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Intellectual Property (Unjustified Threats) Bill [Lords] – in the House of Commons at 1:30 pm on 21st March 2017.

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Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 1:30 pm, 21st March 2017

I beg to move amendment 1, page 2, line 15, after “do,” insert “or claims to do,”.

This amendment deals with people or companies who hold themselves out as the primary infringer: ie, they claim to be the manufacturer or importer of a product (and therefore can be written to freely) when, in fact, they are not. A definition is provided in amendment 3.

Photo of John Bercow John Bercow Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Speaker of the House of Commons, Chair, Commons Reference Group on Representation and Inclusion Committee

With this it will be convenient to discuss the following:

Amendment 2, page 2, line 19, at end insert—

“(4A) A threat of infringement proceedings is not actionable if the threat—

(a) is made to a person mentioned in subsection (4), and

(b) relates to—

(i) potential future acts of infringement, or

(ii) other acts of infringement which are fundamentally similar to the current alleged act of infringement.”

This amendment would allow communications from the rights holder to the primary infringer to also refer to secondary infringing acts (by the primary infringer), without it constituting a threat.

Amendment 3, page 2, line 24, at end insert—

“(7) In subsection (4)(a) “claims to do an act” means the person makes an explicit claim in public that they are the manufacturer or importer of the product or process.”

This amendment provides a definition of “claims to do” in amendment 1.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

Amendments 1 and 3 are related to primary infringers and those who claim “to do”. Amendment 1 addresses the concern about the impact on those who claim to make a product and the potential for action to be taken against them. Amendment 3 defines "claims to do".

We are dealing here with communication and threats. As the Bill stands, the onus is on a rights holder not to communicate with a party that claims to be a primary infringer of rights. The example that springs to mind is that of an own-label brand in a supermarket. Under the Bill, a manufacturer who believes that a product contravenes their rights may not communicate with the supermarket unless they are confident that there is no other way of finding out who the manufacturer really is. The problem is that smaller manufacturers wanting to challenge the bigger players may not have the expertise or access to expertise needed to comply with the provisions of the Bill. They do not have the staff, time or money to engage legal services or to search for the true identity of the manufacturer. The Minister said in Committee that if action were taken against a rights holder, they would be able to defend themselves in court. Now, that is entirely accurate in legal terms, but the problem is that smaller organisations lack the resources to be able to do so.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

As my hon. Friend may well have said in Committee.

The problem is one of imbalance. Our court system necessarily favours those who have the deepest pockets and the greatest resources, and that does not mean smaller businesses. Will smaller businesses risk winning or losing in court? Will they have the money to defend themselves against an action, or will they think it is worth defending their intellectual property in the first place? It will be for the courts to decide whether a rights holder could have found out who the primary infringer was. For smaller businesses, it could well be a tough choice as to whether they believe the court will back them when they say in court that they did not realise that they should not have contacted the apparent infringer.

If not through what I am proposing, and what my hon. Friend Chi Onwurah proposed in Committee, how does the Minister propose to ensure that there is a level playing field between protecting the rights holder, especially the smaller rights holder, and preventing unjustified threats, especially where the rights holder is the smaller party? How does he propose to guarantee smaller businesses the ability to operate on a level playing field? To be entirely fair to the Minister, I completely understand that that is the purpose of the whole Bill. My thanks go to the Law Commission for its work in delivering to such an objective. The Bill very much has in mind the need to balance protection and encouragement for innovators, entrepreneurs and investors with the need to ensure a fair market and to prevent unfair and exploitative competition. However, there appears to be a degree of ongoing potential for imbalance in the legislation regarding those who claim to be the manufacturer or the primary infringer, and the Minister’s answers in Committee did not go far enough to guarantee that smaller businesses will be protected.

Amendment 2 would address some further concerns of smaller businesses that lack the resources for legal advice and that may fall foul of the Bill’s narrow remit. The amendment addresses the problems where a rights holder challenges not just the primary infringement but secondary acts of infringement. The rights holder may wish to prevent future infringement or to comment on related infringements of a similar nature. The amendment would minimise the fallout from inadvertent infringements. The amendment would not penalise a rights holder for mentioning secondary infringements when such communication was about potential future infringements or similar current infringements. The Chartered Institute of Patent Attorneys raised the concern that future infringements are excluded as the Bill is now drafted.

It seems reasonable to ask an infringer to stop now and in the future, and not to carry out similar infringements, so amendment 2 also deals with the concern of smaller businesses that lack the resources or expertise to ensure that all their communications are strictly compliant with the Bill’s provisions. I agree with the Minister that rights holders ideally should get their communications right, and that is a large part of the thrust of the Bill, but my concern is that the lack of access to legal expertise for smaller businesses could be a real problem.

I am afraid that I did not follow some of the Minister’s counter-arguments to the amendment in Committee—for example, that the amendment would make it harder for rights holders to approach alleged primary infringers with confidence. In fact, our intention is precisely to increase confidence, especially among smaller businesses as they attempt to protect their intellectual property. Again, if the Minister will not do this through amendment 2, how will he? If CIPA is wrong, in what way is it wrong? If the language is vague—a point that the Minister made in Committee—why has his Department not suggested clearer language? With all the expertise here today and in the Department, it should be possible for the Minister to obtain the clarity of language to address the concerns we have raised. Did he actually ask for that kind of advice, clarification and language that would have addressed the problems, provided the additional assurance to smaller businesses and helped to alleviate some of these concerns? If not, why not?

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Business, Energy and Industrial Strategy) (Universities and Science) (Joint with the Department for Education) 1:45 pm, 21st March 2017

One of the key purposes of the Bill is to simplify an important but complex area of intellectual property law, making it more accessible and easier to use. One way in which it does this is by setting out a clear statement of those acts that a rights holder can safely refer to in a communication, and that will not trigger an unjustified threats action. This helps to encourage rights holders to communicate with the trade source of an alleged infringement. It would include those who manufacture or import patented products or use patented processes, for example. Such acts are known as primary infringements.

Amendments 1 and 3 seek to make it allowable to approach someone who explicitly claims to be a primary infringer. I am not convinced that there is problem that needs to be solved, but, in any event, there are two key points. First, under the reforms as they stand, a rights holder can already communicate with potential infringers of all types, including those identified by amendments 1 and 3. The Bill provides clear guidance on how this can be done. The provisions therefore make it easier for parties, including small and medium-sized enterprises, to communicate and resolve issues without the need for litigation. Secondly, it is perfectly allowable to make a threat to anyone so long as that threat refers only to manufacturing and importing, or other primary acts. Someone making such a threat would not be at risk of being sued, even if the recipient was falsely claiming to do those acts. For these reasons, as well as the additional complexity introduced, I do not accept that amendments 1 and 3 are appropriate.

Moving on to amendment 2, I agree it is important that issues of infringement can be raised early, before real commercial damage is done. For that reason, the Bill already allows threats to be made in relation to future or intended acts of primary infringement, so amendment 2 adds nothing in that regard. Furthermore, the Bill already allows the rights holder to refer to certain secondary acts when communicating with an alleged primary infringer. When someone is manufacturing an allegedly infringing product, the rights holder can also discuss the retailing of that same product. Users wanted this, as it is pragmatic and helps to save time and money, but it would not be right to extend this further and allow threats to be made to that same manufacturer about the retail or stocking of other products that they did not make themselves. That could damage businesses that retail products acquired from a legitimate manufacturer, and would disrupt the ability of that legitimate manufacturer to operate in the marketplace—an outcome that the threats provisions exist to prevent.

Finally, it is highly uncertain for businesses what would be considered to be “fundamentally similar” acts of infringement, as set out in the amendment, and litigation on the meaning would no doubt ensue. If the intention is to capture only similar products, I do not think that is achieved.

These amendments would introduce additional and unwelcome complexity. They would blur the line between who is protected from threats and who can safely be approached. Rather than benefiting rights holders, this could instead make getting legal advice more difficult and costly. For those reasons, I ask the hon. Gentleman to withdraw his amendments.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade)

We appear to have rehearsed, more or less word for word, what happened in Committee. I am disappointed by the Minister’s responses, because he does not appear to have picked up on the concern about the imbalance between larger and smaller businesses—a fundamental element of what we think is missing from the Bill as drafted. I would like greater clarity from him, but perhaps that will come as the Bill is implemented. I urge the Government to consider the impact on smaller businesses. On own label, apparently once the rights holder has found out that an own label product is not made by a supermarket, such action would have to cease or it would be covered by the legislation. That was certainly our intention in the amendment.

I hope that our points about the need to protect smaller businesses have been well made. I thank the Minister for his responses, and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Business, Energy and Industrial Strategy) (Universities and Science) (Joint with the Department for Education) 1:52 pm, 21st March 2017

I beg to move, That the Bill be now read the Third time.

Intellectual property is crucial to supporting economic growth and a key part of our industrial strategy. I am therefore pleased that this small but important Bill is completing its passage today. The Bill will ensure that businesses, especially SMEs, are best able to make use of the IP regime. In doing so, it will help to deliver the Government’s manifesto commitment to make the UK the best place in Europe to innovate, patent new ideas, and set up and expand a business. The Bill brings clarity and consistency, making it easier and cheaper to solve infringement issues quickly and without litigation. It clearly defines how information can be exchanged to resolve disputes over IP infringement. It also means that legal advisers will now be better able to help to settle disputes without becoming embroiled themselves.

The reforms contained in the Bill are widely supported by stakeholders, not least because of careful research and consultation by the Law Commission. I thank the Law Commission and the Scottish Law Commission for their hard work and expertise in developing these reforms, and for the excellent support they have given the Bill during its passage. I would like briefly to highlight the value of the Law Commission special parliamentary procedure used in the passage of this Bill. The Bill has been strengthened by, in particular, the detailed scrutiny in the other place afforded by that procedure. I am grateful to hon. Members in this House, particularly those who served on the Committee, for their interest and for giving this Bill due consideration. My thanks also go to the hard-working Bill team and to Intellectual Property Office officials for their exceptional work.

The unjustified threats provisions are a valuable part of the wider IP regime and provide much needed protection. These reforms will ensure that those provisions are fit for purpose and make a real difference to our innovators, designers and businesses. I commend the Bill to the House.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 1:54 pm, 21st March 2017

I join the Minister in saying that the provisions of this Bill are, overall, exactly what is needed to create a level playing field and support and encouragement for innovation and creativity. Those who develop ideas need to have their ideas protected and supported, and bringing together the different elements of intellectual property legislation in the way that this Bill does is very much the right way to go. I mentioned on Report some of the figures and the benefits derived from the fact that the UK has one of the finest IP systems in the world. We must do all in our power to ensure that that continues because it is one of the reasons that this country is an attractive place for investment, and that is one of the reasons we must be optimistic about our future, despite the many challenges that we currently face, particularly the uncertainty around Brexit.

However, we have raised concerns throughout this process. It is a shame that there was not more in the Bill about alternative dispute resolution. The opportunity to tighten things up in relation to smaller businesses would have been welcome, but that has not happened. We need to reward innovation and entrepreneurs, and to balance that against the creation of a fair market and a successful economy. The Minister mentioned the industrial strategy Green Paper. It is critical to the success of the industrial strategy that our intellectual property system functions as well as possible. I hesitate to say that I look forward to how this will develop during the Brexit negotiations, but we certainly need to work extremely hard to make sure that the success of our IP system is retained during those negotiations because of the very close linkage between IP in this country and across the European Union. The Minister mentioned the protection for legal advisers. That is a welcome step forward, as is the clarity and consistency achieved by this Bill. We certainly support its core principles and the overall aims and objectives that have been achieved.

I add my thanks to the Law Commission, to those who have worked on the Bill, and to those who served on the Bill Committee. I hope that the Bill will achieve what is intended for it.

Question put and agreed to.

Bill accordingly read the Third time and passed, without amendment.

Photo of Eleanor Laing Eleanor Laing Deputy Speaker (First Deputy Chairman of Ways and Means), First Deputy Chairman of Ways and Means

I must say that that is the most efficient debate on a Bill I have ever seen in this House, and I think that somebody somewhere ought to be commended for it.