This article first appeared in the August 2016 issue of PLC Magazine
Trade mark owners have been given a boost by the Court of Appeal’s decision to uphold the High Court’s landmark 2014 order requiring internet service providers (ISPs) to block access to websites selling counterfeit goods (Cartier International AG & others v British Sky Broadcasting Limited & others  EWCA Civ 658).
The decision will be of particular interest to brand owners that regularly tackle websites selling counterfeit goods from outside of the jurisdiction and also to ISPs, which will be forced to bear the costs of implementing website-blocking orders.
Richemont International SA owns a large number of UK registered trade marks, including for Cartier, Montblanc and other brands. In 2014, in order to deal with websites selling counterfeit goods into the UK, Richemont sought injunctions requiring the UK’s largest broadband providers (the ISPs) to implement technical measures that prevented their customers from accessing those websites. The High Court granted the injunctions and made its first ever website-blocking order to combat trade mark infringement and the sale of counterfeit goods ( EWHC 3354 (Ch); see News brief "Online counterfeits blocked: test case paves the way").
The ISPs appealed on the bases that:
- The court did not have jurisdiction to make the order.
- The threshold conditions for making the order were not met.
- The order granted was disproportionate.
Court of Appeal decision
The court rejected all of the ISPs’ arguments. The ISPs were also unsuccessful in persuading the court that brand owners, rather than the ISPs, should bear the costs of implementing the website-blocking orders from which they benefit.
Jurisdiction. The High Court had held that the court’s jurisdiction to grant a website-blocking order to prevent access to a website selling counterfeit goods comes from section 37(1) of the Senior Courts Act 1981 (section 37(1)), which confirms that the court can grant an injunction in all cases in which it appears to the court to be just and convenient to do so.
The High Court had to resort to this broad general principle because, unlike section 97A of the Copyright, Designs and Patents Act 1988, which implemented Article 8(3) of the Copyright Directive (2001/29/EC), there is no equivalent statutory provision for granting injunctions against intermediaries in the context of trade mark infringements (see box "Copyright-infringing websites").
The court agreed that the High Court has jurisdiction to make website-blocking orders under section 37(1), as interpreted in light of Article 11 of the Intellectual Property Rights Enforcement Directive (2004/48/EC) (Article 11). Among other things, Article 11 provides that EU member states must ensure that rights holders 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. Therefore, although the ISPs were not guilty of any wrongdoing, the court must adopt a flexible approach to granting injunctions to ensure that intellectual property rights are protected in the digital environment, in this case by ordering an injunction against an intermediary.
Threshold conditions. The court endorsed the following four threshold conditions that need to be met before the court can grant a website-blocking order under its discretion in section 37(1):
- The ISPs must be intermediaries within the meaning of Article 11.
- Either the users or the operators of the website must infringe the claimant’s trade marks.
- The users or the operators of the website must use the services of the ISPs.
- The ISPs must have actual knowledge of the infringing activity.
The ISPs submitted that the websites which were used to sell the counterfeit goods had not used the services of the ISPs to infringe the trade marks because, unlike with copyright infringing material which is delivered to users digitally, counterfeit goods are instead posted to the buyer once the transaction has been completed. The court rejected this, instead finding that the threshold conditions were satisfied because:
- Each of the target websites was directed to consumers in the UK.
- The ISPs were "essential actors" in the communications between the consumers in the UK and the operators of the websites selling counterfeit goods.
Proportionality and cost. The court then reviewed the factors to consider in assessing whether the injunction was proportionate. Those requirements are that the relief sought by the rights holder must: be necessary; be effective; be dissuasive; not be unnecessarily complicated or costly; avoid barriers to legitimate trade; be fair and equitable and strike a fair balance between the applicable fundamental rights; and be proportionate.
The focus of much of the argument before the court was on whether the rights holders or ISPs should bear the costs of implementing the website-blocking order. Those costs comprise the marginal costs of implementing each block and a proportion of the costs of the technical systems which enable the ISPs to block access to certain websites.
The court agreed with the High Court, by a majority of two to one, that all of those costs should be borne by the ISPs. Lord Justice Briggs gave a dissenting judgment expressing the view that the marginal costs of implementing website-blocking orders should be borne by the rights holders. This, he said, would be in line with the approach taken by the court in other situations where the so-called "victim" meets the expense of an innocent party complying with an equitable duty to assist them.
The key implication of this decision for brand owners is that the court clearly has jurisdiction to grant website-blocking orders to prevent access to counterfeit selling websites. The conditions that need to be met to grant such an order, and the factors that will be considered by the court in assessing whether the order sought is proportionate, are now very much settled.
Brand owners will also be encouraged by the confirmation that ISPs will bear the costs of implementing website-blocking orders. This means that, if the ISPs decide not to oppose future applications from brand owners for website-blocking orders, this useful remedy will become a particularly attractive one from a costs perspective.