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Intellectual Property Bill [HL]

Volume 753: debated on Wednesday 2 April 2014

Commons Amendments

Motion on Amendments 1 to 3

Moved by

1: Clause 3, page 2, line 33, leave out subsection (1)

2: Clause 3, page 2, leave out lines 42 to 44 and insert—“(b) a body corporate or other body having legal personality which— (i) is formed under the law of a part of the United Kingdom or another qualifying country, and(ii) has in any qualifying country a place of business at which substantial business activity is carried on.”.”

3: Clause 3, page 3, leave out lines 7 and 8 and insert—“(a) in subsection (1)(a), omit “who is exclusively authorised to put such articles on the market in the United Kingdom”, (b) in subsection (2), for “requirements” substitute “requirement”,(c) in subsection (3), for “those requirements” substitute “that requirement”, and (d) omit subsection (4).”

My Lords, these amendments were moved in the other place following discussions that I and my right honourable friend David Willetts had with industry representatives. They raised concerns about the possible unintended consequences of simplifying the eligibility requirements for UK unregistered design right. Their concerns focused on whether the qualification requirements had been extended too far and as a result included those countries which did not offer reciprocal protection to UK designers.

Following further helpful exchanges with industry groups such as the IP Federation, SIPA and the International Chamber of Commerce, the Government amended the Bill. Commons Amendments 1, 2 and 3 ensure that those who qualify for UK unregistered design right must fall within the definition of a “qualifying person”. Broadly, they must be either an individual who is habitually resident in a qualifying country, or a company that is formed under the law of a part of the UK or other qualifying country and which has in a qualifying country a place of business where substantial business activity is carried on. Further, where the unregistered design right arises by virtue of being the first to market the design, such marketing must be done by a qualifying person.

Representatives of both large and small players in the design industry have welcomed these changes, and noble Lords may also be aware that the changes received broad support in the Commons. I therefore hope that this House will agree to these Commons amendments, which represent a reasonable and realistic way of ensuring that the design framework continues to support UK businesses in an appropriate and fair way while also meeting the original aim of simplifying overly complex aspects of unregistered design protection. I beg to move.

My Lords, I thank the Minister for his introduction to this group of amendments and for his kind words about the role we played last year as part of the group that was involved with the Bill when it was in your Lordships’ House. As the Minister said, these amendments simplify the criteria under which individuals or businesses may be eligible for the UK unregistered design right under the CDPA—Copyright, Designs and Patents Act 1988.

I have no wish to claim all the credit for the Government’s change of heart, but it is fair to point out that my noble friend Lord Young of Norwood Green proposed a very similar amendment to the Bill when it was in Committee in your Lordships’ House. Our amendment focused on the meaning of “qualifying country”. In his speech, my noble friend quoted the comments of Lord Justice Jacob, who said in Dyson v Qualtex that the definition of the current UDR,

“has the merit of being short. It has no other … The problem is deeper: neither the language used nor the context of the legislation give any clear idea what was intended. Time and time again one struggles but fails to ascertain a precise meaning, a meaning which men of business can reasonably use to guide their conduct. The amount of textbook writing and conjecture as to the meaning is a testament to its obscurity”.

That is not very politically correct, but I think noble Lords will get the sense of frustration and the feeling that the present law is unsatisfactory, and that changes were required to ensure that designers in the UK could not unintentionally infringe a UK unregistered design right when they are building on ideas that they may have taken from elsewhere in the EU.

When he replied to the short debate in Committee, the Minister said that our proposed amendments,

“would create an anomaly in the Act and a level of complexity, which the Bill, on principle, is trying to remove”.—[Official Report, 11/6/13; col. GC 333.]

I am glad that in the event the Government have seen the wisdom of what we were proposing, and have decided to bring forward these amendments with the aim of establishing coherence and ensuring that this legislation does not disadvantage UK business. I confirm that we will support this group of amendments.

My Lords, I am grateful for the comments made by the noble Lord, Lord Stevenson, to whom I pay tribute. I also pay particular tribute to the noble Lord, Lord Young of Norwood Green, for highlighting the issue at an earlier stage of the Bill.

To summarise, these amendments ensure that appropriate reciprocity arrangements remain in place. They ensure that, to be considered a “qualifying person”, businesses must be formed under the law of a part of the UK or other qualifying country. They also ensure that only qualifying persons can benefit from being the first to market. Finally, they do not change the position in relation to individuals, who are not required to have citizenship in a qualifying country as long as they are habitually resident there.

Motion agreed.

Motion on Amendments 4 to 12

Moved by

4: Clause 13, page 11, line 22, after “person” insert “intentionally”

5: Clause 13, page 11, line 23, leave out “exactly or substantially to that design” and insert “—(i) exactly to that design, or(ii) with features that differ only in immaterial details from that design”

6: Clause 13, page 11, line 31, after “been” insert “intentionally”

7: Clause 13, page 11, line 31, leave out from “product” to end of line 32 and insert “— (a) exactly to the design, or (b) with features that differ only in immaterial details from the design.”

8: Clause 13, page 11, line 40, after “been” insert “intentionally”

9: Clause 13, page 11, line 42, leave out “or substantially to the design” and insert “to the design or with features that differ only in immaterial details from the design”

10: Clause 13, page 13, line 1, leave out “or substantially to a registered design” and insert “to a registered design, or with features that differ only in immaterial details from a registered design,”

11: Clause 13, page 13, line 2, at end insert “intentionally”

12: Clause 13, page 13, line 4, at end insert “intentionally”

My Lords, Clause 13 makes it a criminal offence intentionally to copy a UK or EU-registered design in the course of business without the consent of its owner. It will also be an offence to try to profit from the use of the copy in the course of business. This clause has attracted much debate, both here and in the other place. My right honourable friend David Willetts and I have also had extensive discussions with industry representatives, and I have listened carefully to the views of both large and small design businesses.

A number of industry representatives voiced serious concerns that the drafting of the clause left some uncertainty as to the scope of the sanction. They believed that the clause could be interpreted more widely than the Government intended—a view supported by members of the judiciary. As a result, the Government made two sets of amendments to this clause in the other place to clarify the scope of the sanction, and therefore strengthen its effectiveness. The Government recognise the importance of creating certainty for those businesses that may be affected by the criminal sanction.

Amendments 4, 6, 8, 11 and 12 insert the word “intentionally” into the clause to make it absolutely clear that unconscious and accidental copying should not be caught by the offence. These amendments are not intended to make the offence harder to prove, but simply to clarify that the offence should apply only to intentional copying. It has always been the Government’s aim to create an offence that deters specific, purposeful copying, as can be seen from previous debates in this House. I do not believe that inserting the word “intentionally” into the statute changes this underlying aim.

I now turn to Commons Amendments 5, 7, 9 and 10. These amendments concern the scope of the offence, in the context of assessing whether one design has been copied from another. The amendments replace the word “substantially” in the clause with the phrase,

“with features that differ only in immaterial details”.

I will take just a moment to remind noble Lords that the intention of this criminal sanction has always been to cover exact copies, and copies where the design has been very slightly altered. In achieving this policy aim, the Government have been mindful not to capture the type of differences that can quite legitimately result in the creation of a new design. The amendments help achieve this, so that when making an assessment of whether a design has been copied, immaterial details may be disregarded. It is right that what amounts to “immaterial details” should be determined by the courts in the light of the details of the case in front of them.

The decision to replace the word “substantially” arose from detailed discussions with industry representatives. They expressed concern that the term was not clearly defined in registered design law and could therefore create uncertainty, which in turn could affect legitimate follow-on design. The revised form of wording—“immaterial details”—is more familiar to industry and reflects existing language in the Registered Designs Act 1949, in the context of deciding whether a design is new. By definition, a new design cannot be a copy. The wording provides users not only with a familiar term but gives the courts a more precise test than “substantially”.

These amendments will help remove uncertainty in the criminal sanction that could impact negatively on innovation, but the new wording also reinforces the important point that someone who intentionally copies another person’s registered design will not be excused simply because they have made some immaterial changes to that design.

To conclude, both sets of amendments made by the Government to Clause 13 will help clarify the scope of the offence and give industry the certainty it needs to allow follow-on innovation to continue without fear of crossing the line. I beg to move.

My Lords, I thank the Minister for his introduction to this group of amendments and, indeed, for his oral and written briefings while the Bill was going through the Commons. It was most helpful to have a blow-by-blow account of the amendments as they were put forward by the Government.

I do not want to appear churlish, and I will not be pressing the matter to a vote, but the amendments cause some considerable concern. The inclusion of the phrase,

“features that differ only in immaterial details from that design”,

as inserted by Amendments 5, 7 and others, give me particular cause for concern. I and organisations such as ACID, which represents smaller designers, are concerned that this change drastically narrows the offence to such an extent that it will apply only to the production of counterfeits. Given wider consultation, a much better form of words would have been achieved—something on the lines of “to make a product exactly to that design or to a design which does not produce on the informed user a different overall impression”. In the circumstances, that would have been far preferable.

The provision will put in place a deterrent to protect registered designs against absolutely slavish copying, but the new wording, as it stands, will allow someone to make sufficient small changes which are not “material” changes to avoid the offence. The intent to copy is still there whether they are immaterial or material changes, and I have grave doubts about whether the newly amended provision will be effective in protecting designers, particularly small designers.

At this point, I want to quote from the noble Viscount’s letter of 5 March, which was very heavily directed towards explaining why these amendments had been adopted in the way that he has described. However, it goes into rather greater detail. In his last paragraph dealing with Clause 13, he says:

“Some have inferred that because the term ‘substantial’ is used in copyright legislation, and therefore in the context of criminal sanctions for copyright offences, that this provides a suitable precedent for using it in registered design sanction”.

Truer words were never spake. That is exactly the case that many of us have been making. However, I do not believe that the remainder of that paragraph holds water in the context of copyright law and the ability to enforce it in relation to substantial copying in these circumstances. The term works for the criminal offence in copyright and I see no reason why it should not also work for registered design criminal liability.

I also regret that unregistered designs have not been given greater protection under the Bill. BIS figures, which were very recently welcomed by the Minister, demonstrate that UK investment in intangible assets now totals some £137.5 billion. Of that, some 46% is protected by copyright, 21% by unregistered design rights and 21% by trademarks. That demonstrates why throughout the passage of the Bill I have supported the case for extending criminal sanctions for registered design infringement to unregistered designs. Those are vital matters of national investment. If anything, the addition of the word “intentionally” by the Government in the Commons, as reflected in Amendments 4, 6 and others, has strengthened the case for that protection under the criminal law.

I believe that the amendments relating to intentionality introduce unnecessary additional mens rea to the offence. It is a belt-and-braces approach to what I believe was already there. However, I do not see how, given its inclusion, the Government can still refuse to extend criminal penalties to unregistered designs. If someone has “intentionally”—that is, deliberately—set out to copy someone else’s work for their own commercial gain, it should not matter whether that work is protected by a registered design right or an unregistered design right. It has still been deliberately stolen. I repeat that these rights are extremely important for our national investment. I still live in hope that sense will prevail at some stage in the future and that our designers will be properly protected by the criminal law, as are trademark and copyright owners.

The one bit of good news for designers is the European Court of Justice Advocate-General’s decision today on the Karen Millen v Dunnes case. As we know, the majority of the UK’s designers rely on unregistered rights, so this has provided clarity and will strengthen the unregistered design right in that it is the totality of the design one holds which the law protects, not by eliminating individual parts of a design. There is some good news coming out of the ECJ but not out of the House today.

My Lords, in Committee, we opposed the criminalisation of the unauthorised copying of a registered design and the dealing with unauthorised copies. We also opposed any possibility that that might be extended to unregistered designs. To that extent, I disagree with the noble Lord, Lord Clement-Jones, who has just spoken at length and with passion about these issues, as he has throughout the passage of the Bill. I understand where he is coming from but we simply do not agree on this point.

On Report, although we lost in Committee in terms of these discussions, we decided that the best thing to do was to come back with a series of amendments which would try to moderate where the Government were trying to get to. When I introduced the first of these, I quoted the noted British designer, Sir James Dyson, who had written to many noble Lords on that occasion. He said:

“In the law relating to copyright, acts of unintentional infringement are excluded from criminal sanctions. In the proposed clause of the Intellectual Property Bill relating to registered design … the same is not true. If this Bill is passed unamended, innocent designers will be threatened with criminal proceedings. It is wholly wrong that a designer should go to prison for unintentional infringement. The current wording of the Bill does not exclude that possibility”.

He continued:

“I have spent decades fighting to protect my ideas; taking on competitors who have flagrantly copied my patents and designs. I abhor intellectual property infringement. It is something I feel passionately about. But the Intellectual Property Bill’s inclusion of proposals to criminalise infringement of registered designs is a serious mistake”.

Our argument on this issue is, in essence, that the legislation would open a Pandora’s box of unintended consequences, potentially discouraging the very kind of legitimate, competitive risk-taking that policymakers have been very keen to encourage as a driver of growth. In particular, I said that this could be a deterrent to inward investment in UK design, which may not only result in an innovation drought but threaten the future employability of UK designers. I thought then, and I still believe, that the Government had failed to make their case.

However, notwithstanding the reservations, we also argued that if criminal sanctions were to be introduced we wanted to raise the bar to criminal proceedings by making it clear that they would be commenced only if it was clear beyond reasonable doubt that the action taken had been persistent, calculated and motivated by evidence of an intention to exploit the original registered design.

In that debate, the Minister said he would give serious consideration to the concerns that we expressed, and he brought forward an amendment at Third Reading which would introduce a defence of reasonable belief that the design in question was not infringed. While we were happy to sign up to that amendment, which raised the bar as we wished, we said that it did not go far enough.

We are therefore very pleased that with these new Commons amendments the Government have returned to what is in effect the original IPO consultation document, which for example promised that the criminal offence would contain defences,

“against unintentional infringement of registered design rights”.

We are therefore pleased to agree with the new amendments to Clause 13, which specify intentionality—that the act of copying must be a considered act—and define how close to the original the copied design would need to be by reference to terms currently used in the relevant legislation. We continue to oppose the introduction of criminal sanctions for registered design infringement as a matter of principle. However, we will support the changes to the Bill.

My Lords, I am grateful for the contributions to this short debate on these government amendments by my noble friend Lord Clement-Jones and the noble Lord, Lord Stevenson. I shall begin with a brief summary and then I fully intend to answer the questions, particularly those raised by my noble friend Lord Clement-Jones. These amendments make it absolutely clear that the criminal offence will apply to only those who intentionally copy a design in the full knowledge that it belongs to somebody else. They introduce more clarity for users in describing how two potentially conflicting designs are compared. They seek to ensure that legitimate follow-on innovation by business will not be caught under the offence, but also ensure that those who get too close to existing registered designs are rightly caught by the offence. I believe that we have got the balance right in setting the boundaries of protection for design rights.

If the noble Lord, Lord Stevenson, will excuse the pun, the Government have deliberately chosen the word “intentional”, as we believe that the concept of intention is more familiar to the courts in terms of framing the mental element of a criminal offence and less likely to provoke legal debate than the term “deliberately”. In making this amendment, the Government have acted merely to remove uncertainty, which can be detrimental to innovation. The amendment will help to ensure that we do not deter anyone who legitimately seeks to innovate around an existing design.

I thank the noble Lord, Lord Stevenson of Balmacara, for his overall contribution to the Bill and for his early desire to make this part of the Bill better. I am glad, if I read him correctly, that he is comfortable. I am always happy if the noble Lord, Lord Stevenson, is happy.

I would like to address a number of questions that were raised by my noble friend Lord Clement-Jones. His first substantive point concerned the word “substantial”. He asked why that would not work. He argued that, because the term “substantial” is used in copyright legislation and therefore in the context of criminal sanctions for copyright offences, this provides a suitable precedent for using it in registered design sanction. However, in copyright law, it has been determined to have a “qualitative” as well as a quantitative meaning, such that, for example, a few bars of music from a song, or a single still from a film, could constitute a “substantial part” of the whole work. Such a potentially wide meaning from an unrelated IP right does not provide for a sensible read-across to design legislation.

My noble friend also suggested that the amendments make the offence narrower. But as the Government have previously stated, the policy is to target acts which are “considered”. The amendments do not alter this policy, or make it harder to prove in practice. They simply clarify and reinforce the nature of the act which is inherent in the word “copying”.

My noble friend also asked why there could not be an extension to unregistered design rights. This is a matter that my noble friend has raised before. It is because of a number of fundamental differences between registered and unregistered design rights, which have been examined in detail previously both here and in the other place. These differences mean that it is often not possible for a legitimate business, be it large or small, to find out whether unregistered design rights protect a design or a part of that design. This creates a high level of uncertainty. The Government are simply not protecting and supporting our small businesses if we subject them to this level of uncertainty, especially given the huge number of unregistered designs in existence. The Government have made this distinction between registered and unregistered design rights, we believe, for good reason, and for the benefit of the UK design industry.

My noble friend Lord Clement-Jones also asked about the alternative wording and suggested—although I am not sure that he actually used these words—that we might use the informed user test. The Government have considered alternative wording carefully including the wording based on the phrase, “producing on the informed user a different overall impression”. However, this was rejected because it relates to the test for civil infringement in registered design law. The scope of civil infringement is much wider than the intended scope of the criminal sanction, which is of course restricted to intentional copying. Application of this phrase to the criminal sanction could lead to confusion for businesses.

Because this infringement test is wide, it is also likely to affect the ability of innovators to produce valid follow-on designs. It would require expert testimony, for example, about who is “the informed user” in a particular industry; such testimony would complicate criminal prosecution and can be contradictory, leading to delays in the proceedings.

The test is also still subject to interpretation and development by the EU courts. The Government believe that any uncertainty around such a test for a criminal sanction, which could affect personal freedom, would be unacceptable. As with the sanction in general, this is a fine balance to strike. But the Government do not believe that their amendment, which refers to “immaterial details”, restricts the application of the sanction to exact copies.

My noble friend raised the issue of intention in the Bill, and I shall expand on this a bit more in terms of the link to unregistered designs. New offences are not introduced lightly and the Government must ensure that they have been drawn sufficiently tightly and are workable in practice. The Government believe that these would be difficult criteria to fulfil for unregistered design rights, as mentioned earlier, given the complexity of establishing basic facts such as whether the right exists, what parts of the design it relates to, and how long the protection would last.

However, in completing this analysis, the Government recognise that primary legislation is not the end of the process, and we are working with the relevant bodies, including ACID and its members, to explore ways in which we can improve the experience of designers in the UK. I hope that this will be of some comfort to my noble friend. For example, we are developing plans to introduce a more comprehensive IT system to facilitate the processing of registered design applications. In addition, we will be assessing our fee structure, having taken on board stakeholder concerns regarding the cost involved in registering numerous applications. We will also be evaluating the provision of information about protecting designs to make the system more accessible for businesses. I am confident that these measures will assist our design industry, and I look forward to working closely with members of ACID and other organisations as developments progress. This Bill and the excellent scrutiny given to it by noble Lords have been a catalyst for this further work with the UK design industry.

More widely, I am most grateful to noble Lords for the time and effort they have put into their scrutiny, and I am confident that as a result we are making a series of important and positive changes to the UK intellectual property system which will support our designers, inventors and creators in the years to come. I commend the amendments.

Motion agreed.