The Supreme Court has ruled that trade mark owners should indemnify ISPs for the costs incurred in blocking access to websites that infringe their marks. The decision, in Cartier International v BT & Anor, reverses the lower courts' rulings that these costs should be picked up by ISPs. However, the indemnity must be limited to reasonable compliance costs. The ruling should not therefore deter brand owners from applying for blocking orders in appropriate cases or detract from Cartier's overall success in establishing a new right and valuable method of online enforcement.
Why is this case important for trade mark owners?
Blocking injunctions against ISPs are now a reasonably established part of the legal online landscape. However, until recently, they had only been used to block access to material infringing copyright works such as illegal downloads of films and music. This case was the first in which the courts had been asked to order ISPs to block access to sites infringing trade marks by selling counterfeit goods online. It is now clear that such orders are available to trade mark owners wishing to enforce their registered rights, the ISPs having been refused permission to appeal on the substance earlier this year.
This is a major step forward. It will give brand owners another "string to their bow" in tackling the trade in counterfeit goods online. This is particularly so where more conventional methods of enforcement, such as directly threatening and litigating against website operators and hosts, are less effective. Individuals behind infringing websites are often untraceable or located outside of the jurisdiction of the English Courts and do not comply with requests or court orders. Website operators can easily change hosts if a previous host removes their site, which can lead to infringing websites resurfacing in different locations again and again. The number of "target" websites infringing a brand owner's rights can also run into the hundreds or thousands (Cartier identified some 46,000 in this case), so taking action against all of them collectively, rather than individually, can be more cost effective. Together, the five main ISPs account for about 95% of the UK broadband market and so blocking access to infringing sites via these ISPs can be more effective and have a significant deterrent effect on consumers and website operators.
While brand owners will have to indemnify ISPs for the cost of implementing any blocking injunction granted to them, there will be many situations where this should not outweigh the benefits of obtaining one. Furthermore, it is only the cost of implementing the order and updating the scope of the block (as well as any costs and liabilities incurred if the block malfunctions) that will be borne by brand owners. The cost of acquiring and managing the necessary hardware and software for blocking remains with the ISPs. According to the Court, the costs payable by brand owners are "modest" in practice and they are also subject to an overall requirement to be "reasonable".
In this case, the ISPs resisted Cartier's successful application for a blocking injunction (because it was a test case) and have thus been ordered to pay the costs of the action itself. ISPs are likely to consent to such applications in future. They will still need to proceed via the court because of the regulatory restrictions imposed on ISPs preventing interference in network communications. However, such actions should largely be procedural, helping to keep costs down, an important factor given that these costs are also borne by brand owners.
On what basis are blocking injunctions available in trade mark cases?
There is an express statutory provision in the Copyright, Designs and Patents Act 1988 giving UK Courts power to grant injunctions against ISPs where they have actual knowledge of another person using their service to infringe copyright, which implements an equivalent provision in the Information Society Directive. A total of 17 such orders have now been granted prohibiting public online access to a variety of websites providing infringing content including illegal downloads of films and music, as well as illegal streaming of football matches. Whilst court orders are still required for these injunctions, they now proceed largely unopposed by ISPs.
There is no equivalent express statutory provision for such injunctions in the context of counterfeit products sold on websites, which generally amount to trade mark – not copyright – infringement. However, the High Court and Court of Appeal in this case relied on the discretion afforded to the Court under section 37(1) of the Senior Courts Act 1981 to grant an injunction where it appears "just and convenient to do so". This is consistent with the provisions of the EU Enforcement Directive (see Article 11) which provides that rights holders should have the possibility of applying for an injunction against an intermediary whose services are used by a third party to infringe the right holder's Intellectual property.
What are the criteria for obtaining blocking injunctions in trade mark cases?
In order to obtain a blocking injunction, certain threshold conditions must be met:
- the ISPs must be intermediaries;
- the operators of the target websites must be infringing the brand owner's trade mark (or copyright, as appropriate);
- the operators of the target websites must use the ISPs' services to infringe; and
- the ISPs must have knowledge of this.
If these thresholds are met, various principles must then be taken into account when considering whether to grant the blocking injunction. In particular, the injunction must be necessary, effective, proportionate, dissuasive and not unnecessarily complicated or costly. It must also avoid barriers to legitimate trade and be fair and equitable. Where the focus of a website is offering counterfeit goods for sale, these criteria will normally be met. However, where a website also offers legitimate goods for sale and only specific pages of a website are offering counterfeits, they might not be depending on the particular facts of the case and the technical capabilities of the ISPs involved, which differ from ISP to ISP.
Why did the Supreme Court hold that brand owners should pay bear the costs?
The Supreme Court gave three main reasons. First, ISPs are not themselves guilty of any infringement, even in the absence of any safe harbour protections. They are not even permitted, under EU law, to monitor websites. They are in the position of "innocent intermediaries". In other areas of law – such as the grant of Norwich Pharmacal Orders - such intermediaries are not required to bear the cost of assisting the person wronged. The Court said there was no reason to depart from that principle in this case. Secondly, the Court said it does not matter what the various EU Directives or CJEU decisions say. Questions of procedure for blocking injunctions are matters for national, not EU, law. Lastly, it is wrong to suggest that "ISPs are indirectly benefiting from infringing websites" by gaining traffic to those sites. The cost of implementing blocking injunctions cannot therefore be viewed as "a cost of doing business". Rather, it is in the own commercial interests of brand owners to protect their rights and they should bear the cost of doing so.
The court emphasised that its ruling relates to ISPs only, commenting that different rules might apply to intermediaries engaged in caching and hosting as these operations involve a greater degree of participation in the infringement.
This ruling, which potentially also has implications for copyright owners who apply for such orders, will mean that brand owners ultimately have to bear the cost of blocking online access to counterfeit and infringing products. However, as a whole, this case has established the new principle that blocking injunctions are available to trade mark, as well as copyright, owners. Applications for this type of blocking order should now, as long as they satisfy the tests involved, largely proceed unopposed by ISPs. Brand owners should therefore consider this new tool as part of their overall enforcement strategies.