Correspondence between parties in dispute is often marked “without prejudice”, but what does this actually mean?
A patent, registered or unregistered design, copyright, or trademark is a legal right which can be used in Court to prevent another person from taking advantage of your intellectual creation. From reading news reports of large companies engaging in high-profile and extremely expensive litigation, you might be forgiven for believing that this is the normal way in which intellectual property rights are enforced. In practice though, it is usually preferable to resolve a dispute quickly and cheaply, without involving the courts, so that normal business can resume. Very often the parties in dispute, having settled their differences, continue with a mutually beneficial trading relationship. Most allegations of infringement are therefore resolved by negotiation, and courts hear only a small fraction of disputes.
The possibility of court action, backed by strong legal rights, is however an important part of negotiations. As a rights holder, your main bargaining chip is the threat that, if the infringing party does not substantially cede to your demands, then a strong remedy is available to you in Court. It is therefore vital that, in making concessions in an attempt to bring the dispute to a swift and inexpensive conclusion, you do not harm your position should negotiations prove unsuccessful, necessitating court action. The “without prejudice” privilege allows for free negotiations by preventing concessions made during unsuccessful negotiations from being admitted as evidence in subsequent court proceedings.
The “without prejudice” rule is often misunderstood. Many people, perhaps having received a letter marked “without prejudice”, believe that by similarly marking their reply the privilege will apply to their correspondence as well. However, simply stating that a communication is privileged does not make it so. The substance of the communication must be that of a genuine attempt to bring the dispute to a conclusion, by making a concession to your previous position. Likewise, omitting to include the “without prejudice” label does not automatically mean that the rule does not apply, although it is good practice to be clear when you intend communications to be privileged. There is a risk that an ambiguous communication might be seen as an admission which cannot subsequently be denied in Court, rather than a without prejudice offer of settlement.
It is entirely possible for some parts of a letter to be “without prejudice”, and other parts of the same letter to be admissible in Court. However, in the interests of clarity, it is normally considered best practice to keep “open” correspondence separate from “without prejudice” offers.
If an infringer proves unwilling to compromise during negotiations, and you subsequently achieve a successful result in Court, you will want to recover your legal expenses from the infringer. A proportion of those expenses will have been incurred in attempting to settle, in other words, during without prejudice negotiations. A “without prejudice” marking is therefore often qualified as “without prejudice save as to costs”. A communication to which this qualified privilege applies is unavailable as evidence until after the Court has made judgment, after which it can be used to determine the level of costs which can be recovered by the successful party. When it comes to costs, a court is likely to be particularly unsympathetic to the party who stubbornly refuses to negotiate.
The “without prejudice” rule is designed to help parties to reach agreement quickly and without incurring major costs. If your intellectual property is being infringed or you are accused by another of infringing, a patent attorney can advise you on your position and help you to bring the dispute to a swift, favourable, and cost-effective conclusion.