Australia: What are unjustified threats and the rights of a patent owner?

Most patent owners will know that a patent will protect their inventions during the term of the patent. However, not many owners are familiar with the concept of unjustified threats. This article will explain the rights of a patent owner and the risks associated with threatening a third party with infringement of a patent.

The exclusive rights of a patent owner

Under section 13 of the Patents Act 1990 (Cth) ('the Act'), a patent gives an owner ('a patentee') the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. This means that anyone who exploits the invention without the patentee's consent will infringe the patent and the patentee is entitled to take legal action.

Generally, before taking legal action, the patentee would send a letter to the alleged infringer informing them of the existence of the patent. Typically, the letter will be a 'cease and desist' letter phrased in a stronger language with demands to stop the infringing act(s). The purpose of the letter is to alert the alleged infringer that legal action will be taken if infringement continues and, if possible, try to resolve the issue before initiating legal proceedings.

However, depending on the circumstances, this may be perceived as an unjustified threat of infringement proceedings, which is not permissible in Australia. For example, threatening another party with patent infringement for a product that clearly isn't covered by the patent, or on the basis of a patent that cannot be enforced, would be considered an unjustified threat. Therefore, before a patentee approaches an alleged infringer, the patentee should be aware of the unjustified threat provisions in the Act.

Unjustified threats

Section 128 of the Act states that a person who is threatened with infringement proceedings may seek relief from unjustified threats at a prescribed court. The aggrieved person may seek a declaration that the threat is unjustifiable, an injunction against the continuing of the threat and recovery of any damages sustained by the aggrieved person as a result of the threat. In some circumstances, the court may award additional damages depending on the flagrancy of the threat, the need to deter similar threats and the conduct of the person who had made the threats.

The term "threaten" is not explicitly defined by the Act. However, according to the Oxford English Dictionary, "threaten" is defined as "stating one's intention to take hostile action against someone in retribution for something done or not done" or to "cause someone or something to be vulnerable or at risk" or "seem likely to produce an unpleasant or unwelcome result".¹

In order to invoke section 128, the person threatened, must be threatened with infringement proceedings of a patent.² Whether a notification amounts to a threat of infringement proceedings is determined by fact and according to the understanding of an ordinary recipient.³

The onus of proving justification of the threat then falls on the patentee who has made the alleged unjustified threat.⁴ Accordingly, if the patentee makes a threat of patent infringement and fails to successfully prove the patent infringement, then the threats are likely to be considered unjustifiable.⁵ Conversely, if the notification does not contain a direct or indirect threat of infringement proceedings, then a claim of unjustified threat may not be established.

In a relatively recent case involving hoarding systems, Liberation Developments Pty Ltd v Lomax Group Pty Ltd [2019] FCA 1180, the patentee and its exclusive licensee of the patent (Liberation Developments Pty Ltd and Titan Hoarding Systems Australia Pty Ltd, respectively) not only wrote to the alleged infringer (Lomax Group Pty Ltd), but also to a third party interested in hoarding systems (Mirvac) advising them that the respondent's hoarding system infringes the patent. Notably, there was a statement advising Mirvac that the dispute was confined to Titan and Lomax, and that Titan (the exclusive licensee) did not want to involve other parties (such as Mirvac).

The Judge, Greenwood J, gave consideration to the content and the language of the letter to ascertain whether or not it constituted an unjustified threat. In particular, His Honour observed that the letter was a single letter and bilateral communication with one entity. His Honour was ultimately of the view that the language did not convey, objectively, to a reasonable person, a threat to bring infringement proceedings against Mirvac. Accordingly, the cross-claim of unjustified threat was dismissed.

Although unjustified threats were not made out in this case, the lessons are still relevant and a consideration for how communications may be interpreted by different parties should always be undertaken before advising them of alleged infringement.

Recommendations

Patent owners should be mindful of threatening third parties with infringement of a patent. While patent owners are entitled to commence legal actions and exercise their rights, relief may be sought by alleged infringers against the patent owners for threats that are considered unjustified. In some cases, the alleged infringer may even initiate legal proceedings themselves on the basis of the unjustified threats. Therefore, any communication to an alleged infringer, or related party, must be framed with extreme care. Professional advice, such as that provided by Spruson & Ferguson in relation to patent enforcement, should always be sought before taking action against the alleged infringer.

Footnote

¹ Lexico powered by Oxford, Definition of threaten (2019) Oxford Dictionaries < https://www.lexico.com/en/definition/threaten>.

² Patents Act 1990 (Cth) Sch1.

³ Occupational and Medical Innovations Ltd v Retractable Technologies Inc (2007) 73 IPR 312 [9].

⁴ JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68 [210].

⁵ CQMS Pty Ltd v Bradken Resources Pty Limited (2016) 120 IPR 44 [158]-[159].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.