My Lords, that was a very interesting debate and prefigured what I am about to say about the question of criminality in this area. The noble Lord, Lord Clement-Jones, has made the arguments and is correct about them, and it is up to the Minister to make the best of if. If the industry is voting with its feet and adopting the unregistered design right as its mode of operation, and if it is true that there is a sense that having criminalisation in this area will improve the quality and quantity of our economic activity in it, it must follow logically that criminal sanctions should apply. However, I shall devote the next few minutes to arguing against exactly that proposition, but then, this is Committee.
Clause 13 introduces a new section into the Registered Designs Act, creating a criminal offence of unauthorised copying of design in course of business. It would apply in respect of UK-registered designs and registered Community designs. As I have said, we are concerned about the fact that this is being introduced as a criminal sanction.
There are two categories of offence, and I shall refer to that as I carry on with my remarks. One is about the making of a product by copying a registered design,
“so as to make a product exactly or substantially to that design”,
and the second offence is dealing in products that have been copied. Both will carry sentences of up to 10 years, which, as the noble Lord, Lord Clement-Jones, mentioned, is very high on the list of tariffs. The arguments for and against criminal sanctions for designs have been extensively aired over recent years, and we should bear in mind that levels of piracy have risen.
To recap briefly, proponents of this move feel that the current civil enforcement is expensive for small innovators and that current civil sanctions are not dissuasive enough for large infringers. Opponents are concerned that unexamined IP rights are a dangerous basis for taking criminal sanctions and that there is a risk of stifling competition in useful products.
We understand the Government’s aim—I have just referred it—but we worry about whether the proposal for criminal offences in general is the right tool for the job and, in particular, whether it is appropriate and proportionate and would deter those pirates and counterfeiters whose behaviour the public would, I accept, consider to be criminal. There is rather an important discrepancy here. Those who champion criminal sanctions are largely talking about unregistered design rights, which we have been talking about, and, of course, the huge preponderance of design rights are in that category, but the Bill is about only registered design rights and registered Community designs.
Registered design rights are better defined and have a much longer lifetime but, as we discovered, they are not in any sense better examined, so the proposed introduction of criminal sanctions may not work, and I would like to bring some particular problems to the attention of the Committee. The penumbra around a design, which is to be found in the uncertainties about how “exactly or substantially” is defined, makes it unclear what is or is not a criminal act. Unlike parallel trade mark or copyright offences, mere use, whatever that is, of an infringing product, even if no copying is involved, will become a criminal offence. Furthermore, the maximum sentence is very high for what, in fact, could be just a mere business misjudgment without deceptive intent.
The Bill introduces a defence as it states:
“It is also a defence for a person charged with an offence under this section to show that the person did not infringe the right in the design”.
However, the inclusion of the new section contributes to the bizarrely complex nature of the offence. For example, if the prosecution shows that D copies the design, and produces something exactly or substantially to that design, D can attempt to show that the product would not produce, for an informed user, the same overall impression as the registered design. These distinctions are hard for specialist lawyers to comprehend, let alone lay people such as jurors or magistrates. I will return to this point in relation to a recent case. Implied in what I have just said, of course, is the major concern that the courts that will deal with these cases will be criminal courts, which have no real experience at all in design law.
The defence that the registered design was not in fact copied raises difficult questions, as many of the cases on copyright infringements have shown. As already mentioned, there is a concern that the proposed provision could turn into a tool to be used by unscrupulous companies, to the detriment of UK designers. It is reasonably inexpensive to register a design, especially as there is no effective examination, and an unscrupulous company could apply to register designs it copied from a UK designer and then threaten that designer with criminal sanctions for producing his or her own
design. The prospect of defending a criminal action might be enough to make the designer give in. What sort of fairness does that speak to?
I have some questions for the Minister on the thinking behind this move. Why does the Bill not state a requirement as to where the act occurs? On the face of it, there seems to be no reason why it should not cover making unauthorised copies elsewhere in the EU, where the acts would infringe an RCD, so the defence that it did not infringe the right in the design would not apply.
Secondly, why does new Section 35ZA define “registered” designs as including “registered Community” designs? Does this not leave open whether the offence might not be committed by copying, or dealing in copies of, a foreign-registered design, for example those with a Benelux registration?
Thirdly, following the implementation of the designs directive, the scope of registered design protection has been broadened. This gives rise to the situation where registered design right is now infringed by use of the same design in different products. Can the Minister confirm that, if a design is registered in relation to one type of product—for example, an image of Bugs Bunny on a mug—that design would be infringed if the person featured it on another product such as a pillowcase? If so, in the latter case, would criminal sanctions be applied?
New Section 35ZA(3) applies to dealers infringing products—both importers and traders. One might wonder how stockists of, for example, Samsung Galaxy phones might have behaved towards what were initially allegations made by Apple in respect of infringement. At that point, if the Bill had been enacted, dealers in those products would have faced criminal liability, and up to 10 years’ imprisonment, if they had made an incorrect judgment call as to whether the Samsung products they were attempting to sell would infringe Apple’s registered design. One can only imagine that this would have done serious—and, as it turned out, unnecessary—harm to Samsung.
New Section 35ZA(3) includes as a criminal act the use of a product in the course of a business and the stocking of the product for use. Does the Minister accept that the word “uses” is an unacceptably vague notion for criminal prosecution? What is the Government’s reason for removing the defence of reasonably believing that the defendant’s design was not an infringement—that the designs were different and would not produce in the informed user the same overall impression? This is often the crux of design infringement cases between competitors. It is worth thinking about what Judge Birss said in the Apple v Samsung case in holding that Samsung products did not infringe Apple’s registered designs:
“This case illustrates the importance of properly taking into account the informed user’s knowledge and experience of the design corpus. When I first saw the Samsung products in this case I was struck by how similar they look to the Apple design when they are resting on a table. They look similar because they both have the same front screen. It stands out. However to the informed user (which at that stage I was not) these screens do not stand out to anything like the same extent”.
If Section 35ZA had been in force, would not Samsung have escaped criminal liability only because it got the judgment call as to infringement—the views of the informed user—right? Had Samsung got that wrong, there would be no defence. Is this what the Government really intend?
Absent either a positive requirement of dishonesty or some sort of broader defence, where a person reasonably believes that they are not infringing, this law could have a significant chilling effect on competition—so much for a Government who trumpet themselves as supporters of competition and opponents of unnecessary regulation.