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Law Commission advises reform of groundless threats provisions

11th Jun 2014

Last year, we reported on the Law Commission’s consultation on the provisions surrounding ‘groundless’ threats of intellectual property (IP) infringement proceedings (or, to give them their slightly less proper but altogether easier label, the ‘groundless threats provisions’, or GTP). Following further consideration of the results of that consultation, the Commission has now issued its final report on the matter.

The notion of a bespoke code that provides a direct route to relief for those ‘aggrieved’ by a groundless threat to bring action for infringement of IP is, within Europe at least, a peculiarly British one. (Under the civil law adopted elsewhere, threats actions are for the most part the concern of the general law of tort or of unfair competition.) The UK provisions as they stand are thought by many to be too complex, and in practice both unduly severe as regards right-holders and yet too easily escapable by those more versed in the field. In a nutshell, the advice given in the Commission’s report is to reform the separate existing provisions relating to groundless threats of patent, trademark and design infringement, for consistency between these and for improved legal certainty for all involved. The full report, of which the headline reforms and recommendations are summarised below, can be found here.

Reform No. 1: Permit Communication With Primary Actors – Across The Board

Recognising the increasing tendency for a single invention or product to be protected by multiple IP rights, the Law Commission’s report expresses concern generally at the discrepancy between the provisions relating to groundless threats of patent infringement proceedings on the one hand and their counterparts in trademark and design law on the other. In particular the former, revised in 2004, provide that a threat of infringement action cannot be the subject of a groundless threats action where that threat relates to past ‘primary’ acts of infringement – manufacturing or importing a patented product for distribution, or the use of a patented process – whether or not the (same) threat also refers to ‘secondary’ infringements (such as actual sale or use of a product). Conversely, under trademark and design law, the reverse is currently true: while threats to bring proceedings for primary acts themselves1 are again excluded from the scope of the GTP, a quirk of case law means that a communication referring both to primary and to secondary acts will be open – in full – to attack by anyone ‘aggrieved’ by the threat. Understandably, this can make the sending of any communication to an infringing actor, however well-intentioned, a veritable minefield for anyone not fortunate enough to be acquainted with the ins and outs of the law.

The remedy proposed by the Law Commission is to update the trade mark and design provisions to mirror the approach taken by the patent law, so as to render any person making any threat to a primary actor immune to a groundless threats action. Indeed, the Commission’s report goes even further to suggest that, where there exists a real intention on the part of the receiver to commit an act of primary infringement, none of the GTP should bite even where a communication is sent before that act has taken place. The Commission’s view is that this would enable the resolution of issues of infringement at an earlier stage and, as a direct consequence, would help to minimise the damage done in any given case.

Reform No. 2: When Is A Threat A Threat?

As well as excluding communications to primary actors, the law as it stands currently includes some indication of what may be said in a communication to a secondary actor without qualifying as a ‘threat’ for the purposes of the GTP. For example, in principle at least, simply bringing the existence of a right to a recipient’s attention should not leave one open to a groundless threat action. However, the Law Commission considers that the GTP are nonetheless too wide in scope and too severe in nature: in practice, it is often the case that any form of communication setting out the grounds of a dispute (for instance, in an attempt to comply with the requirements of the Civil Proceedings Regulations, which encourage pre-litigation communication and settlement between the parties) can be interpreted as a threat. Thus an IP right-holder, suspicious of infringing activity, may find himself torn between the need to notify the actor of his suspicions if a defence of innocent infringement is to be avoided in future proceedings, and the concern that anything said may be interpreted as a real threat to bring an infringement action that could come back to haunt if found to be unjustified.

The Law Commission’s report therefore sets out proposals for a “safe harbour” for communications between the parties to an infringement dispute. Reform of the statutes to permit communication that has a “legitimate commercial purpose” (such as avoiding an innocent infringement defence), as well as to include a non-exhaustive list of what can truly safely be said, is considered overdue. This should, of course, be subject to the rider that the communicating party must have reason to believe that the information being communicated is true, so as to avoid the masking of a malicious threat as an innocent and legitimate communication.

Reform No. 3: Protection Of Legal Professionals

In their current form, the GTP provide that any person sending a ‘threatening’ letter may be the subject of a groundless threats action. This can mean that the process of representation, whether by an IP attorney or by a solicitor, can be clouded and frustrated by the need for indemnities lest the professional be denounced simply for doing his job.

In keeping with the theme of encouraging sensible and responsible pre-litigation communications, the third headline reform proposed by the Law Commission is to remove legal professionals acting on a client’s instruction from the scope of the GTP. Unsurprisingly, this proposal has been widely welcomed across the profession.

Overall, then, the Law Commission’s recommendations are for reform along the lines of the proposals set out in its original consultation, which appear to have been generally well-received by respondents. While the alternative option, originally proposed, of doing away with the GTP altogether in favour of a more ‘European-style’ approach based on unfair competition is not felt to be appropriate at present, the Commission and indeed some respondents to the consultation do recognise that wider reform will eventually become inevitable. Indeed, with IP rights becoming ever more international in nature, it can surely be only a matter of time before changes to bring the legislation into line with the enforcement of European and Community-wide rights become inescapable. The emergence of a Unitary Patent will undoubtedly have a part to play in those more fundamental reforms; but, for the time being at least, the profession awaits – with eagerness it would seem – the implementation of the changes proposed in this report.

The complexities brought out by the Law Commission’s consultation highlight the imperative, perhaps all the greater in the light of the developments that are now afoot, to obtain sound legal advice when IP infringement rears its head. For guidance on what the threats provisions could mean for you, please feel free to contact one of our attorneys.

1 Primary acts of infringement of a registered trademark are the application (or causing to be applied) of the mark to goods or their packaging; the importation of goods to which (or to the packaging of which) the mark has been applied; and the supply of services under the mark. Regarding designs, both registered and unregistered, primary actors are those making or importing the protected article or product for disposal.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.

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