Muscling in on unjustified threats: Reform is long overdue but is it enough?

Abstract

The UK regime of unjustified or groundless threats has long been a controversial subject for IP practitioners and their clients. It is largely unique to the UK and the Republic of Ireland and concerns threats to retailers that are merely selling goods that are alleged to infringe, as opposed to manufacturers. These retailers (‘secondary infringers’) may well want to avoid a legal fight and take the easy option of ceasing to deal in the goods concerned. As a result, the manufacturers (‘primary infringers’) may never have the opportunity to defend the allegations or even know why they have lost that particular customer. Despite its good intentions, the threats legislation and case law usually leads to a difficult discussion with a client and can, in practice, act as a barrier to exercising registered IP rights. So what are unjustified threats all about? To recap, if an IP owner makes a communication to a third party alleging infringement that can be reasonably viewed by it as a threat to take action in the UK courts, that party, or anyone aggrieved by the ‘threat’, can sue the rights owner for making an unjustified threat of proceedings. In such an action injunctive as well as compensatory relief can be sought. The threats legislation can, as might be imagined, easily catch IP owners and their advisers out, especially those based outside the UK who may not even know of its existence or easily understand its complexity. The requirements vary according to which type of intellectual property right (IPR) is being invoked, and the regime does not include all types of IPR. Passing off, copyright, trade secrets and database right are excluded and therefore threats based on these grounds are legitimate, whether made to a secondary or primary infringer. IP rights are, of course, intended to incentivise scientific and technical advancement, development and creativity. Arguably the threats provisions are a disincentive to do this as well as to protect IP by way of registration. Why invest in a new idea and protect it with a patent if to avoid being sued yourself you are forced to sue every infringer? Should it not be possible instead to use your rights to seek in good faith to persuade them to stop the infringement? An IP holder may know only the identity of the retailer/reseller of the infringing products and so has no option but to pursue them in the first instance. The reaction of clients is often one of disbelief when they are told of the risks of the tables being turned on them for, as they see it, perfectly legitimate use of their rights for the purpose for which they were acquired in the first place. Originally conceived to prevent bullying use of IP monopoly rights and as a way to tackle unfair competition, the regime ironically encourages rights holders to go straight to court without any advance notice. This can be a very expensive sledgehammer to crack a nut. Also, far from assisting a negotiated commercial resolution it is more likely to put the parties at loggerheads and delay, or even take away any chance of, achieving a sensible out of court settlement. All of this is at odds with a court system in the UK that puts the onus on the parties to attempt to resolve matters out of court and to view litigation as the last resort. Indeed, failing to attempt to mediate or negotiate before suing, at least in the English courts, can result in costs penalties. The regime has, for the reasons outline above, been the subject of consternation in the IP profession. This is perhaps not surprising taking account of the fact that the lawyer or IP professional sending any relevant communication can themselves be sued if the threat is held to have been unjustified. Often that very angle is used by the lawyers acting for the allegedly threatened party as a nuisance tactic to try and drive a wedge between the lawyer acting for the rights holder and their client, as it raises clear issues of conflict. Frequently IP lawyers will request an indemnity from their clients as a condition of sending the potentially threatening communication, prompting the client to terminate the relationship, especially where they do not have a longstanding relationship with the lawyer concerned. Matters would be far more straightforward if it were always easy to decide what constitutes an actionable