Intellectual Property (Unjustified Threats) Bill

Houses of Parliament

Source Wikipedia

Jane Lambert

The action arising from groundless threats has been one of the most perplexing features of our intellectual property law both for foreign owners of IPR in this country and their legal advisors (see Prince Plc v Prince Sports Group Inc [1998] FSR 21) and even non-specialist lawyers in the United Kingdom (see Brain v Ingeledew Brown Benson and Garrett and another [1996] FSR 341). Under s.70 of the Patents Act 1977 and similar provisions in other IP legislation, a letter threatening proceedings that would be quite acceptable in most countries and even in the UK in respect of most other causes of action can land the lawyer or attorney who wrote it, and the client on whose behalf the letter was written, in a whole heap of trouble that sometimes results in an infringer getting away with his or her wrongdoing.

S.70 (1) 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."

The remedies in s.70 (3) are a declaration or, in Scotland, declarator to the effect that the threats are unjustifiable, an injunction or, again in Scotland, an interdict against the continuance of the threats and damages in respect of any loss which the claimant or pursuer has sustained by the threats.  S. 70 (4) exempts threats to those who are alleged to have made or imported infringing products or using an infringing process even if they accuse that person of other infringing acts at the same time.

The words "by circulars, advertisements or otherwise" are very broad.  As Judge Hacon observed in  FH Brundle v Perry  [2014] EWHC 475 "a letter or other communication contains a threat of proceedings if a reasonable person, in the position of the recipient of the letter, with his knowledge of all the relevant circumstances as at the date on which the letter was written and taking the letter as a whole, would have understood the writer of letter to intended to convey an intention to enforce his rights by bringing legal proceedings." A threat can be made in a polite correspondence between business people even where solicitors and litigation are not mentioned just so long as the consequences of infringement are clear (see Speedcranes Ltd v Thomson and another [1978] RPC 221). The fact that a recipient might not take the threat very seriously is nothing to the purpose as Judge Hacon observed in Brundle.

As I said above, "the person making the threats" can be a solicitor or patent or trade mark attorney. The opportunity to sue the legal representative as well as the client can be used ruthlessly by those in the know to induce an immediate conflict of interest between lawyer and client forcing the client to find another legal team at very short notice. The additional costs of fighting a threats action can force an SME to abandon an otherwise legitimate claim simply by exhausting its resources. In an extreme case, it can even ruin the IPR holder (see Perry v F H Brundle and others [2017] EWHC 678 (IPEC) (30 March 2017) which I discussed in General Civil Restraint Orders in IPEC - Perry v Brundle 18 April 2017). The existence of threats actions is possibly one of the reasons why many SME in the UK want to have as little to do with IP as possible, By contrast, the Mittelstand in Germany is responsible for many of the 31,815 European patent applications made from that country last year compared to 7,226 from Britain.

Despite those vices, provisions enabling an action to be brought to restrain groundless threats have been part of our patent law since 1883 and they are there for a reason. In Halsey v Brotherhood (1881-82) LR 19 Ch 386 "both Mr Halsey and Mr Brotherhood manufactured steam engines. Mr Brotherhood, however, had a flourishing business based, in part, on his habit of 'systematically threatening' to sue Mr Halsey’s customers for infringing his patents. He never did sue: threats were enough. When the customers received a threat, they would stop buying Mr Halsey’s engines. Mr Halsey sued Mr Brotherhood to try to stop the threats, but he lost. Mr Halsey could not show that Mr Brotherhood had acted with malice, which was what the law required at that time" (see Patents, Trade Marks and Designs: Unjustified Threats Law Commission No 360 12 Oct 2015). IP litigation in the UK continues to be expensive and if it is conceivable that a supplier's goods may infringe a third party's IPR it is far cheaper, easier and safer for a distributor to remove those goods from its shelves than argue the merits in court.

An attempt to reform s.70 was made by s.12 of the Patents Act 2004 after extensive consultations in the Patent Office (now the IPO) in which I participated. The reforms resulted in new difficulties, one of which was that s.70 differed from the threats provisions in other statutes and statutory instruments in that there was no equivalent of s.70 (4) in those other enactments. HM government's accession to the Agreement on a Unified Patent Court prompted another look at threats actions which resulted in Law Commission reports (see Patents, Trade Marks and Design Rights: Groundless Threats April 2014 and Patents, Trade Marks and Designs: Unjustified Threats  12 Oct 2015). The second of those reports contained a draft bill which Baroness Neville-Rolf, the former Minister for Intellectual Property, introduced into the House of Lords on 19 May 2016. The Houses of Parliament website reports that that bill "was considered at Report Stage and Third Reading on Tuesday 21 March 2017 and passed and will now be returned to the House of Lords without amendment and so awaits Royal Assent" (see Intellectual Property (Unjustified Threats) Bill (HC Bill 113).

The bill is very short consisting of no more than 9 clauses. The first amends the Patents Act 1977. The next 6 amend The Trade Marks Act 1994, The Community Trade Mark Regulations 2006, The Registered Designs Act 1949, Part 3 of the Copyright, Designs and Patents Act 1988 and The Community Design Regulations 2005 respectively. The remaining provisions deal with the geographical extent of the legislation, commencement and the short title of the proposed Act.

Clause 1 replaces s.70 of the Patents Act 1977 with 7 new sections numbered s.70, s.79A, s.70B, s.70C, s.70D, s.70E and s.70F respectively and makes consequential changes to other provisions of the Act. A new s.70A (1) will provide that:

"Subject to subsections (2) to (5), a threat of infringement proceedings made by any person is actionable by any person aggrieved by the threat."

The new s.70 (1) will provide that:

"A communication contains a 'threat of infringement proceedings' if a reasonable person in the position of a recipient would understand from the communication that—
(a) a patent exists, and
(b) a person intends to bring proceedings (whether in a court in the United Kingdom or elsewhere) against another person for infringement of the patent by—
(i) an act done in the United Kingdom, or
(ii) an act which, if done, would be done in the United Kingdom."

S.70A (2) - (5) will provide that the following communications are not actionable even if they contain a threat of infringement proceedings where:

• the infringement is alleged to consist of making or importing a product for disposal where the invention is a product or where the invention is a process, using the process;
• the infringement is alleged to consist of an act which, if done, would constitute an infringement of a kind mentioned above;
• the threat is made to a person who has done, or intends to do, an act mentioned above in relation to a product or process, and the infringement alleged to consist of doing anything else in relation to that product or process; or where
• the threat is not an express threat and is contained in a permitted communication.

S.70B (1) will provide that a communication containing a threat of infringement proceedings is a “permitted communication” if 

• the communication, so far as it contains information that relates to the threat, is made for a permitted purpose, 
• all of the information that relates to the threat is information that is necessary for that purpose and 
• the person making the communication reasonably believes it to be true. 

Giving notice that a patent exists, discovering whether, or by whom, a patent has been infringed and giving notice that a person has a right in or under a patent, where another person’s awareness of the right is relevant to any proceedings that may be brought in respect of the patent are all examples of a "permitted purpose" (see the new s.70B (2)). S.70B (3) will also permit the court to treat any other purpose as a “permitted purpose” if it considers that it is in the interests of justice to do so provided that it has regard to the nature of the purposes listed in s.70B (2). However, communications containing the following requests can never be for a permitted purpose:

• to cease doing, for commercial purposes, anything in relation to a product or process,
• to deliver up or destroy a product, or
• to give an undertaking relating to a product or process.

S.70B (5) will provide that the following information  will be regarded as necessary for a permitted purpose:
(a)  a statement that a patent exists and is in force or that an application for a patent has been made;

(b) details of the patent, or of a right in or under the patent, which—
(i) are accurate in all material respects, and
(ii) are not misleading in any material respect; and
(c) information enabling the identification of the products or processes in respect of which it is alleged that acts infringing the patent have been carried out.

S.70C (1) will provide that the remedies for groundless threats will be the same as now, namely:

• a declaration that the threat is unjustified;
• an injunction against the continuance of the threat; and 
• damages in respect of any loss sustained by the aggrieved.

It will continue to be a defence under the new s.70C (3) for the person who made the threat to show that the act in respect of which proceedings were threatened constitutes (or if done would constitute) an infringement of the patent.by reason of the threat.   Also, it will be a defence under s.70( (4)  for the person who made the threat to show that, despite having taken reasonable steps, he or she has not identified anyone who has made or imported or threatened to make or import a patented product, or used a patented process which is the subject of the threat, and that the person making the threat notified the recipient, before or at the time of making the threat, of the steps that he or she had  taken. 

Under the new s.70D (1) a lawyer or patent or trade mark attorney will no longer be liable for groundless threats provided the following conditions are met:
(a) in making the communication the lawyer or attorney was acting on the instructions of another person, and

(b) that other person is identified at the time the communication is made (see s.700D (3)).

A lawyer or attorney who relies on s.70D (1) must prove, if so required, that at the relevant time:
(a) he or she was acting as a professional advisor, and
(b) the conditions mentioned above were met.

The exculpation of a professional advisor does not exonerate his or her client and, of course, it does not excuse the advisor from a professional negligence claim by the client.

Clause 2 replaces s.21 of the Trade Marks Act 1994 with new sections 21, 21A, 21B, 21C, 21D, 21E and 21F. The effective provision will be s.21A (1) which provides:

"Subject to subsections (2) to (6), a threat of infringement proceedings made by any person is actionable by any person aggrieved by the threat."

S.21A (2) to (6) correspond to the new s.71A (2) to (5) of the Patents Act 1977 except that it will no longer be actionable to threaten infringement proceedings for an act other than

"(a) applying, or causing another person to apply, a sign to goods or their packaging,
(b) importing, for disposal, goods to which, or to the packaging of which, a sign has been applied, or
(c) supplying services under a sign"

provided that one or more of the above acts is also alleged.  As with s.71A (5), s.21A (6) will provide that a threat of infringement proceedings which is not an express threat will not be actionable if it is contained in a permitted communication. The definitions of permitted communication and permitted purpose set out in s.21B are the same as in s.70B. The remedies and defences in s.21C are similar to those in s.70C of the amended Patents Act 1977. A similar conditional exculpation of lawyers and attorneys is provided by s.21D.

Clause 3 of the bill amends reg. 6 of the Community Trade Mark Regulations by extending the new sections 21 to 21F to European Union Trade Marks.

Clause 4 (3) amends the Registered Designs Act 1949 by replacing s.26 with new sections 26, 26A, 26B, 26C, 26D, s.26E and s.26F. The new s.26A (1) provides:

"Subject to subsections (2) to (5), a threat of infringement proceedings made by any person is actionable by any person aggrieved by the threat."

S.26A (2) to (5) are similar to s.70A (2) to (5) of the amended Patents Act 1977. Once again, the definitions of permitted communication and permitted purpose set out in the new s.26B are similar to those in s.70B of the Patents Act 1977 and s.21B of the Trade Marks Act 1994 as amended. Remedies and defences similar to those provided by the Patents Act and Trade Marks Act, including the conditional exculpation of lawyers and attorneys, are provided by the new sections 26C and 26D of the Registered Designs Act 1949.

Clause 5 amends s.253 of the Copyright, Designs and Patents Act 1988 in much the same way as clause 2 amends the Trade Marks Act 1994.  S.253 of the 1988 Act is replaced by a new s.253 and a new s.253A to s.253E with provisions corresponding to s.21 to s.21E of the Trade Marks Act 1994.

Clause 6 amends reg. 2 of the Community Design Regulations 2005 by substituting new regs. 2, 2A, 2B, 2C, 2D, 2E and 2F for the existing reg. 2. These new regulations are structured in similarly to s.70  to s.70F of the Patents Act 1977 and s.26 to s.26F of the Registered Designs Act 1949 as amended.

The new Act will extend to the whole of the UK and can be extended to the Isle of Man or other territories by order in Council. The substantive provisions of the Act come into force on a day appointed by the Secretary of State.

If anyone wants to discuss this article or threats action in general, he or she may call me on 020 7404 5252 during office hours or send me a message through my contact form.