Threatening proceedings for intellectual property right infringement can sometimes backfire. In relation to patents, trade marks and designs, there is a right for any person aggrieved by the threat to bring an action against the threatener. The “aggrieved” person may not necessarily be the person directly threatened with proceedings, it could be anyone whose commercial interests are damaged by the threat – such as a manufacturer whose suppliers or distributors are threatened. Not only does the threats action expose the IP rights-holder to the risk of damages, it also turns the potential claimant into a defendant, with the resulting reversal of burden of proof, requiring it to prove the validity of the rights which it originally asserted and their infringement. This in turn creates a tension with the requirements of the Civil Procedure Rules to communicate a litigant’s case early before issuing proceedings, with rights holders more likely to sue first than to threaten first.
The new Intellectual Property (Unjustified Threats) Act 2017, which comes into force on 1 October, attempts to encourage more pre-action communication by detailing what an actionable threat is, whilst providing for “permitted communications” or communications for “permitted purposes” which cannot amount to an actionable threat. It harmonises the position across patent, trade mark and design rights (including providing for unitary patents and European patents under the proposed Unified Patent Court jurisdiction) and allows pursuit of information on primary infringers from secondary parties where reasonable efforts have been made to find the primary infringer already.
Summary and Business Impact
- What amounts to a “threat” will now be defined in statute (although the test is the same as it is in common law currently: if the communication would be understood by a reasonable person in the position of the recipient to mean that a right exists and is intended to be enforced, then it is a threat of proceedings). It will cover threats in respect of acts done in the UK (as opposed to the previous formula of threats of action in the UK courts) which will allow the provisions to cover threats of proceedings in relation to infringements of the new unitary patents, once they become available and European patents under the jurisdiction of the Unified Patent Court, once established.
- “Permitted communications” (permitted statements made for permitted purposes) are set out in the new legislation to create a “safe harbour” for communications to secondary infringers which might previously have been interpreted as actionable threats.
- Primary infringers of trade marks and designs may now be threatened with proceedings for secondary infringing acts (eg distribution, retail) relating to their primary infringing activities, not just acts of primary infringement (eg manufacture, importation, applying the mark to goods or packaging or commissioning the same), without the risk of an unjustified threats action being brought, bringing these rights into line with the changes made to the patents regime under the Patent Act 2004.
- Professional advisers making threats on an IP owner’s behalf will be no longer be liable for unjustified threats, provided they act on the instructions of their clients and make this clear in the communication.
- The Act harmonises the threats regime across patents, trade marks and designs. This new consistency will be welcomed by IP owners. However, it is still a complex regime and arguably unnecessary.
- The Act does not cover threats relating to copyright, passing-off or misuse of confidential information. However in these areas common law torts such as unlawful interference with business or trade libel can sometimes be used by aggrieved parties.
- The “permitted communications”/”permitted purposes” regime should assist IP rights holders to comply with the requirements of the Civil Procedure Rules, which promote the early exchange of information between parties. It should also minimise the “sue now – discuss later” approach to IP litigation often triggered by the perceived risk of an unjustified threats action, if threats of proceedings were not quickly followed by actual proceedings.
- Litigants should still exercise real care in sending cease and desist letters to third parties where they do not have a genuine intention to follow through on the threat and bring proceedings, should a satisfactory resolution not be possible.
- Note that communications are be excepted from being actionable threats where threats of proceedings are made to a primary infringer in relation to “related” secondary infringements (eg where an infringing manufacturer is selling its own infringing goods). However, where that same primary infringer is selling infringing goods originating from another source, threats in relation to that secondary activity will not be covered by the exception and may be actionable if not within the permitted communications safe harbour.
- The defence of justification is still available under the new Act (that the act complained of would indeed have been an infringement) but there is also a defence to allegations of threatening secondary actors: secondary actors can be threatened where “reasonable steps” have been taken to identify the primary infringer. The IPO guidance on the new Act suggests that reasonable steps will include using permitted communications to make enquiries about the identity of the primary infringer; where these fail to elicit any information on the primary infringer, the secondary actor may then be threatened and the defence will apply. A similar provision was introduced for patents via the Patents Act 2004, but had not been available for trade marks or designs until now. The patents test had been “best endeavours”. During the progress of the bill “all reasonable steps” was reduced to “reasonable steps” for all these rights, implying that the test should not be overly onerous.