Unjustified threats regime: Law Commission final report published
On 12 October 2015, the UK Law Commission issued its second and final report on groundless threats in IP infringement proceedings entitled "Patents, Trade Marks and Designs:
Unjustified Threats" (the 2015 Report) which explained and published the draft Intellectual Property (Unjustified Threats) Bill (the Bill). This final report is the culmination of a project spanning the last two years within which the Law Commission has sought to reform the complicated legislative framework governing groundless threats in order to clarify and harmonise the provisions across IP rights.
The Law Commission initially published a Consultation Paper in 2013 (considered here and followed up with a Report issued in April 2014 which made 18 recommendations for legislative reform – endorsing an evolutionary, rather than revolutionary, approach. 15 of those recommendations were accepted by the Government and the remaining three were accepted in principle, but with comments.
The 2015 Report addresses those three recommendations and provides further explanation of the Bill which proposes to implement the 18 recommendations. Furthermore, the 2015 Report proposes two new recommendations which have arisen from developments with the new Unitary Patent procedure.
Reform to groundless threats legislation
The reforms have four broad objectives: (i) to produce consistency between the threats provisions for patents, trade marks and designs; (ii) to strike an appropriate balance which allows rights holders to protect their valuable IP but not to misuse threats; (iii) to distinguish clearly between those threats made legitimately and those used to damage a commercial rival; and (iv) to support parties in dispute to try to reach a negotiated settlement and avoid litigation.
Of the Law Commission's 18 recommendations, three reform proposals are key:
There will be no liability for threats made to primary actors
The 2015 Report noted that the most significant inconsistency in the current law is that only threats that are strictly limited to "primary acts" (eg manufacture, importation) escape liability in respect of trade mark and design rights; whilst the exceptions are wider for patents as a result of the amendments introduced by the Patents Act 2004. The Law Commission recommended that the law for trade marks and designs should be reformed to bring them into line with patents – ie that a threat made to a person who had carried out a primary act will not be actionable, even if the threat also refers to other, secondary, acts.
For trade marks, the Bill also implements the recommendation that a threat should not be actionable if it is made to the person who applied the mark to goods or their packaging, or to the person who commissioned that to be done.
"Safe harbour" for communications with secondary infringers
The Bill creates a new "safe harbour" for communications with secondary infringers (eg retailers), where (i) the communication is made solely for a permitted purpose (such as to discover if the right is being infringed and by whom), (ii) all of the information provided is necessary for that purpose; and (iii) the person making the communication reasonably believes it to be true, even where the recipient might interpret the communication as an implied threat.
However, it is recognised that the measures must be consistent across the relevant IP rights and seek to minimise the risks of such communications being used as an opportunity to make disguised threats. As guidance, the Bill therefore also sets out what may not be treated as a "permitted purpose".
Further, under the current Patents law, where a secondary infringer is threatened, the threatener has a defence if it can show that the primary infringer could not be found despite using best endeavours to do so. The Law Commission recommended that this should be applied equally to all IP rights and the Bill has implemented this change, albeit with an amendment that the threatener should have used "reasonable endeavours".
Professional adviser liability
The Bill will include the Law Commission's recommendation that professional advisers acting in a professional capacity should be protected from liability against unjustified threats provided that certain conditions are satisfied, namely: (i) the communication must clearly identify the client; and (ii) the adviser must show that they were acting on instructions.
Further, the Bill makes clear that the liability of the client will be unaffected if the exemption applies to their professional advisers.
To its detractors, the Bill will represent a lost opportunity to overhaul the system fully. The amendments suggested by the Bill do not address the status of "missing" IP rights such as copyright, passing off, trade secrets, geographical indications and database rights. There is also no extensive consideration of the potential benefits of (or how to) harmonising the position throughout the EU in respect of groundless threats. Instead, the position in Europe remains inconsistent and advisers must consider whether to seek local advice before issuing letters in individual territories.
The Bill is nevertheless an attempt to provide clarified and harmonised legislation in a minefield of uncertain and inconsistent provisions. To the extent that threats provisions can be simplified and more applicable to commercial practice, it is to be applauded. It may prove not to be sufficient but it will provide a useful "litmus test" and, given that the Government has not ruled out wider reform in the long term, detractors need not be overly pessimistic just yet.