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Implications of the IP (Unjustified Threats) Act 2017 (UK)

13-06-2017

The IP (Unjustified Threats) Act received Royal Assent on 27 April 2017 and reforms the existing law around threats provisions. Novagraaf’s Claire Jones explains the implications of the reforms.

At present, in the UK, if a party threatens to sue for infringement, and that threat has no valid grounds, or the right is invalid, it is said to be groundless or unjustified. 

The rationale behind the old (existing) law was to prevent IP rights holders threatening not the owner of an infringing mark, but rather third-party traders of those goods which bear the infringing mark, as such threatening behaviour would discourage sellers and shops from selling goods.

However, the law has been criticised as uncertain and clumsy, with different rules applying to different IP rights and case law developing certain terms and/or phrases in such a way that it has become difficult for professional advisers to avoid falling foul of section 21 of the UK’s Trade Mark Act (see below), unless the letter written merely confirms the rights upon which the client relies.

What’s in a threat?
In legal terms, a ‘threat’ constitutes any intimation that would convey to the ‘reasonable person’ that an entity has trademark rights and intends to enforce them against another. Threats can be made directly or indirectly, orally or in writing.

The new Act provides statutory guidance on what constitutes a threat, and introduces the concept of a permitted communication – a ‘safe harbour’ – which allows the owner of an IP right to notify a potential infringer of their rights without risk of a threats action (provided they follow the rules). 

Defining groundless threats
Section 21 of the UK Trade Marks Act includes any threat based on a trademark registered in the UK.  It also extends to EU trademarks (EUTMs), if there is a threat to bring UK proceedings. In summary:

(1) Where a person threatens another with proceedings for infringement of a registered trademark other than:
(a) the application of the mark to goods or their packaging;
(b) the importation of goods to which, or to the packing of which, the mark has been applied, or
(c) the supply of services under the mark

any person aggrieved may bring proceedings for relief under this section.

This section does not cover threats made to a primary infringer in the commercial chain nor threats made in relation to the provision of services.

(2) The relief which may be applied for is any of the following:
(a) a declaration that the threats are unjustifiable,
(b) an injunction against the continuance of the threats,
(c) damages in respect of any loss sustained by the threats; and

the plaintiff is entitled to such relief unless the defendant shows that the acts in respect of which proceedings were threatened constitute (or if done would constitute) an infringement of the registered trademark concerned.

There is a defence for the person making the threats, however, this defence will not succeed if the registration is invalid or liable to be revoked.

(3)     if that is shown by the defendant, the plaintiff is nevertheless entitled to relief if they show that the registration of the trademark is invalid or liable to be invoked in a relevant aspect.
(4)    The mere notification that a trademark is registered, or that an application for registration has been made, does not constitute a threat of proceedings for the purposes of this section.

A claimant suing for groundless threats could also bring an action against any person who has made the threat; not only the client, but also the client’s firm of attorneys and the individual attorney themselves (Prince Plc v Prince Sports Group Inc), on the basis that there is no requirement for the person making the threats be the person who owns/claims to owns registered trademarks.

What changes under the new Act?
The Act changes a number of provisions, whilst harmonising the threats provision across the different forms of IP.  In particular, the Act focuses on allowing threats to be made to primary infringers, bringing in a ‘safe harbour’ for secondary infringers and clarifying the meaning of a threat.  In addition, it will no longer be possible to bring threats actions against professional advisers who act on instructions and who identify their client in communication.

1. The test for a threat
The test broadly follows the current test.  However, as this test was based on case law, the test was sometimes difficult to apply.  The new test provides a clearer link to proceedings being brought or intended to be brought in the UK. The test is whether a communication would be understood by a reasonable person that a right exists and that someone intends to bring infringement proceedings in respect of that right for an act done in the UK.

2.  Primary actors
Actionable threats will be permitted to primary actors (mainly manufacturers or importers of infringing goods) and will also give rights to owners looking to make primary actors cease secondary acts (such as selling).

3. An actionable threat
The exclusions to threats have been broadened to make the law consistent across all IP rights, and to allow parties to more clearly understand whether a threat is actionable or not.  

  • Threats that refer only to specified acts, such as manufacture or import that have been done, or if done would be one of these acts;
  • Any threats made to those who have done one of those acts (was previously only in relation to patents) or who intend to;
  • Implied threats contained in a permitted communication.

4. Permitted communication / permitted purposes
The reforms create a framework to allow disputing parties (and their legal advisers) to exchange information in order to resolve the dispute (where the aggrieved party may otherwise have been entitled to sue for unjustified threats). This applies where:

  • Not an express threat; and
  • The part of the communication which contains information relating to a threat was made for a permitted purpose.
  • ‘Permitted purposes’ include:
    • Giving notice that a registered trademark exists
    • Discovering whether, or by whom, a registered trademark has been infringed by a specific act;
    • Giving notice that a person has a right under a registered mark.
  • The Courts will also be given a wide discretion to treat any other purpose as permitted, if it considers it to be in the interests of justice to do so.

5. Professional advisers
Threats actions will no longer be able to be brought against professional advisers.

Implications for clients
When the new Act comes into force, the new provisions will provide a clear framework which will go some way towards allowing IP rights owners to be in a position to sensibly enforce their rights without risk of threats actions.  This framework will be more consistent across patents, trademarks and designs. 

Nonetheless, there are a number of provisions which will leave scope for interpretation, including ‘permitted purposes’ and the discretion of the Court to widen these purposes as appropriate.

The new provisions are likely to become law in October 2017. Please subscribe to our newsletter or contact us for further updates.

Claire Jones is a trademark attorney in the London offices of Novagraaf.