Case No: 1HC35803
Neutral Citation Number: [2004] EWHC 302 (Pat)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

Royal Courts of Justice
The Strand, London, WC2A 2LL

Date: Friday, 13 February 2004

B e f o r e :

THE HONOURABLE MR JUSTICE LADDIE

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	RECKITT BENKISER UK	Claimant	
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	(1)	HOME PAIRFUM LIMITED
(2)	HUBERT WILLEM MAAT
(3)	JOSEPHINE BERNADETTE McCARTHY	

Defendants	

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Based on the tape transcription by Marten Walsh Cherer Ltd.,
Midway House, 27/29 Cursitor Street, London EC4A 1LT.
Telephone No: 020 7405 5010.  Fax No: 020 7405 5026
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Mr. Michael Edenborough (instructed by Messrs Laytons)
appeared on behalf of the Claimant.

Mr Jonathan Hill (instructed by Messrs Lewinson Gray) 
Appeared on behalf of the Defendants.

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Judgment
MR JUSTICE LADDIE:
1.	The Claimant in this action is Reckitt Benkiser UK Limited (“Reckitt”).  It is engaged in the business of designing, manufacturing and selling consumer products, including air fresheners, which are sold in specially designed containers.  Before me, it is represented by Mr Edenborough.  It is part of the group which includes Reckitt & Colman.
2.	There are three Defendants.  All are represented before me by Mr Jonathan Hill.  The first is Home Pairfum Limited (“HPL”).  It also is engaged in selling air fresheners.  Until very recently, it imported its products or the contents of its retail packaging from a source in Germany.  Recently the latter company was sued successfully in Germany.  I understand that HPL now has a UK source.
3.	The Second Defendant is Mr Hubert Willem Maat.  He was an employee of a business partner of the Claimant.  He left and set up HPL.  It is not suggested that, in doing so, he broke any restrictive covenants.  He is the managing director of HPL and is the beneficial owner of all its issued share capital.
4.	The Third Defendant is Josephine Bernadette McCarthy.  She is HPL’s company secretary.  As a result of discussions during the course of the applications before me, Miss McCarthy has been released from the action on agreed terms, which are not relevant to anything I have to decide.  
5.	In this action, which was commenced by a claim form dated 4 June 2003, Reckitt alleges infringement of nine United Kingdom registered trade marks, three Community trade marks, five registered designs and design right as well as passing-off and breach of confidence.  It seeks injunctive relief, certain disclosure and an enquiry as to damages or an account of profits.
6.	By a Defence and Counterclaim, dated 1 August 2003, the Defendants not only denied that they breached any of the claimed rights, but they went onto the offensive.  They seek to invalidate all the trade marks pleaded against them, and they also seek declaratory injunctive and compensatory relief against Reckitt in respect of unjustified threats allegedly made by Reckitt in relation to its UK and Community trade marks and its registered designs.  It has also intimated that it wishes to join the Claimant’s solicitors, Messrs Laytons, as Part 20 Defendants, it being alleged that they are as liable as Reckitt because they wrote and sent the threatening letters of which complaint is made.
7.	There are two applications before me.  The first is brought by Reckitt.  It seeks to have the counterclaim, in so far as it relates to threats, struck out.  The second is brought by the Defendants.  They seek to join Laytons as Part 20 Defendants to their threats counterclaim.  Many of the issues which arise in the two applications are the same.  Reckitt argued that the reasons which justify the striking out of the threats allegations also justify refusing to allow Laytons to be joined as parties.  
8.	It advanced two core arguments.  First it said that the threats counterclaim and the joinder are abuses of the court’s process or are otherwise likely to obstruct the just disposal of these proceedings.  In this regard, it relied on the provisions of CPR 3.4(2)(b).  Second, it says that the threats counterclaim and joinder are breaches of the court’s case management powers under CPR 3.1(2)(e), (f), (i), (j), (k), (l) and (m).  Mr Edenborough expressed the latter point rather differently during his submissions: the court’s case management powers are of such a width that they can and should be exercised to strike out the threats claim and to prohibit the joinder of Laytons. 
9.	In support of its application, Reckitt has served and relies on a witness statement of Simon John Chapman, a partner in the IP, Technology and Media Group of Laytons, who has responsibility in the latter firm for this litigation.  The Defendants rely upon a very short witness statement in reply from Mr Maat.
10.	Before considering the facts in this case, I should say something about the threats legislation.  Threats provisions were first introduced into the Patents Designs & Trade Marks Act 1883.  This was in response to a perception that owners of patent rights were in the habit of threatening infringement proceedings against competitors without any bona fide intention of following them up with proceedings.  The cost and complexity of patent infringement proceedings were thought to be so high that the issue of such threats might drive competitors from the market.  For this reason, unscrupulous patentees with weak cases might be tempted to issue threats even when they had no intention to litigate.  To overcome this, the 1883 Act made it actionable to threaten another with patent infringement proceedings.  Under that legislation, the proprietor could avoid liability if he commenced and pursued patent infringement proceedings with due diligence; thus under that legislation, a patentee could still utter as blood curdling threats as he liked as long as he followed them through.  The legislation was subsequently changed.  It was no longer a defence to follow up the threats with proceedings.  A threat was actionable even if the proprietor had every intention of commencing and pursuing the infringement proceedings and did so.  
11.	Over time, the threats provisions were extended to cover registered designs and, most recently, registered trade marks.  Although there are minor differences between the statutory provisions in relation to different intellectual property rights, those differences are not argued to have any impact on the issues to be decided on these applications.  For that reason, it is sufficient to set out the relevant provision in the Trade Marks Act 1994.  Section 21:-
“21(1)	Where a person threatens another with proceedings for infringement of a registered trade mark other than -
(a)	the application of the mark to goods or their packaging,
(b)	the importation of goods to which, or to the packaging of which, the mark has been applied, or 
(c)	the supply of services under the mark,
any person aggrieved may bring proceedings for relief under this section.
(2)	The relief which may be applied for is any of the following -
(a)	a declaration that the threats are unjustifiable,
(b)	an injunction against the continuance of the threats,
(c)	damages in respect of any loss he has sustained by the threats;
and the plaintiff is entitled to such relief unless the defendant shows that the acts in respect of which proceedings were threatened constitute (or if done would constitute) an infringement of the registered trade mark concerned.
(3)	If that is shown by the defendant, the plaintiff is nevertheless entitled to relief if he shows that the registration of the trade mark is invalid or liable be revoked in a relevant respect.
(4)	The mere notification that a trade mark is registered, or that an application for registration has been made, does not constitute a threat of proceedings for the purposes of this section.”
12.	A considerable body of case law exists in relation to the threats legislation, particularly in the patent field.  A number of points arise out of that jurisprudence which are relevant to these applications.
13.	First, it is well established that threats need not be expressed openly or directly to be actionable.  Wherever a statement is made, whether orally or in writing, to another which would convey to a reasonable recipient that proceedings for infringement will be commenced against a particular person, or will be unless certain conditions are met, it is treated as a threat.  The only exception to this is the statutory exception contained, for example, in section 21(4) of the Trade Marks Act.  In commerce, the receipt of a letter bringing the addressee’s attention to the existence of an intellectual property right would be construed reasonably as a none too subtle indication that the right’s owner is contemplating enforcing it against the recipient.  Were it not for the statutory exception, such a notification would amount to an actionable threat in most cases.
14.	The second point worth noting is that threats can be made directly or indirectly.  There is no limitation that the person issuing the threat has to own or claim to own the intellectual property rights in question.  In particular, it is now well established that where a professional, for example, a solicitor, patent agent or trade mark agent, writes a threatening letter on behalf of a client to a competitor, not only is the client liable for the actions of his agent, but the professional will be liable also.  
15.	The combined effect of these provisions is that it is risky for the owner of one of the relevant intellectual property rights or his legal adviser to communicate with a competitor in advance of litigation in a way that conveys that litigation is being contemplated.  Once negotiations have commenced, the without prejudice privilege may protect the rights owner and his advisers (see: Unilever plc v The Proctor & Gamble Co [2000] FSR 344). But save in this respect, trying to bring home to a competitor in advance of litigation the seriousness of one’s claims is likely to be construed as issuing threats.  The result is that the safest way to proceed is to commence proceedings first and discuss settlement second.  As the late Anthony Walton Q.C. used to say, “there is all the difference between threatening to put the knife in and offering to pull it out”.  
16.	It is apparent that this approach, forced on rightsholders by the legislation, runs counter to one of the most important features of the CPR, namely the emphasis on encouraging parties to resolve their disputes before commencing litigation.  Under the CPR, parties are encouraged to put their respective cases to each other before the litigation starts, in the hope that at that stage, before the temperature of the dispute has been stoked up by the legal process, they can sort out their problems.  The pre-action protocols under the CPR are manifestations of that approach, as is the court’s power to take into account the parties’ actions before the litigation commences when determining issues of costs.
17.	There is then an obvious tension between the sensible “talk first” policy of the CPR and the “sue first” policy encouraged by the legislation.  This tension has manifested itself recently in the difficulties which have been encountered in drafting a pre-action protocol for intellectual property cases which meets the objectives of the CPR without requiring parties to do things which may lay them open to threats proceedings.  
18.	The concern that the threats provisions may have the effect of making litigation more rather than less likely has been voiced before.  It must be assumed that the legislature is aware of this.  Indeed, the question of what to do about the threats provisions has been raised in recent discussions which have led to the Government consulting on a proposed Patent Act Amendment Bill.  It appears from that process that it may well be that an anomaly in the legislation, revealed by the Court of Appeal in Cavity Trays Limited v RMC Panel Products Limited [1996] RPC 361, will be addressed and some minor changes may be made to other parts of the threats legislation.  But the threats legislation is with us now.  It appears that it is likely to remain with us for some time to come.  The tension between it and the CPR remains.  
19.	It is that tension which is at the heart of Mr Edenborough’s submissions.  He argued that I have the power, and should be bold enough to use it, to strike out the threats claims here.  He said that such a course would not only save time and expense, but would send out a message to the IP community that “pointless” threats proceedings would not be allowed. 
20.	That argument incorporates what appears to be, at first blush, a surprising submission, namely that the court can use its case management powers under the CPR to strike out a right to seek injunctive and financial relief which has been bestowed on a party by the legislature.  It could be argued that, no matter how strongly one feels that the threats legislation does more harm than good and is out of step with current views, it is not for the courts to use their CPR powers to frustrate the intention of the legislature.  Those powers are designed to assist in proper case management, but management does not extend as far as taking away a right of action created by statute.  Just as the Good Fairy in Sleeping Beauty could not destroy the spell cast by the Witch but could soften its effect, so the CPR gives the courts wide powers to control how proceedings must be conducted but does not enable them to, in effect, remove rights created by legislation.
21.	Mr Edenborough made it clear that what his client is asking for amounts to nothing less than destruction of the Defendant’s right to seek relief under the relevant legislation.  He accepted, for the purpose of this application, that his client and his solicitors have issued threats.  He did not dispute that the threats were urgent and strongly worded.  Notwithstanding that, he invited me to strike out the Defendant’s claims.
22.	That the CPR gives the court powers to strike out a valid cause of action appears to be inherent in the Court of Appeal’s decision in Wallis v Valentine [2002] EWCA (Civ) 1034, [2003] EMLR 8.  In that case, the claimant and his partner, G, lived next door to the Defendant.  There had been three previous sets of proceedings between the parties.  The claimant said that he had been libelled in two letters which the defendants had sent to G.  G was privy to all previous complaints against the claimant and was party to some of the litigation.  The two letters added little, if anything, to what G already knew.  The defendants applied to strike out the claim.  As Sir Murray Stuart-Smith noted in his judgment, counsel for the claimant submitted that if his client was “seeking to vindicate a legal right the overriding objective was irrelevant”.  In other words, the powers under the CPR could not be used to remove a legal right.  In dismissing the appeal from Mr Justice Eady’s decision to strike out, the Court of Appeal relied upon the following passage from the judgment of Simon Brown LJ in Broxton v McClelland and Another [1995] EMLR 485 at 497-498:-
“(1)	Motive and intention as such are irrelevant (save only where ‘malice’ is a relevant plea): the fact that a party who asserts a legal right is activated by feelings of personal animosity, vindictiveness or general antagonism towards his opponent is nothing to the point.  As was said by Glass JA in Champtaloup v Thomas (1976) 2 NSWLR 264, 271 (see Rajski v Baynton (1990) 22 NSWLR 125 at p.134): 
‘To impose the further requirement that the donee [of a legal right] must be actuated by a legitimate purpose, thus forcing a judicial trek through the quagmire of mixed motives would be, in my opinion, a dangerous and needless innovation.’
(2)	Accordingly the institution of proceedings with an ulterior motive is not of itself enough to constitute an abuse: an action is only that if the Court’s processes are being misused to achieve something not properly available to the plaintiff in the course of properly conducted proceedings.  The cases appear to suggest two distinct categories of such misuse of process:
(i)	The achievement of a collateral advantage beyond the proper scope of the action – a classic instance was Grainger v Hill where the proceedings of which complaint was made had been designed quite improperly to secure for the claimants a ship’s register to which they had no legitimate claim whatever.  The difficulty in deciding where precisely falls the boundary of such impermissible collateral advantage is addressed in Bridge LJ’s judgment in Goldsmith v Sperrings Limited at page 503 D/H.
(ii)	The conduct of the proceedings themselves not so as to vindicate a right but rather in a manner designed to cause the defendant problems of expense, harassment, commercial prejudice or the like beyond those ordinarily encountered in the course of properly conducted litigation.
(3)	Only in the most clear and obvious case will it be appropriate upon preliminary application to strike out proceedings as an abuse of process so as to prevent a plaintiff from bringing an apparently proper cause of action to trial.’
23.	Sir Murray went on to make three additional points. The first was:-
“… where Simon Brown LJ speaks in paragraph (2)(ii) of the conduct of the proceedings, this is not confined as Mr Price submitted, to the conduct of proceedings after the issue of the claim, but includes the initiation of the claim itself.”
24.	In other words, the court’s powers are wide enough to remove or annul a cause of action and not merely moderate how proceedings are conducted.  Mr Hill did not argue that different considerations apply where, as here, the cause of action has been provided by statute.  He accepted that the court has such jurisdiction to strike out even a prima facie valid cause of action in such circumstances.
25.	The second additional point made by Sir Murray in Wallis was that in cases where it was argued that the party had an ulterior motive in bringing the proceedings, that had to be tested objectively.
26.	Third, he agreed with Mr Justice Eady that, whereas Wallis was decided before the CPR came into force, it is now necessary to have regard to the overriding objective.  
27.	In Wallis itself the facts strongly supported a strike out.  Because the libel was only published to one person, who already knew all or most of the allegedly libellous contents, any damages recovered would be very small or nominal.  Furthermore, what was at stake was a 14 day jury trial being conducted by a claimant who had gleefully told the defendant that he had no money.  The defendant was therefore faced with defending a trivial claim with no prospect of recovering costs from the claimant.  The court also appeared to have accepted that the motive for the litigation was vindictiveness rather than a desire to vindicate the claimant’s rights.  
28.	It follows that, on the basis of Wallis and in view of Mr Hill’s concessions, I should proceed on the basis that the court does indeed have power under the CPR to strike out a valid claim brought to enforce a right created by statute.  Mr Hill’s argument was that the Claimant’s application to strike out fails on the facts here.  He relied in particular on the statement in Simon Brown LJ’s judgment in Broxton that it is only in the most clear and obvious cases that a strike out will be appropriate.  He said that it must be obvious that nothing will be achieved by the claim, that it is brought for illicit reasons and that, in all the circumstances, the pursuit of the overriding objective would be seriously hindered were the claim allowed to proceed.  
29.	I accept the generality of that submission.  However, I would prefer to express it somewhat differently.  The court’s powers under the CPR are wide.  They should be tailored to meet the circumstances of the case.  Although, as Wallis shows, the court has power to strike out even a prima facie valid claim where there is abuse of process, it does not follow that in all cases of abuse the correct response is to strike out the claim.  The striking out of a valid claim should be the last option.  If the abuse can be addressed by a less draconian course, it should be.
30.	That brings me to the facts of this case.  Mr Edenborough pointed out that there was only a period of seven weeks between the first threatening letter and the commencement of the proceedings.  During that time, there is no suggestion that the Claimant approached or threatened anyone else.  All threats were directed at the Defendants, not at their suppliers or customers.  He argued that the damages will be minute.  Mr Hill disputed this.  He said that his clients, even if they win the action, will only be able to recover about 70% of their costs on an assessment.  The remaining 30% is an expenditure foreseeably forced on his clients by the threatening letters.  It will be recoverable as damages in the threats action.  Mr Edenborough, for the purpose of this application only, conceded that this point was arguable.  Even so, he said that the recoverable damages will be negligible.  On balance, I think he is right.  In this respect, the claim is like that advanced by the Claimant in Wallis.  
31.	Mr Edenborough argued that the only other substantive relief which the Defendants can be seeking is an injunction to prevent the repeat of any of the unjustified threats.  He said that this is dependent upon his client losing all its registered designs and registered trade mark claims; otherwise, the threats would be justified and therefore not actionable.  He submitted that, as a practical matter, if his client loses the action, the Defendants will need no further relief.  The court’s judgment will vindicate the Defendants’ activities in the most effective way and, in such circumstances, his client (and, for that matter, its lawyers) would not issue further threats.  Continuation of the counterclaim to secure injunctive relief is disproportionate.  He said that, although for the purpose of this application it is accepted that threats were made seven weeks before the claim was issued, there were no threats to repeat them or to issue them to third parties.  Therefore, in all probability, an injunction to restrain the issuing of threats would not be granted, even were the Defendants to succeed at the trial.
32.	Although I accept that, for many purposes, the Defendants would be sufficiently vindicated by a victory at the trial, I do not think it is inevitable that they would obtain no injunctive relief or that any such relief would be valueless.  The threats made by the Claimant were strong.  They were repeated in subsequent correspondence.  That the Claimant is interested in pursuing the Defendants’ suppliers and customers is evident from the prayer for relief in these proceedings, which includes a request for an order that the Defendants should speedily disclose the names and addresses of all their suppliers and customers.  This is consistent with what has happened since this dispute started, namely that the Claimant has found out the identity of the Defendants’ original German supplier and has sued him.  In my view, it is at least possible that a court will conclude that the Defendants have reasons to be apprehensive that threats might be made against their commercial contacts and will grant an injunction for that reason.  
33.	Notwithstanding these conclusions, I accept Mr Edenborough’s submission that the potential benefits to the Defendants of pursuing the counterclaim against the Claimant will be small.  That, however, is no justification for striking it out.  There has to be an abuse, and striking out has to be supportive of the overriding objective.  I will take the latter point first.
34.	The Claimant’s case is that it will be wasteful of the court’s time and the parties’ energies to spend effort on this issue.  As a fall-back position, Mr Edenborough argued that the counterclaim, in so far as it relates to threats, should be stayed until after the outcome of the trial of the main issues.  Mr Edenborough’s submission was based primarily on a passage in the evidence of his solicitor, Mr Chapman, served in these proceedings.  It reads as follows:-
“… there is nothing in practical terms to be gained from such proceedings continuing (other than perhaps those matters touched on below), but rather such proceedings will duplicate and add to those matters litigated as part of the claim and the remainder of the counterclaim, thereby adding both in time and expense to both parties and to the court.”
35.	I agree that the issues raised in the threats counterclaim largely repeat issues which will be covered by the main issues in the action.  However, the result will be to add no more than a few minutes to the duration of the trial.  The cost and time implications of allowing these counterclaims to stand will be very small indeed.  
36.	As far as the other point is concerned, in my view, there is nothing which demonstrates that raising a claim of threats against the Claimant is an abuse at all.  It is not per se abusive for a party to seek relief merely because it is of low value.  Furthermore, even were I of a different view on this, I can see no substantial saving to be achieved by striking the counterclaim out and certainly nowhere near the type of saving that would be necessary to justify striking out what appears to be a valid claim.  I am also not persuaded that Mr Edenborough’s fall-back position is attractive.  Because nearly all the issues relevant to threats will be canvassed at the trial, it would be more efficient to allow all the issues to be determined at the same time, that is to say, at the trial.  
37.	Finally, I should mention Mr Edenborough’s suggestion that, even if the saving to be achieved by striking out was minor, I should still take that course: it would send a clear signal to others that the threats legislation should not be abused.
38.	I do not accept that argument either.  If there is no justification for striking out the Defendants’ claim on its own merits, it would not be appropriate to do so simply pour encouragé les autres.  I can see no reason why the Defendants should be deprived of their entitlement to ask for damages and injunctive relief, even if they are of small value, so as to teach others a lesson.  Furthermore, if, as I have held, this counterclaim is not abusive, it is difficult to see what message is conveyed by striking it out.
39.	This leaves only the question of what to do about the Defendants’ application to join Laytons as Part 20 Defendants.  Most of the matters discussed above apply to this as well.  However, there are some additional factors which Mr Edenborough prayed in aid in support of his client’s opposition to this application.
40.	First, he said there is no suggestion that the Claimant is not good for the small amount of damages which, assuming everything goes the Defendants’ way, would be recoverable by them.  The Claimant is part of an enormous group.  
41.	Second, he said that, even more than in respect of the Claimant, there is no reasonable prospect of injunctive relief being needed against Laytons.  There is nothing to suggest that they would fail to honour both the letter and the spirit of the outcome of the trial.  
42.	Third, he argued that suing the Claimant’s solicitors is abusive.  Assessed objectively in the circumstances of this case, particularly the above points made about damages and injunctions, he argued that the joinder is mischievous: it is designed to sew friction between the Claimant and its lawyers and to distract the latter by causing them to worry about their own exposure.  Furthermore, this objective assessment is confirmed by the evidence served here.  Mr Chapman directly challenged the Defendants in his witness statement.  He said that the only sensible explanation for the joinder was an intent to create mischief.  Although Mr Maat put in a reply witness statement, this challenge was not addressed.  He did not put forward any other reason why the joinder was being pursued nor did he explain how it would benefit the Defendants.  
43.	Mr Hill’s response was to say that, although the Claimant is good for the damages and probably will be at the trial, the Defendants are entitled to select who they want to enforce a damages judgment against.  As far as the allegation of mischief is concerned, he argued that Mr Maat was under no obligation to serve evidence on this issue. It is an issue which has to be assessed objectively. Taken as a whole, there is insufficient here to suggest any motive other than a desire by the Defendants to pursue their legal rights.  
44.	On the last point, it seems to me that “mischief” may be too strong a word.  However, on balance, it is likely that the major or only real purpose of the attempted joinder of Laytons is to retaliate, which is unobjectionable, and to make Laytons and their relationship with the Claimant uncomfortable.  The latter is an illegitimate purpose of the counterclaim. This is the sort of issue on which it would be appropriate to exercise proportionate case management powers.  Had Laytons already been parties to these proceedings, I would have had to consider carefully whether, in all the circumstances, it would be appropriate to stay the threats claim against them.  As it is, they are not yet parties and, taking into account Mr Edenborough’s arguments set out above, it seems to me appropriate to refuse to allow them to be joined in the action.  
45.	This is not an end of the matter.  A refusal to allow a joinder does not prevent the Defendants from commencing separate proceedings against Laytons.  I am not attempting to prevent them doing so.  However, they will only need such proceedings if they succeed against the Claimant and, for example, unexpectedly it fails to meet any order for damages.  Although they will retain the right to commence separate proceedings, I hope they will not do so unless either the need arises, in the sense set out above, or perhaps the imminent expiry of a limitation period requires them to preserve their position.  If, notwithstanding this judgment, the Defendants decide to launch separate proceedings against Laytons, it may be expected the Claimant will apply to stay them.  No doubt, in deciding whether to accede to such an application, the court will bear this judgment in mind.
46.	In the result, the Claimant fails on its application to strike out the threats counterclaim and the Defendants fail on their application to join Laytons.