Intellectual Property & Unjustified Threats – When “I’ll See You In Court” Can Get You Sued

Most areas of law have their quirks and intellectual property is no exception. For those who are unfamiliar with intellectual property rights, the law relating to unjustified threats might seem unreasonable; after all, it provides for the proprietor of certain intellectual property rights to be sued, if they allege that a third party has infringed those rights.

Dig a little deeper however and you can find a commercial rationale behind the rules. At heart, they are intended to prevent supply chains from grinding to a halt if (for example) the owner of a patent threatens a distributor with Court proceedings if they sell a third party product. That distributor will in many instances not be in a position to assess the patent owner’s claims but may well cease sales, so as to avoid being sued. If the product does not infringe the patent, then the threat of proceedings issued by the patent owner has a negative commercial effect, and for no good reason.

The law addresses this through what is referred to as the unjustified threats provisions. The most recent iteration of the unjustified threats provisions was introduced in Autumn 2017, but the basic principles stay the same – if you threaten to sue for infringement of certain intellectual property rights, then it is possible that you could be sued by anyone affected by that threat if it transpires that no infringement has in fact occurred.

What the 2017 Act seeks to do is balance the need for rights holders to be able to communicate with those they consider are infringing their rights and the commercial interests of those within the supply chain.

What is a threat?

The unjustified threats provisions apply to a number of different intellectual property rights in the UK:

• Trade marks;
• Patents; and
• Design rights (registered and unregistered.)

They do not apply to claims for copyright infringement, claims for passing off or claims for breach of confidence.

A threat for these purposes is any communication made which:

1. Makes clear that the intellectual property right exists; and
2. Expresses an intention to bring Court proceedings against another person for infringement of that intellectual property right in relation to an act, or threatened to be done within the UK.

The Act applies an objective test of reasonableness to this, so to an extent, it is immaterial what the actual recipient understood the communication to be. If a reasonable person in the position of the recipient would have understood the communication to be a threat as set out above, it is a threat.

When is a threat unjustified?

A threat of infringement proceedings will be considered unjustified if the right is not infringed – this might be the case if, factually and legally, the infringement claim is not made out (using the patent example above, if the product complained about does not fall within the claims of the patent) or if the intellectual property right relied upon is invalid.

Is there a way to avoid falling foul of the unjustified threats provisions?

The 2017 Act provides for certain communications to be sent that will not fall foul of the unjustified threats provisions – for example, writing to someone to give notice that the intellectual property right exists or trying to ascertain whether that right has been infringed, will not (provided that the letter is couched in the correct terms) be actionable.

Similarly, if you allege that a third party has committed what is known as a primary infringement this should not, without more, cause you a problem.

What is classed as a primary infringement depends on which intellectual property right is under discussion.

For patents, a primary infringement would be making a product for disposal, where the invention protected by the patent is a product, or in the case of an invention that is a process, using that process.

Primary infringement of a trade mark occurs when the allegedly infringing sign is applied to goods or their packaging, such goods or packaging are imported for disposal or services are supplied under the impugned signed.

In the case of design rights, a primary infringement would occur by making an article to the design for disposal or by importing such an article for disposal.

In addition, provided that the threat of proceedings concerns primary infringement, it is also possible to threaten to bring proceedings in respect of what are known as secondary infringements (e.g. sale of a product that infringes a patent/trade mark. design right) without finding yourself on the end of a claim for having made an unjustified threat.

However, because all communications will be judged objectively and taking into account all the circumstances, you should always take specialist advice before contacting any third party who you consider may be infringing your intellectual property.

What’s the worst that could happen?

If you make an unjustified threat, the consequences can be severe. The threat is actionable by any person aggrieved by the threat and so not necessarily limited to the person that you wrote to – if we consider the supply chain, it is possible that multiple third parties could be aggrieved by a threat made. Any and indeed all of those third parties could apply to Court for an injunction to prevent you from repeating those threats in future and seek a declaration that the threat is unjustified.

In addition, any person aggrieved by the threat can seek damages, to compensate them for the losses suffered as a result of that threat. As with any Court case, an order for costs would likely also be made in the third party’s favour, meaning that you have to contribute towards their legal costs.

So what should I do if I think my rights are being infringed?

Put simply, specialist legal advice should always be sought – at best, an unjustified threat claim is a costly distraction from the issues at the heart of the dispute. At worst, such a claim could result in your being liable to pay many thousands of pounds to those that you considered to be infringing your rights.