In this article for Computer and Telecommunications Law Review, partner John Patten, associate Max Harris and trainee solicitor Art Sett discuss a recent judgement from the English High Court pertaining to the scope of the unjustified threats regime for intellectual property rights in the United Kingdom (UK).
The High Court in the case of Shenzhen Carku Technology Co Ltd v The NOCO Company has handed down a rare judgment which comments on the scope of the unjustified threats regime for IP rights in the UK, finding that patent infringement allegations made by NOCO to Amazon through Amazon’s online IP complaints procedure amounted to actionable and unjustified threats of patent infringement. Although this fact-dependent decision may not set a precedent regarding whether a complaint made via the Amazon procedure (or any other online IP enforcement procedure) is automatically an unjustified threat, the judgment serves as a useful reminder to rights holders to give due consideration to whether their allegations may be seen as an unjustified threat, even if making such allegations through an online pro forma procedure.
The claimant, Shenzhen Carku Technology Co., Ltd (“Carku”), and the defendant, The NOCO Company (“NOCO”), both produce battery-powered car jump starters. The parties directly compete to sell these products, including on the online platform offered by Amazon UK (“Amazon”), with NOCO selling the products directly to Amazon (for Amazon to sell on its own account) and Carku selling via third-party distributors.
NOCO is the registered proprietor of UK Patent number GB 2,257,858 (the “Patent”). At various points in 2020, NOCO used Amazon’s template Infringement Form (the “Amazon Procedure”), and additional bilateral correspondence with Amazon, to allege to Amazon that certain of Carku’s products sold on Amazon’s platform infringed the Patent and request their removal from Amazon’s platform. The result of these notifications was that Amazon removed certain of Carku’s products from the Amazon platform.
In response to these events, Carku brought proceedings against NOCO alleging that: (i) the Patent was invalid; and (ii) NOCO’s communications with Amazon amounted to actionable and unjustified threats within the meaning of the Patents Act 1977 (the “Act”). NOCO denied that the Patent was invalid, counterclaimed for infringement of the Patent by Carku, and rejected that its correspondence amounted to actionable and unjustified threats.
Following expert evidence, Meade J found that the Patent was invalid on grounds of obviousness and that, in any event, was “for the most part not infringed” by Carku’s products. The ratio for the decision on validity and infringement are not the subject of this article.
Having determined that the Patent was invalid, Meade J next considered whether NOCO’s communications with Amazon amounted to actionable and unjustified threats within the meaning of the Act.
UK law on unjustified threats
Meade J first considered the law on unjustified threats in patent infringement proceedings in the UK and noted the following elements:
- There must be a “threat of infringement proceedings” pursuant to s.70 of the Act (i.e. a reasonable person in the position of the recipient would understand that a patent exists and a person intends to bring proceedings against another person for infringement of that patent for an act done, or which would be done, in the UK).
- Any person “aggrieved by that threat” can bring proceedings (s.70A(1)).
- A threat of infringement proceedings is not actionable if it is “contained in a permitted communication” (s.70A(5)). A “permitted communication” is any communication “made for a permitted purpose” and which only contains information that is “necessary for that purpose” and where the person making that communication believes such information is true (s.70B(1)). A “permitted purpose” is giving notice that a patent exists, discovering whether or by whom a patent has been infringed or giving notice that a person has a right to that patent, but is not requesting a person to cease doing, for commercial purposes, anything in relation to a product or process, requiring a person to deliver or destroy a product, or requesting a person to give an undertaking in relation to a product or process (ss.70B(2) and 70B(4)). Information which is “necessary for that purpose” includes statements that a patent exists, details of a patent or right to a patent that are accurate and not misleading in all material respects, and/or information which identifies the allegedly infringing products and processes (s.70B(5)).
- The remedies for an actionable and unjustified threat are a declaration that the threat is unjustified, an injunction against continuance of the threat and/or damages in respect of any loss suffered by the aggrieved person by reason of the threat (s.70C(1)).
- It is a defence for the person making the threat to show that the act for which proceedings were threatened constitutes or would constitute an infringement of the relevant patent (s.70C(3)). In relation to this defence, Meade J noted that previous case law had made it clear that since an invalid patent cannot be infringed, this defence cannot apply if the relevant patent has been held to be invalid.
- Previous case law established that the appropriate test when considering whether a communication amounts to an unjustified threat is by reference to what an “ordinary reasonable person in the position of the actual recipient” would have considered the communication to mean based on the known circumstances, and that a threat could be made even if “veiled, covert, conditional or future” and not expressly stated.
Did NOCO’s use of the Amazon Procedure constitute an actionable and unjustified threat?
It was common ground that Carku was an “aggrieved person” within the meaning of the Act and therefore had the right to bring the proceedings. Meade J also noted that the defence set out in s.70C(3) was not available to NOCO given that the Patent had been held to be invalid.
Meade J then looked to past case law in relation to claims of unjustified threats in the use of pro forma online IP infringement procedures. In the absence of any past case law relating to the Amazon Procedure, Meade J considered the facts and decisions relating to claims that had been brought in relation to eBay’s VeRO (Verified Rights Owner) system. Although Meade J found these cases interesting given the factual similarity to the current case (i.e. notifications via the VeRO system resulted in removal of products from eBay), they did not finally resolve whether notifications made through the VeRO system were actionable threats (with such issues having arisen at an interim stage), merely finding that it was arguable that the notifications to eBay amounted to actionable threats. Meade J ultimately held that the judgments in those cases did little to advance the question raised under the Act on whether there was a threat of legal proceedings, other than to identify that such notifications may amount to unjustified threats in certain factual circumstances.
In analysing the position in the current case, Meade J noted the following key considerations:
- NOCO’s communications asserted the existence of the Patent, infringement of the Patent, and requests for Amazon to bring an end to that alleged infringement. Meade J noted that in most situations this would be considered “classic threats” under ss.70A and 70B (i.e. threats of infringement proceedings which were not in permitted communications).
- NOCO argued that Amazon’s “Intellectual Property Rights Policy” explicitly made the case for a “customer-centric goal to achieve zero IPR infringements on its website” and that NOCO believed that Amazon considered itself to be “an arbiter and enforcer of intellectual property rights” as demonstrated by the ability to appeal decisions made through the Amazon Procedure and a scheme to enable entrepreneurs to obtain legal advice on enforcement of their IP. NOCO also noted that Amazon rejected approximately thirty percent of NOCO’s complaints (although did not provide evidence of this), which NOCO held to mean that Amazon was not concerned for its own legal position. Meade J rejected these arguments, agreeing with Carku that: (i) if Amazon had a true “zero IPR infringement” policy then it would take down all products notified as infringing third-party rights, but instead exercised discretion when deciding whether or not affected products should be removed from its marketplace (rather than de-listing “blindly”); (ii) this exercise of discretion suggested that Amazon makes a judgement based on its own self-interest in determining the risks of not removing products that had been subject to a notification (i.e. considering its own legal position in potential patent infringement claims); and (iii) Amazon’s written policy statement is most likely aimed at true forgeries and counterfeit goods, rather than claims of patent infringement relating to two genuine products.
- Meade J noted that whether Amazon itself (as the reasonable person) thought that it would be sued by NOCO was not determinative and that the Act made it clear that Amazon’s knowledge that NOCO intended proceedings against another person (in this case Carku or its distributors) was sufficient. Indeed, NOCO’s communications with Amazon in July 2020 included references to external lawyers and claims charts which made clear that “NOCO would be ready willing and able to sue the relevant third party distributors”. As such, the question was not limited to whether Amazon considered that it would be sued - it was sufficient that Amazon (as the reasonable person) may have considered that the third-party distributors may be sued.
As such, Meade J found that NOCO’s communications via the Amazon Procedure did amount to an actionable threat and, because the Patent was determined to be invalid, was unjustified. Consequently, Meade J ordered an inquiry as to damages based on these unjustified threats.
Judgments in relation to unjustified threats claims are relatively uncommon in the UK. As such, this decision provides a rare insight into how “business as usual” communications in online marketplaces, which many IP holders may send on a regular basis, could result in unexpected claims by the recipients for unjustified threats.
It is unclear whether this judgment will give rise to an increase in claims of unjustified threats by manufacturers and distributors whose products have been de-listed from online marketplaces due to patent or other IP infringement allegations made through online complaints portals. Meade J explicitly stressed that “this is a finding based on the facts… [and] not a general finding about online markets”, and rejected Carku’s arguments that online IP complaints portals must be caught by the law against unjustified threats to prevent excessive notifications by rights holders and no means for the aggrieved party to recover losses from misconceived notifications. The importance of this declaration cannot be overstated, given that Meade J did not seek to establish a precedent for treating any pro forma complaint in online markets as an actionable threat. Meade J’s conclusions that the relevant patent was invalid was of course critical to the decision, as was the nature of the specific communications between NOCO and Amazon.
The nature of Amazon’s IP policy, i.e. not “de-listing blindly”, also appears significant to the ruling, with Meade J having considered that, for Amazon’s IP policy to work as a defence to threats, it would have to be shown that Amazon de-lists products automatically in response to any patent infringement assertion without regard to its own legal position (which would have allowed NOCO to argue that Amazon does not feel threatened with legal proceedings, because its response is pre-ordained by its own policy).
What is clear, however, is that this case, and those preceding it relating to eBay’s online portal, serve as a useful reminder that rights holders who intend to allege infringement should give due consideration to the contents of such allegations and whether they may amount to an unjustified threat, even when making such allegations through an online pro forma procedure, especially if there is any doubt regarding the validity of the relevant IP. This is worth additional consideration if the rights holders do not have any knowledge of how the IP policy of the relevant online platform is followed in practice and given that recently it has been held that the injudicious use of proprietary takedown procedures may also give rise to a claim for unlawful interference with business. Finally, online platforms may also need to consider how they apply their IP policies to prevent being the subject of, or named in, unjustified threats claims.
 Shenzhen Carku Technology Co Ltd v The NOCO Company  EWHC 2034 (Pat).
 Organon Teknika v Hoffman La Roche  FSR 383.
 Best Buy v Worldwide Sales Corp Espana  EWCA Civ 618; Generics (t/a Mylan) v Warner-Lambert  EWHC 2548 (Pat).
 L'Oreal (UK) Ltd v Johnson & Johnson  FSR 686.
 Quads4Kids v Campbell  EWHC 2482 (CH); Cassie Creations v Blackmore  EWHC 2941 (Ch); T & A v Hala  EWHC 888 (IPEC).
 See Costa v DissociaDID Ltd  EWHC 1934 (IPEC).