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Patents County Court (Financial Limits) Order 2011

Volume 726: debated on Tuesday 29 March 2011

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Patents County Court (Financial Limits) Order 2011.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments.

I beg to move that the Grand Committee has considered the draft Patents County Court (Financial Limits) Order 2011.

This order is part of a package of measures to improve the Patents County Court. The Government’s purpose is to make it easier for small firms and entrepreneurs to navigate legal processes, giving them more time to concentrate on business activities. We often hear that intellectual property litigation is expensive and time-consuming. For many small businesses this can be a barrier to justice. Indeed, a 2006 study for the European Patent Office found that the cost of intellectual property litigation for United Kingdom small and medium-sized enterprises was roughly three times higher than elsewhere on the continent. If it costs too much for small businesses to litigate, they will be unable to defend their rights. We cannot have a legal system with such barriers. A reliable intellectual property enforcement regime must be accessible in the truest sense, not in the terms of access to finance. Lord Justice Jackson recognised as much in his comprehensive and independent review of civil litigation costs last year, which was of course commissioned by the previous Government. His recommendations were that we should improve access to justice, reduce the costs of civil litigation, and ensure costs and remedies are proportionate.

Now, the Patents County Court was established in 1990 to provide a cost-effective forum for intellectual property cases. It has jurisdiction over disputes in relation to intellectual property rights, and it should hear less complex and lower value cases and offer an alternative to the High Court. Until recently though, procedures and costs have been the same as in the High Court. The damages it awards remain the same as in the High Court, and it is this that we wish to change.

The order intends to set a maximum limit of £500,000 that could be awarded in the Patents County Court. Without this limit, a small or medium-sized enterprise with a legal case worth less than £500,000 may face litigation in either the Patents County Court or the High Court, and not know the level of financial risk it faces. With this order, however, the same business will have certainty that the Patents County Court is the appropriate forum and that there is a limit to its financial risk.

The principle of a damages limit has been examined through numerous consultations, including Lord Justice Jackson’s review. The Patents County Court judges and senior judiciary are eager to see this limit introduced. Legal practitioners and court users recognise its usefulness, too. A host of businesses and associations support the move, and a recent Intellectual Property Office consultation found 77 per cent of respondents supported the £500,000 limit. We will monitor the effectiveness of the damages cap, with a formal review in 2014.

The order addresses the need for a damages limit for patents and design cases, within the jurisdiction of the Patents County Court. Similar work is in hand to take forward comparable changes to other intellectual property rights, such as trade marks and copyright. This measure is consistent with our broader reform effort. For example, we have already simplified procedures for cases heard in the Patents County Court, and introduced a recoverable costs cap of £50,000. In a court where litigants can represent themselves, these changes have been warmly welcomed.

A further possible consequence of these reforms, as Lord Justice Jackson recognised, is that they may increase the availability of intellectual property insurances to small and medium-sized enterprises. At present, they are not widely available at affordable prices.

We all recognise that litigation around intellectual property is complex. These changes, on their own, are no panacea, but they will help small businesses and entrepreneurs seeking to innovate, providing clarity about legal processes, certainty over risks and giving them confidence they stand on an equal footing with financially stronger companies. The bigger picture, of course, is that innovation is essential to economic growth, and that is the abiding goal of this Government. I beg to move.

My Lords, I am glad that the issue of patents is being addressed today. There is no question that SMEs in particular have disadvantages when it comes to patenting products, particularly worldwide, so anything that can happen to encourage SMEs to embark on the patenting route is to be welcomed. At another occasion, another time, I may emphasise that point.

As the Minister said, the Patents County Court was created to help SMEs by providing an affordable forum for litigation, but it has been found that improvements are necessary, and today we start on that process. In saying that, though, I welcome the fact that within the regulation there is a requirement to review within three years how this process has progressed. Obviously, at the end of it, if any further measures are required, I would certainly support the Minister from these Benches.

SMEs will need to be told about this measure and many similar ones. I see that the benefits will be publicised through the e-mail notification system, which communicates with more than 400 stakeholders. Can we be sure that this means of communicating information will effectively reach SMEs throughout the country? If the Minister cannot provide a detailed answer today, perhaps the matter might be taken away to ensure that SMEs hear effectively and clearly about the measure. On that basis, I am happy to support it and will be glad to hear the Minister's response in due course.

My Lords, we, too, welcome the proposed legislation. I reflected as the noble Baroness moved the legislation that—if I may paraphrase—justice overpriced is justice denied. The report of Lord Justice Jackson provides welcome assistance to SMEs by reducing the cost of protecting patents and designs in disputes and by allowing claims of up to £500,000, excluding interest, to be heard in patent courts.

It is a pity that we will need further secondary legislation to include IP rights such as copyrights and trademarks. It is a shame that this could not be done in parallel legislation. Perhaps that would not have been possible, but I would welcome an explanation of why there has been a delay and why we could not do both at the same time, given the importance of these areas. I, too, welcome the Minister’s comments on intellectual property insurances. Again, if that helps SMEs and entrepreneurs, it will be valuable.

I have a concern about the post-implementation review. Three years is a long time. Perhaps some consideration could be given to shortening that period. After two years a fair body of evidence should be available. Again, I do not know how practical that is. I concur with the noble Lord, Lord Cotter, on the importance of communicating these important changes to SMEs. With those comments and questions, I, too, welcome the proposed legislation.

My Lords I am grateful to all noble Lords who have taken part in our discussions today. My noble friend Lord Cotter welcomed a review after three years and felt that further measures might be required, which he would support at the time if he thought that they were right. My noble friend Lord Cotter and the noble Lord, Lord Young, asked how we would communicate with people and whether we would use means other than the internet. E-mail will reach all SMEs. The e-mail notification system includes a large number of representative bodies—we knew that. We will also hold seminars in which Judge Arnold will cover the changes to practices. This is news to me; I thank noble Lords for asking the question because I now know the answer.

As a past chairman of the National Consumer Council, I am very keen to make sure that people get the information that they want in the way they want it. If there is any question that we need to communicate in another way, we will certainly look at it.

The noble Lord, Lord Young, asked why we do not have parallel legislation on copyright and trademarks. Lord Justice Jackson included recommendations to reduce the cost of intellectual property litigation in his review of civil litigation costs. His recommendations included implementing the package of proposals made by the Intellectual Property Court users’ committee. These were intended to reform the Patents County Court. We were able to expedite the completion of stage one of this process through amendments to the civil procedure rules. These introduced simpler procedures and fixed the scale of recoverable costs. Stage two of the package could only be achieved through the lengthier process of this Privy Council order and this will introduce a damage limit of £500,000, which will ensure that lower-value complex cases are automatically heard in the cheaper patents county courts and not the High Court. I hope that that is some form of clarification. If it is not, we will certainly write to make sure that I have expressed it clearly.

The noble Lords, Lord Young and Lord Cotter, asked about waiting for the three-year review. The Intellectual Property Office is working regularly with the judiciary to see how these changes will progress. I do not know whether that answers the question on the second and third years.

I am very glad that we are all agreed that this is a good package of measures. Not only is the introduction of the damages limit a positive move to reduce the uncertainty of civil litigation for smaller businesses, but the collective packages of changes being undertaken satisfies several of the recommendations made by Lord Justice Jackson and his independent review of civil litigation costs. We need to help small businesses protect and profit from their innovation and creativity. By allowing this measure to complement the wider package being developed, we will be providing small businesses with clarity, with certainty and with confidence. I commend the order to the Committee.

Motion agreed.