You have a patent – now what?

Once you have obtained a granted Australian patent, preliminary steps can be taken to enforce your rights without necessarily instigating court proceedings. This is particularly true where you are aware that knock-off and/or counterfeit products protected by the patent have entered, or will soon enter, the Australian marketplace. 

In some jurisdictions, such as the United States, it is common practice to send a cease and desist letter to place potential infringers on notice of a patent. US law also provides additional measures, including the ability for Customs to seize goods that are suspected of infringing IP rights. US Customs Regulations provide for the detention of an import if there is a suspicion that an import infringes the copyright, trademark or patent. After seizure of the allegedly infringing goods, Customs is required to notify the importer, which then has 30 days in which to file a statement denying that the goods are "piratical" and that "the detention of the article will result in a material depreciation of its value, or a loss or damage to him". If the importer fails to make such a denial with 30 days, the piratical goods are subject to seizure or forfeiture.

Similar steps to those described above in relation to US law could be taken in Australia, but with notable exceptions.

Cease and desist letters
Careful consideration should be given to an intention to send a cease and desist letter as there are risks associated with making allegations of infringement in Australia. 

The Australian Patents Act 1990 (Cth), Copyright Act 1968 (Cth), Designs Act 2003 (Cth) and Trademarks Act 1995 (Cth) all contain provisions allowing an alleged infringer to obtain relief for unjustified threats of infringement from a threatening party.

The respective provisions allow an alleged infringer to commence an action in the Federal Court of Australia, claiming relief by way of an injunction to stop any further threats, a declaration that the threats are unjustified and damages for losses caused to the alleged infringer as a result of those threats.

Australian courts consider that a threat arises where the language, either directly or implicitly, conveys to a reasonable person that the rights holder intends to bring infringement proceedings against the person being threatened. Any wording that directly makes or infers an ultimatum, or refers to a future happening, will likely be found a threat.

However, the respective provisions do provide that a communication which merely notifies a person of the existence of an IP right does not constitute a threat.

Judgments in two recent Australian Federal Court cases, published towards the end of 2013, have provided clarity on the issue of unjustified threats. In short, asserting rights to intellectual property in a provocative manner can be dangerous, unless the rights holder is confident that infringement can be proven.

In the first case an Australian company issued a cease and desist letter to an alleged infringer on the basis of granted patent rights. The alleged infringer commenced court proceedings on the basis that the cease and desist letter was an unjustified threat. The first party cross-claimed for infringement and successfully established infringement.  Consequently, the allegation of an unjustified threat failed.

In the second case an Australian company sued an alleged infringer on the basis of a granted innovation patent. The alleged infringer counterclaimed that the patent was invalid on a number of grounds, and for unjustified threats.

Interestingly, the basis for the unjustified threats action was not a specific allegation directed at the alleged infringer. It was an indirect threat which appeared in a magazine advertisement pointing to the existence of the innovation patent application, and an article in the magazine stating that the patent holder could seek to enforce its patent rights once the application proceeded to grant. This combination of advertisement and article was found to constitute an unjustifiable threat.

Once a threat has been asserted, there is usually only one way that threat is considered to be justified: when the action for infringement is successful. Therefore, an allegation of infringement of a pending patent, design or trademark application, which has not yet proceeded to registration, will be taken as unjustified. Even a belief that conduct is an infringement (albeit a bona fide but wrong belief) is not a defence.

On the part of an alleged infringer, the respective provisions allow a cross-claim for unjustified threats should the rights holder commence an infringement action. If a cease and desist letter has been received, and ultimately the court finds no infringement, an alleged infringer may be afforded the right to a declaration, injunction and, most importantly, damages. Therefore, such a cross-claim should always be considered by a defendant in an infringement proceeding.

The unjustified threats provisions provided under Australian law can open the door for alleged infringers to claim substantial damages as a result of allegations of infringement. This means that it is important to act swiftly in commencing proceedings once the desired outcome of the cease and desist letter is not forthcoming. Otherwise, there is a real risk of a substantial damages claim being awarded by the court. 

Customs protection
In contrast to the situation in the United States, Australian customs protection is limited to the infringement of notified registered trademarks and/or copyright. No customs protection is provided to protect against an infringed patent.

Australian law provides a notice of objection scheme, which enables Customs to seize imported goods that infringe registered trademarks or copyright before entering the market. A notice of objection must be lodged by the owner of a registered trademark. Multiple trademarks can be included in a single notice. The owner of copyright material (eg, a print design, pattern, logo, packaging artwork, catalogue, jewellery or bags which are works of artistic craftsmanship) must also lodge a notice of objection with Customs.

The scheme underwent a change in April 2013. Under the changes made:

• Customs is allowed to disclose more information to trademark and copyright owners which have lodged a notice of objection with Customs to assist with identifying and locating the Australian importer and the exporter/foreign supplier of infringing goods;

• Customs can provide objectors with the opportunity to inspect or obtain a sample of seized goods to facilitate counterfeit determination; and

• an importer of seized goods is required to complete a claim form for release of seized goods on provision of contact information; otherwise, the goods will be treated as forfeited. This provides relief from objectors from the previous, onerous requirement to commence legal proceedings within 10 working days of a seizure of infringing goods in order to prevent their release to the importer. In many cases, the importer cannot be identified without further investigation and, particularly in the case of small-scale seizures, the expense of court action is simply not justified.

The changes to the seizure scheme should reduce the overall costs by enabling easier contact with counterfeiters, as well as by directing enforcement resources to cases where there is a serious risk of counterfeit goods being released to an importer and ultimately into the marketplace.

Additional IP protection for patented protection
Given that customs protection in Australia excludes patented products, obtaining a trademark registration for one or more embodiments of a product claimed in the granted patent might be possible. This is because shape trademarks are registrable in Australia, albeit that registrations for such marks are difficult to obtain. Of course, knock-off products bearing marks that are identical or similar to registered word and/or logo marks notified to Customs can be subject to seizure.

Design protection is also possible (where a design has not previously been publicly disclosed), but is notably excluded from customs protection.

Comment
If there is no real intention to commence infringement proceedings, or if infringement of a patent cannot be proven, sending cease and desist letters in Australia may result in undesirable consequences if an unjustified threats action is commenced.