In the CJEU decision in L’Oréal SA v eBay International AG [1], it was held that trade mark owners (in addition to copyright owners) can seek an injunction against service providers who know that another person is using their service for an infringing activity. It has this month been confirmed by the Court of Appeal that this applies to infringements occurring in the UK, in an action brought by the luxury brand owner, Richemont SA, against the UK’s largest internet service providers (“ISPs”) [2].

The day after the Court of Appeal handed down its decision, the CJEU made its ruling in Tommy Hilfiger LLC v Delta Center [3], further extending the scope of an intermediary ‘service provider’ to those providing a physical marketplace (such as a market stall) for infringers, instead of an online forum for parties committing acts of infringement.

Cartier III

By way of background, Richemont SA, the owner of luxury brands including Cartier and Montblanc, had previously issued an application seeking orders for website-blocking injunctions against the five main ISPs in the UK (having between them a 95% share of the UK market), in order to combat online traders selling counterfeit goods which infringed their trade mark rights (“Cartier I”). The ISPs defended the initial application, a subsequent application (“Cartier II”), and then appealed against the Cartier I decision, one of their primary grounds of appeal being that the UK courts had no jurisdiction to grant intermediary injunctions in respect of trade mark infringement.

Since the introduction of s.97A Copyright, Designs and Patents Act 1988, which implements part of the EU Information Society Directive 2001/29/EC (the “InfoSoc Directive”), UK copyright holders have been able to seek website-blocking injunctions against ISPs being used to commit acts of infringement. Such orders have been granted against websites making infringing content available, such as unauthorised copies of films, music and sports broadcasts.

This principle was extended in the CJEU decision of L’Oréal SA v eBay International, where the CJEU laid down guidelines for instances where trade mark owners could enforce their rights against websites selling infringing products by obtaining an injunction against ISPs as intermediaries, under Article 11 Directive 2004/48/EC (the “Enforcement Directive”), the third sentence of which reads as follows:

“Member States shall also 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...”

However, there was still uncertainty as to whether this applied in the UK, as the third sentence of Article 11 Enforcement Directive was not transposed with the rest of the Directive into UK law, e.g. by incorporation into the Trade Marks Act 1994.

In giving its decision, the Court of Appeal definitively stated that UK courts have the jurisdiction to grant website-blocking injunction orders. The principle explored in Marleasing [4] dictated that the Court was obliged to apply national law, so far as possible, to achieve the purpose of Article 11 Enforcement Directive. The Court concluded that they had the power to grant such injunctions pursuant to s.37(1) of the Senior Courts Act 1981. Despite being a somewhat novel injunction to the UK courts,“the courts have shown themselves ready to adapt to new circumstances by developing their practice in relation to the grant of injunctions where it is necessary and appropriate to do so to avoid injustice”.

(i) Thresholds

The decision also confirmed the requirements which have to be met before an order for such an injunction will be granted.

  1. The ISPs must be intermediaries within the meaning of the third sentence of Article 11.
  2. The users or the operators of the website must be infringing the claimant's trade marks.
  3. The users or the operators of the website must use the services of the ISPs.
  4. The ISPs must have actual knowledge of this.

As regards ‘actual knowledge’, the ISP must have been notified of the infringing use. Here, the ISPs were notified ahead of the application by email attaching schedules of the trade marks and records showing the test purchases made from the infringing websites, and by the application for the orders themselves. Although there is some suggestion that the application on its own would have been sufficient to provide the ISPs with actual knowledge, it is better practice to notify ahead of the application (if only so that this can be relied upon as part of the application).

The ISPs’ arguments that the threshold requirements (particularly the third requirement) were not fulfilled, were dismissed. The Court held that an ISP is intrinsically involved in a trade mark infringement over the internet between one of its customers and a third party, because it makes the infringement possible by transmitting the website of the infringing customer to the public.

The Court of Appeal also confirmed that the injunction must (i) be necessary, (ii) be effective, (iii) be dissuasive, (iv) not be unnecessarily complicated or costly, (v) avoid barriers to legitimate trade, (vi) be fair and equitable, and strike a "fair balance" between the applicable fundamental rights, and (vii) must be proportionate.

A few of these points bear further examination.

In relation to the second principle of effectiveness, the Court held that an applicant need not show the injunction is likely to reduce the overall level of infringement of its trade marks. The applicant need simply demonstrate that it will mostly stop a particular source of infringement. The Court also accepted that an injunction would be less likely to be proportionate the greater the number of alternative infringing websites which were equally as accessible and appealing (referred to as ‘substitutability’).

As regards the fourth principle, the Court discussed at length who should bear the associated costs of the injunction, concluding the applicant should bear the costs of the application, but that the ISP should pay for the costs of implementing the injunction. The costs of enforcing the injunction were not held to be too onerous on the ISPs and were considered to be a part of the operating costs of their business, although Lord Justice Briggs dissented on this point.

The first to sixth principles are, in practice, considered when determining proportionality. In the Cartier I decision, Arnold J concluded:

“the key question on proportionality is whether the likely costs burden on the ISPs is justified by the likely efficacy of the blocking measures and the consequent benefit to Richemont having regard to the alternative measures which are available to Richemont and to the substitutability of the Target [infringing] Websites.”

When considering proportionality on the whole, the availability of alternative measures must be considered, for example taking action against the website operators, or sending takedown requests to the website hosts. In this case all of the alternative methods were considered ultimately less effective and economical to carry out.

The Court of Appeal also approved Arnold J’s safeguards against abuse of the orders in Cartier I, whereby the order must:

  1. Permit the ISP to apply to discharge or vary the order upon a change of circumstances, including in respect of the costs and the effectiveness of the blocking measures in place from time to time.
  2. Permit the infringing websites to apply to discharge or vary the order.
  3. Permit affected ISP subscribers to apply to discharge or vary the order.
  4. Have the blocked website display information on who obtained the blocking order, and inform affected users of their rights to apply to discharge or vary the order.
  5. Not be indefinite, and include a ‘sunset clause’.

Comments

Although Richemont was successful in obtaining the website-blocking injunction orders sought in these circumstances and this decision has confirmed their availability in the UK for both copyright and trade mark infringement cases where the thresholds are met, the grant of such injunctions will be highly dependent on the suitability of the injunction based on the principles, and thoroughly considered within the factual matrix presented to the court. There appears to be a sympathy with right-holders where the thresholds are met, but it is likely that the ISPs – as the frequent defendants in these actions – will likely become savvy to the defensive strategies they should use in these type of proceedings, meaning securing an injunction of this nature could become more difficult in the future.

Extension of intermediary injunctions: Tommy Hilfiger v Delta Center 

No sooner had the Court of Appeal clarified that website-blocking injunctions against intermediaries were available to trade mark owners in the UK, the CJEU took the concept of intermediaries under Article 11 Enforcement Directive further.

Tommy Hilfiger and other designer brands had discovered that products were being supplied in the ‘Pražská tržnice’ (Prague Market Halls), of which Delta Center was the tenant who sublet the stalls selling the infringing goods. They applied to the Czech courts for an injunction to stop Delta Center from letting stalls to those traders who were infringing their trade marks. The Czech Supreme Court referred the question of whether (and on what basis) it was possible to order the operator of a physical market place to take measures to stop its tenants from committing trade mark infringement to the CJEU.

The CJEU held that it was irrelevant for the purposes of Article 11 Enforcement Directive whether the infringing trader was operating in an online or a physical marketplace, and that the considerations for granting such an injunction should be applied in the same manner also (as laid down in L’Oréal SA v eBay International). The CJEU stated that Delta Center was clearly an ‘intermediary’, as it facilitated the infringing traders by subletting them a marketplace stall from which the counterfeit goods were sold.

The principles to be considered when granting an order echo those in Cartier III, being that the injunction must adhere to the principles of proportionality, and, in particular (i) be effective and dissuasive; (ii) be equitable and proportionate (and therefore not be excessively expensive or create barriers to legitimate trade); and (iii) not require the intermediary to exercise general and permanent oversight over its customers (which is actually the fourth threshold test in Cartier). It is interesting to note, however, that the intermediary may also be forced to take measures which contribute to avoiding new infringements of the same nature by the same market-trader.

Comments

As usual, the CJEU did not apply the principles to the case before it, but instead referred it back to the Czech Supreme Court for it to apply the ruling to the facts. However, it is clear that this is an important development and a widening of how the term ‘intermediary’ will be interpreted in the future. The Czech courts had suggested that potentially, for example, might an electricity or other utility supplier be considered an intermediary, as a service provider? The CJEU did not answer the hypothetical question, but clearly this expansion might have some interesting results.

It will also be interesting to see how the Czech courts practically implement and make the orders for what action the intermediary must take in order to stop the infringement and avoid new infringements by the same market-trader. This may be more straightforward in instances where a stall-holder sells exclusively infringing goods in one location, but practically enforcing this ruling against larger operations at various sites with both infringing and non-infringing activities could prove more complicated, and costly.