Nvidia sweats over Hardware Labs' "threats"

Nvidia’s attempt to bring a groundless threats action against Hardware Labs in the English High Court has failed - whilst there was a threat to sue in Germany there wasn't a threat to sue in the UK.  

Hardware Labs, a manufacturer of computer cooling systems, instructed German attorneys to send a letter to Nvidia (the chip manufacturer) in the US threatening to bring proceedings unless Nvidia ceased using Hardware Labs registered EU trade marks GTX, GTS and GTR on its chips.

Nvidia's response was to seek a declaration of invalidity in respect of Hardware Labs' EU marks at the EUIPO, a declaration of non-infringement of Hardware Labs' marks in the UK coupled with an injunction and damages for an "unfounded threat" to sue Nvidia in the UK. Hardware Labs' sought summary judgment and strike out of Nvidia's groundless threats action.

The key question for the UK Court to consider in respect of the groundless threats action was whether the letter from Hardware Labs constituted a threat of infringement proceedings in the UK.

The answer to this question is a matter of construction of the letter in question – it depends on "what a reasonable person, in the position of the recipient of the letter, with its knowledge of all the relevant circumstances as at the date the letter was written, would have understood the writer of the passage to have intended when read in the context of the letter of the whole".²

Nvidia pointed to the fact that the letter from Hardware Labs: (i) was in English; (ii) referred to various German websites "by way of example"; and (iii) required pan-European relief. Nvidia also pointed to the "surrounding circumstances" – in particular the fact that the letter was sent in the context of the wider EUIPO proceedings in which Nvidia's allegation of invalidity was based on an earlier unregistered right in the UK.

Hardware Labs argued that its letter did not amount to a threat to sue in the UK because, having been sent by a German attorney in Germany and with detailed references to German law, it amounted to a threat to sue only within Germany.

The judge sided with Hardware Labs and summarily dismissed Nivida's groundless threats claim.¹

Interestingly, the judge confirmed that "in an appropriate case" threats letters should be treated as though viewed with the benefit of legal advice, and in this case, the Defendant argued that a reasonable lawyer would have advised Nvidia that pan-European relief could only be obtained against the German company in Germany and consequently there was no prospect of infringement proceedings in the UK. 

Even though on the facts Nvidia's groundless threats action failed, slightly different facts (e.g. had Hardware Lab's letter being sent to Nvidia's UK address, or had the letter referenced Nvidia's UK trade marks) could have led to a very different result. This decision therefore serves as a useful reminder to practitioners and their clients alike over the dangers of threatening to sue third parties with proceedings for trade mark infringement in the UK, but also in other EU jurisdictions with no threats regime where pan European rights are being relied on.