Threats made to a manufacturer to sue its customers can also be actionable

On Monday of this week PatLit posted this item on liability under UK patent law for making unwarranted threats to sue certain categories of persons for patent infringement. The same topic crops up again today in Sudarshan Chemical Industries Ltd v Clariant Produkte (Deutschland) GmbH [2013] EWCA Civ 919, a decision yesterday of the Court of Appeal for England and Wales consisting of Lords Justices Moore Bick, Kitchin and Floyd). While most of the appeal court's decision was taken up with other matters, its position regarding threats is its most interesting feature. The alleged threat consisted of this line in a letter:

"Certainly you will not be interested in continuously effecting a patent infringement, which may involve the most serious penalties to the infringer and his customers"

Was this an actionable threat? Kitchin LJ, speaking for the court, explained the issue succinctly at [116]:

"The letter undoubtedly constituted a threat to sue Sudarshan. But, as both parties accepted, this is not actionable because Sudarshan is the maker and importer of the product complained of, and s.70(4) [of the Patents Act 1977] makes clear that proceedings may not be brought for a threat in respect of its activities. The question to which this aspect of the appeal gives rise is whether the letter also constituted an actionable threat to sue Sudarshan's customers. Sudarshan says it did because it conveyed to Sudarshan that Clariant intended to sue its customers. Clariant says it did not because a threat must be communicated to the person threatened. Further, the scheme of the 1977 Act is to permit threats to be made to the primary infringer, and that is just what happened here: the threat was communicated to Sudarshan".

The Court of Appeal resolved this argument, as the trial judge (John Baldwin QC, sitting as a Deputy High Court Judge) had done, against Clariant. As Kitchin LJ said at [126], having reviewed the background to the current :

" ... A threat to sue a manufacturer in respect of his own activities is one thing. In a culture which encourages parties to discuss their differences before going to court, that is something with which he may be expected to cope. But a threat to sue his customers is quite another. A manufacturer may be very fearful of the damage this would cause to his goodwill and customer connection and so prefer to cease manufacture and sale altogether. A patentee may of course be prepared to sue the customers and if he does so the manufacturer must take the consequences. But Parliament may well have thought it wrong that if the patentee is not prepared to do so, perhaps because he knows it will damage his reputation too, that he should nevertheless be permitted to secure a commercial advantage by telling the manufacturer that that is what he intends to do".