The recent decision of CQMS Pty Ltd v Bradken Resources Pty Ltd is a timely reminder of the dangers and risks in asserting your intellectual property rights to potential infringers and the marketplace too strongly or prematurely.
In that case, after determining that there was no infringement of the plaintiff’s patent, the Court proceeded to find that initial letter of demand and circulars to customers constituted unjustified threats of legal proceedings, entitling the respondents to declaratory and injunctive relief and damages.
Unjustified threats of IP actions
The relevant Australian laws relating to patents, designs, copyright and trade marks each have similar provisions that provide an aggrieved person with a claim in the event that a threat of infringement action is unjustified.1 The threat can be express or implied, and can be directly through a letter of demand, circular or advertisement.
Importantly, rights holders should be aware that except for registered trade marks,2 it is enough that any subsequent infringement claim is unsuccessful at trial for the aggrieved person to successfully establish that the threat of intellectual property rights infringement was unjustified. There is no defence that the rights holder had a reasonable belief or even that he or she had a granted patent or registered trade mark at the time.
This is especially the case for rights holders from overseas, who should check that the corresponding rights in Australia are in fact enforceable. For example, copyright in an artistic work may not be enforceable in Australia where that work has been embodied in a product that has been “industrially applied" anywhere in the world. Similarly, any infringement claims for a registered innovation patent will be unjustified until that patent has been certified.
In short, rights holders should take care before taking action in Australia to enforce their intellectual property rights so as to avoid the risk of liability for an alleged infringer’s losses should the claim ultimately be found to be without merit.
When is a demand not a threat?
There is a “safe harbour” for each of the patent, design, copyright and trade mark regimes. Rights holders that merely notify a person of the existence of a granted patent, registered design or copyright in a work will not be found to have made a threat.
Letters of demand often are found to constitute a threat of infringement proceedings. This is even the case where a letter does not identify any patent being infringed or specify exactly what goods are the subject of that patent. Another case established that an advertisement for a patented product intentionally juxtaposed with a short article titled “infringement danger” (which notably did not mention the patented product) also constituted a threat.
In the CQMS case, the respondent was also able to show that two notices to its potential customers were threats in relation to which the respondent could claim relief. In the first notice, a statement that the rights holder believed that the specified products supplied by the respondents infringed its patents was sufficient to constitute a threat. In the second notice, a statement that the rights holder would consider “further action” once the court found in favour of the rights holder was enough to constitute a threat.
The Australian Consumer Law
Rights holders should be mindful that seeking to enforce its rights may also breach the Australian Consumer Law if it constitutes misleading and deceptive conduct. This is particularly the case in correspondence directed at customers of another trader. If a false or misleading representation is given that another trader’s products infringe a patent, trade mark or copyright, then this may result in a breach of the Australian Consumer Law.
The sword cuts both ways though – most infringers may also be engaging in conduct that may create false representations or misleading and deceptive conduct as to its right to supply goods or services or any affiliation it may have to a rights holder.
Protecting your rights
Ultimately, protecting intellectual property rights is a complex balancing act between attempting to avoid costly litigation, incentivising a respondent to cease and desist while not creating an undue exposure for a respondent’s losses in the event a claim is ultimately unsuccessful.
A threat of infringement proceedings that is vindicated by the Courts will, of course, yield no negative legal consequences. However, litigation is never certain and in many cases it will be a high stakes gamble involving many factors not necessarily limited to the validity of the intellectual property rights in question.
For these reasons, it is prudent and highly recommended to always undertake a proper risk assessment and seek professional advice before taking any steps.