Patents: Groundless Threats
Kooltrade Ltd. v. XTS Ltd., [2001] FSR 158 , [2001] ADR.LR 07/11
Pumfrey J, 11 July 2000
I was instructed by an importer and distributor of prams, child seats, baby goods, children's clothing and similar merchandise. The company had recently managed to persuade Tesco to list some of its goods on the store's home shopping website including a baby buggy or pram that it had imported from China. The buggy was attractive and convenient and my client exhibited it at the "Mother and Baby" show at Earls Court.
The defendant company imported and distributed a similar buggy from Taiwan. One of its representatives attended the show and saw my client's buggy. It instructed its solicitors to send a cease and desist letter to my client headed with the words "without prejudice" and sent a copy to Tesco. Three months later the solicitors wrote to Tesco in the following terms:
"Our clients further contend your marketing of the three wheeled
buggy amounts to an infringement of patent. Accordingly, our client reserves the right to pursue a claim for compensation for loss incurred as a result of your activities. In the meantime, may we have your assurance that all such activities will cease forthwith.ʺAgain the letter was headed "without prejudice". quick patent search revealed that there was no patent and indeed the product was probably not patentable. As the product had been imported from Taiwan design right could not subsist. My client's manager wrote to the defendant inviting it to withdraw the complaint while my solicitors pointed out that the letter to Tesco was an actionable threat. That only response from the defendants was that the letter was shielded by "without prejudice" privilege.
Shortly afterwards, Tesco dropped not only my client's buggy from its website but also some other quite unrelated products that it distributed. My solicitors issued a claim out of the Manchester District Registry and sent the papers to me. As the District Registry has no jurisdiction in patent cases, I applied for the transfer of the case to the Patents Court and summary judgment on the claim. Mr. Justice Pumfrey ordered a trial on witness statements only on whether the defendants could rely on the without prejudice privilege and whether there was evidence upon which he could order an inquiry as to damages.
The reason the judge ordered a trial was that the case followed the Court of Appeal's decision in Unilever plc v. The Procter & Gamble Company [2000] F.S.R. 344 which appeared to reverse over a century of authority that the "without prejudice" privilege does not extend to actionable threats. I argued that the Court of Appeal's decision applied only to bona fide negotiations and that the words "without prejudice" could not be use din a situation such as this. The judge upheld by argument and also decided that there was sufficient evidence to order an inquiry.
I represented the claimant at the inquiry identifying the expert and assisting in the preparation of the case. After a 4 day trial before the master we were awarded a very substantial sum. Unfortunately, the defendants went into liquidation before the judgment could be enforced. I was instructed to apply for judgment against the solicitors and directors but was met by the objection of issue estoppel which I was unable to overcome.
