Speech

Intellectual property priorities in business innovation

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Speech by Baroness Neville-Rolfe at the intellectual property annual seminar mentor dinner in London.

Baroness Neville-Rolfe DBE CMG

Introduction

Shortly after the end of the Second World War Winston Churchill said that Britain had nothing left except the abilities of her people. Even then, this may have been something of an exaggeration, though an understandable one, but it encompasses an important truth. Britain has fewer major natural resources than many other countries. It follows that to earn our way in the world we have to rely more on brains than on nature.

This is the fundamental reason why for us in the UK the protection of inventions in the broad sense, intellectual property in the current jargon, is so important. According to one calculation, we in the UK invest much more in intangible than in tangible assets. Whatever the truth of that I do believe the trend is for intangible assets to become relatively more important.

Overall it seems fair to conclude that worldwide intellectual property, which I will call IP from now on, is becoming increasingly important relative to other forms of property and, for the UK, it is especially important. These trends and tendencies seem likely to become even more pronounced as far ahead as we can see, with digital technology and indeed digital crime giving this an added relevance.

All this is clear enough. But we with responsibilities in the area of IP also face real difficulties. It is complicated - a bit geekish might be the best description - and for many, probably most, people it is not very interesting.

One cannot see senior ministers of this, or indeed any other, country being convinced of the case for their making a major speech on the subject, however important it might be objectively speaking. A speech on something with more appeal is always likely to seem more compelling.

Now as a relatively new minister in the area of IP, I am surrounded by talented people who are fascinated by the complexities of the subject and feel passionately about it. That is of course all to the good. However it is ministers who have to make the case for action on IP and, for the reasons I have indicated that is not always easy.

Though I believe I have just set out the realities accurately, it is true to say that we have made significant progress in recent years. It has come to be better appreciated within Her Majesty’s government that the protection of IP is a vital component of innovation and scientific advance; and that many of the benefits of invention will be lost if the resulting IP is not protected.

And we have put a lot of effort into improving the legal framework. Indeed, according to the Taylor Wessing Global IP Index, in 2013 the UK had the top rated IP regime in the world. It suggests we are doing something right.

And this is important because in my view one contribution government can and must make to business innovation is to get the IP legal framework right.

To this end, Prime Minister David Cameron commissioned an independent review of the UK IP system, which reported in 2011 and is often known by the name of its Chairman, Professor Ian Hargreaves. The review was focused especially on how IP could best support innovation and growth in the UK economy.

Reporting in May 2011, the review set out a vision of how making better use of IP could facilitate UK economic success.

The review recommended improving the efficiency of the patent system, bringing greater clarity to design rights and modernising copyright licensing. This required the strengthening of the legislative framework in various ways leading to the Intellectual Property Act 2014 and a substantial body of subordinate legislation. I had the privilege in my first week on of being a minister of taking through the most contentious measures and the chastening experience of replying to a debate where only one peer spoke strongly in favour of the changes - all good experience for my next challenges, the Consumer Rights Bill, now nearly through, and the Small Business, Enterprise and Employment Bill which is in committee.

One of the reasons debate is heated on IP is that there is a lot at stake economically. Design for example is important for the UK’s creative industries. They are worth more than £71 billion to our economy annually, growing at around 10%, and accounting for 1.68 million jobs. The 2014 Act strengthened the law around design rights and introduced a new criminal sanction for intentional copying. It also made a number of simple changes to patent law that will improve working practice, streamlining the whole system.

Technological developments and a shift in cultural practices around how we consume content meant a reform of copyright law was badly needed. We introduced a range of exceptions aimed at bringing certainty and clarity to the use of copyright material. It was important to bring the law into line with common practice - which sees almost everyone taking copies of online documents and music for their own use - and to allow greater use of copyright material, for example of so called ‘orphan works’ languishing in museums because the copyright owner could not be found.

We strongly believe that these changes will benefit both the economy and wider society, but they were contentious in the creative communities, especially the exceptions for private copying and parody.

So the UK has largely completed a major programme of change and you see the same in some other countries, particularly as digital transforms copyright. The European Union are embarking on ambitious plans for the Digital Single Market and we will be feeding proactively into that process in the coming months.

Improving the ecosystem

This reform of the legal IP framework is an essential element in supporting innovation, but more is needed.

To encourage the production, flow and sale of legitimate goods and digital products we also need to reach out to businesses and give priority to enforcement and education. People need to understand the value of ideas that can so easily be stolen and the costs of counterfeits and IP theft. Indeed the relevant UK enforcement authority, Border Force, has estimated that IP crime costs the UK economy around £1.3bn each year. And we also know that better protection of legitimate ideas encourages innovative investment.

So what have we done to improve the ecosystem? The steps we have taken include:

Through our Intellectual Property Office, we have been trying to help businesses identify and make the best of their IP. We have created a suite of mainly on line tools for SMEs and business advisers to understand IP better, what protections rights offer, and whether IP is relevant for individual businesses.

We have also negotiated new advisory services from around 250 specialist IP advisers to help businesses take forward the recommendations of IP Audits.

We are collaborating with the British Library and other key libraries across the UK to build a network of Business and IP Centres. They are centres of expertise where people can come together to access free or low-cost advice and support in starting, developing and running a business or protecting a business idea.

We have set up an IP attaché network to help UK companies operate more effectively overseas. Last year the attaché network supported over 3,700 UK businesses.

Setting the future agenda

We have also established a research programme to increase the understanding and valuation of IP rights, to analyse the efficiency of complex IP systems and to examine possible future challenges.

We hope this will provides valuable insight into how the knowledge economy and the IP regime can better work to support business innovation. Indeed IPO have produced some fascinating reports on patent data in areas such as robotics, life sciences and genomics and agri-science as part of the government’s innovation work on great technologies that can drive growth.

A new report on 3D printing and IP issues will be published later this month which considers the current state of the market, its likely development and what this means for the UK IP system.

Getting businesses to make the most of their IP is vital, but making sure there is a sophisticated and responsive marketplace for IP is equally key.

We have provided start-up funding for the Copyright Hub that is creating a marketplace and boosting trade in IP. It signposts users to relevant supplier websites so it is easy to obtain permission rights, vital in the music industry and to making legitimate use easy.

We have also welcomed other industry-led solutions to strengthen the marketplace for the licensing and trade in IP rights, for example ACID which stands for ‘anti-copying in design, is a safe online trading platform where design buyers can view the latest designs created by its members.

We have driven up the standards of practice of Collecting Societies by introducing a backstop power to make sure the minimum standards for the industry are met. We have also put in place an Orphan Works Licensing scheme that has opened up access to culturally valuable pieces of creative work where rights holders cannot be found.

The IPO’s ‘Banking on IP’ project is aimed at raising awareness of IP as an asset. Once finance directors start looking at IP as a positive addition to the balance sheet, rather than just a cost line covering patent and other registrations, we will be getting somewhere. The advent of our Patent Box, a tax break to encourage R&D spending, will help here by focusing the finance men and women on this area.

To help the 60% of students in the UK who think they do not understand enough about IP to support them in their future careers, we are working with universities to support academics teaching many different courses and on their students through an online tool.

We are also recognising and rewarding strong examples of entrepreneurship and the development of ideas. We have a well established competition, Fast Forward, which has given out some £3 million in support of outstanding projects to develop and commercialise the use of IP.

Encouraging commercialisation

And we support UK institutions from the inception of their ideas through to commercialisation. IP is often initially generated during research projects and the IPO has developed a toolkit to help universities and businesses manage IP created in these collaborative research projects. The Lambert Toolkit contains a series of model IP agreements designed to facilitate negotiations between potential collaborators, reduce the time and effort required to secure agreement and provide examples of best practice.

We also work with the younger generation, for example in partnership with Aardman Animations, and their Wallace and Gromit Children’s Charity, targeting 4 to 16 year olds and covering all forms of IP. The ‘Shaun in the City Schools Programme’ featuring the popular animated character Shaun the Sheep, is being marketed to schools nationwide with a cross curricular education pack and a design competition that will encourage children to think about design, innovation and intellectual property.

As part of our work to build understanding and respect for IP rights, the government is also working with the creative industries, including the Motion Pictures Association, Sky and BT, as they fund a major 3 year education and advertising campaign to alert consumers when they are accessing infringing content online and build up an understanding of the value and potential of IP.

Protecting IP

Of course there is no point encouraging and supporting businesses innovation if you cannot protect it. So I am cautiously gratified that, according to the US Chamber of Commerce, the UK has the best enforcement regime in the world.

We have made significant reforms to the system of Patents Courts. Our renamed IP Enterprise Court makes it easier for rights holders and other businesses to access justice at a fair cost with a scale of recoverable costs, capped at £50,000, hearings limited to 1 or 2 days and a Small Claims Track for cases under a value of £10,000.

We also offer a range of Opinion and mediation services, designed to help resolve disputes more effectively. As part of the IP Act, we expanded the Service to provide opinions on a much wider range of patent disputes and Supplementary Protection Certificates.

The City of London IP Crime Unit has had some notable success in its first year, taking down more than 2,000 infringing websites and investigating more than £28 million of IP crime.

Last year’s IP Enforcement Summit which we hosted in London brought together more than 300 representatives from governments, industry and enforcement agencies from across the world. It demonstrated the importance of collaboration, locally, nationally and internationally, if we are to tackle the growing issue of IP crime.

This is complemented by the government’s huge programme to tackle cybercrime with 60% of small business reporting a breach in the last year. This can be very costly. Think of the potential targets – and what has already happened the destruction of data at the Saudi Petroleum company and of course the Sony incident. The one advantage was that it made the public case for our national cyber security programme.

Contrasts with the US

Given our audience this evening it would be wrong not to comment on the differences between IP law here and in the US.

Much that is different stems from the fact that the US is more litigious than the UK. This is exemplified by the emergence of the term ‘patent troll’ which you may have heard - companies whose business model relies on asserting patent rights and sitting on them. I am told that patent trolls are more common in the US, partly because software and business method patents have been more widely available there than in the UK, where a more strictly defined position reduces the legal uncertainty on which trolls can thrive. And the costs regime in the UK is also a clear disincentive for trolls – here, the loser pays the winner’s costs which is not the case in the US, at least for the time being.

The US has tackled one of the problematic issues around copyright protection through a non-compulsory register of copyright works.

And the US approach to trade marks differs in requiring commercial use of a mark for validity but no compulsion to register it, although doing so gives a stronger legal footing if you wish to defend it against infringement.

Looking forward we believe that there is much to be gained from a more global approach to IP as trade and the flow of ideas knows no boundaries. We need forums in which to discuss IP issues, both the development of parallel legal structures and international enforcement and education.

I am glad to say that are making progress on the issue of patent harmonisation. For example, the US currently has a 12 month ‘grace period’ in which an inventor can make his or her invention public without compromising the right to file a patent. There is no such provision in Europe currently but there are on-going discussions on how to remedy this difference in protocol. The IPO’s Chief Executive John Alty chairs Group B+, an international group looking at potential areas for patent harmonisation, which amongst other things is considering harmonisation of the grace period.

Challenges over the next 5 years

So what are the challenges for the next 5 years? Our focus will continue on strengthening the UK IP framework to maximise support for business innovation and help drive growth.

There will be an increasing concentration on the European and international scene.

We are working with the EU on the successful delivery of the unitary patent and the Unified Patent Court, with its pharmaceutical division to be based here in London.

And we will be making sure that proposed copyright reform and digital single market meets the interests and needs of the UK.

Looking beyond Europe, we will continue the work around harmonisation of the international framework. China will remain a priority because of its strategic importance in terms of UK trade and investment.

I visited China in September to open the 2nd UK-China IP Symposium. I was struck by the progress the Chinese are making. Chinese industries are moving up the value chain and domestic innovation is driving the need to further strengthen their IP system. IP is no longer a foreign concern but a key issue for both the Chinese government and Chinese businesses. This is clearly illustrated by the fact that in 2013 less than 2% of IP related court cases were brought by foreign companies.

I met 8 ministers during my visit and it is clear that the government is intent on creating an economy in which IP plays a fundamental role. As former Premier Wen Jiabao often said, “competition in the future is competition in IP.”

So what does this look like in practice? The largest number of patents per year are now filed in China, and the Chinese authorities have recently announced their intention to increase this, with an aim to triple patent filings by 2020. Their whole IP framework is being reformed and developed rapidly. Whilst we recognise that there are still IP risks involved in investing in China, the IP reforms are positive for British businesses and I hope that the UK, like the US, seizes the opportunity to engage in this fast-moving market.

Conclusion

But I would like to conclude with a challenge that harks back to my opening remarks.

We have a cultural problem in improving the understanding and value of IP in the UK business environment. Lawyers understand the area well and its complexity suits the legal mind, but companies must realise that IP asset management is important. They must find IP literate employees and directors who understand its value.

Perhaps this evening’s distinguished gathering can help us to decide how we can do this better?

Ladies and gentlemen, I look forward to your comments and questions and of course to Sir Richard Arnold’s response.

Published 9 January 2015