Australia: Unjustified Threats of legal action: tread carefully when enforcing IP rights

Last Updated: 3 November 2017
Article by Gavin S Stuart

Intellectual property (IP) rights come in a number of different forms – patents, trade marks, designs and copyright to name a few. In our experience, clients that have gone to the time and expense of acquiring IP rights want to ensure that they protect those rights against potential infringers.

The most common approach in protecting IP rights is to threaten an injunction stopping the infringing conduct along with a claim for damages or an account of profits.

Often, the reaction of infringers is to issue a counter claim when an allegation of IP infringement is made. Depending on how the counter claim is conceived, it may include a claim against our client for making 'unjustified' or 'groundless' threats of legal action.

In this bulletin, we explore what these claims are and why they are important to bear in mind when enforcing IP rights, or defending against a rights holder's claim of IP infringement.

What are unjustified or groundless threats?

The right to take legal action against threats of IP infringement proceedings arise under legislation, including the Patents Act, Designs Act, Trademarks Act and Copyright Act.

Each of these Acts provides for a person or company to take legal action against another person or company if they feel that they have been unjustifiably threatened with IP infringement proceedings.

While there are some differences in the wording of the prohibitions in each Act, the basis for bringing the action is largely the same – that a threat of IP infringement proceedings has been made and that the threat was unjustified. This is the case in respect of registered trade marks, patents, designs or copyright materials.

When is a threat made?

The question of whether or not a communication, in whatever form, is a threat is considered objectively by the court.

The test that a court will apply to this question is based upon what a reasonable person would conclude. That test is whether or not the language used in the communication would indicate that the IP owner has asserted their rights in the relevant IP and intended to take court action against another person in respect of the infringement of that IP.

An example of this test in operation is a case where a provisional patent owner was found to have made a threat of legal proceedings in the following circumstances:

  • walking into a retailer;
  • showing the retailer a copy of their provisional patent;
  • asking the retailer to remove products from their shelves; and
  • reasoning that the sale of those products would be an infringement of their rights in the patent.

In another more recent case, a patent owner had already taken an alleged infringer to court for the infringement of their patents. While the court action was underway, the patent owner sent emails to its own customers, stating that:

  • it had taken the alleged infringer to court; and
  • it may consider further action against any customers of the alleged infringer if the court agreed that the alleged infringer had infringed the patents.

The Court did not agree with the patent owner and found that, as the customers of the patent owner could have also been customers of the alleged infringer, the emails included a clear threat of future action against any of them that were customers of the alleged infringer.

The examples above highlight the care that needs to be taken in making any communication with potential infringers, or other related parties. Even if you have not specifically mentioned legal proceedings in your communication, this will not necessarily mean you have not made a threat.

Whether or not a threat has been made will depend on the circumstances surrounding the communication. For example, we make sure to remind our clients of the need for caution when they ask us to send a communication to a potential infringer, as the communication will carry more force when coming from a solicitor and is even more likely to be found to be a threat.

When is a threat unjustified?

A threat will be unjustified if the IP owner cannot make out a case of actual infringement of their rights in the IP.

Generally, if an IP owner satisfies the court that the acts of the alleged infringer did in fact infringe the rights of the IP owner, then the threats will be justified. This can be quite a difficult obstacle to overcome, as bringing an action for IP infringement can be complex and costly, especially in relation to patents.

Trade mark law goes one step further in favour of an IP owner that takes action for trade mark infringement.

In that circumstance, an alleged infringer will not be able to take action against the IP owner for an unjustified or groundless threat if the action against the alleged infringer is pursued with due diligence and without any unreasonable delay. This is referred to as the 'due diligence defence' and it will apply regardless of whether or not the trade mark owner is successful in proving that the alleged infringer has infringed the rights in the trade mark.

What are the consequences of an unjustifiable threat?

If an alleged infringer is found to have been unjustifiably threatened, they can apply to the court for:

  1. a declaration that the threats are unjustifiable or groundless;
  2. an injunction against the IP owner to prevent any further threats; and
  3. an award of damages for any loss they have suffered as a result of the threat.

The award of damages is most daunting for IP owners, however it is not particularly easy for an alleged infringer to prove a connection between the threat and the loss they have suffered.

The Federal Court of Australia has recently confirmed that you must be able to clearly show that the only reasonable explanation for the loss (of profits for example) suffered was the unjustified threat itself. If there is any other explanation for the loss, such as market trends and other general commercial matters, then there will not be an entitlement to damages. This decision is a move towards making it more difficult for alleged infringers to successfully prosecute unjustified threats claims, and a welcome one for IP rights holders.

Tread carefully

When communicating with IP infringers and others in relation to any potential infringement, it is important to do your homework before making any threats. A long forgotten arrangement, however informal, may become relevant once a threat is made.

A way to tread carefully in this respect is to notify a potential infringer of the existence of your rights in the relevant IP and seek confirmation from them that they are not aware of any wrongful use or infringement of your IP rights. This will not be a threat, and should still open up a dialogue around the issue.

If you think that you have a strong case against the alleged infringer and want to threaten them with legal action if they do not comply with your reasonable demands, you should also be prepared to commence infringement proceedings against the infringers. Otherwise the infringers may call your bluff and commence proceedings against you for an unjustified threat.

In any case, it is important to seek legal advice before making any communication to alleged infringers or commencing proceedings for unjustified threats. The law in this area is complicated and its application will depend on the circumstances surrounding your particular case.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions