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Reforms to the groundless threats doctrine provide a safe harbour to IP owners

Posted: 21/06/2017

The doctrine of unjustified, or groundless, threats provides that anyone ‘aggrieved’ by a threat of infringement of an intellectual property right in the UK (except for copyright) can bring a lawsuit against the person or entity making the threat. The problem for IP rights owners, however, is that there are legitimate reasons why they might wish to communicate with the alleged infringer. For instance, the Civil Procedure Rules (the rules that govern how litigation must be begun and conducted in England and Wales) require rights owners to give potential infringers full information about the relevant right, the alleged act of infringement, and how to resolve any potential dispute without going to court. It is therefore a fine balancing act between giving the right amount of information, and giving the kind of information that might backfire on the IP right owner.

To elaborate, in the UK, if the recipient of a communication (ie a letter, email, or even an advertisement) alleging infringement is, in fact, not infringing and the recipient suffers loss as a result of the wrongful allegation, the recipient can sue pursuant to this doctrine and be awarded damages for that loss. In fact, the ‘aggrieved’ person need not be the recipient of the communication at all. A company whose customers are contacted by a patent owner, for instance, could bring a suit if its commercial interests are affected, and it is not infringing.

Generally speaking, threats to sue for infringement are unjustified where they are made in respect of an invalid right or where there has been no infringement. Where the threat is based on an issued patent, proof of infringement constitutes a defence (ie the threat is justified). However, where the threat action relates to a threat of infringement made by a patentee in relation to a patent application where the application has not been granted before the date of trial, the patentee may be precluded from presenting a defence. The reason for this is that such a threat cannot be justified, because it has not been made in relation to a granted patent; it is not possible to infringe a patent application that has not issued. See Global Flood Defence Systems Ltd & Anor v Johann Van Den Noort Beheer BV & Ors [2016] EWHC 99 (IPEC).

The doctrine, which for patents is codified into Section 70 of the Patents Act 1977, is a trap for the unwary and has long been criticised for creating uncertainty for patent owners, not least because what constitutes an actionable threat has been poorly defined.

In October 2015, the Law Commission for England and Wales released its final report on proposed reform to the doctrine, laying the groundwork for the Intellectual Property (Unjustified Threats) Act 2017. The Act incorporating many of the Law Commission’s recommendations received royal assent on 27 April 2017, marking the last step in the legislative process. It is expected to come into force in October 2017.

The Act introduced a number of important changes to the law, including harmonising the doctrine across the various intellectual property rights, limiting legal advisor liability, and clarifying what does and, crucially, what does not constitute an actionable threat.

The new framework

Does the communication contain a threat?

A communication is a threat if it would be understood by a reasonable person in the position of a recipient to mean that an IP right exists and that the IP owner intends to bring an infringement proceeding whether in the UK or elsewhere against another person for infringement of the IP right by an act that is done in the UK or which, if done, would be done in the UK.

The communication is evaluated from a point of view of a reasonable person in the position of a recipient. The intention of the person who is threatening to sue is irrelevant. To be actionable, a threat need not be contained in a letter addressed to a recipient. Threats on a website, oral threats and even implied threats could each be actionable.

If the communication contains a threat, does it refer to acts of a primary infringer?

A threat of infringement proceedings is actionable by any person aggrieved by the threat, unless the threat is of a type that precludes an aggrieved person from taking action. There are three types of exclusion: the threat is not actionable because – of the subject matter of the threat; of the person to whom the threat is addressed; or, because it is contained in a permitted communication.

Two of the exclusions turn on the distinction between primary acts of infringement and secondary acts of infringement. Under the Act, primary acts of infringement are those that are perceived as more likely to cause damage to the patent holder, such as manufacture or importation. By contrast, secondary acts of infringement are those further down the supply chain; for example, advertising or selling a product made by somebody else.

Excluded by the subject matter
Where the threat refers to specified primary acts for the particular right (in the case of patents, manufacture by that person or importation by a person where the invention is a product or where the invention is a process, using the process), an aggrieved person may not bring a claim for unjustified threats. The justification for this provision is that the primary actors are usually the source of the infringement and are more likely to be in a position to challenge the threat in a full infringement trial.

Threats made in relation to secondary acts should be actionable, subject to the following exceptions.

Excluded by the person to whom the threat is addressed
So, threatening a primary act of infringement will give no right for the recipient of the communication (or an aggrieved person) to bring an unjustified threats claim. But what of the position where the threat also includes (or is limited to) a threat in relation to a secondary act – for example, promoting or selling? In that case, whether a person aggrieved can bring a claim depends on his identity. Thus, if the threat is made to a primary actor, the threat will not be actionable whether or not it is made in relation to a primary or a secondary act. If it is not made to a primary actor, threats in relation to secondary acts will be actionable.

Excluded by virtue of a 'permitted communication' for a 'permitted purpose'
Given the previous uncertainty surrounding what constitutes an unjustified threat, the introduction of the concept of a “permitted communication”, which creates a safe harbour for owners of intellectual property rights, is a welcome change. For patents, a permitted communication includes a communication for the purpose of giving notice that a patent exits, discovering whether or by whom a patent has been infringed, and to give 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.

The Act specifically states that 'permitted purpose' does not include requesting a person to cease commercially using anything in relation to the infringed right, deliver up or destroy goods relating to the infringed right, or give an undertaking relating to their use of the infringed right.

If a threat is made and it does not fall within one of the three exclusions, then the communication is an unjustified threat and, absent a defence, the person making the communication is liable under the doctrine.

Remedies under the Act remain the same in that the recipient of an unjustified threat may get a declaration that the threat is unjustified, an injunction against and/or damages from the party who made the threat.

Changes to advisor liability

Prior to the reform, both the owner of the intellectual property right which is the subject of the threat and the lawyers who sent the letter alleging infringement could be held liable for the damages arising from the groundless threat. The provision was known to be used as a tactic to disrupt the relationship between client and lawyer. To remedy this, the Act introduces new protections for professional advisers, including to those that are outside the UK and EU.

Why does this matter?

The Act is important to businesses because it introduces the concept of a ‘permitted communication’, providing much needed clarity to those wishing to enforce their intellectual property rights. The owner of an intellectual property right is thus able to notify a potential infringer of the existence its intellectual property rights without the risk that the communication would be seen as an unjustified threat. However, this remains a complex area of the law and it is prudent to obtain legal advice before contacting potential infringers.

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