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The UK Unjustified Threats Act receives royal assent
14 June 2017 by Kate Selwyn

On 27 April 2017, the long awaited Intellectual Property (Unjustified Threats) Act received royal assent. The Act now requires secondary legislation before it is expected to take effect in October 2017.

What are unjustified threats?

Unjustified threats occur when a business is threatened with infringement proceedings by a third party when:

a)    There is no actual infringement of the third party's intellectual property right; or

b)    The intellectual property right owned by the third party is invalid.

If a business suffers a loss as a result of a wrongful infringement claim from a third party, then they may be able to claim damages for their loss of business.

The unjustified threats provisions aim to protect businesses against unsubstantiated threats which aim to intimidate or gain an unfair commercial advantage. 

Why is the law relating to unjustified threats changing? 

Currently, the law relating to unjustified threats is thought to be inconsistent and unclear. The law is not aligned for the different intellectual property rights; patents, trademarks or design rights. Therefore, the current bill seeks to harmonise the approach to the unjustified threats provisions.

What is changing?

The Intellectual Property (Unjustified Threats) Act 2017 provides:

  1. A two-step test to determine whether a communication constitutes a threat of infringement proceedings

This statutory test to determine if a communication contains a threat will be the same for all of the intellectual property rights.

It requires that a reasonable person in the position of a recipient would understand from the communication that:

  • a right exists, and
  • a person intends to bring infringement proceedings against another person by
  • an act done (or intended to be done) in the UK. 

This new requirement specifying the act is done in the UK allows the provisions to apply to European patents that come within the jurisdiction of the Unified Patent Court.  

        2.  Clarification on exclusions to actionable threats

Any person who is aggrieved may bring a threats action unless an exception applies. The Act clarifies the exceptions to an actionable threat: 

  1. Threats made in respect of primary infringement acts that have been done, or if done, would be a primary act of infringement (e.g. manufacturing or importing for disposal)
  2. Threats made in respect of primary infringers (e.g. secondary acts of infringement (such as selling) that have been committed by the primary infringer), or
  3. Being a permitted communication (see below).

If one or more of the exceptions in the Act applies to the third party threat, then it is not actionable under unjustified threats proceedings. This clarification is important because it allows a right holder to threaten a primary infringer with legal proceedings for infringement; however it protects secondary infringers, such as the sellers, from these threats, as long as they are not involved in the primary infringement.

         3.  Introduction of permitted communications between parties

This new provision provides a framework for parties to exchange information to resolve disputes. A communication containing a threat of infringement proceedings is permitted if:

  • It does not contain an express threat to sue;
  • The information that relates to the threat was made for a permitted purpose; and
  • The information that relates to the threat is necessary for that purpose, and the person making the communication reasonably believes this to be true.

The Act then gives guidance as to what is a "permitted purpose":

-       Notification that an IP right exists;

-       Discovering if an IP right is being infringed and if so, by whom; or

-       Notification that a person has an IP right, where another person's awareness of the      right is relevant to any proceedings that may be brought in respect of the IP right.

Interestingly, the Act allows the Court to add to the list of permitted purposes over time.

This new provision encourages parties which are involved in a dispute to resolve their dispute through communication, rather than litigation.  It also allows right holders to try to determine who the primary infringer is without the risk of unjustified threats proceedings being brought against them.

          4.   Alteration of the defences available

Although the available remedies remain unchanged (injunction, damages or declaration), the available defences have been amended.

  • First defence: The threat is justified if the acts referred in it are infringing, or if carried out, would be infringing.

This defence no longer includes reference to the defence not being available where the IP right is shown to be invalid.

  • Second defence: A threat against a secondary infringer is justified if the person making the threat has shown that, despite having taken reasonable steps, they have not been able to identify the primary infringer. In order for this defence to be available, the person must have notified the secondary infringer to whom they made the threat, of the reasonable steps they have taken to identify the primary infringer, either before, or at the time of making the threat.

This defence was originally only available to patent holders, however it has now been extended to trademarks and design rights holders.

           5.   Pending IP applications

In the context of patent applications, it is an established principle that a threat of infringement that is made after a patent application has been published, but before the patent has been granted, is only actionably in infringement proceedings after the grant of the patent.

The Act confirms this principle in statute, and applies this principle to trademarks and design right applications as well.

Conclusion

The Intellectual Property (Unjustified Threats) Act 2017 aims to strike a balance between the interests of right holders and the recipients of unjustified threats.

This Act creates consistency across the IP rights as it applies the same legal provisions to patents, trademarks and design rights. Importantly, the Act also provides for unitary patents and European patents which may fall under the Unified Patent Court jurisdiction when it comes into force.

The Act allows threats to be made to primary infringers for both primary and secondary infringing acts but protects secondary infringers from unjustified threats. It also allows a form of "permitted communication" between right holders and potential infringers, where disputing parties may resolve their disputes without litigation.

However, there are still some uncertainties within the Act. For example, the Act does not define what "reasonable steps" are required to have been taken in order for the second defence to be available if a right holder has made an unjustified threat against a secondary infringer. In addition, the Act has not been extended to include copyright provisions.

Forresters attorneys are on hand to provide advice prior to communicating with alleged infringers to deal with the updated provisions.