Clause 8 : Accession to the Hague Agreement
Moved by Viscount Younger of Leckie
1: Clause 8, page 6, line 12, leave out paragraph (b) and insert—
“(b) before subsection (5) insert—
“(4B) The Secretary of State may not make an order under section 15ZA unless a draft of the statutory instrument containing the order has been laid before, and approved by a resolution of, each House of Parliament.””
My Lords, before I begin today, I should like to take this opportunity to thank noble Lords for their continued interest in this Bill and for their insightful contributions to the debate. The Government have listened to the points raised by noble Lords and have given careful consideration to all aspects of the Bill. Since Grand Committee, I have met representatives from the International Chamber of Commerce, and have been working with my officials to continue to engage with stakeholders to understand their concerns and alleviate them where possible. My officials have also issued a plain English guide to the
Bill, particularly aimed at small and medium-sized businesses. It can be found on the IPO website. I hope that the amendments brought forward by the Government today will reassure both noble Lords and industry representatives that their concerns are taken very seriously. The Government believe that these amendments present a balanced and considered approach.
I am also pleased to report that since we debated the issue of e-lending in Grand Committee the Government have announced funding for the public lending right scheme, which will allow this valuable work to be taken forward. I am sure noble Lords will agree that that is a very positive development.
Turning to the amendments before us, during our first day in Grand Committee we had a brief discussion about the recommendations of the Delegated Powers and Regulatory Reform Committee. The committee and its members gave careful consideration to the order-making powers set out in the Bill. As my noble friend Lord Clement-Jones suggested in the debate:
“Simply reading the committee’s report is pretty persuasive by itself”.—[Official Report, 11/6/13; col. GC 344.]
The Government also found the report persuasive. We have given detailed thought to the committee’s recommendations and I am pleased to bring before the House today amendments that will implement the changes suggested.
Amendment 1 concerns Clause 8, which permits the UK to accede to the Hague agreement concerning the international registration of designs. The amendment specifies that any order giving effect to these provisions must be considered and approved by a resolution of both Houses. Amendments 2 and 3 relate to Clause 11, concerning the introduction of an opinions service for designs. These amendments ensure that the first time that regulations are introduced to implement the opinions service they, too, must be subject to the scrutiny and approval of both Houses. Noble Lords will note that the Delegated Powers and Regulatory Reform Committee recommended that thereafter the negative resolution procedure should apply. The Government believe that this is wholly the right approach. Once the service has been set up, following full discussion in Parliament, any changes that need to be made to suit the needs of business users can be implemented more quickly.
I also take this opportunity to briefly set out why the Government have tabled a further minor and technical amendment to Clause 21. As noble Lords are aware, Clause 21 is intended to simplify the way in which the UK currently meets its international obligations to extend copyright protection to works from other countries and their citizens, delivering clearer information for users. The need arises from the fact that the UK is a signatory to a number of international copyright conventions and treaties. This obliges the UK to extend copyright protection to works and performances created by citizens of other member countries or to works that originate in other member countries. These obligations are reciprocal: UK copyright holders benefit from the same protection in those countries.
One of these international agreements is the Berne convention, which has been amended a number of times since its original incarnation in 1886 and most recently in 1971. A small number of countries have not yet caught up with the 1971 update. This minor and technical amendment makes it clear that Clause 21 incorporates countries signed up to any Act of the Berne convention by bringing the language of the clause into line with that used in the CDPA 1988. The purpose is to ensure that countries that are not signatories to the most recent Act do not receive lesser copyright protection in the UK than those that are. I beg to move.
My Lords, these government amendments implement the DPRR 3rd report recommendations and we welcome them on that basis. On the Clause 8 orders giving effect to the Hague agreement, the DPRR Committee found that the Bill created a Henry VIII power, and commented that it,
“would therefore expect to see some justification for the negative procedure that is to apply”.
However, the committee did not consider that the case for the negative procedure had been made for orders under new Section 15ZA and recommended that the affirmative procedure should apply instead. We are glad to see the Government accepting that recommendation.
Clause 11(1) inserts new Section 28A into the Registered Designs Act 1949 to provide for the registrar—that is, the Comptroller-General of Patents, Designs and Trade Marks—to give an opinion about matters specified in the regulations with respect to designs of a kind described in subsection (1)(a) and (b). The new section is purely enabling in that the whole provision about the new opinions service is to be set out in negative regulations. Subsections (2), (4), (5) and (7) set out provisions that the regulations must contain—for instance, about protecting the registrar from liability in respect of an opinion and about appeals. BIS explains, in paragraph 13 of the memorandum, that the intention is that the new opinions service will be similar to the existing patents opinions service. That service is provided for in Section 74A of the Patents Act 1977, but it is important to note that almost all the provision appears in the Act, with only one power to make regulations to provide for an exception.
The committee was not convinced by the Government’s argument for a need for flexibility and was critical that they did not explain why more provision cannot go into the Bill—for instance, about the scope of the opinions service. The committee remained unpersuaded that the negative procedure was appropriate for the introduction of this new service entirely by regulations, and recommended that the affirmative procedure should apply on the first exercise of the powers under new Section 28A, which is why we welcome the Government’s decision in this regard. We also welcome the fact that the Government now make it clear that Clause 21 incorporates countries signed up to any Act of the Berne convention by bringing the language of the clause into line with that used in the CDPA 1988. As the Minister assured us, this ensures that countries that have not signed up to the most recent Act of the Berne Convention do not receive any less copyright protection in the UK than those that have, and therefore we welcome the government amendment.
My Lords, I am grateful for the short contributions to the debate on these government amendments by the noble Lord, Lord Young of Norwood Green, and my noble friend Lord Clement-Jones. I take this opportunity to thank again the Delegated Powers and Regulatory Reform Committee for its consideration of the Bill.
Amendment 1 agreed.
Clause 11 : Opinions service
Amendments 2 and 3
Moved by Viscount Younger of Leckie
2: Clause 11, page 10, line 26, leave out from “after” to “insert” in line 27 and insert ““under this Act””
3: Clause 11, page 10, line 27, at end insert “, and
(c) after subsection (4) insert—
“(4A) Subsection (4) does not apply to the first regulations to be made under section 28A, but the Secretary of State may not make those regulations unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, each House of Parliament.””
Amendments 2 and 3 agreed.
Clause 13 : Offence of unauthorised copying etc. of design in course of business
Moved by Lord Stevenson of Balmacara
4: Clause 13, page 11, line 30, after “person” insert “deliberately”
My Lords, I shall also speak to Amendments 5 and 6, which are in my name and in the name of my noble friend Lord Young of Norwood Green.
Clause 13 introduces two offences: unauthorised copying of a registered design, and dealing with unauthorised copies. Although these provisions have been welcomed by a small number of sectoral groups, the vast majority of businesses and representative bodies strongly oppose the introduction of criminal sanctions for design infringements. Many noble Lords will have received a copy of a letter from Sir James Dyson. He writes:
“In the law relating to copyright, acts of unintentional infringement are excluded from criminal sanctions. In the proposed clause of the Intellectual Property Bill relating to registered design infringement, the same is not true. If this Bill is passed unamended, innocent designers will be threatened with criminal proceedings. It is wholly wrong that a designer should go to prison for unintentional infringement. The current wording of the Bill does not exclude that possibility”.
He goes on:
“I have spent decades fighting to protect my ideas; taking on competitors who have flagrantly copied my patents and designs. I abhor intellectual property infringement. It is something I feel passionately about. But the Intellectual Property Bill's inclusion of proposals to criminalise infringement of registered designs is a serious mistake”.
There is a real concern that the legislation, as currently drafted, will open a Pandora’s box of unintended consequences, potentially discouraging the very kind of legitimate, competitive risk-taking that policymakers have been keen to encourage as a driver of growth. The arguments that the Government have deployed until now are deeply flawed. They say that the treatment of design rights needs to be brought into line with existing copyright and trade mark legislation; that there is an anomaly between the application of criminal sanctions for copyright and trade mark infringement and the lack of equivalent provisions to stop the copying of registered designs. However, there are good reasons to treat design right infringements differently from piracy and counterfeiting. This is because the scope and validity of registered designs depends, as with patents, on prior art. As a result, the scope and validity of a design registration are never black and white but instead are open to a degree of interpretation. Indeed, relevant prior art may not even come to light until years later.
It has been suggested that criminal sanctions would provide an additional layer of protection to small designers, which would spur greater innovation and investment in new design. While this line of reasoning is superficially attractive, it ignores the potential unintended consequences of the draft legislation, specifically the risk of significantly chilling innovation and competitive design in the wider UK economy. Senior executives advised us that even a very small risk of criminal action is likely to discourage the launch of some innovative products in the UK or significantly delay decisions on product launches, particularly where a company has to escalate concerns to board level. In the best-case scenario, this would entail additional costs for the business; however, it is possible to envisage circumstances in which executives might choose not to launch products on the UK market. It is clear that this would have a significant knock-on effect on employment, growth and consumer choice.
It has been said that criminal sanctions for design rights are necessary to protect small designers and to allow them to obtain redress for infringements. The first point is that most small designers do not register their designs and instead rely on the unregistered design right. There is a huge imbalance here, and it is odd—we will return to this issue—that the focus in this clause is only on the registered design route. Secondly, it is important to recognise that criminal sections are not the only tool that can be employed to address some of the very real issues faced by small designers in obtaining redress for design infringements. For example, the Patents County Court allows for design cases to be heard under cheaper and more streamlined procedures than in the High Court. As an alternative to criminal sanctions, the Government’s strategy could have focused on promoting access to the PCC so that it could continue to allow independent and small designers to protect and enforce their ownership of their products’ design.
There are also good reasons to avoid introducing highly technical cases into the criminal court system. Most criminal judges lack the relevant expertise and evidence that is required properly to evaluate infringement claims. It is instructive in this case that the Government chose to exclude registered designs from the small claims track of the PCC last year because, as they said, disputes are likely to involve more complex issues.
There is another danger: the risk of exposing small and independent designers themselves to criminal prosecutions. Small companies will be less able to afford expensive prior-art searches and legal support, leading to a greater risk of wrongful conviction. Cases of this kind would be likely to have a seriously chilling effect on the UK’s design industry. UK enforcement agents would be compromised by the drain on resources that would inevitably arise from extending criminal sanctions to the UK design frameworks.
It is said that the IP Bill will provide a competitive boost to the UK design industry, but the introduction of criminal sanctions would have far-reaching unintended consequences for the British business environment. The uncertainty that would be created by criminal measures will discourage large multinational companies from investing in and commissioning design in the UK, given the legal risks. This deterrent to inward investment in UK design may not only result in an innovation drought but threaten the future employability of UK designers. It is telling that no other leading common-law jurisdictions, such as the USA, Australia, New Zealand or India, have introduced criminal measures for design infringements.
Notwithstanding these reservations, we accept that criminal sanctions could play a part in the fight against counterfeiting. We have therefore tried in Amendment 4 to raise the bar to criminal proceedings by making it clear that they would be commenced only if it was clear beyond reasonable doubt that the action taken had been calculated and motivated by a wish to exploit the original registered design. We feel strongly about this issue, and believe that not only have the Government failed to make their case on this point but that introducing new criminal penalties should be the very last resort, and one on which Parliament should expressly give an opinion—if necessary, by voting.
It may have been assumed that, since the offence is committed if a person copies a registered design, that act must have been intentional and therefore deliberate. However, there have been cases in the past where copying was unintentional—for example, where a design brief that was intended to ensure the creation of an independent design so as to avoid infringement was erroneously too prescriptive. We suggest, therefore, that the offence should be limited to cases where a person deliberately copies a registered design. I accept that the phrasing—using the word “deliberately”—may not be the best way of inserting that sensibility, but I hope that the Minister will give serious consideration to the concerns that we have expressed here and perhaps bring forward a more suitable phrasing at Third Reading.
If this approach does not find favour, we have, in Amendment 5, provided an alternative approach, limiting criminal proceedings to cases where the civil jurisdiction has been exhausted. Our belief is that the civil jurisdiction is to be preferred, so this gives a backstop position to the criminal sanction.
Amendment 6 focuses on the differences between deliberate copying and deliberate infringing. It proposes a defence where there is a reasonable belief that one is not doing anything legally wrong. We note that the IPO, in its report on the consultation, said in paragraph 84 that the criminal offence would contain defences against unintentional infringement of registered design rights. The new section introduced by Clause 13, however, does not contain that defence.
It has often been stated that imitation is the life-blood of competition, so focusing criminal liability on deliberate copying is problematic—ironically, because it focuses on something that is actually socially valuable. We propose, at the minimum, a defence for anyone who reasonably, or in good faith, believed that their actions were non-infringing.
Section 92(5) of the Trademarks Act 1994 offers an analogy. It states that:
“It is a defence for a person charged with an offence under this section to show that he believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark”.
Similarly, Section 107 of the CDPA premises criminal liability on knowing or having reason to believe articles are infringing articles or that acts are infringing acts. Section 107(2A), for example, states in relation to communication of a work to the public, that there is criminal liability only,
“if he knows or has reason to believe that, by doing so, he is infringing copyright in that work”.
We continue to oppose the introduction of criminal sanctions for registered design infringement as a matter of principle. However, should the proposal be approved, we think that the Bill should also contain a defence for any person who reasonably believed that they were not infringing. I beg to move.
My Lords, briefly, I express some bafflement, especially in the light of discussion in Committee, at what the noble Lord, Lord Stevenson, has said. On the one hand, half his speech was devoted to saying that the criminalisation of registered design rights under the Bill was wrong and therefore should not proceed. On the other, the second half seemed to say that, on the basis that it would proceed, it should be amended to add words such as “deliberately”, as in Amendment 4. Looking at Clause 13, however, it is quite clear that mens rea, as the term is used in criminal law, is contained within the clause as it stands.
I can understand the position of Sir James Dyson. He believes in principle that it is not right to criminalise registered design infringement. I happen to disagree with him. A number of particularly small designers represented by bodies such as Anti Copying in Design—ACID—feel strongly that this is a very important protection. It may not be favoured by the IP Federation, which represents the larger companies and their designers, but this is something that is very much to be desired by the smaller designers. The argument used that there is a chilling effect on innovation is completely rebuttable. I am sure that my noble friend will go through that in his own way.
Taking the second limb of the objections of the noble Lord, Lord Stevenson, it is clear that Clause 13 does exactly what he wants his amendment to do. There is no doubt that the act has to be deliberate on reading new Section 35ZA(1)(b)(i). I cannot see that there is any ambiguity there.
My Lords, in Grand Committee we had some detailed debates about the introduction of criminal sanctions for the deliberate copying of a registered design. This is a finely balanced issue, and concerns were raised by a number of noble Lords. On the one hand, some felt that criminal sanctions should not be introduced as the offence may inadvertently capture innocent infringement. On the other hand, some noble Lords agreed that the offence was necessary, and indeed some felt that its scope should be extended further.
We shall no doubt return to the latter point in the course of today’s debate. However, as we consider this particular group of amendments, I would like to speak first to government amendment 7 in order to allay some of the concerns that noble Lords have expressed regarding the application of the offence. This amendment to Clause 13 sets out more precisely the scope of the term “use” within the context of business activities. The amendment will further focus the offence with the aim of ensuring that innocent infringement will not be captured.
Before I comment further on this amendment, I remind noble Lords of the purpose of this clause. As your Lordships know, Clause 13 introduces a criminal sanction for the copying of a registered design. This will create a more coherent approach to the protection and enforcement of designs, trade marks and copyright in the UK, and should help to reduce the scale of blatant copying of registered designs by acting as a deterrent. Under the clause, it will be an offence to deliberately copy a registered design without the consent of its owner. It will also be an offence to knowingly market, import, export, stock or use the design in the course of business activities.
Concerns were raised in Grand Committee as to whether the term “use” may inadvertently capture accidental and incidental use under the offence. As the noble Lord, Lord Stevenson, pointed out in relation to the offence, it,
“includes as a criminal act the use of a product in the course of a business and the stocking of the product for use. Does the Minister accept that the word ‘uses’ is an unacceptably vague notion for criminal prosecution?”.—[ Official Report , 13/7/13; col. GC399.]
Because the offence has been drafted to require an element of active knowledge in order to be found guilty, it should be the case that accidental use will not be caught. However, the Government accept there may be cases where incidental use could conceivably come within the scope of the offence. For example, a business may lease a vending machine, which is a copy of a registered design, for use by its employees. This is completely ancillary to its main business but some have suggested that because the business is “using” the machine, a responsible person within that business who knew the machine was copied but still tendered its lease would be liable for the offence. The Government believe that, in practice, such cases should not attract the criminal offence. This is because the use of the registered design in this case would be ancillary to the main purpose of the business.
I reassure noble Lords that the Government have listened carefully to their concerns, and believe that this amendment is the right way to clarify the detail of the offence. By qualifying the word “use”, it will ensure that the mere incidental use of a copy of a registered design in the course of business will not be subject to criminal proceedings.
Amendment 4 in the names of the noble Lords, Lord Stevenson of Balmacara and Lord Young of Norwood Green, would add a qualification to proposed new Section 35ZA(1)(a) in Clause 13. The noble Lords have set out their position on this amendment. This would mean a person would attract the criminal offence contained in Clause 13 only if an act of copying was undertaken deliberately. The Government are of the opinion that “copying” refers to a deliberate “taking” of the design in question. In crafting the offence of registered design copying, the Government worked hard to ensure that it caught only cases of intentional and deliberate copying. For example, the existing test for whether, in civil law, design is infringed, is to ask whether the product creates a “different overall impression” on an “informed user”. This was rejected for the proposed criminal offence because it left too considerable a margin for subjective judgment within a criminal case. The offence was purposefully drawn to be narrower than civil infringement, and while it of course remains a subset of such infringement, it will not be used in cases where there has been no blatant copying of a design. This ensures that designers can continue to be legitimately inspired by, and innovate around, existing designs without fear of their actions being caught by criminal sanctions.
The Government do not think it is necessary to specify that the act of copying is done deliberately, because the act of copying by its very definition requires an active choice to have been made; that is to say, a deliberate choice. Or, to put it another way, if a person comes up with a design from independent and objective means then, by definition, they cannot have copied it. Furthermore, the offence requires the person to know, or have reason to believe, that the design they have copied is a registered design. This is a high standard to achieve and will capture only acts which have been carried out with positive—that is to say, deliberate—intent. In view of this, the Government believe that it is unnecessary to further qualify that an act of copying must be carried out deliberately. To briefly summarise my point, this amendment would insert an element of tautology into the clause. As such, I suggest to noble Lords that it is unnecessary.
Amendment 5 would introduce an additional requirement to the criminal sanction for registered design copying. Broadly, a defendant would have to be found guilty of civil infringement before they could be charged with the criminal offence of design copying. I will reiterate why the Government are seeking to introduce criminal sanctions in the first place. Many businesses in the design sector do not believe that the civil courts are a viable option when it comes to protecting their rights as they find the cost of court action prohibitive. They also argue that those who take their designs use whatever means they can to delay proceedings when they are initiated, increasing the costs for the smaller party in the hope that they will be forced to give up or even go out of business.
In particular, stakeholders tell us that deliberate copiers of designs also use the fear of losing in court as a weapon against design owners. It is also their belief, as set out during the consultation process that preceded the introduction of the Bill, that a criminal sanction would act as a deterrent against those who copied their designs. The amendment would, therefore, in reality limit access to the criminal offence from precisely those small businesses that were most vocal in pressing for the offence, since they would be required to undertake the civil procedure first. The amendment would also set designs apart from other types of intellectual property to which a criminal sanction provision applies. For example, the offences that apply to trade mark and copyright infringement do not provide in the relevant legislation that the civil route must be exhausted prior to the commencement of criminal proceedings. There are good reasons for this, which relate to the differences between criminal and civil law.
First, the amendment would fetter the prosecuting authorities’ ability to act when there is the potential for public harm, such as in clear cases of counterfeiting. It is worth remembering that the objective of criminal law is to punish and protect society as a whole rather than to provide redress for the individual. Secondly, the amendment requires there to be a verdict through the civil procedure, which usually takes from 12 to 24 months, and for the appeal route to be exhausted. Prosecuting authorities would have to wait until this process was complete before charging an individual, who could be engaging in practices that harm designers and society as a whole. In both cases this would undermine the impact of the criminal offence and does not seem to be in the public interest. Nor would it seem to be in the interests of justice to require the additional hurdle of proving civil infringement before criminal proceedings could begin.
Amendment 6 would effectively extend the defences relating to infringement which apply in relation to criminal sanctions. The amendment would mean that someone who had sufficient reason to believe that their activity was not infringing would not be guilty of a criminal offence. I understand that noble Lords are concerned with the potential chilling effect that the criminal sanction may have, as the noble Lord, Lord Stevenson, mentioned, and will recall that we had a very good debate on these matters in Grand Committee. Indeed, the noble Lord, Lord Stevenson, has said, with reference to a group opposed to the introduction of criminal sanctions, that,
“it argues that criminalisation would create a ‘chilling effect’ on innovation, where deliberate activities are genuinely believed to be non-infringing, but would have no defence”.—[ Official Report , 22/5/13; col. 855.]
As I have mentioned previously, the Government were mindful of this issue in constructing the offence. They therefore built in several requirements which must be fulfilled before a criminal act can be considered to have taken place. These requirements include that copying—in other words, a considered act—must take place, and therefore “accidental” or independent activity will not be caught. This also shows why Amendment 4, to which I have already spoken, is not necessary.
The requirements also include having knowledge or reason to believe that the design in question was registered. Therefore, for example, retailers who do business in good faith with a third party which has itself wilfully copied somebody else’s design, will not fall foul of the sanction provided that they do not know, or have reason to believe, that the design is registered. The criminal sanction also incorporates specific defences. Again, these are intended to eliminate any likelihood of a chilling effect, and to prevent those who have acted in a decent manner being unfairly caught by the offence.
There are two specific defences. One relates to infringement, which is closely related to the amendment we are discussing now, and the other to a reasonable belief that the registration was invalid. Nevertheless, it is clear to the Government that the particular issue of a potentially chilling effect on legitimate business operations remains of great concern to stakeholders.
As I mentioned, I recently met the International Chamber of Commerce and other business representatives to discuss the effect of Clause 13. Even more recently, my officials had further constructive contact with stakeholder organisations and businesses on precisely these matters. In the light of the representations made, the issue is something to which the Government want to give careful consideration. Although I cannot make a commitment now, I would welcome the time to consider this further.
I will take the opportunity also to speak to Amendment 8 in my name. I thank my noble friend Lord Clement-Jones for originally proposing an amendment relating to the liability of corporate bodies and partnerships. The Registered Designs Act 1949 does not make reference to partnerships, and I am grateful to my noble friend for bringing this omission to my attention. In Grand Committee, he said:
“It is very interesting that there is no reference to partnerships in the existing legislation. Partnerships are interesting bodies. Some of them have unlimited liability whereas others are limited liability partnerships. Therefore, some interesting drafting needs to be done in that regard because LLPs are quite akin to corporate bodies”.—[Official Report, 13/6/13; cols. GC 395-96.]
As I said in Committee, the Government wanted to consider this point further, and have consequently done so. Although the liability of corporate bodies is already covered in Section 35A of the Registered Designs Act 1949, the Act does not specifically set out how an offence would be treated if it has been committed by a partnership. It is important that this gap in the law is resolved appropriately.
The government amendment will introduce into the Registered Designs Act 1949 a provision that specifies how offences committed by partnerships will be addressed. Where the partnership is guilty of an offence, every partner will be liable if they were aware of the offence being committed and did not intervene to prevent it. In addition, on conviction, any fine imposed on a partnership will be paid out of the partnership’s assets. This will broadly reflect the provision of the Trade Marks Act 1994, and will be consistent with the Partnerships (Prosecution) (Scotland) Act 2013 to ensure that Scottish law is adequately provided for. The amendment will provide legal clarity on the liability of partnerships and partners, and will address the gap that exists in the law.
I hope that noble Lords will forgive me for making a long speech. The noble Lord, Lord Stevenson, raised a number of questions that I will address now. He stated his belief that the majority of bodies opposed criminal sanctions. The majority of respondents to the consultation, including small businesses and individual designers, were in favour of the introduction of criminal sanctions. The noble Lord also asked for criminal sanctions to be replaced by improved access to the PCC. The Government recognise that improving access to the PCC is certainly also important. For example, the UK Government’s series of reforms in the patent county court have simplified and streamlined procedures. The introduction of a small-claims track means that low-value claims relating to unregistered designs can be dealt with quickly, informally and cheaply. It ensures that SMEs in particular are not deterred from innovation by the potential costs of litigation to safeguard their rights.
The noble Lord, Lord Stevenson, raised the question of whether small design businesses would be intimidated. The Government do not believe that criminal sanctions will lead to small designers being intimidated by larger businesses. The CPS has powers to intervene in cases where a private prosecution is vexatious: for example, where there is no case to answer, or where the public interest factors against the prosecution outweigh those in favour. As the noble Lord will know, each case is treated differently.
Finally, the noble Lord, Lord Stevenson, claimed that other common law intellectual property countries do not have criminal sanctions—for example, the USA. Some countries that operate within the EU legal framework, as the UK does, have criminal sanctions. These include Germany, Denmark and Finland. In the light of my comments and the government amendments tabled, I ask the noble Lord to withdraw the amendment.
I begin by thanking the Minister for his very full reply and his customary courtesy in dealing with all the points, for which I am most grateful. He sets a high standard in this House. However, let us be clear: we are talking about approximately 4,000 designs which are registered each year at the Intellectual Property Office and some 350,000 designers who suggest that about 18,000 unregistered designs are lodged with the asset database, so this is a very small proportion of the designs with which we are involved. We are probably arguing around a very narrow point but it is an important one. I want to come back to it, but before I do so I thank the Minister for his comments about Amendments 7 and 8, both of which we welcome, and which have gone a long way to answering points raised in Committee, for which we are grateful to him.
The issue that we are left with is the pleasing word “bafflement” which invaded the otherwise normally sane and sober noble Lord, Lord Clement-Jones. I am delighted to have struck a blow for those who believe in bafflement. However, I must say that I am not at all baffled by this. The situation is very clear: we are against criminalisation of this aspect of the design world. We accept that there may be a case for having as a very last stop a criminalisation process which would enable those who are constantly engaging in this sort of behaviour, or are doing so on such a scale, to be given appropriate penalties. The issue is whether or not the clause that we are debating has sufficient safeguards. My argument in Committee and today was that the Minister, on behalf of the Government, did not adequately defend why it was necessary to move from a very effective civil situation to criminalisation. However, I accept that it is important to consider whether criminalisation would help the design community. That is the question we have to resolve.
It is interesting that in his response in Committee and today, the Minister kept saying that these criminal measures would apply only to deliberate acts. I think he is using the mens rea argument, which is that if somebody has gone to the point of copying, by definition it must be intentional and deliberate. However, when discussing that, he used the word “deliberate”, which is what I sought to include in the Bill. Therefore, I am baffled in the sense that I do not understand why it is possible to talk about a criminalisation which is restricted to those who are deliberately engaging in this act, but not accept that it would be helpful to have that in the Bill. That is the important thing.
If we are talking about people who are blatantly ripping off individual designers, taking their designs, using them and obtaining financial reward from them without having paid for a licence, obviously there is a point where that has to become a criminal act. I am prepared to go along with that but the bar has to be set very high. I do not believe that it has been set high enough in the present wording. Therefore, I would like to test the opinion of the House.
Amendments 5 and 6 not moved.
Amendments 7 and 8
Moved by Viscount Younger of Leckie
7: Clause 13, page 12, line 12, at end insert—
“( ) The reference in subsection (3) to using a product in the course of a business does not include a reference to using it for a purpose which is merely incidental to the carrying on of the business.”
8: After Clause 13, insert the following new Clause—
“Offences committed by partnerships
At the end of section 35A of the Registered Designs Act 1949 (the title to which becomes “Offence by body corporate or partnership: liability of officers or partners”) insert—
“(3) Proceedings for an offence under this Act alleged to have been committed by a partnership are to be brought against the partnership in the name of the firm and not in that of the partners; but without prejudice to any liability of the partners under subsection (6) or (7).
(4) The following provisions apply for the purposes of such proceedings as in relation to a body corporate—
(a) any rules of court relating to the service of documents;
(b) in England and Wales, Schedule 3 to the Magistrates’ Courts Act 1980;
(c) in Northern Ireland, Schedule 4 to the Magistrates’ Courts (Northern Ireland) Order 1981.
(5) A fine imposed on a partnership (other than a Scottish partnership) on its conviction in such proceedings must be paid out of the partnership assets.
(6) Where a partnership (other than a Scottish partnership) is guilty of an offence under this Act, every partner, other than a partner who is proved to have been ignorant of or to have
attempted to prevent the commission of the offence, is also guilty of the offence and liable to be proceeded against and punished accordingly.
(7) Where an offence under this Act committed by a Scottish partnership is proved to have been committed with the consent or connivance of a partner in the partnership, or a person purporting to act in that capacity, he as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.””
Amendments 7 and 8 agreed.
Moved by Lord Clement-Jones
9: After Clause 13, insert the following new Clause—
“Offence of unauthorised copying etc of a design protected by design right
(1) The Copyright, Designs and Patents Act 1988 is amended as follows.
(2) After section 235 insert—
“235A Offence of unauthorised copying etc of a design protected by design right
(1) A person commits an offence if—
(a) in the course of a business, the person copies any design protected by design right so as to make a product exactly or substantially to that design, and
(b) the person does so—
(i) knowing or having reason to believe that the design is protected by design right, and
(ii) without the consent of the owner of that design right.
(2) Subsection (3) applies in relation to a product where a design protected by design right has been copied so as to make the product exactly or substantially to the design.
(3) A person commits an offence if—
(a) in the course of a business, the person offers, puts on the market, imports, exports or uses the product, or stocks it for one or more of those purposes,
(b) the person does so without the consent of the owner of the design right in that design, and
(c) the person does so knowing or having reason to believe that a design has been copied without the consent of the owner of the design right in the design.
(4) In this section “design right” includes an unregistered community design and a reference to the owner of the design right is also to be read as a reference to the owner of a community design right in a design.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding ten years or to a fine or to both;
(b) on summary conviction in England and Wales or Northern Ireland, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both;
(c) on summary conviction in Scotland, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum or to both.”
(3) In section 235B (enforcement) substitute all references to “35ZA” for “235A”.
(4) In section 235C (forfeiture in England and Wales and Northern Ireland) substitute all references to “35ZA” for “235A”.
(5) In section 23ZC, in subsections (2) and (3), substitute all references to “registered design” for “design right subsisting in a design”.
(6) In section 235D (forfeiture in Scotland), substitute all references to “35ZA” for “235A”.
(7) In section 235D substitute all references to “35ZC” for “235C”.
(8) For section 235E (offences committed by partnerships and body corporate) substitute—
“235E Offences committed by partnerships and body corporate
(1) Proceedings for an offence under this Act alleged to have been committed by a partnership shall be brought against the partnership in the name of the firm and not in that of the partners; but without prejudice to any liability of the partners under subsection (2) below.
(2) The following provisions apply for the purposes of such proceedings as in relation to a body corporate—
(a) any rules of court relating to the service of documents;
(b) in England and Wales or Northern Ireland, Schedule 3 to the Magistrates’ Court Act 1980 or Schedule 4 to the Magistrates’ Courts (Northern Ireland) Order 1981 (procedure on charge of offence);
(c) a fine imposed on a partnership on its conviction in such proceedings shall be paid out of the partnership assets;
(d) where a partnership is guilty of an offence under this Act, every partner, other than a partner who is proved to have been ignorant of or to have attempted to prevent the commission of the offence, is also guilty of the offence and liable to be proceeded against and punished accordingly;
(e) where an offence under this Act committed by a body corporate is proved to have been committed with the consent, connivance or neglect of a director, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.””
My Lords, my noble friend the Minister correctly said that later in the proceedings we would be coming to the issue of criminal penalties for infringement of unregistered design. This is a rerun of an amendment that I moved in Grand Committee to provide that criminal sanctions would also apply to the deliberate infringement of unregistered designs. As I explained in Grand Committee, design is of key importance to the UK economy. However, the great majority of designers rely on unregistered rights, a point that has already been made eloquently by the noble Lord, Lord Stevenson. The introduction of criminal sanctions for the deliberate infringement of registered designs is a progressive step, but for most lone and micro designers the cost of registering every iteration of a design would be prohibitive. The extension of criminal sanctions to unregistered design rights for the majority of UK designers would be a deterrent to persistent copying in much the same way as it is for copyright and trademark infringement.
Criminal sanctions have been available for copyright infringement since 1862 and for trademark infringement since 1994. Criminal prosecutions have been used sparingly, sensibly and appropriately. Persistently copying designs, however, is not a criminal offence at all, which is anomalous. Persistently copying a two-dimensional drawing of a design or a design document can give rise to criminal liability under Section 107 of the CDPA, but when this two-dimensional work is converted into a 3D design, unless it is protected as a work of artistic craftsmanship, which we have previously discussed on the Enterprise and Regulatory Reform Act, copying that 3D version would not be a criminal offence. Nearly all designs, however, are copied from the 3D original, not the 2D drawings. How do the Government justify providing a higher level of protection to a two-dimensional design than to the 3D manifestation of that design?
I have also described the inequality of arms between infringers and designers and said that, if anything, in these circumstances, there are stronger reasons for imposing criminal offences for unregistered design right infringement than there are for infringing a registered design. In Grand Committee, to my arguments the Minister riposted:
“Registered rights can be readily accessed through the Intellectual Property Office and the EU designs registry website. They include crucial information, including the design that is protected, the date on which protection commenced and whether it is still in force. This is not the case with an unregistered design right”.
However, there is no registration of copyright in this country, yet infringement is a criminal offence as I have described. Why is it not for unregistered design?
The Minister went on to say that,
“the uncertainties surrounding unregistered designs, such as the difficulty of knowing when the design right came into existence, mean that it is more difficult for third parties to ensure that they are not infringing that design right. Therefore, against the backdrop of a threat of a criminal conviction, third parties are more likely to wait longer than necessary to be sure that the design is in the public domain before building on it, thereby extending the design right beyond its term and delaying potential innovation”.
However, exactly the same arguments could be applied to copyright infringement. What is the difference between this and copyright? The evidential burden is exactly the same; it is very similar in these circumstances. It is simply that the term for copyright is longer.
The Minister went on to say:
“Thirdly, because the UK unregistered right affords protection to functional designs, this could cause difficulties in criminal proceedings”— could cause difficulties in criminal proceedings—
“where such designs are complex, as they well might be. For example, determining whether the interior of one alternator”— this must be a good example—
“has been copied from the interior of another is a highly technical issue, probably requiring expert knowledge”.
I am sure that that is the case. However, the use of expert witnesses is common right across our court system. It is all a question of testing the evidence. It happens in trade marks and in copyright, so why not in design?
The Minister ended by saying:
“This is not the sort of discussion the Government believe should be dealt with in the criminal courts, especially where any element of doubt means that the high standard of proof required is unlikely to be met”.
Again, we are back to the evidence.
On the specific 2D versus 3D argument, the Minister said:
“The copying of 3D products is not the same as copying the original design document. Competitors therefore take inspiration from existing designs. Copying original design documents is closer to theft and that is why the law treats these matters differently”.—[Official Report, 13/6/13; cols. GC 394-395.]
As I said in Committee, the Minister said that this should not apply to unregistered 3D because 2D is not the same, the latter being “closer to theft”. That seems an entirely circular argument and the passage of several weeks since Committee stage has not made me any less wondrous at that circularity. I do not see that theft of a 3D design and theft of a 2D design should be morally or legally different.
I think that the Minister’s argument in Committee—I hope that it is different on Report—really boiled down to a policy matter: “We cannot really explain why, but we just don’t want to give the protection of the criminal law to unregistered design rights”. It seemed almost as simple as that. I hope that, on mature consideration, the Minister really will reconsider this issue. It is a matter of huge importance to the 350,000 designers whom the noble Lord, Lord Stevenson, mentioned, and this proposal would rectify a major wrong. I beg to move.
My Lords, I rise briefly to support the noble Lord, Lord Clement-Jones, in this argument. I think that this provision should be exactly parallel to that for copyright. I would say that the Minister should have used these arguments in the copyright case to change that provision so that it was in line with the principles in this Bill—because I think that copyright is probably overprotected—but that is a different argument. However, I certainly think that the arrangements should be the same. At some time in the future we can rationalise, if we need to, the two arrangements so that they move together in the same direction. With the advent of 3D printing it is now quite possible easily to make a three-dimensional copy at not a huge cost, so I do not see the rationale for distinguishing 2D from 3D copying. 3D copies were not possible until very recently. Logically, the two principles should be aligned, as the noble Lord, Lord Clement-Jones, has just stated. Whether we think that this should be dealt with differently, in copyright or under this arrangement, is another matter.
My Lords, I found a lot of what the noble Lord, Lord Clement-Jones, said very convincing and want to hear how the Minister will respond. The noble Lord made a very good case for taking the situation that we have currently, under which copying registered designs will be subject to criminal penalties, and asking why the very large number of unregistered designs that are lodged in a different register from the registered designs—with the IPO—cannot be given a similar sort of protection. I think that the arguments comparing that with copyright and trademarks are very persuasive. The noble Earl, Lord Erroll, made the point about 3D printing, which of course begins to muddle all our previous conceptions of what 2D and 3D design were about. Again, that will require some movement, if not now, in the very near future, in order to keep pace with the way that technology is changing.
Our Amendment 20 departs from the principles articulated by the noble Lord in moving Amendment 9 because we think that we have to take the situation as it is on the ground. As I have said before, there are
350,000 designers in the UK and UK businesses spend around £35.5 billion annually on design. These are substantial figures and make up a significant slice of our creative industries. However, the vast majority of designers rely on unregistered rights. There are 4,000 registered designs against 18,000 unregistered designs. Something like 99% of designers in the country rely on unregistered designs, and there has to be a question about how the Government will provide an appropriate framework for that development.
Our amendment suggests to the Secretary of State that there is another possible route to think about, which makes clearer what the effect would be of having a register of unregistered designs, even if that is perhaps a contradiction in terms. If it was possible to have within the government machinery some system that allowed a way to evidence the existence of the design right, and document its existence on a particular date, that would go some way to giving us certainty about cases, whether they were criminal or not, affecting the unregistered design right. We could perhaps use the copyright harm analogy to find a way for metadata to be applied to designs that would allow them to be picked up and trailed.
The noble Lord, Lord Clement-Jones, asked why there was a growing discrepancy between the registered and unregistered design right routes. Presumably, the Government have made a decision that they are going to bulk up what is available to those who have registered designs and give them more in the hope that that will persuade designers to sign up to the registered design route. But what will happen if they do not? The problems and difficulties will still be there, particularly in the fashion industry, where unregistered design is the mode that is used.
We need to do something and our Amendment 20 tries to make some suggestions that we hope the Government will listen to. Although we cannot support the proposal to criminalise the copying of unregistered designs as a matter of principle, we would be very interested in hearing how the Minister will respond.
My Lords, the effect of Amendment 9, moved by my noble friend Lord Clement-Jones, would be to extend the proposed criminal sanctions to unregistered design rights. I thank my noble friend once again for presenting the Government with his strong views on unregistered design right protection. I can assure him that the Government are absolutely convinced of the value of the unregistered right and are very aware of its role in protecting small design businesses. That is why, following consultation, the UK right and its current term of protection was retained in the face of calls by some to remove it as a means of simplifying design law.
The United Kingdom has a very successful design industry and we tinker with the success of the industry at our peril. I am particularly concerned to ensure that any changes proposed in the Bill do not act as an additional burden on industry but enhance its accomplishments. As with all intellectual property systems, there is a delicate equilibrium between a reasonable return for creators and, on the other hand, access to the creation so that competitors can shape future innovation. This is the balance the Government have to be mindful of in the changes proposed. There is a real fear that extending criminal sanctions to unregistered rights will distort this balance for the following reasons.
First, the existence of the register represents a public database, which can be searched with relative ease. Third parties can quickly assess what has been registered and what has not. This means that they can take due notice of designs protected by registration with some degree of certainty. In particular, they will know accurately when it will be possible to copy a design with no degree of legal risk. With unregistered designs, there is the problem of not knowing exactly when the design right came into existence and the duration of its protection. This means that it is more difficult for third parties to discover when they can legally copy or exploit a design. Where information about the design of an article is limited but copying it attracts a criminal sanction, it is entirely possible that industry will become risk-averse. As I stated in Grand Committee, against the background of a threat of a criminal conviction, third parties are more likely to wait longer than necessary to be sure that a design is in the public domain before building on it, therefore extending the unregistered design right beyond its term and delaying potential innovation.
I will give your Lordships an example. A furniture manufacturer is aware of a rival’s design that is successful in the marketplace and knows that it is not protected by registration. That is easily discovered by a swift inspection of the registry. He is also aware that the unregistered design right is now protected by a criminal sanction. The manufacturer will have no ready knowledge of when the item was first protected—for example, when it was in a design document, made into an article or first marketed. These all affect the term of protection. To be on the safe side, it is likely that the manufacturer will avoid copying or even engaging in reasonable follow-on innovation until he is certain that the product is out of its term of protection. With registered designs, any potential chilling effect is much reduced by the certainty of facts on duration, scope of protection and ownership, which registration creates.
Secondly, the nature of the UK unregistered right magnifies the uncertainty problem. Unregistered right in an article can relate not only to the overall design but to the individual elements of the design. The unregistered design right can therefore be seen as a basket of individual rights. For example, a kettle may have design protection in its overall shape and configuration but also in its individual parts, such as the spout, the handle and the lid. The kettle may be one of a series of kettles, so different design components may have different timelines of protection. The handle may have 10 years of protection to run because it is new, the spout may have three years as it was used in an earlier version of the kettle, and the lid may be out of protection because it is an old design. None of this information will be readily available to a business which wants to use the design or aspects of the design itself. This creates a cumulative uncertainty about the rights, which is not shared where a design appears on the public register.
Thirdly, a chilling effect is likely to be more serious in particular industries. Some designers, such as those in the fashion trade, thrive on novelty, speed of change, imitation, and rapid turnover of seasonal ranges. It is in these industries where the Government have real concerns that criminalisation of unregistered designs, which are often relied on, would have a freezing effect.
Fourthly, the potential inhibiting effect on innovation that has been identified is likely to be a particular problem in relation to functional designs, which the UK unregistered right also protects. This problem does not apply to registered designs that specifically exclude functionality. I also remind noble Lords of a further issue that relates to functional designs, which could cause difficulties in criminal proceedings. Such technical complexity should be avoided in criminal proceedings if possible.
Finally, I will say something about the protection for unregistered rights holders and, at the same time, consider Amendment 20, in the names of the noble Lords, Lord Stevenson of Balmacara and Lord Young of Norwood Green, which would place, in effect, a reporting duty on the Secretary of State. I can assure noble Lords that the Intellectual Property Office is already aware of its responsibilities to SMEs and fully recognises the difficulty that designers face in enforcing their rights. The IPO will continue to work with representative groups for the design sector to help improve the situation for designers. There are many ongoing projects. For example, the IPO and the European design and trade mark office—OHIM—are working together to consider approaches to IP enforcement. This includes the costs of searching for prior rights.
The IPO currently funds IP audits to SMEs that are enrolled on one of our partner business support programmes. From next year, a number of these will be specifically allocated to design SMEs within the Design Leadership Programme run by the Design Council. This will help design-focused SMEs effectively to manage their rights, including unregistered designs, and the creation of audit trails. Such information is readily available from organisations such as the IPO and ACID.
I hope noble Lords will agree that by accepting this amendment the Government would be duplicating information already available. I have already referred to private companies such as ACID, which provide access to highly successful unofficial databases. The amendment would place the Government in direct competition with these companies.
The amendment also raises a number of questions. For example, would an official government-run unregistered designs database be compulsory for designers to use? What about the design rights that exist in other parts of the EU? These can have an effect on rights in the UK so would all European design rights owners be required to record their unregistered designs with the IPO?
These questions may warrant further thought. However, the Government do not believe that it is wise to legislate at this stage without more consideration, particularly given the ways in which the UK IPO is already working hard to ensure that designers are as informed as possible when making business decisions about their intellectual property. For example, the IPO will provide training to the Design Council’s business advisers, to help understand IP and the value of design rights, and to direct SMEs towards the audit programme. On that basis, I am not persuaded of the need for the noble Lord’s Amendment 20.
However, I would not want noble Lords to gain the impression that, in not extending the criminal sanction to the UK unregistered design, the Government regard unregistered rights as second-class rights. The Government recognise that the introduction of criminal sanctions for designs is an important issue that is subject to strong opinions. We believe that the sanction as drawn is the best option to maintain and enhance the success of the UK design industry.
My noble friend Lord Clement-Jones and the noble Earl, Lord Erroll, raised the issue of the discrepancy between protection for 2D and 3D works. There was some debate on this in Committee and it is worth reiterating a number of key points. In the view of the Government, this is a consequence of copyright protection vesting in the “work” that consists of a design drawing, and there is no direct protection of the 2D representation of the design per se. The protection arises as a by-product of the copyright in the work. As noble Lords will know, copyright will protect against the reproduction of the drawing where the defendant knows or has reason to believe that the reproduction is an infringement of the drawing. This is merely a coincidence, caused by the fact that the drawing is a literary or graphic work and nothing more, and is a result of the existence of parallel IP regimes that coincidentally overlap in this case.
It is questionable that the existence of this anomaly, which is hardly unique in IP law, counsels equalisation or harmonisation by criminalisation of unregistered design right. As the noble Lord, Lord Howarth of Newport, who I see in his place, stated in Grand Committee:
“My Lords, consistency is not necessarily a virtue and I think that we should be very careful in the field of intellectual property. We legislate not simply out of tidy-mindedness or a desire to achieve a satisfying consistency by transferring rules and regulations that may have applied relatively successfully in one area to another”.—[Official Report, 13/6/13; col. GC 392.]
The noble Earl makes an interesting point but I see the two as being very separate.
The noble Lord, Lord Stevenson, raised the issue of the low number of registrations. The importance of registration should not be underestimated. Official registers in the UK and OHIM contain approximately 728,000 registrations, which may be of help to the noble Lord.
My noble friend Lord Clement-Jones asked why expert witnesses cannot be used to determine technical matters under unregistered design matters. If the noble Lord’s proposed extension to include unregistered design rights was the right way to proceed, what says about expert witnesses could indeed be helpful. However, as I have said, there are many reasons why the Government believe it is not right to criminalise unregistered design copying, which is the overarching issue.
Finally, the noble Lord, Lord Stevenson of Balmacara, raised the issue of the Copyright Hub to apply metadata to designs, which is an interesting point. The digital Copyright Hub is an industry-led initiative, of which the noble Lord will be aware. I am sure that the noble Lord will understand that I cannot therefore make commitments about what the hub will do in this respect. However, I am happy to speak to the industry team about the noble Lord’s suggestion. I therefore ask that the noble Lord withdraws his amendment.
My Lords, first of all I thank the noble Earl, Lord Errol, for his intervention. We do not often agree on matters in this kind of debate, but I very much appreciate his support on this occasion, and in particular his reference to 3D printing. That will give rise to a number of particular issues. I also thank the noble Lord, Lord Stevenson. I understand that he does not follow me down the same road of principle, but the horizon to which he is pointing in terms of the ability of the Copyright Hub to apply metadata on its database to unregistered designs, could be an extremely interesting salient. It may be that when the Copyright Hub is up and running and it includes a whole data bank of unregistered designs, I come back on a future IP Bill and say, “Right, we know exactly what the provenance of these designs is, we have the metadata applied to them and it is entirely appropriate we should now apply criminal offences to infringement of unregistered design”. I can see that on the horizon, coming down the road.
The Minister was entirely consistent. He may have praised the virtues of inconsistency, but his reply was entirely consistent with his reply in Committee. However, I thought it was more considered and more elegantly constructed than in Committee. Some of his points were good ones. The least convincing were the non-technical ones such as “tinker at our peril”, “the delicate equilibrium” and so on; but some of his more granular points about magnifying the uncertainty where you have different elements within an overall design, and those he made about functional design, had a plausible ring about them. On his point about making industries more risk-averse, in many ways people in the fashion industry would love people to be rather more risk-averse. One of the real issues is copyright and design infringement in that industry. A little risk-aversion would go quite a long way. I still do not see the plausibility of his argument about the chilling effect and so on. However, I understand that the Minister has taken great care to respond, and I thank him very much.
If we can use the principles contained in Amendment 20 to develop the Copyright Hub, we might see a better future for unregistered design, which, as we have heard in this debate, is relied on by 350,000 designers. Registered design is a very small part of that. In the mean time I beg leave to withdraw the amendment.
Amendment 9 withdrawn.
Moved by Lord Young of Norwood Green
10: Clause 16, page 16, line 30, at end insert—
“(2A) In making an order under this section, which confers jurisdiction on a court, removes jurisdiction from a court or varies the jurisdiction of a court, the Secretary of State shall, where the number of patent cases is such as to meet the requirements as set out in Article 7 of the Agreement on a Unified Patent Court, consider conferring local divisional court jurisdiction on—
(a) in England and Wales, the High Court;
(b) in Scotland, the Court of Session;
(c) in Northern Ireland, the High Court.”
My Lords, this amendment seeks to ensure that the Secretary of State consults with appropriate consultees before conferring, removing or varying court jurisdiction. In addition, where sufficient numbers of patent cases in the UK allow, he should confer on each separate legal jurisdiction throughout the United Kingdom a court which has local divisional court status, allowing patent cases where appropriate to be heard in that legal jurisdiction. This will effectively preserve the status quo under the existing national and EU patent regimes.
Article 7 of the unified patent court agreement provides that each contracting member state may request and may have one division of the court of first instance of the unified patent court within its jurisdiction for every 100 patent cases in each calendar year during three successive years prior or subsequent to the date of entry into force of the agreement. That is subject to a maximum of four such divisional courts per such jurisdiction. The Intellectual Property Bill as drafted does not place any obligation on the Secretary of State to consider or confer divisional local jurisdiction on the High Court in England and Wales, the Court of Session in Scotland or the High Court in Northern Ireland.
The society believes that, given the constitutional make-up of the United Kingdom, it is important that each separate jurisdiction continues to provide local access to a court and is fairly represented within the overall unified patent court structure. Without a local designated divisional court, local businesses will be forced to litigate outside their geographical areas. We suggest that a failure to confer local divisional court status may raise access to justice concerns, increasing costs and inconvenience to all businesses and litigants—including SMEs who may be impacted heavily by a potential additional cost in bringing or defending actions. I beg to move.
My Lords, the amendments in this group relate to the unified patent court. Amendment 10, tabled by the noble Lords, Lord Stevenson of Balmacara and Lord Young of Norwood Green, seeks to ensure that the Secretary of State will consider setting up separate local divisions of the unified patent court in three parts of the UK should there be enough case load to justify more than one local division. As I highlighted in Committee, ensuring local access to justice is a key element of the unified patent court. That is why the agreement makes provisions for local divisions. The agreement does not oblige participating states to host a local division, which can be set up and disbanded upon request.
It is important that the unified patent court serves the needs of businesses throughout the United Kingdom and the Government are committed to ensuring that all areas of the United Kingdom will have access to the court. I can assure noble Lords that the Government are already giving careful consideration to the number and location of local divisions that may be hosted in the UK. I cannot say at this time exactly how many local divisions the UK may host because it is not yet clear whether there will be enough cases to justify having more than one local division. The reason for this uncertainty is that there is no common agreement among the participating states on how the number of cases in each jurisdiction will be counted. It is important that a consistent approach is taken to assessing the case load in different countries. The issue will be decided by the participating states before the court comes into being.
While it is not possible to say for certain how many local divisions may be hosted in the UK, I can give noble Lords every assurance that the Government are open to locating local divisions in different parts of the UK. The Government are working closely with the devolved Administrations and the court services in Scotland and Northern Ireland as well as England and Wales to ensure that the needs of businesses throughout the United Kingdom are taken into account. Noble Lords may be also interested to know that the Intellectual Property Office, in partnership with the Chartered Institute of Patent Attorneys and the IP Federation, is running a series of stakeholder events about the unified patent court rules in early September. One of these events will be hosted in Edinburgh. Given that the issue of UK-based local divisions is already under consideration, it is neither necessary nor appropriate to prescribe in primary legislation their number and locations.
I now turn to government Amendment 11. This technical amendment to Clause 16 is intended to provide certainty that the Government will be able to establish fully the unified patent court. The amendment introduces new Section 88B into the Patents Act 1977. It does not extend the scope of the power conferred by Section 88A of that Act. The necessity of tabling an amendment to this clause has only recently come to light as a result of the ongoing legal analysis being conducted as part of the implementation process. That analysis has identified a potential uncertainty which could, if not addressed now, result in a significant delay in bringing the unified patent court into effect.
The unified patent court agreement effectively sets up a new international organisation, part of which will be based in the United Kingdom. It is usual that any agreement which sets up an international organisation would include limited provisions as necessary for the fulfilment of that organisation’s purpose. The unified patent court agreement does not make specific provisions for all the necessary privileges and immunities that are likely to be required for the court to fulfil its function.
For example, there are no provisions relating to the terms and conditions of staff other than the judges of the court. As a consequence, it is likely that the UK and the other participating states will need to finalise a further set of detailed provisions on privileges and immunities for the unified patent court.
It is normal that such an agreement would be given effect in UK law using an order under the International Organisations Act 1968. However, due to the way the unified patent court agreement is drafted, it is not clear that the International Organisations Act 1968 applies to the court. To avoid any doubt, it is prudent that we make this provision in primary legislation now in order to clarify that the International Organisations Act will apply to the unified patent court. A similar approach was taken to give effect in the UK to the International Tribunal for the Law of the Sea.
Subject to the agreement of the House, I will move Amendment 11 in turn. I ask the noble Lord to withdraw his amendment.
My Lords, I thank the Minister for his comprehensive, constructive and helpful answer. We welcome the fact that the principle is accepted and that it is a question of establishing some principles about how cases are counted and of eliminating uncertainty—that seems a very worthwhile approach. We also welcome the fact that the Minister is working with the devolved Administrations. We trust that as the Bill progresses in the other place the Minister will be able to report back on the progress made in this area. We have no adverse comment on Amendment 11 and, overall, we cannot help saying, in light of the debate to come later this afternoon, that we welcome the Government’s pro-European stance in this area. In those circumstances, I beg leave to withdraw the amendment.
Amendment 10 withdrawn.
Moved by Viscount Younger of Leckie
11: Clause 16, page 17, line 2, at end insert—
“88B Designation as international organisation of which UK is member
The Unified Patent Court is to be treated for the purposes of section 1 of the International Organisations Act 1968 (organisations of which the United Kingdom is a member) as an organisation to which that section applies.”
Amendment 11 agreed.
Moved by Lord Howarth of Newport
12: After Clause 19, insert the following new Clause—
“Freedom of Information: lobbying
(1) The Secretary of State must maintain an online register, freely accessible to the public and up-to-date, of all representations, lobbying and advocacy concerning intellectual property addressed to Ministers, their officials and advisers and to staff of the Patent Office and their advisers.
(2) The register must provide information about the names of all individuals and organisations engaged in such communications and the dates, modes and whereabouts of them.
(3) The register must provide a report of the contents of each such engagement, but need not disclose matter that, in the opinion of the Secretary of State, is properly regarded as commercially confidential.”
My Lords, Amendment 12 is a development of an amendment that I tabled in Committee, and I was sufficiently encouraged by the Minister’s response to feel that it was worth tabling this amendment on Report.
I start by saying that I have no interest to declare. No one has asked me to table any of the amendments that I have put down in the course of our proceedings on the Bill and I have no financial interest in any aspect of this legislation. I mention this simply because I think that it is helpful to parliamentarians in both Houses and to other people who may follow our proceedings to know whether any noble Lord participating in the proceedings has such an interest.
I venture to suggest that this amendment is timely. Recent unhappy events have propelled the Government finally to publish their Transparency of Lobbying, Non- party Campaigning and Trade Union Administration Bill. The Second Reading of that Bill in the House of Commons will not take place until September, so the Minister has the opportunity, with this amendment, to show that he is ahead of the game and, indeed, to do rather better than the Government seem minded to do in their Bill.
In Committee the Minister acknowledged the importance of this issue. Intellectual property can be a very valuable thing. It creates monopoly of a kind and it is not surprising, therefore, that lobbying is intense in relation to policy on intellectual property and, indeed, on specific decisions. Officials working in this area effectively have the power to enrich other people, and in that respect they are rather like planning officers. It seems to me that procedures relating to intellectual property policy formation and decision-making, just as with procedures in planning, ought to be as transparent as possible. Indeed, I was encouraged that the Minister said to us in Grand Committee:
“The Government are committed to transparency”.
He helpfully explained that Ministers, special advisers and the Permanent Secretary in his department, as in other departments, disclose on a quarterly basis on the government website the names of external organisations that they meet. It was very welcome that he announced that this practice would be extended to the chief executive of the Intellectual Property Office. He said that the publicity on the website would state what the main topic had been at the meeting, but he disagreed with my suggestion that there should be some further disclosure of the contents of the meeting—he said that disclosure must be proportionate. He observed that freedom of information law applies in this area and that an FOI request would be considered in the light of the requirements of the Act. However, at that point he said:
“We feel that we have gone as far as we can”.—[Official Report, 18/7/13; col. GC 54.]
I submit that the Minister did not go far enough in Committee. Indeed, the ministerial code, as it is, requires that the disclosure of meetings between Ministers and others with external organisations should be at least quarterly, so the Minister adopted a minimalist position in this regard.
“it’s time we shone the light of transparency on lobbying”.
Then nothing happened for three years until scandals forced the Government to act, but even now their proposals are inadequate—many would say derisorily so. I believe that the minimalist position taken by the Government will not hold. The disclosure of only the names of organisations that Ministers, special advisers, Permanent Secretaries and the chief executive of the IPO have met is palpably inadequate. The lobbying consultancies sell their services on the basis that they know how to get to the officials who are formulating policy options and briefing Ministers. There is much agitation in the media about the lobbying of politicians, but the lobbying of officials is at least equally important. Therefore, my amendment would require much fuller transparency than the Minister has so far been willing to contemplate. My drafting is amateur and could no doubt be improved, but if noble Lords are kind enough to read the amendment I think that they will be clear about what I am driving at.
I have of course made an exception to the requirement for disclosure of matter that can properly be regarded as commercially confidential. I think that that must be right, although I also have to say that the mantra of “commercial in confidence” induces quite a lot of scepticism among Members of Parliament and noble Lords who again and again have been fobbed off with its deployment when they have sought to probe government contracts for the public service—contracts that are extremely important and about which parliamentarians should be entitled to know more than the Government customarily allow. However, that is a side issue.
I make it clear that I am not opposed to lobbying. Of course it must be right in a liberal society and a democracy that people can make representations on behalf of themselves and other interests to those who are in power. It is legitimate and indeed positively a good thing that interested parties should have an opportunity to explain their case to the IPO. However, equally, other interested parties and other citizens ought to be entitled to know who is making such representations and, in broad terms, what the content of those representations may be. After all, they may have another legitimate case. Indeed, they may be able to assist the Intellectual Property Office and the Minister as they seek to make the right decisions in the public interest.
The IPO is, I believe, in receipt of a very great deal of lobbying—much of it aggressive. The public are worried about lobbying. Mr Cameron spoke of the,
“far-too-cosy relationship between politics, government, business and money”.
He spoke of the need to shine the light of transparency on,
“who is buying power and influence”.
In those words, it seems to me, Mr Cameron made a fairly serious allegation, although I note of course that it was not specifically in relation to intellectual property.
Last week in a column in the Guardian on
“Doing the right thing is hardly a consideration in Whitehall now”.
I think that that remark is grossly exaggerated and unjust, but if prominent columnists are saying such things, no wonder there is some cynicism among the public.
I do not in any sense impugn the motives or the honesty of officials in the IPO, in the business department or anywhere else, but I believe that they are under great pressure. The drug companies, for example, are prepared to exert pressure on an enormous scale. I again quote Sir Simon Jenkins in that article. He says that,
“the NHS allows drug companies to spend £40m a year on gifts to doctors, blatantly, to use their products at the expense of the same NHS.”.
We have been reading in the newspapers about the extraordinary allegations against western pharmaceutical companies and their practices in China. I do not doubt that pharmaceutical companies will spend whatever it takes to influence decisions on the patenting of new drugs.
I simply think it is important to reassure the public. We have an opportunity through this amendment to protect the reputation of the Intellectual Property Office and to protect the reputation of the intellectual property regime all in all. The Government were slow to act on the commitment made in the coalition agreement, but this amendment offers the Minister the opportunity to provide an exemplary policy. I hope he will seize that opportunity. I beg to move.
My Lords, Amendment 12 tabled by the noble Lord, Lord Howarth of Newport, relates to representations, lobbying and advocacy concerning intellectual property. It would place a duty on my right honourable friend in the other place, the Secretary of State Vince Cable, to maintain an open register of all lobbying which has taken place.
I wish to assure noble Lords that this Government take the issue of lobbying very seriously. This is the most transparent Government ever. I am pleased that the noble Lord, Lord Howarth, while not necessarily agreeing with that, certainly recognised it in his speech. We are the first Government to publish proactively meetings that Ministers and Permanent Secretaries have had with external organisations. We publish an unprecedented amount of information about whom Ministers and senior officials meet. This information is published on a quarterly basis.
The noble Lord, Lord Howarth, is right in saying, however, that the public are worried about lobbying. The Government also recognise that the public are concerned that some lobbying activity is opaque, allowing certain powerful organisations and individuals to exert a disproportionate influence on government in the shadows. We need to combat the sometimes negative perceptions of the relationship between lobbyists and government by giving people confidence that the process is transparent.
That is why only last week the Government introduced the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Bill, which again the noble Lord, Lord Howarth, alluded to. This Bill will bring forward a statutory register of lobbyists, which will make it clear whom lobbyists are lobbying on behalf of when they meet Ministers. Noble Lords will have the opportunity to debate this Bill, which, subject to timetabling, will be before the House later this year.
The noble Lord, Lord Howarth, tabled an amendment in Committee which would have required the annual report on the IPO’s activities, which is to be introduced by Clause 20, to include information on approaches by third parties. In Committee, as Minister for Intellectual Property, I committed to publish proactively a list of all meetings between the chief executive of the IPO and external organisations. This demonstrates the Government’s very real commitment to transparency. I also remind the noble Lord that the IPO responds to requests made by Parliamentary Question and through the Freedom of Information Act. Since
Proactive publication of the level of information required by the amendment would be highly resource-intensive. It would mean the documentation of contact between external parties and some 1,000 IPO staff. In the previous financial year, the IPO received 41,150 applications for trade marks and 22,818 patent applications. Representations on these applications would be covered by the amendment. Such a system would therefore be a highly bureaucratic addition to many of the IPO’s statutory functions concerning the administration of IP rights and applications, which quite properly involve receiving many tens of thousands of representations from the public concerning their IP. The vast majority of such contact would be of no significance or interest to others. Furthermore, the amendment would require in some cases a duplication of the work already carried out in relation to transparency and under the draft lobbying Bill.
The Government’s approach therefore represents a proportionate response to legitimate concerns about the influence of external organisations on policy development. A balance needs to be struck between the need for transparency and the resources required to collect, maintain and, indeed, read through potentially large amounts of information. My points about the Government’s approach generally in this area, when taken with the additional reporting duty in Clause 20 and the further commitment I made in Grand Committee with respect to IPO meetings with external organisations, should, I believe, reassure noble Lords about just how much the Government are doing in this area. I therefore request that the noble Lord withdraw his amendment.
My Lords, I am grateful to the noble Viscount for his response, not least for the facts and figures that he gave us, which I will certainly look at carefully. I welcome the progress that has so far been made. In particular, I thank the noble Viscount for the decision he announced in Committee about the new responsibility of the chief executive of the IPO. However, as he says, there are a lot of meetings and a lot of opacity. I do not think it will be possible for the Government to hold their present line. Of course, I note and respect the Minister’s point that the procedure that I have suggested in the amendment might be excessively resource-intensive and costly. On the other hand, I take it that it is the practice of the IPO, as of the business department, to take minutes of its discussions and meetings. I am therefore not convinced that it would not be possible to produce some sort of streamlined version of those same minutes or that that material could not be adapted to be appropriately displayed on the website.
There will be much more debate about this whole issue of lobbying. We should wait and see what the new Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Bill eventually produces. I think it will emerge at the end of its parliamentary proceedings looking very different from the air that it has as it moves towards Second Reading. On that basis, I beg leave to withdraw the amendment.
Amendment 12 withdrawn.
Clause 20 : Reporting duty
Moved by Lord Clement-Jones
13: Clause 20, page 18, line 19, after “Kingdom,” insert—
“(iii) progress has been made in protecting metadata”
My Lords, briefly, this is a shameless attempt to publicise a success story from the Copyright Licensing Steering Group, the people who are bringing us the Copyright Hub. I take your Lordships back to the passage of the Enterprise and Regulatory Reform Act 2013, when a number of us argued for progress on metadata protection to be included in the Secretary of State’s annual report. On
“The Government are keenly aware of and sensitive to the concerns of creators in relation to metadata. They believe that an industry-led approach is most likely to identify the key issues and the most effective solutions. … The Intellectual Property Office will also be working with the Technology Strategy Board to consider other options to tackle the issues around the misuse of digital images as well as search and stripping of metadata. I hope that in the light of what I have said in my brief comments my noble friend can withdraw his amendment”.—[Hansard, 6/3/13; col. 1602.]
It is very gratifying to be able to report that a sub-group of the Copyright Licensing Steering Group has produced, with a very comprehensive range of people within the industry, a draft code of practice that aims to ensure that relevant licensing metadata is identified in a consistent manner and remains readily available for licensing purposes. It calls on creators of images—photographers, and so on—to make it easier for potential users to find them by ensuring that they include key information such as their name, the date of creation of the image and a contact address. For users of images, the code of practice recommends that they take all reasonable steps to check that licensing metadata is attached to an image before they use it.
I understand that the draft code of practice is currently out to consultation and the Copyright Licensing Steering Group is seeking views on whether it is pitched at the right level and whether having general principles rather than more detailed principles is the right way forward. The Copyright Hub itself is now using Getty Images technology to search and identify images. It looks as though the Copyright Hub will fulfil the hopes placed in it, together with this whole development of protection of metadata.
The irony is that metadata stripping is unlawful under Section 296ZG of the CDPA 1988. The problem until now has been the issue of policing and enforcement. It looks as though photographers will be able, through a combination of the code of practice and the fact that the Copyright Hub is coming into existence, to remedy the unlawful stripping of metadata. It is good to know that other aspects of the Copyright Hub are being developed; some of them involve metadata, others do not. In the case of music, that is in conjunction with the new Global Repertoire Database.
It is useful to reflect briefly that this has been an interesting year in terms of debating and discussing intellectual property so fundamentally, and that there is some good news out there. I beg to move.
My Lords, the noble Lord, Lord Clement-Jones, takes us back quite nostalgically to the days of the passage of the Enterprise and Regulatory Reform Bill. He is absolutely right to remind us of the importance of the metadata issue. It would be welcome if the annual report were to include a section describing such progress as may be being made on that important issue.
I will speak to Amendment 14, in my name. I very much welcome the commitment that the Minister has made in the Bill to the publication of an annual report. Policy on intellectual property is arcane and is vigorously contested among specialists and between special interests. It is very important—its effects are far-reaching—yet it is not well understood, either by Parliament or the public. I therefore hope that the annual report will be more ambitious than is suggested by the terms of the clause in the Bill. I want it to range rather more widely to help Parliament and the public better understand the major policy issues and the principles which animate the Government in taking their specific decisions and formulating their broader policy.
I take it that the role of government is to judge the balance of the public interest in relation to intellectual property between affording protection to creative individuals and enterprises, and opening new possibilities as early as possible to the wider public, consumers and other originators of ideas and knowledge, such as academics, designers and other creative people.
Of course we need to protect intellectual property in certain circumstances. It is essential to incentivise innovation. Often there is a strong public interest in that—but not invariably. It should not be axiomatic that we grant more and more intellectual property rights. Applications should be judged on their merits. The Intellectual Property Office and the Government should not be negative but should be sceptical about applications, and should all the time be ready to question the consensus. While it is desirable to achieve an alignment of international regimes, for example through agreements at European Union level, it is important not to rest on the achievement of those agreements. As the noble Viscount reminded us, consistency is not necessarily a virtue.
Intellectual property is a form of monopoly. It leads to some rigging of the market and restraint of trade—and rigged markets and restraint of trade carry with them inefficiencies and opportunity costs. Others are restrained from accessing or exploiting new knowledge as early as they might do. Price competition is postponed. The holders of intellectual property, being protected, may become complacent and less innovative. That would be an ironic outcome of a policy intended to promote innovation. The incumbent may try to use monopoly power to crush rivals and new challengers who dare to enter the field.
Historically there have been vast benefits when decisions have been taken not to patent new discoveries. Jonas Salk declined to patent his invention of the vaccine for polio—to vast human benefit. Sir Tim Berners-Lee thought it was wrong to patent the world wide web. While it will be many decades before we can begin to assess the benefits or otherwise of that decision, it certainly created large new freedoms.
In Committee, my noble friend Lord Stevenson and I used the historical metaphor of the enclosures movement. We agreed that we preferred intellectual commons to intellectual enclosures. As the House will know by now, my view is that intellectual property is a necessary evil and that we should keep it to a minimum—just enough but no more than is needed to incentivise. Yet the tendency of policy has been to lengthen protection, and Governments have been prone to brag about the number of patents that are held in the UK, as if it was a measure of success. It is a measure of inventiveness, but it is also an index of economic rigidities. The Government should not simply equate maximising the profits of intellectual property holders with the public good. The question must be asked: cui bono?
It is commonly preferable to enlarge opportunities for small and medium-sized enterprises rather than to buttress the monopoly strength of giant multinational corporations. If we want to generate more jobs, spread wealth, tackle the negative externalities of certain business practices and raise more taxes, it may be preferable to support SMEs as against corporate giants.
The methodology needed to establish the necessary minimum has to be pragmatic and based on an assessment of the benefits and disbenefits of protection in relation to the economy, social well-being, research and culture. There are different effects of intellectual property depending on different timescales, industrial sectors, amounts of market share and geographical scales, just as there are different effects between luxuries and necessities.
The Government’s vision should not just be of what is in the narrow interest of the United Kingdom. They should not take the view “my country right or wrong” in relation to intellectual property. We should not always reflexively back UK plc. As we move towards a world with a population of perhaps 10 billion people and with vast migrations, it will be enormously in the interests of the United Kingdom that the poorer peoples of the world should be able to make rapid progress in knowledge, education and the growth of their economies. Judgments about intellectual property policy need to be economically farsighted, humane, ethical and wise. They will be very difficult indeed to make in, for example, the burgeoning field of the life sciences and where bioethical issues are at stake. I very much welcome the judgment by the US Supreme Court in relation to Myriad Genetics. However, as the noble Lord reminded us in Committee, it poses a significant challenge to the European Union. The EU biotechnology patents directive may need to be reconsidered in the light of that American judgment. As we see the development of techniques of so-called human enhancement, such issues are likely to proliferate. I hope that, year by year, the annual report will offer discussion of these matters.
The Minister very understandably and rightly said in Grand Committee, at col. 53 of Hansard on
I conclude by noting that the noble Viscount, as Minister for intellectual property, has vastly important responsibilities which go beyond what is written into the clause as we have it now—that is,
“the promotion of innovation and of economic growth”.
The annual report ought to reflect those wider responsibilities and should be the basis of Parliament’s and the public’s continuing consideration of this policy area, which has such wide significance.
My Lords, I would like to pick up on the points made by the noble Lord, Lord Clement-Jones, about metadata. I endorse his feeling that good work is going on in this area in the Copyright Hub, which I think will bridge a gap between where everybody would like to be and where photographers think we are. I think that a number of steps still need to be taken on that but if the Government will keep a close eye on it and help where they can there is a reasonable expectation and hope that we will find something of lasting good coming out of that. As regards the amendment proposed by my noble friend Lord Howarth, he makes his point with great elegance. I look forward to hearing from the Minister.
“progress … made in protecting metadata”.
As I said in Committee, this report will have value to the extent that it addresses issues pertinent to the year in which it is published. While some issues such as innovation and growth are bound to endure, other issues may rise and fall in their topicality.
My noble friend Lord Clement-Jones talked about the work being carried out currently by the industry-led Copyright Licensing Steering Group to develop a voluntary code of practice on the handling of metadata. The Government support the voluntary approach being taken by industry to look at this problem, and we welcome the consultation that was published on
Amendment 14, tabled by the noble Lord, Lord Howarth of Newport, is intended to require the Government to report on how the activities of the IPO impact on the interests of wider society and the economy. The amendment returns us to the debate which we had during Grand Committee on the detail of what should be included in the Secretary of State’s annual report on innovation and growth. Indeed, the noble Lord tabled a similar amendment at that time. In Committee, I explained:
“I entirely agree with what I believe is the principle behind the noble Lord’s amendment, that the wider interests of society are important in the context of IP rights. I can assure the noble Lord that the report will indicate where other policy objectives have been taken into account, alongside economic considerations—for example, where, say, freedom of speech, public health, or international development considerations have taken priority over economic ones”.—[Official Report, 18/6/13; col. GC 51.]
However, as the noble Lord has returned to the issue today, I return to the Hargreaves review to which the report responds. The review stated that the IPO should focus,
“on its central task of ensuring that the UK’s IP system promotes innovation and growth through efficient, contestable markets”.
The intention of the report is to sharpen the focus of the IPO on this core objective. Broadening the scope of the report would reduce its effectiveness in clearly setting out what the IPO is doing to promote innovation and growth.
However, I reassure the noble Lord that the Government take very seriously the need to balance the protection of intellectual property with the promotion of the wider interests of society and the economy, both in the UK and throughout the world. I was delighted to see that international negotiators, including representatives from the IPO, came to an agreement last month on a new treaty to improve access to books for millions of people who are blind, visually impaired or print disabled.
Also last month, the World Trade Organisation Trade-Related Aspects of Intellectual Property Rights Council decided to extend the transition period for least developed countries to comply with the TRIPS agreement until
The noble Lord, Lord Howarth of Newport, said that the Government should not rest on the achievements of international agreements. The Government are determined to improve the global IP system so that it benefits the UK and the global economy. I reassure him that we are certainly not resting on our laurels. Whether it is reducing patent backlogs or agreeing transitional periods for least developed countries in TRIPS agreements, we take a global view and seek continuous improvement. In the light of this, I hope that the noble Lord will feel able to withdraw his amendment.
My Lords, I thank all noble Lords for their remarks during the course of the debate, particularly about the importance of the protection of metadata. I thank my noble friend in particular for his assurances that the first annual report will include a report on progress on metadata protection. The marvellous thing is that it will be a good news report in that respect. I beg leave to withdraw the amendment.
Amendment 13 withdrawn.
Amendment 14 not moved.
Moved by Lord Clement-Jones
15: After Clause 20, insert the following new Clause—
(1) A person (“A”) shall not, in relation to any goods or services, use any features of packaging, marking, labelling or decoration in such a way that the public is likely to attribute to A’s goods or services the reputation of another person (“B”) or the qualities or reputation of B’s goods or services.
(2) For the purposes of subsection (1) it is immaterial whether there is any similarity between the goods or services of A and those of B.
(3) Subsection (1) shall not apply to features of packaging, marking, labelling or decoration that are commonplace.”
My Lords, I return to an amendment on lookalikes which was first proposed by my noble friend Lord Jenkin in Grand Committee on
The Minister responded with a number of points on, first, the IPO study, the amendment itself, the Consumer Protection from Unfair Trading Regulations, the Which? report and TRIPS compliance. I will take each of his statements in turn and comment on them. First, the Minister said that the findings of the IPO study,
“were, perhaps surprisingly, fairly equivocal”.—[Official Report, 18/6/13; GC63.]
Having now studied the IPO study findings, I believe that they are unequivocal in key areas. The review of existing surveys concluded the following:
“It is clear across all these studies that consumers report making mistakes in what they have bought and in high numbers”.
“where the packaging is similar then it appears that more people think the own brand has a common origin with the manufacturer”.
The study also states that,
“as the similarity of packaging increases it becomes more likely that consumers will perceive the quality of products to be the same”.
The study’s own consumer surveys found:
“Increased perceived similarity of packaging to manufacturer brand product packaging of one own brand product relative to another is significantly correlated with higher perceptions (ratings/expectations) of price, quality, suitability for intended use and (marginally) value for money … Substantial proportions (50-60%) of the UK, German and US populations report having purchased a lookalike accidentally or mistakenly at least once or twice … In summary, across the three national samples 5-15% of accidental purchasers of lookalikes rated the purchases as having been of the highest level of disadvantage … to them, and 30-40% rated the purchases as having been of the next highest level of disadvantage”.
The study also concluded that,
“some lookalikes are already unlawful in the United Kingdom as they are contrary to the Consumer Protection from Unfair Trading Regulations 2008”.
Tellingly, it went on to say:
“However, certain lookalikes already being unlawful under the 2008 regulations is of little significance if trading standards (or others) do not have the resources to take action against those breaching the regulations”.
The Minister went on to say that,
“there is a fine line between confusing packaging and the use of ‘generic cues’ to signal to customers”.
Competitors may adopt a category cue—typically this is one design element. The Minister quoted green for mint toothpaste. Nevertheless, each product can be distinct from others carrying the same cue. There is a big difference, however, where competitors set out to mimic a range of features associated with a familiar brand in order to create a similar overall appearance. Where there are borderline cases, the courts should have no difficulty in drawing an appropriate line. They must do so, for example, when determining whether or not a product is a counterfeit.
Category cue arguments are often used to justify copying familiar brands. However it is one thing to say that green equals mint or yellow equals lemon, it is quite another to say that red equals cola or squat, dark bottles equal Marmite. The Minister went on to say that,
“a substantial majority of consumers had deliberately purchased a lookalike and, of those consumers, most of them found the experience to be advantageous. The research did not analyse why some consumers perceived the purchase to be advantageous”.—[ Official Report , 18/6/13; GC63-64.]
It should not be inferred from these findings that similar packaging is benign. A copy may be purchased deliberately, in the belief that it is comparable to the brand. This is what the copy intends to convey and the consumer may feel advantaged. However, the consumer would be misled were the copy not to share all the functional and emotional attributes normally associated with the brand. The IPO study demonstrates that similar packaging increases perceptions of quality and price. A consumer may feel advantaged, but actually may be paying more than would be the case were the product not free-riding and boosting its appeal artificially on the back of a brand.
The IPO study also demonstrates that similar packaging increases the belief that the product comes from the same manufacturer as the brand. The consumer may feel advantaged, but is actually misled when the product is not made by the brand owner. As the study states, crucially the research did not analyse why consumers perceived an advantage. It also makes a far-reaching and rather far-fetched assumption that shoppers have perfect information about the products on offer in supermarkets. This is clearly absurd. The finding therefore has little value in policy analysis.
It should also not be forgotten that some consumers believe that purchasing counterfeits is advantageous to them. Indeed, some buy them deliberately. The Minister went on:
“Although a high number of consumers felt disadvantaged by the accidental purchase of a lookalike, a substantial number saw it as an advantage”.—[Official Report, 18/6/13; col. GC63.]
Suggesting that because some consumers feel advantaged in some way balances those who feel disadvantaged is an unusual approach to policy. It is akin to suggesting that were rogue traders to satisfy at least 51% of their customers, their exploitation of the remainder should not be open to challenge.
The last comment made by the Minister on the study was that,
“only in a limited number of categories was there an association between, ‘a reduction in the sales of the brand leader and an increase in the sales of the lookalike’”. —[ Official Report , 18/6/13; col. GC64.]
I do not believe that that fairly and accurately represents the IPO study, which actually states in the data analysis that this effect was not proven. The brand owners believe this to be the case because the study used a limited number of products, inappropriate data and poor control products, and were unable to match the sales data to the packaging designs, and the effect of similar packaging could not be isolated from other influences such as advertising promotion, shelf display formulation and the many other factors that affect rates of sale. With similar packaging prompting mistaken purchase and creating false assumptions about the origin and quality of product, there must be a sales effect. Generally on the IPO study, to reiterate, there are significant findings in crucial areas that are conclusive such as shoppers buying the wrong product and making mistaken assumptions about the origin and quality of goods. These are underplayed when the study as a whole is presented as equivocal.
The Minister commented on the nature of the amendment put forward. He said that it would prohibit the use of packaging which tells consumers that a product has similar qualities to those of a competitor’s product even where it is true. The amendment, which is in exactly the same form as the amendment moved in Grand Committee, would prohibit only the use of similar packaging to indicate such similar qualities, including reputation.
Quality can be conveyed to consumers in many distinctive ways that would be unaffected by the amendment, such as unique label design, materials, imagery and printing techniques such as embossing and metal foils. If a competitor mimics the brand’s packaging to convey similar or identical qualities, it is not competing on its own merits, but free-riding on the brand’s hard-won reputation. The copy is essentially inferring that the product is similar in every respect. Under comparative advertising rules, such a claim would not be permitted as it is neither objective nor verifiable. Were such a message to be conveyed through words in an advertisement, the advertisement would be banned. Why should the principle differ when the product packaging is the medium, especially as such imagery conveys the false message far more powerfully? The comparative advertising rules, while applying to a wide range of marketing communications, regrettably do not apply to similar packaging. Furthermore, the comparative advertising rules were not considered in the IPO study.
On the second major point under this heading on the amendment, the Minister said:
“The law already provides for the protection of distinctive packaging … First, where packaging is distinctive, it may be registered as a trade mark”. —[Official Report, 18/6/13; col. GC63.]
While packaging may be registered as a trade mark, it would have to be well known to have protection against unfair competition. It is uncertain whether most packaging would be deemed well known, and certainly it would discriminate against small suppliers who were copied. Furthermore, protection by Cadbury, for example, for its purple colour, has been a hugely long and drawn-out process taking many years. In reality, copiers are able to design around registered trade marks while still conveying a similar overall impression. The Minister went on to say that there are,
“remedies under the common-law tort of ‘passing off’”.—[ Official Report , 18/6/13; col. GC64.]
As the interviews in the IPO study convey, a passing-off action is very difficult and expensive to bring in cases involving similar packaging. Often the pack clearly displays the producer’s name, reducing the likelihood of misrepresentation, and consumer confusion is extremely difficult to prove to a court’s satisfaction. Consumers tend not to complain about low-priced items. Evidence cannot be gathered in stores, and courts often dismiss survey evidence as unreliable. These factors explain why in 2006 the Gowers review commented:
“The review believes that passing off does not go far enough to protect many brands and designs from misappropriation”.
The Minister’s final point on the amendment was:
“Any proposal which changes the status quo should be considered with caution”.—[Official Report, 18/6/13; col. GC63.]
This amendment was first tabled in 2000 when my noble friend Lord McNally’s Copyright and Trade Marks Bill was presented to the House. There have been something like 13 years for careful consideration of the amendment. As the IPO study states in relation to the Gowers review:
“This response was criticised by some commentators for largely reflecting the same wait-and-see approach that had been taken when the Trade Marks Act 1994 had been adopted. Such criticism argued that wait-and-see had been used as a strategy for too long”.
That criticism was made in 2006.
Coming on to consumer protection through unfair trading regulations, the Minister said that civil powers to enforce were rejected at that time,
“because of the danger that such powers in relation to regulations with a very broad, principles-based application could lead to a great deal of costly and burdensome litigation before the courts”.—[ Official Report , 18/6/13; col. GC65.]
This statement appears to acknowledge that there is a significant problem in the UK with many potentially unlawful products on the market. The IPO study indicates that the Government’s fears are groundless. Other countries where civil powers to enforce have been granted to companies have not seen a wave of litigation. The Minister’s second point on the CPRs was that such actions,
“would also need to be based on consumer detriment”.—[
Report, 18/6/13; col. GC63.]
I do not believe that that is the case and it would amount to government gold-plating. There is no consumer detriment test under the CPRs. The IPO study verifies that consumers make mistaken purchases and are misled in significant numbers, with many considering themselves disadvantaged. I appreciate that the OFT and trading standards may wish to adopt a consumer detriment test to determine their enforcement priorities, but this would be less of a constraint on brand owners were they to have civil enforcement rights. The outcome would be higher levels of consumer protection at no cost to the taxpayer.
Penultimately, the Minister dealt with the Which? report by saying:
“The Which? survey of 2,244 of its members, conducted in February of this year, also found that of those who had mistakenly purchased the lookalike product, 38% were annoyed by the fact and 30% felt misled. However”— this was the Minister’s point—
“the survey also reported that 18% of participants had deliberately purchased an own-brand product because it resembled a branded product, some of them because it was cheaper than the branded product. Taken together, the Government consider that these measures grant a proportionate level of protection to the packaging of brand owners and that therefore the amendment is not necessary”.—[ Official Report , 18/6/13; col. GC65.]
This Which? finding should not be taken at face value—it refers to only 18%. A consumer may deliberately purchase a copy, but may still be misled over its source and/or its quality.
Finally, the Minister responded to the point on the TRIPS agreement and the Paris convention. He assured me,
“that the UK is fully compliant in its obligations under TRIPS and other international agreements.—[ Official Report , 18/6/13; col. GC65.]
In response to a Parliamentary Question in 2000 from my right honourable friend Norman Baker, the Government were unable to substantiate that the UK complies with its obligation to give nationals effective protection against unfair competition. This is a requirement under the Paris convention and TRIPS. In the same year, Christopher Morcom QC reviewed all the documents referred to in the answer, but could find nothing that was relevant to the UK’s compliance. In 2006, the Gowers review of the UK’s IP regime, undertaken at the behest of the Treasury, found that brands in the UK are not well protected from misappropriation. The review was accepted by the then Government.
Other than this reply, I am not aware of any substantiating evidence from the Government of the UK’s compliance, only assurances such as those that were given by the Minister on
I hope that, in the light of what I believe is a comprehensive rebuttal of the points made by the Minister in Grand Committee, the Government will reconsider their position on lookalikes and on this amendment. I beg to move.
My Lords, the noble Lord, Lord Clement-Jones, has gone through the case originally made in Committee together with the Minister’s response. He has done it in some detail, so I do not want to delay the House further by going forward. I should just like to pick up on two points.
It is certainly true that, as the noble Lord said, lookalikes are to a large extent already unlawful in the United Kingdom because they are contrary to a variety of measures introduced by previous Governments—in particular, the Consumer Protection from Unfair Trading Regulations 2008. The point that he made—and I think that it is important—is that these regulations are of little effect if the responsible authorities, such as trading standards, do not have the resources to take action against those breaching the regulations. Therefore, the point that the noble Lord makes, and I support it, is that we need a bit more detail from the Minister when he responds on whether it is true that trading standards are able to deliver on this point.
The noble Lord also mentioned that there was a fine line between confusing packaging on the one hand and the use of generic cues to signal to customers. This was something that the Minister gave us examples of when he spoke in Committee. However, the point here is that, if similar packaging prompts mistaken purchases and creates false assumptions, there must be a sales effect. If there is a sales effect, then it is surely right for the Government either to strengthen the existing powers so that they are effective or to introduce new legislation.
My Lords, the effect of the amendment put forward by my noble friend Lord Clement-Jones would be to protect the distinctiveness of product packaging. Noble Lords will be aware that the amendment reflects the one tabled by my noble friend Lord Jenkin in Committee, which was mentioned by my noble friend. I thank my noble friend Lord Clement-Jones for his detailed and eloquent introduction to the amendment. Indeed, his and other noble Lords’ contributions in Grand Committee caused me to reflect at some length in the interim. This reflection has reinforced my understanding that the Government are committed to protecting intellectual property.
Like my noble friend, the Government recognise the importance of brands. In recent years the Government have held two brands conferences and established the Brands Industry Forum—a vehicle for brand owners to discuss directly with the Government the policy issues that matter to them. The research on lookalike packaging, which I spoke about when we discussed this issue during Grand Committee, was commissioned by the Government in response to concerns raised by brand owners. This demonstrates that the Government are receptive to the needs of brand owners and willing to explore their concerns. However, we also have a duty to the public and wider economy. It is on this basis that the Government will be resisting the amendment. We consider that it would impact on competition and risk damaging future growth.
I now propose to set out the key issues in more detail. First, as I said during Committee, protection for brands already exists through the IP rights of trade marks and registered designs, and through the tort of passing off. A trade mark is a very powerful monopoly right—the most important identifying feature for any brand. It can last in perpetuity. The first ever trade mark registered in the UK, the Bass red triangle and motif, is still in use nearly 130 years later. If packaging is distinctive, it can be protected as a trade mark.
Secondly, registered design rights protect the appearance of a product if it is novel, has individual character and is not dictated by technical function, which I hope my noble friend agrees would be necessary elements of distinctive packaging. Thirdly, passing off protects one trader’s goods from being represented as those of another. An act of passing off requires existing good will in the goods, a misrepresentation causing confusion as to the origin of the goods and likely damage to the good will from this misrepresentation. These three aspects address the issues that lookalike packaging is suggested to cause, so it is logical that redress is sought through this existing mechanism.
Passing off is an effective remedy when a competitor’s packaging has strayed too close to an existing brand. An example is the Jif lemon case, where highly distinctive packaging in the form of a plastic lemon was found to indicate that specific brand of lemon juice to consumers. More subtle imitation resulted in passing off in United Biscuits v Asda. This case, which noble Lords may remember, concerned Puffin and Penguin biscuits. The High Court found that packaging depicting seabirds of similar physical appearance, and with names that were not very different, amounted to passing off. More recently, the threat of a passing off-action was used by Diageo to settle a dispute surrounding its Pimm’s brand.
I appreciate that securing the evidence for a passing-off action is not always a straightforward exercise—a point made by my noble friend Lord Clement-Jones. However, from the successful cases that I have cited, it is clear that it is possible to obtain redress. It is right, however, that the courts set a testing evidential burden because the remedy is so powerful. On this basis, I hope that my noble friend will agree that the answer cannot be to side-step this evidential burden by creating a new right that is less rigorous.
My second reservation is founded on the difficulty encountered in defining a lookalike product. Lookalikes are said to mimic the look and feel of the branded product on a wide range of features such as colour, shape, wording, logos, iconography and layout. The question is: how many features have to be present or how strong do they have to be to form a lookalike? This can often be a subjective judgment—something that brand owners admitted when speaking to the researchers who conducted the lookalike packaging research. One brand representative interviewed described identifying a lookalike as,
“an art and not a science”.
Another admitted that drawing the line between similar packaging and a lookalike was,
“very difficult, and very subjective”.
Furthermore, consumers surveyed for the research did not consider that any of the 12 products identified were a good example of a strong lookalike.
That illustrates the uncertainty inherent in the identification of lookalikes. Translating this into statute is likely to create a right that is unfocused and too widely drawn. The challenge has always been to find a remedy that is effective but also targeted, and I do not believe that the amendment would meet these requirements. It would create an ill-defined property right—neither a trade mark, copyright nor a registered design but appropriating elements of them all. The creation of such an all-encompassing right, if it were deemed to be desirable, would require extensive consultation with industry, given its potential impact. However, even without a consultation, it is a reasonable assumption that requiring businesses to add this opaque assessment to product development would lead to increased costs, deterring investment. The clear risk is that such a broad right would create anti-competitive monopolies for brands.
My final reservation concerns the currently available evidence surrounding lookalikes. It does not point to a clear course of action. Much research has been carried out but the economic impact of lookalikes remains unclear. There is some evidence of consumer benefit through increased innovation, greater choice and multiple price points, but balanced against this is a slight suggestion that brand owners may suffer lost sales, although the picture is mixed. Furthermore, while brand owners may incur increased research and development costs, they benefit from the resultant innovation. It is therefore difficult to conclude that lookalikes harm the economy.
I understand that some interpret this evidence differently and we welcome the discussion. However, we are clear that legislating as suggested is not justified given the evidence that we have seen to date. That the
Government cannot support the amendment should not be taken as an indication that we do not have a real and continued interest in the lookalikes question. This remains a complex issue and, in the absence of a definitive answer, it is right that the Government maintain the search for an appropriate policy response. My noble friend can be certain that we will continue to do so. As part of this search, the Government will maintain a dialogue with all interested parties. Indeed, my officials are due to meet the British Brands Group to discuss the issue following publication of the research.
My noble friend Lord Clement-Jones raised the issue that some of the IPO study is fairly unequivocal. Our view is that the findings of the report are equivocal when viewed as a whole. For example, the consumer research found that the lookalike effect is weak and that it varies substantially across product categories. My noble friend Lord Clement-Jones stated that there was no analysis of why people found picking up the lookalike copy to be advantageous. It is fair to say that the consumer surveys were not designed to pick up these points. That is recognised in the report, and the possibility of further work to explore the issue is raised.
My noble friend Lord Clement-Jones also raised the issue of comparative advertising rules and the point that the IPO had not considered applying it to lookalikes. The connection between comparative advertising and lookalikes is an interesting one, and I am happy to reflect further on any possible connection and afterwards to write to my noble friend.
My noble friend Lord Clement-Jones raised the issue of the Which? magazine findings, which should not be taken lightly. However, the Which? report is just one component of the evidence that exists in this area. As I said, the picture is far from complete and more evidence needs to be collected before we act. I hope that that is some reassurance to my noble friend. For the reasons that I have outlined, I fear that this amendment will cast too great a shadow, which is why I ask my noble friend to withdraw it.
My Lords, I thank my noble friend the Minister for a very careful and well crafted reply, which had resonance in a number of areas. I particularly appreciated him saying that he and his officials were committed to protecting IP, that the Government are very receptive to the interests of brand owners, and that he had a real interest in discussions with brand owners and in continuing that dialogue. That is very important. I do not think that we are going to get very far in debating equivocal versus unequivocal—that seems to be a tomahto versus tomayto-type debate—but it will no doubt continue nevertheless. That continuing discussion and dialogue is extremely important and the noble Lord, Lord Stevenson, put his finger on it when he said that it could well be that enforcement of the CPRs is absolutely at the root of this. They are not being enforced currently. It may well be that there are some equivalent remedies to the comparative advertising rules that the Minister mentioned and I very much hope that, whichever way it goes, that continuing dialogue bears fruit. In the mean time, I beg leave to withdraw the amendment.
Amendment 15 withdrawn.
Clause 21 : Recognition of foreign copyright works and performances
Moved by Viscount Younger of Leckie
16: Clause 21, page 20, line 17, leave out “the Berne” and insert “any Act of the International”
Amendment 16 agreed.
Moved by Lord Clement-Jones
17: After Clause 21, insert the following new Clause—
“Copyright in broadcast
Omit section 73 of the Copyright, Designs and Patents Act 1988 (reception and re-transmission of wireless broadcast by cable).”
“Given the interrelation between Section 73 and many other rules and regulations, it is key that this is looked at in the context of the wider framework”.
He said that the DCMS was essentially leading the work on this and that the department,
“will set out the next steps on this issue when it publishes its approach to digital connectivity, content and consumers, which is planned for publication before the end of July”.
I hope that the Minister can give us some news on that hot off the press but I am not totally optimistic. He also said:
“It is right and proper that any proposal will be consulted on with the relevant stakeholders and interested parties. This proposed amendment to the CDPA would pre-empt the Government’s approach to this area”.—[Official Report, 18/6/13; col. GC 94.]
I set out, fairly comprehensively, the reasons why it was not right to retain Section 73 of the CDPA, largely because of the outcome of the case involving an app that is retransmitting ITV and other commercial—
I wonder whether the noble Lord will give way. He has spoken eloquently and diligently in Committee and now on Report on this matter, as he did on the previous amendment. I wonder whether he could give the House and me some reassurance as to whether there is any link between any of these subjects and the interest that he has declared in the register.
My Lords, there is no connection at all. I am very surprised, quite honestly, that the noble Lord is asking that question, since I have spoken on this issue both in Committee and today.
I was not raising it as a question of obligation or, indeed, challenging what he has properly declared in the register. All I was seeking to ascertain was whether any of the many clients of DLA Piper—personal or otherwise—have interests in these matters. I wonder whether he could clarify that.
My Lords, DLA Piper has something like 80,000 clients. I am sure that some of them have interests in virtually everything that passes through this House on a daily basis. However, that does not require a partner in a law firm, like me, to make a declaration or, indeed, to state who their clients are. Otherwise, I would take up even more of the House’s time than I already am. Perhaps I could continue.
The current regulatory regime governing the relationship between PSB channels and TV platforms rests on three assumptions: that some of the analogue terrestrial value enjoyed by the PSBs should be used to encourage platform competition in the UK; that platforms effectively offer audiences to commercial PSBs to sell to advertisers; and that platforms do not inhibit the ability of commercial PSBs to exploit content, originally delivered free to air, in secondary markets.
The first assumption no longer holds—there is no analogue spectrum and there is a highly successful and well resourced pay-TV platform in the UK. Increasingly, however, the second and third assumptions are also in jeopardy, in particular as a result of the rise of subscription-based, high-capacity personal video recorders. PVRs are now in the vast majority of Sky and Virgin households and are key to both platforms’ proposition to consumers. PVRs are rented or sold by the main pay-TV platforms to their subscribers as added-value services and enable pay-TV platform customers to record and keep copies of very significant amounts of commercial PSB content. They also allow viewers to skip the advertising in such content, as they are doing in increasing volumes, particularly in genres such as drama.
For example, the Sky+HD 2TB box is now capable of recording the entire ITV peak-time schedule for 11 months of the year, and storage space is expanding exponentially. The concern is not about PVRs per se—they are a great enhancement to consumer choice—but rather the fact that the regulatory regime now allows platform operators to extract further value from PSB content, which is supplied either for free or, worse still, following payment to the platform operator in the first place. The PSBs are not able to capture any of this value by renegotiating the original terms of supply to the platform, as a result of the following components of the current regulatory regime: Section 73, which this amendment attempts to deal with; the Ofcom-regulated technical platform services regime, under which PSBs have to provide content for free and have to pay several million pounds to a platform operator for the technical platform services that enable viewers to receive the PSB channels; and thirdly, the time-shifting exception to copyright that allows customers to record and keep TV content. Around 10% of all viewing is now time-shifted, which is nearly five times greater than the highest level of time-shifting in the VCR era. PSB content is the most time-shifted—drama in particular, where levels of time-shifting and advertising-skipping are far higher.
I want to deal with some of the arguments made in Committee. The first is that repealing Section 73 would unbalance a delicate equilibrium in the UK broadcasting market. The market is evolving very rapidly as technology changes and convergence continues. In no sense is the UK market in equilibrium, whether technologically or economically. The second argument is that Section 73 ensures that consumers who have already paid for PSB content through the licence fee or indirect taxation can access this content through a cable platform at no additional cost. This is not the case for ITV, Five and, arguably, Channel 4. These are commercial channels with no government funding. The third argument is that Section 73 continues to provide cable subscribers with access to the PSB channels without their having to pay twice. Cable subscribers would not have to pay twice for ITV and Channel 4. As I have described, they do not have to pay even once at the moment. Watching advertisements is really the way that they pay, and that is being undermined by subscription.
A further argument is that the broader channel-platform relationship should be on a level playing field —that is, zero fees either way. Rather than repealing Section 73, a clause should be drafted to ensure zero fees either way. This surely would not be the right outcome. If platforms increasingly enable consumers to skip advertisements, extracting more value from channels and reducing the size of the secondary market for programme rights via subscription PVRs, such as Virgin’s TiVo and Sky+, it will become impossible for the free-to-air channels to sustain investment in high-value content such as drama.
The penultimate argument is that repealing Section 73 would be contrary to the interests of 4 million cable customers who access PSB content, at no cost to those broadcasters, through cable platforms. There is an increasing cost to broadcasters as the TV market continues to evolve. Subscription PVRs generate content for platforms and extract increasing value from FTA content, reducing the opportunity for PSB channels in secondary content markets.
The final argument is that the Government believe that Section 73, properly interpreted, is consistent with EU law. In that case, the UK Government are substituting what they think is the proper interpretation of Section 73 for that of the UK High Court. It was the UK court’s interpretation of Section 73 that the European Commission suggested was in breach of the UK’s obligation under the 2001 copyright directive. Therefore, I am unclear what the words “proper interpretation” might mean. The fact is that the European Court of Justice did not comment on compatibility in its recent judgment because the UK court did not agree to the request by the broadcasters to refer the question to the European Court of Justice in the first place.
We discussed these arguments in Committee, and those are some of the points of rebuttal to the arguments made. I am not sure that we had a particularly enlightened debate last time. I hope very much that the Minister will be able to respond with greater particularity. In addition, I very much hope that he can give some reassurance that this issue is being seriously addressed and will be dealt with when the expected White Paper sees the light of day. I beg to move.
My Lords, despite the points made by the noble Lord, Lord Clement-Jones, Section 73 of the CDPA 1988 is but one component of a complex web of regulations that provides equilibrium in the UK broadcasting market. It is true that Section 73 is relatively old, created when the cable industry was in its infancy. It is also true that the cable industry is in a different position now. I certainly acknowledge that the catch-up TV case referred to by the noble Lord, Lord Clement-Jones, raises legitimate concerns about the use of Section 73 as a defence for the retransmission of free-to-air channels online.
However, the point surely is that this amendment points out the need to look again at the objective of Section 73 and to ask whether the outcomes it delivers today are still relevant to the Government's public policy objectives. I understand that the Government are currently looking at how Section 73 might be amended and tightened to ensure that the beneficiaries of the clause are the intended platforms that are acting within the law. Perhaps when he responds, the Minister will let us know what progress is being made in that review and indeed, as has been mentioned, what progress is being made on the communications White Paper, which has been promised on a regular basis since 2010.
While the recent catch-up TV case may require an adjustment to the current law, abolishing the clause entirely, as the noble Lord, Lord Clement-Jones, proposes, seems entirely contrary to the interests of 4 million cable customers who access public service content, at no cost to those broadcasters, through the cable platform. The right thing to do is to ensure that this issue will be considered in some detail when the Government eventually publish their communications White Paper. In these circumstances, the amendment proposed by the noble Lord, Lord Clement-Jones, seems somewhat previous, as well as being contrary to consumer interests. I hope that the Government will resist this amendment.
My Lords, I note the continuing interest that my noble friend Lord Clement-Jones shows in this area. The legislative framework that supports our vibrant and successful TV industry is incredibly important and is deserving of our time and attention. This amendment would repeal Section 73 of the Copyright, Designs and Patents Act 1988. This would remove the copyright exemption for the retransmission by cable of certain public service broadcasts, or PSBs. This issue will be addressed shortly when the Department for Culture, Media and Sport sets out its approach to digital connectivity, content and consumers. I reassure my noble friend that we still anticipate publication of the strategy paper by the end of this month.
This is an area where many competing interests must be balanced. As such, it is of vital importance that the Government proceed carefully, giving each of the opposing views due consideration. I can assure my noble friend that it will be consulted on fully to ensure that the views of all those affected are taken into account. I hope that I might be able to help the development of this debate by setting out some of the key points of discussion and their relationship to key pieces of legislation, including Section 73.
Discussions about Section 73 tend to focus on two key areas. First, they are concerned with the impact on the relationship between PSBs and cable platforms. Secondly, they relate to the use of the Section 73 exemption by internet-based television streaming services. I will look at each of these areas in turn.
This piece of legislation affects the relationship between PSBs and cable platforms by providing cable platforms with an exemption for the retransmission of certain PSBs. This means that PSBs are not able to charge cable services for the inclusion of certain channels on their services. However, this piece of legislation fits within a much wider framework that supports the availability of TV and investment in television programming in the UK. This framework consists of a variety of rules and regulations that affect the production, availability and ease of discovery of public sector programming and its relationship with the services or platforms that carry it. These include the obligations on PSBs to offer their content to all relevant platforms, the rules governing payments by broadcasters for technical platform services, and the powers for regulators to compel these services to carry PSB content.
The Government have been clear that their objective is to ensure that, for the core PSB channels, there is an overall zero balance of payments between the PSBs and the services or platforms, regardless of whether these are based on cable or satellite. This is a fair and pragmatic approach that ensures the wide availability of PSB content and allows PSBs to continue their high level of investment in high-quality UK content. The current framework, including Section 73, is delivering this outcome for TV delivered by cable, and we want to see this continue. However, there is still a way to go before we see net zero fees on satellite, and we want to investigate how net zero fees can be achieved across the main platforms. Therefore, it is right and proper that any proposal will be consulted on with the relevant stakeholders and interested parties.
The second issue at stake is the use of the Section 73 exemption by internet-based television streaming services. This issue is the subject of ongoing legal proceedings and, as such, it is not appropriate for me to comment on the specifics. However, I can say that the Government are concerned about the use of this exemption in this way, and will address it when we set out our approach to connectivity, content and consumers by the end of this month. This proposed amendment to the CDPA would pre-empt the Government’s approach to this area. A complex framework governs the balance of payments between platforms and broadcasters, so we need to consider any changes in the round or risk unintended consequences.
In view of the fact that the Government are actively looking at this matter, I would be grateful if my noble friend would withdraw the amendment. Just before I sit down, I will answer a question raised by my noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson, about when the communications paper will be published. To reiterate, the Government still anticipate that this will be published by the end of July.
To clarify for the noble Lord, it is indeed the strategy paper, which is due to be published by the end of July.
My Lords, I thank the Minister for that response. We have elicited a very useful heralding of the communications White Paper, which the Minister has carefully labelled a strategy paper, so perhaps we are being invited not to expect too much detail. That will be very welcome, since it has been anticipated for quite some time.
The Minister has been very helpful in responding. Clearly, I believe that the discussion about Section 73 is part of an ongoing discussion, which will no doubt take place when the White Paper is consulted on and any Bill comes forward. The Minister talked about the objective to have a zero balance of payments. While that is very helpful in clarification, it is not particularly welcome to the PSBs. The DCMS can expect some argument about that, since the PSBs believe that that means they are at a disadvantage when it comes to the use of their programmes and people inserting advertisements in them for their own benefit and not for the benefit of the public service broadcasters.
I welcome the Minister’s point about the exemption being used by internet-based companies and so on. Again, that tilts the other way in terms of helpfulness. The debate will carry on, I am sure, but this has been a useful canter round the course in anticipation of the White Paper. I beg leave to withdraw the amendment.
Amendment 17 withdrawn.
Moved by Lord Clement-Jones
18: After Clause 21, insert the following new Clause—
(1) The Copyright, Designs and Patents Act 1988 is amended as follows.
(2) In section 107(4A)(b) (criminal liability for making or dealing with infringing articles, etc) for “two” substitute “ten”.
(3) In section 198(5A)(b) (criminal liability for making, dealing with or using illicit recordings) for “two” substitute “ten”.”
Criminal offences for online copyright theft have maximum penalties of two years’ imprisonment. Criminal offences for physical copyright theft have maximum penalties of 10 years’ imprisonment. This discrepancy came about because the new offences were introduced by secondary legislation using the European Communities Act as part of the UK’s implementation of the copyright directive in 2003. Penalties for new criminal offences introduced by secondary legislation via the ECA are limited to two years’ imprisonment.
In addition, my right honourable friend Vince Cable’s Private Member’s Bill, which became the Copyright, etc. and Trade Marks (Offences and Enforcement) Act 2002, increased penalties for criminal copyright offences to harmonise them with those available for trade mark offences at 10 years.
Criminal sanctions should not be dependent on whether the offence is taking place in an online or physical environment. Intellectual property is being stolen, whichever format is being used. This amendment is essentially about addressing an anomaly that arose simply because of timing. These are exactly the same offences—they are just being committed online—and therefore should have the same maximum penalties.
Having a maximum penalty of only two years for online offences can be used by defendants to argue that these are not serious offences. Prosecutors have on occasion managed to work around this anomaly by using charges of conspiracy to defraud but it will certainly not always be appropriate to use fraud legislation. The circumstances of the Vickerman case—which we discussed in Committee; he got four years in prison—will not always be repeated. In other cases there may not be a conspiracy or the Fraud Act may not be applicable. Some cases are copyright cases pure and simple but we cannot currently risk using the CDPA in serious cases because of the reasons given above.
In his response in Grand Committee, the Minister said:
“With existing legislation already providing the necessary penalties and prosecutors having a range of options already at their disposal, at the present time I see no reason to increase sanctions under the Copyright, Designs and Patents Act, despite there being a slight discrepancy”—
I would have thought that eight years was rather more than a slight discrepancy. He went on to say:
“In particular, changes should not be made without carrying out the appropriate consultation to gather evidence of the impact”.—[Official Report, 18/6/13; col. GC 98.]
Existing legislation does not provide the necessary penalties. Rather, they are different. Why would it be necessary to consult in these circumstances? I remind the Minister of comments made by my right honourable friend Vince Cable when he was steering his Private Member’s Bill through Parliament. He said:
“There is no logical reason for two sets of intellectual property law to impose different criminal sanctions … it is important that we have legislation that makes criminal sanctions effective deterrents … There are some who have argued that we do not need to change the law because it is possible to find some existing power under which sanctions can be imposed. That is an unsatisfactory way to proceed. The approach is cumbersome and costly, and often it does not work. There is an enormous inherent advantage in having a law that is clear, open and completely honest in what it is designed to achieve”.—[Hansard, Commons, 23/11/01; cols. 628-30.]
All these points are apposite today as regards physical versus digital online copyright infringement. I hope that the Minister will reconsider his position on that amendment.
On Amendment 19, in responding to the Hargreaves review, the Government committed to introducing a limited private copy exception to allow copying of content lawfully owned by an individual for their own personal use. The Intellectual Property Office has recently issued the draft private copy statutory instrument, which can be summarised as follows. First, an individual who has lawfully acquired a work on a permanent basis can make a private copy for his or her own personal, non-commercial use. Secondly, the individual cannot circumvent technological protection measures but—interestingly—will be able to appeal to the Secretary of State to intervene to obtain a private copy if the work is protected by technological protection measures. Thirdly, it does not allow contract terms to override the exception.
Amendment 19 inserts a new clause in anticipation of this draft statutory instrument. The draft SI has provoked considerable concern among the audiovisual sector—indeed, across all the creative industries. I strongly believe that copyright exceptions should be adopted only in response to a well defined public policy objective and market failure. In this regard, the Government’s draft statutory instrument disregards altogether consumers’ ever-widening choice of commercial offerings facilitated by a rapidly evolving technological landscape, and risks jeopardising these market-led developments altogether. The purpose of this amendment is to ensure that a private copy exception should not apply where a commercially available alternative already exists. This principle is entirely consistent with European and international copyright norms and, indeed, is an existing principle in UK law.
Historically, private copy exceptions were established in an analogue environment where business models and technology could not accommodate consumer offerings that provide secure copies. With the rapid conversion to digital business models in recent years, the technological and therefore the commercial landscape has changed considerably. The audiovisual sector has recognised the growing consumer demand for additional copies and portable content, and already provides many avenues for consumers to obtain legal digital copies of content they buy for their own use. Most commonly, the purchase of a DVD or Blu-ray Disc includes access to a digital copy. In addition, products such as UltraViolet allow legal and secure access to that content through the cloud among six family members for up to 12 personal devices such as laptops, tablets, smart phones and televisions, thereby enabling format shifting. Additional multicopy offerings are being brought to the market, and none requires the consumer to pay twice for the same content. At the same time, an explosion of new digital audiovisual services—currently there are more than 30 in the UK—has occurred under the existing legal framework. There are an increasing variety of means which put increased choice and control in the hands of the consumer, and are made possible only through industry-led investment and innovation.
The UK already leads Europe in its range of audiovisual services and technologies, without any change being required to the current legal framework. In proposing the introduction of any copyright exception in the absence of a clear public interest, surely the burden of proof should rest firmly with the Government to define and quantify the extent of the market’s failure to meet consumer needs. It is very questionable whether the Government have made a convincing argument in support of a private copying exception. Indeed, far from incentivising the market to continue innovating in the interest of the consumer, it may be that the private copy exception proposed will fundamentally undermine the technologies and services that the market is developing.
There are numerous other concerns expressed about the draft copying statutory instrument, not least its apparent conflict on a number of points with EU law. It needs to be strengthened to ensure that the exception applies only for the sole personal use of an individual and not to be used by commercial operators. It should not authorise the making of a further copy by another person or entity, such as an electronic storage provider, in relation to a further copy. Without such clarification, the exception could seriously impact on the ability of the music industry to license innovative value-added services, such as “scan and match” services in the cloud.
Given the widespread concerns about the latest wording of the exception, I hope the Minister can assure us that a further draft will be presented before the formal publication of the SI. I had a letter today from the Minister saying that the SI may be tabled later on in the year but that it is not intended to bring it into force until 2014. So there is no rush; there is ample time for another draft before proceeding with implementation. However the purpose of the present amendment is to ensure that, where private copying is permitted under the terms of the original product purchase, the exception is not invocable. There is no doubt in my mind that the absence of any commercial availability test when applying a private copying exception would be incredibly damaging for the health of our audiovisual sector. I beg to move.
My Lords, this group is in two quite separate halves. Amendment 18—to which the noble Lord, Lord Clement-Jones, spoke first —is the continuation of a debate that was held in Committee. It will be interesting to hear how the Minister wishes to respond to it. There is a good case here for trying to unpick some of the discrepancies between the various regimes, and in particular to try to anticipate the way in which technology is moving forward.
In Amendment 19, which has been linked in this group, we are hearing a different debate, which is about the Hargreaves exceptions which are currently in consultation. As the noble Lord obviously anticipated, some changes may well occur as that debate goes forward. However, I do not think that it fits well into this Bill and confidently expect the Minister to say that it is a matter for another time. The question, of course, is when.
At the conclusion of the Committee stage the Minister offered—and we gratefully accepted his invitation—to have a broader-based debate around the sort of issues that the noble Lord, Lord Clement-Jones, has been raising. We felt that the recourse to secondary legislation for this important issue in itself makes it difficult for the House to exercise a broader view on these matters. In particular, as there are so many of these exceptions, there is a need for what might be considered a more general debate around the overall balance and overall approach which the Government could have taken in this matter. The noble Lord made that offer and we look forward to hearing whether he has had any success in finding time for that debate. It would be helpful, for exactly the reasons that the noble Lord,
Lord Clement-Jones, has given, to have a broader-based discussion around some of the more far-reaching ends of these 11 different exceptions so that when the time comes for both Houses of Parliament to consider these matters—as they will in the secondary legislation process—we are better informed and can make better decisions about how to respond to them. I look forward to hearing the Minister’s response.
My Lords, Amendment 18, tabled by my noble friend, Lord Clement-Jones, would increase the maximum penalty for online copyright infringement to 10 years. Under the Copyright, Designs and Patents Act—CDPA—the current maximum penalty that can be incurred by online copyright infringement is two years, while for physical copyright infringement, the maximum penalty available is 10 years. This is not a new proposition. A similar recommendation was made by Andrew Gowers in the report he wrote for the previous Government. At the publication of the Gowers report, the previous Government indicated their intention to implement all of its recommendations. However, after a consultation, they decided to increase the financial penalties to £50,000 but left the maximum custodial sentence untouched. I am sure that they did not reach their conclusions on this matter lightly.
This issue is sometimes presented as if there is a gap in the fabric of criminal offences which apply in this area, and that this change will plug that gap. I am not entirely convinced. The statute in question is not the only way in which criminals can be charged for copyright infringement. There is already a range of options for prosecutors looking to obtain a conviction for such activities. Many of these require a lower evidential burden than copyright offences, require less specialist knowledge and offer the sort of sentencing options which my noble friend seeks to add to this offence. Indeed, I am told that prosecutors would usually prefer to charge under the Fraud Act 2006, which carries a maximum penalty of 10 years, or use “conspiracy to defraud”, which also carries a penalty of 10 years. The Fraud Act in particular seems to have met the challenges posed by developments in technology and internet crime, helping industry to report crime as fraud, and has garnered praised from the City of London Police, among others.
There is another issue here of sentence length, by which I mean convictions and sentences actually handed down, rather than those that are theoretically available. The average custodial sentence given for physical copyright infringement under CDPA offences in 2011 was 12.7 months, the highest for five years. So the questions that occur to me are these: is this a necessary change? Is it a useful change to make? I would like to reflect on this matter further, and perhaps have the benefit of views from experts and practitioners in the field. I therefore ask my noble friend if he would be prepared to withdraw his amendment in return for an assurance that I will set in hand a study of this question, the timing of which I will confirm following the Summer Recess. If there is a need for a change to the law then I will, of course, look for a suitable legislative opportunity.
I turn now to the private copying exception, to which Amendment 19 relates. This is a measure that the Government are preparing to introduce under secondary legislation, separate to this Bill, as the noble Lord, Lord Stevenson, pointed out. I remind noble Lords of the lengthy Committee discussions which have already been held on copyright exceptions, and of the detailed information already provided to this House on the Government’s ongoing technical review process. Noble Lords will recall my invitation for contributions to that process from all interested parties. I am very grateful for the contributions we have received to this review process so far. I also remain committed to having further debate on these issues prior to the draft regulations being laid before Parliament. The noble Lord, Lord Stevenson, asked when the exceptions debates might take place and about the timing. I believe that we agreed that the timing would need to be agreed through the usual channels. I would like to await the results of these discussions first before I commit to a particular time.
In light of all this—and I am sorry to strike a rather discordant note—I will admit that I am surprised, and slightly disappointed, to see that my noble friend Lord Clement-Jones has chosen to lay this amendment on private copying, on Report, on one of the proposed changes to copyright exceptions. It is rather late in the day for an amendment that would add a new clause to the IP Bill, and appears to ignore the many opportunities there have been to debate the private copying exception. However, I will endeavour to provide my noble friend with some reassurance in the interim.
By introducing a copyright exception for private copying, it is the Government’s aim to give consumers greater certainty over what they can do with products they have bought. It will not allow people to bypass commercial markets to acquire products for free. Instead it sets out basic rules on how people can use copies that they have already purchased lawfully. The new law will allow people to make further copies for their own personal use but will not allow them to give any such copies to other people. To that extent, the new exception will be very narrow—the narrowest in Europe. It will only grant very basic permissions that are necessary to allow reasonable consumer use.
Consumers in other common law countries, such as Australia and Canada, already benefit from similar laws, as do consumers in most of Europe. In many ways, we are only playing catch-up by giving British consumers some of the advantages people already enjoy in many countries around the world. The proliferation of licences online has created even greater confusion for consumers. Consumers deserve basic rights, set out in law, to use the things they have bought without having to deal with multiple and complex licences. The approach set out in this amendment, which foresees a greater role for licences, risks undermining that principle. The Government’s view is that this narrow private copying exception will, first, make life easier and simpler for ordinary people; secondly, remove unnecessary regulation from businesses; and thirdly, help our copyright law catch up with the rest of the world.
My noble friend Lord Clement-Jones asked why consultation would be necessary. It is important that the Government take a proper look at what the impact of increased sanctions would be. An increase in prison sentences of eight years is a serious one and the decision needs to be given the appropriate level of consideration and be based on the right evidence. Making changes such as those in the first amendment without first assessing their impact can often lead to a complex and confusing statute book that is unable to respond to new crimes as technology and techniques advance. In view of that, I ask my noble friend to withdraw his amendment.
My Lords, I thank the Minister for his two replies, which were rather different in their tenor. I very much welcome some of the points he made in his reply to Amendment 18. While not necessarily agreeing that it is inappropriate to change the penalties available for online infringement, the Minister said he would reflect further, set in train a review and consult with experts on this subject. That gives us a chink of light. He said that he would advise later on the timing of that review. At this stage, with noble Lords gathering for the next debate, that is as good as it gets.
Amendment 19 should be treated as a preliminary canter. I very much hope that there will be a more extended debate on this. This is the problem with secondary legislation: we may be faced with a debate simply when the order comes and we will not be able to amend it in any shape or form. The Minister should know that there is very deep disquiet about the private copying exception among various members of the creative industries. I hope that he will keep channels open to them because there is basically a fundamental difference of opinion here. Some members of those creative industries believe that their interests are threatened by the private property exception as proposed. They believe it is not narrow but actually quite broad and not explicit about the cloud. They have considerable interest in further discussion.
I hope that the Minister will keep all his channels open in that respect—on the exceptions as a whole but on the private property exception in particular. In the mean time, I beg leave to withdraw the amendment.
Amendment 18 withdrawn.
Amendments 19 to 21 not moved.