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Putting your money where your mouth is

August 02, 2017

Contacts

Partners Earl Gray, Richard Watts

Intellectual property

Intellectual property rights owners often use threats of legal action as a tool for deterring infringers.  However, threats of legal action can also potentially be open to abuse, such as by businesses making dubious claims to deter competitors or to extort settlements (acting as "trolls").  Many countries, including New Zealand, therefore provide defendants with remedies against unjustified threats and groundless infringement proceedings.

The United Kingdom recently reformed its regime relating to unjustified threats.  The developments in the United Kingdom serve as a reminder for businesses in New Zealand that:

  • defendants, and other aggrieved parties, may have remedies against threatened or commenced infringement proceedings that are unjustified;
  • the position regarding unjustified threats and proceedings varies between territories.  In New Zealand, it depends on the particular IP rights in issue.  This can make it complicated for rights owners where several types of IP rights are infringed, or where an infringing activity spans across more than one territory; and
  • IP rights owners should obtain appropriate advice before threatening or commencing infringement proceedings.

Recent Developments in the United Kingdom

The United Kingdom recently enacted the Intellectual Property (Unjustified Threats) Act 2017 (the Act), which is expected to come into force later this year.  The Act unifies the approach to remedies for unjustified threats of proceedings for certain types of IP.  Highlights include:

  • remedies can be sought by a "person aggrieved" by an unjustified threat of infringement proceedings.  This means parties other than the recipients of threats could seek remedies.  Remedies can include a declaration of non-infringement, damages, and/or an injunction against the party making the threat;
  • the Act introduces a new test for what constitutes a threat of infringement proceedings.  The test now relies on what a reasonable person would understand, and whether the threat is understood to relate to acts done in the United Kingdom;
  • there are exceptions for "permitted communications" by rights owners.  This is intended to allow rights owners to give notice of their rights and make genuine enquiries without facing potential liability of being sued as a result; and
  • the Act excludes liability for professional advisers of the parties making the threats, subject to certain conditions.

 

The Act applies to patents, registered trade marks, and registered and unregistered designs.  The Act does not affect the position regarding other IP such as copyright and unregistered trade marks.

The Position in New Zealand

Unlike the United Kingdom, in New Zealand there is no unified approach to groundless threats or unjustified infringement proceedings.  Instead, the approach differs depending on the particular IP right.  Notably, New Zealand's Patents Act 2013 does not provide a remedy for defendants who are subject to unjustified threats and proceedings.

The table below summarises provisions in New Zealand for particular types of IP regarding groundless threats and unjustified proceedings.

IP Right

Comments

Registered trade marks

Section 105 of the Trade Marks Act 2002 provides a remedy for defendants where proceedings brought against them are unjustified.  But relief will not be granted to the defendant if the claimant proves that the relevant act constitutes an infringement.

Copyright

Section 130 of the Copyright Act 1994 provides a remedy for defendants where proceedings brought against them are unjustified.  But relief will not be granted to the defendant if the claimant proves that the relevant act constitutes an infringement.

Patents

The Patents Act 2013 does not contain any provisions addressing groundless threats or proceedings.  However, defendants can counter-claim to revoke a patent (s 147), and any person wanting to exploit an invention can apply to the court for a declaration of non-infringement (s 159).

Registered designs

Section 34 of the Designs Act 1953 provides a remedy for a "person aggrieved" where proceedings are threatened against them.  Relief will not be available if the plaintiff proves that the relevant acts constitute an infringement and the registered design is not shown by the defendant to be invalid.

Circuit layouts

Section 40 of the Layout Designs Act 1994 provides a remedy for defendants where proceedings brought against them are unjustified.  Relief will not be granted to the defendant if the plaintiff proves that relevant acts constitute an infringement.

Plant variety rights

The Plant Variety Rights Act 1987 does not have provisions dealing with threats of unjustified proceedings or the bringing of groundless proceedings.

Making threats that are not capable of being substantiated or that are misleading or deceptive could also breach the Fair Trading Act 1986.  Furthermore, threats that are malicious and false could give rise to an action in tort for slander of title or goods, trade libel, defamation, injurious falsehood, or interference with contractual relationships, and potentially malicious civil proceedings if proceedings are commenced.

Additionally, lawyers are subject to professional obligations that deter groundless threats and proceedings.  For example, lawyers must not mislead the court, must ensure that there are reasonable grounds for proceedings relating to fraud and other reprehensible conduct, and must ensure that they are satisfied with certain matters in interlocutory applications without notice.

Time for New Zealand to unify its regime?

The policy reasons underlying remedies for unjustified threats and proceedings are sensible.  However, the varied position under New Zealand's IP statutes does not encourage efficiency or certainty for rights owners or defendants.  The regime in New Zealand relating to unjustified threats and proceedings could therefore benefit from a review and a possible unification of the approach across all types of IP.

Of the New Zealand statutes discussed above, the Patents Act 2013 is the most recent.  In around 2009, when considering the possibility of including an unjustified threats or proceedings provision in the Patents Bill, the Ministry of Economic Development (now called the Ministry of Business, Innovation and Employment) was of the view that such a provision was unnecessary and could be used to intimidate patent owners into withdrawing or not threatening proceedings.  The Ministry also noted that such provisions are not generally available in areas of law other than IP.

The Ministry recently launched a review of New Zealand's Copyright Act 1994.  It will be interesting to see whether the Ministry's view on unjustified threats and proceedings in patent infringement still holds and, if it does, whether the same approach is applied to copyright infringement.

Contributors raymond.scott@simpsongrierson.com