The UK Court of Appeal has upheld the High Court decision that communications made using the Amazon IP rights notification and takedown system were unjustified threats of intellectual property litigation.
Background
Shenzhen Carku Technology Co Ltd (Carku) launched proceedings against NOCO Company (NOCO), to revoke NOCO’s patent for a battery-powered car jump-starter for invalidity on inventive step grounds. Carku further claimed that statements issued by NOCO to Amazon in respect of Carku’s products were unjustified threats of patent infringement proceedings.
NOCO counterclaimed, denying the invalidity, and stating that Carku had infringed its patent. The High Court decided in favour of Carku that the patent was invalid and that NOCO’s submissions to Amazon constituted unjustified threats, notably in respect of both threats against third-party vendors of Carku products, and Amazon itself.
The unjustified threats regime offers a remedy to parties aggrieved by unjustified threats of intellectual property litigation. These threats are only actionable when made in relation to “secondary” acts of infringement (e.g. distribution of allegedly infringing products).
Using an IPR notification and takedown mechanism such as that provided by Amazon may result in de-listing of products on the platform, without the need to prove infringement.
The potential to be liable for damages for infringement may encourage distributors/platforms to de-list their products. For businesses which mainly use Amazon or similar platforms, the effect of de-listing products can have a substantial adverse impact on their ratings and search appearances.
Appeal
The issues on appeal were firstly whether NOCO’s communications to Amazon constituted threats of patent infringement proceedings, and secondly which threats were relevant to the damage incurred. A threat is defined by whether a reasonable person receiving the relevant communication would understand from it that a patent exists, and that a person intends to bring proceedings for infringement of that patent for certain acts.
NOCO contended that the High Court had not recognised a “key distinction” between the situation where the recipient (Amazon) would understand from a communication that there was (i) a dispute which might later lead to litigation and (ii) a threat against Amazon itself. The Court of Appeal did not reach the conclusion that this distinction was significant in terms of the target of the threat of litigation. That is, irrespective of whether Amazon believed that either it or the third-party sellers would be sued, they were motivated to remove the products, and this had “causative potency” to damage Carku’s business.
The Appeal Court added that the Amazon procedure was still competent for sending permitted communications, such that they would not amount to an actionable threat of infringement proceedings under the unjustified threats regime. ‘Permitted communications’ should not go further than providing information relevant for a permitted purpose (e.g. giving notice of a right).
Summary
The Appeal Court made it evident that online notifications are capable of being threats of proceedings. This is irrespective of whether the target of the proceedings would be the online platform itself or the sellers listing the allegedly infringing items on the online platform.
Clearly, the notional ‘reasonable recipient’s’ view of the communication is important in determining whether a threat has been made, rather than the actual view of the online platform in question.
Whilst there are benefits to taking action via online take down procedures (automatic de-listing), IP owners must balance this against the risk of inadvertently making threats to the platforms themselves. Those types of threats could obviously increase the liability for costs and the chances of a groundless threats action.
Carefully drafted letters, sent directly to infringers rather than through online platforms, can significantly reduce the risk of a groundless threats action, whilst often having the intended effect.
Please do not hesitate to contact your usual CSY representative for specialist advice.