An unjustified threat means a threat to bring legal proceedings
for infringement, which are ultimately found to be without basis by
Intellectual property (which includes copyright, patent, trade
mark and industrial design) legislation permits a party who has
received a threat of infringement proceedings to apply to court for
injunctive relief to prevent any further unjustified threats, and
the recovery of damages occurring as a result of the threats.
CQMS alleged that Bradken had infringed its patents by supplying
certain tools. Prior to and during the course of the litigation,
CQMS sent Bradken, Bradken's solicitors and Bradken's
customers a series of letters with respect to the alleged
infringing conduct which contained the allegedly "unjustified
threats" at issue.
Bradken denied the patent infringement claim and cross-claimed
on the basis of patent invalidity and that CQMS's
correspondence constituted unjustified threats.
The Court in its judgement ruled in favour of Bradken and
rejected CQMS's claim for intellectual property infringement.
The Court then considered whether the claims made by CQMS prior to
resolution of the Court matter were "unjustified threats"
Federal Court rejects infringement claim and therefore threats
of legal action unjustified
CQMS raised two defences to the unjustified threats claim.
That CQMS had commenced infringement proceedings and therefore
were not liable, as the intellectual property infringement claims
were made in good faith and were subject to legal proceedings.
CQMS asserted that their letters were genuine attempts to
resolve the dispute as required by the Civil Dispute Resolution
Act, and not threats of any kind.
As to CQMS's first argument, the Court held that it is not
enough to defend the making of a threat by commencing infringement
In respect of the second argument, as the Court rejected CQMS's
claim of infringement, it found the threats of legal action for
intellectual property infringement must be found to be
CQMS's correspondence found not to be a genuine attempt to
resolve dispute under the Civil Dispute Resolution
To resolve the matter, the Court considered whether the
requirement to take genuine steps to resolve a dispute prior to
litigation has altered the extent to which pre-litigation
correspondence can amount to an unjustified threat.
In its judgement, the Court drew a distinction between
correspondence that demands everything the applicant is entitled to
and correspondence which constitutes a genuine step towards
resolution of a claim.
The Court's judgement relied on the fact that in addition to
letters sent between the two parties to the dispute, CQMS also sent
correspondence directly to Bradken's customers which provided
notice of the alleged breach by Bradken, and included an assertion
that the customers' use of the alleged infringing material
amounted to a further infringement.
The Court held that this led the customers to an
"inevitable" concern as to their own liability.
Further, the correspondence could not amount to a genuine
attempt to resolve the dispute as it was written after proceedings
were commenced and the point of the correspondence was
"undoubtedly" designed to "discourage potential
customers from buying the respondents' products."
As a result, the Court granted injunctive relief to Bradken. The
question of the amount of any loss suffered by Bradken has not yet
Correspondence alleging infringement of intellectual property
rights must be carefully drafted.
All correspondence alleging intellectual property infringement
should be, and should be drafted to read as, an attempt in good
faith to resolve the conflict, not a mere letter of demand.
Sending letters to third parties who are not directly involved
actors in any infringement claim (such as customers of the alleged
infringer), may constitute a threat to those customers which could
expose the sender to liability if the underlying infringement claim
is not upheld in a final court judgement.
These cases provide some guidance as to how the courts have approached the assessment of damages in nervous shock claims.
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