Overstepping the Line: Unjustified Threats of Infringement

Recipients of communications which threaten litigation for patent infringement which are baseless, and those who are affected by communications are entitled to bring proceedings to obtain redress for damage suffered as a result of such communications. The action is designed to prevent such threats in the future, to obtain damages for the loss suffered as a result of the unjustified claims of infringement. Such communications need not be in writing. As such, actions are available not just to direct recipients of the threat – those up or down the distribution chain are entitled to bring claims for damages and an injunction to prevent repetition of the threats.

These so-called threats actions are available in respect to claims made for infringement of registered designs and patents.

Not all recipients of a threat of patent infringement proceedings are entitled to take action for an unjustified threat of infringement. Threats actions are not available against recipients who are manufacturers, importers or user a patented process.

To successfully defend a claim that the communication was a groundless threat, the person alleged to have made the threat (usually a patent owner, but this is not a requirement), must show the acts complained of in the threat would have infringed the patent provided that the patent is not found to be invalid.

The Threat

Unjustified threats may take the form of advertisements, brochures, letters, orally or any other means. A mere notification of patent rights however does not amount to an unjustified threat. It is not unlawful to inform a person of rights possessed by a patent owner provided that the communication is limited to factual information about the patent.

A threat to sue a person for patent infringement need not be made expressly.

For instance, a statement that the patent owner intends to enforce their rights may amount to an implied threat and be sufficient from the perspective of a reasonable and normal recipient. If it is the case that a particular addressee or act of infringement cannot be identified from the face of an advertisement or circular threatening proceedings, it is less likely that a threat has been made.

Aggrieved Persons

Any person that has been affected by the threat may take action to prevent further instances of the threat and/or recover losses suffered by the making of the threat. A distributor may cease distributing patented products or process - as a result of receiving the threat.

One or many of its customers suffer loss as a result of distributor taking the notice seriously and ceases distribution. In these circumstances, each of the customers of the distributor is entitled to take action to prevent the threat being made in the future and recover the loss that they suffered as a result of refusal on the part of the distributor to continue to distribute the product or process.

Conversely, when threats are made to customers of a distributor which results in the customer refusing to purchase the allegedly infringing goods in the future, a claim will lie in the hands of the distributor for the loss of sales caused by the threat.

Conclusion

When looking to assert patent rights against potential infringers, owners of patents should be cautious to frame enquiries warning other businesses that their activities may infringe patent rights. Making assertions of infringement which are unable to be substantiated at law are actionable by recipients and others which may give rise to a claim for damages and a right to an injunction to restrain future threats.

Prior to writing to potential infringers to place them on notice of infringement, a patent owner should think carefully about the trading activities of the alleged infringer and draft correspondence carefully to avoid unnecessary counterclaims for unjustified threats.