It has been a busy year on the blocking injunctions front, particularly for Fashion and Luxury companies. Just the day after the Court of Appeal decision in Cartier, the CJEU handed down its decision in the Tommy Hilfiger case, confirming that the operator of a physical marketplace is an intermediary under Enforcement Directive, similar to an online marketplace; (C-494/15 Tommy Hilfiger).

In a decision that has strengthened the rights of right holders but which may put landlords on alert, the CJEU has decided that the operator of a physical ('brick and mortar') marketplace is, similar to an online marketplace, an intermediary under Article 11 Enforcement Directive 2004/84/EC, and may therefore be forced to bring trade mark infringements committed by market traders to an end and/or take measures to prevent further infringements; (C-494/15 Tommy Hilfiger).

In its response to preliminary reference by the Czech Supreme Court, the CJEU has extended the application of the guidance in L'Oréal v eBay (C-324/09) from an online to an offline environment and appears to leave scope for other - yet unspecified - operators to be defined as 'intermediaries' within the ambit of Article 11.

Facts

The defendant in the proceedings was a tenant of a marketplace in Prague, who sublet spaces for stalls to market-traders who sold trade mark infringing products. The applicants in the underlying court proceedings, a group of owners of trade marks, applied to the Czech courts for an injunction to order the defendant to stop renting spaces to infringers.

The Czech Supreme Court decided to suspend the proceedings and seek guidance from the CJEU as to whether the CJEU's guidance in L'Oréal in relation to Article 11 which states that rightsholders should be able to apply for an injunction against intermediaries "whose services are used by a third party to infringe an intellectual property right" (L'Oréal v eBay), also applied to physical marketplaces.

The Case

The CJEU held that operators which provide a service to third parties relating to the letting or subletting of pitches in an "offline" (real world) marketplace, and which thus offers the possibility to those third parties of selling counterfeit products in that marketplace, must be classified as an 'intermediary' within the meaning of Article 11 of Directive 2004/48.

The CJEU thus applied the principles of its landmark decision in L'Oréal v eBay to physical marketplaces and ruled that not only the vendors but also the operator can be held to account for infringing activity taking place on its online marketplace.

The court explained that whether the provision of a sales point is within an online marketplace or a physical marketplace is irrelevant since the scope of Directive 2004/48 is not limited to electronic commerce and as a consequence, the operator of a physical marketplace may be forced to put an end to third party trade mark infringements committed by market-traders.

Furthermore, the judges held that legal injunctions issued by a judicial authority against an intermediary who provides a service of letting sales points in market halls are identical to those applicable to injunctions addressed to intermediaries in an online marketplace, as held in the L'Oréal case: they must be effective and dissuasive but must also be equitable and proportionate.

Comment

While the decision relates to counterfeits sold in market stalls, i.e. trade marks, its reasoning may equally be applicable in design and copyright infringement cases and may no be restricted to a marketplace situation. While the CJEU clarified that the L'Oréal criteria may be applied in online and offline environments, i.e. for electronic online marketplaces, as well as for physical market places, is not necessary for the defendant to maintain a "specific relationship" with those using the service or "provide a service other than the one which is used by the third party" in order to be held liable for the vendor's infringement of the intellectual property right. It is now up to the national courts in the EU member states to determine the concrete "equitable and proportionate" measures the landlords have to take to prevent further infringements. Going forward, landlords should make sure that the lease agreement allows to terminate the contract if the vendor sells counterfeits.

Further, the idea of landlord liability is not entirely new, as illustrated in the 2006 Silk Street Market decision by Beijing Higher People's Court (see http://www.wipo.int/wipo_magazine/en/2007/06/article_0006.html). In this landmark case, Baker & McKenzie represented a group of leading fashion brands against the landlord of the Xiushui Market, a major market in Beijing also known as the "Silk Market". In its judgement, the Chinese court held that trademark owners can hold the landlords of street markets liable for IP infringements if they provide premises to vendors known to be dealing counterfeits. The court confirmed that landlords must take prompt and effective measures to stop infringements of a certain vendor now and in the future after receiving notice of the violation. This procedure largely corresponds to the notice-and-take-down procedure applicable to online marketplaces. As a result of the decision of the CJEU, landlord liability is now also applicable in the EU.

The decision in full can be found here.