Clause 3 - Qualification criteria

Intellectual Property Bill [Lords] – in a Public Bill Committee at 9:30 am on 28th January 2014.

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Photo of David Willetts David Willetts Minister of State (Universities and Science) 9:30 am, 28th January 2014

I beg to move amendment 3, in clause 3, page 2, line 33, leave out subsection (1).

Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

With this it will be convenient to discuss the following:

Government amendment 4.

Amendment 19, in clause 3, page 2, line 42, leave out ‘a person’ and insert

‘A Body Corporate formed under the law of a qualifying country’.

Government amendment 5.

Photo of David Willetts David Willetts Minister of State (Universities and Science)

This useful clause simplifies the qualification requirements relating to the UK unregistered design right, and removes overlapping requirements for finding who may qualify for UK registered design rights because of where they live. However, in response to sensible points made by leading British businesses, we have tabled amendments 3 to 5 to ensure that there are no unintended consequences as a result of that simplification that could disadvantage UK businesses.

The law currently specifies certain criteria, based loosely on nationality, that determine which individuals and bodies qualify for unregistered design rights in the UK. Those eligibility criteria are complicated. In response to the views of those replying to the Government’s designs consultation, the clause seeks to simplify the qualification requirements without removing them completely. The requirements are maintained because it  would be unfair if a manufacturer in another country had design rights they could assert against a UK business when that UK business had no such rights in that other country.

Stakeholder and industry groups raised concerns about the changes proposed in the clause to the qualification requirements. The issue was whether the proposed simplifications tipped the balance too far in favour of businesses in countries where UK designers cannot gain reciprocal protection. That issue was raised with myself and my noble Friend Viscount Younger after the Bill had left the Lords, and we set up a number of meetings specifically to hear views on the issue, which led to the amendments before the Committee.

I welcome the collaborative working between the IP Federation, the Chartered Institute of Patent Attorneys and the International Chamber of Commerce, as well as officials at the IPO, to find a solution to the issue. As a result of the positive and constructive discussions with business, the Government have now brought forward amendments to the clause.

The change simplifies the qualification requirements, but ensures that appropriate reciprocal arrangements remain in place, so that those designing outside the UK or in reciprocal countries are not given undue protection. In particular, it deals with concerns expressed by businesses about qualification for UK rights where a foreign company operates in the UK, and based on circumstances in which a foreign company has chosen to market its design in the EU first. The qualification criteria as amended will therefore apply to a designer, employer or person of any nationality doing first marketing, provided that they fall within the definition of a “qualifying person”, which is an individual who is habitually resident in a qualifying country, or a company that is formed under the law of a part of the UK or other qualifying country and that has in that country a place of business where substantial business activity is carried on. Also, in the case of first marketing, it must take place in certain designated jurisdictions—in essence, the EU.

Please forgive me, Mr Havard, for going into that in some detail, but the amendment is significant and I wanted to explain our thinking rigorously to the Committee. Our amendment is matched in intention by that tabled by the hon. Member for Hartlepool. Drafting differences between our amendments, however, favour the Government’s approach in dealing with the issue. Sorry, to be grumpy again, but that is the case.

First, the Government amendment reflects the fact that anyone should qualify, as long as they have legal personality. Secondly, it also follows more closely the existing drafting in the 1988 Act, which has the advantage of familiarity and a proven track record. I accept that, as a result, our formulation might lead to slightly more complicated wording, but it is more precise than that proposed by the hon. Gentleman. In that context, I hope that he will withdraw his amendment and accept that our amendments achieve the shared objective of both Government and Opposition in Committee. I hope that the Committee will agree to the sensible and pragmatic Government amendments.

Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

I thank the Minister—given that we are discussing clarity, it is important that you put your thinking properly on the record.

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

I rather thought that clause 3 and any associated amendments would take up a relatively large part of the Committee’s time, but I was pleased with what the Minister said on Second Reading about looking at the issue. I am pleased with what the Government have done with their amendments and with the Minister’s comments today. We will be able to dispense with the clause and consideration of the amendments relatively swiftly.

The Committee might recall the concerns I expressed on Second Reading, which were substantial and reflected the concerns of many businesses operating in the UK. I stated that the clause as drafted

“extends the qualification of unregistered design rights to the functional designs of companies incorporated in countries that do not offer reciprocal protection for UK functional designs.”—[Official Report, 20 January 2014; Vol. 574, c. 48.]

The Minister today cited the IP Federation, which has been incredibly strong on the matter. On Second Reading, I quoted from the IP Federation, and I will repeat that quote, if you do not mind, Mr Havard, because it is important:

“Under the changes proposed in Clause 3 of the IP Bill, parity no longer exists and UK manufacturers are strategically disadvantaged with additional hurdles being introduced to the manufacture of functional designs in the UK. This will directly impact those engaged in general engineering because of the importance of functional designs which are covered by UK UDR.”

The federation continued:

“The manufacturing facilities of both small and large UK-based engineering companies will be seriously impaired by extending UK UDR to foreign corporate entities. Careful consideration would need to be given to the location of manufacturing facilities as the manufacture of functional articles in the UK will be inhibited. It would become more attractive to move design and manufacturing offshore and to commercially source functional designs from businesses outside of the UK where the copying of functional designs is lawful.”

The whole House must share the view that manufacturing, especially high-value manufacturing, is a major part of what this country should be doing. I was interested in the Prime Minister’s comments on Friday about the intention to reshore a lot of manufacturing, which I welcome. Clause 3, as originally drafted, would inhibit that and would stop it taking place. The Government amendments help to rectify that.

I am pleased with what the Minister said. I understand his point about his amendments going further and possibly adding a bit more complexity into the arrangements. Perhaps he will mention how that will be effected and how he intends to mitigate that complexity. Generally, I am not grumpy this morning. I am pleased with what the Minister has done here. I am glad that he listened to UK-based manufacturers on this matter and changed tack. I will not press my amendment and I support the Government amendments.

Photo of David Willetts David Willetts Minister of State (Universities and Science)

I am grateful to the hon. Gentleman for agreeing not to press amendment 19. I assure him that we have listened to members of the IP Federation. I had an important meeting with them. When leading British businesses, such as Dyson, made the point that they feared that the clause, as originally drafted, would have not ensured proper reciprocity, of course, we listened. We are pleased that we listened; it was the right thing to do, for them and for other innovative British businesses.

I assure the Committee that, overall, the clause simplifies the law on reciprocity. Essentially, it ensures that a qualifying person consists of a business, which must be formed under the law of a part of the UK or other qualifying country, and properly ensures that countries that do not offer reciprocal recognition of design rights cannot benefit from recognition of design rights in the UK. I am pleased to move the amendments and grateful for the hon. Gentleman’s support.

Photo of Dai Havard Dai Havard Labour, Merthyr Tydfil and Rhymney

The written evidence from the people quoted will be published as agreed earlier. That will help, given the additional explanations that the Minister has given.

Amendment 3 agreed to.

Amendments made: 4, in clause 3, page 2, leave out lines 42 to 44 and insert—

‘(b) a body corporate or other body having legal personality which—

(i) is formed under the law of a part of the United Kingdom or another qualifying country, and

(ii) has in any qualifying country a place of business at which substantial business activity is carried on.”.’.

Amendment 5, in clause 3, page 3, leave out lines 7 and 8 and insert—

‘(a) in subsection (1)(a), omit “who is exclusively authorised to put such articles on the market in the United Kingdom”,

(b) in subsection (2), for “requirements” substitute “requirement”,

(c) in subsection (3), for “those requirements” substitute “that requirement”, and

(d) omit subsection (4).’.—(Mr Willetts.)

Clause 3, as amended, ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.