The High Court has refused to strike out an action for threats arising from a notice from eBay under its Verified Rights Owner (VeRO) system.
Groundless threats of infringement are actionable under section 26 of the Registered Design Act 1949 (for registered designs) and section 253 of the Copyright, Designs and Patents Act 1988 (for unregistered designs).
An actionable threat involves a statement from which a reasonable man in the position of the recipient would understand that he might be the subject on infringement proceedings.
The eBay VeRO system allows an intellectual property (IP) rightholder to notify eBay if it believes that a third party is offering goods for sale on eBay that infringe its IP rights. Following notification, eBay often de-lists the allegedly infringing products until the dispute between the IP rightholder and the third party is resolved.
In Quads 4 Kids v Campbell, the High Court granted an interim injunction on the basis that it was arguable that the notice under eBay’s VeRO system was an actionable threat ( EWHC 2482 (Ch)).
B and C marketed cake stands on eBay. B sent two notices to eBay complaining that C’s cake stands infringed their registered and unregistered designs. As a result, eBay sent notices of claimed infringement under its VeRO system to C requiring C to desist from selling its cake stands on eBay and then removed C’s listings from its website.
B and its solicitor also sent C a letter alleging infringement. C’s cake stands were not re-listed on eBay for several months.
C issued a claim against B for groundless threats on the basis of the eBay notice and the letter. C also argued that eBay might regard C as a serial infringer and approach re-listing with caution. B applied to strike out C’s claim, and C applied for summary judgment.
The court dismissed both applications.
The question of whether eBay’s notice constituted a threat was not clear and as each side had a real prospect of success the matter should be tried in the usual way. Provisionally, the court considered that C’s submissions were the more persuasive. However, two factors weighed against granting the summary judgment application. Firstly, the High Court in Quads 4 Kids had regarded it as a difficult question and only said it was arguable, and here the court was not precluded from taking a different view. Secondly, the court did not have all the material desirable to make an assessment of B’s arguments that, on the particular facts of how the VeRO system operated, there was no threat.
The court noted that if an intermediary like eBay is put on notice that its operation is being used for the purposes of infringing activity it will generally protect itself against becoming liable for infringement by de-listing the material. Following L’Oréal SA v eBay, it risks becoming liable if it does not desist from the allegedly infringing activity once it is put on notice (see News brief “L’Oréal v eBay: good news for brand owners”, www.practicallaw.com/9-507-0026 ). So, it is to be expected that, in most cases, an intermediary will choose to avoid the risk of liability by taking steps to prevent or limit access to the material. Although the issue remains to be decided at full trial, this decision confirms that it is arguable that filing of VeRO notifications with eBay may be an actionable threat, which could expose the IP rightholder to damages for the loss suffered by the online seller as a result of eBay de-listing their products.
Case: Cassie Creations Ltd v Blackmore and Mirrorkool Ltd  EWHC 2941 (Ch).
First published in the November 2014 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.