to an IP

Respond to an IP infringement claim

The first step in an IP infringement claim is usually a ‘cease and desist’, letter otherwise known as a letter of demand. This letter is issued as a formal notice alleging that a person or company has infringed another’s rights and must take certain steps by a deadline to avoid certain serious consequences.

At W3IP Law, we have extensive experience in responding to letters of demand. If you’ve received one, we can advise you on the merits of the letter and what defences you may have under the relevant legislation.

  • The letter of demand may threaten litigation proceedings or it may use language that suggests this.
  • If you have received a letter of demand, you should obtain legal advice before responding and should not sign any undertakings that have been requested of you in the letter, as they may be groundless, unreasonable or onerous.
  • A demand letter usually calls for a response within a relatively short period of time. Your legal representative should respond to the letter promptly, acknowledging its receipt and informing the sender that a substantial response will be forthcoming.
  • This will inform the rights holder that the complaint has been taken seriously and that their concerns will be addressed and are not being ignored.

What is a letter of demand?

A letter of demand is used by a rights holder to put infringers on notice of intellectual property rights and demand they take certain steps. It may include:

  • an assertion that the rights holder is the owner of the IP or authorised to use it
  • information about the rights granted under various IP legislation
  • supporting documentation for the claim, including details of any registrations
  • details of the offending action
  • the legal remedies available to the rights holder to remedy the offending action
  • a request for documents, including an accounting of profits in respect of the infringing action
  • a demand that the alleged infringer take certain steps, including the provision of undertakings
  • a deadline for the demands to be met
  • an assertion that if the demands are not met by the deadline, the rights holder will start litigation proceedings

Preliminary investigation

A letter of demand needs to be very carefully investigated. You need to know whether the claim meets the grounds for infringement, particularly if a sum of money is demanded, and there are threats of legal action or strict undertakings are sought. Each claim in the letter needs to be evaluated, including for any misrepresentations. The particulars of the claim and documents should be sought from the purported rights holder to support the claims made in the letter.

In particular, the following will need to be investigated:

  • whether the rights holder has standing to sue and can substantiate its ownership of or right to use the IP
  • checking the records at IP Australia about the claimed IP
  • whether the claimant has provided any proof of registrations or can establish a chain of title
  • the alleged IP rights of the rights holder or authorised user
  • the particulars of the alleged infringement, including any documents and a clear explanation from the purported rights holder to substantiate the claims made
  • the basis of any calculations made when a fixed sum is demanded, including any relevant sales data, details of how the amount was arrived at and the details of any legal costs sought
  • the merits of any potential statutory defences, challenges or claims that can be raised against the allegations of infringement (e.g. non-infringement, enforceability, validity assessment of rights, cancellation, removal proceedings, non-use, re-examination or revocation, misleading and deceptive conduct, anti-competitive behaviour)
  • whether the demands are unreasonably onerous and are unlikely to be granted by a court
  • whether the demands constitute groundless threats, which are actionable under Australian law
  • any opportunities to obtain settlement without resorting to litigation proceedings (e.g. negotiation or other alternative dispute resolution mechanisms, cross licensing)

Groundless threats

A letter of demand is often the first step to put another party on notice of the potential consequences of their actions. Many disputes can be resolved with a simple ‘cease and desist’ letter, but you must consider it carefully before sending. By sending a cease and demand letter, you may expose yourself to a claim from the recipient – or any person aggrieved by the threat – that it amounts to a ‘groundless threat’ (i.e. that you have no grounds for making the threat).

In Australia, a letter of demand constitutes a threat on the basis that it asserts to the alleged infringer that the complainant has a right, that the offending action has infringed that right, and that serious consequences will follow if the demand is not met, because the rights holder will start litigation proceedings (or the language of the letter suggests this consequence).

It’s important to determine whether there has actually been a legal infringement, because threatening someone of an infringement gives rise to serious consequences. The threat of litigation proceedings against another gives rise to a cause of action available to the alleged infringer because the Trade Marks Act, the Copyright Act, the Designs Act and the Patents Act all have provisions against groundless threats. They may seek relief from the court, including a declaration that you have no grounds for making the threat, an injunction restraining you from continuing to make the threat, and an order for recovery of any damages sustained because of your actions and demands.

Civil Dispute Resolution Act 2011 (Cth) (‘Act’)

The Act applies to proceedings commenced in the Federal Court of Australia or the Federal Magistrates Court. It requires that a person (and their lawyer) make a genuine attempt to resolve the dispute before commencing litigation proceedings:

  • they must file genuine steps statements in the court, setting out each and every step they have taken to resolve the dispute, otherwise the court may take into account any failure to do so when exercising its discretion in awarding costs
  • the lawyer must inform their client of this requirement and help them comply with it, otherwise s/he risks personal cost consequences which are not recoverable from the client

What are genuine steps?

Section 4 of the Act gives examples of what is considered a “sincere and genuine” attempt to resolve the dispute, including:

  • notifying the other person of the issues that are or may be in dispute, and offering to discuss them in a way that resolves the dispute
  • responding appropriately to such a notification
  • providing relevant information and documents to the other person to help them understand what the issues are and how they can be resolved
  • considering whether the dispute could be resolved by alternative dispute resolution or a different process
  • trying to negotiate with the other person to resolve some or all of the issues in the dispute