Select Committee on Defence Minutes of Evidence



Examination of witnesses (Questions 140 - 159)

WEDNESDAY 28 FEBRUARY 2001

BARONESS SYMONS OF VERNHAM DEAN, SIR JOHN CHISHOLM, MR BILL CLIFFORD and MR TERENCE JAGGER

  140. You will have probably seen rumours of 30 to 130 million, 70 to 80 million is your best estimate?
  (Baroness Symons of Vernham Dean) Best estimate as of today, but obviously we will keep you informed of any changes in that.

  141. Can you please give us now, or if you cannot will you write to us, a breakdown between consultants' fees, physical works, computer site reconfiguration and other main aspects?
  (Baroness Symons of Vernham Dean) Yes, I can give you some figures, not now but certainly I will write. Again they will have a health warning on them at the moment because they will not be complete figures. Those are estimates but we will certainly give you what we have got to work on at the moment.

  142. Who will pay for these conversion costs?
  (Baroness Symons of Vernham Dean) Sir John pays the lion's share but some of it does come to MoDwhere it reflects MoD's own advice costs.

  143. These costs will be a burden on New DERA?
  (Baroness Symons of Vernham Dean) Sir John was describing a little earlier that he has not yet completed his financial report for the year, and I think he is due to do that over the course of the next month or so. Then those will be in the public domain.

  144. I take it that not all of the 70 to 80 million will come out of the 250 million the MoD has been promised from the sale proceeds, they will be left on the balance sheet of New DERA?
  (Baroness Symons of Vernham Dean) Perhaps you would like to explain how it will work.
  (Sir John Chisholm) You are right, the costs have to be borne off the trading fund. The assets of the trading fund including those liabilities, so to speak, go into the PLC and have to be taken into consideration by investors when the time comes.

  145. The plan continues that MoD will receive approximately £250 million having sold a vehicle which will include some debt?
  (Baroness Symons of Vernham Dean) We hope that we will receive as much as we can persuade the Treasury to part with. The figure of £250 million as being in the public domain, I am sure you will recall that the last time we discussed this I was rather reticent to go nap on any of these figures because I am sure that is a discussion that we will wish to continue with the Treasury.

Chairman

  146. In our last report we commented on the Nomura sale and the fact the MoD got very little and the Treasury got a hell of a lot.
  (Baroness Symons of Vernham Dean) Yes. Well, from the point of view of an MoD Minister, of course, we would like to see a substantial amount of money coming to the MoD. I am sure that our friends in the Treasury will be robust in their arguments with us.

  147. Probably win in the end.
  (Baroness Symons of Vernham Dean) Who can tell, Chairman, I would not throw in the towel at this stage and, with your admirable support, I am sure we will make some progress.

Mr Viggers

  148. The figure of 250 will not be eroded?
  (Baroness Symons of Vernham Dean) I regard the figure of 250 as an opening point price. I very much hope that we will be able to build on that. These are all bargains, as I am sure all of you around the table will know, the discussions continue. I do not think we will be dipping under that.

  149. In your response to our last report on the future of DERA it was noted that you were "... exploring the potential to re-invest a proportion of the privatisation receipt in research and development...". How are your plans firming up on that front?
  (Baroness Symons of Vernham Dean) We have not got any firm plans to give you on how we are going to deal with any of the receipt. I hope that we do invest a certain amount on research and development because I do think that overall that is where the thrusts of the arguments in Government are taking us. I know that my colleague, Lord Sainsbury, is extremely interested in how we are going to deal with the receipt. We have not, as yet, got anything firm to tell you about in respect of that.

Mr Brazier

  150. Intellectual property rights. Can I ask what intellectual property rights will be owned by New DERA or rather, to be more specific, because obviously you are not going to give us a long list now, are there any outstanding disputes about this? How much has it cost to untie the ownership claims on DERA's IPR? Are there people out there in the private sector who feel the work they have done is technically the property of DERA?
  (Baroness Symons of Vernham Dean) Can I say, before I give further detail, this is a process that is going on at the moment and is due to be completed by the vesting date and is then subject to an independent audit. It has not been completed as of now, physical separation has. We have dealt with the computer side. The winnowing out on the intellectual property is still going on at the moment. You have the detail on this, Terence.
  (Mr Jagger) I was just going to say, obviously we are absolutely determined that New DERA should only go into the market with IPR it is entirely entitled to and should not take any foreign governments' IPR or industry IPR. That is a position we have explained at length.

  151. Sorry, or any industry IPR, what do you mean by that?
  (Mr Jagger) IPR may exist in New DERA because the MoDhas spent money with New DERA in the past and that is New DERA's IPR and we will have, as Sir John was explaining earlier, free user rights. Undoubtedly there has been a lot of information shared with the UK Government, with the MoD from industry and from foreign partners which has gone to DERA in the past because it has been part of the MoD in support of Government work. All of that is being extracted and New DERA will take none of it into the private sector with it. Sir John has been managing an extremely comprehensive programme called RASP which will cover everyone's records, paper records, software models, e-mails on their hard disk.

  152. We have heard rumours of costs of up to 23 million. Can I just pursue this a little further because I want to be clear I have understood it. One of the concerns when I was a consultant in the industry a very long time ago, even in those days, was that MoD usually in letting contracts for research has a contractual position which is legally much stronger than in practice you would normally want to enforce. If you have let a contract with a particular company you own the property rights at the end of it but normally the company would allow you to get on and use them because they actually carried the work out and very often ended up subsidising it themselves. When you say there will be no industry research IPRs left with New DERA, do you mean no IPRs funded by industry or do you mean no IPRs carried out by industry because there are a lot of smaller companies who, I imagine, that distinction will be particularly important to?
  (Mr Jagger) I am not clear that the understanding of exactly how our contracts are let is correct, if I may say so. If we let a research contract at the moment, the IPR belongs to the contractor, it belongs to whoever it may be. We keep free user rights for all defence purposes and if they can use it for some civilian purpose we may take a licence but it is actually their IPR if it is a non MoD body. As far as your second point goes, I am talking about the actual ownership of the IPR and access to it. New DERA will not have access to or be allowed to use any intellectual property that belongs to anyone other than the MoD other than by agreement with that external organisation.

  Mr Brazier: I am delighted to hear that. Can we come on to the US position now.

Mr Cohen

  153. Can I just follow up one point on that because I tabled a parliamentary question only about a month ago asking for a list of the IPRs that will go with New DERA or be retained and I did not get an answer, or I got an answer but certainly not a list. Will you be able to produce a list in due course of what goes where?
  (Mr Jagger) The list would be a huge document.

  154. Surely someone has got to know it, have they not?
  (Mr Jagger) No, I do not think they have. What we have to do is to do an exercise to take out all the intellectual property that is not New DERA's or to which New DERA is entitled to access in support of an MoD contract. What remains lies where it falls so the intellectual property, for example, in Porton Down will belong to the Secretary of State and DSTL will hold it. Intellectual property which is in New DERA and has been funded by the MoD will be part of New DERA, MoD retaining the user rights.

  155. That strikes me as a recipe for absolute confusion. Surely what you are saying is what the MoD want to keep it will have to name and everything else will basically go across to New DERA, is that what you are saying?
  (Sir John Chisholm) It is actually the other way round.

  156. That is not what you said before, if we look it up. You are now saying that New DERA will have to have it named and everything else will stay with the MoD. What are you saying? Surely even if you are saying one of those, a list of one could be produced.
  (Mr Jagger) I do not think we are saying absolutely either of those things. We are going through all the intellectual property which is physically within New DERA and saying "Is this the MoD's? Is it legal and appropriate for it to go into the private sector with New DERA?" If the answer is no or if there is any doubt about it then we are taking it out of New DERA. It is a very long, complicated and painful process involving hundreds of thousands of records.

  157. The key thing is transparency. Someone must know somewhere which IPR is with who, surely, even if it is at least one of the groups involved having it.
  (Baroness Symons of Vernham Dean) I think we are talking about hundreds of thousands of bits of information and I think that to give a list of hundreds of thousands of bits of information, even if it was a practical thing to do, would involve time and expenditure which would be really quite extraordinary. Would it help if we were to give some indicative headings of the sorts of information that will go one way or the other? I really am enormously reluctant to involve people in something that I do not think would add to the sum of the whole knowledge.

  158. My next question is are you contemplating squabbles, including legal squabbles?
  (Baroness Symons of Vernham Dean) No, we are not, absolutely not. This is a process that will be very carefully audited, as I have said. It will be looked at independently. As I say, I do think that lists of hundreds of thousands of bits of information would not be particularly helpful to you or, indeed, to anybody else.

Mr Brazier

  159. There would be a security aspect too.
  (Sir John Chisholm) Can I make a comment? I think it is useful to distinguish between intellectual property and intellectual property rights, they are frequently used the same way in the same sentence. What we have been mainly talking about here is intellectual property, of which there is a vast amount. Every document, every file, every computer programme, all of that is intellectual property. All of that is being carefully audited at the moment and New DERA can only keep that which it has been audited that it should keep. Okay? That is the first point. Intellectual property rights—


 
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