Law Commission proposes reform to groundless threats in IP
Written by Aasim Durrani on 24 April 2013« Return to Reading Room
The Law Commission has released a consultation paper setting out the case for reform of groundless threats provisions in intellectual property law. At present, a threat of legal action relating to an allegation of infringement by a trade mark, design rights or patent owner may result in them facing legal action for groundless threats.
Groundless threats provisions were introduced in respect of patents under the Patents, Trade marks and Designs Act 1883, but have since been expanded to other forms of intellectual property as follows:
- Section 21 of the Trade Marks Act 1994;
- Section 26 of the Registered Design Rights Act 1949;
- Section 70 of the Patents Act 1977; and
- Section 253 of the Copyright, Designs and Patents Act 1988.
The rationale behind the existence of groundless threats provisions is that a threat to issue proceedings may cause a business to cease using certain intellectual property rights, even where those rights have not actually been infringed or are invalid. A threat to litigate can have a massive impact on a business, particularly SMEs, and so groundless threats provisions were introduced as a counterbalance to discourage bullying by way of baseless allegations of infringement.
The Law Commission states in its consultation paper that groundless threats actions are "impeding genuine pre-litigation negotiations over legitimate disputes." At present, a practical gap exists between the Civil Procedure Rules and best practice in IP disputes. The Civil Procedure Rules require a claimant to assert all of its claims from an early stage, whereas fear of an accusation of groundless threats are usually enough to discourage a rights owner from doing anything more than simply notifying a suspected infringer of their rights.
The Law Commission is in favour of groundless threats provisions for trade mark and design rights being broadened along the lines of patent reforms which took place in 2004. These reforms allowed for communications to suspected secondary infringers to address statements of fact and assertions about the patent without being considered groundless threats to litigate. The Law Commission also said that professional advisers should not be subject to claims for groundless threats, pointing out that such a system is currently working well in Australia.
It also pointed out four loopholes which rights holders are able to take advantage of to mitigate the risk of an action for groundless threats against them:
- Issuing proceedings before opening negotiations;
- Carful drafting so that a letter falls short of groundless threats provisions;
- Threatening proceedings for something other than infringement and not subject to threats provisions; and
- For EU trade marks and designs, issuing proceedings outside of the UK.
Finally, the Law Commission stated it will be consulting on a new statutory tort of making false or misleading allegations in relation to IP infringement in the course of trade, which causes or is likely to cause loss to a competitor. The proposals in the consultation paper have been largely welcomed, although legislation is unlikely to be introduced in the near future.
By Aasim Durrani. Aasim is a Trainee Solicitor and can be contacted on firstname.lastname@example.org
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