Intellectual Property Act receives Royal Assent

United Kingdom

The main purpose of the Intellectual Property Act 2014, which has now received Royal Assent, is to modernise certain aspects of IP law "in order to ensure that the IP system operates more efficiently and is clearer and more accessible, thus increasing legal certainty" (taken from the Explanatory Note).

The act primarily deals with patent and design laws but, significantly, includes provisions to allow the United Kingdom to ratify and implement the Unified Patent Court Agreement.  There are new criminal penalties for intentional infringement of registered designs, strengthening of the patent opinions service and a new opinions service for registered designs, as well as "improvements" to unregistered design right law. Provision is also made for a research exemption from disclosure in relation to freedom of information and for the automatic extension of certain existing copyright provisions to nationals of, and works first published in, other countries (without the need to include a list of countries and territories in an order).

It will be for the Secretary of State to make orders bringing the new measures into force, but it is expected that they will begin to come into force from October 2014, with all measures implemented by late 2015.

The Intellectual Property Act 2014 makes amendments to the Copyright Designs and Patents Act 1988, the Patents Act 1977 and the Registered Designs Act 1949. Many of the changes to the design law stem from the Hargreaves Review and have three main purposes:

  • to help improve the enforcement of designs and understanding the design rights of others;
  • to simplify design law and get the IP framework to better support innovation; and
  • to improve processes associated with the design framework such as better provisions of information.

The Minister for Intellectual Property, Lord Younger, at a recent BIS press release relating to the new act, commented: ''Continued investment in intellectual property is vital to all businesses, as it contributes £16 billion to the UK economy each year. It is essential that we continue to work hard to create the right environment for them to flourish so we can benefit from their creative designs, inventions and ideas'', adding ''I am confident that this act will further strengthen our world-class IP system - from research to market - and help businesses of all sizes continue to thrive''. Progress in this area will be measured as the act introduces a new reporting duty: the Secretary of State will annually report on the state of Intellectual Property law and the work of the IPO.

The changes with regard to UK design rights are as follows:

  • The repeal of first ownership of UK unregistered design rights by a commissioner - the act aligns UK design right with Community registered design and Community unregistered design, where the first owner is the designer rather than the commissioner. The same changes are also implemented for UK registered design ownership (see below). There are knock-on amendments to references to ‘commissioner’ in this part of the act so that qualification can no longer occur by reference to a commissioner (only an employer) etc. As the Explanatory Note puts it, this "removes the situation in which a UK right is automatically owned by whoever commissioned the design, and a EU right (which includes the United Kingdom in its scope) is instead automatically owned by the designer. It brings UK design law into line with UK copyright law, and means that the initial ownership of closely related rights will no longer end up with different parties".
  • Transitional arrangements - these changes in relation to the designer as first owner are not retrospective (either actually or contractually). The changes do not apply to a design created before the commencement of the section of the act that makes these changes, nor do they apply if there is a contract between the designer and the commissioner relating to the commission of the design which was entered into before the commencement of this section (even if the design, is created subsequently to the commencement of the section).
  • Removal of the words "of any aspect of" from the definition of a ‘design’ that can be protected by UK unregistered design right - this is intended to limit the protection for trivial features of designs, by making sure that protection does not extend to "any aspect" of part of an article. The Explanatory Note says that it is expected that this will reduce the tendency to overstate the breadth of unregistered design right and the uncertainty this creates, particularly in relation to actions before the courts.
  • "Commonplace" - the requirement for a design to be "not commonplace" in order to qualify for design right is to be limited to commonplace in qualifying countries, in order to provide clarity on the geographical coverage of the assessment to be undertaken. This change is not retrospective. Under Section 1(4) of the new act, it applies only to designs created after the commencement of Subsection (3), which makes the change.
  • Tweaks to qualifying criteria - simplifying and expanding the concept so that those who are economically active in the European Union - and those countries to which qualification has been extended by order (see the countries listed in S.I. 1989/1294) - may qualify. The act removes the definition of ‘qualifying individual’, and ‘qualifying person’ has been amended to mean "an individual habitually resident in a qualifying country, or a body corporate or other body having legal personality which (i) is formed under the law of a part of the United Kingdom or another qualifying country and (ii) has in any qualifying country a place of business at which substantial business activity is carried out''. The requirement that benefitting companies be formed under the law of the United Kingdom or another qualifying country was removed in draft versions of the bill, but was re-introduced on Parliament's final reading. Thus, the only real substantive change in the definition is to remove the citizenship requirement that is part of the current qualifying individual definition. The definition of 'qualification by first marketing' is more significantly changed by the new act. Whether a design qualifies under this subsection will now depend on the country in which the sales took place and the person who did the marketing having the status of a 'qualifying person'. It will no longer be a requirement that that person has exclusive authorisation to market articles in the United Kingdom, thus broadening the scope of the section. The definition of ‘qualifying country’ has not been altered.
  • Exceptions for private acts, experiments and teaching - the act provides for exceptions to design right infringement for: (a) an act which is done privately and for purposes which are not commercial; (b) an act which is done for experimental purposes; or (c) an act of reproduction for teaching purposes or for the purpose of making citations (provided that (i) the act of reproduction is compatible with fair trade practice and does not unduly prejudice the normal exploitation of the design, and (ii) mention is made of the source). A key rationale for the changes is to encourage teaching and innovation in the design sector. Notably, the exception for acts done for experimental purposes will allow designers greater freedom to innovate by taking inspiration from current designs. From the Explanatory Note to the act, it is clear that these exceptions are intended to be similar to those found in relation to copyright. However, particularly in light of recent changes to the copyright regime, they are less extensive.

The changes with regard to registered designs are as follows:

  • Extension to Community designs of exemption from copyright infringement when legitimately using a registered design - Section 53 of the Copyright Designs and Patents Act provides that those using a design registered in the United Kingdom under the Registered Designs Act, in good faith and with permission from its owner ("in reliance" on it), are not subject to infringement of any associated copyright. Currently it does not refer to Community registered designs which also cover the United Kingdom. The new act extends this existing defence so that it also applies to registered Community designs in addition to UK registered designs.
  • Commissioner - no longer the first owner of UK registered design: this was already so for Community registered and unregistered design under the Community Designs Regulation (6/2002). Employers remain first owners in all cases.
  • Applicants no longer need be the proprietor of the design - the act amends Section 3 of the Registered Designs Act by removing the requirement for the applicant to be the proprietor of the design. This brings UK law into line with the way the Community Designs Regulation deals with applications for registered designs.
  • Right of prior use to be introduced - a new section will be added to the Registered Designs Act which provides a limited defence where a third-party acts in good faith in the use of a design that is subsequently registered by another. The Explanatory Note says that this will allow third parties to continue using the design according to preparations they have already made, without fear of someone being able to stop them at a later date and jeopardising their investment. Similar rights are provided under the regulation (see Article 22) so this is intended as a harmonisation. However, this right of use will be limited: "New Section 7B(1) means that the protection for the third party only applies to the use that they have already made of the design; and new Section 7B(5) means that there is no right to, for example, sell the design to another."
  • International registration procedures now available for UK registered design (accession to the Hague Agreement) - previously, designers could access the Hague registration process only via Community design registration (as the United Kingdom had only acceded to the Hague Agreement via its membership of the European Union). Section 8 of the new act empowers the Secretary of State to accede to the Hague Agreement, subject to Parliamentary approval of any draft order (ie, not simply by Statutory Instrument). Accession will mean that international registration procedures are available specifically for UK registered designs, allowing UK businesses to save costs by tailoring registration to specific territories, an improvement on the current blanket position where international registration can only be used to gain protection across the entire European Union.
  • Alignment of innocent infringement provision with that for Community design rights - the act amends the provisions of Section 24B of the Registered Designs Act which relate to the potential financial liabilities that may be faced by a person who innocently infringes a UK registered design. The Explanatory Note says that the changes have been driven by the fact that there are different potential financial liabilities between the innocent infringement of UK registered designs and those of Community designs, even though both are valid in the United Kingdom, "specifically, damages and/or an account of profits may be sought against an innocent infringer of a Community design but neither can be sought against an innocent infringer of a UK registered design. The amendment to Section 24B of the Registered Designs Act results in a proprietor of a UK registered design being able to seek from an innocent infringer some or all of the profits made because of the infringing activity, but not any wider form of financial damages".
  • Use of the appointed person (as well as court) - new Section 27A provides a new route of appeal against decisions made by the registrar relating to designs. It offers those involved a choice of using either a person appointed by the Lord Chancellor (after consultation with the Secretary of State) or the court, and reflects the system already in place for challenging trademark decisions of the registrar. Sections 30 and 31 of the Registered Designs Act, on costs and evidence, will apply to proceedings before an appointed person just as they apply to proceedings before the registrar, with the aim to provide a quicker and cheaper alternative to the courts. The Explanatory Note indicates that legal professionals, such as IP barristers, are the persons who might expected to be appointed, though further details of the appeals process will need to be provided for in regulations (which could also cover UK unregistered design right). Crucially, the act provides for the appointed person to make a referral to the court in specified circumstances, such as where there is a point of general legal importance involved, or where the registrar or any of the parties before the registrar requests that the referral be made.
  • New registered designs opinions process - a new Section 28A will be inserted into the Registered Designs Act, a power for the Secretary of State to provide for a non-binding opinions service for designs, similar to that which already exists for patents. The opinions service will cover UK registered designs and its scope may be extended to include other design rights such as the UK unregistered design right. There is provision for the details of this service to be included in regulations (by resolution to be approved by each House of Parliament). The Explanatory Note says that this could include, for example, circumstances where the registrar will not be required to give an opinion and also the information and fees that should accompany an application for an opinion. Neither the registrar nor any IPO official will incur liability under the service (as is the case for official actions under trademark and patent law).
  • New criminal penalties for deliberate copying of a UK or Community registered design - a new section, Section 35ZA, is inserted into the Registered Designs Act, making the deliberate copying of a UK or Community registered design a criminal offence, and specifying the circumstances under which the offence applies. The offence will apply only to designs registered prior to the copying, not to those registered after the copying has taken place. For a criminal offence to take place, intentional copying in the course of business to make a product exactly to the copied design or with features that differ only in immaterial details will need to be proven. Parliament added the word 'intentional' to the final version of the act to clarify the type of copying to which the criminal offence applies. This is a high threshold (particularly in light of the criminal burden of proof: beyond all reasonable doubt) and reproducing a design unintentionally will not be caught. Even if intention is proved, various conditions must apply in order to establish that an offence has been committed, for example, establishing that the person accused acted without the consent of the registered design holder, knew or had reason to believe that the registered design in question had been copied, and acted in the course of carrying out business activities. According to the Explanatory Note to the act, in practice, the offence will not apply if the defendant can show reasonable grounds for believing the design in question was invalid or that their design did not copy it, of that their use of the design was merely incidental to the carrying on of the business. If the criteria for the offence are satisfied, then the consequences will be serious. The offence will carry with it a fine and/or a prison sentence of up to 10 years, and will be triable, on summary trial (in a magistrates’ court) or a trial on indictment (in a Crown court). The offences, including the mode of trial and penalties, reflect existing criminal sanctions for trademarks and copyright (see Trademarks Act 1994, Section 92; Copyright, Designs and Patents Act 1988, Section 107).
  • Offences committed by partnerships - the act amends Section 35A of the Registered Designs Act to deal specifically with offences committed by partnerships. Proceedings for an offence alleged to be committed by a partnership must be brought against the partnership and any fine must be paid out of partnership assets. Each partner will also be guilty of an offence in their personal capacity, bar a partner who is proved ignorant or attempted to prevent the commission of the offence.
  • Trading Standards and forfeiture - Trading Standards will have similar powers of enforcement for design offences as they have for copyright and trademarks. Powers of forfeiture allowing, in certain circumstances, a court to authorise the removal of copies of registered designs, or items which have been used to make them, from the premises of people under investigation, will be introduced. These copies may later be destroyed or passed on to another person in order to be recycled or re-used in some way.

With regard to pre-publication research, a new section, 22A, will be added to the Freedom of Information Act 2000 (FOIA) exempting information obtained in the course of, or derived from, a programme of research if certain conditions are met. The programme must be continuing with a view to publication, and disclosure before this date would prejudice either: (i) the programme, (ii) the interests of any individual participating in the programme, (iii) the interests of the authority who holds the information, or (iv) the interests of the publishing authority if different.

The new Section 22A will not be included in the list of absolute exemptions in Section 2(3) of the FOIA; thus it is subject to the requirement that, in all circumstances of the case, the public interest in maintaining the exemption must outweigh the public interest in disclosing the information. Each case will be decided on its own merits, and should the balance fall in favour of the exemption on the facts, the new provisions should allow researchers in 'public authorities' (a wide definition under Schedule 1 FOIA, including many NHS bodies) to more easily validate and analyse their work before putting it into the public domain. So as not to undermine the purpose of the new section, under Subsection (2), public authorities will not be obliged to confirm or deny if they hold exempt information if doing so would likely prejudice the four factors outlined above.

Finally, the Secretary of State will be required to report annually on innovation and growth in IP under the new legal obligation set out in Section 21 of the new act. The report will consider how the activities of the IPO, and how legislation relating to intellectual property, have contributed to the promotion of innovation and economic growth in the United Kingdom. The section does not prescribe the precise content of any report, as the policy objectives of the IPO will likely change over time, but the Explanatory Note sees the reporting duty as a tool for increasing transparency and sharpening the focus of the IPO towards innovation and growth. The report is likely to focus on several factors such as: legislative changes and pre-legislative work, policy development and the main outputs of the IPO's economic research programme. It will contain data to support the assessments made. 

Rachel Montagnon and Kate O'Brien, Herbert Smith Freehills LLP, London

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