07 Mar 2019

Is your threat of IP infringement proceedings unjustified? New additional damages now available

By Tim Webb, Korina Hui

Rights holders should consider their position carefully before making a threat to commence court proceedings for infringement of their intellectual property.

The recipient of unjustified threats of trade mark, patent, design or plant breeder's rights infringement can now claim additional damages above compensation for loss sustained as a result of the threats. IP rights holders need to bear in mind this risk before threatening to commence infringement proceedings.

These amendments came into force on 24 February 2019 under the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (Cth), which amended each of the Trade Marks Act 1995 (Cth), Patents Act 1990 (Cth), Designs Act 2003 (Cth) and the Plant Breeder's Rights Act 1994 (Cth).

What are unjustified threats proceedings?

A person who is threatened with infringement proceedings can commence proceedings in the Federal Court or Federal Circuit Court. The threatened person may seek a declaration that the threat is unjustified and an injunction restraining the person making the threat from continuing to make such threats. In certain circumstances, damages may also be recoverable.

This may be attractive to the recipient if they consider the threat to be unjustified, but the existence of the threat is causing a serious issue for the business (eg. impeding the launch of a new product line).

What are the changes and how will these affect IP rights holders?

Taking the Trade Marks Act as an example (see section 129(2A)), the Court may now award additional damages against a person who makes unjustified threats of infringement proceedings if it considers it appropriate to do so having regard to factors such as:

  • the flagrancy of the threat;
  • the need to deter similar threats;
  • the conduct of the defendant that occurred after the defendant made the threat; and
  • any benefit which accrued to the defendant because of the threat.

This provision applies in relation to threats made on or after 24 February 2019. Similar provisions providing for additional damages have also been inserted into the unjustified threats provisions of the Designs Act (see section 77(1A)), Patents Act (see section 128(1A)) and the Plant Breeder's Rights Act (see section 57A(2)).

The amending Act has introduced two further amendments to the unjustified threats provisions of the Trade Marks Act:

  • new section 130A makes it clear that the mere act of notifying someone of the existence of a registered trade mark does not constitute a threat to bring an action for trade mark infringement. A similar provision has been inserted into the Plant Breeder's Rights Act. Similar provisions already existed in the Designs Act and Patents Act.
  • section 129(5) has been repealed, which means that registered owners (or authorised users of a trade mark) can no longer rely on as a defence to an unjustified threats action the fact that they have commenced trade mark infringement proceedings or are pursuing such proceedings against the threatened person. The old section 129(5) still applies in relation to an action for infringement of a trade mark that was commenced before 24 February 2019.

Lessons for IP rights holders

Rights holders should consider their position carefully before making a threat to commence court proceedings for infringement of their intellectual property. Sending off a letter of demand which has a dubious basis, but hoping it will be sufficient to change the recipient's behaviour, carries with it a real risk of substantial monetary liability.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.