Pre-Action Correspondence: What to do if you get a Stroppy Letter ....... or worse
On Wednesday I stressed the importance of pre-action correspondence and how the drafting of a letter before claim can make all the difference between getting what you want quickly and cheaply through focused negotiation and precipitating an expensive and possibly protracted law suit in Pre-Action Correspondence - Not Just a Box to be ticked or a Hoop to be jumped through 2 Aug 2017. Today, I shall tell you what to do if you receive a letter accusing you of infringing a patent or some other intellectual property right.
If you have carried out an IP audit you should have a strategy in place for just such a contingency and you will have an insurance funded legal team ready to advise and represent you. If you have a case they should be able to see off the challenge with a well-reasoned and documented response. If, however, you are in the wrong they will advise you of that reality and suggest ways of extricating yourself from the dispute as quickly and cost-effectively as possible.
If you have never heard of intellectual property strategies and IP audits then read my little note "What is Intellectual Property Strategy? If you are not in dispute you have an opportunity to take steps to prevent one from arising in the first place. You may also wish to read my article IP Insurance - CIPA's Paper 1 May 2016 NIPC Inventors' Club IP audits, strategies and insurance premiums are not cheap but they are nothing like the cost of a court case.
But what if you receive a stroppy letter and you don't have an IP strategy or insurance? As your man in the donkey cart replies when you ask him for directions from say, Ballycastle to Ballymena that may not be the best place to start your journey but then again you are where you are.
The first thing to do is to acknowledge the letter promptly. Nothing betokens shiftiness more than silence. The other side may already have drafted a witness statement or affidavit stating that they tried to contact you but you did not respond upon which they will rely when they seek costs or if they ask for an interim injunction. If you have a solicitor, patent or trade mark agent, or some other authorized litigator, give the letter to him or her with instructions to reply on your behalf. If you do not have a legal representative, you should acknowledge the letter yourself and tell the other side that you are seeking urgent legal advice and your lawyers will respond in full within a reasonable time.
The next step is to get that legal advice as soon as possible and you should make sure that you get it from an advocate who specializes in IP. Such an advocate is likely to be a member of the IP Bar Association or work for a firm that belongs to the Intellectual Property Lawyers' Association, the Chartered Institute of Patent Attorneys or the Chartered Institute of Trade Mark Attorneys. You may well have a legal advisor who is ace at leases, employment law or getting his or her clients off speeding charges but IP is a bit different from other areas of law. We have our own courts with their own rules and practices, our own arcane jargon and nasty causes of action like threats actions that can trap the unwary. Get your solicitor to refer the case to specialist counsel or instruct one yourself under the public access rule.
If the letter before claim is carefully drawn up in accordance with the Practice Direction - Pre-Action Conduct and Protocols and Code of Practice for Pre-Action Conduct in Intellectual Property Disputes your counsel should have all he or she needs to advise you. If not, he or she can ask for further information or documents which the other side must give or risk censure from the court.
The exchange of correspondence should enable you to identify the issues in dispute and how they can be resolved. if the case hangs on a single issue such as the interpretation of the claims of a patent then some form of early neutral evaluation such as an examiner's opinion may help. If you or your advisors think there is a deal to be done then maybe direct negotiations or mediation may help. If your case is weak, you may wish to consider an offer under Part 36 of the Civil Procedure Rules. Whatever your stance you should reply in accordance with para 6 (b) of the Practice Direction and para 4 of the Code as soon as practicable.
The title of this post ends with the words "or worse". What does that mean?
Sometimes defendants are asked in the letter before claim to promise to do or, more likely, not to do certain acts between the issue of the claim form and the trial with the threat of an application for an interim injunction if they refuse. Interim injunction applications are decided on the balance of convenience and are not supposed to be a dry run for the trial. Applicants do not have to show that they will win at the trial, only that they could win and that they will suffer far more in the interval between the issue of proceedings and trial if the respondent is not restrained than the respondent will suffer if he or she is. Injunctions are always conditional upon a promise by the applicant to compensate the respondent if the respondent wins the case or the injunction proves to have been unnecessary or inappropriate.
A battle over an interim injunction can double the cost of the litigation and the loser usually has to pay both sides' costs of the application at very short notice. If you can live with the restriction then it is safer to give undertakings so long as the other side is able to compensate you fully, If you cannot live with the restriction, you doubt that the applicant can fully compensate you fully for your loss, or both, then you have to weigh the risks and costs of each course of action very carefully. However, unless you are settling the whole action you should never give undertakings until trial without a cross-undertaking from the other side that is in similar terms to the one that he or she would have to give to the court for an injunction.
Very occasionally the first notice that you get of a claim against you is when a solicitor introduces him or herself as a "supervising solicitor", presents you with a large bundle of documents that he or she offers to explain and tells you that you have to admit the solicitors travelling with him to your premisers and let them search your papers and computers otherwise you may be in contempt to court and be committed to prison. The supervising solicitor should give you a reasonable opportunity to take your own legal advice and challenge the order but he or she will not allow you to delay or interfere with the search. In practice, there is rarely much you or your solicitor can do except allow the search to proceed and make a full and accurate record of everything that is said and done. You will get an opportunity to mount a more effective challenge either on the return date or at trial.
Order such as these are known as "search orders" and they are at the very extremities of the court's powers. They are difficult and expensive to get and are given only where the judge fears that there is a risk that you would hide or destroy documents or computer files that are relevant to the case if you had any notice of the claim against you. These orders are open to abuse and there are many grounds upon which they can be challenged. For example, if evidence that should have been put before the court was not fully disclosed when the order was sought, the respondent can apply for the discharge of the order with costs on the grounds of material non-disclosure.
There are other types of orders that can be made upon the application of one party. "Freezing injunctions", for example, restrict your access to your bank account and other assets. These are granted where the judge fears that you might hide, dissipate or transfer your funds abroad to defeat any judgment that might be awarded against you. All of those orders are expensive and difficult to get but also equally difficult and expensive to challenge. However, sometimes those costs can be covered by before-the-event insurance.
In other countries, orders on the application of one party only are granted much more readily. In Germany, for example, it is not unusual for claimants to seek orders to prevent defendants from exhibiting at exhibitions and to serve those orders on the first day of the show. Defendants who fear such applications can protect themselves to a certain extent by serving memorandums known as a Schutzschrift ("protective brief") with the court in which the application is likely to be made setting our reasons why such an order should not be granted
if anyone wishes to discuss this topic, call me on +44 (0)20 7404 5252 or send me a message through my contact form.
30 July 2017