The Government responds to the Law Commission's recommendations for the reform of groundless threats provisions in IP law

31 March 2015

In April 2014, the Law Commission made a number of recommendations for the reform of groundless threats in relation to patents, trade marks and design rights. In February 2015, the Government responded to the Law Commission's report, accepting a number of its recommendations. While not a commitment to legislate, this gives a strong indication as to the direction of travel of any future legislation.

Recommendations

The adopted recommendations are as follows:

  • For patents, trade marks and designs a distinction shall be drawn between allegations levelled at primary actors and secondary actors: the former will NOT be an actionable threat; whereas the latter will be.

    At present, with respect to trade marks and designs, if an allegation is made against a party which is conducting both primary and secondary acts (for example, manufacture and sale), then the allegation in relation to the secondary acts constitutes an actionable threat. By contrast, with regard to patents, if an allegation is made against a party which is conducting both primary and secondary acts, the allegation in relation to the secondary acts does not constitute an actionable threat. The Government has agreed to harmonise the law so that the position in relation to patents applies to trade marks and designs.
  • To create an exemption so that a rights holder can notify a third party of its rights and make enquiries to identify an infringer or infringement without being the subject of a groundless threats action.

    Currently, rights holders are often unwilling to notify third parties (particularly secondary actors) of their rights or make enquiries of them for fear that the notification or enquiry will be construed as a threat and expose the rights holder to an action for groundless threats. This frustrates the ability to gather evidence, driving uninformed cases to the Courts.

    The Government has accepted, in principle, that a rights holder should be able to notify a third party of its rights and make enquiries. In particular, it acknowledges that, at the least, a rights holder should be able to communicate the following:
    • that the right exists;
    • that the right remains in force;
    • details of the right; and
    • information to identify the goods relevant to that right.

    However, it has questioned whether the Law Commission's proposed test ("legitimate commercial purposes") is appropriate as, if construed too widely, this could erode the protection available to secondary actors. In any event, it maintains that the burden of proof should be on the rights holder to show that it has reasonable grounds to believe that the information communicated is true.
  • To create a defence so that a rights holder can make allegations against secondary actors without being the subject of a groundless threats action, if it can show that it has made endeavours to find the primary actor.

    Under patent law, it is a defence against a groundless threats action brought by a secondary actor for the rights holder to show that it has used its best endeavours to identify the primary actor, but has been unsuccessful. The Government has agreed that this defence should be introduced in relation to trade marks and design rights. However, it has questioned what the appropriate test should be.

    The Law Commission had suggested that "best endeavours" was too high a standard and proposed "reasonable endeavours" for all rights. The Government expressed concerns that the test "reasonable endeavours" is not necessarily clearer, fairer or better understood than "best endeavours".
  • Section 70(2A)(b) of the Patents Act 1977 should be repealed.

    s. 70(2A)(b) provides that, if an aggrieved party brings an action for groundless threats in relation to a patent infringement claim and the Court finds in favour of the aggrieved party on the basis that the patent was invalid only (namely, but for the finding of invalidity the patent would have been infringed), then the aggrieved party is not entitled to any relief if the rights holder shows that it did not know and had no reason to suspect that the patent was invalid.

    The Law Commission concluded that this is unsatisfactory for a number of reasons, including that the aggrieved party would be denied all remedies for threats despite having shown that the right is invalid and, without a declaration or injunction, the rights holder was free to continue the threats. The Government agrees.
  • A lawyer, registered patent attorney or registered trade mark attorney should not be liable for making threats where they have acted in their professional capacity and on instructions from their client.

    Currently, anyone making an allegation is liable for groundless threats, including a lawyer. This has a chilling effect on a lawyer's ability to act on behalf of its client and, in the event the lawyer is sued, adds to the complexity and cost of litigation. In those circumstances, the Law Commission recommended and the Government has agreed that an exemption should be created for lawyers, registered patent attorneys and registered trade mark attorneys.

    However, the Government emphasises that the exemption should only apply where, in the correspondence making the allegations, the client is clearly identified and the legal representative shows that it was acting on instructions.

In its report, the Law Commission also raised the idea of wider reform with the introduction, perhaps at an EU level, of a new tort in relation to unfair allegations. The Government accepted that this deserves consideration in the longer term.

Comment

While these reforms are welcome, ultimately they do not resolve the (perhaps insurmountable) tension between the need to engage in pre-action correspondence (in lieu of which there may be cost consequences) and the risk of making a groundless threat. In order to put the proposed reforms into effect, new legislation will need to be passed.


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