Unjustified threats overhaul receives royal nod, raises prospect of increased weak infringement allegations 04 May 17
With the UK Intellectual Property (Unjustified Threats) Act receiving royal assent, clarity on what can be said in pre-action correspondence relating to trademark disputes is a step closer. While the bill has been welcomed, one commentator has warned that the protection from liability afforded to legal advisers could lead to an increase in knowingly weak allegations of infringement.
As Aminder Khatkar, then at Olswang, wrote in World Trademark Review last year, UK law has long provided a statutory right of redress in relation to unjustified threats to sue for infringement of patents, trademarks and design rights. However, he noted that the existing regime is “plagued by inconsistencies and uncertainty”. For instance, exclusions from unjustified threat claims in relation to threats relating to primary acts are inconsistently approached and it can be difficult to ascertain precisely what communications will be held to be a “threat of infringement proceedings”.
As a result, the Chartered Institute of Patent Attorneys (CIPA) notes that “the current law places restrictions on what can be said out of court in order to settle a dispute. If an IP owner is found to have gone too far, the alleged infringer could sue for damages for having to face ‘unjustified threats’”. Additionally, with respect to liability for legal advisers, the existing law allows the recipient of a legal adviser’s letter to take action against the adviser in its own right for unjustified threats contained in the letter.
Given these inconsistencies and uncertainties, in 2012 the Law Commission launched a project to consider possible reform, with a 2014 report recommending evolutionary change rather than a revolutionary overhaul. A bill was therefore subsequently drafted to harmonise the different IP regimes and clarify what can and cannot be said in pre-action correspondence. In its analysis, the UKIPO estimated that the bill would result in around £1.6 million in savings to businesses (through reduced litigation and the need for pre-action advice).
Drilling down, the new bill ushers in a number of changes. As well as aligning the approach to unjustified threats across patents, trademarks and designs, it sets out the principles the court will apply in order to decide whether a communication contains a threat to sue for infringement. First, as the threats provisions are part of UK law, the threat must be understood to bring proceedings in a court for an act done (or intended to be done) in the UK. In terms of permitted communications, those containing a threat of infringement proceedings will be permitted, if it is not an “express threat”, the part of the communication which contains information that relates to the threat was made for a permitted purpose, and the information that relates to the threat is information that is necessary for that purpose (with the person making the communication reasonably believing it is true).
Significant changes also relate to professional adviser liability, with the Law Commission noting that, currently, the risk of personal liability for threats can be used against professional advisers as a tactic to damage their relationship with their client. The resulting loss of professional advice can leave the client reluctant to enforce their IP rights. The regime can also prolong disputes because the adviser has to explain why they are at risk. As the bill removes personal liability for advisers who satisfy specific conditions (including that they are acting on the instructions of a client and are regulated for legal services), it argues they will be able to “act for their client with greater confidence and to the fullest extent”.
In a media release, Vicki Salmon, Chair of CIPA’s litigation committee, welcomed the news that the bill had received royal assent, including “the exemption now given to IP legal advisers when acting on their client’s instructions. The previous regime militated against seeking pre-action settlement of IP disputes, as the recipient could use the threat of suing the lawyer for an unjustified threat as a means of separating the IP right holder from his chosen legal adviser”.
However, as Khatkar noted last year, some of the changes may cause new problems. He suggested that, while legal advisers may be grateful for the protection from liability afforded to them by the bill, “there is likely to be an increase in knowingly weak allegations of infringement as a result of this change”. He also warned: “As a result of the extension of the law to threats relating to acts carried out in the United Kingdom, extra care will need to be taken when alleging infringement of Community-wide rights.”
Overall, though, the royal assent has received a positive welcome, with CIPA stating that, once in place, IP disputes should become easier to resolve. We are not there yet though – secondary legislation is still required before the bill becomes law.
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