Existing IP legislation provides for protection against groundless threats in respect of IP infringement brought by a rights holder against a competitor. The legislation covers patents, design rights (both registered and unregistered) and trademarks, but excludes copyright.
Groundless threats provisions were originally introduced in response to owners of patent rights threatening infringement proceedings against competitors without any bona fide intention of actually initiating proceedings. The cost and complexity of patent infringement proceedings were thought to be so high that the issuance of threats could result in competitors being driven from the market. The provisions were therefore intended to prevent casual threats of IP infringement being made by owners of IP rights without any basis for doing so, while also allowing IP rights holders to retain the opportunity to enforce their rights against those parties manufacturing or importing the infringing articles (ie, not retailers and parties down the product supply stream).
However, the groundless threats provisions have caused problems in practice and commonly discourage discussions from being held in an open and ultimately productive manner. Many consider reform to be overdue.
Earlier this year, the Law Commission launched a consultation into groundless threats provisions in English law. The consultation paper, entitled "Patents, Trademarks and Design Rights: Groundless Threats", addresses recognised concerns about the groundless threats provisions for patents, trademarks and registered and unregistered design rights, and considers whether an unfair competition law may have a role to play going forward.
The consultation closed on July 17 2013 and the Law Commission has now provided its preliminary comments on the responses to the consultation paper.
The 2004 reforms to the Patents Act 1977 introduced four exemptions which permit the threat of proceedings in respect of any alleged act of infringement – not only in respect of the primary acts of manufacturing or importing – where the person being threatened has made or imported the product for disposal (or used that process). In summary, these exemptions are:
- making enquiries and assertions to track down a primary infringer;
- making threats where the primary infringer cannot be found, despite using best endeavours to find it;
- providing factual information about the patent; and
- where a patent is invalid, the defendant to a threats action has a good-faith defence, if at the time of making the threats it did not know and had no reason to suspect that the patent was invalid.
The consultation recognised that these exemptions do not permit a rights holder to take pre-emptive action to prevent infringing items from being manufactured and/or placed on the market, and proposed extending the exemptions to cover situations where someone has threatened to make or import a product for disposal or to use a process.
It was also recognised that the exemptions introduced in 2004 have been well received and the Law Commission's consultation has proposed to implement these defences for trademarks and registered design rights. Such reform would remove the difference between registrable IP rights and alleviate the problems with the existing law applicable to trademarks and registered design rights. The inclusion of unregistered design rights within the reforms was also touched on by the Law Commission, but no clear proposal for reform was given.
The consultation questioned the need for immunity for legal advisers against groundless threats claims. Unlike in many other jurisdictions, UK legal advisers do not have immunity against such claims. Tactically, by adjoining a firm of solicitors to a groundless threat claim, a receiver of a threat letter can use the claim as a tool to cause friction between a law firm and its client. The reforms would provide immunity to legal advisers against groundless threats proceedings.
The consultation also noted that most civil law jurisdictions do not deal with groundless threats through specific statutory provisions. Instead, potential abuse is dealt with under general tort law or the specific tort of unfair competition. The consultation therefore also welcomed practitioners' views on a proposal to introduce a specific tort of unfair competition as an alternative to the legislative changes suggested above.
The Law Commission received 21 responses to its consultation paper from various European and national bodies representing legal advisers and rights holders, judges, individuals and private and public companies. The Law Commission was delighted with the quality of the responses that it received, describing many as "thought provoking".
The Law Commission will consider the responses further and is not expected to discuss any proposals with the commissioners until after Christmas 2013. However, the Law Commission's initial comments provided some insight into the respondents' prevailing viewpoints.
The Law Commission noted that there was strong support to reform trademark and registered design rights law to mirror the approach taken in the Patents Act 2004, in order to provide greater clarity and consistency. The majority of responses also agreed with the need to provide immunity to legal advisers against groundless threats litigation.
On other proposals, particularly in respect of unregistered design rights, the responses were more diffuse. This is understandable, given that unregistered design rights are unregistrable rights and their inclusion within the threats provisions creates a distinction between them and copyright. The Law Commission has confirmed that it will consider the various views in greater detail.
The preliminary comments from the Law Commission are positive and confirm support for reforms to the legislation in order to remove uncertainties for legal advisers, rights holders and alleged infringers.
In the first instance, such reform is likely to amount to changes to the existing legislation – at least as an interim measure. The consultation paper recognised that the introduction of a new tort of unfair competition would be an "evolutionary step" – akin to a revolutionary change – that would bring the United Kingdom closer to civil law jurisdictions. As such, it was likely to require a further, more detailed consultation.
The Law Commission confirmed that its formal response will be published in Spring 2014, but at this stage the commission is not planning to write a draft bill. What is clear is that the current position amounts to a trap for the unwary, with inconsistent positions adopted across the spectrum of IP rights. The proposals to remove inconsistencies between threats provisions for patents and other IP rights are to be commended. However, the oft-raised alleged panacea of introducing a law of unfair competition should be considered in more detail in due course, even if the commission (understandably) considers that this requires additional work and a separate consultation.
For further information on this topic please contact Jeremy Drew or Georgia Davis at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.