Amazon policy exploited for “baseless threats”, says court
Notifications to the e-commerce company’s infringement system fell within the unjustified threats statutory regime | Communication issues arose in a patent dispute between US and Chinese lithium-ion battery manufacturers.
Notifications to Amazon via its IP infringement notification system constituted threats of IP litigation and fell within the unjustified threats statutory regime, according to the UK Court of Appeal.
In its decision handed down on Tuesday, December 19, the court weighed in on the battery patent dispute between the US-based Noco Company and China’s Shenzhen Carku Technology, emphasising the potential harm posed by “baseless threats”.
Background
Noco and Carku are rival manufacturers of lithium-ion batteries for jump-starting a motor vehicle with a flat battery.
The case looked at whether Noco's use of Amazon's IP policy and brand registry was threatening, and more specifically, whether communications between Noco and Amazon amounted to a “threat of infringement proceedings” under the Patents Act 1977.
In 2022, Carku launched proceedings for a declaration of non-infringement of Noco’s patent GB 2 257 858; a declaration that the patent was invalid; the revocation of the patent and relief against unjustified threats of infringement.
Noco counterclaimed for the infringement of the patent, which was later held to be invalid for obviousness in August 2022.
Carku, however, also took issue with Noco’s communications with Amazon, which it said had adversely affected its business.
The Chinese company supplies products to distributors who market the products via Amazon, which aims to provide protection and safeguarding measures for rights holders under its 'Amazon Intellectual Property Policy'.
Under this policy, any proprietor of IP rights is able to file complaints with Amazon via its website using an infringement form.
Noco filed a large batch of complaints against its rival using this form between January and July 2020.
A ‘substantial loss’
As a result of the notifications made by Noco, Amazon then notified Carku distributors that it had removed some of Carku's products from sale because they had received a report of infringment from a rights owner.
Carku argued that the removal of its products from the Amazon site resulted in “a very substantial loss in sales”.
After the Patent Court favoured Carku’s stance concerning the negative effects of this communication, Noku appealed.
In examining the evidence, the Court of Appeal stressed the importance of protecting IP rights by either taking legal action or making “a believable threat to do so”.
“This helps prevent the misuse of baseless threats that could harm the party accused of infringement,” said the court.
The decision affirmed the Patent Court’s earlier ruling in August 2022, resulting in the dismissal of the appeal.
Eleanor Wilson, associate at Mishcon de Reya, told WIPR that the unjustified threats statutory regime “enables those aggrieved by unjustified threats of IP litigation to seek legal remedies, provided that certain conditions are satisfied”.
The Court of Appeal, she added, had made an important distinction in terms of what could be viewed as an unjustified threat under this regime.
“Whereas the lower court distinguished between communications to Amazon which it found to be threats against distributors on the platform, and threats to Amazon itself, the Court of Appeal found that who the target of the threat is does not make a difference: the threat has "causative potency" either way,” said Wilson.
Rights holders must tread carefully
Jeremy Hertzog, partner at Mishcon de Reya, added: “While rights holders must therefore take the threats regime into account when considering whether to issue takedown notices to online platforms, the Court of Appeal did also highlight that not all communications sent using Amazon's notification forms would constitute threats.”
“The standard form allowed the provision of neutral information as per the unjustified threats rules, as long as it didn't contain threats or serve unauthorised purposes such as issuing cease and desist demands,” said Hertzog.
He recommended that businesses using the Amazon notification system (or any similar system) to assert their IP rights “should seek advice to avoid risking liability for inadvertently making unjustified threats to sue”.
This week’s decision emphasised the precedent established by L’Oreal (UK) v Johnson & Johnson and Best Buy v Worldwide Sales Corporation Espaňa.
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