Unjustified Threats

A new draft bill has recently been introduced into the UK Parliament, by the Law Commission in England and Wales, which aims to harmonise the law dealing with unjustified threats relating to intellectual property rights. The intention of the Intellectual Property (Unjustified Threats) Bill has been described as helping to create an IP environment that favours negotiation and settlement rather than litigation, by proposing changes that clarify the existing provisions, making the provisions more consistent across the relevant intellectual property rights (including patents, trade marks and designs).

Provisions regarding groundless threats are currently provided by the Patents Act 1977, the Copyright, Designs and Patents Act 1988, the Registered Designs Act 1949, the Community Design Regulations 2005 and the Trade Marks Act 1994. These provisions are generally similar but differ in certain key details.

For example, under the Patents Act 1977, where a person threatens another person with proceedings for infringement of a patent, a person aggrieved by those threats may in some circumstances bring proceedings against the person making the threats. There is no requirement that the person making the threats is the patent proprietor or even a licensee. In addition, the person aggrieved by the threats need not be the person directly threatened. This is significant because it is typically product manufacturers who are damaged by threats made to their customers or distributors. Such threatened customers or distributors are unlikely to want to become involved in any legal action. The legislation therefore provides a route for the manufacturers themselves to reclaim damages incurred if their customers or distributors decide to stop purchasing their products, for example, due to unwarranted threats of legal action.

If successful in their action, the person aggrieved may be entitled to a declaration that the threats are unjustifiable, an injunction against continuance of the threats, and damages in respect of any loss sustained because of the threats, unless the person making the threats can prove that the acts in respect of which proceedings were threatened constitute, or would constitute, infringement of a patent. Nevertheless, the person aggrieved may still be successful in their action if they can show that the patent in question is invalid, as long as the person making the threats is unable to show that, at the time of making the threats, he or she did not know or had no reason to suspect that the patent was invalid.

The Patents Act 1977 makes it clear that merely providing someone with factual information about a patent does not itself constitute making a threat. In addition, making enquiries of a person for the sole purpose of discovering whether or by whom a patent has been infringed, by the making or importing of a product for sale or by using a process, also does not constitute making a threat. The purpose of these limitations is to allow patent proprietors to inform suspected infringers of the existence of their patent and to investigate such potential infringers. Essentially, the legislation does not prevent rights holders from threatening manufacturers or importers of goods (i.e. persons committing ‘primary’ acts of infringement of the patent).

Regarding designs, the Copyright, Designs and Patents Act (CDPA) 1988 provides a right to persons aggrieved by threats of proceedings for infringement of design rights (i.e. rights in UK unregistered designs). Similar to the case for patents, the CDPA permits rights holders to notify potential infringers of their design rights, but it does not specifically permit enquiries to be made for the purpose of discovering whether a design right has been infringed. The Registered Designs Act 1949 provides a similar right to persons aggrieved by threats of proceedings for infringement of the right in UK registered designs, while the Community Design Regulations 2005 extend this right in respect of proceedings for infringement of Community registered designs.

In addition, the Trade Marks Act 1994 provides a right to persons aggrieved by threats of proceedings for infringement of a registered trade mark, except with regard to proceedings concerning the application of a mark to goods or their packaging, the importation of goods to which, or to the packing of which, the mark has been applied, or the supply of services under the mark. Again, merely notifying a person that a trade mark is registered, or that an application for registration has been made, does not constitute a threat of proceedings.

Notably, there is no equivalent legislation concerning unjustified threats of proceedings for copyright infringement or passing off (an action at common law which provides protection for unregistered trade marks in certain circumstances). A remedy to persons damaged in such cases, at least in England and Wales, may lie in a common law action for malicious or injurious falsehood (otherwise known as trade libel), but this can be difficult to prove.

Accordingly, the legislation regarding designs and trade marks, in contrast to patents, does not currently permit rights holders to make enquiries of a person for the purpose of discovering whether their right has been infringed, without the risk of facing an action for unjustified threats. This is one area of law which the proposed Intellectual Property (Unjustified Threats) Bill is intended to harmonise. In fact, the Bill also seeks to expand this provision for all forms of intellectual property (except copyright), by allowing rights holders to make enquiries regarding persons who intend to infringe the right, rather than just those who have already done so.

The Bill also introduces the concept of a permitted communication, meaning a specified type of communication sent by a rights holder to a potential infringer which cannot be used as the basis for a threats action. Permitted communications include those used for the purposes of: giving notice that a right exists; discovering whether, or by whom, a right has been infringed; and giving notice that a person has such a right, where another person’s awareness of the right is relevant to any proceedings that may be brought in respect of that right. The Bill in its current wording also specifies certain communications which are not permitted. For example, it would not be permitted to request a person to: cease doing, for commercial purposes, anything in relation to a product or process; deliver up or destroy a product or goods; or give an undertaking relating to a product or process. Similar communications relating to trade marks and designs would also be prohibited.

Other changes proposed by the Bill include updates which permit the unjustified threats provisions to apply to European patents and unitary patents which in future come under the jurisdiction of the planned Unified Patent Court, as well as liability protection for regulated professional advisers making threats when acting for their clients.

The Bill has undergone its first reading in the House of Lords and may take some time until it becomes law, but the harmonisation of the legislation relating to unjustified threats would be an important step to give clarity to both rights holders and third parties. In any case, rights holders should remain cautious and take appropriate legal advice before putting third parties on notice or threatening any form of legal proceedings. Manufacturers who believe they have been damaged by unwarranted threats should consult an appropriately qualified legal professional as soon as possible. It is important to begin to gather evidence quickly in such cases, as this will be required to prove the nature of the threats in any subsequent court action.