Section 128 of the Australian Patents Act 1990 provides relief for a person threatened with patent infringement where such threats are later shown to have been "unjustified". The aggrieved person may be entitled to various forms of relief:
- a declaration that the threats are unjustifiable;
- an injunction against the continuance of the threats; and
- the recovery of any damages sustained by the Applicant (i.e. the aggrieved person) as a result of the threats.
A largely equivalent provision exists under s.74 of New Zealand's Patents Act 1953. However, a corresponding section is surprisingly absent from the New Zealand Patents Bill 2008, which is presently awaiting its second reading before Parliament.
The rationale underpinning s.128 (AU) and s.74 (NZ) is that if a person "threatens" another with patent infringement, the onus then falls upon that person to prove it. If infringement is proved, then no relief will be available under these sections. However, the flip side is that a threat will generally be held to have been "unjustified" if the acts subject to the threat cannot be shown to amount to an infringement.
Mere notification of the existence of a patent does not constitute an unjustified threat; this is codified in s.131 (AU) and s.74(3) (NZ). Under these sections, it is also permissible to seek confirmation that the recipient is unaware of any improper use or infringement of a patent. However, stray beyond these confines and a correspondent risks exposing themself to an action for having made an unjustified threat. In the Australian case of U & I Global Trading v Tasman-Warajay (1995) 60 FCR 26, it was held that a threat of infringement proceedings following grant of the relevant patent fell within the ambit of s.128 and was thus an unjustified threat. Further, the New Zealand case of Tapley v White Star [1957] NZLR 612 established that even oral threats may fall foul of s.74.
However, the most authoritative guidance as to what does and does not amount to an actionable threat was provided in the Australian case of JMVB Enterprises v Camoflag (2005) 67 IPR 68. An actionable threat was held to arise where the language, directly or impliedly, conveys to a reasonable person that the correspondent intends to bring infringement proceedings. In considering whether a threat has been made, one is to assume the position of the recipient of the communication, considering it within the normal course of business.
Therefore, to be liable for more than nominal damages, the recipient of the communication must also have altered their position in reliance upon the threat, with the most common scenario being withdrawing from sale an alleged infringing product. This, in turn, opens the door for alleged infringers (who are not, in fact, infringing) to claim substantial damages. In the recent case of World of Technologies v Tempo [2007] FCA 114, the Australian Federal Court awarded AU$213,059 in damages to an alleged infringer who removed a product from sale after receiving a letter threatening design infringement (s.77 of the Australian Designs Act 2003 contains a largely analogous provision to s.128 of the Patents Act 1990).
While an action to restrain an unjustified threat may be a viable option, s.130 of the Australian Patents Act 1990 must first be considered. This section provides basis for filing a counterclaim for the relief to which the Respondent would be entitled in separate proceedings for an infringement by the Applicant of the patent to which the threats relate.
Accordingly, given the remedies available to the recipient of an unjustified threat, one should always err on the side of caution. Patentees should be wary of initiating such correspondence in the first instance without – at a minimum – obtaining an infringement opinion from a registered Australian or New Zealand patent attorney.
Shelston IP has legal practitioners experienced in how best to initiate such pre-action correspondence. It goes without saying that these types of letters should always be sent by one's authorised representatives, rather than the Patentee themselves.
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.
