Contribution
My Lords, I welcome the committee report. It is a case study in how it is not enough to lead in an area of technology—that is easily lost without a joined-up strategy and harnessing the role of procurement. This is elaborated in chapter 2, with quotes from Dame Angela McLean that
“a purchase is worth 10 times a grant”,
and from the noble Lord, Lord Willetts, that it is easier to sell products to overseas Governments than to the UK Government because of UK procurement rules. It is still very hard for smaller companies to be considered at procurement stage, despite the new rules. The system, including the resource demands, remains against them.
Worse than that are the extensive pre-procurement phases of innovation grants. Designed to draw in innovative companies, they then have the lifeblood sucked out of their intellectual property, removing their competitive edge for any procurement stage or commercial exploitation, forced to hand it to competitors or incumbents. I drew this to the attention of the House in the science and technology and economy debate on 31 October 2024, and I have to tell the Minister that, despite his endeavours, if anything, it has got worse.
The point and principle at issue is that many, if not most, pre-procurement phase terms of reference and/or contracts and full procurement contracts require the purchaser—that is the government department, quango, commercial catapult or Innovate sponsor—to be granted a free, worldwide, perpetual, irrevocable licence, with full sublicensing rights to anybody, to the intellectual property, including any necessary background technology. This is then made available to others at the procurement stage or later renewal of contracts.
Anyone who knows anything about intellectual property will understand this undermines the innovative company’s position, not just in later tendering to government but for wider commercial exploitation. Competitors have free licences without having invested in research, and it undermines the ability to attract investors and scale business. The Chartered Institute of Patent Attorneys is very concerned about this issue and has set up a committee to gather evidence. As the key relevant professional body, I suggest the committee looks to CIPA for expert evidence going forward.
Meanwhile, let me give a couple of examples. Recently, a department wrote a threatening letter to a growth company that had submitted a procurement bid in which it referenced its existing patents to illustrate its state of development. Among other things, the letter stated that, by having patents, it was behaving anti-competitively and demanded that the patents be surrendered—note the belief that patents are anti-competitive, despite all the rhetoric we have about innovation, growth and export. Even among key officials at the Cabinet Office, IP is not fully understood.
Another SME had signed up for an Innovate grant in collaboration with a catapult. During later due diligence for a large-scale licensing deal with a multinational company, it discovered problematic IP terms. These terms created a serious impediment to the deal being completed and favoured Innovate and the catapult. It took persistent follow-ups with the senior management of Innovate UK and the catapult organisation before they agreed, in writing, to remove the IP obligations. That SME was lucky. More stories, many around the MRC, end in refusal to change terms—but that bar should not be there in the first place.
It also highlights how young, unadvised companies do not see the danger, especially when hidden behind headline statements offering the grant declaring that you keep your own IP. Undermined IP has no value, even though you keep it. These clauses are also generic, whereas in law what is right for commissioned copyright is wrong for patentable inventions.
Technology cannot scale without intellectual property. Investors will not invest unless you can demonstrate competitive advantages, and our government-sponsored system of IP destruction must change dramatically to get growth, scale-up and value out of grants and the line of sight mentioned in paragraph 106 just referenced by the noble Lord, Lord Willetts.