It is easy when a business feels that it has been wronged and its intellectual property misused or taken advantage of to make statements against the other party. However it must be careful since statements that contain unjustified threats may turn against it.

Intellectual property, also known as intangible assets, comprises patents, copyright, trademark, design rights and registered designs. Some intellectual property rights (such as Patents, Trademarks and Registered Designs) need a formal process of registration and payment of fees by the owner to the Intellectual Property Office, in order to provide protection and monopoly rights to their owner. Copyright and design rights, arise automatically upon creation, but do not protect the owner from a third party’s independent creation - only from actual copying. The intellectual property rights differ in terms of duration and procedures, but their effect is to ensure that the owner has the exclusive right to use its rights and decide how those rights are used and exploited and to prevent any other party from using the same rights. This is extremely important for a business seeking to protect its assets, to achieve growth and potential investments.

Another difference regarding intellectual property rights is what is known as “unjustified threats” or in other words the unjustified accusations that a party has committed some unauthorised acts against the intellectual property rights of a party.

In particular, section 21(1) of the Trade Marks Act 1994 contains an “unjustified threats” provision and remedies in the event a person threatens another with proceedings for infringement of a registered trademark other than: (a) the application of the mark to goods or their packaging; (b) the importation of goods to which, or to the packaging of which,  the trademark has been applied; or (c) the supply of services under the trademark. In such a case any person aggrieved by the unjustified threats may bring proceedings for relief under this section.

Claimants of such proceedings can seek a declaration from the trademark owner that the threats lacked justification, damages and an injunction to prevent further threats.The line between justified and unjustified threats is a very thin one and this is demonstrated in a recent case.

Generally speaking, a threat may be hidden in a letter sent to a party demanding a stop to the infringing act, assignment of rights, and similar which if not completed will see the start of legal proceedings.   

In a recent case the High Court found that the threats action was unsuccessful because the relevant letter was covered by without prejudice privilege. The court rejected arguments that the ‘real’ purpose of the letter was a letter before action, because in context, the letter was setting out a negotiating position. The court came to this conclusion because the letter contained genuine offers to negotiate. The offer was made during a cooling-off period intended for the parties to negotiate a consensual solution. In context, and as the letter itself requested a response confirming a willingness to start a negotiation process, it was found that the letter fell within the protection of the without prejudice rule.

So although it was found that a threat had been made, the High Court held that since a part of the letter (the last three paragraphs) contained genuine offers to negotiate, and requested a response confirming a willingness to start a negotiation process, the letter had the protection of the without prejudice rule and so did not constitute a threat when viewed as a whole.

On appeal, however, the Court of Appeal: (a)  agreed with the High Court that the letter contained a threat of proceedings in the UK; but (b) in relation to the “without prejudice” rule, the Court of Appeal held that the High Court had failed to consider the letter as a whole and had focused too much on the last three paragraphs, which the Court of Appeal found that they merely underlined the defendant’s belief in its case and its determination to pursue it, rather than being a genuine attempt to settle the dispute.The question to consider was “whether the parties would reasonably have thought that their negotiations in the correspondence in issue were sufficiently advanced to have moved into the "without prejudice" zone”.  The letter would therefore not attract “without prejudice” protection as it was not part of a genuine negotiating process and could therefore be put before the court as evidence.

This case highlights the risk of incorporating a threat in a letter with the assumption it will be protected by the “without prejudice” rule.  In addition, it casts doubt on whether truly "without prejudice" correspondence would be excluded from liability for threats at all, since the Court of Appeal held that even if it had agreed with the conclusion of the High Court regarding the last three paragraphs of the letter it would nonetheless have held that the letter could be relied on to support the claimants' threat claim ...".

This article is for general purposes and guidance only and do not constitute legal or professional advice. Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.