What are the rules of the road in an IP dispute?

Intellectual Property Partner Martin Noble, takes a look at what rights holders and potential defendants should do in order to ensure that they protect themselves from criticism later on if a dispute ends up in court.

First, we are asked a lot about time limits when it comes to raising an issue such as patent infringement with a potential defendant, or responding to a formal letter of claim that appears on a Friday afternoon?

As a general rule of thumb for rights holders, you can raise the issue of a third party infringing your rights at any time where your rights are valid (for example, relating to a patent that is in force and has not expired). This is because the primary remedy in an IP case is a court order known as an ‘injunction’ that prevents the other party from doing the act(s) complained of. This is the first question any court would look at and if you are successful then the second stage is what amount should be paid in the form of monetary compensation? There is a time limit here, in that you can only go back 6 years before the date of the proceedings in terms of that financial remedy. This is not normally an issue because most rights holders will take action fairly quickly in order to avoid any significant financial damage building up.

But what if you’re on the receiving end and you’ve had a letter demanding a response within a short period of time, like 7 or 14 days? Unless there is an urgent issue at stake, perhaps where the rights holder claims that their position can’t be compensated in damages later on, such a short time period is unlikely to be viewed as reasonable. Any claim that concerns IP rights will normally need to be looked at in detail and probably with the benefit of professional IP advice. The scope of the rights being claimed will need to be considered and there may be several of them to consider. They might also be arguments over whether the rights are valid and this is something that can involve extensive search reports and detailed analysis. The court rules say that a reasonable response time is 14 days in a straight forward case and no more than 3 months in a very complex case. Many IP cases will sit somewhere between these limits – probably more like 2 – 3 months.

If you’re responding to an IP claim, then the best practical advice is to acknowledge the position, which at least tells the other party that they’ve got your attention. That is better than doing nothing and you can also then set their expectations as to when they might hear from you.

Before a dispute gets anywhere near a court, parties are expected to comply with the court’s general pre-action protocol (as there isn’t one specific to IP cases). This includes setting out your position in sufficient detail for the other party to understand it, along with providing copies of key documents – whether you’re bringing the case or defending it. You can be criticised if you withhold key documents and try to make the position harder for your opponent – the court rules advocate a ‘cards on the table’ approach. If you don’t act reasonably in providing key documents then you could face a pre-action court application by the other party, which could come with a sting in its tail like an adverse cost order.

Parties are expected to try and narrow the issues in dispute and they should bear in mind that court proceedings are a last resort. So with that in mind, parties are supposed to consider at all times whether a form of alternative dispute resolution (ADR) might be appropriate in order to avoid IP proceedings. You could be penalised later on if you ignore a request to meet on a without prejudice basis for example. That could be deemed to be unreasonable behaviour and again, an adverse costs order could be made against you. There would have to be a good reason not to engage with the other party.

In some cases, the court gives a party a longer time period to formally respond if there has been a failure to comply with the pre-action protocol. Or the court might even say that the proceedings have to be put on ice (known as a ‘stay’) whilst some form of ADR takes place. A court also has a wide discretion in terms of imposing sanctions if a party does not comply with the pre-action protocol (and the court rules generally once proceedings are in play). Certainly once proceedings have been started, there are typically fairly strict time limits in order to progress an IP case and a failure to meet them can lead to your case being dismissed in severe cases.

Any party in an IP dispute should allow the other party a reasonable opportunity to set out their position and should only make reasonable demands for information and documents, unless it is a case of sufficient urgency. Any threat of court proceedings should only be made as a last resort and when the parties have given each other the opportunity to try and narrow the issues between them.

The good thing about a case at the pre-action stage is that the parties do have the freedom to explore their positions and how a case might be settled without being subject to the strict time limits imposed on them when proceedings have been issued. Another significant benefit is that the parties can be more creative as to how an IP dispute can be settled – perhaps with a commercial licence being signed or a time period for a re-brand to take place. Parties have the freedom to sign up to settlement terms that go beyond what a court can order. Also, once a case is issued at court, it will generally be more public and it is possible for third parties to get hold of documents within the court file. If a case is settled on a confidential basis then it will typically never become a matter of formal public record and that can be a significant benefit to all concerned.