Contracting Out (Functions in Relation to Applications for Patents) Order 2002

– in the House of Lords at 12:49 pm on 5th December 2002.

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Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, this proposal will make it possible for the UK Patent Office to contract out some of its search and examination work. Contracting out serves two purposes: first, it will take forward the process of international co-operation in which the Patent Office is playing a leading role; and, secondly, it will help the Patent Office improve turnaround times. I shall come in a moment to the draft order, but I should like first to set out the context, particularly the international context, which has led us to bring this measure forward.

International co-operation already plays a large part in the international patent scene. Applicants seeking protection across the world can make a single application to the World Intellectual Property Organisation in Geneva, which will eventually evolve into national patents in as many as 179 countries. Alternatively, the European Patent Convention allows a single application to be made to the European Patent Office, resulting in European patents effective in up to 30 European countries. This co-operation is taken forward by a continuous process of harmonisation of the patent laws in different countries. Increased harmonisation makes it easier, cheaper and quicker to obtain patent protection across the world. In a recent development, many patent offices are now beginning to consider work sharing. Currently, work is repeated over and over again in different patent offices as applicants prosecute their applications in different countries. Work sharing would help reduce this duplication.

The UK Patent Office is widely recognised as a strong performer. It has been improving efficiency on a number of measures since it became an agency 15 years ago, and it delivers a high level of service to its customers. It has recently been awarded the Charter Mark for the fourth consecutive time. It introduced a fast-track search and examination procedure some years ago which is used by 20 per cent of applicants. It issues search reports quicker than most others in Europe and the world. However, its input has been steadily increasing, which puts a strain on resources, and it recognises that it must do better to meet the needs of its customers, in particular by reducing turnaround times.

In recent months, the Patents Directorate of the Patent Office has introduced a series of measures to make further improvements in its efficiency, its turnaround times and its customer service. These measures include improved recruitment, retention and training of patent examiners. The office is also working with patent agents to streamline the way applications are drafted and examined. A further measure is the introduction of a "Private Applicants Unit" to deal with applicants who do not employ a patent agent to represent them. The office has been using electronic searching for many years and is now developing electronic filing and processing systems. It is also currently seeking ISO 9001:2000 quality accreditation for the patent granting process.

A medium-term objective for the Patents Directorate is, by these measures, to reduce the number of applications awaiting processing. The intention is to provide a more rapid response than it currently achieves, and in the longer term to provide a response with substantially no delay at all. In that way, the office will not only be better geared to the needs of its customers but will also be better prepared to contribute to wider innovation issues in the future.

That is the background. The message is that the Patent Office operates in an increasingly international arena. It is working hard to improve efficiency and responsiveness to its customers, and is looking forward to increased co-operation with other patent offices in the future in order to provide further customer benefits.

It is within this framework that the present draft order has been introduced under the Deregulation and Contracting Out Act 1994. It is very brief, but it has the effect that the Comptroller-General of Patents, Designs and Trade Marks will be able to authorise persons outside the UK Patent Office to carry out the search and examination functions normally carried out by UK patent examiners. The Patent Office is currently discussing contracting out a small number of searches with the Danish Patent and Trade Mark Office, and a small number of searches and examinations with the Netherlands Intellectual Property Office. Such contracts will constitute a further measure, in addition to those I have already mentioned, to help deal with pending work. At the same time, the contracts will initiate some practical co-operative working arrangements between the UK, the Danish and the Netherlands offices which will be a step towards work sharing.

The contracts under consideration would run for two years initially. They would be renewable in one-year tranches if both parties agreed. Any contract must last no longer than 10 years, as is provided in the deregulation Act. The total number of search and examination actions under consideration is less than 5 per cent of the UK input. The contracts give flexibility to increase this number, and this option is open if it is convenient to do so, but it is not intended that the amount of work contracted out should increase to any great extent. The cost to the Patent Office will be the same as the in-house cost and the applicant would pay the same fee. On timing, most of the preparations have been made and the contracts could begin soon after the passing of this order, subject of course to the will of your Lordships' House.

The work will be done to the same standard as in the UK Office: Danish and Netherlands examiners have worked alongside UK examiners during the past year to train in UK practice and procedures. Work they have done has been assessed in comparison exercises. In any contract, their cases will be included in the Patent Office's existing quality assurance system and the outcome will be fed back in regular management meetings. The Danish and Netherlands offices will be subject to the same confidentiality obligations as the UK Office, and any patent application which has a bearing on national security will not be included in the scheme.

The Patent Office consulted on these proposals earlier this year. The consultation paper was placed on its website and sent to 46 organisations and 77 individuals. In the event, very few responses were received, just five to be exact, to which I shall come. The views expressed were carefully considered in the Patent Office in bringing these proposals forward, and the office made some refinements to its preparations as a result. Now, these responses have also been posted on the Patent Office website along with a discussion of the responses and the decision to continue with the proposals.

Among the responses, there was broad support for contracting out the search function. Respondents recognised the advantages of improved responsiveness and preparing for the future, but stressed the need to safeguard aspects such as quality, cost, security and timeliness. Those matters are of course of great concern to the office, and I have already referred to the measures that will be put in place to safeguard them.

Respondents raised other issues in relation to patent examination. Under the arrangements being discussed, examination would be carried out in the Netherlands office. The issues raised included the Netherlands examiners' competence to operate in accordance with UK law and procedures, and the need for close interaction between the applicant and the examiner during examination. I understand the concern, but these factors should not affect the outcome for the applicant. Contracting examiners have a very good command of general and technical English, they already work under patent law which is aligned across Europe, and have trained in UK procedures. The office will also run a "buddy" system whereby applicants can discuss their case with the buddy UK examiner. The work which the office has done with the Netherlands to satisfy itself about their English language and examination capabilities is positive so far but is nevertheless continuing. It will need a satisfactory outcome for the contract to proceed.

This is a practical move for the Patent Office. It will introduce a useful element of flexibility into its resource planning over the next few years and will involve close working with colleagues in other offices. It will help the office to improve customer service both in the short term by providing a faster turnaround and potentially in the longer term by developing international co-operation. I am pleased to commend the draft order to the House.

Moved, That the draft order laid before the House on 5th November be approved [40th Report, Session 2001–02, from the Joint Committee].—(Lord Sainsbury of Turville.)

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Conservative

My Lords, the Minister has explained the purpose of the order in his usual equable and persuasive style, for which we are grateful. However, although he has presented the matter as de minimis in many ways, I cannot help but feel that there may be more to it than at first meets the eye.

My concerns are in no way diminished by reading the proceedings in another place, where Miss Melanie Johnson, the Minister's colleague, spoke to the order at length in Committee. Her speech, which has now been echoed by the Minister, can be paraphrased as follows. The UK Patent Office is an efficient and strong performer—witness the Charter Mark grant for four consecutive years—but it is overwhelmed by work. She did not say whether that was because the office has been starved of resources and not recruited sufficiently, or whether it was because of the natural inventiveness of the British people—but we can let that pass. So, she said, we have to find a new way of providing help at no additional cost, which we can do by employing the Dutch and Danish patent offices. She concluded that that is excellent, first, because it is value for money; secondly, because it will maintain a rapid response rate to applicants; and, thirdly, because it will show us to be good Europeans and internationalists. So far, so reasonably logical.

But when answering questions from the committee she threw it all away. She remarked that the UK Patent Office carries out 15,000 searches and 12,000 examinations per annum. She said that the two offices in the Netherlands and Copenhagen—as the Minister has now told us—would carry out 400 searches in the first year and 750 searches in the second year and no examinations at all. So behind this brave proposal, which is trumpeted as a huge step forward, we have something that will cover only 2.7 per cent of the searches in the first year and 5 per cent in the second year and will give no help at all as regards examinations.

Further, as the Minister correctly pointed out, even to achieve that minimal help the UK Patent Office has had to set up substantial elaborate administrative schemes with regard to quality control, standard operating procedures, language tests and, above, all, as the Minister said, with regard to a buddy system whereby each applicant dealt with in Holland or Denmark has a UK patent officer as a buddy. That must represent a huge duplication and waste of effort.

It is hard to see how this proposal makes sense on an operational, administrative or financial basis. So what could be the basis behind the proposal? It could be the forerunner of a much larger, more far-reaching and ambitious idea. We can discover whether that is the case if the Minister is prepared to give the House clear and unequivocal responses to three questions.

First, does a UK citizen applying to the UK Patent Office to have his or her invention patented have the right to insist that it is done within the UK or can he be forced to accept processing in Holland or Denmark? Secondly, do the powers being granted in this regulation permit the Comptroller-General of Patents, Designs and Trade Marks to contract out to any country in the European Union provided he is satisfied with the quality standards being offered, or is it permissible to contract out only to Holland and Denmark? Noble Lords should note that I refer to powers in that regard, not proposals. Thirdly, by what date does the Minister expect the UK Patent Office to have recruited sufficient additional staff to be able to take back the 5 per cent share of applications from Holland and Belgium for processing within the UK?

If the answers to those questions are, respectively, "no", "yes" and "I do not know"—that is, no, a citizen cannot insist on processing within the UK; yes, he may go anywhere within the EU; and I do not know when the UK Patent Office will have recruited sufficient staff to bring back all processing within the country—a bigger issue may be at stake; that is, that this is a first step in the Government subsuming the UK Patent Office operations within the European Patent Office. After all, that has already happened in Holland, which is why that country has surplus capacity to offer us for the reasons the Minister laid out.

There is another straw in the wind with regard to this matter. While preparing my remarks for this debate I looked at an article on the front page of yesterday's Financial Times. I am sure that the Minister has seen the article; he probably wrote it. The article is headed,

"Inventive employees could be awarded royalties".

But that is not the critical paragraph, which comes later. It states:

"The proposal comes in a consultation launched by the DTI and the Patent Office as part of moves to bring the UK into line with changes to the European Patents Convention. Patent laws in Britain have not been significantly updated since 1977".

This idea is not necessarily a bad one. After all, as I believe the Minister pointed out, it would result in a single patent giving an inventor protection in 30 European countries simultaneously. However, it would be wrong for the Government to slide in such a proposal under the cover of a minor, not to say minimalistic, change involving Holland and Denmark only. If a strategic change of that kind is in prospect, the Minister ought to withdraw the statutory instrument we are discussing and resubmit it with revised explanatory notes. The House can then debate it properly in the full knowledge of what is in prospect.

Last night I had the privilege of listening to a lecture in Oxford on the five tests for entry to the euro given by Mr Ed Balls, one of the Minister's colleagues. He said that transparency was a key policy for the Government. I look forward to hearing from the Minister how transparent he is prepared to be.

Photo of Lord Razzall Lord Razzall Liberal Democrat

My Lords, it is obviously for the Minister and not for me to respond to the speech we have just heard from the Conservative Front Bench. I am somewhat puzzled by the conspiracy which the noble Lord, Lord Hodgson, seems to spot within the terms of the order. I am particularly puzzled by it as the Explanatory Memorandum that Her Majesty's Government circulated with the order makes quite clear what their policy objective is:

"On a global scale, this points to an obligation on patent offices to work towards increased co-operation with a view to reducing duplication of effort and moving in due course towards mutual exploitation of each other's work".

Her Majesty's Government make no secret of the direction in which patent procedures and, indeed, hopefully, patent law, are moving. That is their policy objective. As someone who has over the years been involved in that field on a professional basis, I welcome that policy objective. I agree with the noble Lord, Lord Hodgson, that if we reach the stage where there is a significant further development in that area, we ought to have the opportunity to debate it within this House. However, on behalf of the Liberal Democrat Benches, I welcome the policy objective. Indeed, all practitioners in the field would undoubtedly welcome it as anything that can be done to eliminate the duplication of effort and cost that results from having to make individual patent applications in different countries is obviously to be welcomed.

However, as regards the terms of the order, I should like to probe the Minister on two points. First, I believe that the Explanatory Memorandum makes clear why the Patent Office is going down this route; namely, that there is now a significant mismatch between demand and examiner capacity. The reason for that is that it appears that the Patent Office has recruited and trained many examiners who then get a much better paid job in the private sector or in patent organisations. The Minister ought to confirm that the Government will keep an eye on that matter vis-a-vis the Netherlands and Denmark which, after all, are nice countries in which to live. It would be unfortunate if we continued the practice of training many examiners who then obtain better paid jobs in the Netherlands or Danish patent offices. If that situation continues, it rather defeats the objective of the proposed scheme. I hope that the Minister will confirm that his department will keep an eye on relative pay scales in that area as they could constitute a potential problem.

Secondly, on the general issue, perhaps the Government could confirm when they intend to conduct a review of how the scheme operates and when they will produce a report on how it operates in practice.

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, I am grateful for the comments that have been made. The issue we are discussing constitutes a significant development for the Patent Office. It is important that people should understand the thinking behind the measure.

There is a backlog in this area, for the reasons that have been clearly set out. In terms of providing a service to industry it is important that that backlog is dealt with as quickly as possible. This is one—but only one—of the ways in which that should be done.

In answer to the noble Lord, Lord Razzall, I say that we must put even more energy into ensuring that we increase the numbers of people whom we recruit and hold on to them. That is fundamental to tackling the main issue. We have made some steps in relation to pay to bring that about, but it is difficult to increase numbers rapidly because of the large training element.

Some examinations are in fact being contracted out. Contracts have not yet been signed with either the Danish or the Netherlands office, but it is proposed to contract out 250 searches to the Danish office in the first year, rising to 500 searches in the second year. For the Netherlands, it is proposed to contract out 150 searches or examinations in the first year, rising to 250 in the second year. As the noble Lord rightly said, however, that is minor in comparison with the scale of the problem. Above all, we need to drive up the number of people so that we do the work in this country. The order should not be seen as doing anything more than giving added flexibility to deal with the problem in the light of the most important consideration, which is to improve the service that we give our customers.

The noble Lord, Lord Hodgson, asked three questions. He asked whether people had the right to insist that the patent was done in this country. The answer is "No", but we will make certain that the quality is the same throughout and allocations will be made in line with that. He asked whether the contract could go to any country, to which the answer is "Yes". Finally, he asked by what date we would be able to withdraw. We believe that there will be a possibility of that in two years, but that depends on being able to achieve the necessary recruitment.

None of this has anything to do with moving operations to the European Patent Office. Our Patent Office is one of the strongest in Europe. One problem with getting a further new European patent, which is actually highly desirable, is that many countries are deeply concerned that, in those circumstances, all the patent work would come to the United Kingdom, because the advantage of the English language is enormous for many businesses. The measure should be seen as standing on its own and creating useful flexibility to deal with the problem of the backlog.

The order is only a starting point. The Patent Office has still to finalise preparations with the Danish and Netherlands offices. If all parties are content with those preparations, work could begin in a matter of weeks and Patent Office customers would then start to benefit from an increased flow of work. The international co-operation issue is for the medium and longer term, but there is every prospect of significant developments in that direction. Such developments will be of great benefit to innovators seeking to protect their ideas across the world.

The draft order is a significant measure that will provide increased flexibility for the Patent Office, improve the service it can offer customers and prepare for future international co-operation.

On Question, Motion agreed to.