Clause 13 - Offence of unauthorised copying etc. of design in course of business

Part of Intellectual Property Bill [Lords] – in a Public Bill Committee at 11:45 am on 30th January 2014.

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Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills) 11:45 am, 30th January 2014

I understand what the Minister is saying. He has had discussions with industry bodies, legal experts and companies, some of which he has mentioned. The one thing we want to avoid is disbarring innovation and creativity, and ultimately prosperity, in this country. He will be aware of the many concerns that remain. The IP Federation has stated that the proposals

“create a sledgehammer for the purposes of cracking a specific problematic nut. The trouble is that, in cracking the problem nut, many other valuable nuts will also get cracked or severely damaged as a consequence.”

There is a risk that criminal sanctions will deter innovation and invention in this country. The IP Federation continues:

“If there is a risk that knowledge of a registered design, combined with actual infringement, could give rise to a criminal penalty, IP advisors will advise their clients not to take that risk. Products which would otherwise have been brought to market as a result of healthy competition will be withheld. This will reduce choice for consumers.”

I have had a meeting with the International Chamber of Commerce—as has the Minister—which has said:

“Whilst it is acknowledged that the proposed criminal offence would contain defences against unintentional infringements, there remains considerable nervousness within industry that criminal sanctions may still be employed in cases where there has been no deliberate copying of a registered design…Senior executives have advised us that even a very small risk of criminal action could significantly delay decisions on product launches—particularly where a company chooses to escalate concerns to board level. In a best case scenario, this would likely entail additional costs for businesses (such as for external legal advice); however, it is possible to envisage circumstances in which executives may choose not to launch (perfectly legitimate) products in the UK market-with possible knock-on effects for employment and consumer choice.”

Will the Minister directly address the point that innovation in this country might suffer as a result of clause 13? Neither the original impact assessment nor the revised impact assessment makes that case clear; they merely state that no evidence was produced. Should there not be more rigour for something as important as possibly sending inventors to prison for 10 years?

Amendment 25 would ensure that the Bill contained a clear and acknowledged difference between copying and infringement, to which the Minister has referred. As the Bill is currently drafted, a person will be committing an offence and be subject to criminal sanctions if they copy

“a registered design so as to make a product exactly or substantially to that design”.

The Minister has tabled amendment 7 and other amendments—to which I shall respond in due course—to address that situation to some extent. However, the purpose of amendment 25 is clear. It would make a distinction in the Bill between copying and infringement. I realise what the Minister said about Apple v.Samsung, but this was touched on then. This is an important point for the Committee to consider. What is the nature of innovation? I referred to this on Second Reading. Is it giant leaps forward or leaping from tree to tree, gradually and incrementally? Is innovation evolution or revolution?

In the commercial sphere, it seems entirely reasonable and legitimate for firms to want to build on existing products, retaining the features that consumers like and  discarding those that they do not. That is an accepted part of design law—it is called the design corpus—and it happens in every commercial field. Cars may have new features; other companies may develop and expand on them, taking them a step further. To what extent is that copying or innovating to give the consumer greater choice and a better standard of products? I am interested in the Minister’s views. I know he takes innovation seriously, and we do not want to do anything that deters it in this country.

The Apple v. Samsung case is fascinating. Samsung applied to the High Court for a declaration that its Galaxy tablets were not too similar to Apple’s products. Apple countersued, but Samsung won the case here in the UK, although there were different rulings in other jurisdictions. An appeal found in favour of the previous ruling, meaning that Apple was required to publish a disclaimer on its own website and in the media stating that Samsung did not copy the iPad. The judge ruled:

“This case illustrates the importance of properly taking into account the informed user’s knowledge and experience of the design corpus”.

I will come to the phrase, “informed user”. He continued:

“The degree to which a feature is common in the design corpus is a relevant consideration. At one extreme will be a unique feature not in the prior art at all, at the other extreme will be a banal feature found in every example of the type. In between there will be features which are fairly common but not ubiquitous or quite rare but not unheard of.”

The judge went further:

“When I first saw the Samsung products in this case I was struck by how similar they look to the Apple design when they are resting on a table. They look similar because they both have the same front screen. It stands out. However to the informed user (which at that stage I was not) these screens do not stand out to anything like the same extent. The front view of the Apple design takes its place amongst its kindred prior art.”

In bringing forward criminal sanctions, how does the Minister intend to ensure that such considerations about informed users, the design corpus and prior art will be taken into account?

Ministers have stated that the same type of arrangements are being put in place as exist in Germany. Indeed, the updated impact assessment states that

“the UK’s and Germany’s designs laws are governed by the same European legal framework, as well as each country retaining its own national system of registration”.

That is true; however, although it is true that unauthorised use of a German registered design can be punishable by criminal sanctions, the infringement must be wilful or reckless to attract those sanctions. That is why amendment 25 would add those words to the Bill and ensure that a further safeguard was in place.

Amendment 28 would make a similar change after proposed new section 35ZA(3)(c)(ii) of the 1949 Act to clarify that when a person commits the offence, they do so knowing that, or being reckless as to whether offering, putting on the market, importing, exporting or selling of the product is an infringement of the registered design, rather than the vague and imprecise definition of “copying”. In a similar vein, amendment 29 is designed to show that it is a defence for a person charged with an offence to reasonably believe that the registered design was not infringed.

Amendment 27 would tighten up the definition and provide a greater legal lock, and make it very clear.  I understand what the Minister was saying about acceptance of the words “intentional within IP law”, but we think the amendment would tighten that further. I should be grateful if he would respond to that; I will say more about it in a moment.

Amendment 26 is a probing amendment to clarify two aspects of clause 13 and the impact on business. The amendment would leave out the word “uses” and insert the word “sells” in its place. I have tabled the amendment for two reasons. First, the clause as it stands does not take into account the complex and collaborative nature of processes within commerce and industry. If a firm uses something in its production process, does the Minister think that that firm is copying? If so, would it be subject to the criminal sanctions in this clause? Clarification of that would be helpful. I propose that the Bill would be clearer if it used the word “sells” rather than “uses”.

My second consideration when tabling amendment 26 may seem perverse and contrary: to probe the Government’s thinking on third parties being liable for criminal sanctions under the clause as part of their normal business operations. The Apple v. Samsung case prompted me to think about that, but that consideration will apply to an infinite variety of products, a large number of retailers, other distribution and business-to-business companies. Will the Minister clarify whether firms that sell products—in the case of Apple or Samsung products, shops such as Carphone Warehouse—are subject to the clause? As the clause is currently drafted, I think they would be, as proposed new section 35ZA(3) states:

“A person commits an offence if…in the course of a business, the person offers…or”— this is the key point—

“puts on the market”.

To my mind, that means that the directors of Carphone Warehouse and other similar retailers will be liable for criminal sanctions. Surely that will prevent competition and consumer choice. Apple could have sued Samsung and then put pressure on retailers by saying, “Look, a court case is going on in which criminal sanctions and imprisonment of up to 10 years apply, so stop stocking Samsung products.” Surely that would be a real hindrance to competition. Can the Minister confirm that that would not be the case? If that risk were there, would not retailers be reluctant to stock products, which, in turn, would restrict consumer choice and, ultimately, product development and innovation? I hope he will reassure me on that. I appreciate that amendment 26 would not insert the precise wording to which I have referred, but I hope I have explained our intention in tabling it.

The Minister spoke to Government amendments 6, 8 and 10, which would insert the word “intentionally” at various points in the Bill. I appreciate that he is trying to provide greater clarity and safeguarding to prevent the possibility of accidental or inadvertent copying infringements. However, as I have said, I think that our amendment 25 would work better and provide greater clarity. I know he probably will not accept it, but given what he said, will be consider taking a look at it? Knowing the Minister and given his remarks—and his  non-grumpiness—I suspect that he will not look at it, but will he go away and look at the wording of section 92 of the Trade Marks Act 1994 to see whether that could apply in this area? The wording is used several times in section 92, which states:

“A person commits an offence who with a view to gain for himself or another, or with intent to cause loss to another, and without the consent of the proprietor”.

That seems to be a good and consistent means by which the bar for criminal sanctions could be set sufficiently high.

Government amendment 7 would leave out the phrase

“exactly or substantially to that design” and insert instead

“exactly to that design, or…with features that differ only in immaterial details from that design”.

Government amendment 9 and, to an extent, Government amendment 11 are similar to that. I am concerned about those. Does not the wording of those amendments merely deal with counterfeits, rather than infringement or deliberate copying? Should not that precise wording be looked at again? The Alliance for Intellectual Property has suggested a form of words that is consistent with article 10 of the Community design regulation. We are willing to look at that again and, if necessary, return to it on Report. I hope that the Minister will pledge to do the same, to ensure that his intention is right.

This is an important part of the Bill. We have a shared aim to ensure that innovation and creativity is established and reinforced, and our amendments would help do that. I hope the Minister agrees.