Posted: February 10th, 2016
On 1 February 2016 the Intellectual Property Enterprise Court handed down a decision of Judge Hacon in the case of Global Flood Defence Systems Ltd & others v Johann Van Den Noort Beheer BV & others  EWHC 99 (IPEC) on the subject of groundless threats and fraudulent misrepresentation. The alleged groundless threats were made on the basis of a patent application rather than a granted patent and although the threats trial was adjourned pending the grant of the patent, the decision should act as reminder that threats can be made in relation to an application and a warning to those threatening infringement proceedings based on a patent application to proceed with caution.
Van Den Noort Beheer BV (“BV”) had applied for patents relating to flood defence systems. In 2010, Global Flood entered into a licence with BV allowing it to sell its self closing defence barrier. However, by 2014 Global Flood had stopped paying royalties, the licence was terminated and Global Flood began selling an alternative product, the self activating flood barrier. BV threatened to bring infringement proceedings against Global Flood, which formed the basis of Global Flood’s claim for groundless threats. BV counterclaimed for royalties under the licence, following which Global Flood amended its claim to allege that BV had made misrepresentations that induced it to enter the licence in the first instance. Global Flood’s claim to actionable misrepresentation failed, and BVs counterclaim for royalties under the licence succeeded but it is the threats aspect of the case which is most interesting.
In relation to the threats action, the Defendants sought to rely on a statutory defence that the threats were justified on the basis that the Global Flood’s actions would constitute infringement of a valid patent. However, the patent had not yet granted at the time that the proceedings were commenced, nor on the date that the trial started. It is settled law that a threats action can be based on a patent application; such a threat would generally be understood to be a threat to bring patent infringement proceedings on grant. Obiter comments from Aldous LJ in the Court of Appeal in Brain v Ingledew Brown Bennison & Garrett  F.S.R.341 indicated that the defence of justification could also be relied upon in such circumstances, provided that appropriate steps are taken to ensure that the patent is granted before trial.
If not, the defence should not be available as to rely on it would require the court to assess the scope of various hypothetical claims and the likelihood of the patent office granting such claims. Only in exceptional circumstances would this be permitted. Despite this, Mr Justice Laddie in Brain v Ingledew Brown Bennison & Garrett (No. 2)  F.S.R. 271 suggested that where a decision on grant is imminent a stay may not be improper.
In this instance, the EPO issued a notice of intention to grant the patent a few weeks before trial, at which stage the claims and specification were fixed. However, the date of grant was to fall some 8 days after the trial. Applying Brain v Ingledew Brown Bennison & Garrett (No. 2), the court considered which factors it should take into consideration in exercising its discretion to stay the proceedings to allow the Defendants to run a justification defence. Despite the Claimants arguments that the Defendants (i) should accept some degree of risk for making threats based on an application, (ii) should have pursued its EPO prosecution in a more timely manner and (iii) had breached an interim injunction not to make further threats (an allegation that the court found was unfounded, as the threat was one that it considered to be a threat to bring proceedings in Spain, which is therefore not actionable under UK law), the Court decided to allow the Defendants to be heard on the defence of justification and adjourned the proceedings pending grant of the patent. Whether the defence will be successful remains to be seen.
It is notable that the UK Government are in the process of passing a Bill amending the law of unjustified threats, such that it applies to threats based on Unitary Patents and European Patents that have not been opted out. Given that the new provisions will not be linked to a threat to bring proceedings in a UK Court, but instead will be a threat to bring proceedings in relation to an act of infringement in the UK, careful thought will be required as to the content of communications which could be perceived to be threats.
Read the decision here.
Headnote: Claire Phipps-Jones, Bristows LLP