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IP infringement – threats to sue 22/04/2014 In a move that will have implications north of the border, the English Law Commission has published a report recommending reforms to intellectual property rules.

IP infringement – threats to sue

In a move that will have implications north of the border, the English Law Commission has published a report recommending reforms to intellectual property rules that will allow individuals and businesses to protect their IP rights but not at the expense of new ideas and inventions. The reforms specifically consider the question of groundless threats to sue.

Disputes relating to patents, trademarks and design rights can be expensive, complex and disruptive, says the Law Commission. Threats to sue for infringement can be misused by being targeted at a competitor’s customer base or retailers who will find an alternative product rather than risk litigation. This can cut off the competitor’s route to market and cause them huge commercial damage.

A threat to sue for infringement can be “groundless”, in that there has been no infringement or the right concerned is invalid, but this does not make it any less powerful. At the moment the law in England and Wales provides a remedy for a person affected by a groundless threat. Under the “threats provisions”, they can seek an injunction to stop the threat, a declaration that there has been no infringement and/or damages for any losses caused. However, there are problems with the current law:

  • the provisions, first introduced in 1883, are complex and inconsistent between the various rights
  • a threat to sue for making a groundless threat can be used tactically by well-resourced enterprises to bully smaller rights holders out of enforcing their IP rights, and
  • under the provisions any form of communication that sets out the grounds of an infringement dispute may be interpreted as a threat to sue.

This can make negotiating a settlement almost impossible. Anyone providing advice to disputing parties can also be found liable for making threats and this can be used tactically to drive a wedge between adviser and client.

The aim of the Law Commission’s recommendations is to simplify and clarify the law and bring the law for trademarks and design rights into line with that for patents.

Under the recommendations, threats to sue for infringement could safely be made to anyone doing (or intending to do) the most damaging acts, such as manufacturing or importing a product. But others such as retailers, suppliers and customers would be protected against threats. Rights holders would be able to communicate with them as long as there is a legitimate commercial purpose, for example, to find the source of an infringement.

The Commission’s report provides guidance on what kind of information could be given and recommends that there should be a requirement that whoever is giving it should believe it to be true. The Commission is also recommending that professional advisers should no longer be liable for making threats.
 

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