UK legislation has long since offered protections against frivolous or intimidatory threats of litigation, meaning that careless or ill-considered communications from IP rights holders or other invested parties could inadvertently land them in legal hot water.
However, evolving technology, particularly in the world of ecommerce, continues to create new dynamics between rights holders, consumers, and potential infringers. Where new or alternative channels for communication arise, it’s not always immediately clear how existing legislative tests might be applied. For those looking to assert their IP rights in the UK, the recent Court of Appeal decision in NOCO vs Carku serves as a reminder to tread carefully when initiating and navigating disputes, or risk incurring unintended legal consequences.
BACKGROUND
Between January and July 2020, The NOCO Company (“NOCO”) made a number of complaints to Amazon, via its "Infringement Form", about listings of Shenzhen Carku Technology Co Ltd (“Carku”) products, claiming that they infringed their GB patent to a lithium-ion battery for jump-starting a motor vehicle. In the months following, Amazon delisted a number of Carku products, with Carku alleging a substantial loss in sales as a result.
In 2022, Carku filed an action seeking revocation of NOCO’s patent on grounds of obviousness. In the action, Carku also alleged that the statements made by NOCO to Amazon, which led to the products’ removal, were actionable (unjustified) threats under UK law. NOCO denied the patent’s invalidity, counterclaiming for infringement by Carku, and argued that their communications to Amazon had not constituted threats, or, if they had, were justified.
THE LEGAL TEST
UK law grants, in certain circumstances, the recipient of a threat of litigation for infringement of a registered IP right (i.e. patents, trade marks, or registered designs) a cause of action, allowing them to obtain an injunction against further threats by the rights holder, and damages for the losses caused by the threat in question.
In this instance, the threats in question arose out of an assertion of patent infringement. The test for groundless threats is set out, in relation to patents, at sections 70-70B of the Patents Act 1977, but a similar test applies to trade marks (section 21 Trade Marks Act 1994) and to registered designs (section 26 Registered Designs Act 1949).
1. Has a threat been made?
A "threat" is anything which would convey to a reasonable person, with knowledge of the circumstances at the date of the communication, that somebody had patent rights and intended to enforce them against another person. What the recipient actually understood, or how they actually responded, is not the question. Nor is it relevant whether the threat is veiled or covert, or conditional or future, or whether the threat is unsolicited or made in response to an initial enquiry from the threatened person.
2. Is the threat actionable?
Threats of patent infringement are not actionable where:
- the allegation is of manufacturing or importing the patented product (or, if applicable, using the patented process); or
- the threat is made to a current or intended manufacturer or importer (or user, in the case of a patented process), even if the threat also refers to other acts; or
- the threat is not an express threat, and all of the information relating to the threat is reasonably believed by the threatener to be true and for one of the following purposes:
- to notify a party that a patent exists; or
- to discover whether or by whom a patent has been infringed by manufacturing or importing (or using, in the case of a patented process); or
- to notify a party that a person has patent rights, if the party’s awareness is relevant to potential proceedings (e.g., to stop an infringer availing themselves of an “innocent infringer” defence in the UK)
The courts may decide that other purposes are permitted. However, requesting cessation of commercial activity, delivery-up or destruction, or a financial settlement are not permitted purposes in the UK.
Similar provisions apply to trade marks and registered designs.
3. Who may bring unjust threats proceedings?
Any person aggrieved by the threat - this might not necessarily be the recipient or the person against whom the threat has been made.
AMAZON: MEDIATOR, OR JUST CAUGHT IN THE MIDDLE?
Carku argued that NOCO’s notifications to Amazon were threats against Amazon itself, or at least against the distributors of Carku’s products. They reasoned that Amazon’s decision to de-list the notified Carku products was contrary to its mission statement of maintaining the broadest possible product offering. This, Carku said, could only be explained by a motivation on Amazon’s part to protect itself from potential liability, and demonstrated that Amazon understood NOCO’s notifications to be threats of infringement proceedings. Carku also reported that they had themselves previously notified Amazon that some of NOCO’s products were infringing Carku’s own rights, and that Amazon had given NOCO the option to indemnify the retailer in exchange for the notified products being re-listed. Carku argued that requesting indemnity made sense only if Amazon had perceived Carku’s communication - made in a similar manner, via the Infringement Form - to be a threat of infringement proceedings. The judge at first instance took this argument with a grain of salt, however, noting that the wording submitted on Carku’s Infringement Form could have materially differed from NOCO’s, and that this may have influenced Amazon’s reaction.
NOCO countered that notifications made via the Infringement Form are not to be perceived as threats but merely “assistance in [Amazon’s] customer-centric goal to achieve zero IPR infringements as whole”. Amazon, NOCO argued, is positioned as the arbiter of IP complaints, not the target. NOCO pointed to Amazon’s policy of accepting “appeals” against notices, and the platform’s “IP Accelerator” scheme to help entrepreneurs obtain legal assistance in enforcing their IP rights. Even had Amazon considered itself the target, the Infringement Form was, according to NOCO, only a first step in the context of Amazon’s IPR procedure. They reasoned that Amazon would have understood there to be no danger of proceedings until, for example, the form had been followed up by further communications via the designated Amazon manager, or from solicitors. NOCO also argued that, since a significant fraction of NOCO’s de-list requests had already been rejected by Amazon without prompting any form of legal claim against the retailer, there could have been no underlying implication in NOCO’s notifications that legal repercussions would follow for Amazon should they refuse to de-list the Carku products.
The judge, in answer to the question of whether Amazon reasonably considers itself a mere arbiter or potential liable party, weighed up the arguments and concluded that “Amazon makes a judgment [as to whether to delist] in its own self-interest” since clearly “the policy is not just to delist blindly”. What’s more, while NOCO’s intention may never have been to sue Amazon, Amazon could not reasonably have known this with any certainty. After all, no reassurance to this effect was ever provided to Amazon by NOCO, and the judge deemed that communications from NOCO to Amazon had “the strong flavour of lawyers being in the background”. Despite the thread tying NOCO’s arguments being that its correspondence with Amazon had not amounted to threats, the judge disagreed, concluding that NOCO’s Infringement Form implied action against Amazon were it not to delist Carku’s products.
The judge noted that, even were threats deemed not to have been made against Amazon, NOCO’s legal liability with respect to threats against platformed third parties was crystal clear; Amazon would have understood that, had it not de-listed the products, NOCO would have been willing at the very least to sue third-party distributers.
The judge at first instance therefore found NOCO’s infringement notifications constituted threats, and that such threats were groundless as they were directed to Amazon.
NO DICE ON NOCO'S APPEAL
NOCO appealed the threats decision, though did not contest the parallel finding that its patent was invalid and therefore unenforceable.
On appeal, the judge noted that whether Amazon perceived a threat to itself or to third-party distributors was not relevant to the core question of whether Carku incurred loss as a result of the de-listing.
He also emphasised that exactly what Amazon actually understood the communications from NOCO to mean was not the relevant test. The law is interested in what a “reasonable person” in Amazon’s position would have understood. In this case, Amazon were deemed by the judge to have had “skin in the game” at least because the company was potentially liable for secondary infringement. What’s more, Amazon’s IPR policy repeatedly references terms such as “defence”, at the very least alluding to the issue of liability. It seems that Amazon had contemplated situations in which it may become the target, rather than the mediator, of disagreements.
NOCO argued that the first instance decision implied, or opened the door to a reasonable argument, that any Infringement Form received by Amazon under its IPR policy ought now to be deemed a threat of litigation under UK law. However, the judge disagreed, noting that the content of the form is highly relevant, and that the boilerplate part of the Infringement Form merely invites the complainer to submit information. This information may be legally harmless if for a permitted purpose under the existing test. In NOCO’s case, it had gone further in making a positive request to de-list in the “Additional Information” section, and this had amounted to an unjustified threat.
TAKE-HOMES FOR RIGHTS HOLDERS
Statements vs. threats
Understanding the difference between bona fide statements and threats of legal action is crucial. The key consideration is what a reasonable person, with knowledge of the circumstances at the date of the communication, would have understood the communication to mean.
Context matters. First impressions must be considered when determining how a reasonable person would interpret a communication. By the same token, a sequence of communications should be evaluated as a whole to avoid misunderstanding or misattributing meaning. A document which is not threatening when taken in isolation may be when read in the context of a longer chain of correspondence, or against the backdrop of a lengthy history between parties.
Potential or perceived liabilities could colour correspondence
Understanding how platform-specific IP policies could be interpreted legally is crucial in avoiding unintended legal consequences. When hinting at IP disputes, claimants should make themselves aware of the possible - and perceived - liabilities of all parties, including platform providers and third parties. Recognizing that fulfilment and marketplace platforms have "skin in the game", parties asserting their IP rights should consider the implications of their communications in the context of the broader business interests of the recipient and other potentially affected parties.
Clearly, there is a need for rights holders to remain mindful of the reasonable-person and permitted-purposes tests when communicating, or risk making unintended actionable threats. This said, rights holders in certain markets may find themselves having to file thousands of takedowns a month. This presents a difficult balancing act of quality vs quantity in communications, and one which must be taken seriously by those looking to assert their IP rights in the most commercially effective manner.
Alternative dispute resolution to avoid actionable threats
Businesses might consider exploring alternative dispute resolution options to avoid the issue of threatened litigation altogether. Amazon's ADR process is an example of structured dispute resolution which offers claimants the option to circumvent infringement proceedings.
