My Lords, in Grand Committee we had some detailed debates about the introduction of criminal sanctions for the deliberate copying of a registered design. This is a finely balanced issue, and concerns were raised by a number of noble Lords. On the one hand, some felt that criminal sanctions should not be introduced as the offence may inadvertently capture innocent infringement. On the other hand, some noble Lords agreed that the offence was necessary, and indeed some felt that its scope should be extended further.
We shall no doubt return to the latter point in the course of today’s debate. However, as we consider this particular group of amendments, I would like to speak first to government amendment 7 in order to allay some of the concerns that noble Lords have expressed regarding the application of the offence. This amendment to Clause 13 sets out more precisely the scope of the term “use” within the context of business activities. The amendment will further focus the offence with the aim of ensuring that innocent infringement will not be captured.
Before I comment further on this amendment, I remind noble Lords of the purpose of this clause. As your Lordships know, Clause 13 introduces a criminal sanction for the copying of a registered design. This will create a more coherent approach to the protection and enforcement of designs, trade marks and copyright in the UK, and should help to reduce the scale of blatant copying of registered designs by acting as a deterrent. Under the clause, it will be an offence to deliberately copy a registered design without the consent of its owner. It will also be an offence to knowingly market, import, export, stock or use the design in the course of business activities.
Concerns were raised in Grand Committee as to whether the term “use” may inadvertently capture accidental and incidental use under the offence. As the noble Lord, Lord Stevenson, pointed out in relation to the offence, it,
“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?”.—[Official Report, 13/7/13; col. GC399.]
Because the offence has been drafted to require an element of active knowledge in order to be found guilty, it should be the case that accidental use will not be caught. However, the Government accept there may be cases where incidental use could conceivably come within the scope of the offence. For example, a business may lease a vending machine, which is a copy of a registered design, for use by its employees. This is completely ancillary to its main business but some have suggested that because the business is “using” the machine, a responsible person within that business who knew the machine was copied but still tendered its lease would be liable for the offence. The Government
believe that, in practice, such cases should not attract the criminal offence. This is because the use of the registered design in this case would be ancillary to the main purpose of the business.
I reassure noble Lords that the Government have listened carefully to their concerns, and believe that this amendment is the right way to clarify the detail of the offence. By qualifying the word “use”, it will ensure that the mere incidental use of a copy of a registered design in the course of business will not be subject to criminal proceedings.
Amendment 4 in the names of the noble Lords, Lord Stevenson of Balmacara and Lord Young of Norwood Green, would add a qualification to proposed new Section 35ZA(1)(a) in Clause 13. The noble Lords have set out their position on this amendment. This would mean a person would attract the criminal offence contained in Clause 13 only if an act of copying was undertaken deliberately. The Government are of the opinion that “copying” refers to a deliberate “taking” of the design in question. In crafting the offence of registered design copying, the Government worked hard to ensure that it caught only cases of intentional and deliberate copying. For example, the existing test for whether, in civil law, design is infringed, is to ask whether the product creates a “different overall impression” on an “informed user”. This was rejected for the proposed criminal offence because it left too considerable a margin for subjective judgment within a criminal case. The offence was purposefully drawn to be narrower than civil infringement, and while it of course remains a subset of such infringement, it will not be used in cases where there has been no blatant copying of a design. This ensures that designers can continue to be legitimately inspired by, and innovate around, existing designs without fear of their actions being caught by criminal sanctions.
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The Government do not think it is necessary to specify that the act of copying is done deliberately, because the act of copying by its very definition requires an active choice to have been made; that is to say, a deliberate choice. Or, to put it another way, if a person comes up with a design from independent and objective means then, by definition, they cannot have copied it. Furthermore, the offence requires the person to know, or have reason to believe, that the design they have copied is a registered design. This is a high standard to achieve and will capture only acts which have been carried out with positive—that is to say, deliberate—intent. In view of this, the Government believe that it is unnecessary to further qualify that an act of copying must be carried out deliberately. To briefly summarise my point, this amendment would insert an element of tautology into the clause. As such, I suggest to noble Lords that it is unnecessary.
Amendment 5 would introduce an additional requirement to the criminal sanction for registered design copying. Broadly, a defendant would have to be found guilty of civil infringement before they could be charged with the criminal offence of design copying. I will reiterate why the Government are seeking to introduce
criminal sanctions in the first place. Many businesses in the design sector do not believe that the civil courts are a viable option when it comes to protecting their rights as they find the cost of court action prohibitive. They also argue that those who take their designs use whatever means they can to delay proceedings when they are initiated, increasing the costs for the smaller party in the hope that they will be forced to give up or even go out of business.
In particular, stakeholders tell us that deliberate copiers of designs also use the fear of losing in court as a weapon against design owners. It is also their belief, as set out during the consultation process that preceded the introduction of the Bill, that a criminal sanction would act as a deterrent against those who copied their designs. The amendment would, therefore, in reality limit access to the criminal offence from precisely those small businesses that were most vocal in pressing for the offence, since they would be required to undertake the civil procedure first. The amendment would also set designs apart from other types of intellectual property to which a criminal sanction provision applies. For example, the offences that apply to trade mark and copyright infringement do not provide in the relevant legislation that the civil route must be exhausted prior to the commencement of criminal proceedings. There are good reasons for this, which relate to the differences between criminal and civil law.
First, the amendment would fetter the prosecuting authorities’ ability to act when there is the potential for public harm, such as in clear cases of counterfeiting. It is worth remembering that the objective of criminal law is to punish and protect society as a whole rather than to provide redress for the individual. Secondly, the amendment requires there to be a verdict through the civil procedure, which usually takes from 12 to 24 months, and for the appeal route to be exhausted. Prosecuting authorities would have to wait until this process was complete before charging an individual, who could be engaging in practices that harm designers and society as a whole. In both cases this would undermine the impact of the criminal offence and does not seem to be in the public interest. Nor would it seem to be in the interests of justice to require the additional hurdle of proving civil infringement before criminal proceedings could begin.
Amendment 6 would effectively extend the defences relating to infringement which apply in relation to criminal sanctions. The amendment would mean that someone who had sufficient reason to believe that their activity was not infringing would not be guilty of a criminal offence. I understand that noble Lords are concerned with the potential chilling effect that the criminal sanction may have, as the noble Lord, Lord Stevenson, mentioned, and will recall that we had a very good debate on these matters in Grand Committee. Indeed, the noble Lord, Lord Stevenson, has said, with reference to a group opposed to the introduction of criminal sanctions, that,
“it argues that criminalisation would create a ‘chilling effect’ on innovation, where deliberate activities are genuinely believed to be non-infringing, but would have no defence”.—[Official Report, 22/5/13; col. 855.]
As I have mentioned previously, the Government were mindful of this issue in constructing the offence. They therefore built in several requirements which must be fulfilled before a criminal act can be considered to have taken place. These requirements include that copying—in other words, a considered act—must take place, and therefore “accidental” or independent activity will not be caught. This also shows why Amendment 4, to which I have already spoken, is not necessary.
The requirements also include having knowledge or reason to believe that the design in question was registered. Therefore, for example, retailers who do business in good faith with a third party which has itself wilfully copied somebody else’s design, will not fall foul of the sanction provided that they do not know, or have reason to believe, that the design is registered. The criminal sanction also incorporates specific defences. Again, these are intended to eliminate any likelihood of a chilling effect, and to prevent those who have acted in a decent manner being unfairly caught by the offence.
There are two specific defences. One relates to infringement, which is closely related to the amendment we are discussing now, and the other to a reasonable belief that the registration was invalid. Nevertheless, it is clear to the Government that the particular issue of a potentially chilling effect on legitimate business operations remains of great concern to stakeholders.
As I mentioned, I recently met the International Chamber of Commerce and other business representatives to discuss the effect of Clause 13. Even more recently, my officials had further constructive contact with stakeholder organisations and businesses on precisely these matters. In the light of the representations made, the issue is something to which the Government want to give careful consideration. Although I cannot make a commitment now, I would welcome the time to consider this further.
I will take the opportunity also to speak to Amendment 8 in my name. I thank my noble friend Lord Clement-Jones for originally proposing an amendment relating to the liability of corporate bodies and partnerships. The Registered Designs Act 1949 does not make reference to partnerships, and I am grateful to my noble friend for bringing this omission to my attention. In Grand Committee, he said:
“It is very interesting that there is no reference to partnerships in the existing legislation. Partnerships are interesting bodies. Some of them have unlimited liability whereas others are limited liability partnerships. Therefore, some interesting drafting needs to be done in that regard because LLPs are quite akin to corporate bodies”.—[Official Report, 13/6/13; cols. GC 395-96.]
As I said in Committee, the Government wanted to consider this point further, and have consequently done so. Although the liability of corporate bodies is already covered in Section 35A of the Registered Designs Act 1949, the Act does not specifically set out how an offence would be treated if it has been committed by a partnership. It is important that this gap in the law is resolved appropriately.
The government amendment will introduce into the Registered Designs Act 1949 a provision that specifies how offences committed by partnerships will be addressed. Where the partnership is guilty of an offence, every partner will be liable if they were aware of the offence
being committed and did not intervene to prevent it. In addition, on conviction, any fine imposed on a partnership will be paid out of the partnership’s assets. This will broadly reflect the provision of the Trade Marks Act 1994, and will be consistent with the Partnerships (Prosecution) (Scotland) Act 2013 to ensure that Scottish law is adequately provided for. The amendment will provide legal clarity on the liability of partnerships and partners, and will address the gap that exists in the law.
I hope that noble Lords will forgive me for making a long speech. The noble Lord, Lord Stevenson, raised a number of questions that I will address now. He stated his belief that the majority of bodies opposed criminal sanctions. The majority of respondents to the consultation, including small businesses and individual designers, were in favour of the introduction of criminal sanctions. The noble Lord also asked for criminal sanctions to be replaced by improved access to the PCC. The Government recognise that improving access to the PCC is certainly also important. For example, the UK Government’s series of reforms in the patent county court have simplified and streamlined procedures. The introduction of a small-claims track means that low-value claims relating to unregistered designs can be dealt with quickly, informally and cheaply. It ensures that SMEs in particular are not deterred from innovation by the potential costs of litigation to safeguard their rights.
The noble Lord, Lord Stevenson, raised the question of whether small design businesses would be intimidated. The Government do not believe that criminal sanctions will lead to small designers being intimidated by larger businesses. The CPS has powers to intervene in cases where a private prosecution is vexatious: for example, where there is no case to answer, or where the public interest factors against the prosecution outweigh those in favour. As the noble Lord will know, each case is treated differently.
Finally, the noble Lord, Lord Stevenson, claimed that other common law intellectual property countries do not have criminal sanctions—for example, the USA. Some countries that operate within the EU legal framework, as the UK does, have criminal sanctions. These include Germany, Denmark and Finland. In the light of my comments and the government amendments tabled, I ask the noble Lord to withdraw the amendment.