Patents Bill

Public Bill Committee, 15 June 2004.

Standing Committee D

Patents Bill

Gerry Sutcliffe (Labour, Bradford South)

I beg to move,

That—

(1) during proceedings on the Patents Bill [Lords] the Standing Committee shall, in addition to its first meeting on Tuesday 15th June at 10.30 a.m. meet—

(a) on Tuesday 15th June at 2.30 p.m,;

(b) on Thursday 17th June at 9.25 a.m. and 2.30 p.m.;

(2) the proceedings shall be taken in the following order namely, Clauses 1 to 5, Schedule 1, Clauses 6 to 15, Schedules 2 and 3, Clauses 16 and 17, new Clauses, new Schedules, remaining proceedings on the Bill;

(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5 pm on Thursday 17th June.

My first task is to welcome you to the Chair, Mr. Amess, and I take great pleasure in doing so. I have not served under your chairmanship before, but I am sure that your leadership and skill will get us through the Bill effectively and efficiently. I also welcome all members of the Committee.

On Second Reading, hon. Members on both sides of the House broadly welcomed the Bill. I hope that that will put us in good stead as we approach the detailed scrutiny. I wish the Committee well in its deliberations.

James Arbuthnot (Conservative, North East Hampshire)

May I also say how honoured we all are to be under your chairmanship, Mr. Amess?

A matter of huge importance was raised on Second Reading, namely whether we were talking about ''pat-tents'' or ''pay-tents''. The hon. Member for Newport, West (Paul Flynn) led us down the garden path, I regret to say; he suggested that a short 'a' would allow his constituents to get home more quickly for tea. That may be true. The Minister then told us that the pronunciation depended on which area of the country one came from, but I am afraid that that, too, is incorrect. I have now been informed that it is pronounced ''pat-tents'', because it comes from the Latin patens, meaning open. When one discloses a secret, one is making it open, and one is therefore granted letters on the opening of it. That sounds hugely convincing.

Gerry Sutcliffe (Labour, Bradford South)

I am grateful to the hon. Gentleman, who has already started scrutinising. I will take his word on the pronunciation of patent. Those who read the report of Second Reading were even more confused, because hon. Members also talked about the parent Bill and the patient Bill. I am afraid that we caused difficulties.

James Arbuthnot (Conservative, North East Hampshire)

It is good to hear that the Bill is being talked about, at least in circles in which it matters, anyway.

The other issue I want to raise is the order in which we are to consider the clauses. Most unusually, the Bill deals with patents just as a regulatory reform order is going through its stages, so the measures that the Committee is considering might be changed under regulatory reform procedures, and although measures are being considered under the order, we might change them in Committee. That is potentially unsatisfactory. A note from the Library says that it has been assured by parliamentary counsel that it is possible to refer in a Bill to legislation that does not yet exist. I find that unsatisfactory, too; it is like trying to legislate on quicksand. Will the Minister comment on the fact that two groups of people are considering the same body of law, with potential consequences for both groups?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I, too, am pleased I am to be under your chairmanship, Mr. Amess. I was tempted to go out into the sunshine this morning, but I thought, ''No, this Committee will be so lively and well run that I must attend,'' so here I am.

Patently, we have come to a decision on whether we should say ''pat-tents'' or ''pay-tents''. I am already beginning to forget which it is; ''pay-tents'', I think. I congratulate the right hon. Member for North-East Hampshire (Mr. Arbuthnot) on having done the work on that.

As regards the timing in the programme motion, I expressed my concern on Second Reading that we were waiting for a key report. It had been promised to us in November, March and April; there is now talk of it arriving in the summer. It worries me that such a key report will not be available before the end of our discussions on the Bill. Apart from that, however, I am happy to proceed on the basis of the programme motion.

Gerry Sutcliffe (Labour, Bradford South)

I am grateful to hon. Gentlemen for making their points in the way that they did. The right hon. Member for North-East Hampshire made a point about the regulatory reform order and the discussions that are taking place. I can assure hon. Members that there are no difficulties. I acknowledge and accept his concerns that there could be problems, but because the Bill has been drafted in the full light of everything that has taken place, I do not perceive that there will be any. As he rightly explained, it might be something for the House to examine; I understand that a procedure such as we are discussing has been adopted before. The provisions of the Bill that refer to the regulatory reform order are minor and will not come into force until that order does. I hope that that makes the matter clearer for him.

The hon. Member for Weston-super-Mare (Brian Cotter) mentioned the report. I said that it would be produced in the summer and that is still the case. Although I acknowledge his concerns, I still think that we have the opportunity to scrutinise a Bill that has

been well consulted on. I hope that the Committee will be able to do that and will support the programme motion.

Question put and agreed to.

Sir David Amess (Conservative, Southend West)

I remind hon. Members that adequate notice should be given on amendments. As a general rule, my fellow Chairman and I do not intend to call starred amendments, including any such amendments that may be reached during an afternoon sitting.Clause 1 Methods of treatment or diagnosis

Clause 1 - Methods of treatment or diagnosis

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I beg to move amendment No. 9, in clause 1, page 1, line 20, at end add— '(5) The comptroller will undertake periodic review of the efficacy of subsection 1 above in providing protection against monopolisation of scientific discoveries in humane genome technology relating to subsection (1).''.'. The amendment aims to add a new subsection to the end of the clause. It is important that I emphasise that we are talking about a periodic review, which is a response to concerns in the wider world about the issue. DNA patenting has been allowed under European, United States and Japanese law since the first DNA patents were filed 20 years ago. To date, thousands of DNA molecules, cells and proteins produced by genetic engineering have been patented. Many medicines that use patented DNA are on the market. They include treatments for cancer, anaemia, diabetes and vaccines for hepatitis B. Some patient groups, such as the Genetic Interest Group, and many of those involved in research into genetically inherited disorders, have welcomed patenting. They see it as a spur to promote research into rare inherited diseases and as a way of putting the newly acquired genetic information in the public domain. However, there are concerns that the creation of monopoly rights over genes and the royalties that are payable to patent holders may lead to prohibitive costs for users of screening services. Dr. R. G. Elles of the United Kingdom Clinical Molecular Genetics Society, writing in the Bulletin of Medical Ethics in January 1997, warned that: ''The issue of gene patenting first came to our attention through a demand for royalty payments on the use of the cystic fibrosis gene sequence from the Hospital for Sick Children in Toronto in Canada in early 1993 . . . negative effects of gene patenting can be recognised and measures need to be taken to control them.'' Therefore, many argue that rather than providing incentives for research, the patenting of living material merely restricts research by other laboratories. That is a key and important point, which the Minister should address. An EU directive on the legal protection of biotechnological inventions was translated into UK law in the Patents Regulations 2000. The new regulation was supposed to help the biotechnological sector by introducing a legal framework based around the patent system which would allow biotech companies to make appropriate decisions about

investment and research, and encourage innovation by allowing them to benefit from the commercial risks that they were taking. None the less, hon. Members expressed concern on Second Reading about the ambiguity of the regulations and exactly what could be patented. The Minister nobly tried to quell those fears by stressing that raw, fundamental information on the genetic code was not patentable. He also stressed that it would be different if the genetic material were isolated from its natural environment by means of an invented process involving a new technical solution. Therefore, certain gene-based inventions might be patentable provided that they satisfied the normal criteria for any invention. However, Dr. Lynne Jones was less concerned about a gene that could be patented just because it had been discovered than about the simple patenting of that discovery covering all uses of that gene, regardless of whether they were known at the time of the patent. That concern was repeated a couple of years later in a report published by the Nuffield Council on Bioethics in July 2002, which concluded that companies were being granted exclusive rights over the use of genes in diagnosis, research and treatment, thus preventing other scientists from working on any aspect of that gene. The Nuffield report concluded that, as a result of that, research into AIDS and diseases such as cancer and malaria was being held up because patents on human genes were being granted too readily to pharmaceutical companies. I appreciate pharmaceutical companies' need to invest and to put a lot of money into making progress so that they can take advantage of their work, but that, none the less, is a genuine concern. When the Government were implementing the EU directive on the legal protection of biotechnological inventions in 2000, they agreed that that issue should be addressed and that they would not wish to introduce regulations that would allow a company to control a range of processes that were consequential to an initial patent, and thus prevent valid and proper applications taking place in the future. That is a key point, and, difficult as it may be to see a way around it, it has to be addressed. The Government said that they would ask the committee of the World Intellectual Property Organisation, a special UN agency, to investigate the matter. What is the outcome of that request? Will they reassure us that there is sufficient protection under UK law to ensure a proper balance between promoting innovation and ensuring that future research is not unreasonably restricted by the patents process? This is a can of worms and a difficult issue. My amendment asks for something to which the Minister could say no. However, I repeat that we would be asking the comptroller to ''undertake periodic review of the efficacy of subsection 1 . . . in providing protection against monopolisation of scientific discoveries''. I hope that the Minister will either look at that and return to it before the end of our proceedings, or accept that there is a big problem. I look forward to his response.

10.45 amMr. Arbuthnot: On a question of typography, I think that the amendment is meant to read ''human'' rather than ''humane'' genome technology.

Although I am sympathetic to the points raised by the hon. Member for Weston-super-Mare, I am not attracted to the method that he has chosen to address them. I do not believe that the Patent Office can act as a branch of the Competition Commission. It has expertise in many areas, but monopolies is not one of them. I am not quite sure what the Patent Office would do if one of the reviews suggested in the amendment found that a monopoly did exist. The purpose of the Patent Office is limited, namely to protect new inventions. Although the consequences of that protection are a monopoly in certain terms for about 20 years, it would be beyond the scope of the Patent Office to police the consequences by trying to root out monopolies.

Paul Flynn (Labour, Newport West)

I am sympathetic to the points that have been raised, and share the doubts of the right hon. Member for North-East Hampshire.

This is an area of enormous importance. Pharmaceutical companies have had something of a Jekyll and Hyde career. Wonderful scientists have made miraculous breakthroughs in scientific knowledge and in discovering how our bodies work, and we do not want that to be inhibited, but the way in which the pharmaceutical companies have used patents has not been entirely for the benefit of human kind. Scientists produce their great works, which are handed over to the marketing people who behave in a way that is entirely oriented to making profits for the companies. The marketing people manipulate patents when a drug's patent is running out: the normal practice is to put part of an existing drug into a new drug, give it a new patent and a new name, and harvest the resulting sales.

Scientific progress on the human genome should be shared throughout the scientific community; it should not be used by one single company to obstruct development by all the other scientists in the world, but that, sadly, is likely to happen. A discovery in the field of human biology is different from an invention by a scientist as a result of his own creativity, or from an inventor who registers a unique discovery that is entirely the product of his or her imagination. Discovering a new scientific truth in the field or biology is different. Although the Patent Office cannot make the necessary decisions in such cases, it is right that we understand the potential abuses that can arise from patents on scientific discoveries, which should be available for future development by all scientists, not just one company.

Gerry Sutcliffe (Labour, Bradford South)

We have had a short but important debate. I am grateful for the way in which the hon. Member for Weston-super-Mare moved his amendment. He will not be surprised by the comments of the right hon. Member for North-East Hampshire and my hon. Friend the Member for Newport, West

on the mechanisms. The hon. Members for Weston-super-Mare and for Gordon (Malcolm Bruce) are clearly concerned about the scope of gene patenting and want to amend clause 1 as a result.

It is important to set out what the clause does and does not do. It inserts a new section 4A into the Patents Act 1977 that brings together all the provisions that concern the patentability of methods of treatment and methods of diagnosis, and substances or compositions used in those methods. Subsection (1) makes clear the important fact that such medical methods cannot be patented; that includes medical methods that are biotechnological in nature or that flow from gene-based research. Subsections (2) to (4) relate to substances or compositions that are found to have a use in such a medical method. Those substances or compositions have already been susceptible to patent protection but, as I mentioned on Second Reading, the new provisions avoid the need to use a rather specialised and complex form of wording when obtaining such patent protection. The provisions do not open up patent protection into areas where none was previously available. That applies equally to biotechnological substances or compositions.

Having given those reassurances, I now turn to the area of gene patenting more generally. Our law in this area is governed by the European directive on the legal protection of biotechnological inventions, which was adopted in 1998 and implemented in the UK in 2000. It makes it very clear that neither DNA nor the raw information from the human genome project can be patented. That is because those are discoveries, not inventions. What can be patented, but only under certain circumstances, is genetic material that has been isolated from its natural environment. Those circumstances are where the isolation process is an inventive one that involves a new and technical solution. To put that another way, the directive—and therefore UK law—makes it clear that gene-based inventions will only be patentable if they meet all the usual criteria for any other invention. The invention must be more than just a discovery; it must be new and not obvious in the light of what has gone before, and it must provide a solution to a technical problem.

I am confident that we have in place with our European Union partners, a system that allows those who take important steps forward in this field to obtain patent protection without allowing patents to be taken out on the fundamental discoveries surrounding naturally occurring genetic material. We will continue to work with our European Union partners to ensure that the patent system achieves the right balance in this complex and exciting field, for the public good.

I hope that what I have said is of reassurance. However, if it is not, I hope that what my noble Friend the Minister for Science and Innovation said on 7 June will help. In response to the report by the House of Lords Select Committee on Genetic Databases, he said that we had promised to investigate the impact of UK law on the patenting of genetic sequences. He made it clear that the Government welcomed the findings of the resulting study carried out by the Intellectual

Property Institute on behalf of the Department of Trade and Industry, and that we would look at ways to take forward the issues raised by the report. The Government welcomed the report's main finding—that current law and practice is meeting the needs of both the public and private sectors in this field.

I hope that hon. Members will draw further comfort from that recent statement. It is an example of us keeping the commitment to get the balance right. I hope that, with those words of reassurance and comfort from my noble Friend and me, the hon. Member for Weston-super-Mare will withdraw his amendment.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

It is essential that we have addressed this issue again. We must get the balance right between not stifling invention and not barring people from making necessary progress in this very complex area. I am encouraged by the Minister's statement that the Minister for Science and Innovation said something that is very much on the radar. This is a serious issue, and I sincerely hope that it does not come back to haunt us if in some manner we did not find a way to address it more precisely in the Bill. I have borne it in mind that the issue will be addressed and will be looked at on a rolling basis, although I wonder what would happen to amend the patents situation if some problem was discovered. It is important that we have raised the issue, which may be something that we will hear about from people outside the House soon and over time. I hope that it will be dealt with, if needs be, in some other way in future. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

James Arbuthnot (Conservative, North East Hampshire)

I beg to move amendment No. 1, in clause 1, page 1, line 20, at end add—

'(2) In section 1(1) of the 1977 Act, after paragraph (d) there is inserted—

''(e) the grant of a patent for it is not excluded by section 4A below;''.'.

This technical amendment relates to the revocation of patents under section 72(1) of the Patents Act 1977. At the moment, a method of treatment is not patentable because it is deemed not to be capable of industrial application. That is wrong, because a method of treatment could be capable of industrial application. Nevertheless, it is deemed not to be so. The clause would change to the law to say that a method of treatment will not be patentable. That is a much more straightforward approach, which we welcome, but there are two consequences. First, the Patent Office ought not to grant a patent for a method of treatment. Secondly, if, through the fault of the Patent Office, or for a different reason, the Patent Office does grant a patent for a method of treatment, there has to be an opportunity for the courts to revoke it later.

My amendment would allow the revocation of a grant of a patent that is in breach of new section 4A. Since I tabled my amendment, the Government have tabled their own—a starred amendment, No. 15—which I am satisfied achieves the same result. I do not know whether it is in order for me to say that I would

be content, subject to your guidance, Mr. Amess, to make comments on the Government amendment, but I am happy with it because it seems to accept the principle of the point that I was making in my technical amendment.

Sir David Amess (Conservative, Southend West)

Order. It would be more in order to make fuller comment on that amendment when we come to it.

Gerry Sutcliffe (Labour, Bradford South)

I thank the hon. Gentleman for the way he moved the amendment and for showing his ability to scrutinise the Bill effectively by identifying a problem that needs to be resolved. I apologise for tabling amendment No. 15 so late that it affected our being able to discuss it this morning. In the spirit of what the hon. Gentleman said, I hope that the Government amendment, with the different wording that we prefer, meets his requirements.

I have nothing more to say, other than that I hope that the hon. Gentleman will withdraw his amendment in favour of ours. I acknowledge that there is concern about how the revocation procedure could take place. We do not want that to be so.

With your permission, Mr. Amess, we will return to this subject and give the detail an airing during our debate on schedule 2.

James Arbuthnot (Conservative, North East Hampshire)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clauses 2 and 3 ordered to stand part of the Bill.

Clause 4 - Revocation

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I beg to move amendment No. 11, in clause 4, page 3, line 7, at end insert—

'(2) In section 73 of that Act after subsection (3) there is inserted—

(4) The comptroller shall not take action under subsections (1) or (2) later than six months after the grant of a full patent unless the action falls within section 2 subsection (4).

(3) In section 74 of that Act in subsection (1) after ''in issue'' insert ''within six months of the grant of a full patent''.'.

This is another issue of great importance. Hon. Members will note that the key part of the amendment is the insertion of ''six months''. Under current law, if a small business's patent is infringed, it can approach the alleged infringer and request it to pay licence fees for exploiting an invention. However, the alleged infringer may be a larger company. Many of the issues that I raised on the Floor of the House concerned the great difficulty faced on a range of issues, but particularly patents, by small businesses, which are often a David taking on a Goliath.

If the alleged infringer is a large company, it is likely to issue a counter legal claim questioning the validity of the small firm's patent. It is estimated that about 80 per cent. of time spent on patent cases in court is spent questioning the validity of a patent, rather than on its infringement. That is because a larger company is

often backed by a team of expert intellectual property lawyers. In debate in the House, I put forward the example in which a judge put up his hands in horror at the costs involved in a fairly simple case that ran for four days; it was £80,000, I think, or perhaps a lot more—a large figure, anyway.

Large companies are often backed by a team of experts and are able to pursue matters with intellectual property lawyers who have great expertise. Such companies have the time and money to spend hour upon hour in court presenting even the most spurious arguments to undermine the validity of the patent that they are alleged to have infringed. That is of grave concern. If a small firm loses such a case, and its patent is ruled to be invalid, it may be liable to pay the other side's court costs, which is another issue of grave concern. It is therefore unsurprising that many small firms drop their infringement cases before they even get to court. In paying for a patent in the first place, a small business should have the right to assume that the Patent Office has done its work thoroughly and has ensured that there are no other such inventions in existence before establishing a patent as valid.

The amendment would introduce a six-month time limit after a patent is adopted during which any party could challenge its validity. After that, the validity of the patent could no longer be questioned in court. There would be two benefits. First, the amendment would give small firms more certainty. It would reassure them that, in using the patent process, they were acquiring for their invention a protection that really meant something and that the validity of their patent would not be challenged years down the line.

Secondly, the amendment would encourage people to keep an eye on the patent process and on which patents had been granted in their field. According to the Patent Office, 30 per cent. of money spent on research and development is wasted on developing ideas that have already been patented. Introducing a six-month limit would encourage companies to keep a closer eye on developments in their field, and thus to save money on unnecessary R and D. I would be pleased if the Minister accepted this key amendment.

James Arbuthnot (Conservative, North East Hampshire)

This is a fascinating and important amendment that would have a far-reaching effect on the whole of the European patent system. As I understand it, not many countries, if any, allow patents to be valid even if it later transpires that the invention that was patented was in the public knowledge at the time it was patented.

The amendment would therefore make a major change to the structure of the European patent system, and would, as the hon. Gentleman suggests, encourage people to keep an eye on the patent system as patents are being granted. However, it is such a major change that I wonder whether it might not be preferable to introduce it—if it is introduced at all—after consultation with industry. Comments on the Bill that I have received from those interested in patents range from those of the Patent Reform Group, which says that the whole patent system is ranged against the

small inventor and small company and needs root and branch reform, to those of several other operators in the field, which say that, by and large, this is a good, small, sensible Bill that ought to be passed without many changes.

The change in the amendment would be so large that it needs consultation before it becomes the law of the land. At present, I am not opposed to the broad thrust of the hon. Gentleman's ideas, because a degree of protection, which is not currently available, is needed by small businesses. The costs of taking out a patent and of enforcing it are so daunting as to put off many small inventors. As I said on Second Reading, something needs to be done to protect small and medium-sized enterprises.

Finally, it is not always the small and medium-sized enterprises that are protecting the patent. Sometimes, the big guys—the big companies—exercise control in a way that the hon. Gentleman suggested the small companies should. Enforcement in this area is a reciprocal issue—a two-way street. We need to consider changes such as the one that he proposes carefully, but after consultation with industry.

Gerry Sutcliffe (Labour, Bradford South)

Once again, this is an important area of discussion. I am sorry to disappoint the hon. Member for Weston-super-Mare, who generally moves amendments so delightfully that one feels one ought to support them, but I shall try to explain why I think the amendment is unworkable and perhaps a little unfair.

The right hon. Member for North-East Hampshire raised a point about the Bill itself, and on Second Reading he described it as workmanlike and less challenging than it could have been. However, the organisations to which he referred, and others, have been well consulted on the Bill, and discussion continues. If there is a need for substantial change in the light of what we say in Committee, there is always the possibility of bringing things back on Report. We are trying to achieve the best result for legislation that has not changed dramatically since 1977. Having said that, consultation has been excellent and the process has been well thought through. I am not expecting dramatic change, but if bodies still want to consult and discuss key issues with officials, that offer is on the table.

On amendment No. 11, a patent is not some kind of award or certificate of merit for a good idea, although it may be perceived as such. It is a powerful statutory right that allows the holder to stop other people from doing what they would otherwise be perfectly entitled to do. It goes much further than just preventing someone from deliberately copying someone else's idea: if someone patented an idea and I later developed that same idea independently, I could still be stopped from using it. It falls to Parliament to ensure that, as far as possible, those powerful rights are awarded only to, and exercised by, those who have genuinely new ideas.

There are two ways to do that. First, we can ensure that we have a robust and reliable patent granting system, which weeds out as many non-patentable ideas as possible; that is where the Patent Office comes in. I

and other Members, notably my hon. Friend the Member for Newport, West, spoke at length on Second Reading about the high quality of the work done by that organisation.

Secondly, we can ensure that a legal framework for patents does not, as far as possible, allow unjustified patents to remain in force and give people powerful rights to which they are not entitled. An important part of the patents system is allowing such powerful rights to be challenged, and not just during a short, arbitrary time frame after a patent has been granted. At any time during the lifetime of a patent, someone can be taken to court for infringing it; why should they be denied the defence that they were not infringing it because the patent was invalid? To deny such a defence would seriously restrict the public's legitimate right to innovate or simply to continue doing things that they are entitled to do.

The availability of the revocation procedure, which is open to all at any time, is an important factor in the delicate balance achieved by the patents system. It allows the removal of patents that should never have been granted and that are stopping people from doing what they should be allowed to do. That ensures that we have a patents system in which, as far as possible, only genuinely new ideas remain protected.

I should like to make two other important points, which I hope will help to explain why I am opposed to the amendment. First, the hon. Member for Weston-super-Mare talked about the difficulty endured by a patent holder when his patent is revoked. It is important to note that when a patent holder faces a revocation action, it is often not the end of the road for the patent. The court or the comptroller of the Patent Office will allow the patent holder to amend the patent if that could save it from revocation. The amendment must result in a valid patent, one that genuinely protects a new invention. There can surely be no argument with that.

Secondly, our law on the revocation of patents is harmonised with the European patent convention and applies to UK patents and European patents enforced in the UK. Adopting the amendment would mean that the UK no longer complied with the convention and that we would have to leave the European patents system. I noted from the hon. Gentleman's comments that he does not want to support what would be a disastrous move for UK businesses. I hope that on that basis, and in light of my earlier points, the hon. Gentleman will consider withdrawing his amendment.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

The Minister's last point was about withdrawing things and making difficulties in the European Community. I am not one of the ilk who want to withdraw in any way from the European Community, although of course there are issues to address, even with the European Community, which does not always get it right.

I welcome the support, qualified of course, of the right hon. Member for North-East Hampshire for the amendment. If people gave us more information, so that we could come back to the issue on Report, that would be very welcome. I appreciate that there is always a balance with this sort of thing.

The Minister may remember that in my previous speech on the Floor of the House I referred to some rather weird patents, one of which was to enable a ginger cat—not a black, grey or any other colour of cat—to get through a cat flap. There were 162 patents of a similar nature. I understand that one of the patents that went through was introduced by the ginger cat itself. That calls into question whether the patent should have been accepted by the Patent Office.

James Arbuthnot (Conservative, North East Hampshire)

The hon. Gentleman is clearly not a cat owner, and has never had his house flooded with stray cats coming in through an unguarded cat flap. I am disappointed in him.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I am sufficiently told off, and I can see that there is a problem. Perhaps we should examine that patent and see whether it could be effective. Maybe the right hon. Gentleman would like to join me and see whether we could market it.

It is important that we keep the matter on the agenda, because there is still great concern about whether the larger firms have extra power and ability. It is important that the Patent Office is effective. Part of the reason for putting forward patents that went through in the past was to indicate that it is important that the Patent Office is vigilant and effective in ensuring that patents are watertight, that people are advised well and that things are done in proper order. We will wait to see whether more people approach us on that issue, but on the basis that it has been aired, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Clause 5 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 6 ordered to stand part of the Bill.

Clause 7 - Restrictions on applications abroad by United Kingdom residents

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I beg to move amendment No. 14, in clause 7, page 3, line 42, leave out 'national security' and insert

'the defence of the realm'.

I want to highlight a concern of mine that others share. The amendment is clear in expressing concern that the comptroller can make directions in any circumstances in which there is a need to protect the national security interest of the United Kingdom. The phrase ''national security'' is much wider-ranging than ''defence of the realm'', and it could be interpreted as being a much more intangible test. I ask the Minister to clarify why the Government feel it necessary to make a change of wording; there must be some reason for it. I would like him to justify it, because there are concerns that we are slightly tinkering at the edges of issues of security and the protection of individual rights.

Gerry Sutcliffe (Labour, Bradford South)

I understand the hon. Gentleman's concerns. It would be most unsatisfactory if the limitations on filing patent applications abroad that are present in section 23 of the Patents Act 1977 were made worse not better. Clause 7 is significantly deregulatory and reduces the section 23 restrictions on the filing of patent applications in other countries. Restrictions will remain only where an application relates to sensitive subject matter, which, if published, would be prejudicial to national security or to the public's safety.

The hon. Gentleman queried the scope of ''national security'' in section 23. I believe, however, that he might be concerned about too many patent applications not being published if that term was too broad in scope. Therefore, he may be more concerned about the use of the term ''national security'' in relation to section 22 of the 1977 Act. Paragraph 7 of schedule 2 of this Bill would change ''defence of the realm'' to ''national security''. Section 22 of the 1977 Act currently permits the comptroller to give directions prohibiting or restricting the publication of information in a patent application that might be prejudicial to the defence of the realm. Naturally, I would not want the provision to be broader than is necessary to ensure proper protection in a sensitive area. It is part of the deal with the state that when a patent is applied for or granted the information in the patent application or patent will be published so that others will be aware of, and can develop their inventions, in the light of other people's ideas. That is one way in which patents support innovation. They provide a comprehensive database of the latest technological developments to which everyone can have access. In amending section 22 of the 1977 Act by changing the words ''defence of the realm'' to ''national security'', we do not intend that there should be a broadening of what information can be prohibited in dissemination. We intend only to bring the wording of the Act into line with other legislation and with modern terminology, such as that used in paragraph 3(2) of the schedule to the Export Control Act 2002.

In deregulating section 23, so that it applies only to sensitive applications that might be made abroad, it is sensible to use the same modern terminology as is proposed for section 22.

I hope that the hon. Gentleman will accept my reassurance that the measure is not about restricting and agree to withdraw his amendment.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

How could I resist the Minister's reassurance? I feel great confidence now that he has reassured me doubly and trebly. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clauses 8 and 9 ordered to stand part of the Bill.

Clause 10 - Compensation of employees for certain inventions

James Arbuthnot (Conservative, North East Hampshire)

On Second Reading, I said that I did not understand the need for this change. The current law says that where an employee has made an invention that belongs to the employer, and as a result there is an outstanding benefit to the employer, the employee shall be entitled to compensation, provided that the existence of the patent is of outstanding benefit to the employer. The clause changes that so that the outstanding benefit refers not only to the existence of the patent but to the existence of the invention, or a combination of the two.

On Second Reading, I said that I did not understand the basis of the existing law. I do not understand why it is necessary to provide special compensation arrangements for employees who make outstanding inventions, when it is not set down in law that employees who make outstanding marketing contributions to those inventions should get special compensation. I do not understand the current law, still less the need to extend it, thereby extending the anomalies that inevitably already exist.

On Second Reading, I said that if an employee makes an invention and the employer applies for a patent, the compensation provisions arise, but if an employee makes an invention and the employer decides to keep it secret, they do not. The anomalies between inventors, marketers, financiers and all the other employees who contribute to the success of an invention are already bad enough, and to extend them is bizarre. Perhaps the Minister has some frightfully good reasons for that. This is not something on which I would wish to go to the stake, but it requires considerable justification.

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman is right to raise the issue. I will tell him why we considered the measure again. The principle of the outstanding benefit scheme was first adopted in the 1977 Act after great debate and consultation. I will explain some of the consultation that has taken place this time.

Increasingly, successful UK businesses have a highly skilled work force working in technologically advanced industries, such as pharmaceuticals, telecommunications and those producing computer and office equipment. In those industries, the creativity and inventiveness of the work force is essential to the continued progress and development of companies. Sustaining the motivation and interest of such highly skilled staff is important if such businesses are to grow—

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

Standing Committee D

Clause 10 - Compensation of employees for certain inventions

Sir David Amess (Conservative, Southend West)

For the convenience of the Committee, I have decided to select starred amendment No. 15 to schedule 2.

Gerry Sutcliffe (Labour, Bradford South)

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.

James Arbuthnot (Conservative, North East Hampshire)

I am grateful to the Minister, but that was completely unconvincing. I castigated the hon. Member for Weston-super-Mare (Brian Cotter) for

attempting to introduce an innovative change to the Bill without consultation. The logic of what I was saying was that one would have to change the 1977 Act to get rid of the whole of the employee compensation provisions, which I would ideally like to do. The Bill is not the place to do that, however, so I am content not to divide the Committee on the clause.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 11 ordered to stand part of the Bill.

Clause 12 - Threats of infringement proceedings

James Arbuthnot (Conservative, North East Hampshire)

I beg to move amendment No. 5, in clause 12, page 6, line 35, leave out from beginning to 'for' and insert 'Relief under subsection 3(b) or (c) above (injunction, interdict or damages) shall not be granted'. This is a rather complicated issue, and I apologise for perhaps giving the impression of not entirely understanding my own amendment—let me work through it. The threats action was first introduced as a result of a case in the chancery division in 1881 involving the Halcyon brotherhood. In that case, the Court of Appeal ruled that in common law no action lay to recover the damage caused by threats of patent infringements proceedings that turned out to be unjustified in the absence of malice. Enormous commercial damage can be done by such threats, especially if they are directed against the customers of a competitor of the patentee. The customers will not be interested in getting mixed up in a patent action and will stop buying the goods. That lacuna in the law was addressed by Parliament in the patent and design legislation of 1888. The statutory threats action was carried forward into successive Acts. It covered threats made to anyone, not just customers, and included, for example, threats made by a patentee direct to his manufacturing competitor—although in practice such a threat is unlikely to cause damage in the same way as a threat to customers The 1977 Act narrowed the threats action by excluding threats made in respect of importing or manufacturing a product or using a process. The intention was that threats made to principal alleged infringers would be excluded from the action, but threats made to customers would be covered. However, in 1996, in the case of Cavity Trays Limited v. RMC Panel Products, the Court of Appeal said that people would still be covered by the threats action if they sent a letter to a manufacturer saying that they would sue him for infringement for manufacturing and selling. That is a bit illogical because people would almost always want to sue a manufacturer for selling the alleged infringing products as well as making them. The Bill would amend section 74 of the 1977 Act to correct that anomaly.

There are other anomalies. In the case of patents for processes or methods, the customer is often the primary infringer—for example, where a machine that operates in a particular way is sold to customers. It can be essential for a manufacturer to get the problem of infringement resolved once an allegation is made against him. Sometimes he can use section 71—a declaration of non-infringement. I suspect that the Minister will refer to that in his reply, but that can be an unsatisfactory method because it is cumbersome and requires the applicant to furnish full particulars in writing of his proposed act and to wait for a period until the patentee responds. In practice, patentees almost always respond to such requests by asking for further nit-picking details. Dealing with the key practical point in disputes where one party is abroad and another is based in the UK is the effect of article 5(3) of the Brussels convention—now known as the Brussels regulation—on civil jurisdiction, which requires that cases are brought either in the defendant's country of residence or, in the case of tort, in the country where ''the harmful event occurs''. That would include a person abroad who sends a threat to a British manufacturing company to sue for infringement of a British patent or a European patent (UK). Under the Bill, such a company would be unable to sue for threats and might be unable to get the infringement determined at all in the British courts until the threatener chooses to take action. It is not unknown for threateners to be happy to make threats that cause commercial damage and then take their time in going to court. The amendment would allow the British company to go to court in Britain and seek at least the declaration. The drawback is that it is possible that huge costs would still follow the event. There is a balance to be drawn. Mr. Sutcliffe: I am grateful to the right hon. Gentleman for carefully explaining the purpose of his amendment, which would allow any alleged infringer to launch proceedings for groundless threats and to get a declaration from the courts that they were unjustified. The threats would be unjustified if no infringement had taken place. The alleged infringer would essentially be launching proceedings to ask the court to consider an infringement and, where appropriate, to declare that it was not taking place.

I agree that it is desirable for an alleged infringer to be able to ask that question of the courts or the comptroller of the Patent Office. Fortunately, Parliament also thought that that was desirable when it considered the provisions of the 1977 Act. If the right hon. Gentleman looks at section 71, which he suggested I would refer to, he will see that anyone can ask the courts or the comptroller for a declaration of non-infringement. That provides the sort of mechanism that the right hon. Gentleman seeks.

The inclusion of a procedure for a declaration of non-infringement counterbalances a patent holder's right to bring infringement proceedings. Without it, an alleged infringer who wanted the court or comptroller

to determine whether an infringement was occurring would have to wait for the patent holder to launch infringement proceedings. Section 71 avoids that problem by providing the alleged infringer with a route to launch proceedings to resolve the problem.

Before the alleged infringer launches such proceedings, he must have approached the patent holder to attempt to get an acknowledgement that infringement is not occurring. If that is not forthcoming, the alleged infringer is entitled to ask the courts or the comptroller to resolve the issue. It is right that the statute encourages the parties to come to an agreement before proceedings are launched. As an aside, it is worth noting that the new opinions procedure, which we will come to later, will also help in this regard.

I took note of what the right hon. Gentleman said about the European position and will reflect on that. However, I am satisfied that there are provisions in the 1997 Act that meet his concerns, and, with the assurance that we will look at this matter on Report, I ask him to withdraw the amendment.

James Arbuthnot (Conservative, North East Hampshire)

The Minister has helpfully set out that he will consider further the overseas position and the Brussels convention. On that basis, I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 ordered to stand part of the Bill

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

James Arbuthnot (Conservative, North East Hampshire)

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.''.'.

James Arbuthnot (Conservative, North East Hampshire)

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.

Gerry Sutcliffe (Labour, Bradford South)

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.

James Arbuthnot (Conservative, North East Hampshire)

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.

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

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

Malcolm Bruce (Liberal Democrat, Gordon)

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.

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman raises an important point. I wonder whether he can help me along. Where will these technical people, covering the range of issues he mentions, come from?

Malcolm Bruce (Liberal Democrat, Gordon)

As I understand it, the system would be a bit like a peer group assessment. Basically, if the patent in question is a pharmaceutical patent, one gets independent pharmaceutical experts. If it is a software patent, one gets independent software experts. The argument is that experts with an objective view and expert knowledge would be more informed. The problem for a judge is that very often the information will be completely outside his area of experience or beyond his competence to evaluate. That is no criticism of the judges. After all, what they are evaluating is the intellectual property in a patent. Only people who have a concept and understanding of the particular intellectual property arguments in dispute can really do that. The counter-question to the Minister is this: if one does not bring in that expertise, how on earth can the matter be resolved fairly and objectively?

Of course, the proposal is that the procedures be compulsory. That would force the parties to communicate and even up the balance between big and small companies. That could lead to more out-of-court settlements, which the Government are keen to have. That would be in everybody's interests and would reduce the costs of enforcing the law.

Ian Liddell-Grainger (Conservative, Bridgwater)

The hon. Gentleman makes a valid point, but he may remember that Microsoft took on the American Government and won. We will not get people who have the capability to look at such cases in an arbitrary way. One manufacturer took on IBM, and IBM's entire aim was to bankrupt that person. We will not get people who are far enough away from any one concern to undertake that employment.

Malcolm Bruce (Liberal Democrat, Gordon)

The hon. Gentleman raises a legitimate point of concern, but I counter it by saying that if no attempt is made to do what I suggest, that gives Microsoft or IBM a completely free rein. I do not believe that there are not people—probably ex-employees of the likes of Microsoft and IBM—who are in a position to make an independent judgment.

The hon. Gentleman offers a poor argument for not trying. The counter to it is that it would, effectively, concede that the big guys always win because they have the ability to bankroll the litigation to the point where the small guy has to back up and go away. That is the concern. As 95 per cent. of useful inventions come from small businesses—to repeat a statistic—this is not a fringe issue, but central to what patents are all about.

A binding opinion would give smaller firms greater certainty. If an alleged infringer still decided to go to court even after expert opinion had found against them, the patent holder would have the comfort of knowing that the judge could take that expert opinion into account. The judge will, of course, make his own independent evaluation, but at least he has an expert view to draw on. An alleged infringer who did not have

a real case, but who had the resources to question the validity of a rival's patent, would be deterred from going to court in the first place if an independent judgment suggested that he would lose. The alleged infringer would not automatically be guaranteed to win simply because they had the resources to take things to the nth degree. That point might be relevant to the hon. Gentleman's intervention.

The new clause would help to even the balance. We think that it is worthy of serious consideration, and that is what we are asking the Government to do. I am not going to force a Division, and I do not think that the Minister would expect me to, but he should accept that this is a serious proposition. Also, if the patent enforcement project has validity, the Government should at least consider its recommendations. It is a problem that we are considering the Bill before the consultation has reported. I do not wish to detain the Committee, but it might have been more desirable had we dealt with the Bill after the consultation. Nevertheless, the Government can, perhaps, take that it into account, so that small firms are in a better position as a result.

Another option has been suggested. Instead of setting up the compulsory binding expert arbitration, a fighting fund might be provided for small and medium-sized enterprises. If they were able to draw down on such funds, that would even up the imbalance. In his report ''Making Patents Useful to Small Firms'', Professor William Kingston of Trinity college, Dublin suggests that an obvious source of funding would be the subsidy paid to the national offices by the European Patent Office, which he claims is currently running at Euros 250 million. I am not sure whether he is being facetious, but I am less attracted than him to that proposition because all it would do is set up a fund that small businesses can draw on to even up the balance.

The proposal that there should be expert binding arbitration is a move in the right direction. We should ask, ''How good is the intellectual property?'' rather than, ''Who has the deepest pockets?'' That is the crux of the argument. Can we not ensure that the Bill allows justice and fairness and does not give the spoils to the bigger operators, so that they can put the small guy out of business?

James Arbuthnot (Conservative, North East Hampshire)

The hon. Member for Gordon (Malcolm Bruce) has given an interesting expose of an important argument. The aim behind the non-binding opinion proposal is to encourage people not to go straight to court because they have an alternative method of resolving patent disputes, by negotiation if possible. That is a laudable aim, and we would like it to come true. However, I am not quite sure how it will be achieved—perhaps the Minister can set that out in his response.

I do not know whether compulsory binding technical arbitration is the answer, but it may be. It is easy to pick holes in new clause 1, but if we do not go down that route, how does the Minister intend to support small and medium-sized enterprises that find

the cost of litigation completely unaffordable? It is not surprising that it costs £1 million to take a patent enforcement action, because it deals with highly technical issues of great difficulty and involves expensive scientists and lawyers—and I declare an interest as an expensive lawyer. It is necessary to find small and medium-sized enterprises a small degree of relief. If the Minister intends to pick holes in the new clause, it will be interesting to hear what he is going to do instead.

The Minister, as graciously as ever, said that he supports the patent enforcement project, yet somehow it always seems to be just over horizon; it is about to report—but not yet. I would love to know when it will report and whether, when it does so, it will produce anything to help small and medium-sized enterprises. The Minister asked the hon. Member for Gordon where the technical experts were to come from. In a sense, his intervention contained an implication of despair—namely, that technical issues in patents cases have to be decided by the ignorant. That is not necessarily true.

Gerry Sutcliffe (Labour, Bradford South)

I am not suggesting that things are hopeless, or that all this is about people who have no knowledge of the matter. The right hon. Gentleman knows that the patents county court, which I will mention on winding up, has a user group comprised of technical people. Mandy Haberman, one of the people to whom the hon. Member for Gordon referred, is a member of the patents county court user group. There are experts, but they operate in a particular framework.

James Arbuthnot (Conservative, North East Hampshire)

Yes, and that is fine as long as we do not have biotechnologists examining the difficulties of computer software. That is the sort of issue that we should consider. Many countries make greater use of court-appointed experts, but the leaders in their fields do not necessarily go in for that sort of work. If the Minister does not like this, what is he going to do instead?

Gerry Sutcliffe (Labour, Bradford South)

As ever, we have had a useful debate on issues affecting many of the people involved with patents, including small and large companies. It has always been the intention of the Secretary of State, of the Department of Trade and Industry and of Ministers to do whatever we can to support small businesses. The Small Business Service considers regulation issues to ensure that there is an impact on small businesses. Hon. Members should consider the Bill in the wider context of the DTI's and the Government's motivation and their concern with small businesses.

We keep returning to why the Bill is being introduced now, why we do not wait until the enforcement project reports and why we are not considering other issues as we progress. There was a great deal of debate on Second Reading about things that were not in the Bill, but which should have been. I acknowledge that some hon. Members have concerns about that. The reason that I gave for the Bill's being

processed now, and why it was urgent to do so, was that we had to bring UK patent law in line with the European patent convention. However, that does not mean that Europe has forced us into it. We are key players in the convention.

It would be wrong to delay the Bill until the results of the research of the patent enforcement project are known. Failure to bring UK law into line with the EPC provisions would mean that the UK was outside, and we would have to leave the convention. We discussed earlier how disastrous that would be. Nobody has introduced that as a possibility—it would be detrimental to all UK stakeholders.

James Arbuthnot (Conservative, North East Hampshire)

It would have been wrong to delay the Bill. I was not suggesting that; I was just saying that the patent enforcement project was being delayed.

Gerry Sutcliffe (Labour, Bradford South)

The right hon. Gentleman will know, from his years of experience, that it is important to get these things right. He would not want us to rush into making decisions that were wrong. The patent enforcement project report will be here in the summer, although I know that the definition of ''summer'' varies depending on which Department people talk to.

Within the project, there is an issue around the fighting fund, which, if we introduce it, might mean that we do not have to rely on primary legislation. That could still flow from this, and I know that discussions will take place. People accept that delaying the Bill would have caused problems that nobody wanted.

I should have welcomed the hon. Member for Gordon this afternoon; as usual, it is a delight to see him. He has argued for his new clause, following the strong contributions from the hon. Member for Weston-super-Mare this morning.

The right to control who is allowed to exploit an invention covered by a patent is legally enforceable and resides with the patent holder. That right is challenged if a third party does something that the patent holder believes is covered by the patent. For example, a third party might produce competing goods, using a process that the patent holder believes falls within the scope of his patent. At that point, the patent holder would have to decide how best to deal with that challenge. He would want to stop the third party from carrying out what he believed was an infringement, because that would reduce his ability to gain commercially from the patent.

That is the purpose of the whole exercise. The patent holder takes out the patent to recoup the investment that he made, having come up with the invention in the first place. A third party should not be able to piggyback on the work of the patent holder without paying him. The third party could agree to pay him a licence fee for the use of the patent, or agree to stop any infringing behaviour and reimburse him financially for any unfair use.

However, the third party may argue that what he is doing is not covered by the patent, and is therefore not an infringement, and that he is merely providing a

product that competes with the patent holder's, using an alternative process, which, although it may bear some similarity to the patented process, does not fall within the scope of the patent.That is the key issue. There has to be a balance between giving the patent holder the exclusive right to prevent others from exploiting his invention without his permission, so that he gains commercially from his efforts, and making sure that such exclusive rights do not inhibit others from entering the market and providing fair competition, so that the public can have access to a wide range of products at an affordable price. For that reason it is important, as we said during consideration of clause 13, that the patent for an invention that is the subject of such a dispute, which would provide the basis for an exclusive right, should be valid.

In new clause 1, subsection (2) would put in place a new ''technical arbitration'' procedure, which would have to be used to decide whether infringement of a patent had taken place before any infringement proceedings could be brought before a court. It appears to follow from subsection (4) of the new clause that the comptroller would continue to have jurisdiction under section 61(3) of the 1977 Act, although he might decline jurisdiction in favour of a technical arbitration.

Subsections (5) to (8) would make corresponding changes to other provisions of the 1977 Act, giving jurisdiction to the comptroller or the courts. Technical arbitration would have to be used in the context of threats actions under section 70 and declarations of non-infringement under section 71, although it appears that, in the latter case, the provision would still be intended to be without prejudice to the jurisdiction of the courts under common law.

The proposal appears to raise more questions than it answers, although I do not mean that as an attack on the hon. Member for Gordon. For example, arbitration usually requires the agreement of two parties in dispute to enter the process and to be bound by the result. However, under subsection (1) of the new clause, such agreement would be a compulsory ingredient of every patent application; it is currently one of a range of available alternatives. The new clause would not provide anything not already available. Indeed, infringement proceedings before the comptroller under section 61(3) can be regarded as a kind of arbitration by technically skilled experts at the Patent Office, as the parties have to agree to the dispute being decided before the comptroller.

Perhaps the only novelty of the proposed procedure is that it removes any element of choice. Is it appropriate to compel people to use a process in this way? Is it appropriate to have only one forum to decide such issues? Presumably it is intended that some kind of appeal should be available to alleged infringers who lose their case before the arbitrators, although, as the new clause is drafted, it is difficult to see how that appeal mechanism would arise.

It is important that binding decisions on infringement, which have important economic repercussions for the alleged infringer, should not be made by a single forum without any possibility for

appeal or review. What if the decision were wrong, or some serious abuse or error had taken place? The reason why I asked where the technical experts will come from was that in some areas of technology things are growing and developing rapidly. We wonder whether enough technical experts will be available. The hon. Gentleman answered that by saying that experts from industry would be involved, but that creates its own problems. Will experts working in industry be suitable or will they be considered to have an interest in the outcome depending on which company they work for? Will experts in academia be suitable? Are they likely to be up to date or will they have a problem because of their perceived increasing dependence on funding from industry for their research? They might be funded by a company that has an interest in the outcome. Would the experts come from the Patent Office, or are they considered to be too closely involved in the granting of a patent that is under dispute?

That latter point suggests another problem with the procedure: it does not take it into account that in infringement disputes the alleged infringer often raises the defence that the patent is not valid. That issue then needs to be explored, because an invalid patent cannot be infringed.

Lastly, there is the problem that the procedure would appear to increase the number of litigation steps that would have to take place before the issue was finally decided. That would be a big step backwards, and I hope that the Committee accepts that. Technical arbitration could decide whether or not infringement had occurred, but separate civil proceedings would be required to decide the relief that would be provided to the patent holder if the allegation of infringement were upheld—hon. Members may refer to new clause 1(2). Separate revocation proceedings would seem to be the only way that an alleged infringer would be able to raise the defence of invalidity. As I have mentioned, some mechanism of appeal would have to be provided for, although it is not part of the current proposal.

Despite the allegation put forward by some that big companies are always blatantly infringing the patents of little companies and relying on their financial clout and on time-consuming procedures to avoid having to face any legal consequences of their actions, few infringement cases are so simple and easy to decide. Although disputes on infringement often require careful consideration of technical issues concerned with the products or processes that are being compared, they also involve consideration of legal issues, such as the weight and value to be put on certain statements and what is relevant material. To separate those two kinds of issues, as the proposed new clause implies, or even to reduce them merely to consideration of technical issues, is too simplistic an approach. In any case, the courts and the Patent Office both have the power to use advisers to assist them in their work should the need arise. That is shown, for example, in section 122(5) of the 1977 Act.

The hon. Gentleman will not be surprised if I conclude that the new clause causes more problems than it provides solutions for. It confuses the situation

and will do little to encourage patent disputes to be settled before expensive, time-consuming and financially draining litigation is undertaken. I do not see that the proposal would be any more helpful in resolving disputes between two small or medium-sized enterprises than the one in clause 13.

The system is in place in terms of the procedures that are proposed in the Bill. We should give the patents county court some opportunity to develop. It had a slow start, as I accepted on Second Reading. The users group is in place, as are the procedures, and I hope that with that explanation the hon. Gentleman will withdraw the new clause.

Malcolm Bruce (Liberal Democrat, Gordon)

I thank the Minister for that answer. Obviously, it does not surprise me that he would take that view. I do not wish to press the new clause to a Division, but I ask that he will continue to keep his mind open on some of those issues. We have established that the status quo is unsatisfactory and that there is a widespread belief that the Bill will not make a huge difference. The new clause was simply an attempt to see whether we could explore some other avenues that might help to secure a resolution.

If the issue of experts is a problem, presumably it will also be a problem for the courts. Therefore, it is a problem whatever happens. It is possible that making that an established part of the process will make it become less of a problem, because experts would become more available. It concerns me that what would otherwise happen is that when the dispute reaches court, it is the party that has been able to buy the most powerful expertise that wins, rather than there being an objective decision. I ask the Minister consider keeping the lines of communication open with the Patent Reform Group and others.

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman was not present earlier when I gave the commitment that discussions would continue to take place during the life of the Bill; important improvements could be made to it. This morning, I made the point that there has been lots of consultation on the Bill and the circumstances relating to it However, we will look at everything that is put to us during the lifetime of the Bill before Report.

Malcolm Bruce (Liberal Democrat, Gordon)

I am grateful for those comments.As I said, we cannot judge the situation by the number of cases because the problem is that people fall away when they cannot maintain their actions. It is important that that is taken into account. People with big pockets are effectively winning by default against people who do not have the resources.

The Minister referred to the complexity of the issues, and I agree. Intellectual property is a complex matter by definition but, as in all legal matters, complexity plays into the hands of those with the deepest pockets. Therefore, we still have to find a simple and pragmatic way of resolving this by limiting the process and the costs. The new clause is an attempt to do that. It may not be the perfect answer but, if I

may say so, I do not think that the Bill is the perfect answer either. Keeping the consultation open, and seeing whether we can come up with a better compromise, would be a good outcome.

Question put and agreed to.

Clause 13 ordered to stand part of the Bill.

Clauses 14 and 15 ordered to stand part of the Bill.

Schedule 2 - Minor and consequential amendments

Gerry Sutcliffe (Labour, Bradford South)

I beg to move amendment No. 15, in schedule 2, page 12, line 24, at end insert—

'In section 1 (patentable inventions), in subsection (1)(d), after ''subsections (2) and (3)'' there is inserted ''or section 4A''.'.

We addressed Opposition amendment No. 1 this morning, and the Government accepted the principle that the right hon. Member for North-East Hampshire identified about the patents. I will explain the background first, and the rest should flow from that.

In the interests of public health, a patent cannot be granted for an invention that comprises a medical method—that is, a method of treatment or diagnosis. If such a patent is granted, anyone can later ask the courts or the Patent Office to revoke it. The Bill simplifies the legal mechanism by which such medical methods are excluded from patentability, and in doing so aligns UK law with the revised European patent convention.

The right hon. Gentleman argued that the new provision might give rise to doubt over whether, if a patent is granted for such an invention in the future, it could be revoked later. If someone wished to revoke a patent that had been granted for a method or treatment, it is possible that they could argue successfully for revocation on the grounds that new section 4A makes it clear that a patent may not be granted for a medical method invention, so the courts could well deduce that it was never the Bill's intention to remove the possibility of revoking a patent for a medical method. Nevertheless, I can see that this is a less certain position than at present, and it is better to ensure that we continue to provide this outcome explicitly in UK patent law. We saw the benefits of addressing the issue that the right hon. Gentleman raised, but we have chosen a slightly different form of words to achieve what we think he intended to achieve.

Amendment agreed to.

James Arbuthnot (Conservative, North East Hampshire)

I beg to move amendment No. 3, in

schedule 2, page 12, line 36, at end insert—

'(5A) In section 16 (publication of application), at the end there is inserted—

''(3) The Comptroller will keep confidential the address of any inventor or applicant (if also the inventor) if requested by the inventor to do so.''.'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments: No. 4, in

schedule 2, page 15, line 6, at end insert

'and subject to section 24(4) (publication and certificate of grant)'.

No. 2, in

schedule 2, page 13, leave out lines 27 to 29 and insert—

'(4) The Comptroller will keep confidential the address of any inventor or applicant (if also an inventor) if requested by the inventor to do so.'.

James Arbuthnot (Conservative, North East Hampshire)

In another place, the concerns of bioscientists were addressed by making the identity of inventors confidential in schedule 2. The bioindustry raised with me the problem that I brought up on Second Reading that what really needs to be kept confidential to protect the safety of bioscientists from animal rights activists is not their identity but their address. If their identity is also protected, that makes it harder to do a search against known inventors for important inventions, which makes it more difficult to discover whether a patent exists. The purpose of the amendments is to discover whether it might be better to keep inventors' addresses confidential instead of their names, in the hope that that would provide some protection for bioscientists without causing difficulty for the BioIndustry Association.

How will the measure work in practice in relation to other European countries, which may have different rules about confidentiality? Will it be possible to look up on a German patent office website the name and address of an inventor, despite the fact that the name, address or both is kept secret on the UK Patent Office website? I would be grateful if the Minister addressed those concerns and talked us through how, in practice, international confidentiality is expected to work, and what he thinks is the right way forward for protecting scientists and allowing searches for bioindustry inventions.

Gerry Sutcliffe (Labour, Bradford South)

Once again, I thank the right hon. Gentleman for pushing the Government and trying to tease out why we want to deal with the problem. He raised the issue on Second Reading, and is quite right to say that it was raised in the other place, too.

I think the right hon. Gentleman accepts that the wording of his amendment would not necessarily resolve the problem in the way that he would like. However, it is the spirit of the amendment and what he is trying to achieve that we need to consider. We all agree that a balance has to be struck between the public's right of access to information about patents and the rights of individuals to have their personal details protected.

As the right hon. Gentleman knows, we originally proposed that an inventor should be able to have his address kept confidential by the Patent Office, but in another place we heard persuasive arguments from the Opposition parties that that did not go far enough, particularly when it came to protecting inventors employed by businesses involved in controversial technologies. We all know of the examples raised in the various debates. The noble Lords pointed out that an inventor's address would be all too easy to find if he had a name that was the least bit unusual—unlike Arbuthnot, which is not unusual in any way. Furthermore, it is worth knowing that in all likelihood the patent applicant will be the inventor's employer. It

would be even easier to locate the inventor, given that the identity and location of his employer would be known.

The right hon. Gentleman's concern about the potential loss of a tool for searching patent databases was certainly considered in another place. I reassure him that the point did not pass us by when we balanced up the competing arguments. We listened to the points made in another place and were persuaded that our original proposal, to which the right hon. Gentleman would like us to return, did not quite get the balance right. It provided little or no real protection for inventors working on controversial technologies. We introduced amendments to make it possible for an inventor to have both his name and address kept confidential by the Patent Office in appropriate circumstances. That will give some protection to those inventors—they are no doubt a small minority—who wish to have such protection, without having a significant effect on the information about patents and applications that is publicly available.

For the sake of completeness, I should mention that that will not be an option if the inventor is also the patent applicant. In that case, his name and address will have to remain available to the public. It is, of course, right that the public always know to whom patent rights have been awarded, and who is requesting those rights.

James Arbuthnot (Conservative, North East Hampshire)

Why is it necessary for the home address of the person to be given out? Is it not permissible simply to make available the business address of the patent holder?

Gerry Sutcliffe (Labour, Bradford South)

The requirement is for the home address, but I shall reflect on that and let the right hon. Gentleman know the exact details in writing—unless, by a miracle, the answer comes before I finish.

We were talking about UK patent law and what happens in the rest of Europe. I do not want to minimise those concerns, because I have been made aware by lots of industries, particularly the controversial ones, about the extent to which individuals are put under pressure. There are reprehensible attacks on people's homes and, in some cases, even on the businesses supplying the technology.

The benefits of confidentiality in the UK may be limited where the inventor's employers choose to apply for patents in countries where no such confidentiality is available. Confidentiality is available for inventors who are associated with European patents. If other countries follow suit, that will help, too. The fact that confidentiality is not available in every other country is not a reason for doing nothing or for failing to offer the limited protection that it is in our power to provide.

People do not have to use the home address. The business address can be used, but even if it is, it is not beyond the realms of possibility that people can be identified. I hope that the right hon. Gentleman accepts that explanation.

James Arbuthnot (Conservative, North East Hampshire)

I accept what the Minister says. This is an important, fundamental rule-of-law issue. We need to protect scientists going about their ordinary lives, and we need to protect their families and people with whom they do business. I accept that it is essential, in the interests of the freedoms of this country, that we protect them. Nevertheless, in drawing the right balance, it is important that people should be able to search for patents. I am grateful for his explanation. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2, as amended, agreed to.

Schedule 3 agreed to.

Clauses 16 and 17 ordered to stand part of the Bill.

New Clause 2 - Two patent grant system

Malcolm Bruce (Liberal Democrat, Gordon)

I beg to move, That the clause be read a Second time.

The new clause is intended to deal with what people might call vanity patents, whereby people try to record a patent simply to say, ''I am an inventor and I have secured a patent'', rather than to apply it commercially. If there were a two-stage process, we could simplify the procedure and ensure that all commercial patents got the full treatment. On Second Reading, my hon. Friend the Member for Weston-super-Mare revealed that vanity patents of somewhat dubious character have gone through the whole process. The serious point is that the new clause intends to create a two-stage patent grant system that will free up time spent on vanity patents.

As we have discussed, obtaining a patent can be expensive. Official estimates suggest that it can cost around Euros 50,000 to obtain a patent in the EU. A small firm will have to pay the Patent Office hundreds of pounds to endorse their invention in a process that can take more than three years. A patent holder wants to be confident that the patent that he has purchased is worth the paper it is written on and will not be endlessly challenged.

Vanity patents mean that the Patent Office is diverted and has to spend much time examining ideas that were never intended for commercial use. We discussed some of the more ridiculous ideas on Second Reading, and there may be one or two more. Patent No. 1047735 is a plan to

''get snowballs of 10 ft in diameter to run down mountains in Antarctica, attaining speeds of about 500 mph, then being piped to Australia where they could be used to solve the world's famine problems.''

That is a genuine patent with its own number. Patent No. 1426698 is a plan for

''an automatic defence deterrent to solve the cold war problem'',

which has been solved by other means. It would work by the UN placing

''nuclear bombs on three earth-orbiting satellites. If those satellites detected that one of the superpowers had been nuked, the bombs would automatically drop on Washington, Moscow and Peking, thus ensuring mutual destruction of all three.''—[Official Report, 7 June 2004; Vol. 58, c. 422.]

The idea that the Patent Office has spent serious time considering that as a piece of intellectual property that should be recorded and given a due number demonstrates that we do not need to use such resources, at least not to their full extent.

The Patent Office has suffered from a lack of resources in the past. To explain its rationale for contracting out several patent examinations to Denmark in March 2002, it admitted that the decision was

''part of wider efforts to deal with the rising input of patent work, which has, so far, not been matched by our ability to recruit and retain examining staff.''

My proposal is for a two-stage patenting process, which practically exists already. The Patent Office currently performs a preliminary search, and, subject to the patentee's agreeing to a full search and further fees, a full search is performed. Rejection can occur at a preliminary stage as well as later. The proposal for a two-stage patenting proposal allows the Patent Office to issue a preliminary patent grant certificate that should meet many of the needs of vanity patenting. As a full search has not been conducted at that point, the Patent Office cannot then be held responsible for any prior invention that it may have missed in the process. The new clause covers that point.

Under the proposal, a full search would be initiated only by those who seek a full patent, which could then be exploited for commercial purposes. This time, the Patent Office would be bound by the new clause to do its work thoroughly, because it would be held responsible for any errors made. In other words, the preliminary view says, ''Yes, you have a clever idea; you can record it.'' The thorough view, which follows,

says, ''We have now done an exhaustive search, and you have a commercially protected patent, which has the full status of patent protection.'' We contend that such a proposal could free the time of the patent office to examine commercially viable inventions, and give those patent holders more confidence in the service that they are buying when purchasing a patent.

The new clause makes a simple point. We could all list the endless ridiculous patents that have been recorded, but the point is that they are harmless if they do not take up too much time and effort and can be dealt with in a simple way. It is absurd that an awful lot of time and effort seems to be expended on recording those patents, and that there is no distinction between a vanity patent and a serious commercial patent. I would be interested to hear whether the Minister agrees that that is a real problem, and whether there is a system, such as that in this new clause, that would meet the needs of inventors who want their inventions recorded for posterity, while concentrating the resources of the Patent Office where they are most needed, ensuring that commercial patents are properly explored, processed and protected.

James Arbuthnot (Conservative, North East Hampshire)

The hon. Member for Gordon speaks to this apparently minor new clause very engagingly. However, he concentrates on the issue of least importance in the new clause, namely the vanity patent. The issue of greatest importance is that the Patent Office would have its immunity removed by section 116 of the 1977 Act. The Patent Office would be immune only in relation to vanity patents. The issue that the hon. Gentleman is creating is that the Patent Office is to be liable for all patents except vanity patents.

That would be an interesting development, and I am not sure what effect it would have on the Patent Office, but I am sure that the response of the Chancellor would be one of deep concern. I am surprised that this contingent liability that the hon. Member for Gordon would create in the new clause has not been ruled it out of order—since your decision is always right, Mr. Amess, I am sure that it is in order. I will be interested to hear what the Minister says about it.

Paul Flynn (Labour, Newport West)

Very engaging examples have been given by the hon. Member for Gordon, but the suggestion of a patent for three nuclear weapons in space sounds similar to a proposal by a past American President; it is of similar practical value. The difficulty would be finding people who decide which are the vanity patents and which have some practical application. I do not think that the Patent Office has any record of making decisions of that kind; it makes decisions on originality and on whether there are other examples of the patents around, but I do not think that at present it has the training or skills to make judgments on practicality.

If the new clause were accepted, there would be a new opportunity for a new grade of patent examiners to decide whether to have a vanity President of the

United States, or other such crackpot suggestions. However, that would mean major extensions of the skills required at the Patent Office.

Gerry Sutcliffe (Labour, Bradford South)

As the right hon. Member for North-East Hampshire says, the hon. Member for Gordon is very engaging, and I almost wish that I could support what he says. However, again it falls to me to say that we are not happy with his suggestion. I refer not to the way in which he made it, but to its detail.

He wants to put forward a two-tier patent system; we are in favour of a two-stage system, which we believe works. On Second Reading, the hon. Member for Weston-super-Mare gave us example after example of patents that he thought were not appropriate for development. I am sure that, had the time been available, he would have given many more examples.

We feel that the two-stage system is better than the two-tier system. The right hon. Member for North-East Hampshire highlighted one of the main reasons for the objection, as did my hon. Friend the Member for Newport, West (Paul Flynn). The 1977 Act provides two distinct stages in the process of granting a patent. The first—the preliminary examination and search stage—permits every patent applicant to assess the likelihood that he will be granted a patent, after he has the results of the search of relevant prior art. For those who merely want their idea published, the patent application is published after the preliminary examination and search.

The second stage, the substantive examination stage, is for those who assess that it is worth going on to seek the granting of the patent. We believe that the two-stage process is appropriate, and I have to reject the hon. Gentleman's advances.

Malcolm Bruce (Liberal Democrat, Gordon)

I am not entirely surprised, although I would like to make two points of clarification. The idea is that people who wanted a vanity patent should be able to register it through a one-stage process. I say to the right hon. Member for North-East Hampshire that removing the exemption would enable us to say, ''That is the deal; we are not liable because we have not gone through the whole process.'' That would not cause the Chancellor of the Exchequer concerns, because there would be no liability.

The Minister is right to say that, in a sense, the two-stage process exists. I made that point; however, there would be a patent only if both stages were gone through. We were asking why we should not allow people to register a patent through the first stage, without any liability on the part of the Patent Office, to enable them to register the vanity element, while requiring the full process for anybody who had a serious intention for their patent.

The judgment would be made by the person making the application; they would have to consider how seriously they wanted their patent to be taken. If they could get a patent number that said that their idea had been registered, that would satisfy their vanity; only if their idea needed commercial application would they need to take it forward. However, at the moment, the

silly patents that I gave details about have to go through the whole process to get a patent number and be duly qualified as patents.

There was a serious point behind the new clause, and a serious intent to reduce the work load of the Patent Office. The problem is that some people are so vain that they will insist on going through the whole process and take up Patent Office time. I am more than happy to withdraw the new clause, but there was a serious point behind it: to try to reduce the work load and deal with the needs of the kind of people—home inventors, perhaps—who have the desire to register their inventions, but do not necessarily need to go through the whole process as they do now. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Gerry Sutcliffe (Labour, Bradford South)

Thank you, Mr. Amess, for your chairmanship, which has taken us through the Bill speedily, but effectively and efficiently. I thank the Committee Clerks, Hansard, the police and Committee members, particularly the right hon. Member for North-East Hampshire and the hon. Members for Gordon and for Weston-super-Mare for their support in ensuring that we got through the Bill,

not only during Committee, but on Second Reading. It was properly examined, and they raised issues that I will take back with me.

The spirit of the Bill has been to examine what works best, and to ensure that United Kingdom patent law is in line with the European situation and that we do everything in our power to make things easier for inventors. I congratulate Committee members, particularly my hon. Friend the Member for Newport, West. The Patent Office is situated in his constituency in Wales, and he spoke eloquently about its quality.

Sir David Amess (Conservative, Southend West)

I call Mr. Arbuthnot.

Mr. Arbuthnot rose—

Gerry Sutcliffe (Labour, Bradford South)

If the right hon. Gentleman will forgive me, I have one more thing to add. He will appreciate that I nearly made a serious omission that could cost me my political career. I almost forgot to thank the Whips on the Government and Opposition sides. As a former Whip—and I know that the right hon. Member for North-East Hampshire is also one—I know how much pain would have been caused to me had I not thanked my hon. Friend the Member for Lincoln (Gillian Merron) for the work that she has done.

James Arbuthnot (Conservative, North East Hampshire)

I would do the same, but my Whip is not present. In accordance with the remainder of the Committee, I agree with the Minister's comments and will not add anything.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at four minutes to Four o'clock.