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Groundless threats of legal proceedings

Date: 04 April 2012
Author: Joanne Martin
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When an IP conflict arises involving trade marks, patents, designs or copyright, often the first action on behalf of the complainant is to send a Letter of Demand.  Such letters typically set out:
 
  1. The alleged rights of the complainant
  2. Details of the offending action
  3. The actions available to the complainant to remedy the situation
  4. The demands made by the complainant
  5. The deadline for the demands to be met
The various IP legislation provide for action for groundless threats of legal proceedings.  This is an action by the threatened person against the complainant, where the threatened person believes that the complainant has no grounds for making the threat and where no legal proceedings are commenced by the complainant.  Actions for groundless threats do not occur frequently, notwithstanding that many Letters of Demand do not identify, with sufficient specificity, the rights of the complainant, and the demands made against the threatened person are often overreaching. 
 
The recent case of Bell v Steele (No 3) FCA 246 (16 March 2012) is a case in point.  The facts of this case involve an indigenous artist, Richard Bell who employed Tanya Steele to assist making the film “Blackfella’s Guide to New York”, in New York.  The film was completed and a trailer for the film posted online. Steele claimed copyright infringement against Bell and a gallery owner Mr Malini who was promoting the film in conjunction with an exhibition of Bell's paintings.
 
Bell filed a claim in the Australian Federal Court for groundless threat, claiming financial loss and damage to his artistic credibility and integrity.  The Judge determined:
 
  1. Threats of legal action were made by Steele
  2. The threats took no account of Australian legal principles
  3. Notwithstanding the threats, no legal action was commenced, nor did Steele make an appearance in response to the action for groundless threats
The Judge ordered Steele to pay Bell damages in the amount of $147,000 and Bell's legal costs in the amount of $22,224, on that basis that Steele never commenced proceedings against Bell, and the damages for the potential loss of sales of paintings and costs incurred by Bell arose from the unjustifiable threats made by Steele.
 
A claim for copyright infringement was also made against Malini, a gallery owner who uploaded a trailer relating to Mr Bell’s film on his website,  in support of an exhibition of Bell’s paintings in Australia.  On receipt of the Letter of Demand Malini removed the film trailer from the internet.  The action for groundless threats is an important safeguard where groundless threats are made against third parties, such as internet service providers or website owners who may wish to take the easiest route to avoid risk of infringement, without assessing the strength or otherwise of the complainant's claims. 
For further information on this subject, please contact Joanne Martin.
 
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