Threats: Global Flood Defence Systems Ltd v Van Den Noort Innovations BV

Lord Esher MR: the judge in Ungar v

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One of the peculiarities of our intellectual property law is the threats action. It arises from provisions of the Patents Act 1977, Registered Designs Act 1949, Copyright, Designs and Patents Act 1988, Trade Marks Act 1994, The Community Designs Regulations 2005 and The Community Trade Mark Regulations 2006 that enable persons aggrieved by threats of infringement proceedings whether express or implied to sue the person making such threats (and his lawyer or trade mark attorney) if those threats prove to be unjustified. There are no similar provisions in other areas of our law and except for a few Commonwealth countries and the Irish Republic no similar provisions in other countries' intellectual property laws. These provisions ensnare foreign intellectual property owners and even experienced English commercial litigators.

This legislation has been criticized many times. In Intellectual Property 'Groundless Threats' Actions To Be Tackled By Government 17 April 2013 DACbeachcroft wrote:
"The complexities, in relation to patents, designs and trade marks, mean that:
  • IP rights owners are often simply advised to write opaque letters to infringers referring only to the existence of certain trade mark registrations or design rights but with no evident request to desist or take other action;
  • Lawyers have found themselves the subject of legal proceedings when they have simply sought to settle an IP claim without the issue of legal proceedings;
  • Claimants are often driven to threaten legal proceedings for infringement of certain areas not covered by the 'threats' provisions, eg, for copyright infringement when the real (unsaid) claim is for instance in respect of design right or trade mark infringement;
  • Intended defendants cannot obviously understand what they are being asked to do or explain."
I have warned Americans of the hazards of this legislation in Consider the Implications of Foreign Laws Before Sending a Cease and Desist Letter Intellections June 2005, The Law Commission considered threats actions in Patents, Trade Marks and Design Rights: Groundless Threats in April 2014 and recommended that they should stay albeit with reforms. The basic justification for threats actions is that intellectual property litigation is particularly unpleasant - Lord Esher MR famously compared it to what was probably a strain of bird flu in Ungar v Sugg (1892) 9 RPC 113 - and folk should not be allowed to threaten it willy nilly.

All this is a roundabout but I hope nonetheless instructive and entertaining introduction to Judge Hacon's decision in Global Flood Defence Systems Ltd and Another v Van Den Noort Innovations BV and Others [2015] EWHC 153 (IPEC) (29 Jan 2015). The threats were notices that appeared on the defendant's website and in a letter to Sir Peter Luff MP after it fell out with the claimants in February 2014 which readers will find between paragraphs [9] and [11] of the judgment:
"9.  The copy of the first of the Website Notices in the evidence was taken from the first defendant's website on 17 February 2014. It was in relevant part as follows:
'Important message
We are sorry to inform you that we have terminated the cooperation with Global Flood Defence Systems Ltd by the first of January 2014.
Global Flood Defence Systems LTD in the UK is therewith not longer allowed to manufacture, marketing and distribute the Self Control Flood Barriers.
Infringements of our patents by any party, which have not explicit our written approval, will be prosecuted by court.'
10 The copy of the second Website Notice in the evidence was dated 4 March 2014. It was headed "Important warning with regard to global Flood Defence Systems!" and stated that licences granted to the claimants had come to an end. It went on as follows:
'Global Flood Defence Systems Ltd and UK Flood Barriers Ltd are, however, still marketing the Self Closing Flood Barrier as is shown on their website.
At this stage, we have taken legal proceedings against Global Flood Defence Systems Ltd and UK Flood Barriers Ltd for infringing our patent rights as well as our intellectual property rights.
Under these circumstances we need to advise you that Infringements of our patents by any party (also buyers), without our explicit and written approval, will be brought to court.'
11. The letter to Sir Peter Luff MP of 3 March 2014 included this:
'We have seen an invitation of UK Flood Barriers for the reception of "Britain Prepared - A Flood Resilient Society on the 11 March 2014 at the Churchill Room, House of Commons, London SW1A 0AA.
On the list of speakers we see Mr. Frank Kelly CEO of UK Flood Barriers. Therefore it is our duty to warn you that Mr Kelly will speeks in his presentation about the Self Closing Flood Barriers, he is not allowed to do this and will probably suggest the stakeholders that Global Flood Defence Systems Ltd or UK Flood Barriers Ltd are the inventors and / or own the IP of these or same specific barriers.
At this moment we have taken proceedings against Global Flood Defence Systems Ltd for infringing our patents and the intellectual property rights.
We will warn you that infringements of our patents by any party (also buyers), which have not explicit our written approval, will be prosecuted by court.
The new distributor of the Self Closing Flood Barriers (SCFB) for the UK and Ireland is Flood Control International Ltd at Tavistock, Devon.
When you need more information please contact us or our Sollicitor Mr. Richard Arnold from Quality Solicitors Wilson Brown at Kettering"
There was a third notice put on to the home page of the first defendant's website on about 7 March 2014 but it adds nothing."
S.70 (1) of the Patents Act 1977 provides:
"Where a person (whether or not the proprietor of, or entitled to any right in, a patent) by circulars, advertisements or otherwise threatens another person with proceedings for any infringement of a patent, a person aggrieved by the threats (whether or not he is the person to whom the threats are made) may, subject to subsection (4) below, bring proceedings in the court against the person making the threats, claiming any relief mentioned in subsection (3) below."
There was no doubt that those notices and the contents of the letter to Sir Peter were "threats" within the meaning of that section or that the claimants were persons aggrieved. Right now the defendants don't actually have a patent that covers the claimants' flood defence products though they have applied to the European Patent Office for one.  The claimants sued the defendants for groundless threats and applied for summary judgment under CPR Part 24.

The only defence to the application was justification under s.70 (2A):
"(2A) If the defendant or defender proves that the acts in respect of which proceedings were threatened constitute or, if done, would constitute an infringement of a patent -
(a) the claimant or pursuer shall be entitled to the relief claimed only if he shows that the patent alleged to be infringed is invalid in a relevant respect;
(b) even if the claimant or pursuer does show that the patent is invalid in a relevant respect, he shall not be entitled to the relief claimed if the defendant or defender proves that at the time of making the threats he did not know, and had no reason to suspect, that the patent was invalid in that respect."
The defendants relied on the provision that the rights granted by a patent are backdated to the date of grant by s.69 (1)  of the Patents Act 1977 and they argued that even though they didn't have a patent just now they might have a patent by the time of trial.

This question had arisen in  Patrick John Brain v Ingledew Brown Bennison & Garrett [1996] FSR 341 which the judge considered between paragraphs [21] and [24]:
21 The related matter which remained in dispute in the appeal was this: given that a party could sue for a threat to bring proceedings to enforce s.69 rights, was there a defence of justification available to the party who issued the threat? (At the time of the Brain litigation such a defence was provided for by what was then s.70(2) of the Act. The change introduced by the repeal of that subsection and the introduction of s.70(2A) makes no difference here.) Aldous LJ observed that it would be illogical to provide for a cause of action for a threat to bring proceedings for infringement of s.69 rights and yet deprive the threatening party of a defence of justification. Accordingly there is such a defence. He said this (at p.344):
'Section 70 is designed to prevent groundless threats of patent proceedings being made. Thus it would be illogical to construe section 70 as giving rights to a person threatened with proceedings for infringement of a patent albeit in respect of pre-grant acts, if the threatener could not establish that his threats were proper. That illogicality does not in my view arise. Section 70(2)(a) allows the threatener to avoid liability if he proves that the acts in respect of which the proceedings were threatened constitute or if done would constitute an infringement of a patent. The acts, to be an infringement, must fall within section 60. That section is to be read subject to section 69. Thus a threat of the type contemplated in this case, is a threat to bring proceedings when the patent is granted for acts which are actionable acts by reason of section 69. No difficulty arises in deciding whether the threats can be justified, provided appropriate steps are taken to ensure the patent is granted before the action comes to trial.'
22. Thus, Aldous LJ's primary view was that where a defence of justification was being run by a party threatening to bring proceeding for infringement of s.69 rights, that party should make sure that the patent is granted before trial. He went on to consider what the position might be if the patent had not been granted by then. He said this (at p.348):
'If, however, there is an extraordinary delay in grant of the patent, the court could perhaps look at the published specification and decide, upon the balance of probabilities, whether the alleged acts will infringe the patent when granted and whether a valid patent will be granted.'
23. Hobhouse LJ agreed that threats to bring proceedings for infringement of s.69 rights could be brought under s.70(1) and justified under what was then s.70(2). But he was not persuaded that a defence under s.70(2) could ever be available unless the patent had been granted before the trial (at p.355). Beldam LJ agreed with both judgments.
24. Following the appeal the plaintiffs applied to strike out the defence of justification under s.70(2) on the ground that the second defendant's patent application was still pending before the European Patent Office. As a consequence the defendants were unable to give particulars of each patent claim which they said would be infringed or of the respective alleged infringing acts. Laddie J ([1997] FSR 271) considered the earlier judgment of the Court of Appeal. He ruled that there was a strict limit to the defence of justification available under s.70(2) where the threat had been in relation to s.69 rights: there could be no such defence if the patent had not been granted by the time of the trial."
The claimants made the point that the defendants had not alleged that they would have a patent by the time of trial. The judge took the view that this matter should not turn on a pleading point and gave the defendants' permission to amend so that they could rely on s.70 (2A).

Judge Hacon then considered whether the contention that the defendants would have a patent by trial was sufficiently plausible to resist an application for summary judgment and decided at paragraph [35] that it was:
"Mr van den Noort's evidence that he had been informed by the second defendant's patent attorney that the patent will be granted in the near future is at least something, and it has not been contradicted by the claimants. Secondly, it is apparent from the exchanges between the patent attorney and the EPO that the prosecution of the patent has reached the stage at which the patent attorney is submitting claims intended to satisfy objections raised by the EPO examiner. Of course the examiner may never be satisfied. Alternatively, these exchanges might go on for a long time, more than a year, before the EPO is finally prepared to grant the patent. But taking a realistic view on the limited information I have, it seems to me that there is a real prospect (as opposed to a fanciful one) that the patent will be granted in the course of this year. Such is the crowded state of the IPEC diary currently, absent an application for a speedy trial (there has been none) the trial will not be fixed until December 2015. For those reasons I reject Mr Campbell's first argument."
The claimants also argued that the threats could never be justified but that would have required argument over the construction of the claims of the application that was not appropriate for summary judgment proceedings. They also contended that any defence under s.70 (2A) should apply now. The judge rejected that on the ground that it was incompatible with his earlier finding that the defendants would be entitled to rely on that subsection if they get their patent by the date of trial. Finally, His Honour rejected the claimants application for an order that leave to defend should be conditional upon the defendants paying £50,000 into court as he did not believe that this matter was to be approached as if it were a runner-up prize. The need for such relief must always be justified on the facts and will only be granted if it is necessary to do justice between the parties. Although the defendants had made an incorrect statement in alleging that infringement proceedings had already started that was not a sufficient ground for the order sought by the claimants.

This is an interesting decision and possibly an important one as it extends the Court of Appeal and Mr Justice Laddie's reasoning in Brain. There was a lot of disappointment among practitioners when the Law Commission rejected the opportunity to get rid of threats actions. They are definitely a dampener on litigation for they reinforce the impression that IP is an arcane area of the law that is best avoided. In view of the reforms to IPEC, the introduction of the small claims track and the advent of the Unified Patent Court can it still be said that IP litigation is so much more awful than any other type?

If anyone wants to discuss this judgment or threats actions in general give me a ring on Monday on 020 7404 5252 or use my contact form.


rob nyman said…
This is an interesting decision!

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