The Intellectual Property Bill: "more evolution than revolution"

No sooner was the announcement made in the Queen's speech than the Intellectual Property Bill was published. This wide-ranging bill had its first reading the day after the Queen's speech, in the House of Lords, on May 9 (a formality that signals the start of the bill's journey through the Lords). A second reading - the general debate on all aspects of the bill - took place on May 22.

The press release from the Department for Business Innovation and Skills (BIS) commented that a key element of the bill was the new powers to enable the UK to implement the Unified Patent Court Agreement, the London part of the central division of which will adjudicate on pharmaceutical and life sciences patent disputes. The BIS suggests this "will benefit the economy an estimated £200 million per annum".

Another key feature is the introduction of criminal penalties for intentional copying of UK registered designs and the strengthening of design protection.

The Minister for Intellectual Property, Lord Younger, said:

"The measures we are publishing to reform IP law are more evolution than revolution. Cutting red tape for SMEs, making laws easier to understand and helping to speed up the granting of patents internationally will all help business in the UK.  Our smallest businesses, in particular, will benefit to protect their creative ideas and to further encourage them to grow. One of the key initiatives is the introduction of criminal sanctions for deliberate copying of registered designs. This will be a deterrent to those who deliberately copy UK registered designs and provide greater protection for our hugely important design sector."

On the proposals for a designs opinion service and an expanded patents opinions service, the BIS' press release says:

"This would allow design or patent rights holders, or anyone else, to ask the Intellectual Property Office to provide an expert opinion on whether a UK design or patent is valid or being infringed. This will help businesses assess the strength of their case before embarking on more formal and costly legal proceedings, and may help avoid litigation altogether."

This update will focus on the changes affecting UK design rights and registered designs.

With regard to UK design rights, the bill proposes the following changes:

• The repeal of first ownership of UK unregistered design rights by a commissioner - this proposal would align UK design rights with Community registered designs and Community unregistered designs where the first owner is the designer. Such changes are also planned 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). As the Explanatory Notes put it, this "removes the situation in which a UK right is automatically owned by whoever commissioned the design, and an EU right (which includes the UK 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 will not be retrospective (either actually or contractually). The changes do not apply to a design created before the commencement of the section of the bill 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 design right - the Explanatory Notes say that this change "limits the protection for trivial features of designs, by making sure that protection does not extend to ‘any aspect’ of part of an article. 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 decision 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.



• 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 SI 1989/1294) - may qualify. The definition of ‘qualifying individual’ is to come out, and ‘qualifying person’ would be amended under the bill to mean "an individual habitually resident in a qualifying country, or a person who has in any qualifying country a place of business at which substantial business activity is carried on”. This provides a cleaner definition of ‘qualifying person/individual’ and no longer requires benefitting companies to be formed under the law of a part of the United Kingdom or another qualifying country. The removal of the ‘qualifying individual’ means that whether a design qualifies for protection because of the circumstances in which it was first put on sale (first marketed) will now depend on the country in which those sales took place, rather than on the nationality or place of residence of the person who did the marketing (previously the ‘qualifying individual’). As the Explanatory Notes say: ‘qualification’ is instead now centred on a ‘qualifying person’, which is defined according to where that person resides or carries on business activity (the ‘qualifying country’). The reference to a person in Paragraph (b) of the definition of ‘qualifying person’ will, as a result of the Interpretation Act 1978, ensure that the definition covers businesses. The definition of ‘qualifying country’ would not be altered. Qualification by first marketing now depends only on this first marketing taking place in the United Kingdom or qualifying country or EU member state (and not also on it being done by a qualifying person).



• Exceptions for private acts, experiments and teaching - the bill provides for exceptions to design right infringement for an act which is done privately and for purposes which are not commercial; an act which is done for experimental purposes; or 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).

With regard to registered designs, the bill proposes the following changes:

• 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 1949 (RDA), 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 bill 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 bill amends Section 3 of the RDA by removing the requirement for the applicant to be the proprietor of the design. This brings UK law into line with the way the regulation deals with applications for registered designs.



• Right of prior use to be introduced - a new clause will be inserted 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 Notes say 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 (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 only access the Hague registration process via Community design registration. The accession of the United Kingdom would make international registration procedures available for UK registered design as well.  



• Alignment of innocent infringement provision with that for Community design rights - the bill suggests a change to the provisions of Section 24B of the RDA which relate to the potential financial liabilities that may be faced by a person who innocently infringes a UK registered design. The Explanatory Notes say 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 RDA 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 the court) - new Section 27A would provide 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 Secretary of State (appointed person) or the court, and reflects the system already in place for challenging trademark decisions of the registrar. Details of the appeals to an Appointed Person would need to be provided for in regulations (which could also cover UK unregistered design rights).



• New registered designs opinions process - a new Section 28A is proposed for the RDA, 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 statutory instrument). The Explanatory Notes say 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 proposed for the RDA, 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 only apply to designs registered prior to the copying, not to those registered after the copying has taken place. For a criminal offence to take place, deliberate copying in the course of business would need to be proven. Various conditions must apply in order to prove 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. Reproducing the design unintentionally is not caught by the offence. Thus, say the Explanatory Notes, the offence will not apply if the defendant can show reasonable grounds for believing that the design in question was invalid or that its design did not copy it. The offence would carry with it a fine and/or a prison sentence of up to 10 years, and would be triable, on summary trial (in a magistrates’ court) or a trial on indictment (in a Crown court), depending on the severity of the case. 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, Section 107).



• Trading Standards - 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.

Joel Smith and Rachel Montagnon, Herbert Smith Freehills LLP, London