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IP rights holders’ threats & unregistered rights

In September 2015, the High Court held that it had the power to pass an order that prevents an intellectual property (“IP”) rights holder contacting alleged infringers. This would only be so where the IP rights holder’s claim amounts to an unjustifiable threat.

The decision is welcome news for alleged IP rights infringers who receive correspondence from IP rights holders alleging infringement.  IP rights holders have enforcement rights. However, rights holders often misuse the standing to force smaller businesses into submission.  For instance, IP rights holders can afford larger legal teams.

The High Court has protected the position of smaller businesses and has held that it has jurisdiction to prevent such unjustified threats from the same rights holder in the future.

The facts in outline

The claimant, Tech 21 UK Ltd (“Tech”), was a UK company, manufacturing impact protection cases for iPad tablets. The defendant, Logitech Europe S.A (“Logitech”) was a Swiss company with establishments in other EU countries. Both Tech and Logitech launched iPad protection cases, following the breakdown of a joint venture agreement. A hostile relationship between the parties.

In early September 2014, Tech received a letter from Logitech’s German lawyers. Logitech alleged that Tech’s iPad protection case infringed Logitech’s community unregistered design right for a similar iPad protection case in market circulation. Tech issued proceedings in the UK, seeking a declaration that:

  • Logitech had made unjustifiable threats to bring proceedings for community unregistered design rights in the UK.

Logitech argued in defence:

  • That the letter did not constitute an unjustifiable threat to bring proceedings in the UK as the letter was from German lawyers; and
  • That in the alternative, the UK court had no such jurisdiction to hear the claim as Logitech was not based in the UK (a general principle of EU law is that a company defendant is sued in the country in which it is established).

The outcome

The High Court held that:

  1. It did have jurisdiction to hear the claim for unjustified threats; and therefore
  2. The High Court would issue the declaration requested by Tech.

The High Court stated that the threat was received by Tech in the UK, and if carried out, would occur in the UK, which in turn would lead to loss in the UK. Hence, the High Court had jurisdiction.

What did Tech prove to show an unjustified threat?

Tech had to show:

  1. That the letter, as perceived by a reasonable reader, would amount to an unjustified threat;
  2. That regardless of the letter being received from a German law firm, as Tech was based in the UK, there was a potential that proceedings would be issued within the jurisdiction;
  3. That the threat did not have to be explicit, a mere warning would suffice, here the letter; and
  4. That on legal advice, a reasonable reader would have contemplated infringement proceedings.

Why was Logitech unsuccessful in its defence and why did Tech succeed?

Logitech argued that the letter should have been read subjectively – this means how Tech would, as an established entity, perceive the letter in determining whether the letter amounted to an unjustified threat. Logitech asserted that the letter came from a German law firm, and therefore Tech, as an established entity, would perceive the letter as being a warning to bring proceedings in Germany. Even if the letter did constitute an unjustified threat, which Logitech did not admit, it could not be actionable in the UK by Tech and therefore Tech had no grounds to claim that the letter was indeed an unjustified threat.

The High Court rejected this argument. The High Court stated that this approach would lead to uncertainty, the risk of unfairness and increased costs, contrary to the aims of the civil justice system in the UK. The test was how the reasonable reader would have perceived the letter: an objective test. The High Court concluded that such a reasonable reader, following advice from a qualified lawyer, would perceive the letter to amount to an unjustified threat to bring legal proceedings in the UK.

Community unregistered design right

A community unregistered design right is a right which confers enforcement powers on the holder to certain lines, contours, colours, shapes and textures or materials of a product.

The killer blow for Logitech came from the High Court’s analysis of the community unregistered design right. The very nature of the community unregistered design right gives the right for the holder to sue an entity across the EU. It did not matter that the letter came from Germany. As long as the recipient was within the EU, any reasonable reader could contemplate future proceedings.

Consequently, the letter amounted to an unjustifiable threat. Any claim for infringement in Germany would initiate action in the UK. Logitech shot itself in the foot by taking aggressive action without planning for Tech’s response. This should have been considered given the hostile relationship that existed between the parties.

Where next for Tech?

As Tech succeeded on its claim for unjustified threats from Logitech, the High Court will now proceed to hear both parties’ submissions on what order the High Court should make. The following may be ordered:

  1. Financial damages for loss associated from receiving the unjustified threat;
  2. An injunction preventing further unjustified threats from Logitech;
  3. A declaration that the claim lacks justification; or
  4. An order preventing Logitech from proceeding with its claim.

A combination may be ordered – watch this space.

What does this judgment mean for your business?

It is clear from the judgment that a key factor in determining whether or not a letter amounts to an unjustified threat will be whether the recipient receives legal advice within a reasonable time – this point alone assisted Tech with its claim.

We often find that businesses panic on receiving a letter from an IP rights holder. However, the High Court has here recognised the damage that can be caused to a smaller business when receiving a letter alleging infringement. Remedies are in place to protect your brand and your business’s financial position. IP infringement proceedings can be prevented with the right case strategy, the first consideration is to assess the merits behind the claimant’s case.

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