Alan Massenhove, solicitor in Sykes Anderson LLP’s Litigation and Dispute Resolution Department discusses the impact of a recent case on IP owners threatening proceedings against alleged infringers.

Please note that this area of the law is a complex subject and you should not take or refrain from taking any step without full legal advice on your particular circumstances. The content of this article is of a general nature and no liability is accepted in connection with it or if any reliance is placed on it.

They’re Infringing My IP Rights: Tell Them To Stop!

Owners of certain IP rights must be careful when alleging that third parties are infringing their IP rights as some threats to bring proceedings are actionable and can give rise to a right for the person being threatened to claim an injunction and/or damages for any loss suffered

Patent owners and owners of design rights can be liable for threatening to issue infringement proceedings. In the case of patents, a threat is only actionable if made against a secondary infringer - a seller or distributor of infringing goods, not a manufacturer or importer (this is primary infringement) - and in the case of design rights, a threat against a manufacturer or importer is not actionable.

These provisions are intended to promote competition by seeking to prevent owners of IP rights from acting in an abusive way to restrict legitimate business. Many smaller businesses are not in a position to defend claims from larger businesses and may be ‘scared off’ by simply the threat of proceedings.

The reasoning behind this principle has recently been tested in the High Court in somewhat novel circumstances. The internet site EBay has a policy of requiring items listed for sale on its site to be removed if it has received an allegation that the items in question infringe the IP rights of a third party. This is designed to protect EBay from liability for infringement due to the actions of people selling items through its site. Sellers on EBay have a contractual relationship with EBay and must therefore abide by the terms of that contract.

A Policy Decision?

The problem in the case of Quads 4 Kids -v- Campbell was that the defendant notified EBay of the alleged infringement of a Community Design Right in respect of a design for children’s dirt bikes. EBay immediately removed the sellers items alleged to be infringing the defendant’s design rights from its listings. The defendant took no further action to protect the alleged Design Right but had effectively prevented the Claimant from selling its goods through Ebay without having to prove anything.

The claimant issued proceedings for an injunction to prevent the defendant threatening to issue proceedings and to allow his products to be sold through EBay. The court was conscious that the claimant would be left without a remedy if an injunction was not granted. The seller’s relationship with EBay was governed by contract and EBay’s policy was clear. The seller had no remedy against EBay for acting in accordance with its published policy.

The court granted the injunction on the basis that the reason EBay has a policy to remove alleged infringing product listings is that it is seeking to protect itself from infringement proceedings. Persons notifying EBay under its published procedure that it was hosting listings for alleged infringing products would be aware that EBay would simply remove the listing and such notification therefore qualifies as a threat of infringement proceedings in accordance with the underlying purpose of the legislation.

The logical conclusion to be drawn from the case is that any owners of IP rights notifying EBay of an alleged infringement will have made a threat of infringement proceedings such as to potentially give rise to a claim against themselves.

It should be noted however that this is only a first instance decision and may yet be appealed. Unless and until an appeal is completed, the decision sets a useful precedent and may well lead to further similar claims.

So How Do I Deal With Infringement of My IP Rights?

It is not an actionable threat to simply point out that a patent or design right is in existence. If you believe that sellers are selling products which infringe your IP rights through EBay, notifying EBay through their procedure is still an option but you should ensure that you are in a position to issue proceedings immediately upon notifying EBay. Issuing proceedings (assuming that you have a strong case) is likely to protect you from a claim for damages or an injunction based on the above principles.

If the potential defendant is a primary infringer, i.e. a manufacturer or importer of infringing goods, there is no liability in damages. Only secondary infringers are protected. It would make sense therefore to engage in a fact finding exercise before making any threats of proceedings.

In any event, you should always seek legal advice before taking any steps as the potential consequences need to be considered carefully.