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Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016

Volume 769: debated on Wednesday 2 March 2016

Motion to Consider

Moved by

That the Grand Committee do consider the Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016.

Relevant document: 24th Report from the Secondary Legislation Scrutiny Committee

My Lords, this order forms part of the implementation of the unified patent court agreement and is an essential step in the United Kingdom’s ratification process of that international agreement. The creation of a single patent system has been a long-held desire across Europe. The current European patent system is fragmented. Even if you go through the European Patent Office, you have to maintain a bundle of patents with each patent covering a single country where you want protection. Each patent must be enforced separately in the national courts of each country. For example, around a quarter of the patents litigated in the UK between 2000 and 2008 had parallel litigation in other European countries involving the same parties. This can be very costly and burdensome.

The negotiations to bring about a single patent and court for Europe were finally concluded in February 2013 with the signing of the unified patent court agreement. The UK worked hard during those negotiations to secure changes to the agreement which UK businesses needed. Most notably, my right honourable friend the Prime Minister was personally involved in bringing the part of the court dealing with the pharmaceuticals and life sciences sectors to London. This is good for the pharmaceutical industry, which is very important to the UK economy, and it will further boost the reputation of the UK as a global centre for commercial dispute resolution.

The unitary patent and the unified patent court form a package of European patent reforms which aim to provide a more streamlined and cost-effective option for innovative businesses wanting to protect and market their inventions across Europe. The Government want the UK to be the best place in Europe to innovate, to patent new ideas and to set up and expand a business. The unitary patent and the unified patent court will help us to deliver this goal. Importantly, the whole system can come into effect only once 13 countries, including the UK, have ratified the unified patent court agreement. So far, nine countries have ratified the agreement, and it is likely that the court will be open for business in early 2017.

I now wish to address the matters which the report of the Secondary Legislation Scrutiny Committee has brought to the attention of noble Lords as issues of public policy likely to be of interest. The committee raised a concern that the approach to implementing the software exception appeared to be inconsistent with the European Patent Convention, which requires that European patents are treated in the same way as national patents. I want to reassure noble Lords that there is no inconsistency. The UPC agreement introduces an exception to patent infringement which allows very limited use of computer programs. The exception is intended to allow someone to find out how a computer program works so that they can write another program that works with the original. For example, a programmer wishing to write an app to work on a smartphone needs to know how the phone’s software works to make sure that the app will communicate properly with it. The new software exception would allow the programmer to find out how the phone software works, but if the app still used the patented features of the phone’s software, the programmer would need a licence from the patent owner.

The consultation identified widespread and serious concerns from businesses in the high-tech and ICT sectors about the uncertain scope of the proposed exception. Many responses to the consultation proposed a “safe haven” approach, where the exception would not apply to national patents which are granted by the UK Intellectual Property Office. In the light of these concerns, and after further discussions with concerned parties, the Government have decided that the software exception will be introduced only for European patents and unitary patents at first. It will not apply to national patents, thus providing the safe haven advocated by business. The legislation will then be reviewed within five years of entry into force of the UPC agreement, which is expected in 2017. The safe haven approach is not inconsistent with the European Patent Convention, which allows for contracting member states to make special agreements on any matter concerning European patents which are subject to national law, and the UPC agreement is just such an agreement.

The second matter of interest raised by the Secondary Legislation Scrutiny Committee relates to contributory infringement, where a person knowingly provides another with the means to infringe a patent. For example, providing someone with a part which is essential to making a patented invention without the patent owner’s permission could be a contributory infringement. The Patents Act 1977 already makes adequate provision for contributory infringement of European patents valid in the UK. For such a patent, the infringement can occur only in the UK, because the patent is valid only in the UK. The order amends the Act to account for the unitary patent because infringement of a unitary patent can take place in any country covered by the patent, not just the UK. I wrote to the committee on 27 January to clarify those points, and I note the report of the committee which acknowledges that my letter dealt with the issues raised.

The order amends the Patents Act 1977 and makes changes in three areas: it clarifies where the UPC will have jurisdiction and where the UK courts will retain jurisdiction; it ensures that the Patents Act correctly provides for the unitary patent; and it introduces two new exceptions to patent infringement which are provided for in the UPC agreement but which do not currently exist in UK law. These two new exceptions to patent infringement are an exception to allow plant breeders to use patented biological material to create a new plant variety—the UK is the fourth largest market for plant breeding in Europe after the Netherlands, Germany and France, where this exception already exists—and an exception which allows limited use of computer programs, which I have already spoken about.

The European Patent Convention established the current system more than 40 years ago. The order is a major milestone towards achieving the goal of an even more streamlined and cost-effective system. It allows the UK to ratify the agreement in conjunction with a further order on privileges and immunities, which will be brought before the House later in the year, following a recent international agreement. I commend the draft order to the Committee.

My Lords, I was waiting for the noble Lord who speaks for the Opposition to commend the excellent work and great speech of my noble friend. Your Lordships may be startled to learn that, 39 years ago, I was a young Opposition Whip taking the Patents Bill through your Lordships’ House. One had to be a lawyer and a scientist, and I am neither, but it enabled me to have immense fun, and I am sure that involved in the proceedings—luckily, not today—are issue and action estoppel, res judicata and many other elements.

One particular chunk of that Bill, now an Act, is concerned with compulsory licences. I thank my noble friend very much for her excellent opening speech. I think that it was less than a minute in that she mentioned the pharmaceutical industry, which caused me to pay close attention. There was quite a problem—indeed, a government defeat—on compulsory licences. Will my noble friend be kind enough to write to me to confirm that there is no major change on compulsory licences, which I think are covered from Section 48 onwards?

If my noble friend glances at page 4 of the draft order, she will see mentioned, among the enormous number of entries on the left-hand side, Sections 103 and 105. Perhaps I should have grasped this 39 years ago, but I did not. Why is there an,

“extension of privilege for communications with solicitors relating to patent proceedings”

in England and Wales—I know not about Northern Ireland—but an,

“extension of privilege in Scotland for communications relating to patent proceedings”?

In England, it is communications with solicitors; in Scotland, it is not necessarily so. I do not think that there is a major problem—it may be a legal problem, or it may be something else. As I murmured to my noble friend before we started our proceedings, I recall that two years ago there was a singularly difficult case that will have concerned her department over extradition, and the law of extradition did not cover the territory of Scotland for that particular matter. However, I do not think that compulsory licences and the communications and privilege that we are discussing will be of that gravity.

I thank the Minister very much for setting out the necessity and the reasons for this order. Perhaps she would be kind enough to write to me about Sections 103 and 105 and confirm that the situation concerning compulsory licences is still in order and working. I am very grateful to her and to the Committee.

My Lords, I was not in any sense trying to discombobulate the noble Lord, Lord Lyell. I certainly wanted to hear what he said so that I could use anything that he did say to amplify and extend the point that I want to make in response to the Minister. As the noble Lord said, the noble Baroness made a very good fist of introducing a complicated and technical area, showing her ability to switch from detailed trade union negotiations and Sunday shopping yesterday to today’s detail on patents. This subject usually attracts a slightly larger audience. I am rather sad that we do not have the usual coterie of friends and camp followers who normally flood in for debates on this interesting and yet rather narrow topic.

Funnily enough, the noble Lord, Lord Lyell, has stolen one of my lines, which must be almost unique in the annals of your Lordships’ House. I was going to pick up a slightly narrower point but he raised it for me by drawing attention to a potential territorial problem in the way in which some of the sections are described. Mine is a more general question, which is that this instrument—which we are certainly not against and indeed support—does not include the Isle of Man. I wonder whether some explanation can be given as to why plant breeders and others in the Isle of Man will be excluded from the new benefits. I am sure that the officials supporting the Minister will have a ready answer for that, as it is an obvious question to ask.

I was involved, as was the noble Baroness, in the primary legislation that set up this court and we had a lot of discussions about it. Therefore, many of the comments that I would have made are redundant because we are aware of where this has come from and fully support the way in which it has been developed. As far as I can tell, the statutory instrument is exactly as one would expect it to be.

Having said that, I notice that the Minister said that we were making some progress—albeit glacial rather than dramatic—on getting this to take off. She mentioned that nine out of the 25 countries have now signed up to the agreement, but she said that she thought there was a possibility of the court starting in 2017. I wonder whether she can expand on that a bit. Can anything more be done to progress this? I know that she has been active in Europe on these matters and I am sure that she has been raising people’s interest in it as she has gone around.

Related to that are two questions about overall progress, assuming that we get there in 2017. There was talk in the original discussions in Committee and on Report about the possibility of a second court in this whole approach. The first one is clearly going to be in London, where the bulk of patent work and activity is happening, but there were hopes in Scotland that the expertise within the Court of Session could be deployed if there were sufficient work. I wonder whether she has any thoughts on that and whether progress on that or any further assessments has been made.

Secondly, for those who are not up to speed on the detail, the way in which the scheme operates is that, rather than having a single place within which patent expertise is to be developed, four of the major countries have bid for—and got, as I understand it—the four main platforms of patent law. However, I think that I read in the papers somewhere that there were some difficulties in holding these courts in one or two of the countries which had expressed an interest. Is there is anything to report on that? Clearly, it would be great if more than one court could be located in the UK, and if there were a failure, possibly in Spain, perhaps there will be an opportunity for the UK patent group to bid for that as well.

Turning to the two exceptions which the Minister talked about, the comments she referred to in the report of the Secondary Legislation Scrutiny Committee were broadly supportive of the plant breeding exception, as are we. As has been said and she repeated, the UK has the fourth largest plant breeding industry in Europe, and we must do what we can to try to support it. I did not come across any evidence to back the assertion made in the report that the plant breeding industry is very supportive of introducing this patent to the UK. I do not wish to delay the debate, but if I could be sent a letter explaining where that evidence is to be found I would find that helpful, because my colleagues in Defra have indicated that they would like to be better apprised of this development.

On the points about computer programming, it is a pity that the noble Baroness, Lady Bowles of Berkhamsted, is not able to be here, because she has such expertise in this area. I will resist making too heavy a gibe on this, but in a move towards trying to create a successful unified patent court, it seems a little bizarre to provide a safe haven for a group of people in the country who do not particularly want to be fully engaged with this patent activity in the unified court. To create a safe haven for patents developed in this area within the UK and allow them to be dealt with separately, not exposed to the rigours of the EU and the unified patents scheme, seems a little bizarre. I accept that a five-year review will take place, but perhaps the Minister could explain a little further why that was necessary. Again, the representations were not published for us and we are not aware of them. If there is significant concern about this, it may be the right decision, but I do not have the information to allow me to make a judgment.

Finally, I associate myself with the general comments that this is an exciting European initiative. This is the sort of thing that strong membership of the European Union could and should be developing for the people of this country, and I absolutely associate myself with the words of the noble Baroness in saying that this is the right course and we should support it.

My Lords, I thank the noble Lord, Lord Stevenson, for his comments and for his support for this statutory instrument. As he said, we have debated these issues on and off, and this is a very important European initiative which I am very glad to be presenting to the Committee.

I am also delighted to see my noble friend Lord Lyell and to hear about his experience of the 1977 Act. I will now look to him when I have patent complications, which will improve our discussions in the Tea Room even more. My noble friend courteously gave me advance notice of his questions, so I will answer them briefly and write to him if he feels that necessary. Sections 48 and 49 of the Patents Act 1977 relate, as he said, to compulsory licences. There is no change. The unitary patent regulation requires national law on compulsory licences to apply to unitary patents. He also asked about Sections 103 to 105 relating to the client-attorney privilege before the comptroller of patents. The comptroller will have some jurisdiction over unitary patents, for example over entitlement, so we need to apply Section 103, which is the reason for this curious provision.

Continuing on these difficult questions of detail, the noble Lord, Lord Stevenson, asked about the Isle of Man. There will be a separate order for the Isle of Man, but the Isle of Man Government have indicated that they want the UPC. The noble Lord shot the bullet in terms of questioning me, but I think that the answer is a positive one; this European endeavour will also stretch to the Isle of Man. He also asked about the ratification process. As I have said, we have had nine ratifications so far with a few more expected this summer. In particular, we expect Germany and the UK to be ready this autumn for the reasons I have already stated.

On the point about keeping the pressure on, on Monday I was at the European Competitiveness Council at which Commissioner Bienkowska gave us an update on progress with ratification. I think it is fair to say that the Competitiveness Council is keeping up the pressure in this important area.

In terms of where the UPC will be based, the noble Lord, Lord Stevenson, mentioned that several countries were sharing in the opportunity here, and it is worth just running through them. The court of appeal will be in Luxembourg. The court of first instance will have a central division in Paris and specialist sections in London, for pharmaceuticals, and Munich, for mechanical engineering. The court of first instance will also have a number of local divisions in most member states, including in the UK, Germany, France, the Netherlands, Austria, Denmark and Finland. Sweden and the Baltic states will join together in a regional division based in Sweden.

The case-counting data so far suggest that the UK will only have enough cases to sustain one local division, at least in the early days of the new court. Of course, the UK could set up an additional local division in Scotland in future, should the case load increase, in consultation with the court jurisdictions across the UK.

The noble Lord, Lord Stevenson, asked about the object of the software exception. I think I explained this fairly well in my opening remarks. We listened to industry concerns because this exception is untested and there is no case law on its interpretation. As a result, we are implementing the exception for European patents first and will then review how it works—as he said, we have a five-year review clause. In that way, the Government are able to meet their obligations under international law and to give effect to the provisions of the UPC while addressing the real concerns of industry on this issue. I can certainly share some of those with the noble Lord, but they were quite substantial. We believe in listening to consultation on these sorts of matters in the IPO area.

The noble Lord also asked about the evidence from plant breeders. They were pretty noisy about this provision, both here and in the European Parliament. They responded to our consultation to support it. I know that other member states feel the same: that the system for plant breeding works well and you do not necessarily want to add extra patent complications. That is why we felt it was okay to make this exemption.

I understand the case for that, and we take it, but it would be interesting to see the nature of the evidence. I have not seen evidence published for this particular point, and it would be helpful if it was possible to see it.

We would of course be delighted to send the noble Lord what evidence we have. It is useful, when you make exemptions, to look at why you are doing it—what the rationale is—and what it means for future cases. I would be delighted to share that evidence with the noble Lord and look forward to his comments. Plant breeding is a very important industry. We are not number one in Europe, but its output is very important to the future of this planet.

I think we are all agreed that the order takes us a step closer to implementing the UPC agreement and makes it easier for businesses to enforce their patents across Europe. Innovative businesses have been waiting for more than 40 years for a single European patent system, and we are much closer to achieving that long-held aim. With the introduction of the UPC, for which we now have premises, firms will be able to start taking advantage of the unitary patent if they so wish. I commend the order to the Committee.

Motion agreed.

Sitting suspended.