07/12/2007

Don’t make idle threats

Matthew Howarth, intellectual property partner

What can you do if you find that a competitor is blatantly – as far as you are concerned – infringing your intellectual property rights? You would understandably be aggrieved and want to take action to stop them.

However, you are reticent to contact your legal advisors because you do not want to get embroiled in lengthy and undoubtedly – in your eyes – expensive litigation. So instead you decide to send a letter telling them of your rights in reasonable terms and give them one last chance to stop, or else.

But before going any further and writing your letter STOP…..it is a tale of woe that will follow if the letter that is written threatens to sue the alleged infringer, either explicitly or even impliedly.

Certain aspects of UK intellectual property legislation have little known stings in their tails to catch out the unsuspecting and ‘wronged’ party. There are certain types of rights where a threat of court action can result in the maker of the threat being sued for making unjustified threats.

All of a sudden the olive branch of a cease and desist letter can end up with you facing the very court action that you wanted to avoid. The rationale behind such ‘threats’ actions are that the government takes the view that in some circumstances you have strong rights protected by intellectual property laws and these must not be abused by unwarranted threats of litigation against people who may or may not be infringing such rights.

The areas where such rights can be caught by ‘threats actions’ include registered trade marks, patents, registered and unregistered design rights. The relevant legislation all provide that a recipient of an unwarranted threat to cease its actions ‘or else’ can pursue a claim in the court seeking an injunction to prevent such threats being made in the future and damages for any losses suffered as a result of those threats.

Threats can be a legal minefield and it is imperative that before a letter is sent careful thought is put to its wording. In most cases only limited information can be sent (for example, advising that you have a registered right) and no more.

There are some exceptions that permit firmer threats to be made, but these all depend upon the nature of the infringing act. A recent case involving eBay demonstrates the ease in which threats can be perceived, even if never intended.

In a case brought by a company called Quads4 Kids the minefield of threats actions were brought to the attention of the High Court. Quads 4 Kids were offering for sale dirt bikes on the internet auction site eBay. A Mr Campbell had seen this and had sent eBay a completed form on its VeRO (Verified Rights Owner) system. That is a system designed for members of the public to complete if they believe that their intellectual property rights are being infringed by listings or products offered for sale. The form is a pre printed form and requires the notifier to complete details of the offending product and the rights that they believe are being infringed. Quads 4 Kids argued that Mr Campbell had been making threats of litigation over 16 registered Community Design Rights that he claimed were owned by him in relation to children’s dirt bikes when he completed the VeRo form.

Neither VeRO nor eBay checked whether the rights claimed by Mr Campbell were valid, but eBay informed Quads 4 Kids that its listing had been removed as they had received notification of a complaint contained in its VeRO form. Although Mr Campbell had made it clear that he had no intention of bringing legal proceedings, Quads 4 Kids brought a claim against him for having made a groundless threat of infringement.

The court held that the test of whether a groundless threat of infringement had been made was whether a reasonable person in the position of Quads 4 Kids would understand that he might be the subject of infringement proceedings in the future.

It held that unsupported and unchallenged allegations of infringement of registered rights were an abuse of those registered rights and in light of the damage caused by such threats (the removal of the listings) it was appropriate at this stage to grant in interim injunction to restrain such further threats from being made.
The ruling is interesting because it is another demonstration of how easy it can be to make a threat that might result in a claim being made against you, even if you never intended it. The position for eBay is also open to further debate as the VeRO notice is an automated process that involves little consideration of the evidence.

The court observed that it may need to take a wider view as to what amounted to a threat in this type of case, but found against Mr Campbell. The threats actions can be a complicated area and to avoid falling foul of them it is sensible to seek advice before letters (or other forms of notification) are sent.
Alternatively if you have received such notification you may be entitled to object to such threats especially if as a result of such notices sales have been lost.

Gordons regularly advises on threats actions. If you require any further information or advice please contact Matthew Howarth on 0113 227 0100 or at matthew.howarth@gordonsllp.com