Easy on the trigger! Additional damages now available for unjustified threats

The cease and desist letter is a staple of Intellectual Property practice. 

However, after recent changes to the Trade Marks Act 1995 (Cth) (the Act), trade mark owners must be extra careful when threatening infringement proceedings. 

Previous position

Prior to the recent amendments, if a person threatened to bring a groundless infringement action against another, the threatened party could seek:

• a declaration that the threat was unjustified;
• an injunction restraining the person from continuing to make the threat; and
• damages sustained because of the threat.

This, however, placed the onus on the threatened party to prove (on the balance of probabilities): 

• it had suffered damage;
• the quantum of that damage; and
• that the damage was caused by the threat.¹

Courts would not “engage in estimation, speculation and guesswork”² to decide the appropriate quantum of damages. This placed an evidentiary onus on the threatened party to prove actual loss and damage.

Therefore, the prohibition did little to dissuade the making of groundless threats. The “benefit gained from hindering a competitor by making unjustified threats of infringement proceedings…outweigh[ed] the cost of ordinary compensatory damages for making such threat.”³ 

Amendments

The Act now allows a court to award additional damages, as well as regular compensatory damages.⁴ 

In assessing additional damages.  A court will consider:

• the flagrancy of the threat;
• the need to deter similar threats;
• the conduct of the defendant after the threat was made;
• any benefit shown to have accrued to the defendant because of the threat; and
• all other relevant matters.⁵

These factors are almost identical to those that a court may consider in an infringement action.⁶  Accordingly, a party who makes an unjustified threat may be liable to pay significant damages, regardless of whether the threat caused loss and damage.⁷ 

Lavan comment

When preparing a cease and desist, you must ensure that you do not threaten action where that threat is unjustified. 

It is important to obtain legal advice before contacting another party to threaten (or even foreshadow) proceedings. 

Alternatively, those on the receiving end must understand their rights and respond accordingly.

If you require assistance in handling a trade mark dispute, do not hesitate to contact Iain Freeman or Andrew Sutton.