§ Order for Second Beading read.
§ The PRESIDENT of the BOARD Of TRADE (Sir Auckland Geddes)
I beg to moveThat the Bill be now read a second time.4.0 p.m.
It is very urgent now that we are looking forward to restarting trade to have certain new powers and certain improvements in out- patent law. This Bill is brought before the House in order to get sanction for particular points which we think necessary. Clause 2 institutes quite a, new form of patent protection. It is proposed that we should have in future a class of patents which are different from anything we have had before, in so far as licence to work the patent and manufacture the patented article is a matter of right. If the patentee at any time after the sealing of a patent so requests, the patent can be endorsed with the words "Licences of right," and it may be worked at a later stage. It is hoped that in that way the poor inventor who has a difficulty in getting capital to work a valuable invention will be able to get his invention taken up and worked, and at the same time to have his own interests looked after. It is a matter of great importance that we should have such a class of patent. In connection with Clause 1, we have a series of provisions which it is hoped will have the effect of controlling in the interests of the public the monopoly which the granting of a patent gives. In order that we may end the device whereby foreign inventors were able to secure and obtain protection in this country, and then not really to manufacture it in this country on a commercial scale, we may have various alternatives for dealing with the difficulties created. The foreign inventor, having got his patent into a state of commercial production in a foreign country, it may well pay him financially to run the risk of having the patent protection in this country cancelled, because, as a result of its commercial establishment and protection in a foreign country, he may be in a position to prevent, or at all events to seriously discourage, capital being put into the working of the invention here. And it has been found in the past that the protection given to foreign inventors has been useful by them to stimulate industry abroad 1842 and to limit industry in this country. Under the powers suggested in Clause 1 of the Bill it will be possible, by one of the alternatives, to deal with this by endorsing the patent "Licences as of right," and there are other ways of dealing with it. We have under Clause 6 of the Bill a very important provision with regard to the duration of the protection which the patent confers. At present the duration of protection is four teen years. We propose that the protection should be extended to sixteen years. During the War it has been quite impossible to get many patents worked, and, if the period be not extended, inventors, at the end of fourteen years, will have lost some years which might have been fruitful to them if it had not been for the War.
§ Sir A. GEDDES
But it is not thought that the automatic extension should cover the whole period which may have been lost, because we are here affecting, or will affect a permanent alteration in the duration of the protection. There fore, we have got to consider not only the interests of the inventor, but also the interests of the community at large, and after careful consideration, what we have decided to recommend to the House is an automatic extension of two years of the existing period, and we also have in the Bill certain provisions which will enable on cause shown further extension to be obtained by those who have suffered. By the combination of these two methods we hope to meet the difficulty and also to give a greater encouragement to the inventor, while at the same time we hope to safeguard the point of view of the community. In every stage of a Bill of this kind we are sailing between two difficulties. We have, on the one hand, the fear that we may discourage invention and, on the other hand, the fear that by giving too great protection to the inventor we may do injury to the community. So all through we are dealing with the question of balance, and that is the solution which, on balance, we believe to be the best. In Clause 8 of the Bill we have certain provisions as to which it has been very difficult to arrive at a just and a fair decision. We have there the question of the right of the Crown to use patent inventions.
Broadly, the principle of the Bill is. to improve the position of the inventor so far as it is right that that position should be 1843 improved and to make it easier for the man without capital who is an inventor to secure the fruits of his invention for himself and to remove him from the position in which so many poor inventors have found themselves of having to part with their rights in the invention at far below their real value in order that the invention might be worked at all. That is provided for in Clause 2. In Clause 1, which is a long Clause, we have a whole series of arrangements by which we hope to prevent the abuse of patents whereby in the case of certain foreign-owned patents the mere fact that this country gave protection to the patent-owner was utilised by unscrupulous competitors to do damage to the country from which they have received this benefit. I think that we have dealt effectively with that in Clause 1 of the Bill. Among the minor and yet not unimportant provisions of the Bill we have in Clause 18 a whole series of provisions for dealing with patent agents. In fact, if this Clause becomes law it will transform the calling of patent-agents really into a profession. It is very necessary that these experts should be placed in a recognised position, because of the very important and valuable work which they have to do. Those are the main provisions of the Bill, which embodies a large mass of detail that will require very careful study; but we believe that, taken as a whole, this Bill, if it becomes law, will effect very substantial improvements in the law of this country with regard to patents and also extend a much needed encouragement to inventors.
§ Mr. WALLACE
I beg to move, to leave out the word "now," and, at the end of the Question, to add the words" upon this day three months."
This is a most complicated and highly technical Bill, and 1 shall attempt no detailed examination of it now. I take it that its object is to amend and strengthen the Act of 1907. The right hon. Gentleman has referred to Clause 1. There is one paragraph of it which says:(2)The monopoly rights under a patent should be deemed to have been abused in any of the following circumstance?:(e)If any trade or industry in the United Kingdom, or any person or class of persons engaged therein, is unfairly prejudiced by the conditions attached by the patentee, whether before or after the passing of this Act, to the purchase, hire, or use of the patented article, or to the using or working of the patented process.1844 I am specially interested in something of this kind, especially regarding the boot and shoe machinery trade. The Act of 1907 was intended to deal very effectively with the abuse and monopoly which then existed and exists still in the boot and shoe machinery trade of this country. The effect of that Act was totally destroyed by a most ingenious Amendment which was introduced into the Act at a late stage of its passage through this House. It may not be generally known that the boot and shoe machinery trade in this country is held as a monopoly to the extent of 85 per cent. by an English company, whose headquarters are at Leicester —the British United Shoe Machinery Company—and it is well to point out that though this company is registered in Leicester it is really an American company in disguise. Nearly the whole of the common stock, and certainly the balance of the voting power of the English company is held in America, and the American company controls the whole policy of the English company, and it is not without interest to the House, and certainly it is quite germane to the subject of this Bill, if I direct attention to this American company, which is called the United Shoe Machinery Company, incorporated under the laws of New Jersey. The history of that company is really one of the most wonderful business romances in a very romantic country. In about twelve years it succeeded in eliminating all other competitions in the United States. It bought up every possible patent device in boot and shoe machinery, and in the same short period of twelve years it managed to amass profits to the extent of $50,000,000 It is very important to remember that it is this company which is controlling the operations of the English company and directing its whole policy. The result of the operations of this company in America has been that at the present time the United Shoe Machinery Company of New-Jersey controls 98 per cent. of the whole trade in America. It imposes a royalty on every pair of boots manufactured in America, and the same policy is being pursued here.
How does the English company conduct its business? If a boot manufacturer in this country wishes to buy boot and shoe machinery, the first discovery he makes is that he cannot buy it from the British United Shoe Machinery Company. In any other business outside boot and shoe machinery the procedure is perfectly- 1845 simple. If I wish to buy machinery to-day I select three or four reputable machinery manufacturers, send them specifications, and receive quotations on a competitive basis. That is not the case in the boot and shoe machinery trade. You cannot buy from the English United Company; you can only lease, and lease only on very onerous terms. Take the case of a firm which wishes to instal one of the British United Machinery Company's machines, say, for example, a stitching machine. That is leased on certain conditions over a term of years, but at the same time the man who leases it must sign an agreement binding himself that win-never any other machines in his place run out he will on no account buy from any other firm except the British United Shoe Machinery Company. Then if in the course of a year or two he has bought one or two other machines the leases are all running out at different times, and he discovers that once within the meshes of this company there is absolutely no escape from them. That is an intolerable position for a great British industry, and I consider that it is necessary for my right hon. Friend the President of the Board of Trade not only to express the pious hope which he has expressed in Clause 1, paragraph (e), but to embody the sentiment in Clause 1, paragraph (e), to which I have referred in define legislation in order to protect a great trade.
In this lease to which I have referred there are many vexatious and complicated clauses. The lease runs to about 10,000 words, and although it may look very innocent the document has been described by some of the Law Officers of the United States as being the cleverest lease which has ever been devised by the wit of man. If my right hon. Friend really has at heart the interests of this country he must not allow himself to be left behind by the United States Government in the way in which they are dealing with the monopoly over there. To give some idea of how they regard this matter in the United States I will mention that the Law Officers there in a Report made this observation:The United Company is not merely a formidable competitor; it is absolute monarch of the industry. No competitor can exist unless for its own pleasure or policy it withholds its destroying hand.That is a very strong statement, but it is not an over-statement of the position in America. At the present time in this country door after door is being closed to 1846 British manufacturers. Considering the strong position in which the company is, holding as it does so many patent rights and devices of all kinds, the area for British machinery manufacturers is so limited, that it can be only a very short time, unless the President of the Board of Trade takes some action, before the whole of the trade of this country will be gripped in this vice which now has got such a strong strangle-hold upon the trade in America. This matter has been dealt with by a Departmental Committee appointed by the Board of Trade—by my right hon. Friend's predecessor I think. That Committee made a long Report on the subject. One paragraph reads as follows:We are of opinion that agreements restraining the liberty of the individual to buy or use the machines of other makers should be declared illegal, and any attempt by promise of bones or imposition of penalty to arrive at such a monopoly should equally be illegal.I commend that Report to the very careful attention of the President of the Board of Trade. The feeling in the trade itself is very bitter indeed, because of the humiliating position imposed upon it by these tying leases. The London Boot and Shoe Manufacturers' Association have expressed themselves very strongly about it time and again. At a meeting held a few months ago they passed the following resolution unanimously:The time is now opportune for the Federation to obtain an amendment to the Patent and Designs Act of 1907 by which the conditions generally known as the linking-up Clauses of machinery leases shall be rendered illegal under any circumstances as being a restraint to trade and contrary to public policy.I understand that one or two other hon. Members may allude to other parts of these leases, but I would point this out: The present Prime Minister, when the 1907 Bill was before this House, expressed himself as being wishful to see that that Bill, when it came into operation, should deal directly with the interest of the boot and shoe machinery trade. That was very cleverly evaded. I sincerely hope that if this Bill ever becomes law my right hon. Friend will see that a. great industry of this sort receives the protection which it has a perfect right to expect from His Majesty's Government. The boot and shoe manufacturers cannot possibly help themselves now, unless by Parliamentary interference. They are in the meshes of the coil. I ought to point out that the American Government has already taken steps in an attempt to abolish the monopoly on the other side of the 1847 Atlantic. I hope that when America frees herself we ourselves shall not remain bound. I think I have said enough to let the House know something of the real position of the boot and shoe machinery trade, and the danger of permitting this ever-growing monopoly to extend its borders. The danger is that if it be allowed to go on unchecked this leasing system for machinery may go far beyond the confines of the boot and shoe machinery trade, and it is my opinion that, in the interests of freedom of trade and from the point of view of encouraging legitimate competition, and also from the point of view of stimulating British inventions, my right hon. Friend will very seriously consider the effect of the limitations forced on the boot and shoe machinery trade.
§ Sir EDGAR JONES
1 bog to second the Amendment.
Having had a good deal to do with this question during three years of the War, I must express not only my disappointment, but my astonishment that the President of the Board of Trade has not provided for this very serious matter in this Bill. I am quite certain that my disappointment will be shared by all those men in the War Office who had to struggle against this thing when we were providing boots for the Army. I think I can safely tell the right hon. Gentleman that the commercial and industrial sections of his own Department will be seriously disappointed too. I am quite certain that if he goes back from this Debate and consults his own commercial and industrial branches he will find that the view taken here to-day is not considered to be exaggerated. Really, I must press seriously upon the President that, although this is a thin House, this is by no means a trifling matter, and that it is really an obligation on him to deal with it now in this Bill. The failure to secure in the 1907 Act the provision that was attempted in this House was a very serious thing for this country in the struggle of the War, and I feel it is my duty to tell hon. Members frankly what were the serious consequences we were faced with as a result of that failure, in the hope that the President will be convinced that we cannot face a similar risk in future. The position was this. Let honour be given where honour is due. This is one of the most efficient engineering concerns in the world. There is no 1848 doubt about it. Their methods of production, their works, their machinery, the skill of their workmen, and the character of their management, have made them, undoubtedly, about the finest engineering works in this country. Secondly, one is bound to say this—and it is what makes the monopoly so dangerous—not only are they very efficient as an engineering concern, but they have been, on the whole, a very tactful company. They have been walking very gingerly in this country during the whole period, because they know very well they arc living in a glass house. They have not been making exorbitant profits, and they have not been creating any serious conditions from the point of view of finance. My reason for pressing the importance of dealing with this matter now is based upon the, general question of public policy, and is by no means an attack upon an individual company. What happened during the War was this. We discovered, in the terrible rush at the beginning to get the shells made, an enormous difficulty in getting the gauges both for the shells and for the guns. As is well known, if it had not been for the assistance of workpeople in some other country there was no telling when we should have got either the guns or the shells. We found that this company in Leicester was one of the companies, because of the skill of its work people and its machinery, best suited for the purpose of providing us with these gauges, and it devolved upon me to endeavour to bring this company back from its normal occupation to the work of turning out these gauges. I am very sorry to say that I was up against two things. To one allusion has already been made—the fact that this company was in the hands and really under been control of an American monopoly, which America had been trying to fight for many years.
Quite frankly and plainly we met with this kind of threat: "All right, if you press us too hard, and if you impose upon us this concentration for the provision of a very essential thing for the War, the American people will do this and the American people will do that, and you will be in this condition and the other." One was always met by those responsible for raising the output of boots for our Armies with something like this statement. "For goodness sake, even if you want these things and the urgency is great, we cannot afford to offend this company." That is the position which the Government of this country 1849 had to face when the great crisis was upon us. It dared not even offend this one company, because it was absolutely in the company's hands. Therefore it was that at conference after conference one had to compromise. It is true that on investigation we were entirely in their hands. If that is proved I am sure that the House of Commons will take the view that this country can never remain in that position, that we cannot again go into a similar crisis and allow ourselves to be in the hands of one concern. What has the War done for this company to aggravate this state of things? It is an amazing story, but the thing is on record. An hon. Member has referred to the ingenious method by which this company is able, through leases, to tie up every bootmaker who takes a contract from them. That applies not only to machinery but to other things. If you once lease a certain machine you have to undertake always to buy your wire for the stitching of your boots from this company, and as all that wire comes from America and is made only in America hon. Members will realise how these wheels within wheels have set up in this country a monopoly that is too powerful even for the Government, with all the powers that D.O.R.A. gave it.
It became necessary at one stage late in the War to provide all the boots for the rebooting of the Russian army It was one of the biggest things done by the War Office, and the officers who undertook it are to be complimented. In order to provide those boots it became necessary to call to the aid of the Government practically every person in the country who could make boots, to bring in for the first time a large number of women, and for the first time in the history of the trade to put on night shifts as well as day shifts. The Government was therefore in this position. It practically compelled bootmakers all over the place to take machines from this company. They had to put their machines in so that they might train labour and increase output. The Government, therefore, practically forced every bootmaker to do this because they had all the leather, and if the bootmakers did not do it their occupation was gone. What have we done by that? The Government under the duress of the War tied up practically every bootmaker in the country for ever and ever to this monoply unless the President of the Board of Trade does something to deal with it in a drastic way, 1850 and to declare the whole thing absolutely illegal and against the interests of the country. Having done that, and having tied up all these people not only to take no machines from anybody else, but even to take a spare part from anybody else, and to take all the wire they required from the same people, would anybody think that the President of the Board of Trade would have come down here and done nothing really to deal with the situation. I must say I feel so strongly about this, and I could say much more if time permitted, and believe so strongly that it is absolutely impossible that such a state of things can be tolerated in the country, that if the President cannot promise to do anything to relieve the position I shall personally feel it necessary to take a very strong line on this Bill.
§ Sir CROYDON MARKS
I think I have never heard the Mover of the rejection of a Bill and the Seconder make stronger speeches in favour of the Bill in question than those two hon. Gentlemen have just made. Those speeches show that they cannot possibly have read this Bill, for the Bill sets out very effectively, very strongly, very definitely, and very clearly to remedy the very abuses that they have been speaking of, and to remedy them in a way which Americans or no one else can possibly get rid of. The hon. Member for Dunfermline (Mr. Wallace) referred to Clause 8 of the Bill as though that were the one which dealt with the licence. He said that it was unfair to have Clause 8 dealing with licences and not to deal with the matter in a drastic way. Clause 8 has nothing whatever to do with the licence so far as the individual is concerned.
§ Sir C. MARKS
I withdraw. Clause 8 is a Clause which deals only with licences to the Crown, and has nothing whatever to do with licences to the individual. It is Clause 1 of the Bill which deals with the very abuses which have been complained of, and that shows that the hon. Members cannot have studied the Bill. Clause 1 (e) provides thatIf any trade or industry in the United Kingdom or any person or class of persons engaged therein is unfairly prejudiced by the conditions-attached by the patentee, whether before or after 1851 the passing of this Act, to the purchase, hire or use of the patented article, or to the using or working of the patented process—that is deemed to be an abuse of the monopoly rights, and that licence comes to an end. The very conditions which have caused so much trouble and the difficulties with which we were dealing in the 1907 Bill, and which we thought we were then about to remedy by means of a very cumbrous piece of organisation and procedure, giving the Controller power to revoke the patent, are now dealt with in this Clause. By that procedure there have been since 1907 only twenty-three such patents revoked, due, as has been suggested, to the way in which these Americans and other people have managed by licences to make people agree to keep out of the Act. They have imposed terms that the people evidently were willing at the time to accept, and having accepted those onerous terms and unfair terms they very naturally afterwards complained about an oppression they could not get out of, because there was the licence which they entered into willingly. As a result the people who did so suffered badly, and the whole country suffered also, because they entered into licences into which they ought never to have entered, and which they could have got out of if they had taken the proper steps to do so. This first Clause is designed absolutely to make it impossible for any such condition to be imposed in another licence, and it also nullifies every licence that now exists with those conditions in it. That being to, to ask that this Bill should be read this day three months while the abuses are so strong and so serious in their effects on British trade rather goes to suggest that the hon. Members have been reading the complaints sent to them, as to every one of us, and have not read the Bill carefully, as it is a Bill which is designed to meet and remedy those very complaints. The Bill undoubtedly by Clause 1 sets up a new position for British industry. It prevents altogether hereafter any person who has a patent from using that patent in a way which abuses the monopoly which the Crown has given. The granting of the patent is a bargain on the part of the Crown on the one hand and the inventor on the other. The inventor in his specification describes how he proposes to carry out a new process so that the country itself can have the benefit of it. The Crown then says, "We will give you 1852 protection for fourteen years on certain conditions, and at the end of that time you shall have built up a new industry." That is the theory of patents, but, unfortunately, the theory has worked out more strongly to the advantage of people abroad in many cases than it has for the people at home. The 1907 Act was intended to remedy that, but did not remedy it. This Bill will so remedy it, and I am perfectly certain the more hon. Members study its provisions, the more they will see that the very difficulties which are now complained of are met in a very clear and easily ascertained way.
There are other features connected with this Bill. There are other industries besides the shoe-making machinery industry that have to be considered, and the Bill very rightly takes note that all industries depend on invention. They also take note of this fact, that during the beginning of a man's protection there are certain years of experimental working. At the present time, after four years, a person can go to the Patent Office and ask that a patent may be revoked because it is not being worked. That Clause was intended to help, but it does not help. Under the new Clause a person has not to move in a Court at all, and has only to approach the Patent Office, and if he fulfils the conditions can immediately get relief. There is a period of extension granted to the inventor during which he may develop his invention. The Bill which is now before the House is the cheapest Patent Bill in the whole world for any inventor. There is no country in the whole world that can offer for £5, as this Bill does, a period of six years' protection without any other fee having to be paid. That which is proposed to be granted under this Bill for £6 would cost in France £28, Germany £40, Holland, the country with the most recent patent law, £32, and America £7 7s. Therefore we are going ahead of all the countries in the world by that which is now proposed, and we are improving industry by making it cheap for inventors to obtain protection. Not only are we improving industry, but we are lengthening the life of the patents and giving every patent now in existence two years' extra life without any increased fee. The Government might very well have asked patentees to pay something extra for that two years additional. While that is being done there are other advantages con- 1853 nected with the Bill, which, in my opinion, make it a forward step and must tend to the advantage of British industry. The Bill eliminates the possibility of those leases and tying-up conditions which monopolists have hitherto been able to impose, and makes the poor inventor quite safe with regard to his invention not being taken away from him because he cannot afford to work it. It is provided in the Bill that, if a patentee at the beginning feel she cannot work his invention or has not money enough to do so, all that he has to do is to ask the Controller at the Patent Office to endorse the patent with the words "Licences of right," and with those words endorsed he will only have to pay one-half the fees anyone else would pay, and any person seeing that specification can then go to the inventor and ask for a licence, because by his specification he invites everyone to do so, and he can never get into trouble by the fact that he does not work the patent. That is a new condition which does not exist in any other law in the world, and it must make for the betterment of industry. Therefore I am surprised at the attitude adopted towards a Bill which is the most democratic measure ever proposed for the control and encouragement of inventions, and which does away with the abuses complained of very effectively. The Bill is one which, with the remedies it contains and the advantages it confers, that we ought to pass as quickly as possible. We ought to get rid of all those licences the hon. Gentleman complained about. You cannot get rid of them now, because they were entered into by willing people. If they were insane enough or foolish enough or, perhaps, helpless enough to put their hands to an agreement by which they undertook not to do certain things and always to buy from certain people, it is not much use to come whining now when they ought to have stood out, as they might have stood out, and broken the thing before. They need whine no longer; they need only ask hon. Members to press the Government to get through this Bill. The moment it is through, every licence of the kind referred to is nullified.
There are other matters in the Bill which one can only discuss in Committee. During the War the, patentees have had to pay taxes for five years and have not been able to work their inventions. I consider that the Government, in taking the five ears' taxes and now giving only two years 1854 for them, have not quite done the right thing. All patentees have been paying five years' renewal fees, and now the Government extend all the patents which happen to exist, taking no notice of those that have lapsed during the time and that ought to have an increase of life given to them. In Committee, I hope the attention of the Government may be directed to that point, and, if so, one of the strongest objections which many feel towards the Bill in one of its details will be removed. The more we can encourage invention, the more we develop British industry, and the more we develop British industry the easier is going to be the manufacturing problem. We must have more mechanical devices for labour saving, and labour-saving devices come chiefly from workmen, who cannot afford to develop the inventions This Bill enables a workman for a fee of £5 to get a patent for six years, and no country in the world offers such facilities. That being so, I hope the hon. Members, when they restudy Clause 1 and the other Clauses in the Bill which go towards remedying these defects, will see that they have made a great mistake in asking that this Bill should be postponed for one minute, much less for three months. T strongly support the Bill, and I am certain that every engineering firm, every manufacturing firm, every chamber of commerce, and all the industries of this country would, if they could, speak in this House in favour of the Bill. So great is the value of inventions that in the Peace Treaty there are five clauses devoted to the particular benefit and safeguarding of inventors who have had troubles during the War. I consider this Bill does not go far enough, in that it does not give sufficient extension of time to those who have been very severely hit during the War by paying their taxes and getting nothing in return. I reserve to myself in Committee the right to move an Amendment in this respect, whilst strongly supporting and congratulating the Government upon bringing in a Bill which will remove the vary objections which the two hon. Members have had in mind in moving its rejection.
§ Mr. W. GRAHAM
The hon. Member who has just sat down suggested that we were wrong in putting down this Motion for rejection on the ground that it would prevent something which would be an undeniable advantage to British industry. There is no desire whatever on the part of 1855 those who have moved the rejection of the Bill to impede its progress. What we are concerned with is to make absolutely certain that this Bill will meet a very difficult and trying circumstance of the highest importance to industry in this country. In the second place, the hon. Member indicated that the Sub-section of Clause 1 clearly met all that had been indicated by hon. Members who have previously spoken and that under that Sub-section there was full protection against what is practically a trust influence, and a very large trust influence, in British industry at this hour. If that is the view of the hon. Member, it is very remarkable indeed that practically all the boot manufacturers do not consider Unit the position is safeguarded by this Clause, and that opinion is also held by all the representatives of organised labour in this industry with whom I have been able to get into consultation. This Clause, as the hon. Member for Dunfermline (Mr. Wallace) pointed out, appears to confer large powers. I shall be delighted if in practice that proves to be the case, but we can never forget that under the four or five lines of Sub-section (e) of Clause 1 we are dealing with one of the largest trusts not only in the United States but also in this country, and if that is going to be met by the plain and simple terms of this Sub-section, I think many of us will be more than surprised. Our contention is that the Bill must be strengthened and developed, and that there must be no doubt whatever, as the result of Committee proceedings on the Bill, that it meets the set of circumstances which I shall briefly try to describe. The hon. Member who last sat down seemed to indicate that there was more or loss freedom in the signing of these leases, but, according to the history of the development of this trust in this country, there is practically no such thing as freedom under these leases and in the signing of them at all. There are two leases, a free or optional lease, and what we can call for practical purposes this afternoon a tied lease. If you examine the so-called free or optional lease, you must remember that the trust has made enormous progress, and that under that so-called free lease extra or higher charges are immediately imposed, and if they are not imposed in that form a royalty or some extra payment falls upon the lessee. In a position of that kind there is really no choice for the applicant at all, and he 1856 must accept the tied lease with all that the tied lease involves if he is going to make a start in the industry at all.
What are the heads of this tied lease? In the first place, it provides for the exclusive use of this particular machine or set of machines. That practically rule out all competing machines, however well developed, however scientific they might be, however better adapted perhaps for the particular purpose that the industry has in view. Secondly, if there is extra work and additional machines are required, the lessee is absolutely tied to take the same machines from this same company and to carry on the continuity, so to speak, as regards machinery in his business. In the third place, there is the prohibitive clause, which amounts to this in practice, that they are not allowed to place on these machines any boots or any part of the work which up to that point has been completed on other machines. That is one of the developments of the trust in this country. They want to get right down through the grades of machines to the very bedrock in the raw material. It is control, domination, trust power, from beginning to end of this industry, and that is what makes us suspicious, and I think rightly suspicious, of the too broad, or generous, or what I might almost call with out offence pious terms of this Sub-section. In the fourth place, there is a very harsh and unjust provision in this lease of ten thousand words to which my hon. Friend the Member for Dunfermline has referred. If the lease is broken as it applies to or covers any one machine in the industry- there is a right to abandon all the other leases on the part of the company, and the net effect of that in practice would be to- cause the absolute stoppage of the business of the man who had happened to fall into the toils of this great company. There cannot be any difference of opinion about that. He loses every thing beneath the roof of his factory as far as that machinery is concerned. In the fifth and sixth places, he is called upon to work this machine to its full capacity, and he must keep it running at full strength. He. is not at liberty to turn work on to other machinery and to give it a rest or anything like that. It gets a preference as regards use, and is in a strong and dominating position. In the last place, he is also liable to a return, charge of a very heavy character if ho gives up the lease and returns the machinery.
1857 These conditions are almost incredible in industry in this country. We have been familiar not only with legal but also with popular and public arguments regarding the evils of restraint on trade, but where could we get a more complete code of absolute restraint on trade than is represented in these six Clauses which I have just described? Fortunately, we are in possession of two public documents of the highest value dealing with this problem, and it is mainly because we possess these documents that I have all the more heart and faith in pressing this view upon the right hon. Gentleman opposite. First of all, there was the Report of the inquiry of the Board of Trade into the position of engineering in this country after the War, and they devoted one of the most interesting passages in their Report to the growth of this trust domination in the supply of machinery for the industry which is now under discussion. They pointed out that there were certain advantages, which I think we shall all readily concede. There was a kind of benevolent despotism, so to speak. The trust was powerful, but after all it tried to give the best conditions and the easiest terms to the men who took up its machinery, but even after that admission had been made the fact remained that in the opinion of this Committee, surveying the engineering trade of this country, it was highly dangerous and should be illegal to restrain anyone from buying or using machines of other makers. That was their considered view after full investigation of the circumstances. Beyond that Report, we have a much more interesting and much more important document in the Report of the Committee of the Ministry of Reconstruction on Trusts. Let us be perfectly fair and reasonable in our arguments. It is quite true that in the near future this country may or will be called upon to embark upon anti-trust legislation. We shall probably pro-fit by the experience of the United States in that connection, and we shall avoid, I hope, a very great deal of the weakness and the hesitation which were true of the United States' attempts to deal with the trusts within their own borders. This Committee pointed out that there are certain advantages attaching to trust operations, and in this particular industry they concede at least three points which are not without their value in this Debate.
> Very often the existence of this company enables the small man to start by providing machinery on terms of lease 1858 where, in other circumstances, he would not have had an opportunity of beginning. In the second place, the efficiency of their organisation is absolutely undeniable. It was conceded by my hon. Friend he Member for Dunfermline (Mr. Wallace) that they have their staff of trained operators, and they can give expert advice with regard to that machinery. They can put a wealth of experience readily and immediately at the disposal of the small manufacturer and so on, and that does a very great deal, as most reports have indicated, to reconcile him to the trust domination under which he is compelled to pass his days. Beyond these two advantages, there is what is really not an advantage at all, and reference was made to this by ray hon. Friend opposite. He said that these people do voluntarily and willingly enter into these agreements, and that they had a way out of these agreements if they so desired. I presume he had in mind the way out under the system of making application to the Board of Trade for arbitration, but the Report of the Committee on Trusts on that particular head was that the cost of arbitration was so prohibitive that, in point of fact, it afforded no real protection to the people we have in mind. The costs are prohibitive either by way of initial charge or arbitration, or under any heading we like to take. I think most hon. Members will concede that that protection is fictitious, and not in any sense a reality.
What are the disadvantages? In the first place, as regards this machinery, there is an absence of complete economic freedom for the man in the toils of this trust. There can be no doubt whatever that it is foreign to the whole tradition of the industry of this country to tie up men in the manner I have described. That is not our desire, because that must penalise invention. It must confer a real hardship on many men who would use capital to advantage, and must lead to a great loss to the community. There is a second disadvantage. Most of us are under the impression, rightly or wrongly, that when we pass beyond this sphere our responsibility and duties, and certainly our burdens, are at an end. Not so with this particular undertaking in the shoe industry. This is transferred to the heirs and executors who continue the business —the men to whom this machinery has gone—so that it involves a domination, or a form of compulsion, not only for the 1859 man himself, but actually for those who follow him as well. A state of affairs like that is contrary, I submit, to law or business, and, one would think, to elementary decency in these things. In the third place, the conclusion of the Committee was that it is exceedingly doubtful as to whether there was any advantage to industry in this country under these conditions. They weighed up the economies of the Trust; they weighed up the immediate and other advantages to the lessee. They set the disadvantages against these advantages, and they came to the conclusion that this was a most pernicious and unhealthy influence in British industry.
The only point which I would press in a final sentence is this, that we on these benches concerned with the future of labour view this problem with very grave concern. We are very anxious to assist the Government, with all the means at our disposal, to provide legislation which is going to minister to the best in the commerce and industry of this country. But we do suggest most strongly that on every Bill which comes before this House it is our duty to fight this trust influence with all the ability at our command. Unless we take steps under the Bill now under discussion we shall lose a great opportunity. The domination is real. Manufacturers and labour in this particular industry are united along the lines of the views I have tried to express. We do not press, perhaps, our Motion for rejection, but we do urge, in all fairness, that this Bill must be strengthened to deal with that trust influence. Otherwise, I think even the right hon. Gentleman himself would consider that it would largely fail to attain the object it has in view.
§ Sir W. PEARCE
I think the House will be glad to hear that hon. Members do not intend to press their Motion for the rejection of this Bill. They have made a very strong case, and if Clause 1 does not meet the case, perhaps the Government may be prepared to agree to Amendments in Committee. But there is no provision, so far as I can see, to meet what has happened during the War. During the War any application for a patent has been obliged to carry nationality, and there have been a good many restrictions which provided that everybody should know on whose behalf protection or a patent was required. I am not at all sure 1860 something of the same sort is not necessary in this Bill, and I can see nothing of the kind to meet what has been instituted during the War. I do, therefore, venture to suggest to the Minister that it is well worth while considering whether something of this kind should not be put in. I welcome the Bill as a great improvement on the Bill which was drafted in 1917. I am sure the Government have been wise in extending the term limiting the duration of patents from fourteen to sixteen years. They have not gone as far as industry and science desire, but they have gone some way. Not only during the War has it not been possible to work a patent, but during the present time it is difficult to get any plant to put a patent into operation, and therefore I am quite sure the Government have been wise in granting this extension. Clause 11 is a great improvement, speaking for the chemical industry. The Clause, as now drafted, depends upon process rather than the actual substance itself, and in that, I think, the Government have taker; the right view. There is also a provision which stipulates that for food substances the royalty charged shall not be large, and that the Comptroller, before granting the licence, shall take into account the public requirements for food. I notice that no difference has been made in the Court of Appeal. I know that scientific industry would be very glad to see a different Court of Appeal. They would like a special Court with technical knowledge. It has been pressed upon the Government on many occasions, and I should like again to suggest to them, that, when the Bill gets into Committee, they might be prepared to listen to suggestions of this kind. But in many respects the Bill is a great improvement. It is a great addition to the law of 1907, and a great improvement on the Government's first attempt in 1917, and, speaking for myself, I have great pleasure in welcoming the introduction of this Bill, and I am glad to hear that the rejection is not going to be pressed.
§ Mr. J. F. GREEN
I merely want, as representing a constituency which is very specially affected by the trust to which so many references have been made this afternoon, to endorse what has been said by my hon. Friends with regard to the evils of this trust. One hon. Member thinks that these evils are provided against in the Bill as it stands. If that is the case, it is a somewhat remarkable circumstance that places like Leicester and North- 1861 ampton, the great centres of the shoe industry, do not consider that is the case, and I can hardly think the manufacturers of those towns are so ignorant that they would not be able to understand this Bill if it really did provide against these evils. None of us who have supported this Motion for the rejection of the Bill, which, as has already been stated, will not be pressed, have any hostility to the Bill as it stands, except that we do not think it goes far enough in this direction, and I hope the learned Solicitor-General, who, I believe, will reply on behalf of the Government, will be able to give us some assurance that if the Bill is not sufficiently strong at present, something will be done in Committee to strengthen it, in order that the great evil of this trust may be put an end to. I want to emphasise again what has been said as to the Report of the Committee on Trusts which was appointed by the Government, in which it was said that the position at present is that 80 per cent, of the shoe factories of this country are tied houses, as regards their machinery, to one machinery firm, and, for all practical purposes, they are tied in perpetuity. I think we shall be agreed that that is a most mischievous state of things, and grossly unfair to these manufacturers, and I feel certain the Government will, if necessary, strengthen this Bill in order that this great evil may be dealt with.
§ Major LLOYD-GREAME
I feel sure the general opinion of this House will be in favour of this Bill, and that any criticism will go in the direction of trying on this occasion, and in Committee, to make this the most efficient Bill possible. I should be sorry if the Debate were to be too much concentrated on what may be the very considerable evils of one particular set of patents, and the way those patents can be used and developed, and that consideration should not be given to some of the wider aspects governing the bulk of patents throughout the various kinds of industries. Of course, in considering any Patent Bill, what one has got to do is to strike the balance of convenience. You have got on the one side to protect your patents sufficiently to induce patentees and inventors in this country to stay here to develop their inventions, and, as far as possible, to induce the bringing of patents from other countries to be developed here. We have a very great field in that way by drawing from our Colonies and Dominions. On the other hand, you 1862 have, of course, got to secure that the widest advantage is enabled to be taken of any inventions that there are. In that connection I would rather suggest to the Government that the wise course in dealing with these patents, and in dealing with patents that have not been worked, is, if possible, not to go for revocation, but to go for compulsory licence, because the circumstances are present to my mind of one case—and I expect there have been many like it—in which a patent was not being worked to the full in this country, and, as a matter of fact, was not being worked because the particular industry was then more or less in its infancy, and development was not going as quickly as could be expected. Application was made for, the revocation of the patent, not by someone who wanted to work it in this country, but by an importer who wanted to get it revoked in this country and import German manufactured goods. I would suggest to the Government the possibility of considering whether it is not better to forgo the power of revocation, and to make as strict as ever you like the powers as to compulsory licence, in order that wherever the patent is going to be developed hero you may fully develop it, but safeguard it from the danger of men who do not want to develop it here, but to import from another country.
There is another point which has been mentioned, and which I should like to see considered—that is the question of the desirability of a moratorium in respect of the war period. Patents really divide themselves into two classes here. Some patents have no doubt been developed in connection with war material; but there have been many in key industries which have not been developed. Take, for instance, the electrical industry. I believe many patents, and much scientific research, were put aside by electrical undertakings for the period of the War, while they turned over their plant to the much simpler and the more direct war work. I think in those cases we might follow the example, I believe, of Belgium, where a moratorium has been granted for the whole period of the War. I should also like the Government to consider whether it is not convenient, on the whole, to grant the War period as the period of a moratorium. One is always chary of making any appeal to the Government to give further State assistance where it is a case of financial aid, but in the present case one is not making any appeal for anything in the 1863 nature of a direct money grant. I hope, therefore, that what I have put forward will be considered.
There are just two other points, one is in respect to the power which is taken— quite rightly—in Clause 8 and in a later Clause, I think, that the Crown is to have full power, notwithstanding that a patent is subsequently taken out, of working any invention which has been the product of a person working in one of the Goverment Departments. The words used here areProvided further, that where an invention which is the subject of any patent has, before the date of the patent, been duly recorded in a document by, or tried by or on behalf of, any Government Department…This is a provision with which no one will quarrel, but I am not quite sure what is meant by "duly recorded in a document." We can foresee what may happen, and unless the matter is made quite clear a number of unfortunate altercations may arise between Government Departments and the patentees, or would-be patentees, as to whether it is a fact that the invention has been discovered in a Government Department. If the record is merely a record filed and put away in a Government Department, it may give rise to considerable difficulty. I understand the discovery of an invention by anyone in the service of the Crown belongs to the Crown. Would it not be possible to give notice, to avoid subsequent disputes in matters of this kind, for the patent to be taken out by the inventor as the nominee of or trustee for the Crown? No dispute could then arise as to whether or not this invention had in fact been previously discovered by anyone in the service of the Crown.
The final point relates to a question of time. I understand it is proposed that the provisional term should be nine months, and afterwards there should be six months, between the filing of the final specification and the scaling. That time may be too short. Of course, one wants to get the greatest possible expedition. In America you may have five years' delay between the application and the time the final decision has been given. In some cases, particularly where the inventor is resident in the Dominions, it is reasonable to give a longer period than six months between the final specification and the sealing. I hope that in all the proceedings on the Bill the House will consider the 1864 whole question of the general balance of convenience, and realise, as I am sure the House does, that this Bill goes much, beyond any question of removing abuses, and that it has a more constructive side than that, namely, to stimulate invention.
§ The SOLICITOR-GENERAL (Sir E. Pollock)
My right hon. Friend, in. moving the Second Reading of this Bill, told the House that the Bill was one which, was distinctly an intricate Bill. I think the discussion proves that he was right. As has been pointed out, the main points dealt with under the Bill—quite apart from the small changes of the Act of 1907 —real changes made in this Bill—are, first of all, an extension of the patent up to-sixteen years. I understand from the discussion, that this is not accounted sufficiently long to overcome the misfortunes under which patent and patentee have, been placed owing to the War. It is said they have had to make the payment of fees, during the period of five years, and now secure only a two years' addition. May I point out that the two years is really a-very valuable addition to the fourteen years which would be granted? I think it would be an increase of rather more than sixteen years. In some other countries the period has been for a long time, and, it is suggested, patentees in this country-have been placed at a disadvantage. In Italy, for instance, the period is eighteen years. In France, fifteeen. In the United States of America, seventeen. All these, parties count their issue of revocation, not. from the issue of the particular date of application, as is the case in this country; and the result of that is that in order to put patentees in this country on an equivalent basis quite clearly some extension is necessary; and we have chosen the period of sixteen years. It will be remembered that in the Clause which deals with it there is the-power of granting an extension of five years for normal cases, five years taking the place of seven years—and for ten years in exceptional cases—these taking the place of fourteen years at present in the Act of 1907. Therefore, if you take it on the one hand that the public loses nothing because you take a definite period of sixteen years with a possible extension of time, on the other hand the patentee gets the advantage of the twenty-one years, and that is no more than the duration of the patent the public has to put up with, for at 1865 present the patentee gets his seventeen years, plus an addition, and he can get, in addition, another seven years, making it twenty-four. My hon. Friend the Member for Hendon also referred to the need for an extension of time between the date of the application and the date of the sealing. Hitherto the time has been six months. It is now proposed to extend it to nine months, as it has been found that asking for a complete specification in the course of six months is, perhaps, placing an unfair burden upon the patentees. If my hon. Friend can show that nine months is still too short, I am sure that the matter is one which can be adequately discussed and a proper judgment pronounced upon it in Committee. It is a matter which, as has been pointed out, must be considered in Committee. I turn to the other observations which have been made, and I think that really they are not observations with which I need to deal. I am not at all discarding some of the suggestions made, because I think it may be valuable that their consideration should be in Committee; but I do not desire to detain the House by dealing with all these things now, Hon. Members will not, therefore, think that I have overlooked them. My purpose is rather to shorten the observations I have to make here. These criticisms can be dealt with efficiently and better in Committee than on the floor of the House.
The suggestion has been made, if I do not do an injustice to the speech of my hon. Friend the Member for Dunfermline, when he moved the rejection of the Bill— for I gather he founded his Motion, which ho was perfectly entitled to put down, on the fact that it would give the House the opportunity for and freedom for debate, in order to see whether the Bill is framed on right lines—he, I say, based his rejection of the Bill on the ground that Clause 1 (a) was inadequate, or did not deal with the difficulties under which, he said, certain classes of manufacturers were placed at the present time. Of course, the Clause to which he was referring is Section (38) of the Act of 1907, with which we are all familiar. If I am correctly informed, it was passed as a middle course between two conflicting opinions, or, perhaps, I might say between two conflicting interests. The hon. Gentleman presented a very strong case showing that that Section does not give adequate protection, or, at any rate, free- 1866 dom to those persons engaged in either purchasing or hiring certain classes of machinery. He will not expect me to ex press any opinion at all upon the facts or materials which have been laid before the House. Indeed, it would not be right for me to express such an opinion. The position was strongly affirmed by the hon. Member for Dunfermline, and reinforced by the hon. Member for Merthyr Tydvil and the hon. Member for Edinburgh. All three Members would, I feel quite sure, respect my feeling that I should maintain a deep reserve upon those matters which, obviously, are matters in which there must be another side. It is my misfortune, being a lawyer, to assume, or to have an uneasy feeling, that there must be another side—
§ Mr. CAUTLEY
The hon. and learned Gentleman will not find it in the Report of the Committee on Trusts.
§ Sir E. POLLOCK
May I point out that the words in this first Clause of the Bill propose that there should be a power, not of revocation, but of the time which is to enable a licence, as of right, to be granted in cases in which the privilege which was granted under patent has been abused—primarily the conditions of Section (27) of the 1907 Act intended for one particular purpose? These were in order to secure that the patentee should not manufacture… … entirely abroad, and that he should become compelled to manufacture, in a large measure over here, to the advantage of our industry and our labour here. Clause 27 of the Act of 1907 deals with articles manufactured exclusively or mainly outside the United Kingdom. When this came to be interpreted it was held that under the word "mainly" you had to consider the relation between profits made abroad and profits made in the United Kingdom, and as it is very difficult and in most cases impossible to ascertain what are the profits made abroad it was impossible to satisfy that word "mainly," and consequently Clause 27 has not been as effective as was intended. Hence under Clause 1 of this Bill we propose a new Section for Clause 27 of the Act of 1907. Hon. Members will find that a number of cases of abuse are indicated, many referring to the abuse of not adequately making the invention within the United Kingdom. Sub-section (e) of Clause 1 provides that 1867If any trade or industry in the United Kingdom, or any person or class of persons engaged therein, is unfairly prejudiced by the conditions attached by the patentee, whether before or after the passing of this Act, to the purchase, hire, or use of the patented article, or to the using or working of the patented process—he can apply to the Comptroller, who can use the powers granted to him under this Section. In other words, if a case is made out where such conditions are attached as make them unfair, then the Comptroller's powers come in after both sides have been heard.
§ Sir EDGAR JONES
The Committee on trusts having been made, would the Comptroller take action under this Clause and cancel all the licences throughout?
§ Sir E. POLLOCK
Certainly not, and I should be very sorry that any such provision should be inserted in the Bill. If I understand the case that is made, and I do not think I misunderstood the point at all, it is that there are important cases where restraint of trade can be proved—indeed, the hon. Member for Merthyr himself rather argued that it has been proved. Assuming cases had been proved, so far as I follow the argument, it is quite unnecessary to a patented article. The hon. Member for Central Edinburgh (Mr. Graham) rather indicated that this restraint of trade which is suggested really had very little relation to patented articles, and he said that he hoped that when a man passes to another place he may be free of the contract he had made, but at the same time he pointed out that this was a liability that lay upon the man and by heirs and executors, and he said it was an entanglement which lasted for a long time. May I point out that the patent only lasts fourteen years?
§ Sir E. JONES
There is always some email extra patent to a small part of the machine, so that the patent is germane to the whole thing.
§ Sir E. POLLOCK
I quite see the sequence of the hon. Member's argument, but whether it is valid or not, perhaps I may be allowed a little more time to consider the point before I decide one way or the other. If hon. Members are right, their point is a restraint of trade which has developed over a very long period of time and not the ordinary and normal period of a patent, whether it be fourteen or sixteen years. That is a matter which must be dealt with, not under a Patents 1868 Bill, but under a measure dealing with trusts, and I understand that the Bill is in actual preparation and my right hon. Friend (Sir A. Geddes) assures me that it is his intention to introduce a Bill relating to that matter in the autumn. I think that really covers a large portion of the serious nature of the complaint made, namely, that freedom is taken away, that men are tied up and that the necessity is shown for what is called anti-trust legislation.
I will now come to the narrow confines of the Patents and Designs Bill. Under Clause 1, paragraph (e), we give an opportunity for those persons who have been injured to come and have their cases heard, and a conclusion can be come to by the Comptroller, and if he decides that there is a restraint and an unfair burden is being imposed upon the users of this machinery he has the power to endorse the patent with the words, "Licences of right." Within the proper limits of the Patents Bill, I think we have gone as far as we ought to go. The other matters on which hon. Members feel strongly must be dealt with by an anti-trust Bill which will be introduced in proper course. With regard to all these questions, whether paragraph (e) of Sub-section (1) is strong enough or requires safeguards, are matters for the Committee, and they are questions which can be adequately dealt with in Committee. I trust the House will now accord a Second Reading to this Bill which is designed to remedy the difficulties which have been found to exist in the working of the 1907 Patents Act
§ Amendment, by leave, withdrawn.
§ Main Question put. and agreed to.
§ Bill accordingly read a second time, and committed to a Standing Committee.