My Lords, before I begin, I hope noble Lords will allow me to take the opportunity to
correct a reference made in my closing speech at Second Reading. In the context of wider points about infringement and the copying of designs, I spoke briefly about the right to license certain intellectual property rights. This is where rights become available to third parties for exploitation under certain conditions. As an example, I cited a figure of 2,097 applications to use designs in this way, but the example in fact referred to patents.
Now that that formality is out of the way, I shall turn to the substantive points that have been debated about the Government’s proposal to introduce a criminal sanction for the deliberate copying of a registered design. I begin by reminding noble Lords of the purpose behind the Bill, which is pertinent to the points that have been raised in the debate. Our objectives, as set out in the consultation on the designs legal framework, are: simplification; improving the services offered by the IPO; strengthening rights, including enforcement; and improving how disputes are resolved. There is clearly a balance to be reached in some of these objectives. Simplification cannot be achieved at the expense of loss of protections in the marketplace. Equally, strengthening rights cannot be at the expense of follow-on innovation.
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It was clear from the responses to the consultation that there was strong support for the UK unregistered design right. We were told that it is relied on when other forms of protection are impractical or inapplicable—for example, when a design is functional or consists of the internal shape or configuration of a product, or when a business produces a large number of designs but only a few will go on to make a profit. Although reducing the complexity of design law was a key element of the Hargreaves review, respondents felt that this should not be at the expense of the unregistered design right, which protects many designs produced by business in the UK. This is why the Government have chosen to retain the UK unregistered right.
Furthermore, the Government heard from stakeholders who made the case for ensuring that the balance is kept between ensuring that a designer is able to see an appropriate return on their investment and supporting follow-on innovation. Many rely on the ability to take inspiration from existing designs to engage in legitimate follow-on innovation. This is a delicate balance, which the Government had at the forefront of their mind when considering criminal sanctions—in particular, the profound difference between rights that arise informally, as is the case with unregistered rights, and those that do not, as is the case when they are available on a publicly accessible register.
I will now respond to the points made in relation to Clause 13, and specifically to Amendments 23 and 24 of my noble friend Lord Clement-Jones. Amendment 23 would insert into the Registered Designs Act 1949 an equivalent to Section 110 of the Copyright, Designs and Patents Act 1988 and Section 101 of the Trade Marks Act 1994. Broadly speaking, the result achieved under the amendment would be that where a body corporate or a partnership has committed an offence, any of its officers or partners involved may also be liable to be proceeded against and punished accordingly.
I should like to bring to my noble friend’s attention Section 35A of the Registered Designs Act 1949, which relates to the liability of companies. This provision reflects Section 110 of the Copyright, Designs and Patents Act 1988 and was inserted into design law by Schedule 3 to that Act. This provides that where a company is proven to have committed an offence with the consent or connivance of a member of the company’s management, then it, too, will be liable and subject to appropriate sanctions. By accepting the amendment the Government would in part be duplicating a provision that already exists in designs legislation.
However, my noble friend Lord Clement-Jones makes an interesting point with regard to partnerships, which I understand are a common vehicle for business today. Section 101 of the Trade Marks Act also covers business partnerships, which is not replicated in Section 35A of the Registered Designs Act 1949. The issue of the effect on business partnerships is something to which the Government would want to give careful consideration.
Amendment 24 introduces a new clause to widen the scope of the proposed criminal sanctions to also include unregistered designs. For several reasons, the Government consider that this would, in practice, be problematic. First, the register represents a clear starting point for any prosecution. Registered rights can be readily accessed from the Intellectual Property Office and the EU designs registry websites. They include crucial information, including the design that is protected, the date on which protection commenced and whether it is still in force. This is not the case with an unregistered design right. Important information, such as what rights are claimed in an article, who owns those rights and when they came into existence—even whether those design rights existed in the first place—would all need to be assessed before any consideration of whether there had been deliberate and unlawful copying could begin. By contrast, a registration certificate makes it far simpler for the design owner to prove if there has been copying and for the authorities to weigh up the validity of this claim.
Secondly, the uncertainties surrounding unregistered designs, such as the difficulty of knowing when the design right came into existence, mean that it is more difficult for third parties to ensure that they are not infringing that design right. Therefore, against the backdrop of a threat of a criminal conviction, third parties are more likely to wait longer than necessary to be sure that the design is in the public domain before building on it, thereby extending the design right beyond its term and delaying potential innovation. This inhibiting effect is likely to be a particular problem in relation to functional designs, which the UK unregistered right also protects. As a functional result can be achieved only in a limited number of ways, the inhibiting effect on innovation is likely to be more serious or pronounced.
Thirdly, because the UK unregistered right affords protection to functional designs, this could cause difficulties in criminal proceedings where such designs are complex, as they well might be. For example, determining whether the interior of one alternator has been copied from the interior of another is a highly technical issue, probably requiring expert knowledge.
This is not the sort of discussion the Government believe should be dealt with in the criminal courts, especially where any element of doubt means that the high standard of proof required is unlikely to be met.
A number of points were raised by noble Lords. My noble friend Lord Clement-Jones raised the issue of design application fees and said that they could be perceived to be somewhat expensive. In respect of fees, it is, I believe, a question of balance. By setting fees too low, we may encourage unscrupulous businesses to register designs that they have no intention of using in the UK, but which may be used to stifle a competitor due to its monopoly right. Design registration must be a considered purpose. For example, it is of no benefit to business or the IPO to have a register of designs that will never be brought to the market. However, we also understand the cost implications for lone designers and SMEs, so we will be looking at the fee structure further in the future. I hope that my noble friend is reassured to some extent by that response.
My noble friend also asked why we cannot use the date of lodging a design from ACID. While no doubt useful, I must emphasise that the voluntary lodging of designs with ACID is not to be taken as being the same as formal registration under the statutory scheme, as a registered design is. My noble friend also referred to SMEs, which do not tend to register their designs, and asked whether they would be disadvantaged. The answer is that those businesses that rely on unregistered design rights will not be disadvantaged by this proposal. This offence adds to existing protections for registered designs; it does not remove anything. Design owners, as now, will have to consider how best to protect their designs and in many fast-moving areas such as fashion will continue to rely on unregistered designs, which may better suit their business models.
My noble friend asked: why two-dimensional and not three-dimensional? The copying of 3D products is not the same as copying the original design document. Competitors therefore take inspiration from existing designs. Copying original design documents is closer to theft and that is why the law treats these matters differently.
The noble Lord, Lord Stevenson, asked why there was no attempt to simplify designs generally. I believe that was more of a general comment. Noble Lords touched on this issue in Committee on Tuesday. As I hope I made clear, we have retained multiple types of design protection in light of the strong calls for users to do just this.
In light of my response, I ask that my noble friend withdraws the amendment.