The Court of Justice of the EU (CJEU) recently held that the obligations on service providers to prevent their service users infringing intellectual property (IP) rights apply to market-hall operators as well as the providers of online services.

The facts

REACT is a not-for-profit anti-counterfeiting network. It raised a claim in the Czech courts against Delta Center, a tenant of The Prague Market. Delta was subletting market stalls to third-party traders, who in turn were selling goods that infringed trademarks belonging to REACT’s members.

Directive 2004/48 on the enforcement of intellectual property rights (the Enforcement Directive) states that protective measures should be available against an intermediary whose service is being used by third parties to infringe IP rights. European case law has confirmed that an intermediary of an online marketplace may subject to an injunction. However, the Czech Supreme Court referred the claim to the CJEU as it was unclear whether the provider of a ‘bricks and mortar’ service (i.e. a landlord of a shopping centre) should also be subject to an injunction.

What was the CJEU asked to consider?

The CJEU was asked:

  1. Is an operator who lets or sublets market stalls to third parties an intermediary for the purpose of the Enforcement Directive?
  2. Are the conditions for an injunction the same for market-hall operators as online service providers?

The decision

The court held that an operator who lets or sublets marketplaces to third parties allowing them to sell counterfeit branded goods is an intermediary in terms of the Enforcement Directive. Protective measures are thus available against the market operator regardless of their own culpability.

The broad purpose of the Enforcement Directive is to ensure a robust system of protection across the single market. To this end, the court found that it makes no difference whether the marketplace is online or physical. The conditions for an injunction against a market-hall operator are the same as an injunction against an online service provider. It must be effective and dissuasive as well as equitable and proportionate. The injunction should thus respect the balance between the protection of rights and the promotion of legitimate trade.

What do we take from this case?

The court acknowledged that a market operator cannot be expected to oversee all the actions of its service users. However, if a service user infringes IP rights, the court may compel the market operator to immediately halt the infringement and take steps to prevent it from reoccurring. Therefore, market operators should be proactive in monitoring the activities of their service users. The risk is that otherwise, the market operator will find themselves in court proceedings.