3 Designs and patents |
115. The Hargreaves Review concluded that the
role of IP in supporting the design industry has been neglected
and recommended that the Intellectual Property Office conduct
an evidence-based assessment of policy in this area including
whether access to the proposed Digital Copyright Exchange would
assist creators and users.
116. Sir Robin Jacob set out his views on the
UK system of design protection:
Now, nobody in their right mind would have such a
complicated system. Personally, I would get rid of the British
design right and the British registered design right, which has
not been used a lot. The European one is very cheap, and can be
sued upon in this country, so I do not really see the point of
the complexity. But the underlying question, which is the really
important one, is: is this helping designers or is it not helping
] Take a simple thing: one of the great cities
of design in Europe is Milan. Historically, the law courts in
northern Italy did not work at all for practical purposes but
it did not stop the design industry being great.
Somebody ought to go out and talk to design schools
and designers and say, "What commercial problems are you
finding?" If they are not finding any or anything significant,
and the litigation patterns you are seeing do not suggest there
are any, maybe it is not such a big problem except it is frightfully
Interestingly, however, the Forum of Private Business
told us that patents and designs were of more concerns to its
SME members than copyright issues.
117. Pursuant to Professor Hargreaves's recommendation,
the IPO in December 2011published an assessment of the possible
need for a reworking of UK design law based on business survey
data, economic research and an earlier call for evidence which
had identified several key findings, including that:
- few firms register designs;
- a very high proportion of respondents had personal
experience of designs being copied (59%), but only a few of these
claimed to be more likely to register a design as a result; very
few of the firms that had experienced designs being copied took
successful action in defending against this copying;
- some firms however noted their view that it is
increasingly sensible to register through the EU, for the immediate
benefits of wider coverage, despite a marginally higher cost;
- procedural issues such as cost, time or complexity
of registering did not appear to be strong disincentives for registering
a design amongst any of the firms;
- there was some anecdotal evidence that firms
are a little confused by the range of options available for protecting
their designs; this includes the UK, EU and International options
for registering designs, as well as the UK and EU non-registered
rights. But, significantly, protection might also be provided
under other modes of intellectual property (trade marks and copyright).
Given this complexity, the specific benefits of registering a
design are not sufficiently transparent.
118. Since then, the IPO has announced a consultation
to be launched in June 2012. This will be a further opportunity
to 'go out and talk to design schools and designers' as counselled
by Sir Robin Jacob.
119. We welcome the review of
UK design law being undertaken by the Intellectual Property Office.
The present complexity of the design protection system in the
UK might be acting as a disincentive to use and hence as a brake
on innovation. If a revision of the law is called for by the industry,
the Government should press forward with proposals for implementing
a new and simplified structure of design rights following that
120. The Hargreaves Review heard evidence that
many aspects of the patent system are functioning well. However,
The most striking aspect of the patent system in
recent years is the worldwide increase in the number of patent
] causing delays in the granting process.
These delays have led to backlogs at patent offices. Meanwhile,
in some business sectors patent proliferation is causing regulatory
blockage in the form of "thickets" of pre-existing patents
and pending patents which impede genuine innovators wishing to
121. The Review noted:
There is no single solution to the growing problem
of patent thickets. The market itself has already devised partial
solutions in the form of standards, patent pools, and the like.
These enable players in a particular area of patenting to set
terms for access to each others' patents. Government can take
three further steps to resist the growing damage of patent thickets
i. preventing the extension of patenting to business
sectors where the incentive effect of patents is low compared
with the overheads imposed;
ii. resetting financial incentives for assessing
whether to renew patents;
iii. and ensuring that only high quality patents
122. The Review recommended evaluating whether
graduated scales of patent fee might provide incentives for patent
owners to weed out their less valuable patents, or to license
them, commenting in particular on the disadvantages suffered by
The evidence shows that SMEs suffer disproportionately
from the effects of patent thickets. Given their importance to
innovation it would be logical to explore the potential for differentiating
the patent fee structure in favour of smaller companies. The current
UK patent framework includes a provision for a reduction in renewal
fees for patents endorsed with a Licence of Right (which means
anyone may obtain a licence at a reasonable rate). These provisions
could be built upon as an additional means to reduce renewal costs
while having the added benefit of encouraging patentees to make
their patents available to third parties, subject to an appropriate
123. However, Professor Hargreaves told us:
We were deep into an examination of the potential
for differential fees, especially differential renewal fees, in
the patenting process, which we thought might shift the balance
of incentives and give people an incentive to get rid of patents
at the elderly end of their holding. We were not able, in the
end, to establish with sufficient evidential clarity that that
124. In November 2011, in accordance with the
timetable set out in the Government Response, the IPO published
an interim study of this issue.
The study stated that it had three key aims:
(i) to begin to take the debate around patent thickets
away from anecdotal and micro-study approach, toward a more generalised
methodology by providing a general taxonomy for discussing patent
(ii) to generate an automated methodology for detecting
patent thickets in published patent data; and
(iii) to assess whether or not patent thickets present
a barrier to entry for companies, particularly SMEs, in the UK.
125. The study concluded:
This report has raised more questions than provided
answers. It can be seen that there is no clear consensus on terms
used to describe patent thickets and the entities involved with
them. By applying these terms consistently it is hoped that further
debate on any issues can be conducted on a level playing field.
The indicators appear to show that there is a possibility
of different forms of thicket occurring where there are different
types of technology linked to the degree of maturity of that technology
space. These potential types can be subdivided into areas where
there are large numbers of small patent holdings, or areas where
there are small numbers of big players, each of which creates
a thicket that any new entrant will have to negotiate in order
to be able to operate. Additional research into more technology
areas will serve to elucidate this possible link.
Is there a barrier to entry, in particular for SMEs?
Again, the analysis work is not conclusive and further work is
126. Following the November study, the next step
will be a research project to look at impacts of patent thickets
for which tenders were submitted in March. The commission to undertake
the project has been won by NIESR group which will report back
by September 2012. We understand that the Government will share
the results in due course with international bodies (USPTO, EU,
Competition authorities). Picking up on Professor Hargreaves'
observation, we suggest that the study consider whether part of
the increase in patent filing numbers over recent years is attributable
to businesses wishing to establish large patent portfolios as
a negotiating platform.
127. Patent thickets are clearly
an area that requires in-depth analysis. We therefore applaud
the level of detail as well as the alacrity with which the IPO
approached its initial study. Further work needs to be done to
establish whether a proportion of increased patent filings has
derived from the wish to support negotiating strategies. We look
forward to hearing more on this from the further studies being
conducted on behalf of the IPO.
The proposed unified patent and
patent court system
128. At present, there are essentially three
routes available to UK inventors to obtain patent protection:
- a national application via the UK Intellectual
Property Office (the IPO);
- a European application via the European Patent
Office (EPO); or
- a World Intellectual Property Organisation (WIPO)
application via one of WIPO's designated offices (which include
the IPO and the EPO).
Each process has its benefits and disbenefits including
on matters such as cost, speed and scope. Provided the application
is successful, however, all three routes end in the grant of national
patents; there being as yet no such thing as an EU patent. Instead,
in the case of a European patent application, applicants specify
in which of the EPO contracting states they would like protection,
and on successful granting of a European patent they obtain a
bundle of individual, national rights in the designated territories.
129. These national rights are enforceable only
in the relevant country. Notably, there is no supervening European
patent tribunal with authority to determine whether a patent is
infringed across the EU or in multiple EU member states. Rather
than bring legal actions everywhere, litigants therefore often
resort to filing claims in the countries of major markets, endeavouring
to persuade their opponents to follow the eventual result in other
territories by using the deterrent effect of the cost of parallel
litigation as leverage toward settlement in those territories.
The UK, Germany and the Netherlands as well as France and to some
extent Italy and Spain are among such lead territories. However,
this does not entirely avoid parallel litigation and its concomitant
costs. Nor does it rule out conflicting decisions between states.
CONTRAST WITH OTHER JURISDICTIONS
AND OBSTACLES TO A PROPOSED SUPRANATIONAL PATENT
130. By contrast, US patents apply throughout
the US, and although there are different court circuits for litigating
them, the ultimate result is definitive for the whole United States.
It has long been argued, therefore, that Europe is disadvantaged
by the need for costly parallel litigation to enforce patents
over EU states despite those states together having a population
and spending power similar to that of the US.
131. A further complication is that patent litigation
frequently involves two issues: whether the patent is infringed,
and the additional question of whether it is valid.
Traditionally, UK (and US) courts have examined these issues together,
seeing it as potentially unjust to grant relief against infringement
of what later transpires to be an invalid intellectual property
right. German courts on the other hand have often considered infringement
and validity separately, not least because historically the validity
of a patent was a federal matter in Germany whereas infringement
was dealt with by the courts of the different Länder. Dealing
with the two issues separately is known as 'bifurcation'. It can
seem attractive to patent owners, because it leads to speedy infringement
findings, but ultimately it may be of questionable merit, since
a subsequent validity challenge tends to lengthen litigation and
make it costlier.
132. Some type of supranational European patent
has been seen as desirable for decades,
but obstacles have arisen in, for example, the form of the permissible
languages of the patent, the permissible languages of the litigation,
the location and jurisdiction of the court (or courts), who should
pay for it (or them), the issue of whether to permit bifurcation
and the need to build consensus around pan-European enforcement
of patent rights based on a experienced, reliable and trusted
THE CURRENT PROPOSALS AND CONCERNS
133. The current proposal is for a non-EU international
agreement for a patent covering 25 of 27 EU Member States, which
would be obtained in English, French or German.
The court system (collectively known as the Unified Patents Court
or UPC) would consist of local, regional and central courts, with
an appeal court. The central court would hear cases concerning
only validity. The local courts would be free to hear infringement
and validity issues if both came before them, but controversially
they would also be free to bifurcate. Other controversial issues
relate to: the funding of the court (as EU funding will seemingly
no longer be available); language issues, including the operational
language of the court, the language of proceedings, the language
of court documents, and the language of judgments; and the question
of whether judges will have sufficient expertise.
134. An additional concern is the risk of so-called
'forum shopping', whereby a litigant chooses the location of litigation
deliberately so as to disadvantage its opponent. This is often
a risk in litigation, but the additional worry with the UPC is
that rather than the result being confined to the relevant territory,
businesses could be sued in remote jurisdictions (with all the
resulting costs of hiring lawyers to defend themselves) and find
that the result applied throughout Europe.
135. Sir Robin Jacob expressed concern to us
that the current proposal could do disservice to British business:
The plan as it currently stands is not to have one
court in which you sue, and where it is held and what languages
are used is decided depending on who the parties are, but to have
regional divisions. If you do that, the immediate consequence
is the plaintiffs will choose to find a division where they think
they are going to win, which is called forum shopping [
So the whole system will not achieve what it is intended to achieve,
which is a uniform position all the way across Europe. If you
watch what is happening in the United States, the same thing has
happened there with all their uniformity, because they have got
differences in different places.
136. Sir Robin preferred the idea of a more regionally
focused system with a small number of courts each with parallel
jurisdiction, not least because they would be easier to populate
with suitably trained intellectual property judges.
EUROPEAN SCRUTINY COMMITTEE REVIEW
137. When she came before us, Baroness Wilcox
updated us on the Government's negotiating position in relation
the UPC. However,
since our evidence sessions with Sir Robin and the Minister, the
European Scrutiny Committee has examined the UPC proposals, held
a short series of evidence sessions in January to March of this
year and published a subsequent report on 3 May 2012. That Committee
referred to the extensive concerns that had been set forth in
evidence submitted to it. 
Submissions had been made by a number of specialist organisations,
including the European Patent Lawyers Association, the Intellectual
Property Bar Association, the Chartered Institute of Patent Attorneys,
and the Intellectual Property Lawyers Association. Importantly,
concerns were not confined to UK representative bodies.
138. Forum shopping was cited as a particularly
important issue. As was pointed out by Henry Carr QC in evidence
to the European Scrutiny Committee:
There is a real fear in some quarters that SMEs will
fold because they are unable to get themselves properly represented
in a distant European division.
139. Asked about forum shopping, the IPO argued
in the case of, say, an Estonian court issuing an injunction against
a UK company throughout Europe, that the court would not be Estonian
but "a local division of the unified court." As the
European Scrutiny Committee pointed out, that was simply cavilling.
The IPO's responses on this issue seem to have irked at least
one member of the European Scrutiny Committee greatly.
It is very irritating. All of you have been doing
it. You never answer questions straightforwardly. It is shocking.
We agree that the approach that was being taken seems
140. There was a certain amount of complacency
about funding. One of the officials giving evidence commented
that the funding mechanism "does not make a lot of difference
in terms of how the money gets there."
However, the European Scrutiny Committee observed that:
It does if it bankrupts small and medium enterprises
that cannot afford to use this court because it is 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.
141. On the issue of why London should have the
central court, the Minister commented:
You can imagine that we are hoping very much that
the central court will be in London; and Paris is hoping that
it will be Paris; and Munich is hoping that it will be Munich.
This will make a decision.
142. Earlier, she argued that London was the
right choice because, "We have a brand-new building."
When pressed, the level of detail that emerged was:
We think that we have the best facilities; we think
the country has a wonderful situation here; we know pretty well
how much it will cost to run it per yearabout £1 million-and
we know the amount of money that it will bring to London.
143. There was no rehearsal of other arguments
such as the high regard for the UK's patent judges, the strength
of the IP bar in London, or the historical depth of UK experience
in patent litigation.
144. It is fair to say that the Minister did
not convince the Committee Members of the merits of the UPC proposal,
of the strength of the departmental line on it or of the thoroughness
with which the Committee's concerns were being addressed. The
Report commented: "We found her responses formulaic, or based
on aspiration, and oddly detached from the practitioners' perspective."
145. The European Scrutiny Committee also believed
that there were issues on which the Government should have negotiating
'red lines', such as on avoiding European Court of Justice involvement
in appeals. Asked
about this, however, the Minister said:
We are negotiating at the moment and, as you will
know, negotiations change and they go along. There is no line
in the sand.
146. This apparent lack of clear desired outcomes
was one reason why the Committee ultimately concluded that the
UPC should not be proceeded with in its current form, stating:
We conclude overall that the draft agreement on the
Unified Patent Court is likely to hinder, rather than help, the
enforcement of patents within the European Union. This will particularly
be so for SMEs, the intended beneficiaries.
147. In some circumstances we might have concluded
that the apparent absence of negotiating "red lines"
could be attributed to a desire not to give away the Government's
negotiating position, but combined with the overall vagueness
about direction and the lack of command of detail, the impression
was instead of a lack of firm direction. The depth and range of
concerns that have been expressed, from such a wide constituency
of interested parties, leads us to conclude that the Government
should resist the temptation toward the "need a win"
argument in favour of proceeding with the UPC. This is especially
so as there are options that would not involve such an irrevocable
commitment to an untested idea. For instance, one possible compromise
would be to set up the new court system with non-exclusive jurisdiction
and let businesses become convinced of its merits over time. This
would also allow the court to compete with the newly reinvigorated
UK Patents Country Court.
148. It is clear to us and the
European Scrutiny Committee that the Government's current negotiation
strategy for a Unified Patents Court is not fit for purpose. As
a matter of urgency the Government needs to take a firmer stand
for UK interests in the UPC negotiations than was manifested in
the recent evidence session held by the European Scrutiny Committee.
In particular, it needs to set out clearly defined options for
outcomes acceptable to the UK and a robust strategy on how to
translate those options to an acceptable overall solution. Such
a strategy has to clearly state the Government's position on avoiding
European Court of Justice jurisdiction, avoiding the risk of remote
and costly litigation for UK business, and neutralising or mitigating
the effects of any bifurcation regime. Furthermore, that strategy
should include a cogent argument for locating the central court
in London and not one that relies upon hope and aspiration. Anything
less runs the risk of undermining the competitiveness of British
105 Qq 125 and 126 Back
Q 156 Back
Paragraphs 6.16-6.20 Back
Paragraph 6.38 Back
Q 52 Back
Ibid., section 4 Back
HC 1799, Ev 29 Back
That is, whether the scope of the patent as determined by its
claims has been breached Back
That is, whether the patent was validly issued in the first place
on the basis of novelty and inventiveness Back
HC 1799, Ev 43 Back
41 years, apparently; see Q 161, HC 1799 Back
It is because of this restricted choice of languages that Spain
and Italy of the 27 are undecided on whether to participate. However,
a smaller number of working languages is arguably more efficient.
HC 1799, Ev 38, 44 Back
Q 141 Back
Q 256ff Back
See footnotes 14 and 15 of HC 1799 Back
See footnote 15, op. cit. The only evidence broadly in
favour of the current proposals was from one German lawyer. Back
HC 1799, Ev 51 Back
HC 1799, Q 119, Mr Connarty Back
HC 1799; Q 77 [Coleman] Back
HC 1799; Q 78 Back
HC 1799, Q 138 Back
HC 1799, Q 85 Back
HC 1799, Q 156 Back
HC 1799, paragraph 183 Back
For example, see HC 1799; Q123; on the ECJ see HC 1799, Q 147 Back
HC 1799, Q 145 Back
HC 1799, paragraph 187 Back