Unjustified Threats

Introduction

In a competitive world, it can be very tempting for a trade mark owner to inform its competitors and their customers of its rights and threaten to bring actions against them if such rights are infringed, sometimes even going to the length of publishing advertisements containing such threats. Such threats, whether justified or unjustified, can be very effective as a deterrent, since many companies would not wish to go to the lengths and expense of fighting a trade mark infringement action and would rather avoid the issue by abandoning their course of action.

Until the 1994 Act came into force in the UK, there was no statutory remedy for a person aggrieved by the making of unjustified threats relating to trade marks. But now, an aggrieved person can bring an action to stop the threats being made and can claim damages under Section 21.

However, there may still be cases where the provisions of Section 21 do not apply and where the person aggrieved will have to fall back on such torts as trade libel. Indeed, such actions may also be commenced alongside an action under Section 21. A threat may amount to a trade libel where it is made maliciously in an attempt to cause damage to the claimant by the defendant asserting a claim to a right where, to his own knowledge, it is without foundation. In Colley v Hart (1890) 7 RPC 101, the first case in which trade libel was used to try to stop a threat of trade mark infringement proceedings, the plaintiff failed since the defendant made the statement in good faith. Had the defendant not acted in good faith, the result would have been otherwise.

Since 1883, there has been a threats provision in patent legislation. This is now embodied in Section 70 of the Patents Act 1977. Similar provisions are to be found in Section 26 of the UK Registered Designs Act 1949 and Section 253 of the UK Copyright Designs and Patents Act 1988 in relation to registered and unregistered designs respectively. This leaves an odd patchwork of intellectual property rights unprotected by such legislation, namely, copyright, unregistered marks (protected by passing off) and confidential information.

The law under Section 70 of the Patents Act 1977 is much more established than that under Section 21 and, although there are some differences, the former are of some use in interpreting the latter.

Professional conduct

Before turning to the provisions of Section 21, it is to be noted that the conduct of certain trade mark professionals in the circumstances of one particular case, was severely criticised by the Court. The case in question was Antec International Ltd v South Western Chicks (Warren) Ltd [1997] FSR 278. The plaintiff was the proprietor of a registered trade mark, ANTEC FARM FLUID. The letter before action drafted by the plaintiff's trade mark agents stated that their client would bring an action for trade mark infringement against the defendant for use of the mark, SUPER FARM FLUID, but did not refer to the number of the registration. After the letter had been written, the agents found out that the words "farm fluid" were the subject of an express disclaimer. They did not, thereafter, retract the allegation of trade mark infringement, nor, on the application of the defendant's agents, did they inform the defendant of the registration number. The question of whether such behaviour amounted to an unjustified threat under Section 21 was not before the Court, nor was the question of whether it amounted to a more serious tort. Laddie J, therefore, had to content himself with stating that it was quite unacceptable for those who have the status of expert professional men in the trade marks field to use the weight of their professional qualifications to make wild and unsupported allegations of trade mark infringement against their client's competitors.

Section 21 of the Trade Marks Act 1994

Remedy for groundless threats of infringement proceedings

(1) Where a person threatens another with proceedings for infringement of a registered trade mark other than -

(a) the application of the mark to goods or their packaging,

(b) the importation of goods to which, or to the packaging of which the mark has been applied, or

(c) the supply of services under the mark, any person aggrieved may bring proceedings for relief under this section.

(2) The relief which may be applied for is any of the following -

(a) a declaration that the threats are unjustifiable,

(b) an injunction against the continuance of the threats,

(c) damages in respect of any loss he has sustained by the threats; and the plaintiff is entitled to such relief unless the defendant shows that the acts in respect of which proceedings were threatened constitute (or if done would constitute) an infringement of the registered trade mark concerned.

(3) If that is shown by the defendant, the plaintiff is nevertheless entitled to relief if he shows that the registration of the trade mark is invalid or liable to be revoked in a relevant respect.

(4) The mere notification that a trade mark is registered, or that an application for registration has been made, does not constitute a threat of proceedings for the purposes of this section.

The Maker of the Threat

Section 21(1) applies to any person (which will include a company) who threatens another. The person will probably have an interest, whether as proprietor or licensee, in the registered trade mark, but the provisions of Section 21 do not state that such an interest is necessary.

Importantly for those in private practice, the most frequent maker of threats is a trade mark attorney or solicitor whose firm will be liable and, indeed, case law shows that firms have often been sued under the analogous threats sections of patents, registered design and unregistered design right legislation (see for example, Brain v. Ingledew Brown Bennison and Garrett (No. 3) [1997] FSR 511, a patent case, where a firm of solicitors was found liable). A prudent professional will therefore secure an adequate indemnity from the client on whose behalf the threats are made.

Companies will be vicariously liable for the threats made by their employees and agents under the normal principles of tort. Thus, even if employees are expressly prohibited from making such threats, the company will, in nearly all cases, be liable. Care must, therefore, be taken by trade mark owners to ensure that none of their staff, either orally, or in writing, make threats or refer to registered trade marks or pending litigation without knowing the implications of making such threats.

The Registered Trade Mark

Section 21 specifically refers to threats made for infringement of a registered trade mark. Section 21 is silent as to whether a threat made between the date of the application and the grant of the trade mark is actionable. However, in Brain v Ingledew Brown Bennison & Garrett [1995] FSR 552 (a patent case), a threat made in this interval was held to be actionable. The judgment was overturned on appeal (see [1996] FSR 341), but not on this point. In a further hearing before the High Court (see [1997] FSR 271), it was apparent that by the time this matter finally came to trial, the patent would not be granted. Therefore, the defence of justification, i.e. that the acts in respect of which proceedings were threatened would constitute infringement of the patent, was struck out. This would, seemingly, also apply to trade marks. The defendant, if he threatens proceedings where the trade mark has not yet been registered, may be at risk in not being able to run the defence of justification in Section 21(2) at the time of trial.

It is, of course, obvious from the wording of Section 21 that threatening proceedings for passing off alone, will not be caught by its provisions. But even here, care has to be taken not to imply a threat of trade mark proceedings (see next section below).

The Threat

What makes a threat actionable under Section 21 is different from that which makes a threat actionable in trade libel. There is, for example, no requirement that the threat be published, that it be made maliciously or that it cause damage. The second of these two provisions, in particular, limited the use of trade libel as a form of relief. Thus, it is now considerably easier, under Section 21 for those aggrieved to bring an action for unjustified threats.

By analogy with patent cases, what constitutes a threat is objectively tested. Therefore, the Court will consider whether the language of the statement conveys a threat to a reasonable recipient. It does not matter what the particular recipient or the maker of the statement thinks. The reasonable recipient would be taken to have knowledge of all the surrounding circumstances and would have the commercial background of the type of person to whom such a statement was made. In Bowden Controls Ltd v Acco Cable Controls Ltd [1990] RPC 427, this meant that the reasonable recipient would:

"read the letter carefully realising that it was meant to convey to him information which the first defendant considered important. He would realise that it contained a threat of patent proceedings. He would realise that there is nothing in the letter which explicitly excluded him for the threat. Even if he thought that suppliers did not consider it practical to sue manufacturers [as claimed by the defendant, the judge, Aldous J, believed that] the recipient would consider what was the purpose of the letter. He would conclude that the purpose of the letter was to give him information and a warning. That requires the answer: a warning as to what?"

Thus it can be seen that both express and implied threats to commence trade mark infringements will be caught by Section 21.

The approach in Bowden v. Acco was quoted with approval by the Court of Appeal in Scandecor Development AB v. Scandecor Marketing AB & anr [1999] FSR 26. The plaintiff's UK distributor had orally told the defendants' customers that action for trade mark infringement of a word mark and a logo would be taken but, on the evidence, no mention was made of taking action against the customers themselves. Nevertheless, this was held to be an implied or implicit threat that if the customers continued to purchase products from the defendants, a trade mark infringement action would be commenced against them.

The threat can be made in writing, orally (as in Scandecor) or even by a gesture. The only drawback in bringing an action for a threat other than in writing, is proving what words were used to convey the threat.

In Frayling Furniture v. Premier Upholstery Ltd (a case on design right) [1999] CIPA 150, Park J held that there was insufficient evidence that a threat was made in a meeting. However, the plaintiff's solicitors' letter sent to the defendant's client some time after the meeting comprised such a general threat that it could not be justified. The letter stated:

"As you are doubtless aware it is an infringement of copyright and design right to sell or offer for sale infringing copies if the vendor knows or has reason to believe that they are infringing copies. Our clients are confident that you would not infringe their rights."

Interestingly, in this case, the defendant tried to withdraw the threat a week later. The judge held that a threat, once made, was not undone by a second letter trying to withdraw it.

Most recently, in L'Oréal (UK) Ltd v. Johnson & Johnson [2000] CIPA 190, Lightman J, held that a claim to remedies for an unjustified threat should be reinstated after a Master had ordered that it should be struck out.

The facts of the case were as follows. The defendant was the proprietor of the UK and Irish trade marks JOHNSON'S NO MORE TEARS and NO MORE TEARS registered in respect of baby shampoo. The claimant had launched a range of hair products for children in the UK and Ireland under the name L'ORéAL KIDS. There appeared on these products the statement "No Tears! No Knots!". The defendant brought proceedings in the High Court of Ireland alleging infringement of its NO MORE TEARS trade mark. In the meantime, the claimant's English solicitors wrote to the defendant referring to the Irish proceedings and requesting confirmation that similar proceedings would not be brought by reason of the sale of the L'ORéAL KIDS products in the UK bearing the words "No Tears". The defendant's response was the subject of this action. Extracts of the letter are worth reproducing:

"As you say, proceedings have now been commenced in Ireland ...

The position in the UK is that whilst local UK management do consider L'Oréal's use of NO TEARS! As an attempt to benefit unfairly from the enormous equity that has been built up in NO MORE TEARS!, no decision has yet been made on whether to make a claim of trade mark infringement. You should, however, be aware that, at the same time as L'Oréal is commencing use of the mark, others in the UK market who had been using the mark in the recent past have now agreed to respect Johnson & Johnson's position and are stopping their use.

Johnson & Johnson are not a company that enters litigation lightly and, in accordance with the spirit of the new Civil Procedure Rules, further investigative work and analysis is needed to take account both of the UK's somewhat complex market and the current state of English and European law before a decision can be sensibly taken as to what to do. Our clients do, after all, have six years in which they could commence proceedings if they were so minded ....

Bearing this in mind, we cannot give L'Oréal comfort at this stage and accordingly we must reserve all of Johnson & Johnson's rights ..."

Lightman J called this letter a "work of a master of Delphic utterances who uses all his skills to say everything and nothing and to convey a enigmatic message which has the same effect on the recipient as a threat or adverse claim whilst disclaiming to be either". Lightman J particularly pointed to the fact that it made clear that others who had used the word "No Tears!" on their packaging had, after pressure from the defendant succumbed and had stopped such use. The defendant had also reminded the claimant that they had 6 years within which to commence proceedings. The letter, seen in the context of on-going litigation in Ireland, was a warning of the possibility of future proceedings for infringement, possibly depending on the outcome of the Irish proceedings. Whilst the threat was veiled by statements of indecision on the part of the defendant, it was sufficient to unsettle the claimant and sufficient to come within Section 21.

Jurisdiction

It has been held in patent cases (see Egg Fillers & Containers (Aust) Proprietary Ltd v Holed-Tite Packing Corporation (1934) 51 RPC 9) that the threat complained of must have been made within the jurisdiction in order to be actionable, for otherwise no tort would have been committed within the jurisdiction. However, it is arguable that since the ratification by the UK of the Brussels Convention, the Egg Fillers case is no longer of binding authority. For example, in Multimedia Corporation v DC Congress Gesellschaft GmbH [1997] FSR 627, Jacob J held that he was properly seized of a passing off action where the defendant's activities in Germany caused damage to the plaintiff's goodwill in England (see Article 5(3) of the Brussels Convention).

Even relying on the Brussels Convention may be unnecessary if the robust approach of Jacob J in an ex parte hearing is followed (Big Smith Global Ltd v Caterpillar Inc, reported in the Information Sheet accompanying the October 1996 edition of the ITMA Newsletter). It would appear from this report that he took the view that the threat did not have to emanate from or be communicated within the jurisdiction. He is reported as saying "You have to look at it purposefully. The substance is that there is a threat to take action in the UK. It does not make any difference where it is". The threat was made in the United States and was communicated to a distributor of the plaintiff's in the UK.

A similarly robust approach was taken in Prince plc v Prince Sports Group Inc [1998] FSR 21. The defendant sought to argue that the threat that was issued related purely to US issues and therefore could not constitute a threat under UK legislation. Neuberger J did not accept this argument and, in a summary judgment, granted relief under Section 21.

The facts of the case were as follows. The plaintiff, a UK company providing computer services, registered the domain name prince.com. The defendant is the well-known maker of tennis rackets and sports equipment. The defendant sent a letter which the plaintiff claimed was a threat because:

  • it referred to the defendant as having registered the mark PRINCE specifically in the UK;
  • the statement that the plaintiff's "use ... of PRINCE as a domain name constitutes infringement and dilution of [the defendant's] trade mark rights in PRINCE";
  • the seeking of "an agreement not to use PRINCE as part of any new domain name [the plaintiff] may select"; and
  • the express reference to and the implied threat of litigation.

The defendant contended that this was not a threat because it came from US attorneys and, because of the language, it was clearly a US-limited allegation. It should also be interpreted in the light of later letters which made it clear that it had been written for the purposes of the Network Solutions Inc (NSI) then dispute resolution procedure. As stated above, Neuberger J did not agree. The letter constituted an unjustified threat.

It may be possible to avoid the provisions of Section 21 if the claim form is issued, but not, at the time of the threat, served. This is because there can scarcely be a threat of infringement proceedings if such are already in being. However, care must be taken when making comments regarding an infringement action once it has stated, as they may still be actionable as threats if, by implication, third parties consider themselves threatened with joinder or with similar proceedings.

Mere notification of a right

Section 21(4) provides that the mere notification that a trade mark is registered, or that an application for registration has been made, does not constitute a threat of proceedings. Care is needed when taking advantage of this provision that an implied threat is not made. An implied threat of trade mark infringement proceedings will almost certainly be contained in a letter before action which specifically threatens proceedings for passing off, but also notifies the recipient of a trade mark registration (see Jaybeam Ltd v Abru Aluminium Ltd [1976] RPC 308, where notification of the existence of a registered design in the same letter as threats of proceedings in respect of copyright infringement was held to be actionable). Therefore, going any further than sending a copy of the trade mark registration certificate and a covering letter drawing the recipient's attention to the registration, is to court danger.

The Person Threatened and the Person Aggrieved

The action under Section 21 does not have to be brought by the person to whom the threats were made, only by someone "aggrieved". However, in order to get relief, the person aggrieved must establish that the threat was likely to cause him damage which was not minimal (Dimplex (UK) Ltd v D=Longhi Ltd [1996] FSR 622). The purpose of this is to exclude frivolous applications or applications by busy bodies.

Thus, if a trader suffered loss of sales due to circulars sent to customers by a competitor claiming that the first trader was infringing a certain trade mark, the first trader would be a person aggrieved and could bring an action under Section 21, even though no threats were made to him personally (see Johnson v Edge (1892) 9 RPC 142, a patent case, where the facts were similar to those related). Again, in a patent case, Bristol-Myers v Manon [1973] RPC 836, a threat was held to be actionable where a customer was told that a writ would be issued against the manufacturer, though not against the customer, of alleged infringing goods.

However, to be actionable, the threat must be made to someone specific. Therefore, a threatener can get away with a general warning to the trade, for example in an advertisement, so long as it is not directed to a particular person (see Alip Pietro E Figlio & C v John Wright & Sons (Veneers) Ltd [1972] RPC 125, where Whitford J held that the plaintiff "must be able to satisfy the Court that a warning finger is pointed against the products of some ... specific manufacturer or importer, or vendor"). However, if a threatener wishes to take advantage of this rule, care must be taken in drafting the threat, for if it can be shown that it is not a general warning, but directed to a specific person, it becomes an actionable threat.

Exceptions

Section 21(1) provides that an aggrieved person will not be able to maintain an action where threats are made to bring trade mark proceedings in three specific circumstances. The rational behind these three exceptions is that the proprietor of a trade mark should be able to put persons, who are committing acts of primary infringement, on notice that he intends to sue. However, people further down the retail chain should be protected from such threats. Thus, Section 21(1) provides that a threat to commence proceedings for the application of the mark to goods/packaging, the importation of goods which bear the mark, or the supply of services under the mark, are not actionable.

Section 70 of the UK Patents Act 1977 contains similar, but not identical, exceptions in relation to acts of primary infringement. In Cavity Trays Ltd v RMC Panel Products Ltd [1996] RPC 361, the construction of these exceptions came before the Court of Appeal. It was argued by the defendant that no threat made to a primary infringer is actionable. The Court disagreed. Section 70 prevents proceedings being brought for threats alleged to consist of certain acts, namely making or importing a product for disposal or using a process. Other threats of proceedings against manufacturers or importers, for example, threats of proceedings alleging disposal or use, do not fall within the exceptions. Section 70 (and by analogy Section 21(1)) defines the acts of alleged infringement which are excluded and not the type of persons who can be threatened.

In the Prince case, the defendant argued that, since the plaintiff's activities were limited to the provision of services, their threatening letter was excluded from the provisions of Section 21. Neuberger J, held that the wording of Section 21 could not be construed this way, his opinion being consistent with the decision in Cavity Trays.

Following these two cases, care must, therefore, be taken in the drafting of any letter before action to take advantage of these exceptions. Any threats made must specifically relate to the acts described in Section 21(1). There must be no implication in the letter that the threat is being made in relation to the sale or disposal of goods bearing the mark.

Practitioners will be aware that it is common practice in a letter before action to demand that the alleged infringer sign various undertakings. Care must be taken that both the threat contained in the body of the letter and the undertakings are confined to the acts of primary infringement in Section 21(1). Should the undertakings be drafted more widely, an actionable threat, by implication, will probably be made.

Section 21 does not deal with the case where a recipient is wrongly threatened with proceedings for an act of primary infringement. There would be, seemingly, little that could be done under Section 21 to stop such a threat, unless, by implication, a reasonable recipient would think that the terms of the threat were wider than those specified and applied to him.

Defences

It is no longer a defence to an action for threats that the threats were made in good faith (c.f. Colley v Hart, mentioned above). A defendant, under Section 21, will either plea that the statement made did not amount to a threat or that the threat was justified.

Section 21(2) states that a claimant is entitled to relief, unless the defendant can show that the acts in respect of which proceedings were threatened constitute (or if done would constitute) an infringement of the registered trade mark concerned. Even if the defendant manages to justify his actions, the claimant is still entitled to relief if he shows that the registration of the trade mark is invalid or liable to be revoked in whole or in part (Section 21(3)).

The practical aspects of these provisions can be seen in the UK where an action was brought under Section 21, Trebor Bassett Ltd v The Football Association [1997] FSR 211. The plaintiff brought a threats action and, by way of an application for summary judgment, sought a declaration for non-infringement and an injunction to restrain the defendant from threatening the plaintiff or anybody else with proceedings. The defendant was thus forced into bringing a cross-action for infringement which the court struck out as an abuse of process and went on to grant the plaintiff's application as sought.

Relief

Section 21(2) sets out the relief which the plaintiff may apply for, that is, a declaration that the threats are unjustifiable, an injunction to restrain the continued making of such threats and damages. In a patent case, Dimplex (UK) Ltd v D'Longhi Ltd (noted above), Laddie J held that the similar provisions in the UK Patents Act 1977 did not take away from the Court its discretion in respect of any equitable relief, but illustrated a general policy that prima facie where the tort of threats was made out, then the plaintiff was entitled to relief, unless there were good reasons for deciding otherwise. Therefore, the width of the injunction granted will, in part, depend upon the nature of the threats made.

In the Prince case, Neuberger J granted a declaration and injunction. However, he was not prepared to direct an inquiry as to damages under Section 21(2) until the plaintiff could put in evidence a prima facie case for establishing that it had suffered some damage as a result of the receipt of the threatening letter. In Kooltrade Ltd v. XTS Ltd [2000] CIPA 401, Pumfrey J (in a patent case) held that the claim to damages had to be bona fide as well as there being prima facie evidence of loss.

In Carflow Products (UK) Ltd v Linwood Securities (Birmingham) Ltd & others [1996] FSR 424, Laddie J held in this design right case, that the making of the unjustified threats did not cause Linwood's losses. Instead, the losses were caused by the decision to withdraw Linwood's products, which only occurred once the writ was served. Although this point was decided as a preliminary issue, it meant that Linwood's claim to damages failed. Again, in what was termed an exceptional case, Frayling Furniture v. Premier Upholstery Ltd (a case on design right - mentioned above), Park J refused to grant any relief, either an injunction or damages. The threats action was only brought after the writ in the infringement action had already been served. The threats had not caused any damage and were unlikely to be repeated. It appeared that the real reason that the action had been continued and fought before the judge was that both sides wanted to recover their costs. Park J, although the judgment does not record what order he made, suggested that he also contemplated making no order as to costs.

The usual principles in assessing damages will be applied either by the trial judge or on enquiry; i.e. the measure of damages is the money which would put the plaintiff in the position he would have been had the unjustified threats not been made, the plaintiff has to prove his loss, damages should be liberally assessed with the object of compensating the plaintiff and not penalising the defendant and the plaintiff must show his loss is the natural and direct consequence of the defendant's threats (i.e. the loss must not be too remote).

Finally, in the L'Oréal case, the claimants successfully appealed against the decision of Master Bragge who had struck out their application for a declaration of non-infringement under Section 21 (although no such remedy is specifically mentioned in this section) and the Court's inherent jurisdiction. Neuberger J held that the claim to a declaration based on inherent jurisdiction was a real issue (he did not consider the point under Section 21). The letter comprised a claim of an adverse nature, sufficiently formulated to be the subject matter of proceedings for a declaration and which the claimant had a real interest in having decided. It was important for them to know whether their marketing was unlawful and whether they were exposing themselves to an ever increasing claim in damages. The policy of the law is to dispel such uncertainty when it impedes otherwise legitimate activities. In the circumstances, the claim to this declaration had a realistic prospect of success and was, therefore, allowed to stand. This is to be compared to the decisions of Laddie J and the Court of Appeal in Unilever Plc v. The Procter & Gamble Company [1999] FSR 847 and [2000] FSR 344 (CA), where a declaration of non-infringement was refused under both Section 70 of the Patents Act 1977 and the Court's inherent jurisdiction, in part because such a declaration should be sought under the specific provisions in Section 71.

Clash with Civil Procedure Rules

The difference between the approach needed to avoid the threats provisions and what is ideally required of prospective claimants under the Civil Procedural Rules has caused some concern. As has been stated above, the provisions of Section 21 will not be infringed if a trade mark proprietor sends a copy of the trade mark registration certificate and a covering letter drawing the recipient's attention to the registration. Under the Civil Procedural Rules, however, the potential claimant is expected to inform the potential defendant of its claim, giving full details prior to issuing proceedings. Furthermore, the Civil Procedural Rules are drafted with the intention of trying to persuade the parties to settle their differences before commencing proceedings. Thus, the conduct of the parties prior to commencing litigation and attempts made to resolve the dispute will be considered by the court. If anyone party is found at to be fault, cost penalties will be imposed.

This requirement for openness under the Civil Procedural Rules is in direct conflict with the threats provisions. If a trade mark proprietor is to comply with the Rules, it will almost certainly fall foul of Section 21 because any negotiations will inevitably include the proprietor making a statement that, if the matter is not settled, it will assert its rights. Thus, the proprietor will risk bringing an action for unjustified threats action down upon it. Indeed, the reference to the Civil Procedure Rules in the claimant's letter in the L'Oréal case (referred to above) did not prevent the letter from constituting an unjustified threat.

The judges in the Patents Court are aware of these difficulties. It has been suggested that a trade mark proprietor cannot be penalised if it complies with the statutory provisions under Section 21, even though this does not fulfill the requirements of the Civil Procedural Rules.

The same public policy behind the Civil Procedural Rules to encourage out of court settlement has applied for many years to without prejudice negotiations between parties. Conducting negotiations on this basis allows the parties to attempt settlement without the fear that statements or offers will be brought before the court as admissions on the question of liability. As such, they are privileged from disclosure. This matter is dealt with more fully the following section on privilege.

PRIVILEGE

Introduction

Privilege is an exception to the rules of disclosure and, in effect, deprives a tribunal of relevant evidence. It follows that there should be good cause, plainly shown, for the existence of any privilege. The crucial question is whether there is some interest protected by the privilege which is at least as significant as the proper administration of justice.

The tendency of modern law has been to reduce both the number and the scope of the rules of privilege. For the purpose of this talk, I am going to consider in some detail:

  • legal professional privilege and the statutory extension to communications with registered trade mark agents (section 87 of the Trade Marks Act 1994); and
  • privilege for statements made without prejudice.

There are two other heads of privilege which I will merely mention in passing. The first is privilege against self-incrimination which has been withdrawn in relation to civil proceedings for infringement of intellectual property rights. The second is privilege for statements made to a conciliator during conciliation or mediation.

The common law of legal professional privilege is enjoyed by legal advisers, solicitors and barristers, and does not include trade mark agents. In Dormeuil Trade Mark [1983] RPC 131, Nourse J held that legal professional privilege was not afforded to the defendants' trade mark agents. The issues between the parties were opposition, trade mark infringement and passing off; both parties claiming ownership in the mark, DORMEUIL. At various stages in the dispute the defendants were represented, not by their solicitors, but by their trade mark agents who acted in the same way as solicitors would have acted if they had been instructed. The judge observed that the result seemed odd and perverse, given that the trade mark agents could and did act in the same way as solicitors.

This case is to be contrasted to the situation in McGregor Clothing Co. Ltd's Trade Mark [1978] FSR 353, where communications between an advising lawyer (American) and the client's trade mark agent were privileged. This was not because privilege was granted to the trade mark agent's communications, but because the communications as between the lawyer and client, were undoubtedly privileged. It would, therefore, make a nonsense of the privilege if, because the letter had been addressed to a trade mark agent and not the client, privilege was lost.

It is statute, in the form of the Trade Marks Act 1994, and not the common law, therefore, which confers privilege on trade mark agents.

Section 87 of the Trade Marks Act 1944

Privilege for communications with registered trade mark agents

(1) This section applies to communications as to any matter relating to the protection of any design or trade mark, or as to any matter involving passing off.

(2) Any such communication -

(a) between a person and his trade mark agent, or

(b) for the purpose of obtaining, or in response to a request for, information which a person is seeking for the purpose of instructing his trade mark agent,

is privileged from, or in Scotland protected against, disclosure in legal proceedings in the same way as a communication between a person and his solicitor or, as the case may be, a communication for the purpose of obtaining, or in response to a request for, information which a person is seeking for the purpose of instructing his solicitor.

(3) In subsection (2) "trade mark agent" means -

(a) a registered trade mark agent, or

(b) a partnership entitled to describe itself as a firm of registered trade mark agents, or

(c) a body corporate entitled to describe itself as a registered trade mark agent.

Limitations to the grant of privilege

The privilege in Section 87 is in the nature of a limited grant, both in the scope of things that it covers and in the persons to whom it is granted.

Firstly, it should be noted that it relates to "any matter relating to the protection of any design or trade mark, or as to any matter involving passing off". It does not protect communications in matters other than those listed, that is, it will not cover communications between trade mark agents and their clients relating to, for example, breach of contract, confidential information and copyright (other than copyright where it relates to the protection of a design). There is also scope to argue that the use of the word "protection" limits the grant of privilege to procurement, grant, validity and infringement of designs and trade marks. However, this point has not been tested. Given that privilege is seen as an exception to the general rule of disclosure, a similarly strict line to that in the DORMEUIL case (above) might be taken.

Secondly, it should be noted that privilege is granted to registered trade mark agents. A registered trade mark agent means a person whose name is entered in the register kept under Section 83 of the Trade Marks Act 1994, in other words, the register kept by ITMA. A person who is not so registered, and there is no requirement to be registered to practice as a trade mark agent, does not qualify for the grant of privilege. This is somewhat alleviated by the fact that the grant of privilege is extended to cover partnerships and companies of registered trade mark agents. Therefore, although Section 87 does not make specific reference to those acting on behalf of a registered trade mark agent, the grant of privilege must presumably be taken to extent to those working at a firm or company, such as secretaries and trainees.

It should also be note that the grant of privilege will extend to communications with registered trade mark agents working in-house. However, as noted above, it will only relate to communications dealing with those things within Section 87. Information and advice given in relation to the general running of the business will not qualify for privilege. It will apply, however, to documents where the dominant purpose was to take or pass on legal advice and, by analogy, trade mark agent's advice.

Privilege applies to two types of communications with trade mark agents; direct communications between client and agent and indirect communications between third parties and the agent or client for the purpose of instructing the trade mark agent. Such communications are privileged from disclosure in legal proceedings in the same way as communications between direct and indirect communications between client and solicitor are privileged.

There is a small point in relation the to characterisation of proceedings and whether trade mark proceedings before the Comptroller/Registrar are "legal proceedings". Section 103 of the Patents Act 1977, specifically extends solicitors' privilege to cover "patent proceedings" i.e. proceedings before the Comptroller. Therefore, there appears little doubt that privilege can be asserted by patent agents in accordance with Section 280 of the Copyright Designs and Patents Act 1988 if disclosure is ordered in patent proceedings. However, there is no such equivalent in the Trade Marks Act 1994. Despite this apparent gap, it would seem nonsensical that, if disclosure was ordered under Rule 55 of the Trade Marks Rules 2000, privilege could not be asserted by trade mark agents in relation to correspondence with their clients etc. The proceedings relate to the protection of trade marks and therefore comply with Section 87(1). It would defeat the purpose of Section 87 if such communications then became open to inspection because the proceedings themselves could not be characterised as legal proceedings.

Finally, it should be noted that, as an exception to the limitations mentioned above, there is no jurisdictional limitation placed on Section 87. Therefore, communications between a UK registered trade mark agent and a foreign agent relating to the protection of a UK trade mark or design many be assumed to be privileged, as are documents prepared in relation to foreign filings at the instruction of a UK registered trade mark agent.

General rules on privilege

Section 87(2) states that trade mark agents' communications are privileged from disclosure in the same way that solicitors' communications are privileged.

It has been authoritatively stated that section 10(1) of the Police and Criminal Evidence Act 1984 reproduces the common law on legal privilege. The section sets out the two heads of privilege, that is communications relating to legal advice which are strictly between legal advisor and client and litigation privilege which also covers communications with third parties. Section 10(1) states:

(1) ... in this Act "items subject to legal privilege" means -

(a) communications between a professional legal adviser and his client or any person representing his client made in connection with the giving of legal advice to the client;

(b) communications between a professional legal adviser and his client or any person representing his client or between such and adviser or his client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings; and

(c) items enclosed with or referred to in such communications and made -

(i) in connection with the giving of legal advice; or

(ii) in connection with or in contemplation of legal proceedings and for the purposes of such proceedings;

when they are in the possession of a person who is entitled to possession of them.

Confidence lies at the very heart of legal professional privilege. In order to attract privilege, the communications passing between legal adviser and client must be intended to pass in confidence. This also applies to the statutory privilege granted to trade mark agents= communications. However, it should be noted that confidential communications are not necessarily privileged. They have to fall within the scope of Section 87 in order to be privileged.

Privilege applies to the communication itself, in other words, the document and not the information it contains. For example, in Brown v. Foster (1857) 1 H&N 736, it was held that a barrister who saw a book produced at the trail of his client could testify without the client=s consent, in subsequent proceedings, on the question of whether it contained a particular entry when he previously saw it at the preliminary examination.

Litigation privilege applies to communications in respect of ongoing litigation and contemplated litigation. Litigation must be a definite prospect and not merely a vague anticipation.

Litigation privilege is distinctive in that it covers communications with third parties, for example, witnesses. However, it should be noted that the Civil Procedure Rules have erased litigation privilege in respect of communication with expert witnesses. Part 35.10 states that an expert's report must state the substance of all his material instructions, whether written or oral, on the basis of which his report was written. Part 35.10 goes on to state that those instructions are not be privileged but that the Court will not order disclosure of them or permit cross-examination in relation to them unless it is satisfied that there are reasonable grounds to consider that the statement in relation to the instructions given is inaccurate or incomplete. This provision has been heavily criticised.

Waiver

At common law, legal professional privilege in both of its aspects is that of the client and its successors. Privilege cannot, therefore, be waived by a trade mark agent without the prior permission of the client. However, there have been occasions where a professional adviser accidentally waives privilege by, for example, sending a privileged document to the other side as part of the disclosure exercise. Where is occurs inadvertently, Part 31.20 of the Civil Procedure Rules provides that the party who has inspected the privileged document may use it or its contents only with the permission of the Court. The Court will look at whether it would appear to the reasonable recipient that, by sending the document, privilege was being waived in it.

In CHC Software Care Ltd v. Hopkins & Wood [1993] FSR 241 (referred to in footnote 2 above), the solicitors resisted an application for discovery of copy letters written on behalf of a former client on the basis that such documents were privileged. The Court held in relation to copies of the letters sent by the solicitors to third parties for the purpose of informing the recipients of allegations of copyright infringement made in respect of the product, that they could not be the subject of legal professional privilege, nor could the identity and the addresses of the recipients of those letters be confidential or the subject of legal professional privilege. Therefore, by instructing the solicitor to send the letters out, the client had waived privilege in them and they could no longer be said to be confidential.

Great care should be taken in situations where a client purposely waives privilege as this can give rise to difficult questions as to the extent of the waiver.

Retrospectivity

It has been suggested that, since a statute cannot have retrospective effect unless it is expressly stated, privilege does not attach to communication with trade mark agents which were made prior to the coming into force of the Trade Marks Act 1994 on 31 October 1994. However, it would appear that, although not decided, there are good arguments that the grant of privilege in Section 87, does have retrospective effect.

Firstly, Section 87 applies to communications as to any matter relating to the protection of any design or trade mark. Therefore, it could be argued that this section applies to any communication irrespective of whether they were made prior to 31 October 1994 or following that date.

Secondly, privilege is an exclusionary rule of evidence. It is a procedural rule which does not rely on the date that the evidence is generated but relies upon the rules in force when disclosure is made. There are supporting statements in various authorities for this proposition but no authority directly on the point.

Similarly, it can be argued that the privilege granted by Section 87 is a privilege "from disclosure in legal proceedings". If the legal proceedings commenced after 31 October 1994, then the benefits of any grant of privilege under Section 87 are prospective and not retrospective. This same argument was used in the case of Empson v. Smith (1966) 1 QB 426. A diplomatic official had been granted the benefit of diplomatic immunity from suit under the Diplomatic Immunity Act 1952. This was removed by the Diplomatic Privileges Act 1984. The Court held that despite the fact that the acts in question had occurred at a time when the official could claim immunity under the 1952 Act, such an immunity was merely a procedural bar which had subsequently been removed by Parliament. In the same way, it could be argued that the benefit of Section 87 is merely a rule of evidence which could be relied on when a party is required to disclose documents. The ambit of privilege is that existing at the date privilege is claimed even though the document in question was created or came into the possession of the party on a date prior to the commencement of the relevant statute.

Without Prejudice Communications

As part of an attempt to settle a dispute, parties frequently make statements "without prejudice". When this is done, the contents of the statement cannot be put in evidence without the consent to both parties, the case being one of joint privilege.

Without prejudice communications often contain offers of compromise. Were it not for the rules of privilege, they would constitute valuable evidence of admissions or intentions. Therefore, there is a public policy point (as well as the agreement of the parties) behind this type of privilege aimed at encouraging settlement. This public policy point is seen specifically in the lack of requirement of any magic formulation of wording need to be used by the parties. A letter does not have to be headed or contain the words "without prejudice" for privilege to apply.

However, the converse is also true. Use of the words "without prejudice" is inefficacious if the statement is not made as part of a genuine attempt to negotiate a settlement. For example, if a letter merely contains a simple statement of a legal claim with no hint of any intention to negotiate, it will be insufficient.

In Unilever Plc v. The Procter & Gamble Company [1999] FSR 847 and [2000] FSR 344 (CA), the Court of Appeal upheld the decision of Laddie J who had held that statements made in without prejudice negotiations did not amount to an actionable threat. In this case, P&G had stated that it would assert its rights in relation to the patent in suit if negotiations were not successful. The statement was made while discussing a number of topics in a high level meeting between the parties. There was no suggestion that P&G was, in any way, trying to interfere with Unilever's day to day marketing of the allegedly infringing items. Not surprisingly, therefore, Unilever did not claim damages or an injunction. In these circumstances, Unilever was unable to show good reason why the veil covering the without prejudice negotiations should be lifted. It would be an abuse of process for Unilever to be allowed to plead anything that was said at the meeting, either as a threat or a claim of right. The circumstances were such that each side was entitled to expect to be able to speak freely, and their agreement to the meeting being arranged evinced that common intention. Therefore, the normal rule granting privilege over without prejudice negotiations based on public policy covered these negotiations.

Following this judgment, a proprietor who, during without prejudice negotiations, puts forward its case on trade mark infringement strongly, but honestly and fairly, will be able to shelter behind the without prejudice rule. The important considerations to remember are that the negotiations must be genuinely aimed at settlement and the proprietor's behaviour must be reasonable. Since at no material time there were any relevant negotiations taking place between the parties in Kooltrade Ltd v. XTS Ltd [2000] CIPA 401, the defendants could not shelter under the fact that they had marked their threatening letter "without prejudice".

Finally, there are certain exceptions to the without prejudice rule preventing disclosure. For example, the Court will consider the contents of without prejudice correspondence where an agreement has been concluded, or an apparent agreement should be set aside on the ground of fraud, misrepresentation or undue influence or where the rubric is used as a cloak for perjury or blackmail. It was this last exception which Unilever had, unsuccessfully, sought to expand to catch the comments made by P&G. The Court warned that the exception should only be applied in the clearest cases of abuse of a privileged occasion.

From a practical point of view, the most important exception relates to costs. If one or other party wishes to show a letter or series of letters to the Court when costs are considered to show that attempts were made to settle the proceedings, this cannot be done without agreement between the parties if the letters are marked without prejudice. The exception in use for many years has been to mark letters with the rubric "without prejudice save as to costs". This means that once the judge had given his decision on the substantive matters and costs are then at issue, the letter can be disclosed. Again, the public policy aim of trying to get the parties to settle the matter is behind this exception to the "without prejudice rules".

1 There have now been 3 substantive decisions under the 1994 Act: Prince plc v. Prince Sports Group [1997] FSR 797, Scandecor Development v. Scandecor Marketing [1999] FSR 26 (CA), L'Oréal v. Johnson & Johnson 2000 [CIPA] 190
2 Under CHC Software Care Ltd v. Hopkins & Wood [1993] FSR 241, a solicitor, and by analogy a trade mark agent, who has written a letter on behalf of a client which contains threats (in this case of copyright infringement) and which he later realises to be inaccurate, must take steps to put right the mistake himself.
3 The Act refers to trade mark agent, but the term includes or trade mark attorney
4 section 72 of the Supreme Court Act 1981 - for a case which discusses this point at some length, see Cobra Golf Inc. and Cobra Golf Limited v. Rata and others (No. 2)