March 2, 2015

Cartier International AG and others v British Sky Broadcasting Limited and others [2014] EWHC 3354 (Ch) (17 October 2014)

Introduction

Over the past few years there have been a number of cases in the UK where the court has, principally at the request of film studios and record companies, granted an injunctions against internet service providers (“ISPs”) requiring them to block access to websites which are involved in the infringement of copyright. Until now, similar blocking injunctions against ISPs had not been sought in respect of online infringements of trade marks. This was therefore a test case, and one of, if not the, first of its kind anywhere in the EU.

Background

The claimants are the owners of a number of UK registered trade marks for marks including: ‘CARTIER’ and ‘MONTBLANC’ (together, the “Trade Marks”). The defendants are the five main ISPs which operate in the UK, which between them have a market share of 95% of UK broadband users. The claimants applied for an injunction against each ISP to compel them to block, or at least impede, access to six websites, each of which which sold counterfeit goods which bear the Trade Marks (the “Websites”). Each of the Websites incorporated a brand name into its domain name and sold articles which were both counterfeit and of significantly lower quality than the genuine articles. Whilst some of the websites disclosed that they were selling replicas, others did not.

Arnold J set out five questions to be answered when deciding whether an injunction should be granted in this scenario: (i) does the Court have jurisdiction to make an order of the kind sought?; (ii) if the court has jurisdiction, what are the threshold conditions which must be satisfied?; (iii) are those conditions met in the present case?; (iv) if the conditions are satisfied, what are the principles to be applied in deciding whether or not to make such an order?; and (v) applying those principles, should such an order be made in the present case? This report will consider only the first of these five questions.

The Law

Article 8(3) of the EU Information Society Directive (2001/29/EC) mandates that Member States must ensure that rights holders are able to obtain injunctions against intermediaries (including ISPs) whose services are used by a third party to infringe copyright. This directive was transposed into UK law in 2003 (and resulted in the enactment of section 97A of the Copyright Designs and Patents Act 1988) and has resulted in a number of blocking orders being made against ISPs to prevent or impede access to websites which infringe copyright.

The EU Enforcement Directive (2004/48/EC), pursuant to the third sentence of Article 11, extends the obligations on Member States to ensure that injunctions must be available to rights holders where the services of intermediaries are used by third parties to infringe any intellectual property right. However, when the EU Enforcement Directive was implemented in the UK, the UK Government did not enact legislation to specifically implement this provision (as it did with Article 8(3) of the EU Information Society Directive).

The claimants brought the present action as a test case to establish whether it is possible to obtain blocking injunctions against ISPs in respect of websites which infringe trade marks in much the same terms as the orders previously made in respect of copyright infringement.

The Parties’ Contentions

The claimants argued that, despite the fact that a new statutory provision had not been enacted into UK law equivalent to section 97A of the CDPA to implement the third sentence of Article 11 of the EU Enforcement Directive, s.37(1) of the Senior Courts Act 1981, which provides that “The High Court may…grant an injunction…in all cases in which it appears to be just and convenient to do so” means that the court nonetheless had the power to order the injunction.  They contended that this was so on a purely domestic interpretation of this provision or failing that s.37(1) should be interpreted, in accordance with the Marleasing principle, to give effect to the third sentence of Article 11 of the Enforcement Directive.

The defendants maintained that absent a specific statutory provision analogous to s.97A CPDA, the court has no jurisdiction to make the requested order.

The Decision

Arnold J traced the history of the court’s inherent jurisdiction to grant injunctions and reviewed the case law of the House of Lords, Privy Council and Supreme Court over the past 40 years. He then adopted the following principles, first set out by Lord Scott of Foscote in Fourie v Le Roux [2007] UKHL 1: (i) it is important to distinguish between the court’s power to grant injunctions and the conditions under which it will choose to do so; (ii) the court’s power to grant an injunction derives from the inherent jurisdiction of the court, as codified in various guises, including s.37(1) of the Senior Courts Act; (iii) where the court has jurisdiction, the practice of the courts in relation to the situations in which it will grant an injunction, varies over time in accordance with prevailing precedent and rules of court.

The judge then noted three supplementary points, pertinent to the case in hand: (a) the power is not limited to the grant of injunctions against infringers; (b) should it be a requirement for there to be a prior legal or equitable duty owed by the defendant to the claimant (argued by the defendants but not explicitly acknowledged by the Court), such a duty would arise in the present case by virtue of the fact that the defendants were on notice that their services are being used to infringe and therefore the ISPs had an equitable duty to take steps to prevent or reduce such infringements; and (c) an analogy can be drawn with the grant of a publicity order under the inherent jurisdiction of the court as codified by s.37(1) of the Senior Courts Act, the grant of which was recently upheld by the Court of Appeal. Accordingly, he found that a purely domestic interpretation of s.37(1) meant that the court had the power to grant the blocking injunction sought.

Arnold J nevertheless proceeded to consider whether the claimants’ second argument would succeed. He began by considering the Government’s approach to the implementation of both the EU Information Society Directive and the EU Enforcement Directive, concluding that, whilst the Government’s reasoning was confused and there was no obvious explanation for the divergence in approach when implementing Article 8(3) of the EU Information Society Directive and the third sentence of Article 11 of the EU Enforcement Directive, it is clear that the Government considered that existing domestic law meant that there was no need to enact legislation to explicitly implement the third sentence of Article 11 of the EU Enforcement Directive. Arnold J also considered the guidance of the CJEU in L’Oreal v eBay (Case C-324/09), which states that s.37(1) should be interpreted as far as possible as giving effect to the third sentence of Article 11, pursuant to the Marleasing principle. Accordingly, the judge concluded that, if a domestic interpretation of s.37(1) was not found to be sufficient, the application of the Marleasing principle would lead to the same result.

Finally, the judge considered whether the order sought by the claimants, which it was accepted would curtail the defendants’ (and their customers’) rights under the Charter of Fundamental Rights of the European Union, was “provided for by law” and therefore permissible. Arnold J referred to the cases concerning copyright infringement in which similar orders had been made and, applying the test set out in the judgment of the European Court of Human Rights in the case of Yildirim v Turkey (Application No. 3111/10), concluded that the order fell within the range of possible orders which would be foreseeable by the ISPs pursuant to s.37(1) of the Senior Courts Act and the third sentence of Article 11 of the EU Enforcement Directive and was therefore “provided for by law”.

Comment

This case represents the first time that a English court has make a blocking order against ISPs to prevent trade mark infringement. Arnold J himself acknowledged that it was “…a test case, which, if successful, is likely to be followed by other applications by [the claimants] and other trade mark owners, both here and in other countries”.

A test case was necessary because of the uncertainty arising from the fact that a new statutory provision corresponding to the third sentence of Article 11 of the EU Enforcement Directive was enacted into the domestic legislation upon the implementation of that directive into UK law. The uncertainty being compounded by the approach taken previously by the Government when implementing Article 8(3) of the EU Information Society Directive, namely the enactment of s.97A of the Copyright, Designs and Patents Act 1988.

One point of particular interest is the statement by Arnold J that when ISPs are put on notice that their services are being used to infringe an intellectual property right, they come under an implied equitable duty to take proportionate measures to prevent or reduce such infringements.  To the extent such a duty gives rise to a claim for an injunction, this would be in line with the mere conduit defence provided for in Article 12 of the E-Commerce Directive 2000/31/EC.

However, if equitable compensation is also available against an ISP who did not take ‘proportionate steps’ when they were put on knowledge, itself an open question, then this duty would appear to be contrary to Article 12 of the E-Commerce Directive, which provides for no liability save for the care out in Article 12(3) for an injunction.  This is to be contrasted with the hosting defence in Article 14, which applies only to the extent that the ISP is not fixed with knowledge of the infringement.

A further issue arises in determining the point at which the ISP is fixed with the requisite knowledge to come under this implied duty.   Must the issue of infringement be the subject of a determination by a competent tribunal or does it suffice that the owner can make out a prima facie case?  In L’Oreal v Ebay C-234/09 (at 122), the CJEU considered a similar issue in relation to Article 14 of the E-Commerce Directive and noted that notification by a right owner is ‘as a general rule’ a factor in determining knowledge, but will not be determinative as such notifications can be insufficiently precise or inadequately substantiated.  Therefore, each case is likely to turn on its facts and depend on all the circumstances.

In practice, ISPs are likely to be reluctant to take any blocking action without being ordered to do so by the court.  Therefore, we would expect ISPs to take a similar approach to that commonly taken in response to s.97A applications in copyright cases, that is, once an ISP is put on notice by the right owner of the alleged infringement, the ISP agrees not to oppose any application the right owner may make for a blocking injunction, but otherwise the ISP will, pending such an injunction, take no positive steps to block allegedly infringing websites.

Published with minor amendments in IP Forum Issue 100: March 2015