We were discussing clause 10 and the issue of employee compensation. The right hon. Member for North-East Hampshire (Mr. Arbuthnot) queried the need for provision for employee compensation and asked why it is limited to patented inventions.

Existing law on employee compensation has its basis in the Banks report of 1970, which came to the conclusion that to create more successful UK businesses provision should be made to encourage and motivate employees to be more innovative. Provisions in the Patents Act 1977 were decided by Parliament following a long period of discussion and consultation involving, among others, trade unions and employers' representatives.

If the employee compensation provisions were not limited to an invention that has been patented, we would expect many disagreements about when compensation might arise. It is clear what a patented invention is, as the scope of the invention must be clearly defined in the patent claims. What constituted a non-patented invention would, by contrast, not be clear.

We would not want to stand in the way of any employer who sets up a scheme for rewarding employees for any contributions in the workplace, however measured. However, it is not the place of patents law to cover what approach should be taken for inventions that are not patented, or for any other contributions in the workplace. In any event, the practical effect of the current provision has been to encourage businesses to put in place broadly based reward schemes for their employees.