, will not intervene on AllVoice's behalf, who will? The Government should make an approach to the US Government at the highest level-and I mean the highest level-and say that the injunctive procedures should be brought to a conclusion at once. Indeed, given the large sums of taxpayers' money that the Government have already put into AllVoice, I would like them to go further, by helping to fund the litigation that will still have to take place.

After all, Her Majesty's Government are not entirely powerless. The taxpayer helps to fund many of the manufacturing plants opened by US corporations as UK subsidiaries in areas of regional assistance. I assume that it is no coincidence that IBM has a manufacturing plant and call centre at Greenock in Scotland. Before continuing with those subsidies, or agreeing to new ones, we should insist that those corporations declare all existing official disputes publicly, as well as declaring all new ones, as they occur. The Government could make it a condition of assistance that litigation be conducted responsibly, rather than in a predatory fashion. I say that because I believe in solutions, as well as problems. The Government are better placed than I am to work out what steps they could take. What they should not do is wash their hands of the issue and say that it is all down to the American courts.

The Government should look specifically at the activities of IBM and Dragon in the United Kingdom and at how they relate to the United States. Despite the dramatic growth in the emerging speech recognition market, a number of UK firms that have invested heavily in added-value sales with IBM or Dragon speech technology have been forced out of existence. AllVoice has just completed. a project part-funded by the DTI involving automatic speech recognition over the telephone. One Department, which has seen the prototype, has calculated that AllVoice's innovation could save it more than £3 million a year. Unfortunately, the US litigation has deprived AllVoice of the funds that it should have had to turn a finished piece of development into a marketable product range. The Government must ensure that that innovation, and the savings that the UK Government could make, are not lost through US behaviour.

The Minister has an opportunity today to stand foursquare by British innovation and excellence and by our sense of decency and fair play. That is what the public would expect of the Government. I cannot imagine for one moment that the Minister will not have considerable sympathy with the matter that I have described to the Chamber today.

1.45 pm
The Minister for Small Business and E-Commerce (Ms Patricia Hewitt)

I thank the hon. Member for Teignbridge (Mr. Nicholls) for raising this issue, which is clearly of enormous concern to AllVoice and to the hon. Gentleman, who is the relevant constituency Member of Parliament. I congratulate him on giving such a full account of the company's concerns.

The hon. Gentleman rightly acknowledged that I cannot comment on the details of an individual court case—it would be improper of me to do so, regardless of the jurisdiction in which the case was being heard. I also cannot give details of the contact and support that the Department of Trade and Industry offered to the company, because that is a matter of commercial confidentiality. None the less, I hope that I can help the hon. Gentleman and the company.

The hon. Gentleman discussed possible delays in proceedings in America. I have no standing whatsoever in the American judicial system. I shall ask our officials in the British embassy in Washington to establish the full details of the case and, perhaps, to seek legal advice about taking further action. I shall also ask to be given a personal report on the result of those inquiries.

It might help if I confirm that AllVoice was the beneficiary of two grants from my Department relating to speech recognition technology. In December 1996, it was awarded a grant under the SPUR-support for products under research-scheme, which has been replaced by the small firms merit award for research and technology. In November 1998, the company received a second SMART award. I understand, and the hon. Gentleman confirmed, that significant provision was made in both grants to cover the cost of protecting intellectual property rights.

Since then, Government officials have been in regular contact with the company-indeed, we have been in touch over the past few days. We are aware of the pressures that are on the company, which the hon. Gentleman described, and we have been flexible about its undertaking to exploit the research that we supported. The possibility of a further joint university project was kept open-that would involve the company in the further development of speech recognition technology.

The case that the hon. Gentleman described raises issues that are becoming increasingly important as our economy is transformed by information and communications technology. One of the most striking features of the impact of the new technologies on the economy is the speed of innovation. The Department of Trade and Industry and, more broadly, the Government are determined to ensure that industries in this country contribute fully to the development and exploitation of those new technologies. That will allow the United Kingdom to generate new companies, jobs, products and services and, ultimately, a better quality and standard of life for everyone. As part of that strategy, we support the development of ground-breaking technologies that could contribute to economic growth.

The hon. Gentleman rightly began by saying that speech recognition technology is hugely important to the development of computer technology. In particular, it opens up the possibility of creating a friendlier and more effective interface between the user and computer technology. All of us know, as users, that the current and earlier generations of computers are not easy or intuitive to use.

The United Kingdom is a leader in wireless technology. Indeed, we are currently holding the world's first auction for third generation mobile spectrum. Voice recognition technology will be critical in catching the next wave of wireless technology and ensuring that we build on our competitive edge in wireless technology to develop new businesses, new jobs and new wealth creation.

As part of that strategy we have sought to maximise the support available for UK-based firms from the European Union and we work with our European partners at the leading edge of information society developments—for instance through the European fifth framework programme. That programme, which is funded by all member state Governments, offers a budget of about half a billion pounds each year, from which I am glad to say that last year the UK industry received some £50 million. We are helping firms to take part in that programme to ensure, not least, that they exploit the immediate funding available and then continue to benefit from it.

Through that, through the SMART programme and through EUREKA and so on, we can support not just AllVoice but many innovative, high-technology companies in the United Kingdom. However, I am pleased to say that United Kingdom firms working in speech recognition and language technology won more than £750 million from the European fifth framework programme last year. Those firms and their European partners will work on a series of projects to extend the potential of spoken human language technology for mass market e-commerce, so that users can compare and buy services and products in their own language and in the form that they prefer. The firms will also develop multilingual delivery of information from a single source, tailored to highly personalised requirements with improved quality of speech synthesis. Therefore, with our European partners, we are making significant investments to try to sustain and build further competitive advantage for the United Kingdom.

In this fast-moving and highly competitive technical environment, intellectual property rights become hugely important. The more I talk to companies at the leading edge of the knowledge-driven economy, the more I hear from them that intellectual property rights and related issues around patenting, trademark, copyright and so on are at the top of the agenda for Governments and policymakers. Certainly the episode that the hon. Gentleman has highlighted underlines the need for leading-edge companies to establish a clear and well-directed intellectual property strategy from the outset. It is not always easy, and it certainly is not cheap, to obtain the necessary specialist advice. None the less, as the hon. Gentleman rightly said, the risks of not securing protection for intellectual property are enormous and the returns, therefore, from investing in the protection of successful innovation are very large.

There are huge complexities as laws on copyright—generally on intellectual property—are translated from the older economy to the new. It is not always easy for lawyers and courts to see how concepts that were developed for a different world and a different set of technologies translate into the new world. I make that as a general observation and in no sense as a comment on the specific case that the hon. Gentleman raised.

Mr. Nicholls

I am grateful to the Minister for the way in which she is responding. What she has said, particularly at the outset, is helpful, but will she comment on this proposition? In the case to which I referred the protection is already in place and has had to be referred to the American courts. Clearly neither she nor I can contemplate what the outcome of that litigation will be: that is a matter for the courts. We are not discussing the result of the injunction, because it may be refused, but is she as concerned as I am that injunctive relief is outstanding and has not been decided after 10 months? Will she tell her commercial officials that such matters concern her? I refer not to the decision but to the fact that no decision has been made. That must concern her, given the existence of patents.

Ms Hewitt

I have already said that I shall ask commercial officials at the embassy to investigate the matter. I have also asked DTI officials to look into the general issues raised by the case specifically to determine whether the United States is complying fully with its obligation to enforce patents and other intellectual property rights that are set out in the World Trade Organisation agreement on the trade-related aspects of intellectual property. That is the global framework for intellectual property issues and it is essential that all Governments who have signed the agreement abide by it.

It is also important to seek greater international harmonisation of intellectual property rights, because laws differ. They differ between the United States and the United Kingdom. The Government are playing an active role in seeking globalised norms to provide a more appropriate framework for what is increasingly a global and not a national or even regional knowledge-driven economy. We shall participate in the diplomatic conference for the adoption of a patent law treaty being held in Geneva next month. If we can obtain a successful outcome to that diplomatic conference, it will establish international harmonised standards for the procedures to be followed in patent formalities. A number of cases in different parts of the world have raised concerns about the nature of patents and whether they are granted too easily in some cases and not readily enough in others. We need some harmonisation of the procedures involved in patent formalities, which, in turn, will pave the way for more substantive issues of patent law.

The wider issue, which will not be resolved simply through harmonised legal substance or even improved legal procedures, is that, because information and communications technology is moving so fast and because of the intense competitive pressures on companies to innovate quickly, there is a danger that the brilliant idea or innovation of one company or individual will be taken over by a larger, better established, more powerful company. In the end, the answer is not simply to seek proper legal protection for the innovation and the intellectual property that resides in it, but to give away as little as possible and then to maintain constant innovation and investment in research and development. There is no guarantee in such a fast-moving world that a successful innovator will stay ahead of the game. The successful innovator might be lucky and remain ahead of the competition for 18 months or two years, but will then be taken over unless a new wave of innovation is introduced. The danger is that, unless the innovator keeps moving forward, someone else might take the idea or concept and engineer an application solution without having known how the innovator had done that in the first place. That may be done better, or it may not, but the person who gets to the market first will have the advantage. That is a general observation; it is not a specific observation of the AllVoice situation.

That is a problem particularly for small companies and individual innovators who might not even have created a company or taken the idea to market. The problem is how to protect an innovation and secure intellectual property rights, and then how to introduce them and maintain the competitive advantage.

I am grateful to the hon. Member for Teignbridge for raising this important issue.

Question put and agreed to.

Adjourned accordingly at one minute to Two o'clock.

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