Today, the Court of Appeal has handed down its much anticipated decision in the case of Cartier International AG and others v British Sky Broadcasting Ltd and others concerning website blocking orders in respect of sites selling counterfeit goods. In doing so, it has maintained the ability for rightsholders to obtain injunctions against third party internet service providers (“ISPs”): a valuable new route of enforcement for trade mark owners.

The appealed High Court judgment broke new ground by granting an order against third party ISPs requiring them to block access to various websites identified by the claimants (“Cartier”) as being used to sell goods infringing Cartier’s trade mark rights. Orders of this nature are now commonplace in the context of copyright infringement on the basis that the jurisdiction to make such orders is specifically provided for in UK legislation: section 97A of the Copyright, Designs and Patents Act (“CDPA”) (implementing Article 8(3) of the Information Society Directive). However, no such express provision is made in the national legislation in respect of trade mark infringement.

In 2014, the High Court held that the Court had the general jurisdiction to make such an order against a third party intermediary and further that, in the present case, it was proportionate to do so. The High Court also ordered that the costs of implementation should be borne by the ISPs.

The ISPs appealed all aspects of the judgment arguing that the Court did not have jurisdiction to make the order sought and that, even if it did, it should not have done so in the present case. They further argued that the costs of implementation (in contrast to cases under section 97A CDPA) should be for the account of rightsholders.

In today’s decision Lord Justice Kitchin gives the leading judgment in which he carefully analyses each element of the High Court judgment.

In doing so, the Court of Appeal upheld the prior decision of Mr Justice Arnold. In particular:

  • It agreed that, notwithstanding the fact that there was no equivalent to section 97A CDPA in the national trade mark legislation, the Court had the jurisdiction to grant an injunction against a third party intermediary by virtue of section 37(1) of the Senior Court Act 1981 or, in the alternative, that such a provision should be interpreted to grant the Court such jurisdiction in light of Article 11 of the IP Enforcement Directive which provides that “Member States shall…ensure that rightsholders 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”. While Lord Justice Kitchin acknowledged that the ISPs were not guilty of any wrongdoing, he noted that they were “inevitable and essential actors in [the] infringing activities”. To restrict the interpretation of the Court’s jurisdiction in a manner which would preclude it from awarding an injunction of the nature sought would “impose a straight jacket on the Court and its ability to exercise its equitable powers which is not warranted in principle”.
  • Lord Justice Kitchin agreed that the threshold conditions for granting an order of this nature should be the same as the conditions for granting a similar order under section 97A CDPA, namely that:
    • The defendants are intermediaries;   
    • The operators of the websites are infringing the claimants’ rights;   
    • The operators of the websites use the defendants’ services to do so; and   
    • The defendants have actual knowledge of this.

In the present case, the ISPs argued that their service was not being used to infringe on the basis that the substantive act of infringement, the supply of counterfeit goods, was performed by other means such as post or courier, in contrast to copyright cases where the work itself is transmitted using the ISPs’ services. However, Lord Justice Kitchin held that the ISPs’ services allowed their customers to access the offending material and this was sufficient to make them “inevitable actors” in the infringement.

  • The Court of Appeal agreed with the High Court in respect of the principles to be applied in considering whether to make a website blocking order. The relief must:
    • Be necessary;
    • Be effective;
    • Be dissuasive;
    • Not be unnecessarily complicated or costly;
    • Avoid barriers to legitimate trade;
    • Be fair and equitable and strike a fair balance between the applicable fundamental rights; and
    • Be proportionate.

However, the onus is not on the rightsholder to prove that a blocking order is the least onerous measure or that the remedy would be effective in reducing the overall level of infringement.

  • In the present case, these principles were satisfied. Of particular note, the Court noted that notice and takedown procedures which can be used against web hosts, as an alternative means of enforcement, would be “unlikely to achieve anything more than short-term disruption of the target websites” suggesting that it was believed that blocking orders would have a longer term effect.   
  • On the issue of costs, it was held that the position should not deviate from that which is applied in the context of section 97A CDPA cases, namely that while rightsholders should bear the cost of the court application, the ISPs should bear the costs of implementing the order. This cost should be borne by the ISPs as a “cost of carrying on the business” and, further, was “part of the price which ISPs must pay for the immunities which they enjoy” under the E-Commerce Directive. Interestingly, on this final point, there was a dissenting opinion from Lord Justice Briggs who drew an analogy with orders which are made against banks to disclose the state of a customer’s account for the purpose of tracing property misappropriated by a wrongdoer. In such cases, the applicant is required to bear the bank’s costs of implementation. Lord Justice Briggs considered that, while ISPs should bear the cost of designing the software necessary to implement a blocking order, the marginal cost of complying with any individual order should be borne by the rightsholder.

This decision will be gratefully received by rightsholders because such blocking injunctions represent a powerful tool in their armoury in the fight against the sale of counterfeit goods online. It is likely that such applications will be popular now that this test case has been concluded.

ISPs in contrast will have some significant and understandable concerns regarding the cost of implementing such orders. Recent studies indicate that the global value of internationally traded counterfeit and pirated goods is likely to be in the region of $1,000 billion. Cartier alone had identified some 240,000 website potentially infringing its trade mark rights. There is therefore a significant “floodgates” concern on the part of the ISPs. However, it is likely that the costs incurred by rightsholders in gathering evidence, making applications and monitoring the effects will serve to dissuade applications save for in the most egregious cases. This seems to have been the case in respect of section 97A cases.

Furthermore, the Court of Appeal has left some crumbs of comfort for the ISPs by holding that the cumulative cost of such applications will remain a relevant factor in deciding whether any future order is unnecessarily costly or disproportionate. Such factors should therefore be kept under review in any future applications.