UK: Threats Of IP Infringement And The Amendments To S70 Patents Act

Introduction & Statutory Framework

Lord Justice Bowen observed in Skinner v Shew [1893] that the result of a threat of a patent infringement action was:-

Such sentiments had led to the first statutory provision making unjustifiable threats of infringement actionable being incorporated in the Patents, Designs and Trade Marks Act of 1883. The statutory threats regime now covers:-

• patents - s70 Patents Act 1977 (as amended by s12 Patents Act 2004)

• trade marks - s21 Trade Marks Act 1994

• UK unregistered design right - s253 Copyright, Designs and Patents Act 1988

• UK registered designs - s26 Registered Designs Act 1949

• Community designs (registered and unregistered) - regulation 2 of the Community Design Regulations (SI 2005/2339).

These provisions have a number of common features, discussed in more detail below, but essentially allow a person aggrieved by an unjustified threat of an infringement action to bring an action for an injunction against further threats, for damages caused by the threat and for a declaration that the threat was unjustified. As this suggests, the principle defence available to the threatener is to show that its IP right was in fact infringed so that the threat was justified.

There is no limitation on the form threats can take but they are usually made in letters and particularly in letters before action.

There is no apparent reason for the lack of statutory provisions covering copyright, database rights and passing off. However their absence does not mean that these rights can be asserted with impunity. Several common law torts can be, and have been, used to achieve much the same result as the statutory provisions. The main two are:-

• malicious falsehood - e.g. Olin v Biorex [1969] FSR 361

• economic torts - e.g. Jaybeam v Abru [1975] FSR 334

In this context, malicious falsehood can be equated with slander of title and so the tort be committed by "asserting a claim of right in the knowledge that it was without foundation and thereby causing actual damage"¹. In Olin, as well as considering a likelihood of damage sufficient, Mr Justice Graham found that "malice" meant an improper motive - and, as there was no good faith defence, the motive would be improper unless the asserted IP right was valid and infringed.

More difficult in terms of the likely evidential burden involved, but nonetheless available, are the economic torts of interference with another’s business or contractual relations with the intention to cause damage thereby. These torts were successfully pleaded (alongside malicious falsehood) in Jaybeam to prevent threats of copyright infringement but failed in Granby² where the copyright was asserted in good faith with no malice.

Returning to the statutory provisions, including section 70 Patents Act 1977 as amended, they have several common elements. These are:-

• "threatens" is an objective test of whether the reasonable reader in the position of the recipient would have read the letter as a threat to bring proceedings³.

• "a person aggrieved" is someone whose commercial interests are or are likely to be adversely affected by the threat in a real, as opposed to fanciful or minimal, way⁴

• statements made in genuine without prejudice negotiations (or in a letter aimed at initiating such negotiations) cannot be used to found a threats action.⁵

Other elements common to all provisions (though extended in respect of section 70 of the Patents Act since amendment) are that:-

• an aggrieved person will not be entitled to relief where he is shown to have infringed the asserted IP right (unless the right is a registered one and is shown to be invalid).

• no action can be brought by an aggrieved person threatened by an action for "primary" acts of infringement only, i.e.

• making or importing a design or patent protected product or using a patented process; or
• applying a mark to goods or packaging, importing such goods or supplying services under a mark.⁶

• "mere notification" of a right is also not actionable.

The narrowness of these exemptions has been much criticised over the years, particularly the absence of any protection for an IP holder that asserts its right in good faith that it is valid. Their narrowness also makes it difficult to enquire into an infringement without thereby making an actionable threat.

Some of the criticisms have been dealt with in respect of patents by the 2004 amendments to section 70 of the Patents Act 1977. Hence the amended section adds to the above exemptions by:-

• providing a bona fides defence where the patentee can show that at the time of making the threats it did not know, and had no reason to suspect, that the patent was invalid as found - section 70(2A)(b).

• overturning Cavity Trays so that secondary acts of patent infringement can be asserted at the same time as primary acts without thereby making an actionable threat - section 70(4)(b).

• providing, by section 70(5), that there is no threat where a person merely:-

• provides factual information about a patent;
• makes enquiries solely for discovering whether and by whom a patent is infringed; or
• makes an assertion about a patent for the purpose of such enquiries.

• providing a defence when threatening a secondary infringer where best endeavours have been used without success to discover the primary infringer - section 70(6).

The amendments are not retrospective and apply to threats made after 1 January 2005 only.

Although suggested in consultation, no exemption from liability was introduced for professional advisers. Therefore an advisor writing a letter asserting patent infringement on behalf of a client still incurs the risk of being joined as a defendant to any resultant threats action.

Given this risk, what can be done to avoid it? The key points are to keep in mind the objective test for "threatens", and so how the average business man might read a letter rather than his legal advisors, and, if the without prejudice privilege is to be relied on, to make sure the letter comes across as a genuine attempt to settle. A letter demanding payment and that a licence be entered by the recipient within the shortest possible time else be sued is not an offer to negotiate within Unilever but a threat⁷. In addition:-

• following pre-action protocols and the Civil Procedure Rules will not avoid a threats claim if the letter is not genuinely without prejudice;

• justification is no bar to an interim injunction and the courts tend to the view that "There is no need to make a threat"⁸;

• therefore tailor the letter to the statutory defences and particularly the exemptions;

• but being within the exemptions regarding one right can be actionable if coupled with a threat of infringement of another right⁹;

• woolly wording will not help - there is no need for a particular cause of action to be stated for there to be a threat and similarly oblique and inadvertent threats are still actionable¹⁰;

• responding affirmatively to an enquiry as to whether litigation is contemplated can also be actionable¹¹; and

• threats based on infringement of a patent application will probably not be justifiable if the patent has not been granted by trial¹².

Although the amendments to section 70 are approaching two years old, there are no reported decisions on them yet. There is also little guidance available from the explanatory notes to the Patents Act 2004 or from the Patent Office. This leaves a series of open questions regarding their interpretation. For example, what prospects of success equate to "did not know" or had "no reason to suspect" the patent was invalid under section 70(2A)? What onus is there on a patentee to check validity before writing to the infringer? And what constitutes "best endeavours" under section 70(6)?

That part of the purpose behind the 2004 Act was to make it easier for SMEs to enforce patents suggests that the burden these provisions place on patentees should not be too onerous. This is supported by the Patent Office’s Guidance Note No.2 which suggests that, if a patentee can show it was negotiating in good faith, it should be within the section 70(2A) bona fides defence.

The explanatory notes to the Act also emphasise that the burden remains on the aggrieved person to show invalidity - not the patentee to prove validity.

Therefore:-

• on the section 70(2A) bona fides defence it would be advisable:-

• to check the prior art and common general knowledge known to the patentee for ‘smoking guns’;
• if there is a concern, to ensure that any opinion sought addresses that concern alone so that it can be disclosed in support of the defence if necessary; and
• again if there is a concern, stay within the other exemptions in section 70 and/or the without prejudice privilege.

• while sections 70(4) and (5) are reasonably clear in their language, dressing up a letter before action as an enquiry will probably fail to engage the section 70(5) exemption as not being "for the sole purpose of discovering" the infringer.

• on section 70(6), aside from "best endeavours", does "without success" mean complete failure or will it include finding insufficient detail to enable proceedings to be brought? Also, what protection do you get if you find out that the primary infringer is not worth suing? Until clarification by case law, in these situations it is again advisable to rely on the other exemptions and/or the without prejudice privilege to avoid the risk of a threats action.

Overall the new section 70 should put patentees in a better position with more options by which to protect themselves from a successful threats action compared to other IP rights. However, an element of risk remains particularly where threats are not directed to primary infringers alone.

If, despite all precautions, a real risk of a threats action remains, it may be advisable for the IP holder to send the letter instead of its advisor. This will avoid the advisor’s firm being joined as co-defendant to any threats action and so being unable to continue acting in the matter due to a conflict of interest as well as, potentially, being jointly liable for damages.

An alternative is to issue a "protective" claim form alleging infringement on the basis that an action cannot be threatened if it is already in being. Although this strategy does not seem to have been considered by the courts, and means incurring the relatively high court fees for issue, it has additional potential advantages that make it worth considering in any event. It gives the IP holder rather than the aggrieved person the choice of court (Patents County Court or High Court) and, if the brewing dispute has an international dimension, service of the claim form may assist in keeping the dispute in this jurisdiction by making the English courts seised.

Thus the various strategies that have been developed over the years to minimise the risk of threats should continue to be observed even when dealing with patents at least until guidance on the new section 70 is received from the courts.

In the longer term, there appear to be no plans to bring the other threats provisions into line with the amended section 70 although the Law Society, with the support of the patents judges, is lobbying for all the threats provisions to be repealed as inconsistent with the rest of Europe.

Footnotes

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.