The Threats They Are A-Changin’ – the murky ground of dispute resolution

As legal advisors, we often have to tread the murky ground of dispute resolution.  Frequently, clients contact us, having fired the first shot against a potential infringer and have unwittingly found themselves at the end of counterclaim for ‘unjustified threats’ (better known as ‘groundless threats’ or simply ‘threats’), a peculiarity of IP disputes.  In January, the new Intellectual Property (Unjustified Threats) Bill marched its way through the House of Commons committee stage without amendments and now awaits its third and final reading in the House, meaning we are quite likely to see the new law this year. Considering the upcoming changes, it is worth taking a look at what threats provisions are, why they exist and how they are changing.

What are they and why do they exist?

Depending on your point of view, threats provisions exist to level the playing field of IP litigation, ensuring that malicious or misguided claims are not started against the wrong party.  The threats provisions, even as they are, provide a means of action and a remedy for people or companies who have suffered damage as a result of another party threatening them with allegations of IP infringement. They exist for a variety of IP rights, including UK and EU trade marks, UK and European patents, design rights, UK and Community registered designs, but not copyright.

The following representative scenario shows just one way that the provisions can be used: a rights-holder makes an allegation of infringement against a retailer of an allegedly infringing item. The retailer, fearing an infringement claim against them, immediately stops stocking the product even though the product is legitimate.  The ‘aggrieved’ manufacturer, who has lost sales as a result, makes a groundless threats claim against the claimant.

An aggrieved person can seek remedies against the maker of the threats (who can be the rights-holder, licensee or even the legal advisor) including injunction (to stop the threats), a public declaration that there has not been an infringement and damages for loss caused by the threats.

Why are they being changed?

This ‘levelling’ of the playing field is generally considered the primary reason why threats provisions exist, but unfortunately, they are also a minefield for rights-holders.  The provisions are not consistent for all rights, in particular where brought against the ‘secondary’ infringer (as opposed to the ‘primary’ infringers, who makes the article, or applies the trade mark to packaging etc).

Further, there hasn’t to date been any legislative guidance on what is considered a ‘threat’. Does it apply to any communication made, even if it doesn’t overtly allege infringement, for example?

How are they changing

The Bill is an attempt to harmonise the threats provisions across the various pieces of intellectual property legislation and is generally seen as an improvement on the current law. The same principles will generally apply to each right by:

(1) Providing legislative guidance on what is a “communication” of a threat. Generally speaking, this is whether a reasonable person in the place of the recipient would understand that an IP right exists and intends to bring proceedings
(2) Some communication of threats is ‘permitted’ – this varies slightly between the various IP rights, but generally the communication will not be considered a threat where a rights-holder is making a person aware of the rights they own and they specific acts they are doing (ie. not an express threat of legal proceedings). The ‘purpose’ of the communication must also be permitted, which includes discovery of information related to the threat – it is not permitted however, in this specific circumstance, to demand the person cease doing anything in relation to the product, or deliver product up to the rights-holder.
(3) Legal advisers will not be held liable when acting under the instructions of their clients.

Conclusion

In a year where Brexit has taken the limelight away from the legislative agenda, it is a pleasant surprise to see that intellectual property has not been completely put on the backburner by the Government. Rights-holders will find the changes to the threats provisions easier to manage, but considering the consequences, we still recommend you contact your usual Briffa legal adviser before making any allegations of infringement.