UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1799-ii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

European Scrutiny Committee

Draft agreement on a unified patent court and draft statute

Wednesday 1 February 2012

Baroness Wilcox, Neil Feinson, Liz Coleman and Nicholas Fernandes

Evidence heard in Public Questions 73 - 125

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Oral Evidence

Taken before the European Scrutiny Committee

on Wednesday 1 February 2012

Members present:

Mr William Cash (Chair)

Michael Connarty

Kelvin Hopkins

Stephen Phillips

________________

Examination of Witnesses

Witnesses: Baroness Wilcox, Parliamentary Under-Secretary of State for Business, Innovation and Skills, Neil Feinson, Director of International Policy, Intellectual Property Office, Liz Coleman, Divisional Director, Intellectual Property Office, and Nicholas Fernandes, Legal Adviser, Department for Business, Innovation and Skills, gave evidence.

Q73 Chair: Welcome, Minister. We have just one or two thoughts I would like to convey to you just as we start. There seems to be something of an assumption-and this comes from many quarters-that this is all a frightfully good idea, but I have to say to you that we took evidence the other day and that was not the view that was expressed by the expert witnesses who came in front of us, including at least one from Austria. I would just like to say that the sorts of statements that I have received regarding your statement of 30 January are that it is strong on hopes and weak on certainties; that the danger from bifurcation is grossly underestimated and what has, arguably, worked adequately in Germany will not translate to Europe as a whole; that, if the system proves not to work, we have no redress; and that however valuable and objective it may be in principle to have a unitary patent, there is too much wrong with this proposal as it stands. Then, of course, there were all the questions about the location and the impact on the United Kingdom and so on.

I just wanted to get that on the record as we start, because you will see how that sort of thing fits into the questions. I will start the questioning, and the first question I put to you is this: how much consultation has there been with stakeholders on the agreement to set up the UPC? How far would you say that their views are reflected in the current draft? So, how much consultation and how far have you taken into account their views?

Baroness Wilcox: Thank you very much indeed, Chairman, and thank you very much for laying out the question in the way that you have. Of course, as you know, our Government is very keen that we should, wherever possible, help British business to be able to get their patents and their copyrights as fast, as efficiently and as inexpensively as possible, and this looks to be a way. They have been trying to get it right, as you know, for 41 years or so and, if it is possible for us to do it, we will do it, but we will not do it without looking very carefully and listening very carefully to what the stakeholders have to say.

As the Committee knows, the Intellectual Property Office itself has a consultation group that meets regularly to discuss the patent and the negotiations, so that, when I go to Brussels or wherever it is, I have with me, ringing in my head, the things that the stakeholders have already said that they are worried about, that they are concerned about and that they want us to fight for when we get there. You would know that we have heard what the people who have given you evidence the last time round-the lawyers, etc-have said and, in a lot of cases, we are very sympathetic to what they have said, and we make those points when we get there. So that is important for us to do and, as you will know, that was why we did not agree a deal when I was in Brussels at the Competitiveness Council on 5 December; we felt that there had not been enough discussion, and we did not feel we had a stable text of the agreement long enough to assess it properly. So there is no question that we are just trying to charge ahead and get something. It is important that it works.

Just lastly, if I may say, we have been before this Committee twice before and we are aware of its concerns as well and, therefore, when we went forward keenly to get a single patent under way, we did have a caveat on the court and how it was to be put together and how it was to be progressed, so I think that shows evidence from us that we are being very careful with this.

Q74 Chair: It certainly shows evidence that you are aware of the fact that there is deep concern. The question I would put to you is whether or not you have taken any notice at all of the evidence that has been received by us, for example last week, or indeed any evidence that you have really been listening to what they have been saying, although you have obviously heard what they have said. As far as I can judge from the evidence that we have received, everybody we have interviewed so far is against it, which represents very substantial opinion and a very significant number of people of eminence in the field, despite what you have just told us. How do you comment on that? Is it not just a case of tea and sympathy?

Baroness Wilcox: No. As I said, we have been working very carefully with the stakeholders and, once again, with the Property Office’s thing. To a large extent, their evidence to the Committee has already informed our negotiating position, so we go with a negotiating position of having absorbed, taken on board and taken forward what it is they are worried about. We have been pursuing the option of a specialist patent court outside the ECJ structure precisely because this is what stakeholders told us that they preferred. More recently, we have seen some small improvements in the text of the agreement, and discussions on the rules of procedure have started up again after they stopped in 2009. These improvements concern in particular the transitional provisions and the opportunity to start more cases in the central division rather than a regional or local division.

You will know, of course, from having listened to their evidence, how complex this is. We are working with countries that have very different ways of progressing their courts. The Government very much hopes that the unitary patent and the Unified Patent Court, which is a priority in the Government’s growth agenda, will go forward. We certainly have not come to a situation in which the people who are giving evidence to you and to us have walked away to say that we are doing absolutely nothing and it absolutely will not work. That is not the case.

Q75 Chair: One next point I would make is that, of course, there are some indications that it is a bit of a Government and an EU stitch-up. Therefore, there are these remaining concerns, but what I would like to turn to is what you said to us in a letter that you wrote in December. I will quote; it refers to the Polish presidency, and you said it "was less inclined to take on board amendments of a technical nature" in the negotiations. What exactly did you mean by that?

Baroness Wilcox: Throughout the negotiations, the delegation and the chair have been very focused on taking texts forward rather than renegotiating them. In the last six months, a draft agreement has been negotiated on an intergovernmental basis, as there is no formal EU involvement and EU legislative procedures do not apply. The basis for the draft agreement has been the text reached in 2009 before the ECJ opinion. The main amendments then taken on board were those we needed to ensure the draft agreement was compatible with EU law in response to the ECJ opinion, and only very recently was there an opportunity to make some small improvements in response to the stakeholders’ concerns.

Q76 Chair: Could you explain in short how satisfactory that approach was in the light of the widespread concern among industry and patent professionals about what was being negotiated? Perhaps Mr Neil Feinson would like to answer.

Baroness Wilcox: Yes, he will.

Neil Feinson: Thank you, Chairman. I think the issue for the Polish chairmanship of these talks was very much around them wanting, for their own purposes, to drive this dossier very quickly to conclusion. They thought they could camp on a consensus that had been achieved earlier. I remember discussing with the team who were negotiating this quite hard: how do we get the Presidency to actually talk about the sorts of issues we want to talk about and the sorts of issues that stakeholders had been raising with us?

One of the issues with these sorts of negotiations is that you are in the hands of the people who frame how the negotiations proceed and, unfortunately, we were unsuccessful in persuading the Poles to allow us to raise these issues early enough. That is why, when we got to 5 December, we just said to them, "Here are the points. We have been telling you what these points are. They are the points our stakeholders have been raising with us," and that was one of the reasons why the Minister would not agree on 5 December.

Chair: Of course, there are many people who might believe that a unified patent and a Unified Patent Court would be advantageous-in theory, at any rate-to business, and maybe that is what drives a lot of the thinking. However, it is extraordinary that so many of the people who know more about it than anybody else, who are the practitioners, take a contrary view. I also have to say that at least one witness last week, when I asked them a question, confirmed that there was a very strong element of German thrust behind all this as well in the hope that the court would end up in Germany. For practical purposes, what I am hearing, from both the Minister and from you, does seem to represent a driving force that is built in to the dynamics of the European establishment but not shared by the practitioners. I would now, on that basis, like to move on to Mr Kelvin Hopkins, who has an important question to ask.

Q77 Kelvin Hopkins: Thank you, Chair. We heard evidence that the impact assessment for a Unified Patent Court is out of date now that the EU is no longer going to fund it. Do you agree with that?

Baroness Wilcox: We will let Liz answer that one for you. I think she will give you a better answer than I will on that.

Liz Coleman: Thank you. The EU is no longer funding the court because it is not party to the agreement, but it is certainly the case that the UK was aware that there would need to be contributions from member states, and we were factoring that into our calculations. In the Government, we have always taken the view that the court should be self-funding from user fees, so we thought it was a perfectly acceptable way forward to go with member states’ funding rather than it coming from the EU budget, which we contribute to anyway. The funding mechanism, then, as far as the UK is concerned, does not make a lot of difference in terms of how the money actually gets there.

Q78 Michael Connarty: I will make a comment on that first, Chairman. It does if it bankrupts small and medium enterprises that cannot afford to use this court because it is now going to be funded by them, and it seems to be a much more expensive structure than the one that exists at the moment within the UK. Someone might get an advantage out of it, but it is unlikely to be the companies that are in the field trying to seek patents, in my estimation.

I have another question: the European Council summit’s statement on Monday of this week confirmed that the EU intends to reach "a final agreement on the last outstanding issue in the patent package". In the face of such opposition from stakeholders, can you explain why the only thing that seems to be outstanding is the location of the central division? It seems to me that is what they are referring to when they say "the last outstanding issue". Basically, you have what you have. You have not really done much to change it, despite the fact that stakeholders are quite panic-stricken at the consequences of this coming in as it is structured at the moment. Why has it come to that? If it has to come that, let us be honest about it.

Baroness Wilcox: We will both answer your questions, if we may. First, I would like to reiterate again that it is essential that we make it possible for small and medium-sized companies to be able to get their patents through the European Community countries far less expensively and far quicker than is happening now, and the single patent seems to us to be a way forward to do that. We are mindful of the fact that the Americans can do it right across their country, that the Chinese can do it right across their country and that, in the European Union, it takes a long time, it costs a great deal, it is very complicated, and we need SMEs in particular to be able to obtain a single patent covering 25 countries at an affordable cost. That is the whole idea.

The reason why the patent court is so important for us is because so many of the systems are different across the European Union as far as the courts are concerned, so we are very keen to get that right.

Q79 Michael Connarty: You do not need to lecture me.

Baroness Wilcox: I am not lecturing you at all.

Q80 Michael Connarty: I have been on this Committee since 1998 and I think we have followed this in some detail. My question was about why it is that the only thing that seems to be outstanding is the location of the central division. First, is that what is meant in the European Council summit statement? If it is, let us be honest about it. All the rest is just waffle, quite frankly. If that is the case, why is that, when in fact it is quite clear that the only thing we understand that the practitioners are united on-we normally have many, many opinions, but united on-is opposition to this arrangement?

Neil Feinson: If I may, Minister, perhaps it would be helpful if I explained. One of the problems that has bedevilled this dossier is that there is political interest in certain high-profile issues and, underneath that, there is an awful lot of technical detail. I certainly do not recognise what was in the European Council communiqué as being the situation in the negotiations. I think it is a simplification of the situation in the negotiations. There is a negotiation where there is a question of the location of the court on the one hand and a jockeying for position and horse-trading around a lot of these technical issues on the other, and different member states have different priorities and different issues that the Presidency is looking to bring together into a solution.

I should not call them the previous Presidency, technically, but the previous Polish team tried to do that unsuccessfully on 5 December. The Danes have picked this up and have been having bilateral discussions with people trying to understand, "We know what your ask is about the location of the central division, but what are the technical issues that are also important to you?" We have been having those discussions with the Danes, as have other countries, so I think it is a gross simplification and I do not see how the dynamic of the negotiation can be brought to a successful conclusion if that really is the case.

Q81 Michael Connarty: With the Chairman’s permission, I would like you to set out some of the other matters you are negotiating for us, so we understand where these great struggles are going on. It would be quite useful to indicate how these actually support and might solve the problems concerning the stakeholders.

Neil Feinson: For example, the issue of Articles 6 to 8: the infringement provisions, which are located in the patent regulation part of this package, and our desire for those to be removed from there to limit the opportunities for cases to go on reference to the ECJ. This is, as we understand from our stakeholders, one of their single biggest asks, because of the uncertainty and delay.

Q82 Michael Connarty: That is terrible grammar, by the way. Do not use that term "asks". It is The Sun that uses words like "asks".

Neil Feinson: I am sorry.

Michael Connarty: Requests.

Neil Feinson: Requests.

Michael Connarty: I used to be a teacher. I am deeply offended by that kind of use of the English language.

Neil Feinson: Equally, going to the point of bifurcation, which is this German approach to patent law that is allowed by the package-it is not required by the package but it is allowed-and it is something that I know deeply disturbs our stakeholders as well. One of the things there we have been working hard to do is to mitigate the impact of that. It is quite technical, but the idea is that bifurcation is where you-

Michael Connarty: I understand.

Neil Feinson: The issue is whether we can bring the cases together by changing the rules about what cases are allowed to be brought before what division of the court, so that is another thing where we made significant progress in December, but we are not completely there yet.

Michael Connarty: That has been most helpful.

Q83 Chair: What we simply do not understand-and by "understand", I do not mean that we do not comprehend it; it is that we really do not find it acceptable-is how these negotiations can take place, given the glaring and profound concerns of those whom they will affect. How on earth is this to be regarded as a proper way to proceed? I mean this very seriously. I would like to ask you, Minister, as well, on top of that, whether in fact the Secretary of State has been directly involved, as I imagine he must have been, in these discussions with you, and what directions he specifically has given to you as to the delivery of this policy.

Baroness Wilcox: The Secretary of State is well aware of what each and every one of his Ministers is doing within BIS.

Q84 Chair: Of course. Has he given any directions?

Baroness Wilcox: I meet with him regularly. Officials from the Intellectual Property Office usually go with me, because, as we have said before, this is a technical and difficult area. Always at the forefront of our mind, as you know, for the Ministry of BIS, is growth. At the forefront of our mind is growth for our country and for our people in our country to have the very best way of proceeding in the world, particularly within the European Community.

Q85 Chair: But the evidence that we have received is that, for the reasons that Mr Connarty gave earlier on, and indeed in relation to the evidence that we received last week, the profession and many of the practitioners and the people who know most about not only the strategic but also the technical questions are wholly opposed. In addition to that-and this is a matter of grave concern-quite apart from the lawyers and the patent agents and others, the reality is that the people for whom the whole system is meant to be a benefit and has been for hundreds of years in terms of determining issues relating to patents-the small and medium-sized businesses, where the innovation comes from-are themselves going to be faced with the question of additional costs, difficulties and other matters that have been raised and that you will have read in the previous proceedings. I ask again: how can this be a proper way to proceed, however other people may regard it as of such vast European importance that we have a Unified Patent Court of the kind that is being prescribed, wherever it is located?

Baroness Wilcox: The Unified Patent Court is going to proceed. If we do not take part in that, it will be written and drawn up in a way that we may not be happy with. We think that we should be in the room, we should be part of it, and we should be designing it. The caveat for the court, as you know, is very much based on the fact that we would like to host the central division ourselves. You made a point yourself, Chairman, previously that the Germans are very keen that the court should be with them. The French, of course, would like the court in Paris; the Dutch would like the court in Holland. I understand Italy have also decided that they would like it in Milan, but we, of course, would like it in London. We have a wonderful track record in this area. We have a brand-new building. We have a facility and we were prepared to give a very good advantage for them to bring the court here. We are very keen that we could host the central division, if not certainly be part of the group that draws up the rules around it. If we decide not to be part of it, it will go ahead. It will go ahead without us. It seems foolish for us not to be in the room.

If at the end of the day it turns out that it is not going to work, we do not think it is going to be right and we cannot agree on the court, then, of course, that will be something completely different, but you can be sure that the one thing the Department for Business is not going to be doing is wanting to make small and medium-sized businesses disadvantaged. Our intellectual property organisation here was the first to come out with a fast-track green patent especially for small and medium-sized businesses. As you would know, we have had the Hargreaves report on the future of intellectual property in this country to make sure that we are on the front foot. I do not really want to go and waste my time spending hours and hours listening to negotiations if I do not honestly think that it is going to be right and proper for our country. Also, I have to come back and face you, Chairman, as to what it is I am doing, so it is very important to me that your Committee is confident that we are listening to the people who are going to be involved in all of this, and I will say again that all the people you have seen to give you evidence are part of the group that we consult with every step of the way.

Q86 Chair: No doubt we shall find out by the end of this session of evidence what we think about the answers we have received, but one last question before we move on to the substance of the issues, having dealt largely with process so far, is: in a nutshell, given what we have heard from all quarters, is this a done deal or is there scope for some amendment?

Baroness Wilcox: There is scope all the way along for amendment. I find it very difficult to work in this way in the Competitiveness Council-I have had to get used to it-but it does seem that, if you keep talking and if you stay in the room long enough, you are likely to get the things that will help the process forward. We are fortunate that there are countries that feel as we do and, therefore, are prepared to support us. That does make things very much easier, and now that we have the new Presidency-the Danish Presidency-I am going over this afternoon to the Competitiveness Council to talk about the digital single market. I am going to be doing work for David Willetts, because he cannot go, and I am going to be doing work for Edward Davey, who is also a Minister with us, because he cannot go. We try between us not to miss any of these meetings at all.

Chair: Thank you very much. Moving to the substance of the questions, I invite Stephen Phillips to ask a few questions.

Q87 Stephen Phillips: Thank you, Chairman. Minister, just before we move on-this is a question either for you or for Mr Feinson-I just want to go back to the European Council summit statement on Monday. When they referred to "final agreement on the last outstanding issue" in the summit statement, is it your evidence to this Committee that, in fact, that statement was untrue, in that there is more than one outstanding issue that is currently being negotiated?

Neil Feinson: I would simply like to say that I think it is a simplification. These are complex negotiations.

Q88 Stephen Phillips: You may refer to it as a simplification, but actually, it is very clear: either there is one issue that is outstanding or there isn’t. Which is it?

Neil Feinson: There is more than one issue outstanding. There is one very big issue, which is the location, and then there are a lot of technical issues that are outstanding.

Q89 Stephen Phillips: So, in fact, the statement is either untrue or incorrect. Do you agree?

Neil Feinson: As I say, I think it is a simplification, yes.

Q90 Stephen Phillips: We can form our own view, no doubt. Minister, you have made it very clear that the Department’s ethos or rationale is to help promote British business, and you referred earlier to the need to help SMEs and other companies get their patents as inexpensively as possible and, no doubt, you would add to protect them as inexpensively as possible. How does it assist SMEs or any other British company to have their intellectual property rights protected as inexpensively as possible if the possibility of bifurcation exists, as it does under this dossier?

Baroness Wilcox: We have answered the bifurcation by letter to you, of course. The SMEs, we think, will be able to obtain a single patent right covering 25 countries at an affordable cost. That is the most important thing for them. The current European patent system makes obtaining Europe-wide protection, as I have already said, prohibitively expensive. How can we say the system will be affordable for SMEs? There is a very strong commitment from all involved in negotiations that the patent and court system should be affordable for SMEs.

Q91 Stephen Phillips: Let us come back to the question of affordability, but let us take bifurcation in terms of the Department’s aims and objectives to protect British business and SMEs at the moment. Imagine that a patent is challenged and the case is bifurcated under this regime. An injunction could be obtained restraining a British business, for example, from a court in Estonia, which would prevent a British factory from infringing someone’s intellectual property rights. That may or may not be a correct injunction and, some years down the line, the central division might decide that the patent had always been invalid but, by that stage, the business has been closed down in the UK. How is that helping British SMEs?

Baroness Wilcox: The draft agreement does provide options for the local divisions and central division to choose how to treat cases when infringement and validity are both in dispute, but I wonder if Liz would like to follow up on that.

Liz Coleman: Thank you. As the Minister has said, options are provided to the panel in a particular case. At the moment, if I understand the thinking correctly, an SME could have its business shut down in Germany because of the way that German courts currently bifurcate their cases between infringement and validity. That is not to say that the German practice will have to prevail throughout the whole of the new court, and one of the ways that we hope the system will work to the benefit of companies is that there is still a lot of work to do on making sure that the rules of procedure and the practice of the court are working in such a way that SMEs will be better off, because this is one of the prime objectives of the agreement, and contracting parties will find it very difficult to show that they have lived up to these objectives if those arrangements do not work.

Q92 Stephen Phillips: You will forgive me, Ms Coleman, because this is the triumph of hope over expectation. You hope it might work in this way-you do not know at all.

Liz Coleman: We do not know at all, because the work that has to be done in bringing the practice of the different divisions together has not yet started. The judges have not been trained and the rules of procedure have yet to be agreed, so there is still some work to do.

Q93 Stephen Phillips: Do you and, more importantly, the Minister at least agree with me that there is the possibility, whatever those rules ultimately emerge as being, that someone who says their intellectual property rights have been infringed can quite wrongly go and shut down a British business by going to a regional court in Estonia or some other jurisdiction, as a result of which that business will then shut down, British jobs will be lost, and it will be some years before the question of validity is considered and that is ruled as being wrong?

Neil Feinson: There are two things here: there is bifurcation, which is where the infringement and the validity are dealt with separately.

Stephen Phillips: Correct.

Neil Feinson: Then there is the timing issue. Typically in Germany today, the problem is that you do not get a decision on the validity until too late. You have your injunction and then the other half, as you say, is two or three years down the line. You might find that it was fine but it is too late. The point Liz was making was one that we have been quite insistent on from the outset: before we sign on the dotted line, we need to know what the rules of procedure are going to be, because they are so important. In particular, as I said earlier, it is not a requirement to bifurcate; there is a facility to bifurcate.

Q94 Stephen Phillips: Can I just pause you there? There is a facility to bifurcate.

Neil Feinson: Yes.

Q95 Stephen Phillips: The evidence that you are giving seems to me to come to this: the Department’s position in negotiations, and the Government’s position in negotiations, is that you are prepared to purchase a Unified Patent Court at the potential cost of exposing British business to the same inefficiencies as presently exist in bifurcated jurisdictions like Germany. Is that right?

Neil Feinson: No. What I was trying to explain was that we need to get the rules of procedure right so that you do not get the delay. I admit, if we had our way, we would not allow for bifurcation in this agreement.

Q96 Stephen Phillips: Bifurcation ought to be a line in the sand for the British Government, shouldn’t it?

Neil Feinson: It was a decision that was made a long time ago in order to keep these negotiations going.

Q97 Stephen Phillips: I think, on that basis, the answer to my original question is that you are prepared to, as it were, sacrifice British business by agreeing to the potential for a bifurcation regime purely to get a UPC.

Neil Feinson: Respectfully, I disagree. The point about holding out on rules of procedure is so that, through the rules of procedure, we can ensure that there are rules governing the behaviour of the judges on the various panels. Where there is a panel with one case and a panel with another case, how does the court as a whole handle the timing of those two cases and the treatment of those two cases? People thought we were being darn awkward when we made this point and said we are not prepared to go forward on this and sign on any dotted line until we see a pretty-near final version of the rules of procedure.

Q98 Stephen Phillips: This is all very well, but the trouble is that this Committee is faced with the situation where there was a statement from the summit earlier in the week that there is only one outstanding issue, and that that issue is the location of the central division of the court, but that is untrue-yes or no?

Baroness Wilcox: It is a broad statement.

Q99 Stephen Phillips: Is it untrue-yes or no?

Baroness Wilcox: It is a broad statement.

Q100 Stephen Phillips: We will form our own views, no doubt, about your reluctance to answer the question. Helping British business: obviously, there is the potential for the European Court of Justice, or Court of Justice, to have proceedings before it in relation to patent litigation if the UPC is created. Can we agree on that?

Neil Feinson: To the extent that there is any EU element to the package, yes, there must be.

Q101 Stephen Phillips: There is no experience whatsoever-certainly not specialist experience-in the Court of Justice in relation to patent law, is there?

Liz Coleman: There is no specialist experience in relation to patent law. The Court of Justice does occasionally have to deal with questions that bear on patent law.

Q102 Stephen Phillips: How does it serve to help British business and British SMEs to have the potential for extended and extremely expensive litigation in the Court of Justice in relation to patent law before judges who have no experience of patent law?

Liz Coleman: This comes back to the question of Articles 6 to 8 in the regulation. If you have those provisions in EU law, then, of course, as I am sure people know better than I do, there must be a possibility of preliminary references for the interpretation of those provisions. That is not the same as asking the court to interpret a patent, which is what we would expect to do in an infringement or validity dispute.

Q103 Stephen Phillips: All practitioners have said that they do not want the ECJ involved in this at all. Do you have any solutions that you are proposing in the negotiations to deal with that?

Liz Coleman: This is why Articles 6 to 8 have been the key issues in the negotiations that the Minister has been having with her counterparts.

Q104 Stephen Phillips: Minister, are you aware of the statement of Professor Sir Robin Jacob in his 2 November opinion, where he said, "I know of no one in favour of the involvement of the Court of Justice in patent litigation," and do you agree with it?

Baroness Wilcox: I have had meetings with Robin Jacob and I have heard his views. Obviously, he is a very distinguished lawyer.

Q105 Stephen Phillips: He is probably the foremost authority on patent law in the UK, isn’t he?

Baroness Wilcox: Yes, indeed, and he is very keen to be engaged in this, and has made it very clear to me too that he would very much like to be engaged as we go forward, so that does not bear upon him saying, "Never, never, never will I ever, ever, ever." He seems to be quite engaged by the whole thing. It is a great opportunity. We are not going to sign off things that would disadvantage small and medium-sized businesses, or even large businesses. The idea is for us to see if there is a mechanism available that will make it possible for us to better trade in the world. As we are part of the European Community, there is an opportunity here to try to get the system that we have better.

Q106 Stephen Phillips: What are the alternatives, in terms of Articles 6 to 8, to the jurisdiction of the Court of Justice?

Baroness Wilcox: There are two main alternatives to the proposed arrangements for dealing with the questions of EU law under the Unified Patent Court and the patent regulation. One of these is not to set up the specialist court, but instead to have all patent disputes heard by the ECJ. This would need a different legal instrument under Article 262 of the EU Treaty, because the ECJ has no current powers to hear such disputes. This was an attractive option for some member states, but our stakeholders were strongly against it. The other and simpler option would be to remove, as we have said, Articles 6 to 8 from the patent regulation and rely on corresponding provisions in the court agreement. These would then not be part of the EU instrument, and questions of interpretation would not need to be referred to the ECJ.

Q107 Stephen Phillips: As for the Government’s position, do I rightly understand that, if Articles 6 to 8 are not removed, the Government will not be signing up to the UPC?

Baroness Wilcox: We would very much like to see Articles 6 to 8 removed, but I was glad to hear that witnesses still think it is important for us to be part of the agreement. They have not said, "If you do not sign it, go away and never, never go back." We would very much like it signed. It is the way we would like to go, but if it is not the way we go, we are told by our witnesses that they still think we should continue forward.

Q108 Stephen Phillips: Even with Articles 6 to 8 in the agreement?

Baroness Wilcox: We will have to see how it proceeds.

Nicholas Fernandes: If I may, Minister, to clarify, we have heard the case for removal of 6 to 8 from the patent lawyers. It is one we could subscribe to, but we have not really heard the other arguments, and one concern is, of course, that whatever legal base the unified patent regulation is made under actually supports the measure. This is likely to be challenged, not only, as we know, by member states that are currently challenging enhanced co-operation, but by a defendant saying: "You have concluded this instrument. It does not give me any rights. Where are the rights? You have put it away in some other corner. I cannot avail of these rights before the European Court of Justice." That counterbalances the arguments for including 6 to 8. We have to understand the force of those arguments. We would take the risk and say, "Yes, you can conclude a unified patent regulation just on the basis of its unitary effect," but convincing others of that is an uphill task.

Q109 Stephen Phillips: Thank you very much, Mr Fernandes. I have two final points. Again, returning to doing everything the Department can to help British business, do you agree that, at least in its current negotiated state, the potential establishment of the UPC is, essentially, a charter for forum-shopping?

Liz Coleman: I heard the witnesses say the other day they thought forum-shopping was not a bad thing, because it increased competition between different divisions. I think there is a question about whether competition is a good thing between different divisions of the same court, and one thing that we would be concerned about would be if there was forum-shopping because some divisions were seen as being more favourable to one set of parties than another.

Q110 Stephen Phillips: I am just going to pause you there, Ms Coleman, and I am going to ask the Minister, because this is precisely the point, isn’t it? At the moment, we do not know who the judges are and we do not know what the quality is going to be. Someone who alleges that their intellectual property rights have been infringed can, essentially, sue anywhere in any member state that is going to be a party to this international agreement. In addition to that, there are advantages to be extracted from the fact that some courts may bifurcate and others will not. Can I just ask the Minister? I return to my question: isn’t this just a charter for forum-shopping? There is a follow-on question, which is: if it is, how on earth is that in the interests of British business?

Baroness Wilcox: Genuine competition on a fair basis can lead to efficiency and improvements, and I think you would agree with that.

Q111 Stephen Phillips: Between courts?

Baroness Wilcox: We would be concerned about users shopping around for the right decision because one court of one division is seen to be more sympathetic to the patent holder, and this would affect the other parties involved and, indeed, the balance of the whole system.

Q112 Stephen Phillips: Just pause there: if you are concerned about it, what have you done in the negotiations to ensure that the possibility of forum-shopping is minimised?

Nicholas Fernandes: One of the instruments that govern this whole area is, of course, the Brussels regulation on the enforcement and recognition of judgments.

Q113 Stephen Phillips: Do you mean Council Regulation 44/2001?

Nicholas Fernandes: That is right. That does lay down certain rules about where people can bring actions, so there is a certain amount of forum-shopping in the system already. Part of the exercise of this would be to amend that regulation in tandem with the amendments to the draft.

Q114 Stephen Phillips: Can I just ask, Mr Fernandes: how is Council Regulation 44/2001, which is concerned with civil jurisdiction within the European Union, relevant to the UPC, which is going to be set up and which is outside the institutions of the European Union?

Nicholas Fernandes: It currently grants exclusive jurisdiction to national courts to deal with patent matters, including European patent matters. That provision will need to be amended to take account of developments with the Unified Patent Court.

Q115 Stephen Phillips: Is this another area where the Department has not really thought about what the implications are or, indeed, listened to the professions and those who are engaged in patent law and litigation?

Nicholas Fernandes: I am sure we have taken on representations, but there is another Department on the lead, with whom we work, on Brussels Convention and Brussels regulation issues, but this is a debate that still has to take place, and that will take place, as I understand it, in tandem with the developments of the Unified Patent Court.

Liz Coleman: Can I come back on that, please? The arrangements for jurisdiction between the divisions are, of course, nothing to do with the Brussels regulation, because it does not apply within the court. I think you would agree with that. The basic rules, though, for jurisdiction between the divisions of the Court at local or regional level are very similar to the Brussels rules, because you either have the place where the infringement occurred or the place where the defendant is located.

Q116 Stephen Phillips: Just pausing there, where the infringement occurred, if you are marketing a product across the entirety of the 24 countries that look like they are going to sign up to this, it could be any one of those courts, couldn’t it?

Liz Coleman: That would be the case at the moment as well.

Q117 Stephen Phillips: So a British company could be dragged to litigate in a bifurcation jurisdiction, notwithstanding that there may not currently be jurisdiction at the moment, because exclusive jurisdiction would be conferred on the English courts.

Liz Coleman: But if they were infringing in that jurisdiction, then, of course, they could be taken to that jurisdiction now.

Q118 Stephen Phillips: But with this essential difference: that court, in that state, can now issue an injunction that runs across the entirety of Europe-correct?

Liz Coleman: I think we have to look at it from both sides.

Q119 Michael Connarty: The answer is yes.

Liz Coleman: Sorry.

Stephen Phillips: Mr Connarty is suggesting that the answer is yes.

Michael Connarty: You just answer the question and then do your qualification, but you qualify everything without answering. It is very irritating. All of you have been doing it. You never answer questions straightforwardly. It is shocking. Just give us answers. We are not here as part of the negotiating team; we are here as a Committee of the House.

Chair: Could we have an answer to the question, please?

Michael Connarty: I think Stephen’s point was very clear and he deserved an answer.

Liz Coleman: He was very clear and I would probably have to say I do not know.

Q120 Michael Connarty: You do not know.

Liz Coleman: Is that an acceptable answer?

Chair: Ms Coleman, if you could answer the question, please.

Liz Coleman: Sorry.

Q121 Stephen Phillips: With this essential difference, was the question: that a British company is now going to get dragged off to, let us say, Estonia; it might do at the moment, because the infringement might have occurred in Estonia. Estonia may or may not be a bifurcation jurisdiction-I do not know. The Estonian court issues an injunction. That injunction, without more-without the necessity for any proceedings under Council Regulation 44/2001 or any proceedings in the English courts-now runs across the entirety of Europe, and a British factory somewhere in Britain is shut down as a result of the decision of an Estonian court to which a British company has been dragged because of the creation of this Unified Patent Court. You answer that: yes or no?

Liz Coleman: Can I answer "no"?

Stephen Phillips: Right.

Liz Coleman: The point I would pick up there is that it is not an Estonian court. It is a local division of the unified court.

Q122 Stephen Phillips: Forgive me: that is simply caviling. By Estonian court, I meant a court sitting in Estonia with an Estonian patent judge in charge.

Baroness Wilcox: That is the whole idea, isn’t it? The whole idea of us wanting to get the court right is that, wherever, therefore, the court is sitting in any of those countries, they will be playing by the same rules. This is the whole idea. The whole idea of us putting in the caveat to us wanting to have a single patent to get the Court of Justice right is because it is so important for us to do so.

If I may say so-and I hope you will feel that this is not by way of a question to you but by affirmation to try to give you some comfort-the whole idea of us being difficult and awkward and spending an awful lot of time is because we are there arguing the points that have been point to you by the lawyers and by the attorneys. Of course we have. It would be foolish for us to waste our time, the Government’s time and the Committee’s time going naively into a negotiation that is of no use to Great Britain whatsoever. But if they are going to do this and they are going to do it without us, what you are laying out is exactly how it might be. What we would like to see is that we have the input in the very beginning to make sure that that court, wherever it is sitting, is going to be playing by the same rules.

If I may say, I have sat on three different European Select Committees in the House of Lords and I have been a trader most of my life, particularly in the fishing industry, and if you want to know what the European Community and the fishing industry think of each other, you can imagine what my reaction is to that.

Stephen Phillips: Forgive me, Minister, it has been a very long answer so far and I do not want to cut across you, but-

Baroness Wilcox: I think, if you would be gracious, you would let me just finish this point.

Stephen Phillips: Go on.

Baroness Wilcox: The thing that I carry with me into the negotiations is always the fact that it is how you impose these things-how these things are translated. We want to make sure that it is translated the same every single time, and that we can be confident that, wherever we are dealing in the European Union, that small and medium-sized company will not have any fear that they are going to come up against a system that they do not understand. It is so important that people should be able to understand the system.

Q123 Stephen Phillips: I have three points that I think it is quite important for you to deal with, Minister. Point one: you have already indicated, essentially, that this is an ongoing negotiation and the British Government does not have any lines in the sand, whereas I think it is perfectly clear to this Committee that it should have some lines in the sand and that we should not be signing up to this if there are certain assurances that are not received.

Point two: if you speak to any lawyer practising anywhere in this country with regard to the suggestion that courts across Europe operate to the same standards in this or any other area, you would receive the answer that they do not, so that, again, is the triumph of hope over expectation, and the Department needs to deal with that.

Point three, if I may, is that none of these points that are of concern to the profession and to patent professionals across this country, which is really the procedure point the Chairman was putting to you at the outset, appear to have been grappled with by your officials in briefing you for the purposes of these negotiations, and that has become perfectly clear during the course of your evidence and the evidence of the other witnesses to the Committee. Those are three points; if you want to respond to them, please do.

Baroness Wilcox: I think the word I was trying to look for earlier, just to finish, was that enforcement is a problem. That is the problem that I have had to grapple with in the past. Yes, I would agree, of course, that the systems are all different. I would agree with all of this, but here is an opportunity for us to see if we can improve things for ourselves within the European Community. We are part of the European Community.

Q124 Chair: I think it is called the European Union, if I may.

Baroness Wilcox: The European Union. We are part of it, and here is an opportunity for us to see if we can come closer to a way of proceeding that will benefit our people.

Q125 Chair: Could I just say at this juncture that we have just received a letter-I must say I was rather disturbed to receive it at such late notice-that suggests you have to get a plane to Copenhagen, and that you really would not be able to catch that plane unless you left this evidence session at no later than 4.20. It is my feeling that, in the light of the way this evidence session is going, we are not going to get through the rest of the questions that we want to ask you. I think, in the circumstances, so that it gives us an opportunity to reflect on the answers that we received as well, we should adjourn this session and invite you to come back on a later occasion, because we are simply not going to get through the questions-we have several to go. Therefore, in the circumstances, I am going to propose to adjourn this session and give you an opportunity to fly to Copenhagen and to make what you will of the meetings that you are attending on this matter and on behalf of David Willetts and all the other Ministers who, for one reason or another, cannot go there. I think, on that note, I will adjourn the session now and invite you to come back as soon as reasonably possible.

Baroness Wilcox: Is that an invitation, Chairman, or is that a statement?

Chair: It is a statement in the form of an invitation, because we have no option; otherwise, you will not get your plane and we will not get any further satisfactory answers to the questions that we ask in the next seven minutes. Thank you very much.

Baroness Wilcox: Thank you.

Prepared 27th February 2012