Under threat: fighting off intellectual property litigation bullies

The Intellectual Property (Unjustified Threats) Act 2017 received royal assent on 27 April 2017 and is expected to come into force in October 2017.

Under UK law there is a statutory right of redress against unjustified (or groundless) threats to sue for infringement of a patent, trade mark, or registered or unregistered design. Threats to sue for infringement of IP rights can be a powerful weapon and if made against retailers, for example, their fear of the costs involved in litigation may result in them capitulating and their business being damaged, even if the IP right is invalid.

Therefore, a person so threatened can seek a declaration that the threats are unjustified, damages, and an injunction to prevent further such threats in the future.

There is a consensus that the pre-Act threats provisions were in need of reform. Criticisms included:

• Different rules related to different IP rights and so were confusing for those wishing to assert their rights;

• It was too easy to fall within the groundless threats provisions, with the result that smaller businesses felt disinclined to assert their IP rights; and

• Parties were less inclined to try to settle disputes at the outset for fear of leaving themselves open to a threats action.

The difficulty was that the threat could be oral, implicit, or indirect so there did not need to be any express mention of the right, albeit that mere notification of the existence of the right would not amount to a threat. Mere notification is often considered to be a communication without teeth.

A good example of what amounts to a threat is contained in Grimme Landmaschinenfabrik GmbH & Co KG v Scott [2010] EWCA Civ 1110, a case on design rights. The court held that even though the claimant’s solicitor’s letters expressly stated that the claimant did not intend to take proceedings, the combination of a reservation of rights together with a reference to contacting the customer again if it was successful in its action against the defendant amounted to a threat.

The Act encompasses the recommendations the Law Commission made in its 2014 and 2015 reports and harmonises the previous provisions on patents, European patents (including under the Unified Patent Court), trade marks, EU trade marks, registered designs, design rights, and Community designs. As with the previous law, copyright and passing off are excluded from the threats provisions.

Notable changes

A threats action may not be brought for threats made to a primary actor (that is, someone who is usually the source of the infringement and is responsible for carrying out one or more of the most commercially damaging acts, such as importation or manufacture). This is already part of the current law for patents but will now apply to the other rights.

As you might expect, the question of who or what amounts to a primary actor was heavily debated at all stages of the development of the Act. A late attempt at the Public Bill Committee stage in the House of Commons to extend protection to those who contact parties who hold themselves out to be primary actors when they are not was rejected. It was said that the change was justified because of the increasing complexity of supply chains, but the rejection means that someone who holds themselves out as a primary actor when they are not can bring a claim for groundless threats if such a threat is made.

However, if you are unsure whether someone is a primary actor you will be able to contact them if your communication amounts to a ‘permitted communication’ – essentially safe harbour provisions. The communication must be for a ‘permitted purpose’, for example giving notice that the right exists or discovering if the right is being infringed and by whom. There is also guidance on what is not a permitted purpose, for example requesting an undertaking relating to a product or process.

A professional adviser acting in their professional capacity and on instructions from their client will not face personal liability for making threats.

However, some of the existing principles derived from the case law, such as the test for whether a communication contains a threat, remain good law. The test has two elements: (1) whether the communication would be understood by a reasonable recipient to mean that a right exists, and (2) that someone intends to bring infringement proceedings for an act done in the UK. A recent re-stating of the law was set out in Nvidia v Hardware Labs [2016] EWHC 3135 (Ch), which adds useful guidance to the circumstances in which something is deemed to be a threat in the UK.

Simon Miles is a partner at Edwin Coe. He acted successfully for the defendant in Nvidia and he is an ordinary member of the Chartered Institute of Trademark Attorneys

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