12 October, 2019
Liberation Developments Pty Ltd v Lomax Group Pty Ltd [2019] FCA 1180
What you need to know
- The Federal Court has opined on when a statement amounts to a threat to commence infringement proceedings.
- Applying the reasonable person test, the Court held that a letter referring to proceedings which had been commenced and stating that the sender did not want to involve other entities in the dispute, was not a threat to commence infringement proceedings against the recipient.
What you need to do
- Parties engaged in infringement proceedings should seek legal advice in relation to any notifications intended to be sent to third parties regarding the proceedings, particularly if the recipients include customers of the alleged infringing party.
Background
Liberation Developments Pty Ltd (Liberation) is the patentee of an innovation patent entitled "a weighted support assembly" and Titan Hoarding Systems Australia Pty Ltd (Titan) is the exclusive licensee of the patent. Liberation and Titan commenced proceedings alleging that Lomax Group Pty Ltd (Lomax) and the other respondents infringed the patent by manufacturing, promoting, selling, erecting, renting and supplying the "Lomax Hoarding System" (LHS).
Lomax denied the infringement claims and cross-claimed on a number of points. While the judgment considers a number of issues including patent infringement, this article focuses on the debate regarding unjustified threats.
Unjustified Threats
Alleged threats
Lomax relied on three statements contained in a letter sent on Titan's behalf by Mr Bloom (the sole director of Titan) to Mirvac, a third-party real estate group involved in the purchase of hoarding products. The statements were as follows:
"As soon as we heard about the LHS we started proceedings in the Federal Court of Australia.
Two week[s] ago, my belief was confirmed at an injunction hearing, when the Judge state there is [a] prima facie case of LHS infringement of Titan's Patents and Trade Marks.
Currently this dispute is confined to Titan and Lomax. Titan sincerely does not want to involve any other persons in this dispute."
Prior to this communication, Mr Bloom had made a telephone call to the Mirvac recipient indicating he "had concerns" that LHS infringed "Titan's patent".
Lomax's arguments
Lomax argued that the statements were akin to the threat in CQMS Pty Ltd v Bradken Resources Pty Limited(2016) 120 IPR 44 (CQMS).
In CQMS, the applicants sent an email to customers of the respondents. In the email, the applicants referred to the proceedings they had commenced and allegations made in their pleadings. In particular, the email highlighted that certain of the respondents' products infringed their patents, and that by selling such products to customers, the respondents had both infringed their patents and authorized infringement by the respondents' customers.
Justice Dowsett found that the alleged infringement by customers, in the context of litigation against a supplier, would inevitably raise, in the minds of the customers, their own potential liability, should the applicants decide that such litigation was necessary to protect their intellectual property rights.
Lomax claimed the statements made by Titan had the same effect as those in CQMS. That is, Mirvac would "undoubtedly" wonder why the letter was sent and conclude that any future purchase of the LHS would be attended by a "risk" that Liberation and Titan might choose to protect their rights by suing them.
Liberation & Titan's arguments
Liberation and Titan distinguished CQMS stating that the communication in CQMS:
- was a general notice to the industry and not a single letter sent to one person following a phone call;
- was sent without prior warning to entities unaware of the infringement proceedings before receipt of the letter; and
- expressly referred to the use of the impugned product by customers as an infringement. In contrast, nothing Mr Bloom said referred to the “liability” of installers or customers who used the LHS.
Justice Greenwood's consideration
Justice Greenwood was not satisfied that the letter conveyed a threat. Applying the objective, reasonable person test, Mirvac would not have understood the email to threaten that Liberation and Titan might commence patent infringement proceedings against Mirvac.
Justice Greenwood highlighted that, unlike in CQMS, the communication at issue was a single, bilateral communication made in the context of a prior telephone conversation.
While the communication may have contained an observation that Liberation and Titan might need to consider their position according to changing circumstances, it did not contain a direct or indirect threat of infringement proceedings being commenced against Mirvac.
Conclusion
This decision highlights the importance of considering the language of notification letters very carefully. Since each case will turn on its facts, any entity considering notifying another party of their potential rights or proceedings underway should seek legal advice to ensure that there is no risk of unjustified threat proceedings.
For further information, please contact:
Nina Fitzgerald, Partner, Ashurst
nina.fitzgerald@ashurst.com
