You run a successful business with a well-known brand. You have spent many years and have financially invested heavily in your brand, building up a great reputation. One day you stumble on a third party who, in your opinion, is infringing your brand – the infringer is either blatantly copying your brand or using a brand that is so similar that it will cause confusion among customers. Understandably you are upset – as a first step you are tempted to write to the infringer yourself, threatening legal action against them. Is this the right move? In some cases it may be. But in others, you could leave yourself open to the infringer taking legal action against you – for making groundless threats.
What are groundless threats, and why are they important?
Groundless threats – an overview
Section 129 of the Trade Marks Act 1995 sets out the law on groundless threats of legal action. Subsection 1 states that a person or entity can take legal action against another person or entity if they believe they have been groundlessly threatened with trade mark infringement proceedings.
The purpose of this action, as provided in section 129(2), is usually to obtain:
- a declaration from a Court that a threat is groundless;
- a Court order preventing further threats; and
- a damages award to address losses that may have been suffered because of the threat.
When is a threat made?
This will depend on the way in which the trade mark owner has communicated with the alleged infringer. A threat will be made if the language in the communication indicates that the trade mark owner intends to take court action against the alleged infringer for the infringement of that trade mark.
So if a trade mark owner simply notifies someone about the existence of its trade marks, then this would probably not constitute a threat. However, if the trade mark owner’s letter goes further than that, then this could be interpreted by a Court as being a threat.
When is a threat groundless?
A threat is groundless if the trade mark owner cannot establish that there has been an actual infringement of its trade mark.
So if a trade mark owner can convince the Court that the alleged infringer did in fact infringe the applicable trade mark, then the threat will not be groundless. Depending on the circumstances, it could be challenging for a trade mark owner to satisfy this requirement.
However, it’s not all bad news. Trade mark owners who face an allegation of groundless threats may be able to rely on what is sometimes called the “due diligence defence”. This is set out in Section 129(5) of the Trade Marks Act 1995. A brand owner could rely on this defence if the action against the alleged infringer is pursued with due diligence – in other words, that the action is commenced and pursued without delay. If the due diligence defence applies, the alleged infringer cannot take action against the trade mark owner for a groundless threat.
This defence applies regardless of whether or not the trade mark owner is eventually successful in proving that the alleged infringer has infringed the trade mark.
What could happen if a trade mark owner makes a groundless threat?
If a Court rules that an alleged infringer has been groundlessly threatened, then the alleged infringer can apply to the Court for:
- a declaration that the threats are groundless;
- an injunction against the brand owner to stop any further threats; and
- damages.
Groundless threats – takeaways
Clearly, trade mark owners will wish to avoid being on the receiving end of a claim for making a groundless threat. It would be a bitter pill to swallow to face a legal action from the very party that you believe is infringing your brand.
However, that should not put you off taking action against trade mark infringers. It is possible to write to an infringer to make the same point, but without actually making a threat in relation to trade mark infringement. For example, it may be possible for your correspondence to the alleged infringer to include:
- a notification of the existence of your trade mark rights; and
- a request for the alleged infringer to explain why they consider that they are not in breach of your trade mark rights.
The viability of this approach will, of course, depend on the specific circumstances of the matter and strategy required. The key takeaway is that brand owners should seek specialist advice before writing to an alleged infringer about a trade mark infringement.
If you are the owner of a brand with a number of global registrations, you should take advice in each jurisdiction before taking infringement action. Some jurisdictions outside Australia have similar groundless threats provisions, while in other jurisdictions there are no such provisions.
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