Intellectual Property Threats Reforms – Will IP Owners Benefit?
The Intellectual Property (Unjustified Threats) Act 2017 (the “Act”) comes into force on 1 October. It will reform UK law on unjustified threats in intellectual property infringement disputes. What will change and will this benefit IP owners?
Currently, UK legislation provides that a person (typically the rightsholder) must not threaten another person with proceedings in a UK court for infringing a patent, registered trade mark, registered design or unregistered design. If a threat is made, then anyone whose commercial interests are, or are likely to be, adversely affected by the threat (any ‘person aggrieved’) can issue proceedings against the maker of the threat (a ‘threats action’) seeking damages, an injunction to prevent the threat being repeated and a declaration that the threat was unjustified. This can come as something of a shock to a rightsholder who anticipated leading the infringement action in their chosen venue as claimant, but who suddenly finds themselves on the wrong end of proceedings as defendant, with the consequent loss of control of the action and the risk of being subject to financial penalties. A professional advisor, such as a solicitor or patent attorney, can be jointly and severally liable with their client for any threats made.
Threats laws were introduced to prevent threats being misused to stifle competition. Previously, Company X could write to the retailers of Manufacturer Y’s product alleging that (for example) the product infringed its patent. The risk of becoming embroiled in expensive and complex IP litigation was often enough to persuade the retailers to stop selling the product. The mere threat to sue was successful in getting Y’s product off the market, without X needing to issue proceedings, or even demonstrate that the product did actually infringe its patent at all.
Although encouraging competition and innovation is undoubtedly a laudable objective, one unfortunate consequence of the threats provisions is that IP owners are often reluctant to send a meaningful letter before action to a suspected infringer at all, with the consequent loss of opportunity to achieve a settlement and save costs. It was this key criticism, and the inconsistent treatment of the four IP rights across the threats provisions, that prompted a review of the existing law, leading to the introduction of the Act.
The Act does not radically reform the law, much of which is retained, including the objective assessment of whether a communication amounts to a threat, and the differing treatment of primary infringers (to whom a letter before action may be freely sent in certain circumstances) and secondary infringers (with whom pre-action communication is allowed only in exceptional circumstances). The Act clarifies that, post 1 October, a threat will only be actionable if it would be understood as a threat to bring proceedings in respect of an infringing act done, or intended to be done, in the UK – the threat need no longer be to bring proceedings in a UK court. In addition, regulated professional advisors will be exempt from liability if a threat is made on the instructions of a client and the client is identified in the letter before action.
The current law contains pockets of safety allowing letters before action to be sent to suspected infringers without falling foul of the threats provisions. The Act extends these pockets meaning that letters before action may be safely sent in a greater number of circumstances than before, facilitating pre-action negotiation and settlement. This table summarises the key changes around these safety pockets.
The reforms introduced by the Act may not go as far as some rightholders had hoped. The threats provisions remain in place so careful consideration must still be given to sending a letter before action to ensure that it falls within what is permitted by the Act, and that the recipient does not also have another cause of action, such as malicious falsehood or unlawful interference with contractual relations. However, rightsholders will generally benefit from the reforms by being able to communicate with suspected infringers more freely than before, potentially avoiding litigation, preserving commercial relationships and saving costs.