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This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

Inside IP: Groundless threats
 Briefing 
Date
11 April 2016

Inside IP: Groundless threats

Global Flood Defence Systems Ltd & Anor v. Johann Van Den Noort Beheer BV & Ors [2016] EWHC 99 (IPEC)

key message

The recent decision of the Intellectual Property Enterprise Court in Global Flood Defence Systems Ltd & Anor v. Johann Van Den Noort Beheer BV & Ors serves as a reminder that the groundless threats doctrine may present a trap for the unwary seeking to enforce their patent rights in the UK. The doctrine provides that anyone "aggrieved" by a threat of patent infringement can bring a lawsuit against the person or entity making the threat.  In the usual circumstances, where the threat is based on an issued patent, proof of infringement constitutes a defence.  However, where the threat action relates to a patent application and where the application does not proceed to grant before the date of trial, its owner may well be precluded from presenting that defence.  

the background

A patent owner may seek damages for acts of infringement that occur after the publication of an application provided that the infringer would have infringed not only the patent but also the claims in the form in which they were contained in the application immediately before it published - see S 69 of the Patent Act 1977.  A problem arises where the potential infringers bring suit alleging that the threats are groundless, and the patent application does not issue before trial of the groundless threats issue, which is what occurred in this case.

The threats at issue in Global Flood Defence Systems, were made on three occasions on a website of the owners of a European Patent Application and in correspondence with a third party.  Following the termination of a licence agreement between the claimants and the defendants, the latter objected to the continued use of their flood defence technology and alleged infringement of their patent application.

The former licensees brought proceedings, alleging that the defendants' threats were groundless and actionable.  In response, the owners of the technology and former licensors countered that the threats were justifiable because "the acts in respect of which proceedings were threatened constitute or, if done, would constitute an infringement of a patent."  See S 70(2).

The European Patent Office issued a decision to grant the European Patent Application on 16 December 2015, seven days after the second day of trial.

Because the deadline of the trial date had been missed, the claimants applied for summary judgment arguing that the defendant patent owners could not justify their threats and a judgment on this aspect of the case should be entered against them. 

the result

Because the grant of the patent was imminent, the court used its discretion to adjourn the adjudication of the issue of threats. 

Judge Hacon relied on a Court of Appeal decision in Brain v. Ingledew Brown Bennison & Garrett (No.2) [1997] F.S.R. 271, in which Justice Laddie observed:

"If [a patent owner defendant] chooses to take the risk of issuing threats on the back of an application and not a granted patent, he cannot complain if, at the date of the trial, one of the statutory defences under the Act [proof of patent infringement] is not available to him."

However, in his decision, Justice Laddie also appears to have contemplated that in some limited circumstances, where a final resolution in the EPO is imminent, threats proceedings could be adjourned until after the grant of the patent.

Judge Hacon rejected the claimants' arguments against adjournment. Specifically, he rejected that there should be a bright line rule where the owner of a patent application could never present a justification if the patent was not granted before the trial date. He also rejected the three arguments as to why he should not exercise his discretion to adjourn the trial date in this instance:

  1. The defendants had not prosecuted the European Patent Application with sufficient diligence:  Judge Hacon did not see how this would impact his discretion, noting that in any event defendants had sought expedition of grant from the EPO. 
  2. The proceedings were started some 19 months earlier, and delaying the trial date was not ideal:  Judge Hacon found that the delay was not caused by the claimants.
  3. The defendants breached an injunction against further threats by sending a letter to a Spanish company: Judge Hacon found this act had no bearing on the UK proceedings as there was no suggestion that the Spanish company was doing anything related to the patented technology within the UK.

Consequently, Judge Hacon exercised his discretion to adjourn the proceedings, giving the defendants the opportunity to defend the allegations of threats on the ground that these were justified.

why is this important?

The doctrine has long been criticised for creating uncertainty for patent owners, especially because courts have struggled to clearly define what constitutes a threat.  The push for reform culminated in the Law Commission for England and Wales releasing its October 2015 final report, which supports a number of changes to the law, including the creation of a safe harbour provision and a limitation of legal advisor liability. While the Law Commission's recommendations portend welcomed changes to the law, for the time being the doctrine of groundless threats remains a risk for patent owners and their advisors.

There are of course legitimate reasons for owners of patents and patent applications to notify potential infringers of their rights.  Notably, the Patents Act provides that damages shall not be awarded in a patent infringement action and no order for an account of profits shall be made where the defendant "proves that at the date of the infringement he was not aware, and had no reasonable grounds for supposing, that the patent existed." S 62(1) of the 1977 Patents Act.  While the burden is on the infringer, at least one court has held that the infringer was not deemed to be aware of the patent until it had been sent a suitable warning letter. See In Texas Iron Works v Nodeco [2000] RPC 207. 

Judge Hacon's discussion of the groundless threats doctrine in the context of patent applications serves as a reminder that the timing of any statements regarding infringement, whether made in correspondence or on the web, must be carefully considered. 

Further, the risk of being sued for making groundless threats and then being precluded from presenting a defence is apt to surprise those more familiar with the laws of other jurisdictions. For example, in the US, not only is there no doctrine equivalent to groundless threats, actual notice of the published application is one of the prerequisites for recovery of damages for the period between the publication and the grant of the patent. See 35 USC S 154 (d).