Groundless threats by patent owners can result in damages

Date Added 08.05.14

A business wrote three letters to a metal products wholesaler alleging the wholesaler was selling products in breach of a patent owned by the business. It threatened to take the wholesaler to court unless it provided an account of its profits on sales of the infringing products.

If a business threatens anyone in the UK with court action for breach of its patent, registered trade mark, registered design or unregistered design, the other party may be able to claim damages for loss suffered because of such threats, and an injunction, if the threats are found to be groundless. They are treated as groundless if the business’s ‘rights’ turn out to be invalid, there hasn’t actually been any infringement or the business has no real intention of enforcing its rights in court. However, there are defences, including that the business did not suspect its rights were invalid at the time the threat was made.

People who can apply to court can be anyone threatened by the letter or communication sent, even if it is not addressed to them (for example, distributors, agents or customers).

The test of whether a threat has been made is objective: would the letter or communication lead a reasonable person with knowledge of all the relevant circumstances at the date of the letter or communication understand that the writer intends to convey an intention to enforce their rights by bringing legal proceedings in relation to one of the relevant rights?

In this case the Intellectual Property Enterprise Court ruled that the business was liable for making groundless threats. There are plans to reform this area of the law to reduce the risk to rights owners of being sued for making groundless threats, but no draft legislation is yet available.

Recommendation

  • Businesses intending to write letters in defence of their intellectual property rights in the UK should take advice to ensure they do not amount to unlawful threats, making them liable to pay compensation.
  • Such letters should not refer to third parties such as customers, distributors or agents.

Case ref: FH Brundle v Perry [2014] EWHC 475

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