Saturday, 7 June 2014

Reflections on the Intellectual Property Act 2014

Jane Lambert

The Intellectual Property Bill received royal assent on the 14 May, just over a year after it was introduced into the House of Lords and is now an Act. It is a very short statute consisting of 24 sections divided into Four Parts together with a Schedule. It enables the Secretary of State to implement the Council Agreement on the Unified Patent Court and the Hague Agreement, expands the scope of the Intellectual Property patents opinion service and establishes an opinions service for designs and provides for appeals from hearing officers in designs matters to be heard by an Appointed Person as in trade marks. It also tidies up s.213 of the Copyright, Designs and Patents Act 1988, the Registered Designs Act 1949 and the Patents Act 1977. For a detailed analysis of the legislation, see my article The Intellectual Property Bill 28 May 2013 NIPC Law and the presentation by Alex Roxycki and me.

The Bill's only controversial provision was clause 13 which created a new criminal offence of intentionally copying registered or registered Community design. That provision horrified patent lawyers as exactly the same arguments as were made for extending criminal liability to registered design infringement - namely the cost of civil proceedings and the complexity of the law - could be made by private inventors and their champions for bringing the criminal law into patents.  On the other hand, clause 13 did not go far enough for the design lobby which agitated for extending sanctions for unregistered design infringement throughout the passage of the Bill. In the end clause 13 proceeded more or less in the form in which it was introduced with a few minor amendments. Those were practically the only amendments to the Bill.

The avowed objective of the legislation was to implement Professor Hargreaves's recommendations in Digital Opportunity A Review of Intellectual Property and Growth that required primary legislation. In fact, most of those recommendations concerned copyright but Hargreaves did urge the UK to
"attach the highest immediate priority to achieving a unified EU patent court and EU patent system, which promises significant economic benefits to UK business"
and to 
"take a leading role in promoting international efforts to cut backlogs and manage the boom in patent applications by further extending 'work sharing' with patent offices in other countries."
Hargreaves did not recommend criminal liability for registered design infringement or indeed make any recommendation in relation to designs other than carrying out research because he found that the role of IP in supporting the design industry had been neglected.

As it happens, the Intellectual Property Office had already commissioned research on the economics of design rights before Hargreaves had reported. That research showed that the design sector was already large and thriving under the existing legal framework with total expenditure on design of around £33.5 billion in 2008. It would have been reasonable for the government to have concluded that as the system was not broken there was nothing to fix. Instead, the IPO canvassed designers with a Call for Evidence that more or less invited complaint of the existing procedure for registering designs and enforcing design registrations. Not surprisingly, the IPO received complaints (as it would had it canvassed individual members of the nation's inventors clubs) which prompted the IPO to suggest criminal sanctions for registered design infringement (see Consultation on the Reform of the UK Designs Legal Framework 24 July 2012). In carrying out this exercise the Government and IPO seem to have lost sight of Hargreaves's first recommendation that "Government should ensure that development of the IP System is driven as far as possible by objective evidence."

In drawing up its legislative proposals, the government acknowledged in its response to the consultation (The Consultation on the Reform of the UK Designs Legal Framework Government Response - April 2013) that there was a limit to how far it could reform design law:
"the substantive provisions of the EU registered right, international design designating the EU and the EU unregistered right are outside our competence to amend or repeal, as is much of the UK registered design. All of the latter are based on EU legislation, and there is currently not the will, or prospect, of reform of the latter in the near future. As for the Semiconductor Topography Right, it’s clearly rather esoteric and no-one is calling for its amendment or repeal and – even if they were – it is also based on an EU directive,"
Consequently, the changes to the law achieved by the Act are restricted to unregistered design right and those parts of our registered design law that do not emanate from the Designs directive.

So how will the Intellectual Property Act 2014 affect practitioners and their clients?

First and most obviously, designers and those who commission designs need to review and possibly amend their standard contracts and terms of business to take account of s.2 of the Act with regard to unregistered design right and s.6 with regard to registered designs. My colleagues in 4-5 Gray's Inn Square and I will be glad to carry out such a review.

There is unlikely to be a dramatic increase in national registered design applications as a result of the simplification of design law or the introduction of criminal sanctions for intentional copying. The 3 years protection from copying provided by the Community Design Regulation for unregistered Community designs will continue to be good enough for the fashion, toy, novelties, consumer electronics, mobile telephony and similar industries. White goods, furniture, luxury goods, motor and other manufacturers that require longer protection tend to produce and market goods on a European or global scale and are thus more likely to register their designs with OHIM for the whole EU rather than with the design registries of individual member states. There may be a small increase in applications through the Hague System, especially as more countries accede to that Agreement.

On the other hand, there is likely to be a surge in threats actions and applications to the Patents and Intellectual Property Enterprise Courts or the Intellectual Property Office for declarations of invalidity by businesses and individuals who are, or fear that they may be, threatened with prosecution for intentional copying of a registered design. The launch of a designs opinions service will make it even cheaper and easier to challenge registrations.  So, too, will the possibility of an appeal from the hearing officer to the Appointed Person under s.10. Ironically registered design proprietors who might have hoped to offload the cost of registered design enforcement on to trading standards officers may spend at least as much as they save in defending such proceedings.

Moreover, by providing a right of prior use where non had existed before, s.7 of the Act limits significantly the monopoly provided by design registration.  On balance, that section probably takes away as much from the design sector as it gives by introducing the criminal law into designs, extending the opinions service and appeals to the Appointed Person to designs and accession to Hague.  If the intention was to help to promote innovation and encourage investment in design the net effect of the Act is likely to be neutral and possibly even negative.

The main benefits of the legislation are likely to result from Part 2 of the Act and particularly s.17 which enables the Secretary of State to make regulations to implement the Unified Patent Court Agreement and s.18 that allows the Intellectual Property Office to share information about patent applications with overseas patent offices. At paragraph 3.14 of his review Professor Hargreaves wrote that
"Removal of inter EU country barriers in IP could increase UK national income by over £2 billion a year by 2020."
The Court will help significantly to remove those barriers. Indeed, it is likely to contribute to UK national income in other ways in that art 7 (2) of the Agreement provides for one of the sections of the central division of the Court of First Instance to be based in London. At paragraph 6.10 of his review Professor Hargreaves observed:
"Patent backlogs can generate a spiral of ill effects. They impose costs by increasing the uncertainty of business decisions, impeding competition or giving a patent applicant an unfair advantage in negotiations. Backlogs may also cause more firms to protect their inventions outside the patent system, entailing a loss in the dissemination of economically important knowledge.  Unexamined patent applications, which may be rejected, add to transaction costs on third parties clearing their products and services to ensure they are not infringing patents. Increased pressure on patent offices to examine the large numbers of applications and reduce these backlogs may lead to the grant of even more low quality patents, worsening the costs of uncertainty. This can then precipitate a further downward cycle of increased rates of defensive or “strategic” filing of applications (as firms seek to bolster their own patent portfolios to aid in negotiations), more allegations of infringement and eventually additional litigation. Incorrectly granted patents incur the social costs arising from patent protection without providing the benefit of incentivising true innovation."
A practical way of reducing those backlogs is to allow national patent offices to share information about patent applications and s.18 enables the British patent office to do just that. Other useful reforms of patent law include the extension of the scope of the patents opinions service and enabling the Comptroller to revoke invalid patents under s.16 and the removal of information about research from the Freedom of Information Act 2000 by virtue of s.20.

Though often overlooked the most far-reaching provision of this Act may be the duty imposed by s.21 (1) on the Secretary of State to report on the extent to which
  • the activities of the Intellectual Property Office have contributed to the promotion of innovation and of economic growth in the United Kingdom; and
  • legislation relating to intellectual property has been effective in facilitating innovation and economic growth in the UK.
It will be interesting to see what the Secretary of State has to say with regard to the Intellectual Property Act 2014.

Further Reading

Simon Crossley and Selina Hinchcliffe "What impact will the Intellectual Property Act 2014 have on your business?" 8 July 2014
Selina Hinchcliffe "TMT legal update: What impact will the Intellectual Property Act 2014 have on your business?"
Intellectual Property Office Business guidance on changes to the law on designs 30 June 2914
Intellectual Property Office Expansion of the Patent Opinions Service: business guidance 6 Aug 2014
Intellectual Property Office Patents Worksharing – business guidance 11 July 2011
Intellectual Property Office Minor changes to patents legislation made by the Intellectual Property Act 2014: business guidance 6 Aug 2014
Intellectual Property Office Patent Research Exception  10 Sept 2014
Jane Lambert "Intellectual Property Act: The New Law on Opinions" 29 Oct 2014 NIPC Law
Jane Lambert "CPD Event - "The Intellectual Property Act 2014 - What it means to you and your clients" Leeds 15 Oct 2014" IP Yorkshire 6 Sept 2014
Jane Lambert "The Intellectual Property Act 2014 (Commencement No. 3 and Transitional Provisions) Order 2014" NIPC Law 6 Sept 2014
Jane Lambert "How the Intellectual Property Act 2014 changes British Patent Law" 21 June 2014
Jane Lambert "How the Intellectual Property Act 2014 changes British Registered Design Law" 19 June 2014
Jane Lambert  "How the Intellectual Property Act 2014 will change British Unregistered Design Right Law"  11 June 2014
Jane Lambert and Alexander Rozycki "The Intellectual Property Act 2014" 19 May 2014 Presentation
Jane Lambert "Unified Patent Court Consultation" 25 June 2014
Jane Lambert "How the IP Bill affects Inventors" 21 April 2014
Jane Lambert "Clause 13 of the Intellectual Property Bill will probably go through. What next?" 20 Dec 2013
Jane Lambert "The Intellectual Property Bill" 26 May 2013