§ Order for Second Reading read.4.30 pm
§ The Parliamentary Under-Secretary of State for Technology (Mr. Patrick McLoughlin)
I beg to move, That the Bill be now read a Second time.
The Bill represents an important measure for industry and commerce in the United Kingdom. Though long and, in many areas, complex, the Bill will make it easier for industry and commerce to register their trade marks and will provide owners of registered trade marks with wider infringement rights.
The Bill will harmonise our law with the laws of other members of the European Union. That is important, because business wants to have the same registration criteria and protection for its trade marks as are offered in other member states. It also implements our obligations in respect of trade marks arising from the final act of the GATT Uruguay round which was signed last week.
The Bill is also deregulatory, because it sweeps away the need for businesses to present the Patent Office with legal documentation for relatively straightforward changes to trade marks registration.
The importance of trade marks in day-to-day commercial activity is easily recognised. I doubt whether any of us could go through the day without using someone's trade mark, but trade marks are seldom recognised by most people as valuable assets. That is, of course, exactly what they are. Some have been valued in company balance sheets at several hundred millions of pounds, and the transfer of ownership of registered trade marks internationally each year is valued at billions of pounds.
There are some 350,000 trade marks on the UK register. Each year, there are approximately 35,000 new applications for registration. Therefore, it is important that the statutory framework that surrounds this important area of commercial activity should reflect the needs of businesses. The Government believe that the Bill does that.
The Bill completely replaces the current Trade Marks Act 1938. At present, the law does nothing to support the international marketing strategies of our large exporting companies; nor does it reflect the needs of small and medium-sized companies for an easy registration system.
When we started to discuss the draft European directive on trade marks with representatives of industry and commerce, it became obvious that there was a need to reform the whole of our law on trade marks. Therefore, the Government set out in the White Paper "Reform of Trade Mark Law" proposals for legislation. The White Paper was published over three years ago and received a very favourable response from business.
Since that time, extensive consultation has continued with organisations representing industry, commerce, the legal and trade mark professions and consumers, usually through the Standing Advisory Committee on Industrial Property. Of course, that does not mean that the particular wishes of every sector have been met, but the result is a Bill which commands the full support of industry and companies large and small. The Government believe that it 659 reflects industry's needs for a law that maximises the protection given to owners of registered trade marks, yet reduces to a minimum the amount of regulation. It means that the direct costs to industry and commerce will be reduced and, therefore, their ability to increase investment in product development and marketing will be enhanced.
Part I of the Bill implements the directive and, in doing so, establishes a new code for the registration of trade marks. Clauses 1 and 3, in essence, provide for a mark to qualify for registration if it is capable of distinguishing one trader's goods or services from those of another. This means that it should be possible to register as a trade mark, for example, a container or a geographic name, where those have proved to be distinctive in the marketplace. Those are unregistrable under the current law, which defines a trade mark in a narrow and restrictive way.
§ Mr. John Marshall (Hendon, South)
My hon. Friend will have read in the press that some manufacturers seek to use the Bill as a means of restricting or phasing out own-label products. Does he agree that own-label products in the grocery trade—about which the Minister for Industry, my right hon. Friend the Member for Hove (Mr. Sainsbury), who is also present on the Front Bench, will be happy to inform my hon. Friend—offer the consumer greater choice and more competitive prices, and that it would be wrong to use the Bill to phase them out?
§ Mr. McLoughlin
My hon. Friend anticipates a matter that I may mention later.
Clauses 9 to 13 specify the rights given under registration. The infringement rights are widened. Under the 1938 Act, the owner of a registered mark can sue someone for infringement only if that person uses the same mark on the same goods or services as those for which the mark is registered. The Bill extends infringement rights to cover similar goods or services. That means that if the owner of a registered mark observes that his mark is being used by someone else on goods or services that are the same as, or similar to, those covered by the registration, he will be able to sue that other person for infringement and seek damages.
The directive is the result of negotiations in which the UK participated fully. United Kingdom industry and commerce were, through interest groups, fully consulted. Harmonisation occurs only in those areas where differences in the substantive law of member states could distort competition. The directive does not affect procedures connected with the registration of a trade mark. For example, it requires member states to protect the rights of earlier registered marks, but does not tell them how that should be done.
We decided, after consulting users of the trade mark system, that in the United Kingdom the registrar of trade marks will continue to carry out a search of marks already registered and to refuse an application for registration where that conflicts with an earlier registered trade mark. Clause 5 reflects that. Small companies, in particular, will benefit.
As I said, the Bill deregulates in a number of ways. In particular, the procedures for the registration of assignments and licences of trade marks, which are also dealt with in part I, will be much simplified. The current law requires the registrar to fulfil a kind of consumer 660 protection role. That is an old-fashioned notion. Other bodies and modern legislation can do that job far more effectively. Customers are far more sophisticated than they were in 1938, when the current trade mark law was enacted. More important, it is not in the interests of the trade mark owner to do anything that would cause confusion in the market—and registration could be revoked if, through the actions of the proprietor, the trade mark becomes misleading.
It will not be the registrar's job to police the assignment or licensing of trade marks. The present requirement for the registrar to examine in detail the deeds of assignment and the licence agreements will be discontinued. That will reduce the burden on owners of marks as well as the running costs of the trade mark registry.
Industry tells us that will save it more than £30 million a year. In addition, the resources saved in the Patent Office will be applied to the more positive objective of meeting customer service targets.
Current trade mark law does nothing to support the international marketing strategies of companies in the United Kingdom. Part II remedies that. It makes provisions for the United Kingdom to ratify the Madrid protocol concerning the international registration of trade marks. That will make it much easier for UK industry to protect its marks overseas.
An international trade mark registration system known as the Madrid agreement has been in operation for more than 100 years and has a membership of more than 30 countries. That membership has, however, been fairly static. It has not appealed to countries that, like the UK, examine trade marks before registering them. They include the United States of America, Canada, Japan and the Scandinavian countries.
For that reason, a protocol to the Madrid agreement was agreed in 1989, which overcomes all the disadvantages of the old agreement. The UK took a leading role in the negotiations on the protocol and we signed it. Ratification, however, needs the Bill, which provides for the making of regulations to bring the protocol into force here.
Once the protocol comes into force, a simple arrangement will enable UK companies to obtain an international registration, covering any or all of the countries party to the protocol. The registration will have the same rights and legal effect in those countries as a national application.
That will be of considerable financial benefit to UK trade mark owners. At present, a UK trade mark owner who wants to protect his mark overseas must apply separately for registration in each of the countries concerned. That involves observing whatever procedures each country requires and paying fees in local currency. Some countries insist on the use of a lawyer. All that, as can be imagined, involves a great deal of trouble and expense. Industry told us that the new international registration arrangement should save it up to a further £30 million per year—a considerable benefit.
A further option for companies wishing to protect their trade marks overseas will be the Community trade mark, which will come into being as a result of an EC Council regulation that was adopted last year. The Community trade mark office will open for business in about 1996, in Alicante. The test for obtaining a Community trade mark will, of course, be the same as that applying in all member states. But, through a single application, a proprietor will be able to secure a unitary right that is effective in all 661 member states. Therefore, in the European Union, industry has a further choice when managing its international trade mark portfolios.
Parts III and IV of the Bill deal with administration and general provisions. I should like to single out the provision dealing with trade marks counterfeiting. That is a growing problem throughout the world and the United Kingdom is not immune to it. The offence trades on the reputation of famous and established trade marks. Unscrupulous traders copy goods sold under well-known trade marks. That devalues the reputation of the trade mark, because the counterfeit goods are frequently of inferior quality and might even be dangerous. Moreover, it also harms traders in the genuine goods, who, consequently, lose business. The Bill, therefore, will strengthen the protection against trade mark counterfeiting.
It is an essential ingredient of the offence under the current trade mark law that a trader intends that a consumer should believe that the goods were genuine. There has, however, been a dramatic growth in the practice of selling counterfeit goods clearly advertised as "brand copies".
Until recently, it was believed that that was, none the less, an offence under the Trade Descriptions Act 1968. However, the divisional court held in a recent case—Kent county council v. Price—that this was not so, observing that the Trade Descriptions Act existed to protect consumers and, as the defendant was advertising the goods as fake, they were not deceived. There was, therefore, no offence.
However, as the Bill is concerned with the protection of trade marks, clause 87 defines the offence in terms of unauthorised use of the mark. That protects the legitimate rights of trade mark owners. Even if an unscrupulous trader sells the goods as "genuine fakes", it will still be an offence, because he will be deliberately exploiting someone's mark without their permission.
Some concerns were expressed, both in another place and elsewhere, that the anti-counterfeiting provisions in the Bill went too far and could have made the person who inadvertently infringes someone else's trade mark liable to criminal charges. They felt that such infringements should be left to the civil courts. The Government believe that the changes that have been made in another place remove that danger and better focus the criminal sanctions on deliberate counterfeiting.
It will not have escaped notice of hon. Members that one of the issues surrounding the Bill has been given wide coverage in the press and on television—the issued termed "lookalikes", which my hon. Friend the Member for Hendon, South (Mr. Marshall) raised earlier. The issue, however, is a new one. It was not raised until the end of last year, despite the fact that the Government consulted exhaustively on the White Paper and the Bill for some five years.
Last December, a number of large firms banded together to form the British Brand Owners and Producers Group, with the aim of pressing for the inclusion of a clause in the Bill to curb what have become known as "lookalike products". These are own-branded products allegedly designed to look like the brand leader's goods. It is claimed, for example, that supermarkets sell their instant coffee in jars with labels designed to look like other, well-known brands. Industry is divided and although the brand owners are pressing their case vigorously, many others feel that existing remedies, such as passing-off, are 662 adequate, or that it is not a matter for the Bill. Furthermore, many organisations have emphasised that distinctive shapes and packaging will be registrable under the Bill.
During consideration in another place, an amendment was tabled that would have made it an infringement of a trade mark to market goods designed to look like those of the trade mark owner, even though the actual trade mark was not used. The Government resisted that; it was, in any case, incompatible with the EC trade marks directive.
Those advocating action then changed the amendment to introduce a new cause of action for unfair competition. The Government, therefore, decided to consult via the Standing Advisory Committee on Industrial Property. The committee was a channel through which the discussions on the White Paper and the Bill were carried out, and it is appropriate that it should be involved here.
The advisory committee met on 30 March and discussed the issue. Many other organisations with an interest in the "lookalikes" issue, including the British Brand Owners and Producers Group, were present. Each organisation put its case, and made written submissions. The Government have not yet taken a view. We are continuing with the consultation process, but at this stage we do not believe that it is an issue that can be addressed under trade marks legislation.
§ Dame Peggy Fenner
I must tell my hon. Friend that there will be considerable relief that he does not believe that the action of the British Brand Owners and Producers Group in its amendment in the other place forms a proper part of the Bill. He will know, no doubt, that National Opinion Polls carried out a survey on whether people can be confused by so-called "lookalikes", and found that 78 per cent. of consumers, who, as my hon. Friend said, are very sophisticated, are never confused. MORI carried out an even more recent survey and came to exactly the same figure. I hope that he will regard this as a competition matter and not at all a matter for the Bill.
§ Mr. McLoughlin
My hon. Friend has adequately voiced the concerns of other people as well as the Brand Owners and Producers Group, which has voiced other concerns. This is something that, obviously, will be addressed throughout our consultation process. I am grateful to my hon. Friend for her view.
§ Sir Dudley Smith
I am tempted to say that any politician will tell my hon. Friend that opinion polls are invariably wrong, but I will not go down that line.
My hon. Friend said that this was a relatively new subject in that the representations had come fairly late. I stress that they did so because the problem is growing, and growing daily. As I heard the hon. Member for Workington (Mr. Campbell-Savours) say, one has only to look at the Coca-Cola issue in Sainsbury today.
§ Mr. McLoughlin
I am grateful to my hon. Friend for his cautionary word about opinion polls. I wholly agree with him. I never agree with them unless they say what I want them to say. That is possibly the line that we 663 politicians always take. I am, therefore, very cautious about opinion polls. But he rightly points out the way in which this issue has, perhaps, come more to the fore. It did so rather late. The Bill had been widely debated for a long time. That was the point that I was stressing. We must address ourselves very carefully to whether this would be a right issue for the Bill. That was the point and concern that I was reflecting to the House a while ago.
The Bill, though long and complex, meets the Government's objectives in relation to UK industry. It simplifies and deregulates the national trade mark registration system and, therefore, saves time and money. Reduced costs will assist UK industry to compete in international markets. The provisions in the Bill for the Community trade mark and the Madrid protocol will help also. But, perhaps more important, the Bill represents what users of the trade mark system want. I hope that the Bill will command the support of both sides of the House and that we will give it a fair wind. The sooner that it is on the statute book, the sooner will the benefits start to accrue. I commend the Bill to the House.
§ Mr. Nigel Griffiths (Edinburgh, South)
Hon. Members on both sides of the House welcome the Bill: we understand the importance of trade marks to both British business and national and international trade. Unlike the Bill, however, the debate is concerned with the Government's delays and dithering over the presentation of legislation.
As we all know, trade marks are among a company's most valuable assets. Household names such as Persil and Pedigree Chum are all protected by trade mark legislation. Trade marks are a token of the esteem in which the public hold consumer products, and of a company's investment in achieving quality in a product.
The problem is the time that it has taken for the Bill to be presented. On the Government's own admission—the Minister has just said as much—the measure is likely to save British business £30 million. Why have the Government dithered for four years, while a White Paper published in 1990 has gathered dust on the Minister's shelf? He has had to blow the cobwebs off it.
The Minister must also explain why, during those years of dithering, businesses spent an unnecessary £90 million that would have been better spent on jobs in the businesses concerned and on taking up opportunities that they lost because of the delay. Those costs—and £90 million is the Government's figure, not mine—have all been passed on to the consumer. Businesses have begged the Government for action, but little has been done.
In October 1991, a letter to The Times stated:Industry will continue to be deprived for at least two years and probably more of the proper means for the protection of its trade marks.
The delay has cost business dear. Despite that plea, however, nothing was done.
In June 1992, even Conservative Members were concerned about the Government's dithering. In reply to a parliamentary question, the then Minister, the hon. Member for Gainsborough and Horncastle (Mr. Leigh) reminded the House that there had been many representations on the matter from business—from the 664 Director General of the Confederation of British Industry, Sir John Banham, to the president of the Institute of Trade Mark Agents, Richard Abnett.
The Minister said that there was no time: that the Government's priorities did not allow them to legislate, although business was losing £30 million a year because of the delay. Yet in that very year, although they could spare no time for an important Bill for businesses, the Government found time for the Cardiff Bay Barrage Bill and 51 other measures that were deemed to have a higher priority than the reform of trade mark law. There was no movement for yet another full year—until the end of 1993, when a Bill was at last produced and debated in the House of Lords.
That, however, was only part of the culmination of a number of lengthy delays. More than 20 years ago, Sir Reginald Mathys reported on British trade mark law and practice, and made a number of recommendations to amend the law. None of those recommendations have been implemented in the intervening 20 years, save one—the requirement to register trade marks.
The White Paper published in 1990 followed extensive consultation on the Mathys plan. During the White Paper's consultation period, businesses were asked to make representations by the end of 1990; no action was taken for three years, however. Apparently, the Government had other priorities. Certainly, the President of the Board of Trade has had other priorities recently—for instance, ceasing to be President of the Board of Trade as quickly as possible.
We have four key concerns: the issue of "lookalike" products, the problem of brand copies and disclaimers, the return of seized copied goods to the copier and the future and role of the Patent Office. Recently, there has been much belated lobbying on the issue of lookalike products. On one side, some manufacturers and copyright holders fear that the public might make a mistake in their local grocer's shop or supermarket—that, for instance, they might mistake Coca-Cola for Sainsbury's cola. On the other side, are the British Retail Consortium, the Consumers Association and the National Consumer Council, all of which believe that public choice would be restricted if—in the Bill or in future—the Government introduced provisions to protect packaging in itself, as a concept, and to prevent non-branded goods from being marketed in packaging that might resemble that of branded copies.
In fact, non-branded goods are often merely using packaging that the public have come to accept as symbolising a certain type of product, rather than the particular product being offered by the branded producer. We all find it useful, for instance, to see yellow bottles of washing-up liquid when we are shopping: the colour tells us that the fragrance is lemon. Similarly, the red tops of some coffee jars tell us that the coffee is decaffeinated. Those who lobby for the banning of non-branded similarities would condemn consumers to a lack of choice and much higher prices. The Consumers Association estimates that non-branded goods are between 20 and 25 per cent. cheaper than branded goods.
If the House accepts the arguments for an amendment now or later, it will pander to some of the companies with near-monopolistic market shares. Procter and Gamble and Unilever have 87 per cent. of the market share in detergents; Kelloggs has 57 per cent. of the share in cornflakes. Last year, Kelloggs was involved in a 665 disgraceful attempt to stop its cornflakes being sold at a discount by Shoprite and the Great Northern Co-op chains because it wanted to set the price; no doubt it colluded with other outlets that were not prepared to cut the price of Kelloggs cornflakes. Nestle has more than half the market share in instant coffee, and Pedigree—which I praised earlier—has built up nearly 60 per cent. of a sector of the dog food market.
§ Mr. Douglas French (Gloucester)
Would it make any difference to the hon. Gentleman's views if the branded product and the alleged lookalike were manufactured by the same source?
§ Mr. Griffiths
I do not think so. The packaging of some products that I buy looks remarkably like some branded packaging, and the contents also look very similar. I was taking it for granted that I could buy the original product at a discount. Let us say, however, that I was wrong, and that I was buying an inferior product. In this sector of the market, where products often cost pennies rather than pounds, the scope for a consumer to make an irretrievable mistake or to be deceived is much more limited, and the scope for damage to the consumer is narrower as well. Provided the consumer is not being deliberately deceived into thinking that he is buying branded goods and the manufacturer is not being cheated out of moneys, I can see no harm in it.
§ Mr. Malcolm Bruce (Gordon)
The hon. Gentleman gave figures showing that Kelloggs remains the brand leader. It remains so not because of the protection of the Bill but because it has marketed a product that people want to buy. Is not that far and away the best practice, because people are capable of making a rational choice? The hon. Gentleman is right in his line of argument: the suggestion that branding requires the additional protection of law is contrary to the consumer's interest.
§ Mr. Griffiths
The hon. Member makes a forceful point.
The second matter that I wish to deal with is disclaimers, which were mentioned by the Minister. I am sorry to say that his interpretation seems to differ from that of the industry or of trading standards officers and otherenforcement officers. I hope to have a chance to question him further on that in Committee.
One of the problems is that people running car boot sales at the disreputable end of the market, as against the majority of highly reputable market stalls, are getting away with selling illegal fakes and copies by putting up a sign declaring that goods are copies. It is no comfort for businesses that have invested in the development of a product and have tried to ensure its quality to find that it is a defence in law for someone who has illegally manufactured similar goods at far lower cost and of a far lower quality to say that they are copies.
Kent county council trading standards officers have drawn my attention to problems that have arisen 'when counterfeit items have been seized. I received a letter dated 2 September 1993 from the British Phonographic Institute on the problems of securing convictions. It believes thatthe stance adopted by the CPS will enable criminals to trade in illegal goods with impunity especially in the wake of a recent decision of the Divisional Court",
which the Minister cited,in 'Kent County Council' v. Price which has permitted the use of disclaimers on counterfeit goods as a defence to charges under 666 Section 1(1)(b) of the Trade Descriptions Act 1968.
That Act is the key measure that trading standards officers use to combat counterfeiters. The BPI continues:As a result of the Court's decision, Kent Trading Standards Officers are no longer taking action if disclaimers are used in conjunction with the sale of counterfeit goods.
§ Mr. McLoughlin
I am aware of the BPI's point, but the hon. Gentleman will know that the Bill deals not with counterfeiting but only with trade marks. In opening, I specifically referred to counterfeiting of trade marks.
§ Mr. Griffiths
The Minister has now made it clear what he is saying, but that reinforces my fear that laws on other areas of counterfeiting do not have the support of enforcement officers. The Crown Prosecution Service has been singled out for criticism for not taking a sufficiently vigorous approach to the prosecution of criminals who trade in illegal goods.
The Minister mentioned the importance of the clauses that address the problem, but potential loopholes have been drawn to our attention. Clause 87 proposes the insertion of the wordswith a view to gain",
which may cause problems because they imply an element of guilty knowledge. Trading standards officers, who are in the front line of enforcement, tell me that they can foresee an offender evading liability by claiming that he or she was not selling for profit. Clause 87 (3) contains the phrase,knowing or having reason to believe".
Again, difficulties may arise in proving guilty intention.
Trading standards officers show a distinct lack of confidence when they ask why the word "infringement" is used in the defence subsection—subsection (5)—and not in the offence subsection. They ask whether a defendant will be able to claim that he was not aware that the use of a sign infringed a trade mark. They point out that prosecuting counsel may have problems securing convictions.
Like trading standards officers, we believe that the Bill is a clear improvement, but it should contain a strict liability element. Our fears are echoed by market traders closer to home. Jubilee Market Hall in Covent Garden is concerned about the Crown Prosecution Service's failure to act in several cases where illegal traders are offering counterfeit goods and have been arrested for doing so.
We seek a guarantee that, under the Bill, at least at some, if not all, of those practices will be eliminated so that a prosecution can be brought without any difficulty and, if proven, a conviction secured.
Concern has been expressed about the inadequacy of provisions for returning goods that have been seized where, for some reason, a conviction has not been secured. Kent county council drew our attention to a recent case in which a consignment of counterfeit clothing and Reebok and Adidas sportswear was imported into the United Kingdom. The consignment was seized and detained by Customs, but, because there were no apparent perpetrators in the United Kingdom, it was difficult to institute proceedings. Customs rightly ask what it is supposed to do with 5.5 tonnes of counterfeit clothing. There is no quick way of ensuring that it can be disposed of legally or that it does not go back on the market.
There are, of course, more serious cases in which the people responsible for the illegal manufacturing plants in this country that make fake goods are detained and charged, but, for technical reasons, are not convicted. In such cases, there is no way in which the legitimate 667 manufacturer who holds the trade mark can have the counterfeit goods properly impounded and destroyed instead of being returned to the person responsible for manufacturing but against whom no prosecution is likely or whose conviction has not been secured. British business has pleaded for the trade mark provisions to be put on a par with those in section 100 of the Copyright, Designs and Patents Act 1988.
My fourth concern relates to the role and future of the Patent Office. For 119 years, we have been fortunate in having a public body, paid for by business and the taxpayer, to monitor the registration of patents. It is probably one of the reasons why British manufacturers secured a world lead in protecting their investments. The sad fact is that, had the Government acted quickly to implement the White Paper published in 1990, we should have been in pole position to have the European service based here. Due to their dithering and failure, the new trade mark is to be administered by a Community trade mark office located in Alicante, Spain, instead of in its rightful place. Because of the length of time that we have had a Patent Office and patent protection, that rightful place was in this country, in south Wales or elsewhere.
As we have lost the opportunity to have the European trade mark organisation and office in this country, just as we have lost so many other opportunities in Europe because of our dithering stance, we want an undertaking from the Minister that he will not weaken the service provided by the Patent Office either by embarking on an unwanted and costly privatisation exercise, in which neither the consumer nor business would have much faith, or by hiving it off in any other way. It is important that an office with such a responsible function, and which deals with thousands of millions of pounds' worth of business covered by patents, remains firmly in the public sector and remains open in Britain and does not move to Alicante or anywhere else.
As I said, my main regret about the Bill is that there has been so much delay and dithering. The opportunities and the £90 million which the Minister said that business had lost because of the delay in implementing the Bill are history. The Bill's best provisions should be introduced as quickly as possible so that businesses and their employees and consumers can benefit without further unnecessary delay.
§ Sir Dudley Smith (Warwick and Leamington)
I broadly support the Bill and its objectives, which have been admirably outlined by my hon. Friend the Parliamentary Under-Secretary of State for Technology. The Bill will achieve the necessary updating, which is overdue. I do not agree with the criticisms expressed by the hon. Member for Edinburgh, South (Mr. Griffiths), but I do agree that there has been a delay, although it is sometimes wise to proceed carefully to get things right and experts believe that the Bill represents an advance and is right in many respects.
I must declare an interest in that I have been involved in the industry for more than 30 years, although not as a trade mark expert. I have been connected with trade marks that affect a business's progress. I am also connected with a number of companies that manufacture consumer goods 668 and, in view of my earlier intervention, it will not come as a great surprise to my hon. Friend the Minister if I concentrate primarily on that issue.
The need to include in the Bill powers to deal with the problem of look-alike products has already been explained to the House. My hon. Friend may say that the Bill is not the appropriate vehicle for that, that representations have come too late or that other considerations need to be taken into account, but look-alike products are a serious and growing problem. Lookalikes is the generic term used in the industry. Such products have packaging and labelling deliberately designed to resemble the overall appearance of existing brand leaders.
The House will be aware that counterfeit goods are passed off as originals. That is rightly regarded as a criminal activity because it harasses legitimate manufacturers. However, producing look-alike goods is not a criminal activity although it is undesirable and, in my view, as morally reprehensible as passing off goods as something that they are not. It is subtle and deceptive.
The hon. Member for Edinburgh, South implied that the manufacturers of brand leaders want to run own-label goods off the supermarket shelves, but that is not the case. I must emphasise that I am not against own-label or own-brand products, whatever one wishes to call them. What the supermarkets and big retailers are doing is a perfectly legitimate sales operation, which has grown enormously in the past 25 years; it has added to competition and helped to increase sales and the prosperity of this country. However, I decry their deliberate imitation of brand-leader goods, which is wholly wrong. I shall not mince my words: it is cheating, and it is not legitimate competition, which is so necessary in our society. I am all in favour of proper competition, but it must be fair and should not involve the deliberate copying of someone else's products.
I know that my hon. Friend the Member for Medway (Dame P. Fenner) is closely involved with the British Retail Consortium, the retailers' trade organisation. Via that organisation, retailers are making much of the fact that their own-label approach is in the consumer's interest and helps to reduce prices, but they have no logical excuse for blatantly copying other people's products in order to mislead or confuse the consumer into believing that it is the same product or from the same source. They ruthlessly and unscrupulously imitate goods with household names, and it is sometimes very difficult to tell at a glance which is the house brand and which the brand leader. There will be serious long-term consequences unless unfair competition legislation is introduced in due course.
Branded goods have been developed after considerable investment and with much expertise and research. Someone who gains from that investment by selling a look-alike product gains an unfair advantage. The hon. Member for Edinburgh, South mentioned the share of the market gained by certain dog foods, by cornflakes and other products. It is extraordinarily important to remember that companies have developed their share of the market through their skill and by producing an excellent product. The fact that they have been able to obtain a large share should not be to their detriment. I am all against total monopoly; there is plenty of room available for others who want to come in to segment the market. However, I do not believe that it should be done in this way.
If the branded goods manufacturers are gradually run out of town—there were recent suggestions that at least 669 one big manufacturer was considering dropping one in five of its brand names because of falling markets—there will be a serious effect on employment, not only in manufacturing industry, but on allied industries.
§ Mr. French
Does my hon. Friend accept that in many cases, the branded goods manufacturer agrees to be the producer of the own-label or other look-alike product? What does my hon. Friend say to that?
§ Sir Dudley Smith
That is sometimes true. Speaking personally, it is not a process that I like or with which I agree. The vast majority of branded products are produced by a company that does not also produce a duplicate range for the supermarkets.
I was talking about the erosion of branded goods and the difficulties that it will present for employment and for our industrial effort; I think especially of television and newspapers. Consumer goods advertising is one of the bulwarks of the television industry. My hon. Friend the Member for Lewes (Mr. Rathbone), whom I see here today, probably knows more about advertising than any other hon. Member. He knows that advertising involves the jobs of hundreds of people. If we constantly erode the advertising base, we shall suffer the consequences.
Perhaps even more important than the loss of jobs in various activities is the fact that branded goods sales in Europe and the rest of the world will be undermined. Who can carry on exporting if his home market is fatally undermined by lack of action by the Government:? We shall penalise ourselves, yet again, in terms of exports.
The consumer is called in aid by the retailers, and has already been referred to in this debate; I have no doubt that we shall hear of the consumer again. Will he be so pleased when, in years to come, he can buy any cornflakes, any soap powder or any toothpaste he likes as long as it is a Sainsbury's or a Tesco product? That will be a possibility as a result of the road down which we are going. Will he be happy when the supermarket chains, having cornered the market in branded goods, proceed to increase their prices? That is the logical end. We may get cheaper prices at first, but when a monopoly begins to be established as the branded goods drop off, extra charges will begin to be put on.
We used to pour scorn on the fact that in communist countries, only the state version of anything was available. I hope that in the years ahead, we shall not have to fight a rearguard action to save our own competitive practices. Supermarkets are rightly appreciated by the public because of their convenience, service and simplicity; we all use them. They have an important place in today's society, but surely they cannot be allowed to undermine and to finish off the branded goods industry as they have the small trader through the determination and advocacy that led to the Sunday Trading Bill.
I believe sincerely that the present Bill gives us an opportunity to do something about unfair competition. It is the first vehicle before the House for a long time which would allow a clause to prohibit the practice about which I have spoken and which would allow fairness for a significant part of British industry. The EC directive, which the Bill necessarily follows, gives that opportunity. I am subject to correction, but I do not believe that the practice to which I have referred is allowed in other European countries. I can see the day coming when we 670 shall have a European directive on this issue. We shall then have to comply with it, although we appear to be a little hesitant at present.
I realise from what my hon. Friend the Minister has said that he has no intention of accepting an amendment on this matter in Committee, so I suppose that it would be fruitless to table such an amendment. However, I warn him in the most friendly way that we shall inevitably have to come back to this issue. It is of great importance to many people —not only to the consumer, but to British industry. Those people are entitled to be heard and to have the foremost consideration in the matter. I know that my hon. Friend the Minister is a reasonable man, so I very much hope that he will take on board what I have said and what, I hope, other hon. Members will say as well. I hope that in due course, we shall see some light from the Government on the issue.
§ Mr. Paul Flynn (Newport, West)
I quote:Nid da He gellir gwell.
The motto of the Bettws comprehensive school in my constituency is appropriate to the debate for two reasons: first, this is a good Bill, and the motto means that there is no good that cannot be improved on; secondly, the young people at that school are looking to the Bill, although they may not know about it now, because it may have a profound effect on their futures. Almost the largest employer in my constituency, which is certainly the provider of the best-paid and highest-skilled jobs in my constituency, is the Patent Office. We look to the future of the Patent Office with some confidence based on its success in relocating in Newport, but also with some trepidation because of the many threats to it.
We shall want to make improvements to the Bill in Committee. I found the convoluted argument of the hon. Member for Warwick and Leamington (Sir D. Smith) rather strange. He seemed to say that the Bill was likely to take the'bread out of the mouths of billionaires. We see on the Conservative Benches two groups of vested interests: those who run the supermarkets and those who produce the main branded products. The two groups are in dispute; both are very prosperous. It is an artificial dispute because, in many cases, although the branded product has a different label, it is chemically identical to the product in the other package. As the hon. Member for Gloucester (Mr. French) made clear, the reason is that many who manufacture branded goods also produce those goods for supermarkets where they are sold under own-name labels. The consumer has the choice between having branded names on her or his shelves for snob value or not paying the advertising costs and buying the unbranded goods—the supermarket's own brand. That is the real battle that is going on; in terms of the Bill, it is very much a side issue.
The Bill has been long awaited and will do a great deal of good. It comes after the almost complete relocation of the Patent Office from London to my constituency, which was the subject of an Adjournment debate in 1988. There has been a splendid report on that relocation by the National Audit Office. The report praises the relocation as a success which has worked in all aspects, especially the trade marks aspect.
The alteration or registration of trade marks almost always requires a face-to-face interview between the people who want to register the trade mark and the Patent Office. Many of the interviews are carried out in London, but some are carried out via video links and some are 671 carried out in Newport. I can foresee difficulties when the move is made to Alicante. Although that move may be inevitable, we must continue to ensure that the maximum number of registrations are carried out in this country and that we keep the national interest.
A matter about which I am greatly concerned may be dealt with under clause 5; I seek the Minister's guidance. I refer to the use to which trade marks are being put. There is one trade mark in particular, which has been used abroad and, to a small extent, in this country, on which I think we should legislate because it is used by companies in a way that is surreptitious and deceptive. We were all astonished when, about 30 years ago, one company, Guinness, advertised without using the name of its product. Now many products are advertised in a totally mysterious way, with advertisements which to many of us seem meaningless. Unfortunately, many of those advertisements are produced by cigarette companies, which have perfected the art of the advertisement that mentions neither the product nor the name of the company. There is a grave danger in that art, which we must address because there is a Bill going through the House at present that would ban the advertising of cigarettes. We know that there is a trade mark registered for cannabis cigarettes called Marleys, which may well have come about as a crime-reducing measure.
In other countries, cigarette advertising is banned. In Hungary, there is no advertising of cigarettes, but there has been an enormous growth in the consumption of cigarettes. Two brands in particular—Marlboro and Camel—are involved. The company that owns Marlboro has persuaded all the clubs and many of the pubs in the area to become Marlboro clubs. The signs above the clubs say "Marlboro Magyar Club"; they are in red and white and mimic the well-known Marlboro advertisements. Camel cigarettes are banned, but on almost every bus in Budapest there is a sign showing the familiar camel advertising not Camel cigarettes but Camel shoes; I do not know whether such shoes exist.
In Britain, Dunhill produces a whole range of goods which are advertised. It sells a cigarette lighter that looks similar to the design of the Dunhill cigarette packet. Also in this country we have recently seen subtle advertisements by a tobacco company which I shall not name, which uses blue and white and a certain kind of lettering. That company advertised at a sporting event in my constituency without mentioning the name of the company or the product; however, it was clear from the sign what it was advertising.
It is sad to note that those advertisements were criticised because it was claimed that, because of the moronic jokes that they included, they appealed especially to children and young people. Unfortunately, the danger is that the work of the House and its possible future decision to ban or to restrict the advertising of certain products, which may well happen with cannabis cigarettes, could be frustrated if we allow the trade marks for products to be used to advertise different products.
There would be no difficulty in avoiding that under clause 5, which lists a number of reasons why a trade mark should not be registered. It specifies, for example, that a product shall not be registered for goods or services similar to those for which the earlier trade mark is protected. I 672 should like some guidance, either later in the debate or in Committee, on whether that would apply to a cigarette company that decided to produce Silk Cut tee-shirts, trainers, computer games or anything else that might appeal to young people, thus advertising its product in a devious way and abusing its trade mark. I have no argument with companies such as that which owns Mars, which has used its product to advertise similar confectionery. There are frozen Mars bars, Mars drinks and so on and that seems perfectly legitimate. However, either we need a new clause or we need to expand clause 5 to ensure that that cannot happen in future, because I am afraid that the clever and subtle advertising that occurs could well mean that, against the wishes of the majority of hon. Members and the people of the country, advertisers get round the new laws.
The future of the Patent Office is of considerable importance and is certainly a matter of great concern in my constituency. While I do not wish to press the Minister on that matter with too much urgency, because we want the right decision rather than an early decision, may I gently remind him that in October he told me and a number of representatives of the Patent Office that a decision would be made by Christmas? There have been claims that a decision has, indeed, been made. It was claimed in The Daily Telegraph that the Price Waterhouse report suggested that what has been planned—possible privatisation, contractorisation, management buy-outs—was not practical because it would require primary legislation. I know that the Minister appreciates the anxiety felt by many people who work at the Patent Office and realises that they have been in a state of uncertainty for a long time. Although I do not want to press the hon. Gentleman to make a bad decision rapidly, I hope that he will give the matter serious consideration.
One point that I commend to the Minister, if he is considering the future of the Patent Office, is contained in a letter to the President of the Board of Trade from the Minister of State dated 14 February. The Minister of State, Welsh Office referred to a meeting attended by representatives of a number of unions and myself at which he said that the points about the future of the Patent Office and other agencies of the Department of Trade and Industry were strongly made. He went on to say:It was suggested, for example, that the existing agency status could be developed further, to enable them
—the agencies—to bid for a wider range of work.
That point may be developed in clauses 78 and 79, because they concern the register of trade mark agents. I hope that the Minister and his Department will seriously consider adding the comptroller general of the Patent Office to that register. If the chief executive of the Patent Office became a patent agent and a trade mark agent, it would be a useful way for the agency to improve and enlarge its role and make its role far more profitable.
There are resources available in the Patent Office which may be used profitably so that it becomes competitive in the uncertain years ahead. However, that means a change in the status of the office. The Patent Office has existed for a long period. The Government must not be hide-bound on the issue. There was a certain resistance to "next steps" agency status at first, but it has been a success in managerial terms and in the running of those bodies. They were great monoliths before and could not be run effectively by Ministers in Whitehall. There have been 673 obvious gains in management efficiency in the process and there are now about 75 such agencies. It would be a bad move if "next steps" agency status led to the further steps of contractorisation, a management buy-out or privatisation. In the case of the Patent Office, that would be especially disastrous.
At last, the Government are saying that certain bodies are unable to be privatised. It was a great pleasure to see that the Department of Transport recently decided that the Vehicle Inspectorate was one such body. There must be a similar case to be made in respect of the Patent Office. There is not a patent office in the world in commercial hands. The office cannot conceivably be placed in a position where it would be subject to commercial influential and control. Its independence is paramount; it must exist in that way. It has become a great national resource. My hon. Friend the Member for Edinburgh, South (Mr. Griffiths) paid tribute to it and we may take some pride in our role over the years as a world leader in the registration of patents and trade marks. The White Paper has already been mimicked in several countries—even before the introduction of the legislation—and the processes that take place in Britain lead the world. We cannot conceivably go down the at of contractorisation, privatisation or management buy-out.
Our intellectual property is a great national resource. It is difficult to think of the design on a can of baked beans as intellectual property, but it is of enormous value. It is a priceless resource. We have excelled at the fascinating business of registering patents and trade marks and vie can continue to do so. I appeal to the Government, and to the House generally, to invest in the Patent Office, expand its work and enlarge the area in which it works. The message is clear from the users of the Patent Office—those who register trade marks—from the industry generally and from the staff of the office at virtually every level: do not change the status of the Patent Office; we must remember that the Patent Office at Newport is a world brand leader; beware of cheap imitations.
§ Mr. Iain Mills (Meriden)
I am glad that there seems to be cross-party support for the Bill. It is a most significant and important measure. I am sorry that the hon. Member for Edinburgh, South (Mr. Griffiths) felt that we had been laggard in introducing it. I have some sympathy with that view—I should have liked to see it earlier—but having introduced it in the teeth of a fairly hectic parliamentary programme in the second year of the Government's office ain't half bad. The ensuing advantages to industry have been made clear in answers to my questions and in debate. All those who have spoken so far have referred to those important advantages.
A sad feature in one sense—if I am fortunate enough to be called to serve as a member of the Committee that will consider the Bill, I am sure that we shall go more fully into these matters—is that the office that will administer the Community trade mark, which is one of the main planks of the Bill, will be located at Alicante. I know that some hon. Members will say that it is an area of low employment. I am sure it is, but the United Kingdom has the necessary infrastructure.
I chaired a committee that considered measures designed to promote the interests of London. Against that background, the only serious location for intellectual 674 property of the sort that we are discussing is London. I should have said that any interests I have in intellectual property are clearly defined and registered in the Register of Members' Interests, which has recently been republished. Anyone who wants to read about any of my involvements will find the relevant information in the Register, including my chairmanship of the committee that considered the Community trade mark.
The Community trade mark office will be extremely important because it will to some extent, if it is not effective, become marginalised. Like the hon. Member for Newport, West (Mr. Flynn), I have the greatest admiration for both the London and Welsh operations of the Patent Office, but we must remember that we are seeking the Community trade mark to lower costs for industry, especially for small and medium enterprises that are trying to build up their brands. It will be a disaster if we do not have a good and effective trade mark office to administer what we shall be enacting.
I have written to the comptroller general of the Patent Office to suggest a meeting between myself and members of the committee I represent—they are eminent people who are involved in intellectual property—to discuss, if not a sub-office in London, a facility rather like that which we have at Newport, where there could be videos, faxes and other electronic communications with Spain. I have written to Mr. Jacques Delors, who is well known to us all. His reassurances on the facilities that will be provided at Alicante leave me with some doubts. Air services and the ability for people to register trade marks give rise to doubts in my mind. We must proceed with the Bill, however, and I look forward with enthusiasm to the Committee stage, if I am involved.
There are aspects of the Patent Office's work that I should be happy to see privatised. I recognise, however, that the judicial and quasi-judicial features of Patent Office judgments would be difficult to put into private hands. Perhaps the privatisation of some aspects of registration and marketing could be considered. The Patent Office exercises a judicial function in making judgments when companies are in dispute over trade marks, and I would be concerned about privatisation in that context.
I welcome the Bill, because it will update the Trade Marks Act 1938, which is something that those of us who are involved in trade marks and intellectual property have been seeking for years. The Bill represents the best news that we have had for a very long time. As my hon. Friend the Minister said, the Bill implements the protocol to the Madrid conference, which the United Kingdom negotiated. It is rather miserable if the hon. Member for Edinburgh, South, who speaks from the Opposition Front Bench, is downscaling the benefits to Britain that will flow from the Bill. I hope that he will not be too negative when the Bill is examined in Committee.
I strongly support the Bill, but I have some questions for the Minister, which I shall put briefly. I have met him and warned him about most of my questions. The rights of representation for trade mark agents and trade mark courts are important. They reflect the Government's philosophy in introducing the Bill and trying to lower the costs of registering trade marks and patents for those in industry and business.
I am informed that trade mark agents do not have the same rights as patent agents in terms of a trade mark court, which would be a court of first instance. There is a means of lowering quite considerably the cost of registering trade 675 marks. I am informed that, in France and the Benelux territories, such as Holland, the cost of registering is between £3,000 and £5,000, whereas in the United Kingdom, because of the way in which our system works, it could be between £20,000 and £50,000. Everything that hon. Members have said about the value of trade marks to our companies, large and small, makes it that much more expensive to obtain registration and protection.
Many of those who are seeking registration are put off by the high cost of doing so. If there are international boundaries and difficulties in deciding where a case will be brought, the likelihood is that the companies concerned will seek to register their trade marks in France or in the Benelux countries.
The Community trade mark will help, but it is necessary that we have rights similar to those in other countries in Europe. That means that trade mark agents will be able to plead, just as patent agents do. I understand that most parties to the institutions that are concerned are happy—except, I guess, solicitors, who have right of audience and may not wish to see that right extended to trade mark lawyers.
Let us move to simplified court procedures, agreed facts, a statement of case, discovery only with the leave of the judge, and cross-examination on matters that we could discuss in Committee. I have been in correspondence with my hon. Friend the Minister and with the Lord Chancellor. My hon. Friend the Parliamentary Secretary, Lord Chancellor's Department, in his letter of 8 February, stated:The proposal to introduce a county court jurisdiction for trademark cases is not one to which the Department would be opposed in principle, but it is something which we would wish to consider carefully before committing ourselves to it.
My hon. Friend goes on to explain that it is not primarily a matter for the Bill, and I am happy to accept that. It is relevant, however, to the climate that the Bill will introduce, of lower costs for those who are wishing to involve themselves in the registration and protection of intellectual property.
The term trade mark attorney was discussed during the consideration of the Copyright, Designs and Patents Bill, as it then was, in Committee. It was discussed also in the other place on several occasions. I would hope to raise the matter if I am called upon to serve as a member of the Committee that will consider the Bill. I understand—perhaps my hon. Friend the Minister will write to me if he feels that it is not appropriate to respond today—that at present a trade mark agent could call himself a trade mark attorney.
There is no inhibition, but there may be some who are involved in intellectual property, such as solicitors, who feel that the same level of qualifications as solicitors should be required. As a result of the Government's efforts and the responsibilities of the institute that represents trade mark agents, which it has accepted gladly, qualifications for agents have been introduced over the past few years that leave them extremely well qualified.
The structure of qualification is such that, should I wish to find another job and to qualify as a trade mark agent —I am already somewhat qualified in marketing—I would seek the leave of the House to spend time late at night not voting after debates, but studying carefully, as a solicitor would, to qualify to practise as a trade mark agent.
676 I want to raise a few brief matters with the Minister. The remedy for groundless threats is perhaps best left to Standing Committee. However, clause 19 provides a right of action against those who threaten retailers and other non-primary infringers—both manufacturers and importers—with infringement proceedings unless the trade mark proprietor can show that the acts complained of are an infringement. I hope that I will be able to raise the problem of groundless threats with my hon. Friend in Committee, as they are likely to disadvantage trade mark proprietors.
I was involved with the work of the anti-counterfeiting group long before I became a Member of this place. When I worked in the motor industry, I looked after new products, branding and counterfeiting. The anti-counterfeiting group is, by and large, satisfied with the agreements made in the other place in respect of the counterfeiting measures.
However, I agree with the hon. Member for Edinburgh, South that there are questions about the effectiveness of the Crown Prosecution Service. Are we really happy about the problem of disclaimers, particularly with regard to the lower market car boot sales and the less responsible car boot sales, when we are keen to deregulate local authorities' powers in respect of trading standards officers? My constituency is in the centre of England, crossed by the M6 and the M42. We have an awful lot of car boot sales in my constituency, and I am concerned about the laundering of counterfeit products through those sales.
The Minister referred to Kent county council v. Price. Are we satisfied with that judgment? Like the hon. Member for Edinburgh, South, I am concerned about the apparent ease of return of counterfeit goods when no court action is taken against an infringement. I hope that my hon. Friend can reassure me that that matter can be controlled, or that an amendment may be tabled to deal with that. I should be grateful if my hon. Friend could reassure me on that point, either by letter or in Standing Committee.
Without such a provision, if the owner of the goods is identifiable, the trade mark owner will still be put to the trouble and expense of taking civil action, or threatening it. It has been recognised that we do not want counterfeit goods. We estimate that counterfeit goods cost more than 100,000 jobs in this country as they are brought in to compete with our brands. I seek advice from the Minister on that point.
I want now to consider lookalikes, and I assure the House that I will be brief, as other hon. Members have referred to them already. I have been involved in intellectual property in the House, and before I became a Member, for nearly 30 years. The late entry into the Bill in respect of lookalikes is controversial. I have some support for both sides, in that it is clearly competitive, as my hon. Friend the Member for Medway (Dame P. Fenner) said, to have goods competing on the shelves.
As hon. Members have said, people who are selling products to big retailers may be producing the same goods, in the same packaging, as their own brands. Having examined the information and spoken to most of the key players over the past few days—I hope to meet representatives of the Consumers Association and the retailers when they come to the House tomorrow—I find it difficult to be convinced that the public are totally fooled by the fact that a bottle may be the same shape and colour, when the trade mark is clearly quite different. 677 Sainsbury markets Head and Shoulders, and also its own brand called Headway. In terms of legal action, that is not counterfeiting. It may he considered to be passing off, but I very much doubt it. I strongly suggest to the British Brand Owners and Producers Group, the Consumers Association, the retailers and anyone else involved—I spoke to most of the main parties on Friday and today—that they should get together and discuss the matter. If they believe that a legislative solution is required, they should offer a proposal to the Minister.
I recall with almost burning interest the problems we had in the Standing Committee that considered the Copyright, Designs and Patents Bill. Group after group approached the Minister, or asked for my help to meet the Minister. The interests involved car part design versus car manufacture design. In that regard, who has the design rights—must match, must fit? The two parties must manage to iron out their differences and produce an acceptable proposal.
There have been discussions among the various parties. I have received a fax of a letter from Paul Walsh of the British Brand Owners and Producers Group. He states that the group has presented its case to the Government and to the standing advisory committee:We have also had separate but inconclusive meetings with the Consumers Association. We would therefore be happy to meet with the British Retail Consortium
and the Consumers Associationin a further attempt to find a mutually agreeable solution to the problem of copying brands.
§ Dame Peggy Fenner
I am not sure whether my hon. Friend is aware of this, but, during the growth of own labels, there have been only 25 cases of manufacturers talking to retailers and they have been able to resolve their differences. I am sure that my hon. Friend is right to say that such consultation has been informal, but it has worked.
§ Mr. Mills
I thank my hon. Friend for her helpful comments. Perhaps what she and I have said will help to persuade the two parties to get their heads together to produce a solution, instead of posing problems for the House and the Minister to resolve. There are clearly arguments on both sides. I do not wish to take sides, but I believe that the problem must be resolved. If we do not resolve it, a European solution may be imposed.
I want to leave some minor drafting points with the Minister. Clause 3 states that a sign shall not be registered as a trade mark if it is ashape which gives substantial value to the goods.
That phrase is taken from the directive. Similarly, a trade mark shall not be registered if the application is made in bad faith. If an applicant files in respect of a very broad range of goods going far beyond those on which he does intend to use the mark, is that bad faith? No doubt the Standing Committee will have to examine what is in accordance with honest practices. As it is incurably vague, "honest practices" will be very difficult to define.
I want to end, as it would be most unfair of me not to leave sufficient time for this important Bill. The Minister rightly referred to the significance of trade marks and brands. Many companies are now assessing the value of their brands and including them on their balance sheets.
As chairman of the all-party motor industry group, I found it interesting when we talked to BMW. The people at BMW told me that they valued Rover's brands very highly. BMW purchased Rover not just because Rover was 678 most attractive in terms of work practices, cost-efficiency, unit labour costs and attitude: it purchased Rover because of its brands.
Increasingly, we must protect our companies from predatory purchasing—no longer because a company wants the factories or assets, but because that company wants the intellectual assets. I appreciate that the Minister has emphasised the importance of assessing brands. The Bill is important, and, if I am fortunate, I look forward to discussing it further.
§ Mr. Malcolm Bruce (Gordon)
As the debate proceeds, it is clear that we are finding controversy only around the edges, because there is wide agreement that the Bill is needed. Indeed, it has been needed for some considerable time, as it is more than 50 years since the last major piece of trade mark legislation in this country. The Bill appears to have hit the right balance in most areas. It seeks to simplify and lower the cost of trade mark legislation, and to achieve our obligations within the European Union, at a time when we are moving into the next round of talks on the general agreement on tariffs and trade.
I wonder whether the Minister can comment on the fact that it is unfortunate that two different systems of trade mark registration are being established almost simultaneously, as the Bill acknowledges—the Community trade mark and the international trade mark, which is promoted by the World Intellectual Property Organisation. I wonder whether there is a possibility of harmonisation, rather than divergence. If not, it is clear that we will be back here in a few years to see how we operate in that situation. We should be aiming for a worldwide system, rather than two different systems.
The Bill addresses in some detail anomalies that have been outstanding for some time, such as introducing the idea of a sign that can be represented graphically. I know that at least the Coca-Cola people wish that that had happened a little earlier, because it would have saved them some money. There are others for whom the development is obviously welcome. The Bill has also got rid of one or two anomalies, such as the idea that drug manufacturers can register the colour coding of their pills. That seems to take the matter to an absurd degree, but SmithKline-French got away with it for a while.
The reference to lookalikes seems to have sparked off the liveliest debate. That may be because, in a technical and specialised area, it is the one area of populism with which even the tabloid newspapers can get to grips. Obviously, the issue is generating heat, even if light is not flooding in everywhere at present.
I can understand why people who have invested money in developing innovative products, marketing them, advertising them and securing acceptance for their brand names may want to protect their investment. However, marketing in the proper sense of the word is the best way to protect the investment. The quality of the product, the quality of the marketing and the consumer's acceptance of the product ensure that branded goods secure a premium position in the market.
People know that branded goods are more expensive than own-label goods. As I said in an intervention on the hon. Member for Edinburgh, South (Mr. Griffiths), someone like Kellogg—which produces a basic commodity—has two simple practices. First, it makes it clear, and 679 advertises, that it makes the product for no one else; if people want the product, they must buy it under the company's brand name.
While the hon. Gentleman said that it was disgraceful —perhaps it was disgraceful in the context in which he referred to it—that Kellogg was somehow trying to protect the price level at which its product entered the market, nevertheless he acknowledged that it was the brand leader at that price. Clearly people believe that it is worth spending more money to buy Kellogg's Cornflakes than any other cornflakes.
In addition, do we need to amend this or any other legislation to protect the position of Kellogg in the market? The Armageddon suggested by the hon. Member for Warwick and Leamington (Sir D. Smith)—the elimination of brand products—takes a lot of believing in reality. Indeed, I have a great deal of confidence that most of our manufacturers and marketers of fast-moving consumer goods know how to ensure that they stay ahead of the game.
At the risk of detaining the House any longer on this matter, I should say that the debate has a slightly historical connection for me. In a previous incarnation a long time ago, I worked as a buyer of proprietary products for Boots the Chemist. At that time, I discovered that Boots was wasting an awful lot of space marketing its own brand of toothpaste, and it was losing the company money. When Boots realised that, it decided to discontinue its own brand and market Colgate; it subsequently produced a better product, and marketed it more successfully. That shows that own branding does not always come out on top, even in profitability.
The representation we received from Boots summarises the matter well. The company has some qualification to make a special plea that it is in the unusual position—the company describes it as "probably unique"—of being a major manufacturer of branded products such as Nurofen, Strepsils and so on; a contract manufacturer of own-label products; and one of the largest retailers of own brands which are accepted as national brands in their own right, such as Boots No. 7 cosmetics.
Boots summarised its position by saying:We do not believe that a wish on the part of manufacturers to protect market share is in itself a reason for legislation which can only operate against the public interest.
In referring to the amendment tabled in another place, Boots said:The remedy is to develop and launch an even better product that leaves the competitor standing … This amendment is protectionist, anti-competitive and clearly against the public interest.
That sums up the situation well.
I have no objection to the argument that those who believe that there is a point of concern should talk about it, but I am not at all sure that the House should do anything about it; indeed, I am glad that the Minister has said that he does not intend to do anything in terms of this Bill.
It is interesting that the Bill has addressed some issues that have caused controversy. For example, it recognises that we can have a concept of well-known makes; clearly, that is a Community idea which has been imported here. It also provides a new protection that does not exist in United Kingdom law at present, which allows goods to take advantage of an established reputation. Whatever the merits of the argument, presumably it would have 680 foreclosed in advance the elderflower champagne argument and, ultimately, would have saved both sides some money.
It is also interesting that the Bill specifically provides for the introduction of collective marks. That seems a useful way of enabling smaller businesses to group together and secure the brand identity of products in the market which they could not afford to secure individually. That is a welcome and positive development, as is the recognition that where small businesses have been trading under a name locally, they will continue to be allowed to use that name even if a similar name has been registered nationally.
Once again, that arises out of the Chelsea Girl and Chelsea Man case. Chelsea Girl tried to prevent a small shop from operating under the Chelsea Man image; Chelsea Girl tried to shut it down. That was a case in which a big operator managed to invest in registering its brand and tried to shut down someone who had been in business long before the big operator. I am glad that the Bill recognises that situation and seeks to protect small local businesses by allowing them to operate within a locality, given that they have already established their reputation even though they have not registered the brand name.
The provisions relating to infringement and the remedies for infringement clearly recognise the way in which things have moved since 1938. Big business needs to take on board the potential disadvantages of being so successful in its branding that a brand becomes generic, and it can no longer protect it. The question whether the Hoover company has necessarily lost by that is debatable. I think that Hoover lost more as a result of the way in which it promoted the brand, rather than the quality of the brand itself.
One issue that arises is that exclusive licensees will be able to bring infringement proceedings in their own name without having to wait two months to see whether the proprietor commences proceedings. It has been argued that the Bill says that non-exclusive licensees must still wait two months. The simple question is: why is there a distinction?
In the context of a major national brand, two months is probably not a long time. However, for a small retailer, two months may be the difference between being profitable and being forced into loss. It is not clear why that time delay is still allowed in the Bill. It has been suggested that, at the very least, there should be a provision to allow an interlocutory injunction while a case is pending. That seems to me to be in the interest of small business rather than big business.
In general terms, the Bill clearly has support on both sides of the House, and it meets needs that we must address under international and national obligations in an area of law which certainly needs updating. There has been some comment on the delay, and some concerns have been expressed about the role of the Patent Office. The Minister must take on board the fact that, in updating and changing the intellectual property law, we should be mindful of what is going on outside the United Kingdom.
We should not do anything to prejudice either the interests of our businesses or our ability to ensure that British practice becomes part of the shaping of international practices. Rather than making any ideological attack on the Minister about the future of the Patent Office, I would ask him and the Government to be mindful of those considerations. 681 I am sure that he will recognise that we have a reputation in this area, not least because we have some world brand leaders and because we have been succesful at brand marketing. We must also ensure that changes and updates that may be necessary advance our interest, and do not set it back. The important thing is trade marks, patenting and intellectual property as it matters to UK business, and ideology should not get in the way of it. I hope that the Minister will take on board the fact that that is the balance that matters.
§ Mr. John Whittingdale (Colchester, South and Maldon)
As has been said, this is largely a technical Bill and, despite the valiant efforts of the hon. Member for Edinburgh, South (Mr. Griffiths), I suspect that it is unlikely to generate too much party political controversy. I therefore do not wish to detain the House for too long.
Nevertheless, it is an important Bill and one for which British business has been calling for a long time. The central concern of the Bill is protection of intellectual property, and it is closely related to the laws governing counterfeiting and piracy which are increasing dramatically. One of the helpful results of the Bill will be that it will provide a clearer and less ambiguous definition of what is a trade mark.
Some have tried to argue that trade marks are an attempt by manufacturers to inhibit competition or to create a type of monopoly. I do not accept that argument. I believe strongly that trade marks are in the interests of consumers. They are an essential means of identifying a manufacturer's product and they are frequently symbols which are guarantees of quality. They are also labels of origin which are an acceptance by manufacturers of responsibility for the product which bears them.
The law rightly confers on the owners of trade marks protection to prevent them from being abused by other manufacturers. Those who attempt to abuse are trying to con the public, pass off goods as being of a different origin and defraud manufacturers of the genuine article. Manufacturers, it has been said, frequently invest millions of pounds in the advertising and promotion of their products. They are also entitled to protection to ensure that that investment is not stolen by companies that pass off the goods as being of a different origin.
I therefore strongly welcome the provisions of the Bill. A harmonisation of the laws on trade marks across the European Community will be of great benefit to British business. I have not always been a totally enthusiastic supporter of all matters related to integration across Europe, but, in this instance, I firmly believe in the single market. Like my hon. Friends, I have taken pleasure in pointing out the excellent record of the Government in implementing single market measures. This particular one has been a glaring omission and I am therefore pleased that we can now add it to our record. It is high time that we did so.
The measures to implement the Madrid agreement are of equal importance. The protection of trade marks and copyrights cannot be achieved on a national, or even a Community, basis alone. They must be tackled internationally and that is one of the reasons why the general agreement on tariffs and trade was so important.
I want to say a few words on piracy and counterfeiting which have been mentioned in the debate. There is no 682 doubt that piracy is costing industry millions of pounds every year. The video industry has estimated that it loses £150 million each year through counterfeiting. Gucci has said that it costs the watch industry £450 million each year, and makers of perfume, jeans, computer software and sports equipment are all victims of counterfeiting.
Manufacturers lose sales and the consumer loses any form of protection given to him by law. Usually, the quality of counterfeit goods is poor and the product frequently is not even safe. Recently in Essex, trading standards officers discovered that even the spare parts of cars were being sold under counterfeit brand names. Those spare parts were not just of poor quality, but were unsafe and certainly would have led to serious accidents if they had been used.
Every-day products are sold in car boot sales and by street traders in Oxford street and elsewhere which purport to be brand-named goods. In many cases, the consumers who buy them know that they are not the genuine article since they are paying sometimes one tenth of the price. Nevertheless, manufacturers are still losing sales as a result and their products are being devalued.
The Bill will help improve the situation. It will extend the definition of trade marks and make it easier to register them. The provision to prevent traders selling so-called brand copies is particularly welcome. Traders have attempted to get around the existing law by placing disclaimers on the goods and by acknowledging that they are copies. That has been become a commonplace practice at car boot sales where trading standards officers have been powerless to act. I welcome the fact that the Bill closes that loophole.
However, I am disappointed that the Bill does not go further. In particular, it will not benefit copyright goods such as compact discs and music cassettes. Traders simply delete the trade mark since the product is sold, not on the basis of that trade mark, but on the basis of the artwork, packaging and content. I know that my hon. Friend is aware of the importance of the music business to this country. It is one of our most successful industries, contributing some £800 million in exports and invisible earnings. Indeed, it is hard to think of any other field in which British artists and performers have such a commanding lead.
Yet the music industry is seriously threatened by piracy, with thousands of counterfeit CDs pouring out of China and elsewhere. It is estimated that 14 per cent. of music sales in Europe are now pirate recordings, rising to 30 per cent. in Asia and the middle east and to more than 50 per cent. in Latin America. That is not only depriving British record companies of potential exports worth about £160 million, but it is affecting the domestic market.
By simply removing the company trade mark—while otherwise copying every aspect of the packaging—traders will be able to sell goods without fear of seizure by trading standards officers. I recognise the argument by my hon. Friend the Minister that the Bill is narrowly defined and is concerned simply with trade marks. I still regret that it was not possible to include a provision to allow trading standards officers to seize goods that they believe infringe the Copyright Act 1911, as they will be able to do in future for those goods that they believe infringe the trade mark laws. I hope that my hon. Friend will consider the matter again and see whether there is any way in which the Bill may be amended to allow the problem to be addressed. 683 Finally, I hesitate to plunge into the argument between the Minister and my hon. Friend the Member for Warwick and Leamington (Sir D. Smith) on the subject of look-alike products. However, I recognise that there has been a dramatic increase in recent years in the number of look-alike products sold by major retailers. Frequently, they are manufactured and marketed under similar names in similar packaging to the brand name goods with which they are competing. It is, therefore, understandable why the manufacturers of the original brands should feel aggrieved and should want the provisions of the Bill to be extended to ban look-alike products. Although I understand their view, I could support such a measure only if I thought that consumers were buying such products believing them to be the branded article. The fact that they are usually sold next to the brand-name product and at a cheaper price suggests that they are not.
My hon. Friend the Member for Medway (Dame P. Fenner) has already referred to opinion surveys that show that consumers purchase look-alike products knowing that they are not brand-name products. I therefore tend to share the view of the Consumers Association that outlawing own brands would have nothing whatever to do with consumer protection but everything to do with market protection.
§ Mr. Malcolm Bruce
Does the hon. Gentleman also acknowledge that own-brand retailers such as Sainsbury, Boots and Tesco essentially market a brand image and that they need to maintain a quality standard if they are to sustain consumer confidence?
§ Mr. Whittingdale
I entirely accept that. Those manufacturers have taken great pride in the quality of their products and it is clearly in their interests that all their products should be of a high quality. If not, they would do substantial damage to their general image.
However, retailers have a duty to ensure that their own brands are not too similar to branded products. I understand the argument that the shape of a container may be dictated by its function, and I should not want a manufacturer to be given a monopoly over a product's shape or function, but if it becomes apparent that the only reason for choosing a feature or shape is to increase the product's similarity to a branded product, the manufacturer of the brand-name product would be entitled to take action under existing law covering the passing off of goods.
Although the law already covers that problem, I hope that both manufacturers and retailers will take advantage of the suggestion by my hon. Friend the Member for Meriden (Mr. Mills), who has a long and distinguished history in the field, to come together and discuss what can be done to allay the fears that undoubtedly exist among brand-name manufacturers.
The Bill represents a valuable step forward in increasing the protection of trade marks and thus intellectual property. It is no doubt a field in which British companies need all the protection that they can get. I hope that my hon. Friend the Minister will see whether protection can be increased in any other way, particularly to cover the problems faced by the music industry. If it is not possible to amend the Bill to cover that problem, I hope that in the near future he will consider introducing additional legislation to deal with it.
§ Mr. Tim Rathbone (Lewes)
First, I apologise to you, Mr. Deputy Speaker, my hon. Friend the Minister and the House for not being here at the beginning of the debate. I could not escape from an earlier meeting. Secondly, may I, at the outset, declare an interest—I am a parliamentary consultant to Chanel. I am grateful to Chanel for its briefing, but wish to make it clear that any opinions that I express are entirely mine and should not be laid at its door.
Like other hon. Members, I congratulate the Government on the Bill—on how it has been presented and on the accent that it has placed on the seriousness of trade marks and counterfeiting. From what I have heard from the professions involved outside the House, thanks are due to my hon. Friend's departmental officials for their consultations and positive reactions to representations made to them. In the same breath as welcoming the Bill, may I welcome the amendments that the Government made in another place, particularly the closure of the loophole in current legislation, which does not allow the seizure of goods in the form of a trade mark—a small element of counterfeiting—and the criminal provisions forbidding the use of the phrase "brand copy" or similar phraseology. Those are both important small additions to the Bill for which the Government deserve praise.
I also welcome the easier qualification of trade marks for registration, the simpler procedures for assigning trade marks and the better protection of trade marks overseas. I hope that that will lead to general ratification by all European Community members of the protocol to the Madrid agreement on the international registration of trade marks. Will my hon. Friend the Minister reassure me about the Government's position on that?
I wish to raise one or two questions, the first of which you, Mr. Deputy Speaker, will understand better than most because you have shared with me a certain amount of time in the woolly world of advertising. It concerns comparative advertising. I am worried about the effect of clause 9, which can weaken the trade mark's legal protection. That would run contrary to the thrust and point of the Bill. It could allow unknown or lesser-known competitors to ride in unfairly on the coat tails of brands that are well established in the marketplace at the cost of those brand producers, and could even mislead consumers. I should prefer the whole question to wait upon the European Community trade marks directive, which the Bill has over-anticipated. The directive on misleading advertising will probably appear in the next few months and certain words have been suggested as a specific clause to deal with imitation products:comparisons must not present goods or services as imitations or replicas of goods and services which are already protected by registered trade marks, trade names, and/or designations of origin.
Whether we adopt those words now as an amendment to the Bill, or postpone action until the directive exists, the directive will come down the road towards us and this country, like others in the European Community, will have to fall in line. That is particularly the case as the Government have emphasised their intention to achieve that position on other trade mark issues. So I hope that action on that front can be delayed.
In the meantime, if action is to be taken, it is important to understand properly the meaning of "unfair use". The concern has been expressed to me that the clause could lend itself to litigation to establish the meaning of "unfair 685 use". In the interests of clarity and certainty, and even if it may keep some business away from my hon. and learned Friends who are lawyers, it would be better to deal with the matter as straightforwardly as possible. On that basis, I hope that the Community wording will be adopted. The overriding concern must be that comparative use of trade marks is fair and safeguards are sufficient.
Like my hon. Friend the Member for Warwick and Leamington (Sir D. Smith), may I say a word about lookalikes? What has been said so far may have caused people to mix up the problem of lookalikes and the question of private labelling. The problem of lookalikes is about identifying an act of unfair competition to supply goods that look similar by shape, colour, design or name to goods with a distinctive appearance, where it would take unfair advantage of that appearance or lead to an association between the goods.
The Paris convention on the protection of intellectual property requires EC countries to provide effective protection against such forms of unfair competition. The United Kingdom, unlike most of the rest of Europe, has no such legislation. The directive itself must conform with the Paris convention, and the Government aim to align the Bill with the directive.
It seems from the debate in another place that the Government believe that they are fulfilling their obligations under the Paris convention by means of the laws governing trade mark infringement and consumer protection. It was on that basis that an amendment was withdrawn in another place while the Government reviewed the matter. I understand from what the Minister said that the review has taken place and it has been decided not to include such a measure—I therefore hope that a further review will take place.
I welcome the Government's confirmation of the serious nature of product counterfeiting and their requirement to retain current sentencing provisions—an unlimited fine and up to 10 years' imprisonment. I hope that the courts will bear that in mind when dealing with counterfeiting cases. As we know, sentences are sometimes provided for the courts, but then not sufficiently used, even though certain cases may deserve them.
Counterfeiting certainly acts to the detriment of consumers, who are entitled to expect protection against products that are not what they claim to be, of legitimate retailers, who are entitled to expect fair competition, and of brand owners, who are entitled to expect protection for the branded products in which they have invested and for which they have offered quality control guarantees. It is to the advantage of this country that we set an example in our legislation, with effective enforcement and deterrent sentencing.
The Government have offered reassurances in another place that police and trading standards officers continue to have a duty to enforce the criminal laws against counterfeiting. I should welcome further confirmation from my hon. Friend of police powers and duties in this respect.
My last worry concerns the doubts that some have expressed about when the Bill, if it passes smoothly through its parliamentary stages, will become law. I am led to believe that that is unlikely to happen before the end of the year. If so, it will allow counterfeiters to exploit the weaknesses of current legislation during the most lucrative time of the year—the build-up to Christmas. It would thus be of significant benefit to the prosecuting authorities, to 686 legitimate retailers, to consumers and to brand owners if the Bill were delayed as little as possible and if the Government made every effort to ensure that at least the anti-counterfeiting provisions come into force by September or October. If the Minister cannot reassure me about that today, I hope that he will do so at a later date.
§ Mr. McLoughlin
Every hon. Member who has participated in the debate has given the Bill—in general —a warm welcome. It would be wrong to answer some of the questions that have been asked in a Second Reading closing speech, but they will be dealt with in Committee.
The hon. Member for Edinburgh, South (Mr. Griffiths) did his best as an Opposition spokesman to attack the Bill in the expected manner, but he may have gathered from the tenor of the rest of the debate that this really is not the sort of Bill that demands his sort of attack. It comes a little rough to hear him criticising the Government for not being consistent on Europe; his party has changed its policy on Europe at every single general election. The same goes for his accusations that we are putting extra costs on British industry; his party would implement the social chapter, so that, too, was a bit of a joke. I therefore cannot take too seriously some of his objections.
I am nevertheless grateful for the hon. Gentleman's general welcome for the Bill and in Committee we shall —rightly—examine some of the important cases and points that he highlighted.
The hon. Member for Newport, West (Mr. Flynn) mentioned the review at the Patent Office. We had hoped to make an announcement about that before today, but we are not in a position to do so. We shall make one to Parliament in due course.
I am grateful for the credit that the hon. Member for Newport, West gave to the operations of the Patent Office. I seem to recall hearing him, in the distant past, attacking "next steps" agencies of other kinds—
§ Mr. Flynn
I refer the hon. Gentleman to the Leader of the House who, in an uncharacteristic moment, paid tribute to my work criticising the lack of accountability of "next steps" agencies, and said that he agreed with my campaign, supported by the Rowntree Foundation, which aimed to get the Government to publish replies from "next steps" agencies. Those replies used not to be published in Hansard: now they are.
§ Mr. McLoughlin
I am glad to hear that the hon. Gentleman has managed to get across some of his points to a caring and listening Government.
I recognise immediately the expertise that my hon. Friend the Member for Meriden (Mr. Mills) brings to the subject. Probably most of his questions will be dealt with in greater detail in Committee. He asked me about trade mark attorneys. Proposals concerning the use of the title trade mark attorneys were received only recently, so it is difficult to give full consideration to that at this stage. Again, it is doubtless a point for Committee.
My hon. Friend also asked me about county courts. He will know that the Government are considering extending their jurisdiction to allow them to hear trade mark cases. The Courts and Legal Services Act 1990, however, contains all the necessary powers to confer such jurisdiction on county courts, so it would be wrong to use this Bill for that purpose. I know that my hon. Friend has 687 made representations on the subject to the Lord Chancellor and I have no doubt that we shall discuss it again in Committee, as it is important.
In my opening speech, I explained why I believed that the proposals in the Bill deal with a number of the points that arose out of the Kent County Council v. Price case. We shall return to that in Committee, too. It is related to many of the wider issues raised by my hon. Friend the Member for Colchester, South and Maldon (Mr. Whittingdale).
The hon. Member for Gordon (Mr. Bruce) talked about establishing two systems. The establishment of a Community mark as well as the international protocol is not at all unfortunate. Those systems are complementary and provide international business with a choice, according to where its interests lie. The confusion suggested by the hon. Member does not really exist.
My hon. Friend the Member for Colchester, South and Maldon made some wider points about counterfeiting; some of what he said certainly concerns the British Phonographic Institute. It has discussed those concerns with me. We are dealing primarily with trade mark legislation rather than counterfeiting legislation, and it is important that that is understood.
My hon. Friend the Member for Lewes (Mr. Rathbone) asked about comparative advertising, which is addressed in clause 10. My information is that clause 10 does not go against the draft directive on comparative advertising. Clause 10(6) is very much in tune with the directive in its most recent draft. My hon. Friend asked why comparative advertising was allowed to be used. The Government's intention was announced in the White Paper. We think that the present position is too restrictive on competition.
It is reasonable to be able to identify competing products by reference to their trade marks. However, use must be in accordance with honest practice. To do otherwise would allow an unknown brand, for example, to get a leg up on the chain by claiming equivalence with the 688 brand on which the marketing effort was being expanded. We shall return to that issue in Committee and possibly on Report.
May I put my hon. Friend the Member for Lewes right on the issue of lookalikes. As I said, the Government have not yet taken a view. We are consulting on the matter, but at this stage we do not think that the issue can be addressed under trade marks legislation. I think that that also answers the point of my hon. Friend the Member for Warwick and Leamington (Sir D.Smith). I can tell him that that matter did not come up during the early part of consultation on the Bill, but came to us fairly late. Many of my hon. Friends raised that matter in the debate.
The Bill will replace an outdated Act that has ceased to serve the best interests of industry and commerce by making it easier to register a trade mark, widening the rights given to a registered trade mark and deregulating procedures. United Kingdom companies will undoubtedly benefit. The international aspects should enable those companies that export their branded products to register more easily and protect their trade marks overseas. I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).