Clause 13 - Opinions by Patent Office as to validity or infringement

Patents Bill – in a Public Bill Committee at 2:30 pm on 15th June 2004.

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Photo of James Arbuthnot James Arbuthnot Shadow Secretary of State (Trade and Industry) 2:30 pm, 15th June 2004

I beg to move amendment No. 6, in clause 13, page 8, line 1, leave out from 'below' to end of line 3 and insert'the proprietor and any exclusive licensee of the patent, and such other persons as may be prescribed who appear to have an interest in the matters to which the request for an opinion relates, shall be entitled under such conditions as may be prescribed to be parties to the proceedings before the comptroller under this section'. The Chairman: With this it will be convenient to discuss the following amendments: No. 8, in

clause 13, page 8, leave out lines 4 to 19.

No. 7, in

clause 13, page 8, line 28, at end add—

'(4) In section 97(1) of that Act (appeals from the comptroller) after paragraph (d) there is inserted—

''(e) a decision under section 74A above.''.'.

Photo of James Arbuthnot James Arbuthnot Shadow Secretary of State (Trade and Industry)

We considered the opinions issue extensively on Second Reading and thought that it might be necessary to look at the detail of the opinions, and the legislation that sets them out, in Committee.

Let me explain one of the problems with the opinions. Subsection (6) of proposed new section 74A states:

''For the purposes of section 101 below, only the person making a request under subsection (1) above shall be regarded as a party to a proceeding before the comptroller in relation to that request.''

Section 101 is the section of the 1977 Act that gives the comptroller a duty to give any party the right to be heard before an adverse finding is made against him.

The reason for my amendments is that the rules referred to in the explanatory notes allow both parties to make representations on the opinion, but there is a risk that proposed new subsection (6) prevents that. The request could be initiated either by the patentee or the third party, and then only that party would be entitled to be heard, so in consequence only that person is entitled to appeal to the court under section 97.

It is odd that it is possible for a person to have a finding made against him without having the right to be heard. It is odd even with regard to whether an opinion should be issued. However, is not proposed new subsection (6) so wide that it will prevent the person being found against from being considered a party even in relation to the formulation of the opinion itself, as opposed simply in relation to the question of whether the opinion will be issued? I suggest that it is an oddity. It might be easier simply to remove it, but it would be helpful to give people the right to be heard, as set out in the amendment.

Amendments Nos. 8 and 7 deal with a different matter—the right to appeal to the courts. Proposed new section 74B(1) mentions a peculiar set of rules. If the patentee asks for an opinion, a third party, if he is told that he does infringe, has no right to be heard under proposed new section 74A(6), and no right to request a review under proposed new section 74B. I am not sure why that is, but it may be because of the European convention on human rights, to which paragraph 116 of the explanatory notes relates. Someone can be affected by an adverse opinion to the extent that he has infringed the patent. His human rights should come into the matter, too. It may therefore be better simply to omit proposed new section 74B altogether.

It is difficult to see much purpose in a right to a review of an opinion that is in any event not binding. When we debate clause stand part, we will come to the question of whether the opinions have any value. I suspect that they might, and so, as I said on Second Reading, we should give the overall concept the benefit of the doubt. However, I beg leave to doubt whether there is much value in a right of review of this non-binding opinion.

Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs) 2:45 pm, 15th June 2004

I thank the right hon. Gentleman for the way in which he spoke to his amendments. I shall deal with amendments Nos. 6, 8 and 7 in that order.

To appreciate fully the impact of amendment No. 6, it is first necessary to remind ourselves of the overall purpose of the opinion procedure, and then to look in detail at how the suggested changes to proposed new section 74A(6) would adversely affect its operation. The opinion procedure produced in proposed new section 74A is designed with three elements in mind: timeliness, affordability and impartiality. To be helpful as a decision-making tool, the opinion procedure will have to provide the requester with an

impartial assessment of the validity and/or infringement issues in question in as timely and affordable a manner as possible. A rapid response would be particularly helpful to a requester who is in the initial stages of deciding how best to handle such an issue. Knowledge is power in such instances, and the sooner it is available to the requester, the more helpful it is to them in deciding the implications and likely outcomes of the various courses of action open.

The purpose of proposed new section 74A(6) is to cut down significantly on a possible source of unnecessary delay in completing the opinion procedure. That applies particularly when an issue of validity is in question, as it is important that only valid patents are recognised as such. It is definitely not in the public interest if an invalid patent is perceived to be valid, thereby preventing other parties from working in a particular field and developing new products or processes.

It must be emphasised that the purpose is not to deprive any interested person from making written representations on whether the opinion should proceed. The purpose of proposed new section 74A(6) is to limit the right to an oral hearing under section 101 of the 1977 Act, as the right hon. Gentleman suggests. If the comptroller is minded to refuse a request for an opinion, it is certainly important for the person making the request to have the right to be heard under section 101. Such a hearing will not introduce any delays into the opinions procedure, because in the case of a refused opinion there is nothing to delay. However, once a request has been accepted, it is important that any delay should be kept to a minimum. A person, other than the requester, who intervenes in the subsequent written procedure may have an interest in not proceeding to an opinion. However, against that has to be balanced the public interest of having infringement and validity issues ventilated in the opinion procedure.

The significance of section 74A(6) is best appreciated if one considers how it will work in combination with the proposed new section 74A(3). The latter subsection makes it clear that the comptroller would issue an opinion unless the conditions laid down in paragraphs (a) or (b) arose. The condition in paragraph (a) is that the request should fall into one of the categories specifically prescribed.

We envisage that the following categories of request will be specifically excluded: when the issue in question has already been considered, or is about to be considered, in proceedings before the Patent Office or the court; and when the request for an opinion is found to be frivolous or vexatious. The other condition is referred to in paragraph (b) of proposed new section 74A(3): the comptroller has a general duty to refrain from issuing an opinion if he considers that it is not appropriate to do so. In other words, the comptroller has the power to refuse an opinion if he is satisfied that it might not be right to issue one; he may do that at any stage in the procedure. For example, he may receive persuasive arguments from a patent holder whose patent is being questioned in the opinion procedure,

and he may decide that it is no longer appropriate to continue with that opinion. Such a decision can be characterised as the exercise of discretion adverse to the requester of the opinion.

Under section 101 of the Patents Act 1977, whenever someone is subject to an adverse exercise of discretion by the comptroller, they are entitled to a hearing on the issue. In the example just given, the person adversely affected would be the requester of the opinion, who would be entitled to a hearing under section 101. In a different case, the comptroller might decide to proceed with a request to issue an opinion. Clearly, the requester would have no interest in challenging such a decision, as it would be the decision that he had asked for.

Should persons other than the requester be entitled to an oral hearing under section 101? Such a hearing would delay the progress of the opinion procedure, thereby removing one of its main benefits—speed. Furthermore, and I emphasise this point, the patent holder would in any event have the opportunity to make written submissions during the procedure, which could include representations on why the opinion should not be issued. As has been noted, speed is particularly important if the validity of a patent is in question, as there is a strong public interest in ensuring that only valid patents are recognised as such, and businesses are not unfairly discouraged from working in a particular area.

I move on to the change to section 74A(6) proposed in the amendment. It is clear that the patent holder, his exclusive licensee or any other party with an interest would also be entitled to be heard under section 101. Full oral proceedings would be conducted before the Patent Office to decide whether the comptroller had been correct in deciding whether to proceed with the request to issue an opinion. Those proceedings would not, however, address the actual validity or infringement issue raised in the request for the opinion. In addition, the outcome of such proceedings could be appealed to the patents court without leave. Those oral proceedings, and any consequent appeals, would have to be concluded before the opinion could be issued on the questions raised in the request. Such a source of significant delay would have a serious effect, because although section 101 proceedings would be being dealt with, the fact that a question was being raised about the validity or infringement of the patent would lead to much longer periods of uncertainty for the patent holder and/or third parties before the issue was resolved.

From the third party and public interest point of view, it would also prolong the time before the substantive issue was assessed and would delay appropriate action being taken to address the issue. Section 74A(6) is designed to strike the right balance. It would preserve the right of a requester whose request was refused to show why that decision was incorrect. However, once a request was accepted, it would prevent the introduction of unnecessary delays during the subsequent assessment of the issue of

infringement or validity raised in the request. I hope that, in light of that explanation, the right hon. Gentleman will withdraw his amendment.

Before I consider the effect of amendment No. 8 in detail, I shall explain why it is necessary to have a review procedure for opinions, as proposed in new section 74B. All Patent Office decisions that affect the rights of the patent holder are subject to a review of some sort. For example, the decision to revoke a patent is subject to appeal to the patents court. Although opinions would not be legally binding decisions, an adverse opinion, such as one that cast doubt upon the validity of a patent, might well have an effect on its economic value: it might have a negative impact on the patent holder's ability to exploit the patent commercially. We can all appreciate that it is unfair if no means are available to patent holders to overturn an adverse opinion that they believe to be incorrect.

In most cases, existing procedures available under the 1977 Act will be sufficient to provide such means. For instance, where an adverse opinion on the validity of a patent has been issued a third party might well decide to launch revocation proceedings before the comptroller, either at the Patent Office or through the courts. The patent holder will then have an opportunity to argue the question of validity in a complete manner, which will enable the issues that were dealt with in the opinion to be fully considered. Alternatively, someone who had considered the opinion might seek to rely on that assessment and begin manufacturing a product that was covered by the patent. The patent holder would then be able to launch infringement proceedings, in which case there could also be a complete consideration of the validity of the patent and, hence, of whether the opinion was correct.

If neither of those two situations arose, the patent holder would be left with an adverse opinion issued by the Patent Office. That might affect the economic value of their patent without their having any available means for correcting an opinion that they believed to be incorrect. It is important that that uncertainty is not allowed to persist as it would, arguably, amount to interference with a patent holder's rights, as the right hon. Gentleman suggested, under article 1 of protocol 1 to the European convention on human rights, which protects the right to property. Access to a procedure for reviewing an opinion in a timely fashion will enable the patent holder to defend the validity of a patent in full proceedings before the Patent Office, from which there will be an appeal to the courts in appropriate circumstances.

The purpose of the review mechanism laid out in proposed new section 74B is to provide the final element needed to ensure that in all possible situations that arise, a timely procedure will be available to a patent holder who is seeking to overturn an opinion that they believe to be incorrect.

The amendment would delete all of proposed new section 74B. Everyone will appreciate that to do so would leave the patent holder at a serious disadvantage in certain circumstances. As I indicated,

those arise, first, if no third party chooses to launch revocation proceedings under section 72 of the 1977 Act or, secondly, if the patent holder is not able to launch infringement proceedings under section 61. Consequently, it is essential to ensure that some mechanism is put in place to deal with that situation, and the proposed new section 74B will enable us to provide it.

Finally, before I examine the effect of the third amendment, I should briefly explain how the opinion procedure differs from existing procedures under the 1977 Act concerning issues of infringement and validity. That Act provides for a number of different types of proceedings where issues of infringement or validity are decided. They include proceedings for revocation under section 72, where a decision must be made about whether a patent is valid. If it is not, the patent is revoked and deemed never to have existed. Under section 71, a decision is required about whether a particular act falls within the scope of a particular patent, and if it is decided that it does not infringe, a declaration to that effect can be issued. Such proceedings result in a decision that is binding on the parties involved, and for that reason such a decision should be reached only after a full hearing of all the parties. It is precisely because the decisions are binding that it is appropriate that they can be appealed to the patents court so that any errors may be corrected.

The opinion procedure under new section 74A is, however, quite a different beast. The outcome of that procedure will not be a decision of the comptroller in the same way as the outcome of proceedings under sections 71 or 72 are examples of such a decision. The outcome of an opinion is not legally binding on any party. It is for that reason that an opinion can be based on an assessment of a much more limited range of material, obtained using a paper-based or documentary procedure. An opinion is accordingly not a decision, but a non-binding expression of the view of the Patent Office on a particular matter.

I will now discuss section 97 of the 1977 Act, which provides a general right of appeal against decisions of the comptroller, which is excluded in only a small number of prescribed circumstances. The exceptions all concern administrative functions of the Patent Office, such as where the comptroller decides that material prejudicial to national security under sections 22(1) and 22(2) or material that is offensive or disparaging under section 16(2) should not be made available or published.

The intention of amendment No. 7 appears to be that the outcome of the proposed section 74A opinion procedure should be added to those decisions of the comptroller under section 97(1) that are exempt from appeal to the patents court. As I explained, such an opinion procedure does not produce a decision of the type provided for under section 97, so it is not necessary to include it in the list of exceptions in section 97(1).

I am sure that the right hon. Member for North-East Hampshire will be pleased to learn that I am prepared to reflect further on whether any rights of appeal need

to be excluded under section 97. In particular, I confirm that persons other than the requester cannot appeal against a decision to proceed with an opinion. If necessary, I shall table an appropriate amendment on Report. Given those expansive reasons, I hope that he will withdraw his amendment.

Photo of James Arbuthnot James Arbuthnot Shadow Secretary of State (Trade and Industry) 3:00 pm, 15th June 2004

The Minister is exceedingly gracious. I find it difficult to know how to cope with such graciousness, other than to do exactly as he says: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss the following:New Clause 1 Compulsory binding technical arbitration for new and existing patents