Threatening behaviour


The world's leading online auction site - or car boot sale, depending on your point of view - is eBay. Everything from mousemats to Rolls-Royces can be sold via eBay, and its success is driven by the twin temptations of cheaper-than-retail goods and a dangerously addictive bidding system.



As the world's largest online market, eBay is naturally susceptible to intellectual property abuses. Offers for sale of counterfeit goods are probably the largest problem, but online infringements can include other trade mark misuses, or breaches of patent or design right.



As well as employing a small army of lawyers and enforcers, eBay tries to control abuses through its online verified rights owner (VeRO) system. If you think that someone is selling a product that infringes your Intellectual Property Rights (IPR), you simply notify eBay by completing an online declaration that identifies yourself, your IPR, and the goods that you say are infringing your IPR.



There is a risk of a claim of IPR infringement against eBay itself because it is arguably offering or exposing the infringing goods for sale, and so when it receives these declarations it does not usually check them - it simply pulls the sale. On its face, this is a cheap and easy way for an IPR owner to enforce its rights.



Cheap and easy unless it gets it wrong. In Quads 4 Kids v Colin Campbell [2006] EWHC 2482 (CD), Mr Campbell was the proprietor of 16 registered European Community designs relating to a child's dirt bike. Mr Campbell maintained that his designs were infringed by children's dirt bikes that were being sold by Quads 4 Kids through eBay. He completed the VeRO declaration, submitted it to eBay, and eBay duly pulled the Quads 4 Kids bikes from sale.



Quads 4 Kids responded by issuing a 'threats action' against Mr Campbell, and brought an interim injunction to prevent interference with its eBay sales. Threats actions are a unique feature of patent, registered trade mark and design right law, derived from section 70 of the Patents Act 1977 (in relation to patents), section 21 of the Trade Marks Act 1994 (in relation to registered trade marks) and section 253 of the Copyright Act 1988 (in relation to design rights).



In a threats action, the person threatened with proceedings for infringement can themselves bring an action for wrongful threats against the person claiming a right, usually by asserting that the IPR claimed is invalid, or is not infringed, or both. The person threatened can seek an injunction to restrain the wrongful threats, and damages.



Threats actions were first introduced in 1883 (in relation to patents), and the thinking behind them is that the mere threat of patent, registered trade mark or (more controversially) design right infringement can have a chilling effect on a business, such that persons threatened should have the right to flush out wrongful claims.



It was not in dispute that the Quads 4 Kids bikes were similar to Mr Campbell's registered design. Rather, Quads 4 Kids alleged that it had been selling its design before Mr Campbell's priority date, such that the registered design was not valid. Quads 4 Kids produced evidence of use that pre-dated Mr Campbell's registration, and the court held it was at least seriously arguable that Mr Campbell's registration was invalid.



The only remaining question for the court was whether Mr Campbell's VeRO declaration constituted a 'threat'. The court said that it did &150; and duly issued its injunction &150; although it struggled with the question.



The reason was that Mr Campbell argued that his declaration was merely notification of his right, and was not a threat of proceedings. The law recognises that IPR owners should at least be able to notify third parties of their rights without the risk of facing a threats action. Section 253(4) of the Copyright Act 1988 provides that 'mere notification that a design is protected by design right does not constitute a threat of proceedings'. Section 21(4) of the Trade Marks Act 1994 contains an almost identical provision, and section 70(5) of the 1977 Patents Act goes even further, saying that there is no threat in merely providing factual information about a patent, making enquiries to discover whether and by whom a patent has been infringed, and making assertions about the patent.



Since 'mere notification' is not a threat, IP lawyers will often send letters that fall within the safe harbour of notification, to avoid the risk of a threats action.



The court may have been right that Mr Campbell's VeRO declaration was a threat, but the judgment highlights an absurd situation, arising from the fact that threats actions arise in relation to some IPR but not others. There is no right of action in respect of threats of copyright infringement or unregistered trademark infringement (passing off).



If Mr Campbell's VeRO declaration had claimed copyright infringement rather than design right infringement, and if eBay had pulled the sale as a result, Quads 4 Kids might have struggled to find a remedy. It is just possible that the court might have found an implicit threat of design right infringement &150; in one case, the court had little difficulty in finding that a letter was threatening design right infringement, where it gave 'mere notification' of design right in a product, coupled with a bald threat of copyright infringement in the same product (see Jaybeam v Abru Aluminium [1975] FSR 334).



But the situation might well be different if only a copyright infringement claim were threatened, and design right not mentioned at all. Mr Campbell might not have had good grounds for the claim (given the impact of section 51 of the Copyright Act on parallel copyright and design rights), but still Quads 4 Kids might have had little option but to beg and plead with eBay to restore its products for sale.



A final word of caution for practitioners. Solicitors who make threats on behalf of their clients run the risk of a threats action, not only against their client, but also against themselves and their firms (see Brain v Ingledew Brown Bennison and Garrett No. 3 [1997] FSR 511). Although the Patents Court has in recent times struck out threats actions brought against solicitors, it has not gone so far as to reject the principle that such actions can be brought.



As a matter of best practice, before issuing letters before action for patent, registered trade mark and design right infringement, solicitors should warn clients of the risk of a threats action, and if possible obtain an indemnity from their client against threats that might be brought against themselves.



European patents



This column recently described the European Court of Justice's rulings in Primus v Roche and GAT v Luk (see [2006] Gazette, 12 October, 31), in which it refused to allow the courts of one European member state to issue a pan-European injunction against the infringement of a European patent. The judgments left intact a system in which European patents can be expensive to enforce, but they may have galvanised the patent system in Europe towards change.



The great hope currently lies with the European patent litigation agreement (EPLA), a draft of which has been around for many years but until now the European Commission has opposed the idea. Under the agreement, the courts of states that sign EPLAs would recognise one another's findings on the validity and infringement of European patents, subject to appeal to a central European court.



Since the summer, the EC has dropped its opposition to the EPLA, the European Parliament has called for the adoption of the agreement, and senior judges (including the UK's Lord Hoffman) have met to hammer out the detail. There is still some distance to go before the EPLA is adopted, but at the moment this seems to be the way that patent litigation in Europe is headed.



By Richard Taylor, DLA Piper, Sheffield