14 August, 2016
The Court of Appeal has confirmed that the English courts have jurisdiction to make blocking orders against internet service providers ("ISPs") in the trade mark context, as well as in respect of copyright works. In Cartier, Montblanc and Richemont v BSkyB, BT, TalkTalk, EE and Virgin [2016], the Court of Appeal on 6 July 2016 upheld Arnold J's orders that the ISPs block access to certain target website offering counterfeit products.
Business impact
The decision is good news for trade mark proprietors seeking a powerful and effective remedy to stop website operators infringing their trade marks and clarifies that such orders are not only available to copyright owners. This decision comes after the Brexit referendum and confirms that until the legal framework changes, local laws shall continue to be interpreted in light of the relevant EU legislation.
The Court of Appeal has confirmed that Section 37(1) Senior Courts Act 1981 (SCA) and Article 11 Enforcement Directive independently provide English courts with jurisdiction to grant injunctive relief against ISPs in the context of trade mark infringement.
National law is to be read in compliance with the relevant European Directive, even if that Directive post-dates the national legislation in question.
T establish use of the ISPs' services, it is sufficient that the ISPs enable the communication to the public of the offers for counterfeit goods and allow consumers to access in the UK the infringing websites.
Evidence of customers accessing the infringing websites is not needed and it is sufficient that there is real risk that they be accessed in future.
Effectiveness of the blocking orders sought is assessed according to whether the blocking orders would make access to the target websites more difficult: the basis for assessment is not whether customers may use the ISPs' services to access other infringing websites.
However, blocking orders are likely to be seen as less proportionate, if there are many other infringing websites accessible to customers.
In most circumstances, ISPs will be liable to pay the costs of blocking the infringing sites.
Background
The background to the dispute is set out in our last e-bulletin covering the first instance decision (see here).
In summary, the Claimants, who were all part of the Richemont group (collectively referred to here as "Richemont") had successfully obtained orders at first instance that various ISPs block access to six websites advertising and selling counterfeit goods (the "Infringing Websites").
The ISPs appealed the judgment orders made by Arnold J at first instance.
Jurisdiction
The ISPs contended that the court at first instance had no jurisdiction to grant the orders that were made.
The relevant provisions are section 37 SCA, which gives the High Court the power to grant an injunction where it appears just and convenient to do so and Article 11 of European Directive 2004/48/EC on the enforcement of intellectual property rights (the "Enforcement Directive), which provides that Member States shall ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right.
The ISPs considered that the trial judge had erred in his findings as the ISPs were innocent. Further, the ISPs contended that it was not possible to read section 37 SCA in compliance with Article 11 Enforcement Directive, since Article 11 formed part of a later legal instrument.
The Court of Appeal (Kitchin LJ giving the leading judgment) rejected the ISPs' arguments and decided that:
Injunctions under section 37(1) SCA are not limited against infringers of the rights in question and could apply to ISPs, who are "essential actors" in the infringing activities, since the Infringing Websites "need the services of the ISPs in order to offer for sale and sell their counterfeit goods to consumers in the United Kingdom".
Article 11 provides a further basis for seeking injunctions against ISPs whose services have been used to infringe a registered trade mark. The Court of Appeal based its finding on the decision of the Court of Justice of the European Union ("CJEU") who had ruled (in Case C-324/09 [2011]), in response to a preliminary question referred by Arnold J in L'Oréal SA v eBay International AG [2009], that domestic courts had jurisdiction by virtue of Article 11 to order injunctive relief against ISPs to bring to an end actual infringement and to prevent further infringement. Given that it was not contested that ISPs were intermediaries, Kitchin LJ considered that the English courts had jurisdiction to grant such relief where it was just and equitable to do so and subject to certain threshold conditions (see below).
Notwithstanding the Enforcement Directive being a later instrument to the SCA, it is well established that national law should be interpreted in light of the wording and purpose of the relevant European Directive.
Threshold conditions
At first instance, Arnold J established that the discretion of the court was not unlimited and was to be exercised in compliance with Article 11 Enforcement Directive and the terms of European Directive 2000/31/EC (the "E-Commerce Directive"). The trial judge established that four conditions need to be established: (1) ISPs were intermediaries; (2) users or operators of the Infringing Websites must be infringing the claimant's trade marks; (3) the ISPs' services are used to infringe; and (4) ISPs must have knowledge of this.
The ISPs contested Arnold J's decision as to the third condition regarding use of the ISPs' services to infringe. Firstly, the ISPs submitted that while guidance from the CJEU had been obtained in respect of copyright cases, no such guidance had been obtained in respect of trade mark cases and the trial judge had therefore conflated copyright cases with the present case.
The ISPs argued that the offending acts (offer and advertisements of counterfeit goods) were only complete when the offers and advertisements were uploaded to the host of the target websites. This line of argument was rejected by the Court of Appeal, who considered that use was established by virtue of the services of the ISPs allowing consumers in the UK to access the Infringing Websites and the advertisements and offers for counterfeit goods being communicated to the consumers in the UK through the services of the ISPs.
Further, the Court of Appeal rejected the ISPs' contention that the intermediary must be physically used to transmit protected materials as may be the case for copyright. The Court of Appeal considered that the wording of Article 11 was intended to ensure that holders of intellectual property rights other than copyright were able to seek injunctions against intermediaries whose services were being used by third parties.
Secondly, the ISPs contended that there was no evidence that the ISPs' services had been used to transmit offers or advertisements to customers in the UK. Kitchin LJ considered that evidence of customers accessing the Infringing Websites was not needed and that it was sufficient that there was a risk that the Infringing Websites would be accessed in future. The Court of Appeal considered that a judge was entitled to prevent this from happening as Article 11 was concerned with measures seeking to prevent infringement from occurring, rather than merely seeking to stop infringements.
Principles to be applied
The Court of Appeal upheld Arnold J's finding that relief was: (i) necessary; (ii) effective; (iii) dissuasive; (iv) not unnecessarily complicated or costly; (v) avoid barriers to legitimate trade; (vi) be fair and equitable; and (vii) strike a fair balance.
On effectiveness, the ISPs contended that the relevant question was whether users would continue to use the ISPs' services to access websites selling other infringing goods. The Court of Appeal rejected that argument and held that the CJEU in UPC v Constantin (Case C-314/12) had established that the relevant subject-matter to assess effectiveness was the activities of the operators of the target websites (rather than the activities of other websites) and that the measures must have the effect of making access to the particular target websites difficult to achieve and discourage users from accessing them. Kitchin LJ considered that it would be "absurd", if trade mark owners were asked to prove that relief would reduce the overall level of infringement. That said, the Court of Appeal recognised that a blocking order was likely to be less proportionate, if there were many alternate websites which were likely to be equally accessible to customers.
Costs
Arnold J at first instance had considered that the normal rule that the loser should pay the winner's costs should apply so that the ISPs would pay Richemont's costs of the application and the proceedings. The ISPs contested this finding and argued that costs should be treated as per costs in Norwich Pharmacal orders.
Kitchin LJ acknowledged the entitlement and legitimacy of the ISPs opposing Richemont's application and instructing solicitors and counsel. However, the Court of Appeal (Briggs LJ dissenting) considered that the trial judge had made no error in principle and upheld the finding that the matters did not justify a departure from the normal rule.
The Court of Appeal also decided that the ISPs should pay the costs of implementing the blocking orders, although it remarked that the costs being borne by intermediaries will be a "highly material consideration" in the assessment of proportionality of orders rightholders may seek.
Further Developments
It is noteworthy that the CJEU, in a decision of 7 July 2016 (C-494/115), extended the concept of "intermediary" under Article 11 to physical service providers who were tenants of market halls who sublet sales points to market traders, some of which used the sales points to see counterfeit goods.
The CJEU confirmed that the conditions applicable to injunctions against such providers of sales points were the same as those applicable to injunctions against online market place intermediaries.
For further information, please contact:
Sue Gilchrist, Partner, Herbert Smith Freehills
sue.gilchrist@hsf.com
