First analysis of revised threats provision for patents in FNM Corporation Ltd v Drammock International Ltd and LEC (L’pool) Ltd [2009]

23 September 2009

Oliver Stanley

This article was first published in the August edition of the World Intellectual Property Review.

Facts

The patent related to a cooling spray comprising water and dimethyl ether (“DME”) and was owned by FNM Corporation Ltd (“FNM”).   FNM’s cooling spray product, Magicool, had been marketed since 1993 by the second defendant, LEC (L’pool) Ltd (“LEC”).   The first defendant, Drammock International Ltd (“Drammock”) had marketed a cooling spray product, Cooling Mist, comprising water and compressed nitrogen for some time prior to 2006.  Cooling Mist was manufactured by a third party.  LEC acquired this third party in 2006, and itself took over the manufacture of Cooling Mist in 2007, replacing nitrogen with DME as the propellant, which caused FNM to bring the action.

Summary

The Defendants did not dispute the FNM claim for infringement if the patent was valid but counterclaimed: (i) for revocation; and (ii) in respect of threats made by FNM.

The patent was found invalid as being both anticipated and obvious.  The relevant communications in the threats action had constituted threats of patent infringement proceedings by FNM.  However, the Defendants could not obtain relief in the threats action by virtue of subsection 70(2A)(b) which was added to the Patents Act 1977 (the “Patents Act”) by amendment in 2004, because FNM did not have reason to suspect that the patent was invalid at the time of the threats.

Threats legislation

Section 70 of the Patents Act governs the remedy for groundless threats of patent infringement proceedings.  To address concerns that the existing legislation was discouraging patentees from making genuine attempts to settle disputes over infringement, the Patents Act 2004 introduced certain amendments which came into force on 1 January 2005.

The amendments which are relevant to this case are as follows:

Proceedings which may not be brought under s.70 Patents Act

Prior to the amendments, a person aggrieved by threats of patent infringement proceedings (“the Threatened”) could not bring proceedings against the person making threats (“the Threat-Maker”), if the threat to bring proceedings related to an alleged infringement by:

  • the manufacture; or 

  • import of a product for disposal; or

  • use of a patented process 
    (now s. 70(4)(a) Patents Act). 

On amendment, a further provision has been added (now s.70(4)(b) Patents Act): Section 70 proceedings may not be brought against the Threat-Maker for a threat made to the Threatened (who has made or imported a product for disposal or used a process) to bring proceedings for an infringement alleged to consist of doing anything else in relation to that product or process (e.g. sale, supply).

Entitlement to relief under s.70 Patents Act

Prior to the amendments there was provision for the Threatened to claim relief if it subsequently transpired that the patent in question was invalid (now s.70(2A)(a) Patents Act).   This relief could be brought to bear if the threat and the Threatened’s status as the person aggrieved by the threats had been proved, and could only be defeated if the Threat-Maker could raise the defence of justification of the threat.

On amendment, a further provision has been added (now s.70(2A)(b)) Patents Act:  the Threatened shall not be entitled to relief, even where the patent is shown to be invalid, if the Threat-Maker proves that at the time of making the threats he did not know, and had no reason to suspect, that the patent was invalid in that respect.  This provision has no equivalent in other threats provisions.

Reasoning of the Court

The Defendants alleged that six communications from FNM (or their agents) amounted to threats.  FNM did not dispute that five of the letters were threats (they were sent by their patent attorneys) but disputed that an email, sent to a third party (Superdrug) which was a customer of Drammock, amounted to a threat of patent infringement proceedings.  This email informed Superdrug that there was a dispute currently existing between Drammock… and [FNM].  It contained no direct allegation against Superdrug. 

Mr Justice Arnold held that this email did amount to a threat when viewed from the point of view of the ordinary reader, in the position of the actual recipient.  Arnold J relied on, inter alia, Superdrug’s response sent to Drammock the next day which stated that, in accordance with its standard terms and conditions, Drammock would be liable for any costs incurred by Superdrug in relation to a patent dispute, to conclude that the email did convey a threat of patent infringement proceedings.

Turning to the question of whether the threats were protected by s.70(4), Arnold J held that although the first letter specifically referred to the manufacture of Cooling Mist, this did not entitle FNM to the protection of s.70(4) as the letter had to be read in conjunction with the undertakings contained therein which referred to supplying, other infringing products and sales.  Therefore, although the threat was protected in respect of manufacturing by s70(4)(a), it was not protected in respect of supplying by s.70(4)(b), as that section only protects a threat to a person “who has made… a product [emphasis added]”.  It does not protect a threat to a person who is wrongly alleged to have made a product – which was the case here as Drammock were not the manufacturers, LEC were.  Indeed, Drammock had notified FNM after the first letter that LEC were the manufacturers (but this seems to have been ignored or overlooked).

As the patent had been held invalid, Arnold J held that s.70(2A) applied, and turned to the question of whether FNM was protected by s.70(2A)(b).  He held that FNM was protected by this section as it had no reason to suspect that the patent was invalid at the time the threats were made.  Arnold J noted that whilst the burden of proof is on the Threat-Maker, in practice the Court will look to the reasons suggested by the Threatened for why the Threat-Maker should have suspected the patent to be invalid.  However, Arnold J held there needs to be a specific reason for suspecting invalidity, rather than a mere general awareness that the patent might be held to be invalid.

Accordingly, the two reasons proposed by the Defendants for why FNM were not entitled to the protection of s.70(2A)(b) - an issue with some of the prior art and general claims of invalidity by the Defendant’s solicitors in correspondence - were rejected.

Analysis of the decision

Practically, this decision highlights the pitfalls faced when preparing letters concerning patent infringements.  The Court will look into all the words and the context of a potential threat to determine whether the protection of s.70(4) can be sought.  As seen in this case, the benefits of undertakings with a more general, or catch-all, scope can be of detriment when scrutinised by the Court.  Perhaps, therefore, the best course of action remains simply to communicate the details of the patent in question, and leave it up to the recipient to work out what is going on.

Furthermore, it is unlikely that one can initially identify the manufacturer of a potentially infringing item when it is only possible to identify and locate the item at point of sale.  Therefore the consequence of the decision appears to be that any communication that may be viewed as a threat should contain a “best endeavours” paragraph.  This would provide an explanation to the Threatened that you are seeking the identity of the manufacturer, importer or process user, and explain what steps (other than the communication) you are taking, so as to have the security of the s.70(6) “best endeavours” defence.

If it is correct to conclude that potential claimants in patent infringement actions will still need to take the same precautionary measures when communicating with potential defendants, one is left to wonder whether the 2004 amendments would have done better to delete the threat provision in its entirety, rather than try to amend it.