IP Insight: ‘Is my letter before action an unjustified threat of IP litigation?’

a time to be especially cautious

In these testing times, we are already seeing the impacts the resulting commercial squeeze has had a large number of businesses and individuals in the UK.

The surrounding hardship may, unfortunately, present an opportunity for those more secure rights holders to impact wounded competitors through threats of litigation and costs. In this respect, the last thing anyone wants is to receive is a threat of legal action and be burdened with thinking about how to respond to it.

At this juncture, it is now more important than ever to be aware of where the boundaries lie, concerning justified and unjustified threats to sue for infringement of intellectual property rights, given that those making unjustified threats, in relation to IP rights, may be liable for the damage in respect of loss caused to any aggrieved party.

This IP Insight is relevant to lawyers and parties who may have received a threat of intellectual property litigation and sets out what you need to look out for when thinking how to respond.

The law

The provisions governing unjustified threats are found in the Intellectual Property (Unjustified Threats) Act 2017 ("The Act") came into force on the 1st of October 2017. Accordingly, this IP insight focuses on the position of unjustified threat on or after this date.

Please note also note actions for unjustified threats do not apply to copyright, unregistered trade marks (passing off) or database rights.

What is the test for what counts as a threat?

1. Whether a reasonable person viewing the notification would under the notification that a right exists; and
2. Whether a reasonable person would understand that a person intends to bring proceedings against another person for an act of infringement of the right committed in the UK.

Here are a couple of phrases to watch out for to determine whether a threat is being made:

• ‘request to stop’;
• ‘cease and desist’;
• ‘provide us with the following written undertakings’;
• ‘We are entitled to seek an injunction, delivery up or destruction of infringing items’;
• ‘seeking damages or an account of profits, legal costs and interest’.

Does the threat have to be a threat to bring UK proceedings?

No. It is whether a reasonable person understands the threat to relate to infringing acts done in the UK.

Take for example a statement made on a Swedish website A, claiming that certain pieces of lounge furniture, made by manufacturer B, infringe A’s registered Design right. Additionally, A writes that they will take all reasonable measures to stop any infringement of its registered design right.

The reasonable person, a UK online furniture seller, who has purchased this allegedly infringing furniture from manufacturer B could recognize this as a threat to sue them for purchasing infringing items in the UK.

The new law shifts the emphasis from where proceedings are threatened to where the acts take place.

Who can bring proceedings for making unjustified threats?

It isn't just the person who is threatened who can bring a claim for unjustified threats. The provisions also allow for any person who is aggrieved by a threat to take action.

As such, it is important for those making threats to think about the wider impact of the claim they’re making.

For example, a retailer is threatened and as a result, takes the alleged infringing furniture from their listing as a precaution and pauses any further orders. The manufacturer of the furniture has had its distribution chain damaged may claim that the threat was unjustified. 

Exceptions which can make a threat non-actionable?

There are three types of exceptions within the act that make a threat non-actionable. These are:

Primary act exception

Here action for unjustified threats is not available where the threat is in respect of an allegedly infringing primary act. For example, where trade mark infringement is alleged, the primary acts are:

(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.

This exception is intended to encourage those enforcing their rights to go after the source of the infringement, that is, those applying an infringing sign, rather than those lower in the distribution chain who are not really involved in the alleged infringement.

Primary actor exception

A person who has carried out, or intends to carry out, secondary acts, such as selling or distributing infringing products, would usually be able to bring proceedings for unjustified threats against them. However, this is not available where they are also committing primary acts of infringement (see above).

Permitted communication exception

Provided no express threat has been made.

Permitted communications are allowed where, where the communicator is trying to:

1. Find out more about the primary infringer or infringement;
2. Achieve a permitted purpose, for instance, to notify the recipient of their rights, as with acts of secondary infringement where knowledge is relevant. There may be any other permitted purposes which the court may deem in the interests of justice – however, some purposes such as requesting that a person cease from doing something for commercial purposes in relation to a sign or product, or requesting that products are delivered up or destroyed would not amount to a permitted communication.
3. All information must be necessary for achieving the permitted purpose and must be reasonably believed to be true by the writer. For example, a communication making claims of hyperbolised amounts of damage would not be a permitted communication.

Defences

After considering whether or not you have received a threat, it is important to establish whether the communicator’s threat is justified by:

1. The justification that the act in question amounts to an infringement;
2. That reasonable steps have been taken and find the primary infringer before you have been contacted. (e.g. where a primary infringer has changed address or trade under a different name or company). If this cannot be proven the communicator will have made an unjustified threat.

What are the reasonable steps?

IPO guidance has suggested that it means using the permitted communication to try and find the identity of the primary infringer, would be enough avail you of the defence. However, if the communicator has already been able to find one of the primary infringers then that will take that defence away from them.

The main principle is that the IP right owner should direct their attention to finding the primary infringer if he possibly can, and only then can he start to threaten the secondary infringer.

What Remedies are available?

The remedies for unjustified threats were not altered by the Act. The claimant who has been aggrieved by the threat may seek:

- A declaration that the threat is unjustified;

- An injunction to prevent further threats against the IP owner or other person making the threat.

- Damages in respect of any loss sustained by the aggrieved person due to the threat (i.e. the supply chain, manufacture i.e. of goods)

Liability of a solicitor

Under the old Act, threats actions were often used to drive a wedge between the solicitor and the client where a threat was on the edge of being unjustifiable. The problem would be that the solicitor may be found personally liable if the threat was found to be unjustifiable. However, under the new Act, solicitors and other regulated professional advisers are not liable personally for unjustified threats.

The only criteria for this aspect are:

1. that the solicitor is acting from instructions from the client
2. that the client is identified at the time the communication is made; and
3. that the person is acting in the capacity of being a solicitor or a patent attorney or trade mark attorney or another legal advisor who is regulated by a regulatory legal body.

Our Insight

If you in the position where you feel aggrieved as a consequence of a threat being made to another or receiving a threat yourself, the first thing to do is not to panic, nor to stuff it in a drawer and ignore it.

Instead, we would encourage that you investigate the communication, gather as much detail as you can and work through the above points.

At Virtuoso Legal, part and parcel of what we do is dealing with large quantities of correspondence. In this respect, we are well placed to champion your inquiries in this area. If you would like to find out more about how we can help, please get in touch with our team.