Should I ignore an IP letter before action?

20th March 2020 Intellectual Property

All businesses who consider that their intellectual property (“IP”) has been infringed by another may send a “Letter Before Action” (“LBA”) to the alleged infringers, fully setting out their claims of infringement. This is a strong but costly step for a business to take, so it needs to be taken very seriously.

For those on the receiving end of a LBA, especially those who have not dealt with such IP claims before, this can be a chilling experience for a number of reasons – the LBA:

  1. Uses terms that are not familiar to you, so you do not know precisely what they are asking you to do. After all, what does “copyright infringement”; “unregistered design right infringement”; “passing off”; “trade mark infringement” or even “patent infringement” mean? Is this a foreign language?
  2. Makes demands for “immediate cessation” of your “infringing” activities, an “account of profits” or even “reasonable royalties”. Do they want you to write a cheque or give blood?
  3. Includes hundreds of pages of attachments, some of screen prints of your own website, but it is unclear which products they are complaining about. How many trees were sacrificed for this letter?
  4. Claims that you, as a director, are also liable as well as the limited company. They must be joking, right?
  5. Expects a full response within 14 days from the day of the letter, but you only just had time to read it!

Any of the above is enough to make any business owner or individual anxious, so here are our top tips for dealing with LBAs…

Top Tip #1: Don’t simply do what the accuser demands

Many businesses who face accusations of IP infringement consider that the safest option is to do what the accuser’s lawyers demand them to do. This typically involves removing the complained of item and paying the accuser some money. They must be right, after all?

Fortunately, not. Any lawyer who writes to an alleged infringer does so on behalf of their client. Those lawyers have the best interests of their client in mind, not yours.

While lawyers should not demand anything their client is not entitled to, in our experience, this is often not the case. Indeed, the lawyer who sends you a LBA is not always right in their accusations or in what they demand of you.

JMW’s IP team specialise in efficiently assessing the merits of a case and the likely exposure to any business accused of IP infringement.

Top Tip #2: Do not ignore it

Unsurprisingly, perhaps the worst thing you could do is ignore the LBA and assume that all the issues arising from it will disappear.

If ignored, the accuser will likely go on to issue a claim against you and your business. Once legal proceedings are issued, positions become entrenched, take many months (or even years) to conclude and legal costs escalate. The longer you take to deal with the LBA, the worse your circumstances may become.

It is far safer and cheaper to engage with the accusers and for you to understand their claim and your potential defences.

Top Tip #3: Take specialist IP legal advice

If you respond before taking specialist IP legal advice, you risk saying things which will harm your legal case and ability to secure a favourable settlement.

The accused party often admits facts which later prove to be incorrect and this can cause the other side to be suspicious of what you say to them further down the line. It is very likely that you will prejudice your own case if you respond without taking specialist IP advice.

JMW’s IP team specialise in closing down matters as quickly as possible to minimise the damage and legal costs to defendants.

Top Tip #4: Do not assume the claim is worthless

Many businesses who face accusations of IP infringement consider that the claim isn’t worth a great deal of money. After all, you only sold 100 Gucci watches at £10 apiece.

In most LBAs, the accuser will not tell you how much you owe them by way of damages. This is because they do not know how many allegedly infringing articles you have sold, or to what extent those sales have harmed their business.

The accuser must first prove that there has been an IP infringement, then they can move onto the issue of financial compensation. The value of compensation is likely to be vaguely based upon how much of the infringing product the alleged infringer has sold, but this is not always the case.

For instance, if an infringer sold 100 Gucci watches at £10 apiece, Gucci could elect to seek compensation based upon their own lost profits of, say, £100 per watch, rather than compensation based on the profit the infringer has made (which might be far less than Gucci’s lost profits).

IP LBA Conclusion

You may not have infringed any IP rights at all. You may have infringed them to a lesser extent than alleged. You may need to take down the allegedly infringing products immediately, or you may not. You may have to hand over pocket change, or you may have to hand over the keys to your house. Whichever of the above applies to you, if you receive a LBA, it is important that you seek specialist IP advice in relation to your next steps.

We are an IP specialist team based in London, led by Philip Partington, and offer support, guidance and advice to clients on a wide range of IP issues, with a particular emphasis on IP disputes.

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Philip Partington is a Partner located in Londonin our Intellectual Property department

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