In a recent decision, Tommy Hilfiger et al. v Delta Center (C-494/15), the Court of Justice of the European Union (CJEU) opened the door for injunctions against landlords that rent sales points to traders in counterfeit goods.

The CJEU held that landlords “whose services are being used by a third party to infringe an intellectual property right” can be considered intermediaries within the meaning of Article 11 of the Enforcement Directive (2004/48/EC).

This decision is not surprising. Indeed, operators of online marketplaces have been exposed to this risk for some time, since the CJEU’s L’Oréal v eBay (C-324/09) judgment.

Facts

A tenant of a market hall in Prague, the Delta Center, sublet its space to market traders. 

Several trademark holders, including Tommy Hilfiger, Lacoste and Burberry, learned that counterfeit goods bearing their trademarks were being sold by these traders. They started proceedings against Delta Center in order to force the latter to stop renting to traders in counterfeit goods. 

The case ended up before the Czech Supreme Court, which held that the dispute should be settled by determining whether operators of physical marketplaces should be considered intermediaries within the meaning of Article 11 of the Enforcement Directive (as was the case for operators of online marketplaces in L’Oréal v eBay). The case was referred to the CJEU for preliminary ruling. 

Judgment

The CJEU held that the scope of the Enforcement Directive is not limited to e-commerce and therefore that the L’Oréal v eBay holding applies to physical marketplaces as well.

An operator that lets or sublets market stalls to third parties, thereby allowing them to sell counterfeit goods, should be considered an intermediary within the meaning of the Enforcement Directive.

Consequently, the operator of a physical marketplace may be forced to put an end to infringements of intellectual property rights by market traders and to take measures to prevent new infringements.

Consequences

Brand owners will undoubtedly be pleased by this new option to target middle men when dealing with infringers.

Landlords, on the other hand, face additional risks. This does not mean, however, that they must now ensure permanent surveillance of their tenants’ activities as this would be contrary to the requirement that an injunction be equitable and proportionate.

However, landlords may be forced to contribute to the avoidance of new infringements of the same nature by the same market trader. The national courts will determine what this entails, taking care to ensure a fair balance between the protection of IP rights and the avoidance of obstacles to legitimate trade.

What is certain, however, is that landlords and operators of physical commercial premises can no longer turn a blind eye if they learn that their tenants are selling counterfeit goods. Failure to act can result in the imposition of an injunction. Under such circumstances, they must take the measures necessary to avoid further infringements, which may include termination of the their lease agreement.