New Clause 1 - Compulsory binding technical arbitration for new and existing patents

Part of Patents Bill – in a Public Bill Committee at 3:00 pm on 15th June 2004.

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Photo of Malcolm Bruce Malcolm Bruce Shadow Secretary of State for Business, Innovation and Skills, Shadow Secretary of State for Trade and Industry 3:00 pm, 15th June 2004

I take this opportunity to contribute, although my hon. Friend the Member for Weston-super-Mare has been leading the debate very well and will join the Committee a little later.

The clause is important because it focuses on the problems of small businesses and the costs associated with acquiring patents. General representations that I have received suggest that, as it stands, the Bill does not address the concerns of business. Many businesses have said to me that the theory that one can get a patent is limited in practice because the cost is prohibitive. For small inventors, a patent is of limited value. The biggest hurdle is the cost of the patent and the litigation associated with it.

The Patent Office says that only 20 patent infringement cases are brought in the UK each year, but representations that I have received suggest that that may be because small businesses are too scared to enforce their patent rights and of the costs associated with them. We should protect small firms. They are often the most inventive and creative ones, and we should be encouraging them to believe that when they come up with an invention, their rights will be properly protected.

In October 2001, the chief executive of the Small Business Service, David Irwin, commented, when speaking to the European Forum:

''Since the second world war 95 per cent. of all the radical new inventions came from businesses employing less than five people.''

That is an interesting statistic. If it is true—I doubt whether things have changed radically in less than three years—it justifies asking the Government to include something about the concerns of small businesses.

Under the current system, legal bills of between £800,000 and £1 million are not uncommon for a patent holder attempting to protect their invention. In February, under the heading, ''Inventors up in Arms'', The Daily Telegraph reported:

''Patent enforcers say new law fails to give enough protection.''

For a business employing fewer than five people, a cost of £750,000 to £1 million is completely out of its range and means that it cannot enforce its patent rights even if it can register them.

Mandy Haberman invented the Anywayup children's cup, which is very prominent in my household and is still consistently better than all imitations that attempt to undermine her patent. Perhaps good design has ultimately triumphed more than the patent. She said:

''It is not uncommon for combined costs in similar litigations to amount to between £750,000 and £lm. My insurance cover was woefully inadequate, enough to pay for the first few meetings with a solicitor and a cup of tea.''

That is a good example of the problems encountered.

The patent county court was established in 1988 to provide a cheaper and more user-friendly legal recourse—something similar to the small claims court—specifically for small businesses to defend their patents. The worry is that that court does not meet their needs. In a case brought last year—Warheit v. Olympia Tools—the Court of Appeal expressed the view that the costs incurred in the patents county court

and at appeal were excessive. In one case, brought before the patents county court in November 2003 and involving a short, easily comprehensible patent that dealt with comparatively simple chemistry, the total costs incurred by the parties up to and including the last day of the trial exceeded £850,000. Of that, the claimant's costs were more than £500,000. It is therefore far from certain that the patents county court provides the cheaper and more accessible route to justice that small businesses wishing to enforce their patents are supposed to have.

The Patents Reform Group suggested that the Government could be in breach of article 41 of TRIPS, the agreement on trade-related aspects of intellectual property rights. The article deals with the enforcement of intellectual property rights, and article 41.2 specifically states:

''Procedures concerning the enforcement of intellectual property rights shall be fair and equitable. They shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays.''

We contend that small firms need further assistance to enable them to enforce their intellectual property rights. The Government will argue that clause 13 will allow an opinion to be issued on request on certain matters that might be relevant to a patent dispute. That system will allow a patent holder to bring arguments before the Patent Office, rather than the courts. The idea is that that will obviate the need for costly litigation in settling an infringement dispute between companies.

The concern expressed by many companies is that the Government's proposals have no teeth. Richard Kempner, head of intellectual property at the law firm Addleshaw Goddard, says that many small firms think of intellectual property as a luxury that they cannot afford. He says that part of the problem is that

''those that do have intellectual property rights are unable to enforce them properly simply because of litigation costs.''

There is a catalogue of problems to do with cost. He goes on to say that non-binding opinions—what the Government are proposing—are

''a particularly futile and useless development'' and that the Bill does not address the fundamental issues. It is important that they be addressed, and that is not my opinion, but the view of people who deal with such problems daily.

Our new clause asks the Government to consider a system of compulsory technical and binding arbitration, which has been suggested by the Patent Reform Group and other patent experts. The idea is that a team of independent experts with knowledge in a particular area would use that expertise to resolve the patent dispute. There are a number of cases in which judges have extremely difficult technical matters in front of them, but is it reasonable to expect any judge to be an expert in biotechnology, software, electronics, pharmaceuticals, engineering or a variety of other specialist areas that often arise in disputes? The contention is that it would be better to use a team of outside experts to make judgments on the basis of their expert knowledge.