It is often argued that intellectual property rights create an imbalance of power that is open to abuse by rights holders. In an effort to counter this, section 202(1) of the Copyright Act 1968 (Cth) (Act) provides remedies for groundless threats of legal proceedings for copyright infringement. This article will discuss the elements that define a threat as “groundless” and the remedies available when such a threat is made.
Groundless threats under the Copyright Act
Section 202(1) of the Act states that where a person is threatened with a proceeding in respect of copyright infringement, they may bring an action for:
- a declaration to the effect that the threats are unjustifiable;
- an injunction against the continuance of the threats; and
- an award of such damages (if any) as they have sustained;
unless the person making the threat can satisfy the Court that the acts in respect of which the action was threatened constituted, or would constitute, an infringement of copyright.
Who can make the threat?
Pursuant to section 202(1) of the Act the person making the threat need not be the owner of the copyright or even an exclusive licensee.
How can the threat be made?
Under section 202(1) the threat may be by means of circulars, advertisements or otherwise, but must be aimed at a particular person, whether directly or indirectly, rather than a general warning: SW Hart & Co Pty Ltd v Edwards Hot Water Systems  WASC 130 (Hart Case). The words “or otherwise” have been given a wide interpretation and may extend to, for example, threats in an interview or correspondence.
Pursuant to section 202(2) of the Act, the mere notification of the existence of copyright does not constitute a threat, unless the notification is accompanied by words indicating that the threatener will commence legal proceedings against the alleged infringer if the alleged infringer engages in certain conduct: Hart Case.
It is no defence that the threats were made in good faith in the honest belief that the act complained of was an infringement of copyright: Hart Case.
What constitutes a “groundless” threat?
According to Crennan J in JMVB Enterprises Pty Ltd v Camoflag Pty Ltd  FCA 1474 at -, groundless threats for intellectual property in general are apparent when:
- the aggrieved party establishes that a threat has been made and received in Australia;
- the threat relates to an Australian intellectual property right;
- the language used in the threat directly or impliedly conveys to a reasonable person that the author of the threat intends to bring infringement proceedings against the person threatened; and
- once it is established that the threat has been made, it is prima facie unjustifiable, unless the person making it establishes that it was justified.
These points were built upon in the 2010 case Poche Engineering Australia Pty Ltd v Hitachi Construction Machinery (Australia) Pty Ltd & Anor (No 4)  FMCA 667 where Raphael FM stated at  that:
“An action for threats is an action created by statute … It is not an action found in the common law. Unless the threats which are claimed in the statement of claim to have been made are made in connection with an alleged breach of copyright they are not susceptible to an action.”
In that case the alleged threats were held to be made in respect of an alleged breach of confidentiality and not an infringement of copyright. Therefore, section 202 did not apply.
Can the person making the threat obtain relief?
Under section 202(4) of the Act, the person making the threat may, by way of counterclaim, apply for any relief to which they would be entitled in a separate action for infringement. The infringement can be of somebody else’s copyright, it is not limited to copyright owned by the person making the threat: Avel Pty Ltd v Multicoin Amusements Pty Ltd  HCA 58 (Avel Case). The person making the threat does, however, bear the onus of establishing the absence of a licence: Avel Case.
What relief can be claimed?
In Bell v Steele (No 3)  FCA 246, Bell, a successful artist, made a film in New York with the assistance of Steele. A trailer for the film was made to be displayed in art galleries and published on the internet. In correspondence to Bell, his solicitors and the Milani Gallery in Woolloongabba, Steele and her attorneys claimed that she was the owner of the copyright in the film and the trailer, as a consequence of which the trailer was removed from display by the gallery and from the internet, and also prevented from being shown as part of an exhibition touring the United States.
Collier J observed that a claim for damages arising from unjustified threats must be losses incurred as a direct result of the threats made, and not arising from anything else, such as rumours spreading about or negative comments made by persons not authorised by the defendant. Her Honour observed the following might be claimed:
- impacts upon the readiness of third parties to do business with the applicant;
- losses arising from threats to the applicant’s customers;
- lost sales or lost potential sales; and
- the cost to the applicant of instituting relief, such as a declaration, following receipt of the threat.
Her Honour awarded damages calculated by reference to the loss of sales of Bell’s paintings that would probably have resulted had his work on the film been properly publicised.
Copyright is a valuable asset, and it is therefore important to protect it from abuse by third parties. However, an overzealous or poorly thought out dispute can incur losses of both time and money. It is therefore best to consult a solicitor about how best to protect your intellectual property before making any threats which may give rise to an argument that an unjust threat has been made.
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Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013 | Mobile: 0419 726 535
This article is not legal advice. It is general comment only. You are instructed not to rely on the commentary unless you have consulted one of our Lawyers to ascertain how the law applies to your particular circumstances.