On 17 October 2014, Arnold J handed down his landmark judgment in Cartier, Montblanc and Richemont v BSkyB, BT, TalkTalk, EE and Virgin  EWHC 3354 (Ch). The claimants were successful in their application for orders requiring the leading UK internet service providers ("ISPs") to block access to websites selling counterfeit products. While such orders have been made against ISPs in respect of copyright works, this case is the first of its kind in Europe in the trade mark world.
- This test case provides trade mark owners with a powerful remedy to combat infringing websites, particularly those selling counterfeit goods, often from outside the jurisdiction in countries where enforcement may be difficult.
- Blocking orders may become the remedy of choice for trade mark owners due to their effectiveness over other available measures.
- ISPs shall bear the burden of financing the implementation of blocking orders, whilst trade mark owners bear the costs of notifying ISPs and the costs of any court applications.
- The success of applications for a blocking order will depend on the courts' assessment that the costs incurred by the ISPs for blocking the sites are proportionate to the effectiveness of the order sought.
- Showing that other less costly avenues have been explored prior to applying for a blocking order is necessary to help trade mark owners obtain such orders.
- There is a risk that ISPs see a surge of applications for blocking orders, thereby increasing their operating costs.
- The effectiveness of this type of order may be impeded if the infringing websites register an alternative domain name and/or change their IP address.
- It remains to be seen whether blocking orders will be made against ISPs for websites which sell infringing, rather than counterfeit goods.
- New safeguards have been introduced allowing non-parties to contest the orders and review their continued effect after a period.
The Claimants were all part of the Richemont group (collectively referred to as “Richemont”) who owns a large number of UK trade marks including for Cartier, Montblanc and Richemont (the “Trade Marks”).
Richemont sought orders requiring various ISPs to block access to six websites which advertise and sell counterfeit goods (“theInfringing Websites”) and were alleged by Richemont to infringe its Trade Marks. The defendants were the five main ISPs in the UK, namely Sky, BT, EE, TalkTalk and Virgin. The Infringing Websites included websites located at the following URLs: www.cartierlove2u.net and www.hotcartierwatch.com. The Infringing Websites were targeted at UK consumers, as they were written in English, displayed sterling prices and accepted and fulfilled orders from the UK.
Blocking orders under section 97A of the Copyright, Designs and Patents Act 1988 (“CDPA”)
Section 97A(1) CDPA provides the court with the power to grant an injunction against a service provider “where that service provider has actual knowledge of another person using their service to infringe copyright". UK courts have granted blocking orders in favour of film studios, record companies and the FA Premier League against ISPs in respect of copyright infringing websites. The Richemont case was the first of its kind, as it involved an attempt to block websites infringing trade marks rather than copyright, and there is no express statutory equivalent to section 97A for trade marks.
Jurisdiction of the UK Courts to grant blocking orders for trade mark infringing sites
Notwithstanding the fact that there was no equivalent in the field of trade marks, Arnold J concluded that the Court had jurisdiction under section 37 of the Senior Courts Act 1981 which gives the High Court power to grant an injunction where it appears just and convenient to do so. The Judge ruled that the UK Courts had the power to grant such injunction upon both a domestic and a European law interpretation of section 37.
Arnold J held that the Court's power to grant an injunction is unlimited provided the Court has jurisdiction over the defendant. The Judge specified that the Court's discretion was not limited to injunctions against infringers of the right.
The Judge held that once an ISP becomes aware that its services are being used by third parties for infringement (in this case the ISPs had been put on notice by Richemont), that ISP becomes subject to a duty to take proportionate measures to prevent or reduce such infringements.
Further, the Judge considered that the breadth of the Court’s jurisdiction under section 37(1) and the fact that the jurisdiction can be exercised in new ways were confirmed by the recent decision of the Court of Appeal in Samsung Electronics v Apple .
Finally, the Judge considered that the jurisdiction of the Court was supported on a European law level too. Relying on the CJEU case law, the Judge considered that section 37(1) could and should be interpreted in compliance with Article 11 of the Enforcement Directive 2004/48/EC (the "Enforcement Directive"), which provides that: "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…".
Threshold conditions for the exercise of the jurisdiction
Arnold J noted that Parliament had laid out a number of threshold conditions for granting an injunction and that recent case law in the context of blocking injunctions had established that four conditions should be satisfied:
- the defendants must be service providers (this was not in dispute here);
- the operator of the website must infringe Richemont's trade marks (there was no dispute about this here);
- users and/or operators of the website must use the defendants' services to carry out the infringement: the Judge held that the ISPs had an essential role in the infringements, since it was via the ISPs’ services that the advertisements and offers for sale are communicated to 95% of broadband users in the UK; and
- the defendants must have knowledge of the infringement: the Judge held that the ISPs had actual knowledge of the infringement as Richemont sent the ISPs emails regarding such infringements and they had been served with Richemont’s evidence in support of the application.
Principles under Article 3(1) and 3(2) of the Enforcement Directive
In addition to the threshold conditions applicable for the grant of an injunction, Articles 3(1) and 3(2) of the Enforcement Directive require the relief to be (i) necessary, (ii) effective, (iii) dissuasive, (iv) not unnecessarily complicated or costly, (v) avoiding barriers to legitimate trade, (vi) fair and equitable and (vii) proportionate. The Judge considered these principles in turn.
- the comparative importance of the rights engaged and the justifications for interfering with those rights
Arnold J highlighted that a blocking order addresses: (i) Richemont's right to curtail the infringing activities and the public in preventing trade mark infringement, in particular when counterfeiting was involved; and (ii) the ISPs' freedom to carry on business. Arnold J considered that Richemont had a legitimate interest in seeking to protect its marks and that although the ISPs may incur additional costs in implementing the orders, the ISPs' freedom to carry on business would not be affected as the ISPs already had the technology to implement such orders.
- the availability of alternative measures which are less onerous
Considering the proportionality of making a blocking order, Arnold J considered that no alternative remedy would be as effective.
First, the Judge noted that Richemont had sought to take action against the operators by sending cease and desist letters to the registrants of the domain names of the Infringing Websites, but that this remedy had failed as no response was obtained. The Judge further questioned the effectiveness of this remedy on the basis of the registrants giving addresses outside the UK (mostly in China), thereby causing enforcement issues, if proceedings were brought against the registrants.
Secondly, while the Judge considered that Richemont were open to criticism for not even having attempted to send a notice and take down letter to the hosts of the Infringing Websites, he concluded that this remedy would be unlikely to be effective to achieve anything "other than short-term disruption". Indeed the Judge considered that there was a significant risk of the website operators moving the website to a different host, and ultimately to one based offshore or in a non-Western jurisdiction, which did not respond to notice and takedown requests, thereby causing enforcement difficulties.
A third measure which Richemont could have adopted, but did not, was to ask the payment processors used by the Infringing Websites, such as Visa, MasterCard and Western Union, to suspend the merchant accounts. The Judge considered valid Richemont's arguments that although this method may have diminished the circulation of counterfeit goods, it ultimately left the offending website untouched and websites could shift to alternative payment methods anyway.
The fourth measure which Richemont could have adopted, but did not, was domain name seizure. The Judge considered this would not resolve the problem as the website operator could simply pick a new domain name and start again.
The Judge considered the fifth alternative measures of de-indexing the Infringing Websites was potentially "an important weapon in the armoury of the trade mark owner" as it has the effect of removing the website from the search engine’s search results. However, Richemont argued that there were a number of problems with this remedy, which the Judge agreed with: (i) a search engine provider is not willing to de-index entire websites without a court order; (ii) some search engine providers' policies suggest that de-indexing without a court order in respect of copyright infringement is possible but there is no equivalent policy for trade mark infringement allegations; and (iii) even if search engine providers de-index the URL or even the entire website, it will remain accessible on the internet.
A final measure which Richemont did employ was that of customs seizure. The Judge noted two obvious problems with this remedy: (i) it only tackles the imports of the counterfeit goods and does not affect the Target Websites; and (ii) it is impossible for customs to inspect anything more than a small fraction of the large volume of small parcels that enter the country each day.
- Efficacy of the measures
Drawing on the evidence before him, Arnold J considered that orders blocking websites had proved effective in reducing use of those websites in the UK in the context of copyright infringement and considered that, if anything, such orders would probably be more effective in the trade mark infringement context.
Arnold J held that the orders sought by Richemont would have some dissuasive value, since they would result in preventing consumers who attempted to access the Infringing Websites from doing so and consumers would be informed of the reason for the websites being blocked.
Following his judgment in 20C Fox v BT (No 2), Arnold J considered that Richemont should pay the costs of the application but that the ISPs should generally bear the costs of implementation, as part of the costs of carrying on business in this sector.
- Impact on lawful users
The Judge considered the impact on users minimal as he considered that it ought to be possible to target the blocking so that lawful users were not adversely affected by it.
The Judge accepted the ISPs's contention that other websites were highly substitutable for the Infringing Websites and that consumers were very likely to turn to other websites.
Overall assessment of proportionality
The Judge assessed proportionality, taking into account whether the likely costs burden on the ISPs was justified by the likely efficacy of the blocking measures and associated benefit to Richemont, taking into account alternative measure available to Richemont and the substitutability of the Infringing Websites. The Judge concluded "after some hesitation", that the cost burden on the ISPs was justified.
Safeguards against abuse
Arnold J decided to make the orders substantially in the form sought by Richemont, with the addition of two safeguards: (i) the order should identify the parties which obtained the order and state that affected users have the right to apply to the Court to discharge the order; and (ii) a "sunset clause", under which the orders cease to have effect after a defined period (Arnold J indicated a provisional period of 2 years), should be included in the orders.