Important considerations prior to commencing court proceedings in intellectual property disputes

Where an owner of intellectual property (Owner) is of the view that its rights have been infringed by another person (Infringer), besides deliberations as to prospects of success in Court, there are at least four considerations Owners should be aware of in the lead up to the potential commencement of Court Proceedings by the Owner.

Cease and desist letters and undertakings

The infringement of intellectual property rights involves conduct by the Infringer. The nature of intellectual property disputes primarily involves the Owner taking steps to have the Infringer refrain from doing something. This is different to disputes where the applicant seeks to have the respondent take a positive step, such as payment of a sum of money for damages. That is not to say that damages (or an account of profits) may not be claimed by the Owner against the Infringer, however at the outset the primary concern of the Owner is usually to have the Infringer cease its conduct.

As such, what are known as ‘cease and desist’ undertakings are commonly sought by Owners from Infringers. The manner of seeking a cease and desist undertaking is by letter sent by the Owner or its legal representative to the Infringer or its legal representative. The letter will usually set out the following:

1. The basis for the Owner’s intellectual property rights; that is to say, why it is said that the Owner has intellectual property rights;
2. The nature of the intellectual property rights. For example whether such rights are Patent rights, Trade Mark rights, Copyright rights or other intellectual property rights;
3. The conduct engaged in by the Infringer which infringes the Owner’s intellectual property rights; and
4. An undertaking is sought by the Owner from the Infringer to cease the infringement.

The undertaking sought should be both specific and general. In this regard:

1. The specific part of the undertaking should both be directed to known previous infringing conduct by the Infringer and also specify other specific types of conduct which the Owner wishes to draw to the Infringer’s attention that the Infringer needs to desist from doing; and
2. A general catch-all part so that, for example, previous infringing conduct of which the Owner is not aware, or other conduct, is also captured by the undertaking.

In addition to seeking an undertaking as to the cessation of conduct and desisting from further engaging in that conduct, it is not unusual to also see the following sought by Owners in undertakings from Infringers:

1. The requirement of a statutory declaration confirming compliance by the Infringer with the undertaking; and
2. The provision of further details of the Infringer’s conduct.

Unjustified Threats

In Australia, all statutory based intellectual property rights have unjustified threats provisions.

Each of these provisions involve the alleged Infringer being able to make a claim against the alleged Owner if the alleged Owner threatens to commence Court proceedings against the alleged Infringer without justification. In a claim for unjustified threats:

1. In essence, the alleged Infringer asserts it is not in fact infringing the alleged Owner’s intellectual property rights; and
2. Involves the alleged Infringer seeking a declaration that the threats by the alleged Owner are unjustifiable, an injunction against those threats continuing and an award for damages suffered by the Infringer.

The relevant provisions in Australian intellectual property legislation with respect to unjustified threats are as follows:

• Copyright Act 1968 (Cth): section 202;
• Designs Act 2003 (Cth): section 77;
• Trade Marks Act 1995 (Cth): section 129;
• Patents Act 1990 (Cth): section 128;
• Circuit Layouts Act 1989 (Cth): section 46; and
• Plant Breeders Rights Act 1994 (Cth): section 57A.

Unjustified threats considerations do not arise in relation to non statutory based intellectual property in Australia, involving passing off and confidential information.

The alleged Infringer’s right to bring a claim for damages now also includes a right to bring a claim for additional damages and not just compensatory damages. Each of the intellectual property statutes referred to above contains such a provision. In general terms, the additional damages, which may be significant and material in themselves, arise from the fragrancy of threats and often egregious conduct by the alleged Owner. The awarding of additional damages is at the discretion of the Court.

The challenge with unjustified threats for alleged Owners is that arguably an alleged Owner will be unable to successfully defend a claim for unjustified threats if the alleged Infringer is found to have not infringed the alleged Owner’s intellectual property rights. However, this is not the universal position: Telstra Corp Limited v Phone Directories Co Pty Ltd (2014) 316 ALR 590 where, given the state of case law at the time the threat was made, it meant that the threat was not unjustifiable.

Where Court proceedings are subsequently commenced by the alleged Owner against an alleged Infringer:

• It is not uncommon for a cross claim to be brought by the alleged Infringer against the alleged Owner based upon unjustified threats; and
• The prompt commencement of Court proceedings by the alleged Owner could adversely affect a claim for unjustified threats, due to the reason of whether it is the threat or the Court proceedings which have caused loss.

As such, it is important for care to be taken by Owners in drafting cease and desist letters. Owners should obtain the assistance of an experienced intellectual property dispute resolution lawyer for this purpose.

Choice of jurisdiction

The two relevant Courts in the Federal sphere are the:

1. Federal Court of Australia. This Court has an unlimited intellectual property jurisdiction; and
2. Federal Circuit and Family Court of Australia (FCFCoA). This Court has an infringement jurisdiction regarding Copyright, Designs, Trademarks and Plant Breeders Rights. This Court does not have a jurisdiction in relation to Patents or Circuit Layouts. Whilst this Court has an unlimited jurisdiction for damages, additional damages and an account of profit, its jurisdiction regarding damages for passing off and pursuant to the Australian Consumer Law (ACL) is limited to $750,000.00.

There are also costs considerations when deciding the appropriate jurisdiction for the commencement of Court proceedings. Set out below is a comparison of some present Court fees for each of the above two jurisdictions:

a. Fees for filing an application:

i. Federal Court of Australia – $4,450.00;
ii. FCFCoA – $1,765.00;

b. Fees for setting down for a hearing:

i. Federal Court of Australia – $7,790.00;
ii. FCFCoA – $2,110.00.

c. Daily hearing fees:

i. Federal Court of Australia:

a. $2,970.00 for Days 1 to 4;
b. $5,360.00 for Days 5 to 9;
c. $10,560.00 for Days 11 to 14; and
d. $15,835.00 for Days 15 and following (or part of a day);

ii. FCFCoA: $2,110, excluding Day 1 (or part of a day).

Consideration of joining individuals to Court proceedings where the first respondent is a corporation

Consideration needs to be given, where there is a corporate infringer of an uncertain financial position, as to whether individuals, particularly directors, who are connected with that corporation should also be joined as respondents to Court proceedings.

Examples of particular instances in an Intellectual Property context are as follows:

1. Copyright Act 1968 (Cth) section 36 provides that copyright in a literary, dramatic, musical or artistic work is infringed by a person who authorises the doing in Australia of any act comprised in the copyright. This section provides that in determining whether or not a person has authorised the doing of such an act, the matters which must be taken into account include the following:

1. 1. 1. the extent (if any) of the person’s power to prevent the doing of the act concerned;
      2. the nature of any relationship existing between the person and the person who did the act concerned; and
      3. whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

Please see JR Consulting & Drafting Pty Ltd and Ors v Cummings & Ors (2016) 329 ALR 625 as to an instance when a Court found that an individual authorised an infringement of copyright. In that case a director:

1. 1. 1. with knowledge and the ability to prevent a company from engaging in the relevant conduct where he was aware the company did not have a legal right to engage in that conduct;
      2. who was in substance the economic owner of the company; and
      3. took no steps to prevent or avoid the company’s infringing conduct, but in fact facilitated it.

2. Section 18 of the ACL is often used in various intellectual property contexts.
   Section 236(1) of the ACL provides that a person who suffers loss and damage because of the conduct of another person and the conduct contravened a provision of Chapters 2 or 3 of the ACL, the claimant may recover the loss or damage by action against that person or against any person involved in the contravention;
3. Section 2 of the ACL provides that a person is involved in a contravention of the provision of the schedule if the person:
   1. has aided, abetted, counselled or procured the contravention;
   2. has induced, whether by threats or promises or otherwise, the contravention;
   3. has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
   4. has conspired with others to effect the contravention.

4. Patents: infringement of a patent is a tort. A person directing or procuring another to perform a tortious act or who participates may be liable for commission of the tort. As to an exploration of these issues, please see Root Quality Pty Ltd v Root Control Technologies Pty Ltd (2000) 49 IPR 225.

How can we help?

HWL Ebsworth has a dedicated Intellectual Property Dispute Resolution team experienced in advising on all areas of the lifecycle of an intellectual property dispute. Please contact a member of our team if you would like more information about the services we provide.

This article was written by Ashley Holland, Partner.