My Lords, I shall also speak to Amendments 5 and 6, which are in my name and in the name of my noble friend Lord Young of Norwood Green.
Clause 13 introduces two offences: unauthorised copying of a registered design, and dealing with unauthorised copies. Although these provisions have been welcomed by a small number of sectoral groups, the vast majority of businesses and representative bodies strongly oppose the introduction of criminal sanctions for design infringements. Many noble Lords will have received a copy of a letter from Sir James Dyson. He writes:
“In the law relating to copyright, acts of unintentional infringement are excluded from criminal sanctions. In the proposed clause of the Intellectual Property Bill relating to registered design infringement, the same is not true. If this Bill is passed unamended, innocent designers will be threatened with criminal proceedings. It is wholly wrong that a designer should go to prison for unintentional infringement. The current wording of the Bill does not exclude that possibility”.
He goes on:
“I have spent decades fighting to protect my ideas; taking on competitors who have flagrantly copied my patents and designs. I abhor intellectual property infringement. It is something I feel
passionately about. But the Intellectual Property Bill's inclusion of proposals to criminalise infringement of registered designs is a serious mistake”.
There is a real concern that the legislation, as currently drafted, will open a Pandora’s box of unintended consequences, potentially discouraging the very kind of legitimate, competitive risk-taking that policymakers have been keen to encourage as a driver of growth. The arguments that the Government have deployed until now are deeply flawed. They say that the treatment of design rights needs to be brought into line with existing copyright and trade mark legislation; that there is an anomaly between the application of criminal sanctions for copyright and trade mark infringement and the lack of equivalent provisions to stop the copying of registered designs. However, there are good reasons to treat design right infringements differently from piracy and counterfeiting. This is because the scope and validity of registered designs depends, as with patents, on prior art. As a result, the scope and validity of a design registration are never black and white but instead are open to a degree of interpretation. Indeed, relevant prior art may not even come to light until years later.
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It has been suggested that criminal sanctions would provide an additional layer of protection to small designers, which would spur greater innovation and investment in new design. While this line of reasoning is superficially attractive, it ignores the potential unintended consequences of the draft legislation, specifically the risk of significantly chilling innovation and competitive design in the wider UK economy. Senior executives advised us that even a very small risk of criminal action is likely to discourage the launch of some innovative products in the UK or significantly delay decisions on product launches, particularly where a company has to escalate concerns to board level. In the best-case scenario, this would entail additional costs for the business; however, it is possible to envisage circumstances in which executives might choose not to launch products on the UK market. It is clear that this would have a significant knock-on effect on employment, growth and consumer choice.
It has been said that criminal sanctions for design rights are necessary to protect small designers and to allow them to obtain redress for infringements. The first point is that most small designers do not register their designs and instead rely on the unregistered design right. There is a huge imbalance here, and it is odd—we will return to this issue—that the focus in this clause is only on the registered design route. Secondly, it is important to recognise that criminal sections are not the only tool that can be employed to address some of the very real issues faced by small designers in obtaining redress for design infringements. For example, the Patents County Court allows for design cases to be heard under cheaper and more streamlined procedures than in the High Court. As an alternative to criminal sanctions, the Government’s strategy could have focused on promoting access to the PCC so that it could continue to allow independent and small designers to protect and enforce their ownership of their products’ design.
There are also good reasons to avoid introducing highly technical cases into the criminal court system. Most criminal judges lack the relevant expertise and evidence that is required properly to evaluate infringement claims. It is instructive in this case that the Government chose to exclude registered designs from the small claims track of the PCC last year because, as they said, disputes are likely to involve more complex issues.
There is another danger: the risk of exposing small and independent designers themselves to criminal prosecutions. Small companies will be less able to afford expensive prior-art searches and legal support, leading to a greater risk of wrongful conviction. Cases of this kind would be likely to have a seriously chilling effect on the UK’s design industry. UK enforcement agents would be compromised by the drain on resources that would inevitably arise from extending criminal sanctions to the UK design frameworks.
It is said that the IP Bill will provide a competitive boost to the UK design industry, but the introduction of criminal sanctions would have far-reaching unintended consequences for the British business environment. The uncertainty that would be created by criminal measures will discourage large multinational companies from investing in and commissioning design in the UK, given the legal risks. This deterrent to inward investment in UK design may not only result in an innovation drought but threaten the future employability of UK designers. It is telling that no other leading common-law jurisdictions, such as the USA, Australia, New Zealand or India, have introduced criminal measures for design infringements.
Notwithstanding these reservations, we accept that criminal sanctions could play a part in the fight against counterfeiting. We have therefore tried in Amendment 4 to raise the bar to criminal proceedings by making it clear that they would be commenced only if it was clear beyond reasonable doubt that the action taken had been calculated and motivated by a wish to exploit the original registered design. We feel strongly about this issue, and believe that not only have the Government failed to make their case on this point but that introducing new criminal penalties should be the very last resort, and one on which Parliament should expressly give an opinion—if necessary, by voting.
It may have been assumed that, since the offence is committed if a person copies a registered design, that act must have been intentional and therefore deliberate. However, there have been cases in the past where copying was unintentional—for example, where a design brief that was intended to ensure the creation of an independent design so as to avoid infringement was erroneously too prescriptive. We suggest, therefore, that the offence should be limited to cases where a person deliberately copies a registered design. I accept that the phrasing—using the word “deliberately”—may not be the best way of inserting that sensibility, but I hope that the Minister will give serious consideration to the concerns that we have expressed here and perhaps bring forward a more suitable phrasing at Third Reading.
If this approach does not find favour, we have, in Amendment 5, provided an alternative approach, limiting criminal proceedings to cases where the civil jurisdiction
has been exhausted. Our belief is that the civil jurisdiction is to be preferred, so this gives a backstop position to the criminal sanction.
Amendment 6 focuses on the differences between deliberate copying and deliberate infringing. It proposes a defence where there is a reasonable belief that one is not doing anything legally wrong. We note that the IPO, in its report on the consultation, said in paragraph 84 that the criminal offence would contain defences against unintentional infringement of registered design rights. The new section introduced by Clause 13, however, does not contain that defence.
It has often been stated that imitation is the life-blood of competition, so focusing criminal liability on deliberate copying is problematic—ironically, because it focuses on something that is actually socially valuable. We propose, at the minimum, a defence for anyone who reasonably, or in good faith, believed that their actions were non-infringing.
Section 92(5) of the Trademarks Act 1994 offers an analogy. It states that:
“It is a defence for a person charged with an offence under this section to show that he believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark”.
Similarly, Section 107 of the CDPA premises criminal liability on knowing or having reason to believe articles are infringing articles or that acts are infringing acts. Section 107(2A), for example, states in relation to communication of a work to the public, that there is criminal liability only,
“if he knows or has reason to believe that, by doing so, he is infringing copyright in that work”.
We continue to oppose the introduction of criminal sanctions for registered design infringement as a matter of principle. However, should the proposal be approved, we think that the Bill should also contain a defence for any person who reasonably believed that they were not infringing. I beg to move.