The Court of Justice of the European Union (CJEU) recently confirmed that the ability of rightholders to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right does not apply only in the online environment but extends to the physical world and can be used for example against a landlord who is letting sales points in a market hall.
The relevant judgment, which was handed down in C-494/15, Tommy Hilfiger Licensing LLC and others versus Delta Center a.s., clarified that an operator who provides services to third parties relating to the letting or subletting of pitches in a marketplace, thanks to which such third parties have access to that marketplace and offer for sale in that marketplace counterfeit branded products, necessarily falls within the concept of an 'intermediary whose services are being used by a third party to infringe an intellectual property right' within the meaning of the so-called Enforcement Directive. Such operator may therefore be subject to an injunction, provided that the injunction is effective, dissuasive, equitable and proportionate, as set out by the Court in its L´Oréal judgment.
1.1 Factual Background
Delta Center is the tenant of a marketplace known as 'Pražská tržnice' (Prague market halls) and sublets various sales areas within the market halls to traders. The applicants, who manufacture and distribute brand products, established that certain traders were selling counterfeits of their goods in the Prague market halls.
1.2 Legal Background
Tommy Hilfiger and other applicants sued Delta Center and sought inter alia an injunction which would prohibit Delta Center from concluding or extending rental contracts for sales areas in the Prague market halls with persons who were found by judicial or administrative authorities to have infringed the trademarks of the applicants. The Municipal Court in Prague as the court of the first instance dismissed the application for an injunction and the High Court in Prague as the appellate court confirmed the first-instance decision. The applicants brought the case before the Supreme Court of the Czech Republic which referred the case to the CJEU to answer the following preliminary questions:
- Is a person with a lease of premises in a market, who provides stalls and pitches on which stalls may be placed to individual market traders for their use, an intermediary whose services are used by a third party to infringe an intellectual property right within the meaning of Article 11 of Directive 2004/48?
- Is it possible to impose on a person with a lease of premises in a market, who provides stalls and pitches on which stalls may be placed to individual market-traders for their use, measures as provided for in Article 11 of Directive 2004/48 under the same conditions as those formulated by the Court of Justice with regard to the imposition of measures on the operators of an online marketplace?
1.3 The CJEU decision
The CJEU stated that an operator who provides services to third parties relating to the letting or subletting of pitches in a marketplace, thanks to which they have access to that marketplace and offer for sale in that marketplace counterfeit branded products, must be considered an "intermediary whose services are being used by a third party to infringe an intellectual property right" within the meaning of Article 11 of the Enforcement Directive. The CJEU emphasized that it is irrelevant in this regard whether the provision of sales points concerns an online marketplace or a physical marketplace, because the scope of the Enforcement Directive is not limited to electronic commerce. According to the CJEU, limiting the possibility to issue injunctions against intermediaries to electronic marketplaces would substantially weaken the objective of the Enforcement Directive to ensure a high, equivalent and homogenous level of protection of intellectual property in the internal market.
The Court confirmed that the criteria for an injunction against an intermediary who provides services related to the letting of sales points in market halls are identical to those for injunctions that may be addressed to intermediaries in an online marketplace – namely, the injunctions must be effective, dissuasive, equitable and proportionate. They must not be excessively expensive, must not create barriers to legitimate trade and must not impose on the intermediary an obligation to exercise general and permanent oversight over its customers. The injunction can only be pronounced if it ensures a fair balance between the protection of intellectual property and the absence of obstacles to legitimate trade.
The decision discussed above has given intellectual property rightholders in the European Union further ammunition in their fight against infringers. It is reasonable to expect that the same reasoning by which the Court put the subletting of pitches in a market hall on the same level with services used by a third party to infringe an intellectual property right will eventually be applied to a landlord renting out a store to a tenant who sells counterfeit branded products. The ability to preclude the extension of the lease agreement or to force the landlord to terminate the lease as a result of the infringement of an intellectual property right by the tenant may prove a powerful weapon in the arsenal of rightholders trying to defend their intellectual property against counterfeiting.