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Protecting IP through private prosecutions

20/01/2015

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United Kingdom

Rights holders are often unaware of how effective criminal prosecutions (and in particular, private prosecutions) can be as a means of protecting IP.

Rights holders are often unaware of how effective criminal prosecutions (and in particular, private prosecutions) can be as a means of protecting IP.  While private prosecutions should not be used as a means of settling civil disputes over arguably legitimate activities, they offer a distinct alternative for dealing with clearly criminal behaviour that may not be adequately dealt with in the civil courts and offer costs protection, even where the defendant is acquitted.  Here we outline details of the types of offence that may be covered, some of the benefits unique to private prosecutions and some practical matters to bear in mind when considering whether to bring a private prosecution.

Outline

Budgets for public authorities have been cut to the bone and there is a limit to the number of cases they can prosecute.  Prosecutions for IP offences are a low priority for the CPS and are only one of a range of matters that Trading Standards must deal with.  Finding a state agency with the expertise and resources to bring a prosecution can be difficult.  Fortunately, the Prosecution of Offences Act 1985 allows anyone to bring a private prosecution.  While in the IP field this is most commonly done by trade bodies such as the BPI and FACT, private companies can and sometimes do make use of the right.

When to use

The most common offences are those under s.107 of the Copyright, Designs and Patents Act 1988 (making/importing/possessing/distributing etc. infringing copies of copyrighted work without licence of the copyright owner), s.92 of the Trade Marks Act 1994 (unauthorised use of trademark in relation to goods), and at common law (conspiracy to defraud).  In general, where an individual acts breaches IP rights with a view to cause gain for themselves or loss for another, they may be guilty of an offence.

The courts have made clear that prosecutions are inappropriate to deal with matters that might more properly be settled by civil litigation.  If there is a legitimate debate over fair use then a prosecution is likely to be inappropriate; prosecutions will only be appropriate in clear cases of criminality.  

Benefits

Costs

Provided that they act in good faith, private prosecutors are entitled to recover the reasonable costs of both investigation and prosecution from the government, even if the defendant is acquitted.  It is difficult to overstate the importance of this ability to recoup costs; it provides the private prosecutor with substantial comfort about their exposure in terms of costs and avoids the situation where a defendant in a civil case cannot satisfy a costs order.  In addition, in certain circumstances the courts may make a compensation order to compensate victims of IP crime for quantifiable losses caused directly as a result of the breaches in question.

Deterrent

The deterrent effect of convictions can be substantial.  Serious infringements routinely result in prison sentences.  Convictions remain on offenders' records and are taken into account in the event of further offences.  IP offences are 'lifestyle' offences for the purposes of the Proceeds of Crime Act, meaning that those convicted of them are assumed to have a 'criminal lifestyle' for the purpose of confiscation proceedings.  This means that, unless the defendant can discharge this assumption, all of the offender's income for the preceding six years is assumed to have been obtained illegally and is forfeit to the Treasury on the appropriate application to the court for a confiscation order.  If an offender fails to satisfy a confiscation order, they may be liable to a further period of imprisonment.  Confiscation orders are global in nature and the state is commonly assisted in enforcing them by foreign authorities.  In this way, private prosecutions can impact on infringers in a way that civil proceedings cannot.  The potential deterrent to would-be counterfeiters etc. is self-evident.

Practical benefits

The practical benefits of undertaking a private prosecution rather than relying on state agencies are manifold.  Private organisations are not subject to the same resource limitations as state agencies.  They have the option of instructing solicitors and counsel with extensive experience in the IP arena (which state agencies often do not).  Private prosecutors retain control over the proceedings (including deciding what charges to bring) rather than being at the mercy of the prosecuting authority, including in relation to what pleas to accept.  In some cases, private prosecutions may be concluded far more quickly than civil proceedings; once a summons is served on a defendant, they must appear at court within one month and enter a plea.  In strong cases, guilty pleas are common. 

Practicalities

While the CPS can take over and discontinue a private prosecution on the direction of the DPP/Attorney General, it will not do so if the case has a strong evidential foundation, where the prosecution is brought in good faith and where there are no countervailing reasons why the prosecution should not proceed in the public interest.

The police are unlikely to assist rights holders on the basis of mere suspicion of infringements. It is therefore important to ensure that, when contemplating bringing a private prosecution, rights holders initially conduct a thorough investigation themselves.   Once they are able to establish a prima facie case that there has been criminal infringement, they can approach the police to apply for search warrants, arrests, interview under caution etc.  Even in cases where rights holders are targeting those at the bottom of the chain, they may obtain valuable information that enables them subsequently to pursue those more directly responsible for infringements.  Such 'pyramid' approaches can lead to substantial success. 

It is important to confine prosecutions to strong cases.  The evidential threshold in criminal proceedings is higher than in civil proceedings: allegations must be proved beyond reasonable doubt rather than on the balance of probabilities.  Prosecuting a borderline case may result in acquittal, may see convictions overturned by the Court of Appeal and, perhaps most importantly, may leave the prosecutor unable to recover their costs since it could be argued that the prosecution was not brought in good faith.  Moreover, judges in the criminal courts are generally not experts in the field of IP.  Borderline cases may see them become bogged down in arguments over fair use which may prove to be a distraction from the core issues in the case.  In practical terms, judges are likely to be grateful to prosecutors for bringing well-evidenced and intelligible cases that can easily be comprehended by juries. 

While it is difficult to be prescriptive, the cost of investigating and prosecuting a case that results in a guilty plea can be in the region of £50,000; the cost of prosecuting a contested trial can be in the region of £250,000 or more.  As discussed above, these costs are recoverable.  Prosecutors need to be mindful that they have the same responsibilities as any state agency bringing a prosecution and will be held to the same high standards, particularly where there are questions over fairness to defendants.  They must ensure that they act in accordance with relevant CPS and other guidance on matters such as retaining unused material, disclosure, and the Code for Crown Prosecutors.

Parliament has long considered that IP rights are important and has passed legislation that criminalises infringement.  Rights holders should not fear enforcing their rights in the criminal courts.  Success in civil proceedings may only achieve pyrrhic victories if infringers are able to hide behind dissolved companies or where they leave the jurisdiction.  In cases where rights holders consider that they are clearly being cheated, they would be well-advised to consider whether they are able to establish prima facie evidence of criminality.  Obtaining specialist advice at an early stage will ensure that they are able to assess whether a prosecution may be appropriate and, if so, how to go about pursuing it.  They can then go after those responsible, protect their immediate rights and send a clear deterrent to others who may think that IP infringement is a soft option. 

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