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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: Unwired Planet V Huawei Patent Court Sets Fraud Royalty
 Briefing 
Date
28 April 2017

Inside IP: Navigating the new groundless threats regime

The Intellectual Property (Unjustified Threats) Act 2017 received Royal Assent yesterday, some four years since the Law Commission's initial report proposed reforms to the regime relating to groundless threats of IP infringement proceedings. Whilst the revisions are 'evolutionary' in form rather than 'revolutionary', rights holders should be aware of the key changes. The provisions in the Act will take effect from 1 October 2017.  Once in effect, the changes will make it easier for them to enforce their IP rights in the UK.  In particular, the Act:

  • introduces a new statutory two-part test for a groundless threat;
  • aligns the threats regime across the relevant IP rights, for example, allowing trade mark and design owners to challenge primary actors about their primary and secondary acts of infringement;
  • provides guidance as to permitted 'safe harbour' communications with secondary infringers;
  • introduces a defence where the right holder has taken 'reasonable steps' to discover the identity of the primary infringer; and
  • removes liability for professional advisers provided certain criteria are met.

The aim of the new regime is to see an end to 'Delphic utterances' crafted in such a way as to avoid unwittingly making an actionable threat, and will encourage more parties to resolve their IP disputes without the need for litigation.

Background

In the UK, a recipient of a threat of infringement proceedings relating to patents, trade marks and designs (including unregistered designs), or a person aggrieved by such a threat, may bring a claim against the maker of the threat.  The remedies available include a declaration that the threat was unjustifiable, together with an injunction and damages.   The maker of the threat usually defends the action by arguing that the threat was justified, i.e., the relevant right was infringed (and counterclaims for infringement). 

Whilst it is generally accepted that the groundless threats regime serves a useful purpose in ensuring that, whilst right holders are able to enforce their rights effectively, they cannot use their enforcement powers to distort competition, the regime has been heavily criticised.  In particular, complexity, inconsistency across the different rights, and the lack of certainty over what may constitute a threat, have encouraged tactical game playing and a ‘sue now, talk later' culture.  

Key provisions in the new Act

What is a threat?

The Act provides a two-part statutory definition of 'a threat':

  1. Would the communication be understood by a reasonable person in the position of the recipient to mean that a right exists, and that someone intends to enforce it through infringement proceedings? This reflects the common law definition of a threat, established in the case law.
  2. Would the threat be understood to relate to an act done in the UK or which, if done, would be done in the UK?  This differs from the previous approach, which required that the threat must be understood to be to bring a claim in the UK.  The change will enable the threats regime to extend to threats of proceedings in relation to the Unitary Patent, when it is available.   

Threats to primary infringers

Since 2004, a threat relating to patent infringement proceedings will not be actionable where it is directed at a primary actor, even if it refers to their acts of secondary infringement (for example, dealings with an infringing product).  The Act extends this approach to trade marks and designs.  Previously, it was necessary to exercise particular caution when asserting trade marks and designs, for example, to ensure that any undertakings, as well as the letter before claim itself, did not refer to any secondary acts of infringement.  In relation to trade marks, for example, this means that a threat of proceedings to a party that has applied the mark to goods, can also refer to acts of dealing in those goods. 

Safe harbour communications with secondary infringers

The Act provides guidance on ‘permitted communications’ with secondary infringers, across all rights.  Whilst the overarching aim remains that communication with secondary infringers is exceptional, this guidance recognises that giving greater scope for right holders to engage with secondary infringers could lead to more disputes being resolved without proceedings. 

A ‘permitted’ communication with a secondary infringer must comply with three conditions:

  1. so far as it contains information relating to the threat, it must be made solely for a permitted purpose;
  2. all of the information relating to the threat must be necessary for that purpose; and
  3. the person making the communication must reasonably believe that information to be true. 

Permitted purposes include (a Court may identify others):

  1. giving notice that the IP right exists;
  2. to discover whether, or by whom, the right has been infringed as a primary act of infringement;
  3. giving notice that a person has a right in or under an IP right, where another person’s awareness of the right is relevant to any proceedings that may be brought in respect of that right.

The Act also gives guidance as to what might be information necessary for a permitted purpose, including:

  1. a statement that a right exists and is in force, or that an application has been made;
  2. details of the right (or a right in or under it), which are accurate in all material respects and not misleading in any material respect;
  3. information enabling the identification of e.g., for patents, products or processes in respect of which it is alleged that infringing acts have been carried out.

New 'reasonable steps' defence

The Act extends the defence permitting communications with a secondary infringer where the right holder has made attempts to engage with a primary infringer who cannot be found. The defence previously only applied to patents but has been modified and extended to trade marks and designs. 

The right holder must show they took reasonable steps, without success, to discover the identity of the primary actor (e.g., a supplier); and they must notify the recipient (before or when making the threat) of those steps. What is reasonable will depend on the particular circumstances.  In some cases, it might be reasonable to pursue all lines of enquiry whereas, in others, it would be reasonable to do much less. 

No liability for professional advisers

Under the old regime, claims for groundless threats were sometimes also brought against professional advisers, as the maker of the threat, with the aim of driving a wedge between them and their client.  Professional advisers now have a defence where they can show that they acted on their client’s instructions in making the communication and they identified the person instructing them in their communication.