I beg to move, That the Bill be now read a Second time.
I am delighted to bring the Intellectual Property Bill from the other place to this House. The Government believe in business, large and small, and in removing obstacles that prevent growth. That is why we have pledged to invest a further £4 billion in the industries of the future and why legislative changes, such as those before us today, are so important.
In 2010 my right hon. Friend the Prime Minister commissioned Professor Ian Hargreaves to carry out a comprehensive review of intellectual property. The Bill represents one important element of the Government’s response to his recommendations. The Hargreaves review confirmed that intellectual property is important to the UK and to a wide range of industry sectors. This year, the UK has been rated number one in Taylor Wessing’s global IP index in obtaining, exploiting and enforcing the main types of IP rights. Total annual investment in intellectual property rights represents 4.3% of our GDP.
The Bill proposes changes to help businesses better to understand what is protected under the law, to reduce the need for costly litigation and to provide greater certainty for investors in new designs and technologies. It aims to simplify and improve design and patent protection to help businesses to clarify the legal framework for intellectual property and to ensure that they are appropriately supported by the international IP system. These reforms are vital in cutting red tape to help British businesses to succeed.
UK business invested more than £15 billion in design in 2009, and the Bill seeks to protect and develop this important industry. It will make important changes to design law by strengthening and clarifying the framework that supports the design industry and aligning the UK and EU frameworks where sensible. We particularly aim to help small and medium-sized enterprises, which raised concerns about protecting their designs in the consultation process.
The design sector, which accounts for about 2% of UK export earnings, is made up almost exclusively of SMEs. The Hargreaves review identified the importance of design law and asked for more evidence concerning IP and the design industry. We addressed this challenge through a consultation in 2012. Industry informed us that 350,000 people are employed in the UK’s design sector and that 87% of companies in the design sector have fewer than 10 employees and 60% have fewer than four employees.
These small businesses have made clear to the Government the difficulty that they have in protecting their designs from copying. For example, Anti-Copying In Design—ACID—responded:
“We believe that the currently available ‘punishment’ does not go far enough in fitting the crime of blatant and consistent design infringement and that those who make it their business to follow this unlawful way of doing business should be dealt a criminal record.”
I pay tribute to ACID for its activities in working with us on this negotiation.
My constituents at Dyson, which is one of the few very large companies that employ, I think, several thousand designers and engineers in Malmesbury in my constituency, of course welcome the broad thrust of the Bill. None the less, they are concerned about the fact that clause 13, to which my right hon. Friend refers, would criminalise people who might inadvertently copy someone else’s design. Will he not clarify that by inserting the word “intentionally” into clause 13, to deal with the concern of people such as those who work at Dyson?
My hon. Friend speaks very well on behalf of Dyson in his constituency. I recently met representatives of Dyson. They have a very important concern, which I hope we will be able to address in Committee.
I was paying tribute to ACID’s efforts. Following consideration and consultation, one of the central proposals in the Bill is to introduce a criminal sanction for those who set out intentionally to copy a design in the course of business. That will give design the same protection, in broad terms, as trade marks and copyright. One partner of a leading intellectual property law firm recently described the sanction as “evolution not revolution”, and the proposed changes as “sensible and pragmatic”.
I recently met one SME from Sheffield—I think it is located in the constituency of the right hon. Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), whom I do not see in his place—and the representative of Burgon and Ball told me that it had to cope with 20 civil disputes over alleged design infringements in a period of two years. This problem will have been raised with Members on both sides of the House by SMEs active in the design sector. The problems caused by such design infringements impose an unmanageable financial burden on some of our most innovative small companies. We believe that other means of redress should be available, and the introduction of criminal sanctions will, for the first time, enable small design companies to bring the issue of copying to the relevant enforcement agency.
The Minister accurately sums up the view of Anti-Copying in Design when it comes to registered design rights, but he will have seen its concern about the need for the Bill to cover unregistered design rights, given that the vast majority of designs are unregistered. Will he consider that as the Bill is debated in Committee?
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. As many IP infringements occur in goods manufactured outside the United Kingdom, how will criminal prosecutions take place within the United Kingdom to protect rights?
I am pleased to see the Bill before the House, but the Minister will recognise that large sections of the Hargreaves review, and indeed of the previous Government’s copyright review, are not in it. Will he say something about what is not contained in the Bill, for those concerned about copyright infringement, and on the context in which young people need the freedom to create?
I do not know to what extent you, Mr Speaker, would permit the debate to range across the entire Hargreaves agenda. We have introduced a small but perfectly formed Bill that delivers part of that agenda, but it is an important part that will help the design industry, in particular. I will try to focus my remarks on what is actually in the Bill. The Government, as a whole, have already implemented some of Hargreaves and there is more to come. However, given that this is the Second Reading of an important Bill, particularly for the design industry, I hope that the right hon. Gentleman will understand that I will try to focus on that.
The crucial change set out in the Bill—the introduction for the first time of criminal sanctions for infringement of design rights—is not intended to have a chilling effect on innovation or legitimate and competitive risk taking in business. The offence has been carefully drafted to ensure that innocent infringement is not caught. In addition, it will be measured to the high criminal standard of proof of “beyond reasonable doubt”.
That measure sparked much debate in the other place, and our colleagues there made a number of changes to the clause to improve and tighten the sanction. The Government proposed an amendment to ensure that incidental use of a copied design would not be criminalised. Following discussions with industry, an additional amendment was made to provide a defence for those having a reasonable belief of non-infringement. That additional defence was welcomed by the Opposition and industry representatives. We have continued to talk with businesses big and small. Some still have concerns about the scope and clarity of the new offence. We are continuing our discussions with them—this relates to the earlier intervention by my hon. Friend the Member for North Wiltshire (Mr Gray)—and I hope to say more about it in Committee.
Our colleagues in the other place have sent us a much improved Bill. We have continued to improve it since it left the other place as other concerns have arisen. The intellectual property Minister, his officials and I have continued to engage with a number of interested parties, such as representatives of the pharmaceutical, aerospace and IT industries, on their concerns. That included discussions on the detailed wording of the qualification criteria for unregistered design rights. We have listened carefully, and I am pleased to announce that I will be tabling an amendment to the clause in Committee in the light of businesses’ concerns that it is unduly broad. It will ensure that the principle of reciprocity between countries is maintained. I am grateful to the IP Federation for raising the issue so effectively.
The Bill also makes a number of small but important changes to the definitions and legal framework protecting UK designs. They all recognise the need, identified by Hargreaves, to simplify and clarify the designs system. The measures include changing the standard position for ownership to make the designer the default owner of a design, rather than the commissioner. Such changes bring UK and EU design laws into harmony and provide a more logical and simplified system for designers and design users.
In addition, the Bill provides protections from infringement for businesses and individuals using designs in specific circumstances. For example, allowing use of an unregistered design for teaching purposes, such as carpentry in a school, is a sensible measure. So too is the provision of a defence for third parties when, in good faith and without copying, they have made preparations to use a design before a similar design is registered. This and other measures in the first half of the Bill provide more certainty for business and are aimed at modernising and improving the design framework.
The Government’s consultation on designs sought views on the introduction of a non-binding opinions service along the same lines as that currently available for patents, and the majority of respondents supported that. As well as this, the Bill will therefore extend the patent opinions service. That means that the Intellectual Property Office will provide a wider range of expert, but non-binding, opinions on IP in disputes. The existing opinions service provides a low cost means of resolving such disputes, in many cases without a need to seek redress in the courts. Almost 70% of respondents to an IPO review who had used the service considered that it should be extended to other areas of IP. Over 65% wished to see it extended to registered designs and 40% wished to see it extended to the UK unregistered design right. Many of these users are small and medium-sized enterprises that could not afford the high costs of civil litigation. We are therefore pleased that the Bill is going to extend the non-binding opinions service.
The Bill also makes important changes to the patents framework. In particular, innovative businesses in the UK have been waiting for over 40 years for a single European patent system. Creating a business-friendly patent regime for Europe is an important element of the Government’s growth strategy. My right hon. Friend the Prime Minister was instrumental in the negotiations on the unitary patent and the unified patent court. I am therefore very pleased that the Bill gives us the power to implement the pan-European court structure that will underpin the long-awaited unitary European patent system. [Interruption.] I was overcome with emotion at the triumph of the Prime Minister’s negotiating skills on this. The unitary patent could save UK businesses up to £20,000 per patent in translation costs alone—a saving of enormous benefit. Former Supreme Court justice Lord Walker of Gestingthorpe described the unitary patent as
“a remarkably bold step forward, on which successive Governments are to be congratulated, because it has been a very long haul indeed.”
Establishment of the court will further enhance the UK’s reputation as a centre of excellence for commercial dispute resolution, especially in the field of life science patent litigation.
The Hargreaves review stressed the importance of intellectual property for innovation and growth. It argued, however, that policy development in this area had not always been sufficiently directed towards those objectives because of an incomplete evidence base and strong lobbying activity. Innovative businesses grow twice as fast in jobs and in sales as businesses that fail to innovate. The Government therefore want to ensure that the IPO has a sharpened focus on innovation and growth. The Bill requires a report to be submitted to Parliament on how the activities of the IPO contribute to this goal. The report will also increase transparency and allow a wider range of interested parties to scrutinise the work of the IPO.
Will the report that the IPO will provide to Parliament each year include sections to do with the problems that companies and individuals face with intellectual property rights? I recognise the point about showing how the system is working and impacting on growing the economy, but will areas of dispute or problem areas be covered as well?
Yes, I certainly envisage the report covering issues where further work may be needed. It will be a report on the IPO’s overall activities.
I now turn to the set of provisions in part 3. I am pleased to be introducing a change that has been called for by the Justice Committee and by the UK’s higher education sector—an exemption to the general right to information under the Freedom of Information Act 2000 to protect pre-publication research. The lack of a dedicated exemption has, for example, left academics worried about whether a freedom of information request might be made for their lab notes before they publish an article in Science or Nature.
The lack of such an exemption has increasingly led businesses to demand contractual guarantees that their data will be secure, which is not only costly in time and resource but has inhibited research collaboration between universities and businesses. For example, the Russell Group has informed the Government that significant university resources were needed to negotiate funding for a studentship with a large multinational company that was unhappy with the perception that its sensitive data might be released. An exceptional compromise agreement was required to resolve that situation, because the university and business were unable to sign off the contract.
The Minister is absolutely right to highlight the importance of clause 20, which is very welcome. He will be aware that the Wellcome Trust and others, especially those in the bioscience sector, are concerned about the lack of clarity on when protection starts in relation to people preparing a piece of research, which is often the creative element. The Wellcome Trust has proposed two sets of two extra words that could be added to provide clarification. Will he make clear his position and say whether he is prepared to update the Bill?
My hon. Friend has made that point to me and I have considered it. He is right that the Wellcome Trust has also raised it. Our view at the moment is that we should stick with the proposals in the Bill, because they have the merit of copying exactly what is already done in Scotland. Of course—I am looking across the House at representatives from Scotland—we are always keen to learn from Scottish examples. Indeed, it is known in the trade as the Scottish exemption. We think that having two rather different provisions for research across the UK might be unhelpful, and that the extra words might cast doubt on the effectiveness of the Scottish provision. We have no reason to doubt the Scottish provision, which currently gets the balance right and ensures protection. I am happy to debate the point further in Committee, but I must tell my hon. Friend that we are not at the moment inclined to go as far as the Wellcome Trust has asked.
Let me give another example, which comes from Universities UK, of the problems that the provisions will undoubtedly tackle. A professor turned down an appointment to the European Research Council as an expert referee because the contract could be read to mean that any material had to be subject to absolute confidentiality. His commitment to that was perceived to be difficult due to existing provisions in the Freedom of Information Act, and ultimately the contract was not signed. As a result, the professor did not take up the work, and the European Research Council lost valuable expertise.
The introduction of a specific exemption for research will therefore provide clarity both to higher education institutions and non-public sector research partners—our excellent research community—and enhance the UK’s leading position in international research.
Before the Minister concludes, will he apprise the House of the changes that he said will help to boost small and medium-sized enterprises to grow? When he comes to the Dispatch Box to report on the success of the measures in five years’ time, what metrics will he use to help us to evaluate whether the changes proposed in the Bill have succeeded?
That is a very good question. Above all, we will look to the further growth of innovative SMEs in our design sector. We have a fantastic network of designers, especially in small businesses, but many of their innovations are currently taken all too easily, sometimes by bigger companies that have almost a corporate strategy of copying and lifting what our smartest entrepreneurs and designers are doing. I want our design sector and especially such SMEs to thrive, and I hope that the sector will grow strongly over the years. That will be a very good test of the central provision in the Bill, which is to extend more protection to our world-class design community.
The changes that are introduced by the Bill will mean that UK businesses that want to protect their products and technologies through patents and design rights will be better off. The Bill will support our hugely successful design sector and make the law clearer and easier to navigate for innovative small businesses. I trust, therefore, that the House will be content to give the Bill a Second Reading. I commend it to the House.
I thank the Minister for outlining the provisions in the Bill.
Intellectual property matters, and it is growing in importance in the modern economy. Britain will pay its way in the world, create wealth and provide prosperity and higher living standards for all her citizens not through a race to the bottom and by trying to undercut the rest of the world on wage rates and employment rights, but by emphasising the importance of knowledge, creativity and innovation. That is certainly true of our creative industries. As the CBI said in its recent report:
“Our culture and creativity is at the forefront of the UK’s global appeal”.
Our fashion industry is worth almost £21 billion. As the House can see, I am a leading ambassador of that industry. We have the largest broadcasting hub in Europe. Global successes such as “Downton Abbey” would not have been made here and would not have provided jobs in the UK and export success for this country had it not been for the strong IP framework.
Britain boasts one of the world’s largest music industries. It generates £3.5 billion for the UK economy and provides more than 100,000 jobs. In four of the past five years, British artists were the highest selling artists in the world. One in eight albums sold anywhere on earth are by British artists. It is particularly apt that we are discussing this matter today, because I understand that today is blue Monday, which is apparently the most miserable day of the year. Right hon. and hon. Members will know that the highest selling 12-inch record of all time was “Blue Monday” by New Order. I know that the Minister is a fan. I can see him now in the Hacienda in Manchester, with a wide-eyed stare, dancing to “Blue Monday”.
The UK has the fastest growing digital economy in the G20. Our video games industry is worth £1 billion a year and is growing at a rate of 6.5% per annum.
The UK film industry goes from success to success. It supports almost 120,000 jobs in Britain and contributes £4.6 billion to our GDP. In the past few years, the global film industry produced 42 blockbuster films—that is a film with a budget of more than $100 million. Of those 42 films, 24 were produced in Pinewood or Shepperton studios. That is a fantastic achievement for our country and something of which the House should be proud. I am particularly pleased that the new “Star Wars” film is being filmed here. I hope that it will be more like “The Empire Strikes Back” than “The Phantom Menace”. The recent success of “12 Years a Slave” again shows the enduring quality of the British film industry.
The hon. Gentleman makes a very good point. In the creative industries, and in industry as a whole, there are incredibly important hubs across the United Kingdom. He mentions the film industry in Northern Ireland and there are other examples, such as the great video games cluster in Dundee. There are pockets across our country where creativity and industry are booming.
The UK publishing sector is bigger than our pharmaceutical industry and reaches across all aspects of our economic life. The book market in the UK is the fifth largest in the world and is growing. Every year, 120,000 new book titles are published, including academic journals, titles that tie in with TV or film rights, novels and biographies.
My hon. Friend will be aware of the report by the Culture, Media and Sport Committee on creativity and innovation, which highlights the importance of the book industry. Will he speak about the concerns of the book industry about the role of Google, whose representatives have visited the Prime Minister’s office 17 times in the past two years?
I thank my hon. Friend for that question, but where does he think I am getting these statistics, if not from his Committee’s report? It showed the important role that creative industries play in our economy in providing well-paid jobs, innovation and investment in the country. It also mentioned the tension between content companies and technological companies. My hon. Friend mentioned Google, and I seem to remember reading in the transcript of his Committee’s proceedings that the IP Minister, Viscount Younger, said that he finds it more difficult to get into No. 10 Downing street to meet the Prime Minister than the representatives of Google. Perhaps that needs to be dealt with.
In the Committee’s report on that excellent review of the UK creative industries, my hon. Friend and other hon. Members stated:
“Given the importance of the creative sector to the UK economy and the relative importance to that sector of strong IP protection, strongly enforced, the Government must do more to protect and promote UK IP as a system for growth.”
It would be wrong, however, to think of IP as confined only to the creative industries. High-value manufacturing is dependent on innovative design.
Yes, it does; my hon. Friend is spot on. Given that 11 industrial sector documents—I think—have been produced, and that the creative industries are a fantastic growth area that provides innovative and well-paid jobs and projects around the world an image of the UK’s soft power that is envied by other countries, and given how that can bring further investment and prosperity to our country, I do not understand why the Government have not got a creative industries industrial sector document. Perhaps the Minister will respond to that point when he sums up the debate. Perhaps it is because Whitehall is often silo-driven and IP is often in a conflict between the Departments for Business, Innovation and Skills and for Culture, Media and Sport. No one from the DCMS ministerial team is on the Treasury Bench, and I wonder whether there is a degree of tension and conflict. Are the Government speaking with one voice when it comes to IP and to supporting and promoting our fantastic creative industries?
I think the hon. Gentleman is pitching for that job, so he should have declared his interest. However, he makes an important point. During deliberations in Committee, it will be important to table amendments to consider what the Intellectual Property Office will do to promote innovation and jobs in the UK economy. Having some sort of IP champion, IP tsar, or whatever the hon. Gentleman wishes to call the role, needs to be considered closely, and hopefully we will do that in Committee.
Let me turn at last to manufacturing. High-value manufacturing is dependent on innovative design to produce comparative advantage. Indeed, high-value manufacturing in the 21st century requires a blend of design, creativity, innovation and production to compete and succeed. Modern means of research, development, production and distribution all emphasise in the modern age open, innovative models and the sharing of ideas. That makes IP more, not less, important.
The increased proportion of intangible assets on the balance sheets of many firms means that there is an ever-growing importance to securing returns from those assets. That in turn means that companies need to pay more attention to IP issues. In the 21st century, a strong intellectual property regime is needed. IP should not be seen as regulation or bureaucracy, with all the negative connotation that that entails. IP is not regulation but a legal right, and it would be wrong to suggest that, in an era of globalisation and digitisation, IP is irrelevant or an anachronism that needs somehow to be swept away. Businesses will not invest if their innovation or creativity is not protected. If somebody has created or invested in something, they should have the right in law to derive benefit from that creation or investment. That right should be protected and enforced by the legal system.
The Minister rightly referred to the recent global IP index, produced last year by Taylor Wessing. It should be a source of pride to the House that the UK was placed No. 1 in the world for IP. We need to protect, maintain and enhance that position as much as possible. However, the difference between the top three ranked nations in that report—the UK, Germany, and Netherlands—was only 0.2%, showing intense global competition and the perils of introducing proposals that might undermine our position as No. 1 in the world.
My hon. Friend says that the UK is the No. 1 place in the world for IP, but the ranking in that survey was actually for the enforcement of copyright and trademarks. It was ranked only in second place for patents and in fifth place for design. IP is not a single entity; there are a lot of activities, and we protect some better than others.
My hon. Friend makes an important point. There is a second consideration. We might have the best framework in the world, but if it is not enforced properly, it is largely redundant. We need to ensure that enforcement is maintained.
It is important to retain our position as No. 1 in the world for IP. We should also reinforce the need to avoid needlessly tinkering with the system. The House will agree that IP needs to adapt to take account of changing circumstances such as globalisation; growing collaboration across firms; and new, often disruptive, technologies such as 3D printing and digitisation. All of those bring many challenges. However, it is also important to be mindful of avoiding changes that undermine business certainty and thereby deter investment and innovation.
It is in that context that the House considers the Bill, which is brief and flimsy. It gives the impression of being the remnants of a much larger piece of legislation—perhaps it is the remnants of the much vaunted but hitherto unseen communications Bill. That reinforces the notion that the Government do not have a strong and clear vision on how to proceed with IP, leaving industry with uncertainty. Ministers could be accused of tinkering and making piecemeal changes that could undermine confidence and investment in our economy.
In many respects, the Government are continuing the approach they used last year with the Enterprise and Regulatory Reform Act 2013, several sections of which are devoted to IP and copyright. They were not discussed with stakeholders, and subsequently there was much alarm within the creative industries. The Act deterred investment in the UK economy. We should avoid that when possible.
As the Minister has said, the Bill is meant to simplify and to provide greater clarity and certainty on the IP framework, but it often does not do so. For example, the Government’s recent design consultation asked whether the Registered Designs Act 1949 should be amended by providing greater consistency between joint ownership provisions for both registered and unregistered designs. All or most respondents to the consultation agreed with the move to greater clarity and consistency in principle, but for whatever reason the Government have decided not to change the law in that regard.
Clause 13, to which I will return, has been mentioned a number of times. It provides a significantly different approach to registered and unregistered design rights. It is as if the Government are saying, “We like consistency in certain areas, but not in others,” which merely provides inconsistency by a different name. The measure is a new inconsistency, so it provides greater complexity and subsequent uncertainty to business. We will want to scrutinise the Government on those inconsistencies in Committee.
That said, much in this slight Bill is to be commended, and the Opposition will not oppose it this evening. For example, clause 8 is welcome. It allows UK implementation of The Hague agreement, which allows for the protection of design rights throughout the EU with a single application rather than multiple applications in each country. That should help small and medium-sized firms to cut down on costs.
I am pleased that, in another place, the Government moved away from implementing that measure via the negative procedure, and that they listened to my noble Friends on the Opposition Front Bench and the recommendations of the Delegated Powers and Regulatory Reform Committee and moved to the affirmative procedure. I hope that that listening exercise will continue in Committee.
Clause 17 enables the establishment in the UK of the unified patent court. The use of the court throughout Europe will provide a consistent and welcome framework in participating European country. It is particularly pleasing for the UK economy that part of the court will be based in London, with the prospect of another part of the country—perhaps Hartlepool—being the location for a second part. I commend the Prime Minister, good European that he is, for helping to secure that.
One place where one of these divisional courts will not be—so far—is in Scotland. Will the hon. Gentleman join me in ensuring that the Bill is amended so that the Court of Session can continue the centuries-long tradition of ruling on patent cases in Scotland? Without that, the extra costs and burdens on Scottish businesses will be intolerable.
When I was reading Hansard from another place on this matter, many noble Lords mentioned the importance of Scotland as a possible second area. It would be useful in Committee to discuss that and, possibly, the wider point of whether independence for Scotland would help to produce that—or otherwise, as I would suspect.
Exemptions in the Freedom of Information Act 2000 for continuing programmes of research, as contained in clause 20, will maintain UK universities’ excellent reputation around the world for research, without, as I think the Minister said, forcing institutions to make public research without its being completed or subject to peer review. That is also to be welcomed. There are certain provisions, however, that will need to be looked at closely in Committee, and which might have a detrimental effect on UK-based innovation. The Minister mentioned this point, and I was pleased with his accommodating remarks on the possibility of amendments in Committee. This is a concern for UK-based manufacturing.
Clause 3 extends the qualification of unregistered design rights to the functional designs of companies incorporated in countries that do not offer reciprocal protection for UK functional designs. The Minister mentioned the IP Federation, which has been particularly strong on this point. It stated:
“Under the changes proposed in Clause 3 of the IP Bill, parity no longer exists and UK manufacturers are strategically disadvantaged with additional hurdles being introduced to the manufacture of functional designs in the UK. This will directly impact those engaged in general engineering because of the importance of functional designs which are covered by UK UDR.”
It went on to state:
“The manufacturing facilities of both small and large UK-based engineering companies will be seriously impaired by extending UK UDR to foreign corporate entities. Careful consideration would need to be given to the location of manufacturing facilities as the manufacture of functional articles in the UK will be inhibited. It would become more attractive to move design and manufacturing offshore and to commercially source functional designs from businesses outside of the UK where the copying of functional designs is lawful.”
It is important for the rebalancing of the economy that we in this House do nothing that adversely affects high-value manufacturing in this country. Clause 3, as currently drafted, poses a threat to investment and manufacturing capability in the UK, and could put us at a competitive disadvantage with other parts of the world when considering manufacturing locations. That cannot be right. I am pleased with what the Minister has said. We will examine this matter closely in Committee. I hope we can work together to introduce amendments that do not inhibit UK-based manufacturing.
As has been said, the most contentious part of the Bill is clause 13, which brings into law criminal sanctions for deliberate infringement of registered designs. I think that this will take up a significant part of our deliberations in Committee. On the one hand, as I think I mentioned earlier in my remarks, the Opposition strongly believe in the principle that a person who has created, invented or designed something should derive some protection of ownership in law, together with the right to derive benefit from that creation, invention or design, and that appropriate and proportionate sanctions should be put in law to assert that legal right. If criminal sanctions exist for copyright or trademarks, why not for design, especially when the future UK economy will rely so heavily on innovative design? This is a strong argument, especially when there is already similar protection in other parts of the IP framework, such as for copyright or trademarks. However, the introduction of criminal sanctions with the prospect of 10 years’ imprisonment is a serious matter and must be considered closely by the House.
We will be probing the Government in Committee on whether clause 13 is appropriate and proportionate, whether it would act as a sufficient deterrent to those who deliberately infringe designs—steal, for want of a better term—or whether it would unfairly criminalise those who accidentally or inadvertently copy a design. In another place, the Minister said the arguments were finely balanced. We need to ensure that that balance is well drafted in the Bill. Clause 13 is opposed by many stakeholders working in this field, such as the IP Federation, the Intellectual Property Bar Association, the City of London Law Society, the Chartered Institute of Patent Attorneys, and a number of experts and specialists, including Sir James Dyson, as we heard from the hon. Member for North Wiltshire (Mr Gray), and the Ministry of Defence.
As I said, we will consider this matter closely in Committee, but what causes me most concern about clause 13 is that, as several stakeholders have stated, criminalisation, with the prospect of up to 10 years’ imprisonment, might have a “chilling effect” on innovation. New products might not come to market or benefit the UK economy because people are reluctant to risk a criminal trial and 10 years’ imprisonment. I suspect that in Committee we will deliberate at length about the nature of innovation—whether there are great leaps forward or whether innovation is undertaken by swinging from tree to tree in the jungle or, to switch my metaphor, by standing on the shoulders of giants. We need to be careful to strike the right balance in order to protect designers’ creativity and ingenuity while avoiding the risk that no further product improvements will be made through adaptation.
There is a second concern with clause 13 that I think the hon. Member for Perth and North Perthshire (Pete Wishart) has mentioned. If the purpose of the Bill is to simplify and make consistent the patchwork, as Hargreaves calls it, of differing rights, I do not see why registered designs should be subject to criminal sanctions, but unregistered designs should not be. During the passage of the Bill in another place, the Government could not provide a logical or rational explanation for that inconsistency. In Committee in another place, the Minister stated quite bluntly:
“The introduction of criminal sanctions for unregistered rights could lead to a negative effect on business and innovation.”—[Official Report, House of Lords, 13 June 2013; Vol. 745, c. GC409.]
If that is the case, why are registered designs different? The Minister also said that SMEs
“do not tend to register their designs”.—[Official Report, House of Lords, 13 June 2013; Vol. 745, c. GC395.]
It is difficult to see, therefore, how the Government’s proposals in this part of the Bill will strengthen innovation, prevent infringement for the vast proportion of designs in this country and deter exploitation of small and micro-firms by perhaps more unscrupulous businesses. Registered designs do not imply approval or confer an inflated status, so there is no possible legal justification to treat them differently in this regard.
Many UK businesses clearly see merit in the UK unregistered design right, which helps their competitiveness and commercial position. Why, then, should that right not be protected through criminal sanctions when the Government propose that for unregistered designs? I cannot see anything that would prevent companies from identifying unregistered designs, registering those designs for themselves and then stating to the original designer, “You’ve infringed our registered design. We will bring a criminal case against you for deliberately copying our registered design and you may go to prison for 10 years unless you pay us a large fee or assign the rights of the design over to us to exploit anyway.” How does that protect small and micro-firms or help to promote innovation? I do not think that the Government have offered an adequate explanation for this discrepancy, so we will want to scrutinise it further in Committee.
I think the whole House is united in thinking that a strong and consistent framework for intellectual property is essential if the UK economy is to prosper and thrive in the 21st century. A balance is needed to ensure that the IP regime is consistent and provides certainty, while adapting to rapidly changing economic and technological developments. A balance is also needed between protecting the rights of creators and innovators and not discouraging further innovation or possibly disrupting entrepreneurs, companies and technologies. We hope to work closely and constructively with the Government in Committee to strike those balances and ensure that the UK economy can thrive in the modern world.
I am delighted to have the opportunity to speak briefly on Second Reading this afternoon. Given the enormous contribution of the creative industries to the economy and growth of the UK, the Bill is long overdue. The design industry is worth £33.5 billion or 2.2% of gross domestic product, employing some 350,000 people in the UK.
A recent survey of designers found that 59% had suffered from design copying, but only 32% took a case to court. Copyright infringement costs £775 million every year—5% of the total value of UK design investment—while global patent processing delays cost £7.6 billion annually. We must not forget that intellectual property is not important only to the big multinationals, major record labels or Hollywood studios; it is vital, too, for hundreds of thousands of small, medium and even micro-businesses delivering jobs and growth in every region of the UK.
The Bill seeks to introduce some changes in the field of patents and design law, something that we should warmly welcome. Clause 13 introduces a new criminal offence of intentional infringement of a registered design, bringing the law into line with copyright and trademarks. Unfortunately, although this is a welcome move, the vast majority of designers, many of whom are individuals or micro-businesses, rely on unregistered rights, as several hon. Members have said. Approximately 4,000 designs are registered each year with the Intellectual Property Office, while between 18,000 and 25,000 unregistered designs were lodged on the ACID—anti-copying in design—data bank last year, yet there are only 1,100 members. The vast majority of designers rely on unregistered rights, so if we really want to make this legislation effective, it should be amended to cover unregistered, as well as registered, rights.
I support clause 21, which introduces a duty on the Secretary of State to report annually on how the activities of the Intellectual Property Office have supported innovation and growth in the UK. This is a welcome improvement, but amendments were introduced in the other place to try to ensure that it is a genuinely effective provision in the interests of the traditional creative sector. I seek reassurances from the Minister that consideration will be given to bringing forward similar amendments in Committee to address those concerns.
It is disappointing that the Government have missed an opportunity to tackle a number of other issues around intellectual property, which the other place highlighted, that could helpfully be remedied through the Bill. These issues would benefit from further discussion and examination as the Bill progresses through the Commons.
First, the Bill should increase the maximum penalty for digital copyright theft to bring it into line with the available maximum penalty for physical copyright theft. Criminal offences for online copyright theft have a maximum penalty of two years’ imprisonment. Criminal offences for physical copyright theft have a maximum penalty of 10 years’ imprisonment. This discrepancy has existed since 2003, when new online offences were introduced via secondary legislation as part of the UK’s implementation of the copyright directive, using the European Communities Act 1972. The recent Culture, Media and Sport Select Committee report recognised that that inconsistency needed to be addressed, and the Minister in the other place agreed to have another look at it.
I strongly support what my hon. Friend is saying about the importance of the digital realm. Publishers like Edward Elgar Publishing in my constituency, which is successfully shifting its publishing increasingly into digital format, feel that the whole issue of digital piracy needs to be tackled. Does my hon. Friend agree that it needs to be tackled on an international basis, and that tackling only the domestic situation is only half the battle?
I agree with my hon. Friend that we need an international, as well as a national, dimension.
The discrepancy I mentioned is a source of great frustration. For example, the private prosecution by the Federation Against Copyright Theft of Anton Vickerman, who was making £50,000 a month from running a website that facilitated mass-scale copyright infringement, saw him convicted of conspiracy to defraud and sentenced to four years in prison. This level of sentence would not have been possible if he had been prosecuted under copyright law, but FACT was able to prove conspiracy in his actions. Without proof of conspiracy, a serious criminal could have been left subject to a disproportionately low maximum penalty.
This is not about introducing a new criminal offence, but simply about addressing a discrepancy in the levels of penalty available for existing offences. The current position causes problems for prosecutors, to whom the full package of legislative options should be available so that they can consider each case individually and use the legislation that will produce the best results. Equally important is the fact that the discrepancy sends the wrong message to infringers, and to the public, about the level of seriousness of the crime.
The Bill also fails to deal with the ongoing problem of parasitic packaging. Businesses and consumers need more protection against copycat packaging of goods or services. Packaging consumer products to mimic familiar branded products free rides off investment in brand reputation, misleads consumers, and distorts competition. A report published by the Intellectual Property Office in April showed that nearly 60% of those surveyed had mistakenly purchased a copycat product on at least one occasion. Moreover, the copy hijacks the reputation of the brand, which has often been built up over years of consumer experience and investment in innovation and product performance. The copy bears none of the cost of building that reputation, while benefiting from higher sales and “assumed” reputation and quality.
The current legislation, including legislation on passing off, clearly does not work. An amendment, through the Bill, would clarify the law, allowing consumers to make clear decisions about the products that they are using while protecting the vast amounts that businesses invest in creating, marketing and protecting their brands.
The Bill would be improved by the introduction of a number of simple measures to ensure that intellectual property is better protected online, rights can be enforced, and owners and consumers can be adequately protected from criminal activity. Those measures should ensure that the likes of eBay and social media platforms have robust and effective processes in place to prevent illegal traders from selling on their platforms and to ensure that, once discovered, such traders cannot register under a different name and continue their illegal activity.
The Bill should include measures to compel domain registries to carry out effective verification and validation of all their registrants’ contact details, so that they can be traced for the purpose of serving legal notices or warnings. It should also include measures requiring businesses such as Google to take all reasonable steps not to promote or support sites where they have reasonable knowledge of infringement of copyright, and requiring businesses to have an obligation not to trade with or promote sites where they have actual knowledge of infringement.
I thank my fellow member of the Select Committee for his intervention. He will recall that we visited Google as part of our inquiry, and he will also recall the complacent attitude taken by its representatives to the whole issue, as though it had nothing to do with them and was not their problem. I think we all agreed that it certainly was their problem, and that they should take much more responsibility for tackling it.
Finally, I am disappointed that the Bill does not seek to repeal section 73 of the Copyright, Designs and Patents Act 1988, which was intended to encourage the roll-out of the cable network in the United Kingdom, and allowed cable operators to re-transmit public service broadcasters’ programmes free of charge. At a time when Sky and Virgin are willingly entering into commercial deals with public sector broadcasters for their non-public sector broadcasting content, it is a nonsense that they are still able to make money on the back of free PSB content.
Yes, I think time is up for the likes of Sky and Virgin. They have been making a lot of money on the back of this for some time, and it is about time we brought it to an end.
By contrast, in the United States News Corporation has led the campaign for channels to receive fees from platform operators, which has resulted in over $2 billion being available for investment in original content and news production, so I urge the Minister to bring forward an amendment repealing section 73 of the Copyright, Designs and Patents Act.
I congratulate the hon. Gentleman on reading out so thoroughly the briefing provided by ITV on this issue, but is it not a fact that as long as there is an obligation to carry the terrestrial channels, the Government could either remove that obligation or charge the pay-TV companies for using the material, particularly Virgin, which has the TiVo machine that allows people to build up private on-demand libraries without paying any of the costs or having to watch any of the advertising?
The fact remains that the likes of cable platforms are making significant amounts of money on the back of public sector broadcasting, which often invests a lot of money in original content. A very easy way of bringing this to a conclusion is to repeal section 73 of the 1988 Act, which is why I urge the Minister to introduce that through an amendment to the Bill.
In conclusion, although I welcome the Bill I hope the Minister will recognise its limitations and commit to addressing at least some of the concerns that have been raised. This Bill could deal with a number of the outstanding issues in relation to intellectual property.
I think everybody welcomes the Bill as far as it goes. The Minister said in introducing it that it was a small but perfectly formed extract from Hargreaves. I agree to some extent with part of the latter, but I certainly agree with the former.
The value of the creative industries—however one chooses to define them—to the UK economy is certainly no less than £20 billion, and I have seen figures suggesting sums up to four and five times that. They are therefore a significant part of our economic and social activity. In the fields of music, arts, literature, film, design, invention, fashion and innovation, Britain is an international leader. That is why we need the strongest possible framework for IP protection and why I think the whole House will welcome the Bill as far as it goes.
May I ask the Minister to tell the Prime Minister that Viscount Younger of Leckie in the other place is the Minister for intellectual property, because when I asked the Prime Minister a question a couple of months ago, he seemed to believe it was the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Wantage (Mr Vaizey)? The fact that the Prime Minister does not know who his intellectual property Minister is does not bode well for the Government’s policy in general in respect of the sector. In a letter, Viscount Younger and the Minister for Universities and Science said that the Bill had three main points:
“to simplify and improve design and patent protection; to clarify the IP legal framework; and to ensure the international IP system supports UK businesses effectively.”
In an additional note included with that letter to all Members, three further areas were highlighted: clarifying and enforcing rights in design; improving the operation of UK patent law; and reorganising the Intellectual Property Office and giving it an annual review. I am an office-holder—don’t ask me which one—of the all-party parliamentary intellectual property group, and I see other members of the group in the Chamber today. We have discussed the proposals and I certainly welcome them.
Will the Minister tell us whether the Intellectual Property Office’s new role will include that of champion, advocate or protector of intellectual property rights, rather than being merely a registry as it was when it was the Patent Office? There is a strong feeling that, since it took on the broader remit, it has been searching for a role. I am led to believe that one of its leading officials is going off to pastures greener—or perhaps a different colour altogether—in the near future. I hope that the Government will take the opportunity to redefine the purpose of the IPO, particularly as many competitor countries have a far more interventionist role in IP, given its value to the economy. Perhaps the hon. Member for Hove (Mike Weatherley) could become a tsar, or be given some other rank. I can think of plenty worse appointments; they number at least 20! We need to take this matter far more seriously and push it up the agenda, particularly as we move from an economy based on industry and manufacturing to one that is more knowledge-based. A modern economy needs the protection of strong IP rules and regulations.
In an intervention on my hon. Friend the Member for Hartlepool (Mr Wright), I mentioned the Library briefing document on the Bill. It states that a survey of 36 similar countries found that the UK was ranked as the best place to obtain, exploit and enforce copyright, but that it was ranked second for patents and only fifth for design. That illustrates the imbalance that exists. The question posed in recent years has been whether the existing legislative framework is inhibiting expansion of the design sector. In 2010, the Prime Minister set up the review under Professor Hargreaves. That followed the Gowers review, which was set up by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) in 2005. That review reported in 2006, and I have to be candid and say that I was disappointed that the then Government did not do more to implement its findings. I suspect that that was for similar reasons to those that are afflicting the present Government—namely, that parts of the Government do not really understand the necessity of providing the strongest possible legal framework for creators and innovators.
Hargreaves replicated much of what Gowers had done. He reached different conclusions in different areas, but there are parts of his report on which we need to make progress. Given that the Bill represents only part of the fall-out—that is not really the right word; I should say the results—of the Hargreaves report, does the Minister acknowledge that there is much more to do? Given the threadbare nature of the Government’s programme, the inability of the component parts of the coalition to agree on very much at all, and the likelihood of there being precious little more for the House to do after the next Queen’s Speech, would that not be an ideal opportunity to fillet some more out of the Hargreaves report and bring it before the House—
Well, I am an engineer by training. I just happen to know these things. We could bring forward those proposals and make more progress. These issues are becoming more, not less, urgent, and the need for us to take action is becoming ever more pressing.
I congratulate the hon. Member for Manchester, Withington (Mr Leech) on reading out the briefing from the Alliance for Intellectual Property almost word for word. I am sure that the alliance will be delighted that its researcher has not laboured in vain to bring its concerns to public attention. The hon. Gentleman also pointed out that the most contentious part of the Bill was clause 13. The difficulty with it, and it will be hard to find a way that pleases everybody, is that legitimate and genuine but conflicting rights and interests are involved. Those depend on where someone comes from, and people’s instinct or feelings about the clause tend to be based on their commercial interest in the matter. My hon. Friend the Member for Hartlepool outlined how a large organisation could intimidate a small rights holder by saying, “Unless you pay us, we will not allow you to use this.” Equally, a small rights holder could be told by an organisation that it is going to use something come what may and the only way of stopping it is by court action, particularly if it disputes that there is a breach or infringement in the first place. The IP Federation is the most antagonistic to clause 13, although, as has been mentioned, others are too. By contrast, plenty of others, including the Alliance for Intellectual Property and the Law Society, are in favour of its provisions. Clearly something will have to be put in the Bill there. Rejecting the clause entirely is not a viable option, as it will not bring clarity and it will not deal with the imbalance between those who are powerful and those who are not so.
The IP Federation contains some of the largest businesses and corporations in the country, but that does not mean it does not have genuine and serious concerns. Dyson Technology Ltd, which has been mentioned, is a member of the IP Federation. As I say, that does not mean that it does not have genuine concerns and legitimate interests. The problem in this whole area, and it will be with this Bill, is trying to find the correct balance between competing and sometimes contradictory interests.
There is a broad welcome for the Bill, but the missed opportunity has been outlined in detail by the hon. Member for Manchester, Withington. It is not unknown in this House for people to repeat things that somebody else has said, but I will disobey that particular convention and gloss over most of what he said. However, he did make a point about parasitic packaging, which is entirely different from counterfeit packaging—that is an offence in itself.
This issue was brought home to me most strikingly just last Saturday when I was in The Hare & Billet pub in Blackheath, which is well known to my hon. Friend the Member for Lewisham East (Heidi Alexander), whom I see on the Front Bench. I was having lunch and I asked whether there was any Worcestershire sauce—everybody knows the famous manufacturers of it and, being a simple soul from south-east London, I thought there was only one Worcester sauce. The nice chap serving us said there certainly was, and he came back with a bottle shaped like the one I always remember containing the marvellous concoction that is Lea & Perrins Worcestershire sauce. Not only was this bottle the same shape and size, but, amazingly, its label was orange with black lettering. However, it was something from Sheffield, from someone called Henderson’s, whoever they are. I am sure that Mr Henderson and his company are perfectly estimable, and I am sure they pursue an entirely legitimate business, but I could not help feeling, “Of all the colours they could choose for their label and all of the shapes they could have for their bottle!” I did not even know there was such a thing as Sheffield sauce until then.
I thought that was an ideal example of just how easy these things are to do. As we can all recall, some of the most successful contemporary retailers have their own named products—I will not name them—which mimic exactly the colours and packaging of their more famous rivals. As I recall, in its television advertising one of them actually uses the slogan “Like brands, only cheaper”. That is clearly a deliberate attempt to exploit the efforts of others without any concomitant responsibility to contribute to them.
The other area is the growth of online activities. In recent months, we have seen the emergence of a number of sites that, while not illegal, masquerade as official sites. I experienced that recently in relation to the congestion charge and the Transport for London site. The unofficial site managed to get the search engines to promote it up the scale. Although it offered to pay the congestion charge for someone entering the zone, it charged a fee as well. Anyone going straight to the TfL site can pay the congestion charge with no fee whatever. There has been an increase in the number of such sites, even false sites offering Government services.
One bit of evidence that the hon. Member for Manchester, Withington did not read out said that the British Phonographic Industry, which represents the recorded music industry in which this country excels,
“sends in excess of three million requests to Google”—
I ask my hon. Friend the Member for Bradford South (Mr Sutcliffe) to note that—
“each month to delist URLs which point to infringing content.”
This is a grave and growing problem that we need to address.
My earnest hope is that we will consider all these matters in some detail in Committee and during the later consideration of this Bill to ensure that we optimise the modest proposals that are coming forward today.
In future, comprehensive IP protection will be ever more important as we become more dependent on the knowledge-based and creative industries to ensure the proper utilisation and advance of innovation and the exploitation—in its best sense—of developments while ensuring adequate reward to the creators and innovators to encourage originality and ingenuity. If we do not go down that route, we will lose our expertise across a wide area in which this country has for long excelled, and we will be the poorer socially, intellectually and economically.
It is a great pleasure to follow the hon. Member for London South East or wherever it is. [Interruption.] Sorry, I mean the hon. Member for Lewisham West and Penge (Jim Dowd). We Londoners rightly feel that the centre of the universe is here, but we need to make some allowances for Members from Manchester, Withington and elsewhere.
I recently discovered that I have something in common with the hon. Member for Lewisham West and Penge; we both have German mothers. I must confess that my mother spent the first 15 years of her life living under socialism, courtesy of the Gestapo and then the Stasi, which is why she inculcated some solidly right of centre and Conservative views in my mind. I am not sure what went wrong with the hon. Gentleman’s upbringing. However, I very much agreed with what he and other contributors have had to say today. We must emphasise the underlying importance of intellectual property both to the UK economy and my own central London constituency.
The people of these islands have a long and proud history of innovation. Much of what we take for granted in the modern world came about as a result of various aspects of British ingenuity. However, in an increasingly globalised world, much more must be done to protect the IP that is developed in the UK, so that we can attract the world’s brightest to invest here or to develop their ideas here.
The high-tech sector is naturally a sizeable generator of intellectual property. I welcome the fact that the Bill seeks to reduce the need for costly litigation and provide greater certainty for investors in new designs and technologies. I believe that such reforms send out a clear signal that the UK is open for business and they will play an important role in helping the UK to succeed in these highly competitive international markets.
Over the past five years or so, on the fringe of the City of London, which I represent, Tech City, commonly referred to as Silicon roundabout, has emerged almost from nothing and has quickly flourished into a renowned European IT hub. In my view, that is precisely the type of location where much of the £16 billion of intellectual capital produced annually in the UK originates. We all pay lip service to boosting traditional manufacturing, but it is in the IT and IP fields that we face great international competition. The Government’s strategy to maintain a distinctive reputation and a great competitive advantage over the export of IP is, I believe, vital to future economic growth.
In Soho, Covent Garden and the west end as a whole, in my constituency, we find the spiritual home of our globally competitive creative sector, which includes film, music, television, theatre and, of course, the animation industries. Those creative industries are one of the great white hopes for economic growth. I spearheaded a five-year parliamentary campaign to secure a tax credit for the animation industry and I was delighted when it came to fruition in last year’s Budget. I am afraid it still has a few teething problems in relation to the European Commission, but slowly but surely we are getting there.
I hope that the tax credit will help to keep animation jobs on these shores, but the real golden egg, as we all know, is the retention in this country of the IP rights. Money is generated annually worldwide by unimaginably successful animation franchises such as Thomas the Tank Engine, Wallace and Gromit and Peppa Pig—as I have two young children, I am now rather more used to that, as I am sure you are well aware, Madam Deputy Speaker. They all have a huge amount of secondary branded products. Let me give some perspective. The Thomas the Tank Engine brand alone tots up worldwide sales in excess of £1 billion each and every year, with his tales broadcast to more than 1 billion households in 185 countries each and every day.
It is important that we allow no room for complacency about the west’s domination, as we see it, of the knowledge economy. Within the next 20 years, I suspect that the IP rights that have underpinned the west’s competitive advantage—whether in licensing, copyright, design or patents—will be due for a radical philosophical shake-up. An ever more assertive China will argue that traditional IP structures are no more than an attempt by Europe to impose its own form of protectionism to suit its particular demographic. We cannot assume that the dominance of our values in determining global trade will remain unchecked.
To that end, the aspects of the Bill that are aimed at improving the operation of the IP system internationally are most welcome. The recognition of foreign copyright claims in the UK and enabling the Intellectual Property Office to share information on unpublished patents with other patent offices should, in principle at least, make it easier for UK companies’ IP rights to be respected internationally. However, clause 13 introduces a new criminal offence of deliberate infringement of a registered design, but, as the hon. Member for Hartlepool (Mr Wright) rightly pointed out, the vast majority of the UK’s 350,000 designers rely on unregistered design rights. There should be consideration of whether the criminal sanctions could and should be extended to include them as well.
Only about 4,000 designs are registered each year with the IPO. That pales into relative insignificance when compared with the 18,000 to 25,000 unregistered designs placed on the ACID design database last year, especially as the organisation has only 11,000 members. Given the vast amounts of capital invested in developing brands and the economic benefits that creates, I agree with the hon. Member for Hartlepool that it seems advisable to at least consider in Committee whether criminal sanctions for the infringement of copyright online should match the level of sanctions for the infringement of physical goods. As our lives increasingly shift online, the discrepancy between the maximum penalties for online copyright theft, with a maximum of two years’ imprisonment, and physical copyright theft, with a maximum of 10 years, seems in need of updating. The Minister made it clear that he recognises that the situation is fast moving. The Bill itself will no doubt be largely redundant within a few years, so we need to be aware of those changes.
In my work as a member of the Intelligence and Security Committee, I am increasingly aware that malicious cyber-activity such as the ongoing and daily attempts to steal British-owned IP—whether that involves patents, ideas and designs—is carried out primarily to gain competitive commercial advantage. Such efforts, I fear, are commonplace and are getting more common as time goes by. Much more will need to be done to tackle cyber-security internationally.
On a more parochial and local basis, in 2009, I worked with a group of local entrepreneurs and recommended the development of a start-up business incubator, now called the innovation warehouse, to the economic development office of the City of London corporation. I am pleased to say that that proposal was strongly supported financially and generally by the corporation. It is now based on the northern edge of the City, in Smithfield market. It opened in May 2011, and it provides 88 desks, counts more than 50 small businesses as tenants and provides a range of business-related mentoring and other events each month.
The dynamic office and incubation space developed at Smithfield market not only provides much-needed resources for small and growing businesses, but houses a large number of high-growth potential start-ups that have gone on to secure significant investment. I am sure that one of the Bill’s longer-term effects is that we will see such innovation not just in the gilded parts of the City of London, but in all the suburbs and, indeed, in many other UK cities. The scheme has rightly received praise from central Government and has become a destination of choice for UK Trade & Investment tours of Tech City. It is in my view precisely the sort of initiative that needs to be encouraged if the UK is to continue to aspire to be a world leader in IP, as the 21st century develops.
The Government could do a little more to encourage the development of IP in the UK. At a City round-table meeting on IP a year or so ago, I met a former engineer and investment banker who now helps technology start-ups. He had worked as a part-time chief financial officer for a tech spin-out from one of Britain’s top research universities. In the end, although it was backed by a quasi-governmental venture capital fund, the technology was sold prematurely to a large French company, as it had proved impossible to eke out the limited VC funding to expand the fledgling enterprise. Had it not been for the complexity of Her Majesty’s Revenue and Customs rules and an equity gap in first-stage venture capital, he believed that the UK Treasury would by now have been enjoying the rewards of fresh job and corporation tax receipts.
New tech businesses are typically nucleated when a piece of IP is picked up by a small team of high-calibre executives who practically apply and market that technology. Seed funding of £50,000 to £250,000 is typically not too difficult to come by, but founders’ resources, or those of business angels, can be tapped and new Government mechanisms, such as the seed enterprise investment scheme, incentivise investment in the early stages. However, the next part of the corporate journey—to obtain between £l million and £5 million in more conventional first-stage venture capital—represents the big stumbling block to expansion.
The structural shortage of such funding in the UK is exacerbated by the fact that, before these start-ups begin generating revenue, a large share of funds goes towards paying executives’ salaries. Therefore, the taxman gets much of the VC money through employer and employee national insurance and pay-as-you-earn tax. That is, of course, particularly ironic because, in many instances, a quasi-public source has helped to generate the VC funds in the first place.
To work through this problem, many start-ups eke out their VC money by instead rewarding executives with sweat equity. Since many such participants are perhaps established people in the 45-to-60 age bracket, they tend to have an existing financial cushion that leaves them able to work for free in the short term in return for those shares. However, HMRC rules currently insist that such shares are valued and treated as taxable salary. To pay the tax charge associated with the granting of shares for which there is no liquid market and which might turn out to be worthless in the end, executives must raid their savings. In short, when a start-up fails, as is often the case, executives have paid from their own resources for the privilege of working for free. That common problem is part and parcel of the whole intellectual property package that we are looking at today.
Partial work-rounds are in place based on approved share option schemes, but they are complex and hard for many SMEs properly to understand and administer. The Government could do a little more to solve the conundrum. As other Members have said, it is often difficult to say precisely where the responsibility for intellectual property lies. I am therefore taking the opportunity of this debate to say that, although perhaps other Ministers have a part to play as well, we need to try to find a way to ensure that such share rewards are not crystallised during the tax year in which they are awarded. The tax could be levied instead when the shares are withdrawn from escrow.
I am sure that my hon. Friend has a little more knowledge of that. I think that some specific problems apply to small start-ups in the venture capital world and, as I have said, for individuals who, for tax purposes, would not want an allocation, other than at a particular time when it was known that the venture would work through.
I do not want to be overly negative, because I think that the Bill is an important piece of legislation. It reflects the commitment that the Government, rightly, have made in this area. We can be proud of our place in the global league tables for intellectual property rights, but we have no cause for complacency. We are perhaps ahead of the game, or cheek by jowl with Germany and the Netherlands, which I think—without being complacent —is a good place to be.
I am fairly supportive of what the Government are trying to do, which is to make the IP landscape easier to navigate for businesses, especially small and medium-sized enterprises, many of which will be looking to expand globally and make an impact for the future. It is of underlying importance that the Bill will make better off UK businesses that wish to protect their products and technologies through patents and design rights. The Government must continue to focus their attention on doing more to encourage investment and to secure IP rights if Britain is to remain a global player in what I am sure will be, in decades to come, an extremely competitive international market.
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I also belatedly welcome you, Madam Deputy Speaker, to the Chair. The appointment was perhaps a loss to the no campaign on the constitutional question, but one that we welcome.
I generally welcome the Bill. I have managed to speak in most of the debates on IP since becoming a Member of Parliament, and I have had the great pleasure of introducing a couple of them, but this is the first time in those 13 years that we have had a Bill dedicated to it. It gives us an incredible opportunity to assess the value of IP-supported business and industry to the economy. IP makes a fantastic contribution—4.3% of our GDP, as the Minister said.
The hon. Gentleman is spot on. So much more could be done through educational initiatives. I have seen some important work being done. I have visited schools and seen schoolchildren trade marking their work with the little copyright symbol. They were starting to appreciate that what they produce, even if it is just a drawing, has an intrinsic intellectual value. If we can get across the message that intellectual property is as important as a property right, and if we can encourage that culture, we will be making great strides forward.
It has been reported in recent weeks that the creative sector has grown by 8.6% in recent years, compared with growth of only 0.7% in the general economy. It is the UK’s fastest growing sector and is worth around £71 billion a year. As the Culture Secretary has said, so much of our cultural and creative endeavour rests on important intellectual property rights, which is absolutely spot on. It is the creative industries that are growing us out of recession. Imagine growing our economy on the back of the creativity, talent and imagination of the people of this country. What a fantastic way to grow our economy. That is why it is so important that we get the intellectual framework right.
We have not done too much that is wrong over the past 10 years. The UK remains a leader. We are in the top three countries in practically every cultural discipline, whether music, film, television, publishing or whatever. We must be doing something right. It also comes naturally to people in these isles; we are just naturally creative. That is reflected in the great output we have seen over hundreds of years, in our contribution to invention, talent and creativity. We get something right and we are able to protect it, so we have to be very careful as we progress with intellectual property rights. We tamper with that at our peril. We have to be careful about how we progress.
The genesis of the Bill was in November 2010, when the Prime Minister made his great “Googlesburg” address. I remember coming home one evening and being unable to believe what I was seeing on the television: a UK Prime Minister talking about intellectual property. It was the first time I had seen a UK Prime Minister take an interest in intellectual property, which was great. I was also interested in what he was saying, because I wondered what on earth he was going on about. His basic premise seemed to be that we would never see a Google emerge in the UK because of our restrictive intellectual property laws and copyright framework. He did not say whether it would be a good thing to have a UK Google. The clear thing he said was that we would not be able to create a Google in the UK, and he also said something about our IP rules being restrictive and that they needed to be fixed.
I do not know who was advising the Prime Minister at the time, but it was certainly not the hon. Member for Hove (Mike Weatherley), who is now his adviser, because I know that the hon. Gentleman would never advise him to say such nonsense about the need for a Google to emerge in the UK—he would have advised him to say something much more sensible and measured. Was there perhaps somebody close to Google working at No. 10? Was somebody in a personal relationship with somebody working at No. 10 and advising the Prime Minister? I will leave that question hanging. Thank goodness the hon. Member for Hove is now advising him much more sensibly on such matters. [Interruption.] I see the Whip, the hon. Member for Devizes (Claire Perry), nodding her head. I will return to Google later, because there are lots of important things to be said about that. We have to understand what that has all been underpinned by and the impact and damage that type of process is having.
The Prime Minister then dispatched Ian Hargreaves to solve the Google conundrum. Ian Hargreaves rightly dumped all the Google nonsense as soon as he could. He went to the United States to see if he could introduce the American system of fair use into UK law. When he was prohibited from doing so because of very sensible European legislation, he moved on to the substance of his review by looking at IP’s economic contribution. He came up with 10 recommendations—some good, some bad, some indifferent and some repetitive—that the Government were minded to accept.
Since then, throughout the Hargreaves process, we have been in the business of legislating for those 10 recommendations. Some have required primary legislation, such as the Enterprise and Regulatory Reform Act 2013, and some have required secondary legislation. We are yet to see the statutory instruments, because the Hargreaves process has not concluded. We have this Bill and the SIs are coming forward. One thing that I would like the Minister to tell us—he can intervene now or answer when he responds—is what on earth is happening with the SIs for the rest of the copyright exceptions. He will probably say that they are still with parliamentary counsel and that they are not yet ready to be presented. Well, he had better get a move on, because he only has until March to do it.
I would like to hear about the process for introducing the SIs and what we should expect. I strongly suggest—several Members have said this several times to various Ministers—that we have separate SIs for each of the copyright exceptions. As a matter of principle, it is right and proper that we should be able to assess each of the exceptions individually. It would be unacceptable to bundle them together on a “take it or leave it” basis, particularly the new exceptions, and there are some really important ones, such as parody, copying and all the other ones—I cannot remember what they are, but the Minister knows what I mean. We have to ensure that we see them separately and debate them properly when they come through.
We are getting close to the end of the Hargreaves process. Has it been good? Yes, some of it has been all right. The digital copyright exchange is fantastic—a great little innovation. That part of the process has worked. However, there is a lot of nonsense—stuff that we did not need. In fact, great unhappiness has been caused among many people who represent our creative industries, because when they came to the Government stating their strong concerns about some aspects of Hargreaves they were arrogantly dismissed as though they—the people who have built the success of the industry—did not understand the environment they were working in and the Government or Hargreaves knew it better. There was a great deal of dissatisfaction among people who felt out of sorts with the way the Government went about this business. I hope that if we have a process such as this in future we will be able to look at things much more circumspectly and take everybody with us as we go forward.
I want to make a few remarks about how the Bill has been handled. It is an absolute disgrace that the House of Lords looked at this matter first: it should have been elected Members in this House. Given the value of the role that IP plays in industry and business, we should have considered it first, and if the House of Lords then wanted to look at it and suggest amendments and things we should reconsider, that would have been absolutely fine. Something as important as intellectual property and its contribution to the economy should have been handled first by directly elected Members rather than the House of Lords, talented and well respected as some of its Members may be. It should have been our right and our responsibility.
The Minister responsible for IP is an unelected Lord himself. The hon. Member for Lewisham West and Penge (Jim Dowd) was spot on in his comments. The Minister is anonymous. Not even the Prime Minister could remember his name, so what chance have the rest of us got? It is great that the Minister for Universities and Science is here—who better to have dealing with a Bill on intellectual property than a Minister with a multiplicity of brains?—but the real IP Minister should be taking this Bill forward and held accountable through the questioning of this House’s directly elected Members.
That unelected Lord is a Minister in the Department for Business, Innovation and Skills, which is responsible for the Intellectual Property Office despite the fact that the IPO deals with matters looked after by the Department for Culture, Media and Sport. All the disciplines that the IPO manages and supports are covered by the DCMS, but the IPO is covered by BIS. Is anything as ridiculous as that? Surely we should be trying to bring this together, as suggested by the all-party intellectual property group. I see some of my fellow officers here; the hon. Member for Lewisham West and Penge is its secretary. DCMS would be the perfect fit for the IPO in ensuring that it could work beside all the industries it is there to support. I hope we can resolve this issue.
The all-party group also suggested that we should have an IP champion. If this is going to work cross-departmentally, we need somebody out there banging the drum for IP-supported business and industry. That is the great forgotten in all this. There are people here who are passionate about IP and recognise its value and importance, but the place should be mobbed—full to the gunwales. This is about billions of pounds and we have to get it right. The problem is that we have an anonymous Minister in a Department that does not serve the industry. We must get this fixed. We should make the hon. Member for Hove our IP champion—an IP tsar who is out there getting things sorted out. He was right to mention the IP tsar in the United States, who is doing a fantastic job. When the all-party group met her, we were all very impressed with the power and clout she has on Capitol Hill to get things done. That is what we need in this country—somebody who will work cross-departmentally to get things resolved and make sure that we are able to take this key matter forward.
On the Bill itself, I do not want to be repetitive—[Interruption.] Come on, let me get this properly into context. We have heard all about the sorts of things that the Bill does. It is great that it covers registered design rights—the great forgotten IP right. It is fantastic that ACID has at last got its way and that this will now be covered by criminal infringement provisions, but it is totally wrong that unregistered designs are not covered too. In the House of Lords there was a big debate about this on clause 13. There has also been a debate within the industry whereby a consensus has developed that if we are to pursue the idea of registered design rights, unregistered design rights must be included. The vast majority of people who work in the design industry are in small or micro-businesses with probably fewer than four people working for them, and they cannot spend so much time making sure that things are registered. We must get this resolved.
ACID has built up a database of unregistered designs, and tens of thousands of people have registered with it. If that can be achieved by a small organisation such as ACID, which runs so efficiently and effectively with Dids Macdonald and her very small staff, surely the UK Government can do likewise, and that is what we are asking them to do. It is absolutely right to make sure that our design industry is properly looked after in this regard. I welcome any progress on patents and designs, but we need decisive leadership, not another piecemeal Bill that does the absolute minimum that is required.
I did not expect to be raising a constitutional point in relation to these issues, but the unified European patent court could seriously affect Scotland’s ability to judge and make rulings on patent issues within Scotland. As the Minister knows, under the new European regime every member state is allowed four divisional courts. We know there is going to be one in London, because the Government have said so, but we do not know where the other three will be—if there are three; they have not said how many they have chosen to have. One of them has to be in Scotland. We cannot have our economy suffering because our inventors and creators in small businesses have to leave their jurisdiction to secure justice and satisfaction elsewhere in the UK or further abroad. After centuries of looking after these issues, this ability must be available to the Scottish judiciary. The Minister has probably seen the letters from the Law Society of Scotland and the Faculty of Advocates in Edinburgh, who are very worried that we could be diminishing or getting rid of not just decades but centuries of experience in dealing with patents according to Scots law. We must make sure that the Court of Session in Edinburgh becomes one of the divisional courts of the new unified court.
Several Members have raised this issue. As the hon. Gentleman rightly said, London will be one of the divisions. How many divisions there are and where they are will depend on the pattern of need and demand. We absolutely understand the importance of accessibility to these services across Scotland. We are working closely with the devolved Administrations and court services in Scotland and in Northern Ireland. I cannot give him the assurance he is asking for today, but as we see the pattern of demand emerge, and if we have good conversations, then what he seeks is very possible.
I am very grateful to the right hon. Gentleman for saying that; it does bring a degree of comfort. I recognise that there is an attempt to try to resolve this matter. He clearly recognises that it is a huge issue for us that has to be resolved. The whole Scottish legal establishment is united in calling for that. I welcome what he said and hope that as we take the Bill through we will hear more about it and can ensure that the Scottish courts are satisfied and that we do not lose their centuries of experience in dealing with patent issues.
I want to say a few words about clause 21, which will require the Secretary of State to report on the activities of the IPO and how it has supported innovation and growth in the United Kingdom. I do not think any Member would argue against that. It is a very positive step that provides a bit of a focus for the IPO’s activities. However, any measure must be quantified, and it must include some reference to how those activities have supported IP-dependent businesses and IP rights.
One major battle throughout the Hargreaves process was all the stuff about economic evidence. I remember when the creative industries used to present evidence to us. The work done by the creative industries to inform the Government about their activities—it was sometimes commissioned by the Government—was arrogantly dismissed by Hargreaves as “lobbynomics”. However, the Intellectual Property Office made some heroic assumptions to support its copyright exceptions. It said that if all 10 of Hargreaves’s recommendations were introduced it would make a difference of between 0.6% and 0.9% of GDP. Come on! It expected us to believe that. It therefore works both ways.
Some of the other heroic assumptions underpinning copyright exceptions were totally unbelievable. We in the all-party group on intellectual property asked IPO officers to come in and explain them, and we found what they said totally unsatisfactory. The annual report must therefore be credible and robust, and it must respect everybody in the sector. The Government should not just leave it to the Intellectual Property Office to concoct some figures and expect us to be happy and satisfied with them. At some point, we will have to be able to challenge the assumptions and look at what underlies them, because we cannot have some of the nonsensical economic assumptions that we had in the past.
Lastly, I want to return to Google. This all started with Google, did it not? It was kicked off by the “Googlesburg” address, but let us try to turn that on its head. The issue was all about whether a Google could emerge in the UK because of restrictive intellectual property practices. What about looking at Google itself? It is a digital behemoth—there is nothing bigger in the digital world—and the gatekeeper for all our content industries. Nothing happens without Google, and nothing can go through its prism without satisfying it in some way. It distorts the digital market, and it is damn good at ensuring that it keeps its predominant position. All its activities are about maintaining its predominant, almost monopoly position as the gatekeeper of content. It produces no content of its own—not a bit—but, yet again, the question all comes down to how content is measured and assessed.
As a matter of fact, what the hon. Gentleman says about Google not producing its own content is inaccurate. It would strengthen his argument if he acknowledged that it produces content—for example, maps. He is probably aware that the European Commission is now looking at its uncompetitive behaviour in putting its own products above others in the search engine.
I was perhaps a tad too harsh in relation to Google producing some of its content. Yes, it copies maps, puts them up and makes sure that people can access them, but it produces none of what we understand and appreciate as content, whether drama, film, television or whatever. All it does is act as a platform, which is the only platform that people use.
At some time, this Government must have a proper look at the almost monopoly status of this huge, multinational, non-UK business and ask whether it is good for our content industries. I have a sneaking feeling that it is not. I have seen the evidence from the British Phonographic Industry. It sent 50 million notices to Google asking it to take down links to illegal— I emphasise, illegal—sites. Google should not be doing that. What on earth is going on if it receives 50 million requests to take down links to illegal sites?
If hon. Members run Google searches for MP3 downloads for the top 20 singles or albums from the whole of November, on average 77% of first-page search results for singles and 64% of those for albums will direct them to illegal sites. Is that not incredible? If they put in the name of a band to find some of its musical content, they will be directed to an illegal site through Google. What on earth is going on? As the BPI has said, Google’s monopoly leads consumers into
“a murky underworld of unlicensed sites, where they may break the law…because it persistently ranks such sites above trusted legal services when consumers search for music to download.”
It is time to call in the Competition Commission: we cannot continue to allow Google to be the gateway to content industries when they do them so much damage.
I met and had a fantastic chat with the Featured Artists Coalition just before Christmas. It has represented some of our greatest pop stars over the past 50 years—people who have made millions of pounds for the UK economy and given us great entertainment throughout those years. One of its spokespeople, Crispin Hunt, perfectly summed up the situation when he said:
“A brilliant new band that I recently worked with has just been dropped by their label because their debut EP sold barely 4,000 copies. Yet the number one site on a Google Search for the same EP boasts of 23,000 illegal downloads…then directs me to an online brothel, next to an advert for Nissan as I rip the tunes. What more do I need to say?”
What more, indeed, need he say before something is done about the monopoly status of Google?
I hope that now we are bringing the Hargreaves process to its conclusion, we will start to consider how people access content, how it is distributed and how that distribution distorts the market, as well as how to ensure that our artists, inventors and creators are properly rewarded for their work. I hope to serve on the Public Bill Committee as there are several outstanding issues that need to be considered, and I look forward to the Minister’s response. He has those two brains, so he can get thinking on the Intellectual Property Bill, and I hope that his two brains will be in the mood to accept some helpful amendments as we try to improve it and to secure satisfaction for our creative industries and our artist creators.
The Bill is adequate and piecemeal, but it is the only one we have, so let us get this done. Let us finish the Hargreaves process and move on to the substantial and real work that we need to do to ensure that this country remains at the top of all cultural and artistic disciplines as we go into the next decade.
It is a great honour to follow the hon. Member for Perth and North Perthshire (Pete Wishart). I greatly respect his views on intellectual property, and I thank him for his kind comments.
Intellectual property affects every one of us. We have heard from the Minister about its importance to the economy. The statistics speak for themselves: the creative industries are worth more than £71.4 billion a year in gross value added terms, which is 5.2% of total GVA in the UK; they generate £130,000 every minute for the UK economy; they employ 1.7 million people in the UK, which is 5.6% of all UK jobs; and, at £15.5 billion, they account for about £1 in every £10 of the UK’s exports. Without a vibrant creative economy, our deficit would be higher and our services worse. I am often told that the creative industries are not as important as the NHS, but one thing is certain: without them, we would have a much reduced NHS. Every person in the UK benefits from a thriving creative sector.
As the intellectual property adviser to the Prime Minister, I am well aware that a strong intellectual property culture and regime is the cornerstone of how we do business, and that protecting intellectual property rights is essential for growth. I therefore broadly welcome the measures in the Bill. By valuing intellectual property, we help not only the UK businesses and investors that take the brunt of the litigation headaches arising from intellectual property and copyright infringement, but the consumers by ensuring that the public are able and willing to buy the most legitimate product available, and that creators or authors of products are financially remunerated.
A focus on the entrepreneurial aspects of intellectual property is vital to helping Britain succeed in the competitive global market. Alongside that focus, winning the hearts and minds of the public on intellectual property—in all its forms, from patents to copyright—is essential to the future of our creative industries, world-beating brands and, indeed, the country as a whole.
As many colleagues will know, I pioneered the Rock the House and Film the House initiatives to educate right hon. and hon. Members about intellectual property, and to bring them into contact with musicians and film makers in their own constituencies. Such initiatives for music, film and other creative industries are important in winning the public relations battle. Industry has a huge role to play in that regard, as do the Government. I welcome the initiatives of the Industry Trust for IP Awareness, the Alliance for Intellectual Property, the BPI and many others. With those organisations, I will be exploring what more can be done to ensure that there is greater collaboration and co-ordination between industry and Government with respect to educational initiatives.
The Government have started to tackle the issues that plague intellectual property law enforcement, and the Bill addresses some of those issues head-on. From the introduction of criminal penalties for deliberately copying UK-registered designs to extending the expert opinion services delivered by the Intellectual Property Office to include registered designs, the Bill will bring to design rights the same level of protection that is afforded through copyright and trade marks. In addition, the implementation of the unified patent court agreement proposed by the Bill will lead to direct benefits to UK business of up to £40 million per year. Simple changes, such as providing the option to mark a patented product with a web address, rather than a patent number, and allowing the sharing of information between international patent offices, could reduce the burdens on businesses and individuals, as well as alleviate the backlog of more than 4 million patents worldwide.
Before I discuss what additional measures it would be beneficial to incorporate in the Bill, I will expand briefly on some general points. With industry, I have developed a three-pronged plan for how to address intellectual property issues in my position as the Prime Minister’s IP adviser, using education and the carrot and stick.
As has been mentioned today, education is all about winning the debate about cheap or free goods. We must make the argument that if people get something cheap or free, they will eventually get only cheap goods or none at all. We must use education to get the public on side, with a focus on young people. We must convince people that piracy and similar illegal activities are not in their best long-term interests and are not socially acceptable. My goal is to have young people telling their friends that illegally downloading content or buying counterfeit goods will harm them all in the long run and is just not right. Their friends who might want to carve out a career as musicians will be the hardest hit.
Ultimately, we will all be hit hard. I mentioned some impressive statistics at the start of my speech. The creative industries are the third largest employer in the UK and we are one of only three countries worldwide that are net exporters of music, the other two being the USA and, perhaps surprisingly, Sweden. As I have mentioned, all our public services will be hit if we lose that enormous revenue stream for the country.
The second part of the process—the carrot—is about providing incentives. We must challenge the creative industries to step up and provide appealing, consumer-focused services for their products. Some companies, such as Spotify, Netflix and Bloom, are already doing work in that area, but there are many more possibilities to be tapped. Indeed, there was a Rock the House seminar on that very topic in December last year, chaired by my hon. Friend the Member for Morecambe and Lunesdale (David Morris), at which the industry discussed the role of innovation in protecting British intellectual property rights.
We must encourage supportive industry measures. PRS for Music has proposed a traffic light system for search engine results that would inform consumers whether a site is legal. The Content Map is a web portal that lists all legal services across music, film, TV, e-books, video games and sport broadcasts, providing an invaluable service to those who are unsure whether a site that they or their children are using is safe and legal. Another example is the IPO-funded whiteBULLET initiative.
Finally, I come to the stick. To address abuses of intellectual property, there has to be IP enforcement legislation with real teeth. There are welcome measures in the Bill, such as increasing the protection of design rights. There are other measures, like increasing the maximum penalty for digital copyright theft, that are not in the Bill but perhaps should be. Another enforcement measure would be to follow the money and stop advertising and payment facilities on websites that host illegal content. Internet service providers and search engines would also be accountable if there was known to be criminality. Ultimately, we need to consider withdrawing internet rights from lawbreakers, along with imposing fines and, as a last resort, custodial sentences.
The technology is available to bind the various strands together, and just a little help from the Government is needed. Perhaps it is time, as has been mentioned, to consider a USA-style IP tsar to co-ordinate all the interested Departments and the industry. Perhaps the hon. Member for Lewisham West and Penge (Jim Dowd) would be good in that role. I can think of 10 worse people to have.
Like other Members, I am grateful to the Alliance for Intellectual Property, which has produced a useful list of recommendations on how the Bill could tackle IP issues more effectively. It has rightly pointed to clauses 13 and 21 as especially vital. Clause 13 creates a new criminal offence for deliberate infringement of registered designs. That addresses the long-standing anomaly that a 2D drawing receives greater protection under the law than its 3D manifestation. To provide any significant benefit to UK designers, the provision must be extended to cover unregistered designs. My hon. Friend the Member for Beckenham (Bob Stewart) raised that matter earlier and I would be happy to explain to him in greater detail why that is required.
Certain sections of the manufacturing industry that rely on innovations to maintain their position as market leaders are concerned that clause 13 could turn their directors into criminals when something is copied unwittingly. The Bill is clearly not intended to have that effect. On balance, I think that their fears will be unfounded in practice.
Clause 21 introduces a requirement for the Secretary of State to report annually to Parliament on how the activities of the IPO have supported innovation and growth. That is welcome, but ideally it would include how those activities have supported the businesses and individuals who create and own intellectual property, not just those who seek to exploit it.
Further measures that the Bill could include are an increase in the maximum penalty for digital copyright theft from two to 10 years, which would match the penalty for physical copyright theft. I support that proposal. The same crime is being committed and matching the penalty would show that the Government agreed. In addition, more effective protection is needed for brands that fall victim to clone packaging, as we heard earlier.
The Bill deals with only a relatively small area of IP. It does not include any of the supportive measures of the Digital Economy Act 2010 or any of the Hargreaves exception recommendations. Indeed, this is a missed opportunity to debate those exceptions on the Floor of the House. The Bill shows that the Government wish to strengthen IP importance and enforcement. However, the Hargreaves exceptions have the potential to send out exactly the opposite message, with a plethora of IP relaxation measures that will introduce new exceptions for parody, text and data mining, and private copying.
The Hargreaves exceptions will affect businesses that employ significant numbers of people in the UK, so their wording matters greatly. The wording needs to be tight and must not go further than is necessary to implement Government policy. For example, the statutory instrument on private copying needs to ensure that the definition of private copying does not mean the wider definition of “friends and family”, as it does in Europe. Creative content providers are very concerned that the education exception may extend beyond the classroom. I cannot emphasise enough the importance of considered drafting. It will define the Government’s approach to IP. We await with bated breath the wording of the statutory instruments relating to Hargreaves. However, I fear that it may be too late and that we will send the wrong message to our creative industries and to European legislators. We shall see.
There is one further useful amendment that could be made to the Bill. I suggest that there should be an amendment to encourage the IPO to put education at the heart of its activities. The IPO has some good initiatives, but I believe that they could be expanded. Clause 21 places a reporting duty on the IPO that relates to innovation. My proposed amendment would add a requirement to report on the educational aspects of its work. Specifically, it would ask the IPO to report to the Secretary of State on how the activities of the Patent Office have contributed to promoting an understanding in the United Kingdom of the importance of intellectual property and its effective exploitation, and how the activities of the Patent Office and other UK institutions have contributed to educating users of creative content about intellectual property and intellectual property rights.
Ultimately, the Bill provides us with an opportunity to lead the world in raising awareness of the importance of intellectual property and IP enforcement. Ian Hargreaves recommended that we need an IP framework that is responsive to change. He was right. The Bill is one step in that direction. I urge the Minister to consider the points that I have made and, if at all possible, to include my recommendations in the Bill.
To summarise, I have suggested an extension of clause 12 to include unregistered designs, an increase in the maximum penalty for digital copyright theft to 10 years, more effective protection for brands in relation to clone packaging, an extension of the reporting requirements of the IPO to include educational activities, and the consistent promotion of the benefits of a robust IP framework. Above all, although away from this Bill, I urge the Government to be careful about the wording of the Hargreaves exceptions statutory instruments.
It is a great pleasure to be involved in this debate and to follow the hon. Member for Hove (Mike Weatherley), who has shown why he should be the IP tsar. I know that he is the IP adviser to the Prime Minister, but in his contribution he has shown an understanding of the issues that we face. I first became involved in intellectual property rights as the Minister responsible for consumer affairs in the Department of Trade and Industry, and my interest has continued as a member of the Culture, Media and Sport Committee. It has been impressed upon me how important these issues are. The amendment proposed by the hon. Gentleman, which would put education at the heart of this issue, is vital, and I hope the Whips will ensure that he serves on the Committee so that we have the opportunity to debate the issues he raised.
I was grateful to the Minister for initiating this debate in the way he did because it would have been easy for us to get into the usual argy-bargy about how long it has taken to get to this point. My hon. Friend the Member for Lewisham West and Penge (Jim Dowd) is right to say that the Gower report was the predecessor of the Hargreaves review, but it has taken an inordinate length of time to get to where we are today, which is an important stage of discussing an important Bill that will have an impact on creativity. I will chide the Minister a little because he did not mention the Culture, Media and Sport Committee report—unlike my hon. Friend the Member for Hartlepool (Mr Wright)—and what it said about the creative industries and the impact they have on our communities.
I represent a northern city, and we are looking at creativity to replace many of the manufacturing jobs we have lost over the years. The creative industries—whether film, television, the arts, or books—can create lots of new jobs. Bradford university and Bradford college provide opportunities to young people and small and medium-sized enterprises to use creativity as a way of creating those jobs of the future. Intellectual property is a key element of that, which is why the point about education is so strong, especially with the copying and so on that people do because they think they are getting things for free. In fact, that has an impact on the sector, particularly music, film and television.
The Hargreaves review has been broadly accepted by the Government and it is important that we move forward in a progressive way. The point about exceptions in the statutory instruments is a vital message that will be sent to the sector, and it is important we get that right. I hope the Minister will take that issue to his colleagues and ensure that we see the separate installation of the SIs on the exceptions.
I am not anti-Google. I think it does a lot of good, but the way it has operated with regard to intellectual property is a cause for concern. That concern was echoed by the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Wantage (Mr Vaizey), when he appeared before the Select Committee and said that it was easier for Google to get to No. 10 than it was for him—I do not know what that says about him as a Minister, but there are clearly concerns there.
How soon I forget. My hon. Friend is right: Viscount Younger did come before the Select Committee, but the hon. Member for Wantage, who is also a Minister from the Department for Culture, Media and Sport, also gave evidence to the Committee on IP rights.
The Committee’s report is worthy of being read by hon. Members who have not yet done so, given the impact that creativity can have on well-being, innovation, and the growth of potential new jobs. When the Committee went to America to look at the creative industries—a difficult job but somebody has to do it—we went to Google and to the film studios. I found it interesting to note the importance of tax credits to the film industry. Film tax credits are one thing I will congratulate the Government on, and moving those measures to high-end television and games will maintain our lead in such things.
I do. I know it is difficult when, in austere times, we are asking the Treasury to give more tax breaks, but I think it is a case of invest to save: if we do that for the music industry, we will get more back in the fruition and growth of that sector. I support what the hon. Gentleman proposes.
I think that Google has responsibilities and needs to consider the issue raised by BPI—I had forgotten that so many million requests have been made, and I do not think Google responded in anything like the way it needed to. I hope that with this debate, and with pressure from Ministers, we can put some pressure on Google to meet its requirements and responsibilities.
Clause 21 concerns the IPO report. I was grateful that the Minister said that Members would be able to consider all aspects of that report annually, though there are areas where things have not worked out as well as they could have. Returning to my former role as the Minister responsible for consumer affairs, I remember that on issues like trading standards, reports came from many areas of the country showing that things worked well in some places, but not in others. Enforcement is a big issue, and perhaps when we get the opportunity in Committee, we can look at the role of the IPO, trading standards, packaging, and some of the goods that mimic others. As a former sports Minister, I think particularly of the football industry where counterfeit football shirts and so on are produced. There is a tremendous cross-section of areas to consider, which is why it is important to have an IP tsar. We will want to consider clause 21 in greater detail, as well as clause 13 and the issue of criminalisation.
Like my hon. Friend, I am interested in how successful the legislation will be in addressing new kinds of difficulties with intellectual property. Does he think that clause 13(1)(a) will deal with something like TrafficPaymaster, which is the software product marketed by the HowToCorp company? It allowed people to scrape content from websites, and spin it so that it was presented as fresh content, rather than plagiarised content. I would say that that is a form of intellectual property theft. Will clause 13 deal with that?
I would be interested to see how the Minister responds to those issues because it is difficult to get to the definition of what is and is not a criminal offence. I understand the arguments on both sides, but having received representations from designers in the furniture manufacturing industry, I feel that we have to do something; we cannot continue without there being recourse to some punishment, or without problems being addressed. I believe that clauses 13 and 21 will take up most of the Committee’s time.
To return to the issue of education raised by the hon. Member for Hove, we need to educate many of our colleagues about these issues and how they affect companies in their constituencies. It will be interesting to look at how we can work together to try to raise the profile of such matters. I know the hon. Gentleman has done that through Rock The House and Film the House and I congratulate him on that work, but more needs to be done.
I want to raise a point about IP rights and what the Government are proposing across the health sector with the introduction of plain packaging for cigarettes, and the IP costs linked to that. Legal opinion has stated that compensation may need to paid to some tobacco companies for their loss of intellectual property rights, which could be between £5 billion and £6 billion. I raise the point because people do not look at the consequences of a loss of IP rights. Perhaps in future debates we will consider that issue on the back of what happens in Australia.
I welcome the Bill and the spirit in which the Minister has said that he will listen to what has been said, so that we can try to enhance and develop it further. This is a great opportunity and at long last IP rights are getting recognition in being addressed by this House.
I do not want to delay the House long because I have just a few comments, mainly about business growth created by the design industry across the country. The design industry alone is worth £33.5 billion, but we could put many billions on top of that given the manufacturing that takes place from designs that are developed in this country. It is vital to protect that industry from those who try to copy and fraudulently get involved in it.
There is a company in my constituency that one would not think was a massive designer of equipment for the film industry. In fact, however, AMS Neve designs the music mixing systems that are used by all the main pop groups and pop singers across the world, and it was the main designer of the music mixing systems for the film “The King’s Speech”. For that, the owner, Mark Crabtree, got a British Academy of Film and Television Arts award. It is extremely unusual for somebody working in manufacturing to get such an award. It was developed, designed and manufactured in my constituency. It is so high-tech that he has a problem protecting his designs.
The games industry and the fashion industry are other major industries for which it is vital that we protect design. Many industries are desperate to steal our major designs. Burnley college has an amazing design department. The people there design clothes of the future, particularly for the Asian market. They need their designs to be protected, which will happen under the Bill.
It is important that we protect those industries because 350,000 people work in them. We cannot put such industries at risk. They are high-tech, and are in the main developed by graduates and students of our universities. The Bill needs to be developed to ensure that they are protected against fraudsters and other people around the world who would be delighted to get into those industries. We are No. 1 in intellectual property.
It crosses my mind that it must be extremely difficult to protect our industries when countries —I am perhaps thinking of one very large country in Asia—believe it is in their interests to steal designs for things such as games and do not seem to give a damn about intellectual property.
I agree with the hon. Gentleman. When I was in engineering, we did a staggering amount of work for a local company that made wallpaper machinery. The company lost the majority of the manufacture of the kit but managed to hang on to the high-tech part of it. The country to which my hon. Friend is alluding could not develop the high-tech part, but it could do the basic engineering—the steelwork and building the machines. Fortunately, that equipment is secured in the UK, because that country has not yet developed the skills to develop the high-tech part—changing the machine for the different colours used in the manufacture of wallpaper. The situation is the same in the carpet industry. That country can make the machines easily, but it cannot develop the technology to produce the carpet patterns.
I am delighted with the Bill and am pleased that the majority of hon. Members agree with it—there seems to be no opposition to it at all. I hope that, in Committee, any problems with clauses 13 and 21 are resolved so that we have a good, solid, secure Bill in the House on Third Reading. I hope that we can put the legislation on the statute book to protect the industries of the future and the jobs of the people working in them.
I am pleased to have the opportunity to speak in the debate. I agree with everything my hon. Friend the Member for Hartlepool (Mr Wright) said at the beginning of the debate and am pleased to see a joined-up approach between the teams from the Departments for Business, Innovation and Skills and for Culture, Media and Sport.
As the hon. Member for Burnley (Gordon Birtwistle) has said, protecting intellectual property is essential in the modern, knowledge-based economy. It is particularly important in the creative industries, which support 1.5 million jobs and produce about £36 billion-worth of output.
The hon. Member for Perth and North Perthshire (Pete Wishart) described the problem of illegal downloads, but he did not tell the House how large the number of illegal downloads is when aggregated. Ofcom estimates that, every three months, 280 million music tracks, 52 million television programmes, 29 million films, 18 million e-books and 7 million games are downloaded from sites without payment. It also estimates that about a fifth of households in this country go to those sites and do not pay for content. On behalf of the music recording industry, the BPI estimates that that costs the industry £250 million a year.
In the wash-up at the end of the previous Parliament, Labour and the Conservatives—the two major parties—agreed to pass the Digital Economy Act 2010. Unfortunately, the Government have been extremely dilatory in implementing its provisions. I am not saying that the provisions are perfect in every respect and that they do not need amendment, but the Government’s failure to get to grips properly with illegal downloading will cost the industry more than £1 billion in the lifetime of this Parliament.
The Government’s measures will not come into effect until the end of the next calendar year. They propose a voluntary code for ISPs. Under the Bill, the ISPs would notify people three times, after which the copyright holders of illegally downloaded content can call for slow connections, disconnections and so forth.
I do not agree with the proposals of the hon. Member for Hove (Mike Weatherley), the Prime Minister’s adviser, because he has brought no common sense to the debate. It is important that we distinguish between 14-year-olds in their bedrooms downloading two or three Justin Bieber tracks on to an iPod and people who make multi-billion pound businesses out of providing illegal material. It is not right to treat the two groups in the same way. We need measures that address the audience, who are unconscious of what they are doing, and the industry, which knows perfectly well what it is doing and is utterly disingenuous. [Interruption.] The right hon. Member for Wokingham (Mr Redwood) is mithering from a sedentary position. I am not saying that there should not be a penalty for the teenagers downloading material illegally, but I am saying that we should regard the problem much as we regard driving fines—we should have a points system building up to fines.
My point was that, when we get the education right and people understand that stealing intellectual property is wrong, and when the industry has alternative downloading models, if we exhaust fines and other means of stopping persons downloading illegally, we must consider some sort of custodial sentence for persistent offenders and people who operate on a commercial scale.
The point is that the people operating on a commercial scale are in a different category and should be dealt with much more severely. I completely agree with the hon. Gentleman that education must be part of that strand, but I am uneasy about switching off the internet because, for example, the 12-year-old little sister of a 16-year-old who illegally downloads pop music might be unable to upload her school home work. That does not seem to be the right way to go about dealing with the problem. But if the governing party wants to charge into criminalising every teenager in the land—well, that is an election opportunity for them.
To make any of this happen, it is obvious that we must reform the Intellectual Property Office, which does not have an important role at the moment. The hon. Member for Hove said nothing about what should be done with respect to the industry. The hon. Member for Perth and North Perthshire was absolutely right: we must have an EU approach. I know that that pains Ministers and means that they will have to see off the wilder shores of Euroscepticism, but this is a perfect example of where we need to see a European approach. Two points are particularly important: blocking sites that give people access to material they do not pay for; and requiring search engines to change their algorithms to prioritise legal sites. It is completely disingenuous for them to say, “Oh, we have received 5 million notifications and blah-de-blah-de-blah.” We all know that this is the root cause of the problem, so let us tackle it.
We must remember that this industry is one engine of growth in the British economy, but we must also take seriously the needs and the role of researchers in universities and in the British Library. We must update the law to allow them to have what they need: text mining for non-commercial research; heritage protection by digitising material; a workable private copying regime; and ensuring that the law overrides private contracts on digital material. The Hargreaves report came up with a number of proposals. Some were sensible—on orphan works and digital exchange—while others were perhaps more controversial, but one point on which I think we can all agree is that we do not wish to move the British economy to a litigious model, with the levels of litigation that are prevalent in the United States.
What I will say now relates in part to unregistered design. I have a concern about people putting patents on things that are part of the common culture, either here or overseas. For example, the recipe for a cucumber sandwich or people singing “Ring a Ring O’ Roses” at a children’s birthday party are a part of the common culture. Those examples might seem a little fanciful to hon. Members, but I will provide two examples where the common culture has been appropriated by some people to their financial benefit, and not necessarily to the financial benefit of all.
In the 1950s, some people collecting folk songs went to Teesdale in my constituency. They went right to the top of the dale and met some stonemasons. They got the stonemasons to sing songs and recorded them. They took the recordings away and shared them with people making music. One of the songs they recorded was “Scarborough Fair”. This was given to Simon and Garfunkel, who of course made an absolute fortune with it, and the stonemasons in my constituency made absolutely nothing. I think Simon and Garfunkel are great and they made a lovely production of the song, but it was a part of our common culture.
Today, we see this kind of thing going on in other industries. Sometimes there are glamorous models shimmying along the catwalk wearing prints that, not to put too fine a point on it, have been ripped off from people in Africa. The people in Africa, who have been making the prints for generations, get nothing, but the people who reproduce them patent the design and make an absolute fortune. I am sure that hon. Members agree that this need not to patent the common culture is something that we need to keep in our minds, so that we do not shift from one situation that deprives people who are genuinely making new, scientific innovations and discoveries, to a situation where we put legal attributions on every single idea and part of the common culture.
I am a little intrigued by the hon. Lady’s “Scarborough Fair” example. I presume that Simon and Garfunkel rightly had title to their particular performance, but surely they did not gain title to the song? I assume other people can go off and make their own arrangements of it without having to pay Simon and Garfunkel.
Unhappily, I think that that is exactly what did happen, and that was a mistake. I just want to caution the Minister and my hon. Friend the Member for Hartlepool not to make that kind of mistake.
I remind Members that, although we are talking a lot about the implications of new technology, this is a very old problem. I am sure that some Members will know this poem, which is at least 600 years old and is absolutely on the point:
“The law locks up the man or woman
Who steals the goose from off the common
But leaves the greater villain loose
Who steals the common from off the goose.”
It is all too easy to characterise this as a Bill of interest only to lawyers—one that is technical in nature and of little interest to the general public or the great British entrepreneur. Indeed, the title, the Intellectual Property Bill, does little to describe its underlying purpose, for this is not a Bill about the law; it is a Bill about creativity and innovation.
Every year, UK businesses invest nearly £16 billion in design and innovation. That is £61 million per working day, an incredible figure that represents 1.1% of GDP. The Bill is about not just protecting that investment, but growing it. It is about ensuring that British businesses are able not just to win in the global race, but to protect the advantages that got them to the top of the podium in the first place. Like many other of the Government’s policies, the Bill is about ensuring we attract the best talent and the best companies to the UK. When it comes to business and economic policy, this has been a recurring theme of this Administration.
When I was the chief executive of a global business looking to enter a new market, my board and I would carefully weigh up the tax and regulatory regime before deciding on a host country for the venture. Much has been made of how corporation tax impacts on this decision, and with the rate set to fall to 20% there is no doubt this will become an ever-increasing pull factor, but we should not underestimate the importance of the intellectual property protection regime. As the global race becomes ever more the battle for ideas and innovation over the battle for cheap labour, this will become an increasingly important concept.
As a member of the Select Committee on Business, Innovation and Skills, I sat on the inquiry into the Hargreaves review. Opposition Members would like to characterise the Bill as having little to do with Hargreaves’s findings, but you, Madam Deputy Speaker, will not be surprised to hear that I disagree. At the heart of Hargreaves’s recommendations was the need for copyright laws to recognise that IP is a tool for stimulating economic growth. I am confident that the changes implemented by the Bill will do just that: stimulate economic growth and help to secure the continuing recovery.
There are many admirable clauses in the Bill, but I should like to highlight a few in this context. First, on the creation of a criminal offence of infringement of a registered design, our IP framework already has criminal sanctions for breach of copyright—in the case of music, for example—and breach of trade marks to protect brands, but this change recognises that creativity of design is as important to the economy as any other piece of intellectual property. In doing so, it gives creators an additional tool to protect their creativity from the blatant copying that impacts on their bottom line. One also hopes that the threat of criminal sanction will deter such copying in the first place.
Clause 15 brings patent notifications into the modern world. Currently, in order to obtain the maximum protection, patent owners must mark every single patented product with all the relevant patent numbers, but the clause will allow them instead to mark products with a website address, reducing costs while maximising protection. It will also allow a patent holder to update the information as new patents covering the products are granted. I understand that such a system already operates in the US to great effect.
The Bill also proposes many reforms to the Intellectual Property Office, all of which will reduce costs for business and decrease uncertainty. In particular, the extension of the IPO’s patent opinion service to give non-binding opinions on patent validity and the introduction of a design opinion service will help resolve disputes without the need for costly litigation. It is right that businesses have the option of litigation, but it should not be the first port of call or the only way of testing validity. These reforms will help with this often-heard complaint.
I should also like to highlight the basic structural and operational reforms proposed to the IPO, such as allowing it to provide online inspections of registered design files and permitting changes to statutory forms, and even business hours to be made by directions rather than secondary legislation. It is unbelievable that should the IPO wish to extend its opening hours, secondary legislation would have to be passed in this House. I also welcome clause 21, which implements Hargreaves’s recommendation that the Secretary of State report annually to Parliament on the IPO’s activities and specifically on how they have contributed to the promotion of innovation and economic growth. This increased transparency can only be a positive move.
The final area in the Bill of interest to growth are clauses 8, 17 and 18, which relate to the international and European IP systems. Implementing the unified patent court agreement is a central requirement to creating a single EU patent, and such a patent would save British business about £40 million a year in translation costs when it seeks to protect its innovation EU wide—something that will be most welcome.
To conclude, this is a Bill not for lawyers but for business. It will ensure that British business secures its position in the global race and attracts winning businesses to the UK. It is a Bill that I fully support.
With the leave of the House, I wish to respond to what has been a very knowledgeable debate—fittingly, given that IP is key to knowledge-based innovation and industry.
Ten hon. Members have spoken from the Back Benches, starting with the hon. Member for Manchester, Withington (Mr Leech), who is not in his place, but who mentioned how design was worth £33.5 billion to the UK economy, as did the hon. Member for Burnley (Gordon Birtwistle). He said that 4,000 designs were registered, but that about 18,000 to 25,000 unregistered designs were logged on the ACID register—a point also made by the hon. Member for Cities of London and Westminster (Mark Field)—highlighting the possible inconsistency between the approaches to registered and unregistered designs in clause 13. He also said we needed greater consistency in our approach to digital copyright theft, along with physical copyright infringement, and called for the repeal of section 73 of the Copyright, Design and Patents Act 1988.
My hon. Friend the Member for Lewisham West and Penge (Jim Dowd) pointed out that not even the Prime Minister knows who the IP Minister is. To be fair to the Prime Minister—not a phrase I use very often—there have been three IP Ministers in the last two years, so it is unsurprising that he has not been able to keep track. Importantly, he also mentioned parasitic packaging and his experiences of Worcestershire sauce at The Hare & Billet, which we will cover later in Committee. As my hon. Friend the Member for Bishop Auckland (Helen Goodman) said, there is a sense of a common culture. For example, ready salted crisps tend to be packaged in red—not a bad colour at all. Flavours can denote across the board what colour can be used, but when a design—for shampoo or Worcestershire sauce, for example—becomes misleading, we get into the realms of parasitic packaging. We need to explore that in Committee. He also made a good point about fraudulent websites and, in the public sector, mentioned Transport for London. The Alliance for Intellectual Property has shown me websites for Ugg boots that look very credible but are illegal, fraudulent and not providing a proper service. Again, that should be looked at.
The hon. Member for Cities of London and Westminster generally welcomed the Bill, but said that more needed to be done. He said that his spiritual home was Soho, which started to get me worried, but he soon brought it back to animation and video games, on which he said it is important that we stay ahead in the global race. He makes an important point. Canada is aggressively pushing to be the leading place in the world for video games and animation, using tax credits and other things. We have to be mindful of that. He made another important point about tech companies and their scale. The UK is good on start-ups, but perhaps not so good at growing them to the scale we need. That might have something to access to funding, as opposed to IP, but it is certainly something to look at.
The hon. Member for Perth and North Perthshire (Pete Wishart) was great in Runrig, but he is even better in MP4 and has consistently advocated a strong IP framework. I think he said that we tamper with it at our peril and made an important point questioning what was happening with the delay to statutory instruments for copyright exceptions. He made another important point about how these things should not be bundled together but taken, I hope, on the Floor of the House, and certainly individually so that we can consider things such as parody and private copying. He made the astonishing point that 77% of singles and 64% of album downloads had been directed via an illegal site. That is something we need to look at.
The hon. Member for Hove (Mike Weatherley) is the Prime Minister’s IP adviser. He brought a lot of knowledge and experience to the debate. He said that helping the consumer to buy legitimate products was a key concern and mentioned the three elements he wanted to deal with—education, carrot and stick. He also made the important point that a 2D drawing was covered in the Bill and IP legislation, but that a 3D physical manifestation of that design was not. Surely, that cannot be right and needs to be dealt with.
My hon. Friend the Member for Bradford South (Mr Sutcliffe) said that education was at the heart of all this. His area is using creativity in creating jobs for the future. He mentioned the importance of tax credits and touched on film tax relief, which was introduced by the last Labour Government, showing the importance of certainty and a long-term policy framework. He also mentioned enforcement and the role of trading standards.
My hon. Friend the Member for Bishop Auckland, who is an excellent shadow media Minister but will be an even better actual media Minister, pointed out that the media industry lost about £250 million a year through illegal downloading. The music industry has been slow to deal with illegal copying and digital technology—I think of Napster a couple of years ago—but interestingly this weekend’s Financial Times said that downloading was now being eclipsed by subscription services such as Spotify. We can talk about whether artists, such as Thom Yorke of Radiohead, get enough royalties from subscription services, but pushing people in that direction seems to be the way the music industry is going in order to raise revenue. She also said that the IPO should have an enforcement role and brought to bear the points about stonemasons and “Scarborough Fair”.
More than anything else, this debate has shown that the House appreciates and recognises how vital IP is to the future prosperity of the UK economy. This is an important Bill that will be studied closely in Committee to ensure that the UK economy can prosper and thrive. I look forward to hearing the Minister’s response to the points raised today, but there can be no doubt that IP matters to the UK economy.
With the leave of the House, I would like to respond briefly to the many issues raised in this useful debate.
Although many of the interventions went beyond what is in the Bill, I appreciated the general welcome for the specific proposals, in recognition of the importance of protecting intellectual property. It is sometimes said that behind every fat person is a slim person trying to get out; on this occasion, we have a slim Bill, but there seems to be a fat Bill that Members are trying to impose on us. This slim Bill, however, is intended to achieve some of the specific objectives set by Hargreaves, and I believe we are doing that in the right way.
Several Members, including the hon. Member for Lewisham West and Penge (Jim Dowd), mentioned the IP index. We score well internationally on the quality of our IP protection, including being second in the world in respect of patents. The area where we underperform—down to fifth—is design. That is why this Bill specifically focuses on that area where our performance is weakest, as our legal framework on design is inadequate.
Several Members raised the specific issue of whether the new criminal offence we are introducing should extend beyond registered design to unregistered design. I have said at several points in the debate that we are absolutely up for consultation, and I intend to introduce amendments in Committee. On this particular issue, however, we do not take the view that unregistered designs should be subject to a criminal sanction. Our view is that the design registration provides a clear starting point for any prosecution and includes important information such as the precise scope of the protection of the design and who owns it, which would be important for any criminal prosecution. It can be difficult, however, to track down information about unregistered design—such as who owns it and whether it is still protected. There can be uncertainty about whether a design is free to use. Unlike the UK registered right, the UK unregistered right can protect functional designs, and where these are complex and highly technical, it could cause difficulties in criminal cases. If we think about the risks of injustice from criminal sanctions in cases where unregistered designs are involved—we have had a long consultation on that—we believe that we have got the balance correct in extending criminal protection to registered but not to unregistered designs.
There were several questions about the working of the Intellectual Property Office, including from my hon. Friend the Member for Cities of London and Westminster (Mark Field), who asked where the responsibility for IP lies. Let me be clear: the IPO, which is an agency of the Department for Business, Innovation and Skills, leads on IP policy across the Government. It works closely with a whole range of Departments and organisations, including the Treasury and the Department for Culture, Media and Sport. It worked well with the Treasury on the patent box, for example, which has been a real boost to our IP-generating industry, and it accessed finance for IP intensive businesses, while it has worked with DCMS on copyright enforcement online.
I would not want our earlier exchanges to be seen as negative about the IPO in any way. In my small number of dealings with it, I have been impressed by its clear focus and its international vision. It was clear from what Members of all parties said that dealing with the issue of intellectual property seems to be divided into a number of different Government Departments. It is good to have a welcome confirmation from the Minister today that ultimately his neck is on the line for this matter.
I did not know that I had confirmed that! I must have strayed into that confirmation, as I was about to say that we are also fortunate in having a Minister for intellectual property. On several occasions when Members were talking about the need for a Minister for intellectual property, I could see that Minister up in the Gallery. Those comments were a disservice to my colleague, Viscount Younger of Leckie, who does an excellent job as the Minister for intellectual property. The IPO does have an enforcement role, and it works in parallel with the Home Office and other enforcement authorities, as the hon. Member for Bishop Auckland (Helen Goodman) mentioned.
Several Members, including my hon. Friend the Member for Hove (Mike Weatherley) and the hon. Member for Perth and North Perthshire (Pete Wishart), asked where we are on copyright exceptions and what the next stages will be. There has been a consultation process on these provisions. It is correct to say that it has taken a long time; it is a complicated question. Given the technical nature of some provisions, we put out some draft regulations for further consultation, adding another stage to the process.
Will the Minister adjudicate on the little dispute about whether it is possible for an artist or theatre, for example, to take a very old play or song—it may be a non-trad or written by somebody long dead—and take over the copyright? I thought that was not possible— I thought it was possible to get a copyright for the production, but that a non-trad could not be copyrighted.
Sorry, was it Durham? I am not aware of Simon and Garfunkel prosecuting folk musicians for singing their version of “Scarborough Fair”. I do not think they ever did that, and I very much doubt that the law would have sustained them if they had tried to do it.
What the Government intend to do on copyright exemptions is to lay down the regulations in February, and they will then be subject to a debate under the affirmative resolution procedure. We understand the need for individual consideration; the regulations will not be completely bundled up.
Time is tight, so let me move on. Several Members raised the issue—and I completely understand the strong feelings about it—of links to illegal sites via Google, pirated content and so forth. We in the UK have led the way on intervening against criminal IP infringement through intermediary services. We have set up a new police unit that uses money laundering regulations to force removal of payment services from infringing sites. Similar work is being done with advertising revenue and domain registration. We are absolutely tackling this issue; we are ahead of the rest of the world.
My hon. Friend the Member for Hove asked about the important issue of education. I welcome the work he does as intellectual property adviser to the Prime Minister. Again, we are trying to make progress in this area. We have seen the IPO do more to build an environment in which IP rights are properly respected. We absolutely understand the importance of education.
That brings me to interventions about the IPO’s annual reporting, which will be wide ranging. It will be able to comment on topical issues that developed during the year, looking ahead. It will certainly be able to report on what is being done on education so that people understand the danger of not properly valuing intellectual property. As we heard in the intervention from my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi), in doing so, the IPO will contribute significantly to economic growth by ensuring that innovators, particularly in design, that are essential for our economy’s performance, are at last properly protected against people who rip off their designs and do not properly respect the value of the work they have done. This Bill brings important protection to those designers. For that reason alone, if for no other, I greatly hope that the Bill will be supported on Second Reading across the House.
Question put and agreed to.
Bill accordingly read a Second time.
Intellectual Property Bill [Lords] (Programme)
That the following provisions shall apply to the Intellectual Property Bill [Lords]:
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 30 January 2014.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of the proceedings.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
(7) Any other proceedings on the Bill (including any proceedings on consideration of any message from the Lords) may be programmed.—(Anne Milton.)