Unjustified Threats Bill awaits royal assent

Unjustified Threats Bill awaits royal assent

10 April 2017

The Intellectual Property (Unjustified Threats) Bill has passed the report stage and third reading, and is now awaiting Royal Assent.

Below, Design and Copyright Working Group member Simon Miles (Edwin Coe LLP) looks at the changes to the law which the Bill will bring about when it comes into force.

Unjustified threats bill

UK law provides a statutory right of redress against unjustified (or groundless) threats to sue for infringement of a patent, trade mark or design right. Threats to sue for infringement of IP rights can be a powerful weapon and if made against retailers for example, their fear of being involved in litigation may result in them capitulating and their business being damaged, even if the IP right is invalid. So, a person aggrieved by a threat can seek a declaration that the threats are unjustified, damages and an injunction to prevent further threats against the IP owner or other person making the threat.

This article will look at the changes to the law incorporated in the Intellectual Property (Unjustified Threats) Bill (“the Threats Bill”) which passed without amendment at the Report Stage and Third Reading on Tuesday 21st March 2017, and is awaiting Royal Assent.

Pretty much everybody agreed that the existing threats provisions were in need of reform. Criticisms of the existing law included: (1) different rules related to different IP rights and so were confusing for those wishing to assert their rights; (2) it was too easy to fall within the groundless threats provisions with the result that small businesses felt disinclined to assert their IP rights, and (3) parties were less inclined to try and settle disputes at the outset for fear of leaving oneself open to a threats action.
Mere notification of the existence of the right does not amount to a threat, but the difficulty is that the law has developed to such an extent that there does not need to be any express mention of the right because it is enough for the threat to be implicit. The test is whether an “ordinary recipient in the position of the claimant” would understand the words communicated to contain a threat to sue in the UK.

For example, in relation to design rights in Grimme Landmaschinenfabrik GmbH & Co KG v Scott (t/a Scotts Potato Machinery) the High Court held that even though the claimant's solicitors letters expressly stated that the claimant did not intend to take proceedings, the combination of a reservation of rights together with a reference to contacting the customer again if it was successful in its action against the defendant, amounted to a threat.

The Threats Bill will enact the recommendations the Law Commission made in its 2014 and 2015 reports and will sweep away the existing provisions which apply to patents, European patents, trade marks, EU trade marks, registered designs, design rights and Community designs. The Bill will also make necessary changes to the law so that the protection against threats can be extended to European patents which will come within the jurisdiction of the Unified Patent Court. As with the existing law copyright and passing off are not included within the threats provisions.

Essentially, the protection against groundless threats of infringement proceedings is being retained but reformed:

  • A threats action may not be brought for threats made to a primary actor, that is, someone who is usually the source of the infringement and is responsible for carrying out one or more of the most commercially damaging acts such as importation or manufacture. This is already part of the current law for patents but will now apply to the other rights.
  • Implied threats made to a secondary actor will not give rise to a claim for unjustified threats if they are contained in a “permitted communication”. These permitted communications provide the framework for a safe harbour to allow a rights holder to communicate with someone who might otherwise be entitled to sue for threats, by providing a means of exchanging information in order to resolve disputes. The communication must be made solely for a “permitted purpose”, all of the information that relates to the threat must be necessary for that purpose, and the person making the communication must reasonably believe that the information is true.
  • A permitted purpose includes: giving notice that the rights exists; discovering if the right is being infringed and by whom; and giving notice that a person has an interest in the right in circumstances where some other cause of action is dependent on another person's awareness of that fact. There is also guidance on what is not a permitted purpose, for example, requesting an undertaking relating to a product or process.
  • The justification defence remains (that is that if an infringement action succeeds it is a defence to a groundless threats action because the threat would not be groundless) but without the reference to the defence not being available where the right is shown to be invalid in a relevant respect. 
  • A defence currently only available to patents is extended to all the IP rights: it is a defence to show that all reasonable steps have been taken to find someone who has carried out, or intends to carry out, a primary act, for example the manufacturer that is the source of the infringement. If there are several possible lines of enquiry, all must be pursued. 
  • A professional adviser acting in their professional capacity and on instructions from their client will not face personal liability for making threats.

CITMA responded to the Law Commission reports and supported an evolutionary approach to the law resulting in the developments we now see in the Bill. Some commentators supported the Law Commission’s suggestion in its Consultation Paper that there could be a new tort of making false allegations in the course of business. However, most parties favoured evolution rather than revolution as this was thought to provide greater certainty and less disruption.

Whilst the existing law will be replaced some of the principles derived from the case law will continue to be of general application. So for example in relation to the test for whether a communication contains a threat the existing common law will still apply. The new test has two parts. The first part is whether the communication would be understood by a reasonable person in the position of a recipient to mean that a right exists. The second part is whether the communication would be understood by such a person to mean that someone intends to bring infringement proceedings for an act done in the UK. The recent Nvidia –v- Hardware Labs case in which the writer acted for the Defendant, adds useful guidance to the reasonable person test and clarification to the circumstances in which a threat is deemed to be a threat in the UK.

Simon Miles, Edwin Coe LLP and CITMA Design and Copyright Working Group

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