Parties alleging infringement of their patent rights need to
be careful to avoid the operation of section 74 of the New
Zealand Patents Act 1953.
Under section 74, when an aggrieved person is threatened by
another person with proceedings for infringement of a patent,
and those threats are unjustified, the aggrieved person may be
entitled to a number of different forms of relief,
a) a declaration that the threats are unjustifiable;
b) an injunction against the continuance of the threats;
c) (most importantly) damages suffered as a result of the
If the threatening party can prove that the acts in respect of
which proceedings were threatened constitute an infringement of
the patent, then no relief will be available under this
section. Accordingly, the converse also applies – a
threat will be unjustified if the acts the subject of the
threat do not amount to an infringement. It is immaterial that
the threats were made in a bona fide manner if the allegations
are not upheld: Tapley (HL) & Co Ltd v White Star
Products Ltd  NZLR 612.
So when is a warning a threat for the purposes of the
The starting point is the section itself which states that
the mere notification of the existence of a patent does will
not constitute a threat of proceedings. Further guidance can be
found in the case law which has established:
A threat arises where the language, by direct words or
implication, conveys to a reasonable person that the author
of the letter intends to bring infringement proceedings
against the person said to be threatened.
The meaning of an alleged threat is to be decided in
accordance with the understanding of an ordinary recipient in
the position of the applicant reading the letter in the
normal course of business. The recipient's
understanding of the alleged threat can therefore be relevant
to its interpretation.
A threat can be made by means of a letter from a legal
representative, but may also arise without a direct reference
to infringement proceedings.
However, a communication merely notifying a person of the
existence of a patent or a patent application, together with
a statement that any suggestion that the recipient is
entitled to replicate the invention is not maintainable, or a
communication seeking confirmation that no improper or
wrongful use or infringement of the patent has come to the
recipient's attention, is not a threat: JMVB
Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68;
A threat, made prior to grant, of infringement
proceedings after grant may be a threat for the purposes of
the section: U&I Global Trading (Australia) Pty Ltd v
Tasman-Warajay Pty Ltd (1995) 60 FCR 26
Of course to be liable for more than nominal damages, the
recipient must also have altered his or her position in
reliance on the threat – the most common scenario
being curtailing sales of an alleged infringing product
following receipt of the threat.
The unjustified threats provision of the Patents Act opens
the door for recipients to claim substantial damages as a
result of unsupported allegations of infringement. In a recent
Australian designs case World of Technologies (Aust) Pty
Ltd v Tempo (Aust) Pty Ltd  FCA 114, the Federal
Court awarded AUD$213,059.96 in damages to an alleged infringer
which removed a product from sale after receiving a letter
threatening design infringement. At the time the letter was
received the owner was not entitled to sue for infringement
because the design registration was still under
Given the broad ranging remedies available to a recipient of
a groundless threat of infringement, a counterclaim should
always be considered by any defendant to patent infringement
proceedings, and patentees should be wary of initiating
correspondence without first obtaining a sound opinion as to
the case for infringement.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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