Intellectual Property (Unjustified Threats) Bill [HL]

Baroness Bowles of Berkhamsted Excerpts

Wednesday 15th June 2016 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

I thank the Minister for that explanation. I declare my interests in the register as a retired UK and European patent attorney and a former fellow of the Chartered Institute of Patent Attorneys. As a consequence of that interest I have experience of the issues behind this legislation, stretching back to practice under the Patents Act 1949 as well as the Trade Marks Act 1938 and others.

I am afraid that I confess to being underwhelmed by the Bill because there are missed opportunities. But the Bill is here, so I can agree with making good on the 2004 promise to align the threats provisions in other IP rights with those of patents and to add some clarity to what can be communicated, to reduce likelihood of threats actions and to allow more permitted communications. However, not enough has been done to ensure that the Civil Procedure Rules or alternative dispute resolution are followed or to ensure that a recipient understands their full position and that such procedures should be followed. This should apply to exempted threats and, where relevant, to permitted communications.

The Bill does not capture the kinds of abuses that can and do happen nor even all the loopholes mentioned in paragraph 34 of the original consultation document. The first loophole was issuing proceedings merely as a negotiating tactic; that can still be done, and done repeatedly. The second was careful drafting around threats; drafting may be easier but wider exemptions will no doubt open new loopholes. The third was threatening on related matters such as passing off—that is still available, with no need to be comprehensive about all rights—and finally, forum shopping remains, apart from any commensurate reduction with any reduction in actionable threats.

The Bill also relieves regulated legal advisers of the risk of being liable as a threatener. Paragraph 7.65 of the original consultation suggests that smaller, non-specialist lawyers are at risk even though it is also acknowledged that threats actions against lawyers are very rare. My own experience is that, although actions may be rare, aggressive threats are alive and well. And just as highly qualified advisers have a hand in other walks of life to dream up aggressive and even egregious strategies, so too have some IP specialists. Overaggressive strategies should not be exempt and I will come back to that.

There is also the issue of not having fulsome compliance with the Paris convention. I seem to recall that one of the section heading quotations in Blanco White—a popular tome for practical advice, at least when I first qualified—was:

“Agree to the resolution and say that British Law already conforms”.

The fact is that the more we have allowed exceptions from the original threats provisions, no matter how logical, the further away we are from compliance, and the tapestry of available other torts does not fill the gap, as has been elaborated in the consultation and background documents.

The current law, and the proposed revisions, continue with the presumption that a manufacturer does not need any protection against unjustified threats of proceedings for infringement, that the attitude of the rights holder is irrelevant and no good faith or belief in validity requirement applies, even though it does—or, at least, something called truth does—to the new permitted communications. Experience shows that this presumption leaves small manufacturers, and “start-ups” in particular, open to oppressive behaviour by larger entities. I will turn to some anonymised real life examples.

US corporation X threatened small British manufacturer M with proceedings for infringement of a British patent. The products made by M were within the scope of the claims of the patent. However, investigation showed that all the claims of the patent were clearly invalid in view of a document of which corporation X had demonstrably been aware for at least seven years, it having been cited in proceedings for amendment of X’s United States patent. There was no intention to litigate because of the vulnerability in the US legal position and the motive behind the threat was apparently to produce adverse publicity for M, and consequentially depression of its share price, making M cheaper for X to purchase.

Nothing in the new law would help the manufacturer M in what was a threat under an invalid patent. If aggressively repeated and publicised, the only remedy is still an action for revocation and even if successful there are merely costs and not damages. In similar situations where the patent is valid but there is not infringement, a threatened manufacturer might need instead to seek a declaration of non-infringement, which is even worse protection with merely costs and a declaration and no damages nor an injunction against future threats under the continuing patent.

SMEs cannot be going back to court asking for additional injunctions, even if that is the lesson of Apple v Samsung. In the absence of being able to claim an unjustified threat, the rights holder gets away with it. Here I point out that the purpose of legislation is not just about what happens in the small number of cases that get to court; it is about the deterrent to bad behaviour. It is about the speed limit, not just the speeding fine.

A second example: patentee A threatened small British manufacturer B with infringement proceedings. B commissioned an independent report which demonstrated beyond doubt that A’s patent was not infringed and offered to share that report with A. A refused to consider the report, but each year for four years—always just before a trade fair—A used a different lawyer to repeat the threat and publicised it. Using trade fairs in this way is a common ploy mentioned among the consultation documents. The Bill does not provide a defence for a manufacturer, so it is back to the non-infringement declaration, again with no injunction to stop future and repeated threats and publicity. In this case, A’s fourth solicitor then proceeded to threaten one of B’s distributors, C, on the alleged basis that C was an importer. Since the solicitor was already aware that the products were made by B in the UK, because of their own previous correspondence to the manufacturer and the replies, the threat to the distributor was plainly oppressive.

In subsequent correspondence the solicitor, somewhat smugly, said that a threats action was not applicable because the letter referred only to making and importation, which do not allow proceedings to be brought. That of course was simplistic, and a demonstrable ruse that it would have been interesting to see being explained to a judge. This was a circumstance when I consider it would be appropriate to pursue the solicitor in a threats action for the seemingly deliberate strategy of a deceitful letter in which they must have been complicit, and potentially the deviser. This was not a non-specialist firm.

What can we do? Other countries take the tone and circumstances into account when looking at the issue of liability. Paragraph 6.27 in the consultation says that the law in the Netherlands provides that,

“even a ‘justified’ threat may be unlawful if it is unnecessarily offensive or unnecessarily public”.

That comes from a tort which a senior Dutch colleague described to me as,

“violation of what has to be regarded as proper social conduct”.

The wording in the consultation document would be a useful addition to the Bill, not as a separate tort but as both a general requirement and one applicable to lawyers or advisers. It would enable bringing back lawyer or adviser liability for egregious behaviour without damaging the more general exemption and deal with the “copy and distribute to customers” tactic at trade fairs.

The wording could be extended for the purpose of other abuses—for example, along the lines of the Paris convention that any exempted or permitted threat becomes unlawful if it is contrary to honest practices in industrial or commercial matters; after all, that is what we are meant to comply with. Alternatively, to make a more homegrown version, one could use the tests from the Broxton abuse of process case, which refers to conduct of proceedings,

“designed to cause the defendant problems of expense, harassment, commercial prejudice”,

or for “collateral” reasons.

It is most unfortunate that the Bill only helps rights holders and does nothing for the threatened party, when a significant part of the consultation was about abuses by rights holders. However, infringing manufacturers can be sneaky too and seek a new source, or there may be a commissioning party as the economic actor. I would be interested to cover those situations by allowing wider undertakings to be sought from manufacturers that cover selling from any other unlicensed source and more generally treating those commission acts as primary actors.

I will not elaborate in detail now, but I flag up concerns over new Section 70C(3) and possible ambiguity in the burden of proof for validity, and over whether the position of notice and takedown notices under Article 14 of the electronic commerce directive should be referenced. We could greatly improve the Bill, and I hope I have whetted appetites to help all SMEs with the anti-abuse measures that I have outlined.