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Earl Attlee moved Amendment No. 4:
- Page 6, leave out lines 25 to 28 and insert—
The noble Earl said: My Lords, the objective of the amendment is to hold the balance between honest patentees who believe that their legitimate rights are being infringed and honest third parties who are entitled to continue lawful activities without harassment.
The object of Section 70 is to prevent powerful patentees oppressing small traders by claiming dubious rights that the latter cannot afford to contest. It also hinders all patentees, large and small, from enforcing legitimate rights. There is no point in having rights that cannot be asserted. It should be possible to challenge apparent infringers without having to issue a writ first.
The useful reforms of the legal system brought about by the noble and learned Lord, Lord Woolf, emphasise the importance of reasonable discussion to achieve settlement. Section 70 obstructs such discussions. Just as threats may be issued oppressively or for purely tactical reasons, so may actions for threats. Suing a lawyer for issuing threats on behalf of his client can drive a wedge between the client and his adviser and deny the client justice. Although lawyers may find it convenient to be exempted completely from threats actions, the provision might also allow them to evade the intentions of Section 70. That is why I opposed the amendment tabled by the noble Lord, Lord Razzall, on that point in Grand Committee.
The amendment would allow patentees and their lawyers to issue threats believed in good faith to be justified. The burden would be on the issuer of the threats to prove his good faith. I beg to move.
Lord Sainsbury of Turville: My Lords, I am grateful to the noble Earl for the explanation of the thinking behind the amendment. Taking the amendment at face value, as it is on the Marshalled List, I find it puzzling. It would involve substituting our proposed new Section 70(4)(b) with some new wording. The new wording does not follow from the wording of the proposed new subsection (4)(a), either grammatically or logically. I strongly suspect that the noble Earl's intention is to replace existing subsection (2)(b) of Section 70. The noble Earl's proposed paragraph (b)(i) reproduces the wording of subsection (2)(b). The proposed paragraph (b)(ii) then adds to that existing wording.
I am helped in that piece of deduction—I hope that it is correct—by having seen a paper from the Chartered Institute of Patent Agents that contains exactly that proposal. My reply will therefore reflect the proposal put forward in that paper. I think that it mirrors the noble Earl's proposal.
The amendment proposes an additional way in which a patent holder may successfully defend himself against an action for making unjustified threats. The patent holder may genuinely believe that he has a valid patent and that it is being infringed. If he is sued for making threats against someone, the court may find that the acts under dispute amount to infringement of the patent. In that case, the patent holder is excused, as no unjustified threats were made. However, in those circumstances, the court may also find that the patent is invalid. If so, the patent holder is robbed of his defence and is found to have made unjustified threats, despite the fact that he was right in his assessment that infringement was taking place.
I agree that that seems unfair and may dissuade a genuine patent holder who has correctly assessed that infringement is taking place from seeking to resolve the dispute. As I understand it, the amendment addresses the apparent unfairness. If the court has found that the acts under dispute would have constituted infringement but also that the patent is invalid, the patent holder will not be held liable for making unjustified threats, provided that he shows that he genuinely had no reason for realising that his patent was invalid.
The point was not raised with us during the consultation. Had it been, we would, I think, have welcomed it. I am therefore prepared to agree an amendment that addresses the noble Earl's concerns and will table such an amendment at Third Reading. In other words, we have put the most favourable interpretation that we can on the noble Earl's amendment and will table amendments to take action on the point. We could not be more helpful than that, and I hope that the noble Earl will withdraw his amendment on that basis.
Earl Attlee: My Lords, I am extremely grateful for the Minister's interpretation of my amendment. I apologise for the drafting. I must confess that, when I studied the detail of it, I could not quite work it out myself.
The Minister has given a helpful reply, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Attlee moved Amendment No. 5:
The noble Earl said: My Lords, we return to the issue of the meaning of the phrase "best endeavours", in what is now Clause 12.
I remind the House that Clause 12 provides for the insertion of new subsections into Section 70 of the Patents Act 1977. They give a defence in threats proceedings, when a person finds that he needs to resort to pursuing secondary infringers—often retailers or wholesalers. The defence is that he has used his "best endeavours" to determine who was the primary infringer or importer.
In support of his argument, the noble Lord, Lord Triesman, referred to the IBM case, decided in the Court of Appeal. It is true that the finding watered down the phrase "best endeavours", but I understand that, previously, it meant "to the point of commercial ruin". However, it still meant that IBM was expected to appeal a planning decision which, presumably, it reluctantly agreed with.
I believe that the Bill as drafted will not achieve what the Minister desires and that Clause 12 will be far less valuable. If my amendment is agreed to, the patent holder will still be obliged to try very hard to identify the primary infringer. However, the courts will be able to take into consideration all the circumstances and the reasonableness of the patent holder's actions. I beg to move.
Lord Lyell: My Lords, I support my noble friend Lord Attlee, who has raised an interesting point. I will not weary your Lordships tonight with the case of IBM; I think it was Mr Justice Laddie who had things to say about it.
My noble friend has argued his case cogently—I think there is, or can be, some difficulty with the interpretation of "best endeavours" or other words in quite how far the patent holder or the defendant will go in these cases. Perhaps the Minister can explain. I think that my noble friend's amendment has merit, and we are looking for clarity.
Lord Sainsbury of Turville: My Lords, it was clear in Committee that the noble Earl, Lord Attlee, had reservations about the best endeavours threshold setting too high a standard. In particular, he was concerned that it would, as he put it, hit SMEs hardest. I recall that the noble Lord, Lord Lyell, also expressed his concern about this point in Committee. I have listened carefully to the arguments put forward again this evening.
As my noble friend Lord Triesman made clear in Committee, the intention of our best endeavours threshold is not to set an impossibly high standard. If we thought that it did so, we would not be putting it forward. Neither is it our intention to set a threshold which is easier for some to achieve than others. In particular, we would not wish to weigh the scales unfairly against the small or medium-sized patent holder. However, I am not convinced that this is what the threshold actually does.
The wording in Clause 12(4) makes it clear that the person concerned—I emphasise that point—must use his best endeavours. It does not measure his best against an absolute standard. Instead, the standard that he must attain is to make the efforts that a prudent, determined and reasonable person in his position would make. Since this is the case, the circumstances in which he finds himself—that includes the resources that are available to him—are an important consideration.
The endeavours that a multinational firm can make may well, when all the circumstances are considered, go further than the endeavours that can be made by a small business with five employees. So the person concerned will not necessarily be required to match what someone else with more time, money and resources could do. He must do his best to track down the alleged primary infringer, but that does not necessarily mean that he is required to do more than he is reasonably capable of doing.
I hope that, with those words, I have been able to allay the fears of noble Lords opposite in this respect and that they will agree that the current wording achieves the right balance without being unreasonably hard on any particular person or size of business.
Earl Attlee: My Lords, unfortunately, my legal advice differs from that of the Minister. I fear there will not be a meeting of minds on this issue. Therefore, I wish to test the opinion of the House.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 28; Not-Contents, 93.
"(b) either—
(i) the patent alleged to be infringed is not shown by the claimant to be invalid in a relevant respect, or
(ii) the patent alleged to be infringed is shown by the claimant to be invalid in a relevant respect and the defendant or defender proves that the time of making the threat he had no basis for believing the patent to be invalid in that respect.""
Page 6, line 41, leave out "best endeavours" and insert "reasonable endeavours in all circumstances"
8.12 p.m.
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