The Court of Appeal has reversed a judgment handed down by the High Court last year regarding the provisions governing unlawful threats of trade mark infringement proceedings in the UK. The Court considered that the trial judge had failed to consider the relevant letter as a whole and had focused too greatly on the final three paragraphs, such that the conclusion of the High Court that the letter qualified as without prejudice communication was erroneous. The case provides interesting guidance as to how a threat should be interpreted, and the extent to which a threat may benefit from “without prejudice” protection.
The unjustified threats provisions specify that, in relation to trade marks and certain other intellectual property rights, any person aggrieved may, subject to certain statutory exceptions, bring an action against the maker of a threat of enforcement proceedings. In August last year we reported on the High Court decision in Best Buy Co. Inc v Worldwide Sales Corporation Espana S.L., please see our previous LawNow for details of the case, which clarified the scope of the statutory exceptions to the unjustified threats proceedings and considered the application of the without prejudice rule.
The High Court held that a threat had been made, but held that since the last three paragraphs of the letter contained genuine offers to negotiate, and requested a response confirming a willingness to start a negotiation process, the letter fell within the protection of the without prejudice rule and so did not constitute a threat when viewed as a whole.
Court of Appeal
On appeal, the Court of Appeal agreed with the High Court that the letter contained a threat of proceedings in the UK and did not fall within the ambit of one of the exceptions. However, in relation to the “without prejudice” rule, the Court of Appeal held that the High Court had failed to consider the letter as a whole and had focussed too much on the last three paragraphs, which it considered merely underlined the defendant’s belief in its case and its determination to pursue it, rather than being a genuine attempt to settle the dispute.
Lord Neuberger MR stated that the question to consider was “whether the parties would reasonably have thought that their negotiations in the correspondence in issue were sufficiently advanced to have moved into the "without prejudice" zone”. The letter would therefore not attract “without prejudice” protection as it was not part of a genuine negotiating process and could therefore be put before the court as evidence.
This case highlights the risk of incorporating a threat in a letter with the assumption it will be protected by the “without prejudice” rule. In addition, it casts doubt on whether truly "without prejudice" correspondence would be excluded from liability for threats at all, Lord Neuberger holding “even if I had agreed with his conclusion that the last three paragraphs…brought the "without prejudice" rule into play, I would, at least as at present advised, nonetheless have held that the letter could be relied on to support the claimants' threat claim ...".
The case demonstrates the difficult balance in framing pre-action correspondence without incurring the risk of a threats action and highlights the need to seek specialist advice on such issues.
Case: Best Buy Co Inc and another v Worldwide Sales Corporation Espana SL  EWCA Civ 618, 24 May 2011