Australia: Additional damages for flagrant unjustified threats of IP infringement – the art of finesse

Last Updated: 17 November 2018
Article by Adam Cutri and Puria Davoodi

We get it – you've spent lots of time building your brand, your ideas, your designs. You've also spent money registering trade marks, patenting your inventions and protecting your intellectual property. Your IP is fundamental to the continued success of your business. So, if you think someone is trying to use your brand or your ideas without permission, you want to do everything possible to stop them.

There are different ways you can try to put an end to potential infringement of your intellectual property. The first course of action is usually to send the infringers a 'cease and desist letter', setting out that you own certain IP rights which the other party has infringed, and if they don't stop or don't pay, you'll take them to court.

However, under the Patents Act, Designs Act and Trade Marks Act, a business may take legal action against another if they feel they've been unjustifiably threatened with IP infringement proceedings. We've written an article on this before which explores what constitutes an unjustified threat in more detail ( link here).

In this article, we look at new laws which will allow courts to penalise businesses in cases where a business threatens to take another to court for infringing their IP rights, but does so without justification, without doing their research, obviously for their own benefit and without regard to the detriment to the other person or business they threatened.

We admit that, sometimes, as lawyers, we might get excited by certain legal developments that others in the real world might not find all that interesting. But we promise, this article deals with an important legal development for any IP rights owners. It is especially important for businesses which have had some experience with IP infringement in the past. It is now more important than ever to do your research and make sure you're in the right before going after a potential infringer, otherwise you could be in for a hefty penalty.

How are damages for unjustified threats changing?

A new piece of legislation came into force on 24 August this year called The Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018. We agree with you, the title is dreadfully boring. Despite the unremarkable title, the Act packs a punch by giving courts a considerable discretion to award additional damages against businesses for flagrant unjustified threats of patent, design or trade mark infringement proceedings.

What in the name of The Intellectual Property Laws blah blah blah Act is a 'flagrant unjustified threat of patent, design or trade mark infringement proceedings'? Don't worry, we'll explain further down – before we do that, it's helpful to understand why these laws are being introduced.

Why are additional damages being introduced?

For some time now, courts have been able to award additional damages for the flagrant infringement of a patent, registered trade mark or registered design. 'Flagrant' infringement usually involves some glaringly obvious bad faith behaviour, such as continued infringement even after being made aware of the owners' rights in the IP. These additional damages laws for flagrant infringement are aimed at furthering public interest by deterring potential infringers from wilfully and knowingly infringing the IP rights of another person or business.

Lawmakers have now introduced a similar discretion to award additional damages against those who flagrantly and unjustifiably threaten another person or business with court action for IP infringement. The previous level of damages for unjustified threats of infringement proceedings may have been insufficient to deal with some threateners that might take advantage of their size and position to scare off competition from smaller fish by unjustifiably threatening to take them to court. The considerable benefit that a well-resourced business may gain from making an unjustified threat could potentially far outweigh the usual cost of compensatory damages that could be awarded to the threatened party.

These IP law amendments are consistent with recent legislative public policy initiatives. Over the last few years there have been a number of changes across consumer law and unfair business practices which have been specifically aimed at addressing the exploitation by larger, well-resourced businesses of the imbalance in negotiating power with smaller, less established businesses. The extension of the Unfair Contracts Regime under the Australian Consumer Law to small businesses is a good example of this public policy shift.

When is a threat flagrant?

The word 'flagrant' comes from the Latin flagrare which means 'to burn' or 'blazing'. While the young people we know assure us that in modern vernacular, if something is 'fire', it's a good thing (this song is fire, those shoes are fire, etc), in the context of IP infringement if your conduct is so bad that it is 'blazing', that is definitely not a good thing.

Lawmakers have expressed that the new provisions for flagrant unjustified threats will operate in the same way as the provisions for additional damages for flagrant infringement. In relation to flagrant infringement, this was dealt with in the Full Court matter of in ordinary usage flagrancy connotes, amongst other things, glaring or blatant conduct (1997) 75 FCR 88. In that matter, the Judge, Tamberlain J said that "in ordinary usage flagrancy connotes, amongst other things, glaring or blatant conduct" and that flagrant infringement showed "a calculated disregard of the copyright owner's rights or cynical pursuit of benefits".

While there has been no definitive list of conduct which constitutes a flagrant infringement (or a flagrant unjustified threat), what can be seen is that an award of damages is entirely discretionary. The court will look at the individual facts of each case in order to determine whether the conduct was flagrant or not. With that in mind, you should always think twice (and perhaps obtain advice) before 'shooting from the hip' with a rapid fire cease and desist letter.

Assessment of damages

In assessing whether or not additional damages should be awarded, the court will consider all relevant matters including the flagrancy of the threats, the need to deter similar threats and the conduct of the threatener after the threats occurred.

Additional damages can prove to be quite an effective deterrent. In a recent case that considered flagrant infringement of a trade mark, the court awarded the aggrieved party a meagre $10 in compensatory damages but added a considerable $91,015 in additional damages. As set out above, the assessment of additional damages for flagrant unjustified threats will likely have similar application.

The art of finesse

In our opinion, to avoid flagrant unjustified threats, businesses should cultivate and utilise the art of finesse. By approaching IP enforcement with finesse, a business should avoid any potential liability in relation to unjustified threats. Below are some examples:

Scenario Flagrancy Finesse
You own a registered trade mark for the word BUBBLES in respect of computers. You notice that another business is selling computers under the name BUBBLS. Without conducting any enquiries, post on all of your social media accounts, warning potential customers and resuppliers that:
  1. they should not buy any computers from BUBBLS as they are trying to steal your BUBBLES brand;
  2. you're in the process of taking the BUBBLS business owners to court; and
  3. you may consider further action against resellers of BUBBLS computers if you're successful in court.

Conduct searches on the other business – do they have any registered trade mark rights or other rights in the name BUBBLS?

Send a letter to the other business notifying them of your ownership rights in the BUBBLES trade mark and ask them to provide you with further information on their ownership rights in BUBBLS and the extent to which they've used that name in connection with their business.

You hold a patent for a particular building method and you notice that another, much smaller developer is using what appears to be a similar method. Visit the building site of the smaller developer and serve their subcontractors with notices to immediately cease construction or risk being sued for infringement of your patent. Send a letter to the other business notifying them of your patent and ask them to provide you with further information on the building method they are using and the extent to which they've used that building method in connection with their developments.

The lawmakers appear to be on board with the finesse approach, as they are also amending the Trade Marks Act to clarify that merely notifying someone of the existence of a registered trade mark does not constitute a threat of court action for IP infringement.

The art of finesse can also be helpful when applied to other everyday situations. Here are some examples:

Scenario Flagrancy Finesse
The printer has stopped printing. Wheel the printer to the nearest fire escape and push it down the stairs. Take a deep breath, head back to your desk, have a Kit Kat and get started on drafting your Paperless Office Policy.
You're driving on a busy road, a car cuts in front of you without indicating. Honk your horn continuously for 2 minutes and 15 seconds. Laugh it off, flick the radio over to WSFM and sing along to ABC by the Jackson Five.

These new laws are set to come into force soon (no later than 24 February 2019). Businesses must be wary that their conduct during and after threats of infringement proceedings will be taken into account when considering whether or not to award additional damages. Both threateners and threatened parties should seek legal advice as soon as possible after an alleged 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.

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