When are groundless threats for patent infringement actionable?

A number of interesting developments in the law relating to groundless threats have arisen recently: the government’s response to the Law Commission’s report on changes to the groundless threats provisions, a case at the IPEC, and draft legislation to extend the threats provisions of the Patents Act to the Unitary Patent.

Background to the threats provision

Patentees may consider that threatening a potential infringer, such as a retailer with a court action for patent infringement for say, stocking or selling products which the patentee considers infringes their patent, is a good way to stop the retailer from carrying out these acts as it avoids the need for the patentee to prove its case and also risk losing the patent.
However, UK law has an idiosyncratic provision specifically intended to stop patent owners disrupting markets by making threats to sue people for infringing their patents.

Under section 70 of the Patents Act 1977 (PA ’77), except in relation to the threats referring to the acts of ‘making’ or importing’, a person who is aggrieved by threats (which may have been made to someone else) may bring proceedings against the person making threats. The relief available includes a declaration that the threats are unjustified, an injunction against further threats and damages in respect of loss sustained as a result of the threats.

Under s70(2A) if the patentee proves that the acts carried out by the alleged infringer are an infringement of his patent, the aggrieved party may only be entitled to the relief if he shows that the patent is invalid. Even if so, the patentee may still escape liability for threats made if he proves that at the time of making the threats, that he did not know, or had no reason to suspect that the patent was invalid.

In somewhat of a contrast, under s69 PA ’77, a patentee is entitled to bring proceedings for acts of infringement of his patent once it is granted, and this may include a claim for damages in respect of acts done in the period between publication of the application and grant of the actual patent. It is commonplace for the scope of the patent to change prior to grant.

Section 70 only refers to a ‘patent’ not specifying whether this be a patent application, published patent or granted patent.

What about threats made when the patent is not yet granted?

The balance between s69 and s70 is even harder to address when a patent has not yet been granted. Such letters threatening action are still just as effective at stopping retailers, but how can the alleged infringer respond? Questions such as whether the threats made are considered a threat within s70, when might the patent be granted, whether the alleged infringement falls within the claims of the patent and whether the patentee can rely on the s70(2A) justification have to be decided upon. The Court of Appeal (CA) first considered these questions in Patrick John Brain v Ingledew Brown Bennison & Garrett [1996 FSR 341] (Brain). In that case the court held that the threat made by the patentee to bring proceedings when their patent granted, was indeed a threat and that it would have been illogical to hold that there was a cause of action for a threat and at the same time to deprive the patentee of a defence of justification. The CA held that a patentee could rely on the justification defence [equivalent to s70(2A) PA’77] as long as steps are taken to ensure that the patent is granted before the action comes to trial.

What about when the alleged infringer brings a claim for groundless threats in an application for summary judgment?

The Court had to consider the above question in a recent case brought to the Intellectual Property Enterprise Court (IPEC) by the claimants for summary judgment against the defendants (patent applicant holder) for making groundless threats for patent infringement (Global Flood Defence Systems Limited v Van Den Noort Innovations BV [EWHC 153 (IPEC)].

In this instance, the claimants and the defendants are in the business of selling flood defence products. The defendants had filed an application for a patent in relation to a flood defence device known as ‘self-closing flood barrier’ and granted the claimants an exclusive licence to it. The parties then fell out, ended their agreement and the claimants started selling an alternative flood defence device which they claimed did not fall within the claims of the patent application. The defendants disagreed and placed notices on their website alleging infringement by the claimant and also that action would be taken against any other infringers. The Defendants also wrote to Sir Peter Luff MP since they’d seen an invitation where the claimants were speaking at the House of Commons on flood barriers. In their letter the defendants stated untruthfully that they had taken proceedings against the claimant for patent infringement.

The claimants wanted to get a decision in a hurry so applied for summary judgment that the threats being made against them were groundless.
However, the claimants were refused their application, despite the object of the law being to stop market disruption.

The Decision

In applying the CA decision in Brain, the court set out 3 requirements that the patentee had to show:

1. that the patent is likely to be granted before trial;
2. the acts would have infringed the patent had it been granted on the date it was published; and
3. the acts would have infringed one or more of the claims of the patent in the form they took immediately before publication of the patent.

The court was satisfied on evidence that the defendant’s patent would be granted by trial.

Relating to the claimants’ argument that their product falls outside the claims of the defendant’s patent, HH Judge Hacon expressed his reluctance to allow the hearing for summary judgment to deal with infringement. In American Cyanamid, attempts to prove infringement of a valid claim in an interim hearing ended up taking two weeks in the Court of Appeal. This explains the ruling that the courts will not look into the merits of an action at an interim stage.

The claimants argued that in contrast to the Brain, the defendants had threatened to join third party customers in the proceedings for infringement of a granted patent and that this could take place imminently. They further argued there was no prospect of the defendants following up on such a threat to join third parties, therefore the threat could never be justified under s70(2A).

The defendants argued that s70(2A) did not provide a defence on the condition that the threats are justified in the context that the defendants make good on their threat. Under this section, the defendant is required to prove that the acts carried out constitute an infringement of the patent. The defendants further argued that they have a real prospect of establishing at trial that the claimants’ acts infringe their rights under s69.
HH Judge Hacon held that if he accepted the claimants’ arguments, it would lead to the possibility that a party issuing threats to establish at trial that those acts were unlawful but at the same time the party would be deprived of a justification under s70(2A).

The claimants’ application for summary judgment was dismissed.

Comments

The effect of this case, if it is followed in future, is that an alleged infringer will never be able to get summary judgment in a groundless threats case unless infringement is absolutely clear cut- there are no arguments to be had over claim construction for instance, since they will have to prove non-infringement without expert evidence.

This decision follows established case law that threats made by a person who only has a patent application which is not yet granted, could still be justifiable if it is likely that the patent will be granted by the trial date. The Law Commission recommended in October 2014 that for patents, it should no longer be possible to avoid liability for making threats by showing that at the time the threat was made the threatener did not know, or had no reason to suspect, that the patent was invalid. The government’s recommendation published on 26 February 2015 is that this limb of the justification defence, s70(2A)(b), should be repealed, thus making it easier for the alleged infringer to bring a claim for groundless threats.

The government accepted that communications should be excluded from the groundless threats provisions if they are made for a “legitimate commercial purpose” but wished to consider further whether “legitimate commercial purpose” was the right statutory definition. It agreed that the law should not be too inflexible. The government also accepted that a lawyer, patent attorney or trade mark attorney should not be liable for making threats if acting in a professional capacity and on client instruction. The government emphasised that this exemption will only apply where the letter clearly identifies the client and should have no doubt that the threat is made by the client themselves. Legislative changes have not yet been proposed, however.

The provisions for groundless threats apply to proceedings in the UK only (Best Buy v Worldwide Sales Corp ([2011] EWCA Civ 618). This leaves the possibility that threats to bring infringement proceedings outside the UK would not fall under s70 leaving no redress to the party being threatened in respect of acts committed in other jurisdictions. Most other EU member states do not have a specific threats provision though the courts may rely on Unfair Competition to deal with this. In multi-jurisdictional patent litigation, particularly in light of the up and coming Unitary Patent, the UPC Agreement has no mention of groundless threats. However the UK IPO has proposed draft legislation to extend the UK threats provisions of the Patents Act to the Unitary Patent. This will raise further questions such as to how and when the threat will be deemed to be made in the UK, whether the location of the allegedly infringing acts is relevant and the possible interpretation that seeking to enforce a Unitary Patent will always include relief in relation to the UK.