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PATENTS – NEGOTIATION – ACTIONABLE THREATS – EXTENT OF “WITHOUT PREJUDICE” PROTECTION

K sought a declaration that X had made actionable threats of infringement proceedings and further claimed damages for losses sustained as a result of the threats. X had entered into an agreement with AIC which purported to grant X exclusive rights within the UK in respect of the distribution of children’s three wheel buggies. K subsequently entered into an arrangement with API to import and distribute similar buggies. X wrote to K claiming infringement of its exclusive distribution rights and sent a copy of the letter to T, a major UK retailer whom K had undertaken to supply with the buggies. Both letters were headed “without prejudice”. X later wrote a second letter to T contending that T’s marketing of the buggy amounted to an infringement of patent and design rights. K argued that X in fact had no such exclusive rights but also indicated that they intended to cease distribution of the product when its existing stocks had been used. K sought an apology from X but no such apology was received and K instituted proceedings. X contended that the letters were protected by privilege. K argued that the “without prejudice” rule did not prevent the letters being admitted into evidence as X had abused the rules in respect of privilege.

Held, granting the declaration, that there were no patent or design rights in respect of the buggy and, whilst the first letter from X did not contain an actionable threat of infringement of a patent, the second letter did. The label “without prejudice” could not be used generally and accordingly would not preclude an action from its legal repercussions in circumstances where there was not an actual dispute or negotiations, Unilever Plc v Procter & Gamble Co FSR 344, [1999] CLY 349 considered. The threat or claim made by X had not been made within the course of relevant privileged negotiations as X had not responded to replies from K but had written instead K’s principal customer, T. X had not withdrawn its claims to infringement of patent even when it had become aware that the claim was unfounded and had made no response to K’s request that X notify that the allegations had been withdrawn. T had ceased to order more buggies from K as a result of the letters from X and therefore K had established a prima facie loss and an enquiry into damages was justified, Brian v Ingledew Brown Bennison & Garrett (No 3) [1997] FSR 511, [1997] CLY 3917 followed.

KOOLTRADE LTD v. XTS LTD [2001] FSR, Pumfrey, J, Pat Ct.

“Current Law” March 2001