Court Of Appeal Upholds ISP Blocking Orders Against Counterfeit Websites

06 Jul, 2016

The Court of Appeal has upheld the High Court’s landmark 2014 decisions in Cartier [1] to grant an injunction against internet service providers which required them to block access to certain websites which sell counterfeit goods.

The claimants (together ‘Cartier’), are the owners of trade marks for CARTIER and MONTBLANC (used for luxury watches and pens respectively). The defendants are the UK’s five largest broadband providers (the ‘ISPs’). Cartier sought an injunction which required the ISPs to implement measures which prevented their users accessing certain websites which sold counterfeit goods to UK customers, thereby infringing Cartier’s trademarks. Such measures have become common in relation to copyright infringing websites in recent years, with applications for these orders now not opposed by the ISPs.

In its decision, the Court of Appeal dismissed the ISPs’ arguments that the court did not have jurisdiction to make such an order, that the threshold conditions for making the order were not met, and that the order granted by the High Court was disproportionate.

The ISPs also argued unsuccessfully that Cartier should bear the costs of implementing the blocking orders, not the ISPs.

Jurisdiction

The High Court decisions, given by Mr Justice Arnold, held that the jurisdiction to grant an injunction against the ISPs resided in section 37(1) of the Senior Courts Act, which confirms that the Court can grant an injunction “in all cases in which it appears to the court to be just and convenient to do so”.

It had been necessary to resort to this broad general principle because, unlike section 97A of the Copyright, Designs and Patents Act 1988 which implemented Article 8(3) of the Information Society Directive, there is no equivalent statutory provision for granting injunctions against intermediaries in the context of trade mark infringements.

Whilst taking a slightly different route to get there, the Court of Appeal agreed that the High Court had jurisdiction to make blocking orders under section 37(1) of the Senior Courts Act, as interpreted in light of Article 11 of the Enforcement Directive (which provides that member states shall ensure that rights holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an IP right). The court recognised that the ISPs are not guilty of any wrongdoing, and it rejected a submission that the power of the court is limited in certain circumstances. The decision demonstrates the UK’s flexible approach to granting injunctions to adapt to a changing world.

Threshold conditions

The Court of Appeal was also satisfied that the threshold conditions for making such a blocking order were satisfied in these circumstances.

Those threshold conditions are that the ISPs must be intermediaries within the meaning of Article 11; that either the users or the operators of the website must be infringing the claimant’s trademarks; that the users or the operators of the website must use the services of the ISPs; and that the ISPs must have actual knowledge of this.

The Court of Appeal rejected the ISPs’ submission that the target websites had not used the services of the ISPs to infringe the registered trademarks (primarily on the basis that, unlike with copyright infringing material which is delivered to users digitally, counterfeit goods are instead posted to the purchaser once the purchase has been made).

The Court of Appeal was satisfied that the threshold conditions were satisfied because: (i) each of the target websites was directed to consumers in the UK; and (ii) the ISPs  were “essential actors” in all of the communications between the consumers and the operators of the websites selling counterfeit goods.

Proportionality: who bears the cost?

The Court of Appeal then went on to consider whether it was proportionate to grant the injunction sought by Cartier, bearing in mind the requirements identified by the High Court that the relief must be necessary, effective, dissuasive, not 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.

The focus of much of the ISPs’ argument before the Court of Appeal was whether they should have to bear the costs of implementing the blocking order, rather than the rights holders who benefitted from it.

Those costs include both the marginal costs of implementing any particular order, and also a proportion of the capital costs of the existing technical systems which are needed. The Court of Appeal decided, by a majority of two to one, that those costs should be borne by the ISPs.

Lord Justice Briggs, in a dissenting judgement, stated that the marginal costs of implementing a blocking order should instead be borne by the rights holder, in line with the approach taken by the courts in other situations where compliance by an innocent party (here the ISPs) with an equitable duty to assist the victim of a wrongdoing (here the rights holder) should generally be at the victim’s expense.

Implications

This judgement clearly confirms the availability of blocking orders for trade mark owners, and this will undoubtedly become a useful tool in the armoury of many rights holders, particularly those in the luxury goods sector.

It will be interesting to see whether the ISPs take encouragement from the dissenting judgement of Lord Justice Briggs, and seek leave to appeal to the Supreme Court on the issue of who bears the costs of implementing blocking orders. This will be a particularly contentious issue if the Cartier decision opens the floodgates for other trade mark owners, and the costs of implementing blocking orders escalates greatly.

Written by Partner Jeremy Blum and Sean Ibbetson, Bristows LLP.

[1]Cartier International AG & others v British Sky Broadcasting Limited & others, [2014] EWHC 3354 (Ch), [2014] EWHC 3915 (Ch), and [2014] EWHC 3794 (Ch)

(Source: Bristows LLP)

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