Intellectual property law – achieving a balance between the right to enforce and protecting innovation
Patents, trade marks and design rights are valuable intellectual property (IP) rights and vital to economic growth. They ensure that research and innovation is encouraged and rewarded. And, for some small businesses, they can represent their most significant assets.
The law provides effective ways to enforce IP rights but these can be misused to drive competitors from the market. In a report published today, the Law Commission is recommending reforms that will allow individuals and businesses to protect their IP rights but not at the expense of new ideas and inventions.
Disputes relating to patents, trade marks and design rights can be expensive, complex and disruptive. Threats to sue for infringement can be misused by being targeted at a competitor’s customer base or retailers who will find an alternative product rather than risk litigation. This can cut off the competitor’s route to market and cause them huge commercial damage.
A threat to sue for infringement can be “groundless”, in that there has been no infringement or the right concerned is invalid, but this does not make it any less powerful. The law provides a remedy for a person affected by a groundless threat. Under the “threats provisions”, they can seek an injunction to stop the threat, a declaration that there has been no infringement and/or damages for any losses caused. However, there are problems with the current law:
• the provisions, first introduced in 1883, are complex and inconsistent between the various rights
• a threat to sue for making a groundless threat can be used tactically by well-resourced enterprises to bully smaller rights holders out of enforcing their IP rights, and
• under the provisions any form of communication that sets out the grounds of an infringement dispute may be interpreted as a threat to sue.
This can make negotiating a settlement almost impossible and so prevent rights holders and competitors from complying with their obligation under the Civil Procedure Rules to avoid going to court. Anyone providing advice to disputing parties can also be found liable for making threats and this can be used tactically to drive a wedge between adviser and client.
The aim of the Law Commission’s recommendations is to simplify and clarify the law and bring the law for trade marks and design rights into line with that for patents.
Under the recommendations, threats to sue for infringement could safely be made to anyone doing (or intending to do) the most damaging acts, such as manufacturing or importing a product. But others such as retailers, suppliers and customers would be protected against threats. Rights holders would be able to communicate with them as long as there is a legitimate commercial purpose, for example to find the source of an infringement. The Commission’s report provides guidance on what kind of information could be given and recommends that there should be a requirement that whoever is giving it should believe it to be true. The Commission is also recommending that professional advisers should no longer be liable for making threats.
David Hertzell, the Law Commissioner leading on the project, said “Patents, trade marks and design rights are vital to the UK economy and should be protected, but the right to do this must not be used to stifle competition.
“If implemented, our reforms will prevent threats being used as a means of unfair competition by targeting customers, suppliers and retailers. Our recommended reforms would provide a “safe harbour” for communication and provide guidance on what rights holders and their competitors may say to each other. This would address a major concern, that it is all but impossible to comply with the obligations imposed by the Civil Procedure Rules to avoid litigation through negotiation.
“This is a complex and difficult area of law where proper advice can nip disputes in the bud. The risk of liability should not prevent rights holders from getting the right help and we are recommending that professional advisers acting for their clients should no longer face liability for making threats.”
The report, Patents, Trade Marks and Design Rights: Groundless Threats, is available on the Law Commission’s website: www.lawcom.gov.uk