May 1, 2015
This article was written by Eloise Preston, Solicitor, Wiggin LLP and first published in the Computer and Telecommunications Law Review on 2 December 2014.
*C.T.L.R. 7 In Cartier International AG v British Sky Broadcasting Ltd1 the High Court delivered a landmark judgment establishing that trade mark owners can secure court orders requiring internet service providers (ISPs) to apply technical measures to prevent websites from offering counterfeit goods for sale in the UK. In a comprehensive judgment, Arnold J concluded that ISPs play “an essential role” in enabling websites to sell counterfeit products online and that the court can and should grant an injunction requiring ISPs to prevent, or at least impede, access to the sites. The application was the first of its kind to seek a site blocking injunction against ISPs in respect of trade mark infringement, rather than copyright infringement. The impact of the case will be far-reaching, as it has implications for trade mark owners and ISPs across the UK and Europe.
The market for counterfeit goods in the UK and worldwide is highly valuable,2 and seriously undermines rights of trade mark owners. By their nature, sites which sell counterfeit products are structured to infringe trade mark rights. The internet has enabled counterfeiters to reach a global market, while at the same time operating in an anonymous, and therefore low risk, environment. Highly sought-after and luxury brands are often targeted by counterfeiters, which seek to benefit from brands’ power of attraction, reputation and prestige.
The sale of counterfeit goods causes not only direct loss of sales, for example where a consumer opts to purchase a cheaper replica rather than the genuine article, but also damage to the brand and a lack of confidence in the legitimate market due to poor quality products. In particular, in relation to luxury goods with a cachet related to their expense, the exclusivity of the brand is eroded through the availability of the cheaper replicas.
The application in the present case was brought by the Richemont group, acting through its Cartier, Montblanc and IWC “maisons“. The application was made against the five main ISPs in the UK (Sky, BT, EE, TalkTalk and Virgin), which together have a market share of around 95 per cent of UK broadband users. Richemont sought an order directed at six sites which exist exclusively for the purpose of selling counterfeit products that infringe Richemont’s registered trade mark rights.
The courts had previously granted similar site blocking injunctions against ISPs in respect of sites infringing copyright. The first such application was brought by the film industry in 2011 in relation to the “Newzbin” movie piracy site. Since then, a significant number of orders have been granted in relation to copyright infringement, primarily in respect of sites that make film, television and music content available online. Until now, no such application had been made across the EU in respect of trade mark infringement.3
The legal framework
Mr Justice Arnold held that the application required him to consider five questions. First, did the court have jurisdiction to make the order? Secondly, if the court did have jurisdiction, what were the threshold conditions that must be satisfied for the court to make the order? Thirdly, were the threshold conditions satisfied in the present case? Fourthly, if those conditions were satisfied, what were the principles to be applied in deciding whether or not to make the order? And finally, applying those principles, should the order be made in the present case?
The first question that the judge had to determine was whether the court had jurisdiction to make the order sought. Previous applications in respect of copyright infringement were brought under s.97A of the Copyright, Designs and Patents Act 1988, which specifically provides for the High Court to have the power to grant an injunction against a “service provider”, where that service provider has actual knowledge of another person using their service to infringe copyright.4Section 97A implements art.8(3) of the Information Society Directive,5 which requires Member States to ensure that “rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right”. The difficulty faced in the present case is that there is no statutory counterpart in the field of trade marks to s.97A. The *C.T.L.R. 8 equivalent provision to art.8(3) relating to trade marks can be found inart.11 of the Enforcement Directive,6 but this equivalent provision has not been specifically implemented into the Trade Marks Act 1994, or indeed any other legislation in the UK. This led the ISPs to contend that the court did not have jurisdiction to make an order in favour of trade mark owners.
Section 37(1) grants the High Court a general power to make an injunction where it is just and appropriate to do so. The ISPs contended that this section did not grant the court jurisdiction to make the orders sought in the present case. However, the court held that even if this were so on a domestic interpretation of the law, the statute should also be construed consistently with art.11 in accordance with the Marleasing principle, whereby domestic courts have a duty to construe national law in accordance with the wording and purpose of relevant EU law. An alternative interpretation would lead the court to be in breach of its obligations under EU law.
The question of jurisdiction was a key, and arguably the most challenging, hurdle faced by Richemont. Arnold J conclusively found the court to have jurisdiction to grant a site blocking injunction in respect of trade mark infringement. He summarised the position as follows:
“It seems to me to be plain … that section 37(1) should, if possible, be interpreted as empowering the Court to grant an injunction against an intermediary who is not an infringer so as to comply with the third sentence of Article 11.” 7
Once the question of jurisdiction had been addressed, it fell to the court to consider whether it was just and convenient to make the orders. The judge identified four “threshold conditions” which must be satisfied for an order of this nature to be granted:
1. the ISPs must be considered to be “intermediaries” within the meaning of art.11 of the Enforcement Directive;
2. the users and/or the operators of the website must be infringing the claimant’s trade marks;
3. the users and/or the operators of the website must use the ISPs services to do that; and
4. the ISPs must have actual knowledge of this.
Arnold J found that all four of the conditions had been satisfied. The most interesting point to arise from this analysis was the judge’s reasoning on the third condition, that the site operators use the ISPs’ services in order to infringe. The judge held that “the ISPs have an essential role in these infringements”,8 on the basis that it is through the ISPs’ services that advertisements and offers for sale of counterfeit goods are made to 95 per cent of broadband users in the UK. It was immaterial that there was no contractual connection between the site operators and the ISPs. It was also immaterial that consumers who view the sites would not necessarily go on to purchase the goods; the very act of advertising and offering goods for sale under the registered trade marks was held to be infringing, even where the products are openly sold as replicas.
Principles to be applied and consideration of whether the order should be granted
Arnold J then went on to consider what principles should be applied in deciding whether or not to grant the order, and whether the order should be granted. The judge acknowledged that, in making the orders, it was necessary to consider the comparative importance of, and justifications for, interfering with Richemont’s trade mark rights on one hand, and on the other hand the ISPs’ freedom to carry on business and internet users’ freedom to receive information. A key consideration was therefore the proportionality of the orders requested.
Two key points emerged in the judge’s analysis of proportionality. The first was whether there are alternative measures to prevent access to the sites which are less burdensome and as effective. The judge reviewed the various alternative options available and recognised that while most enforcement options have some use, there is a clear benefit in securing the implementation of site blocking by ISPs. A particular advantage is that ISPs can react to attempts by operators to circumvent site blocking, in a way that is not possible with other enforcement options. For example, where a site operator seeks to evade enforcement action by adopting an alternative domain, the ISPs can be notified almost immediately and redirect their technical processes to the new domain. This provides for a reactive and ongoing rights protection strategy. The clear benefit in securing a site blocking order was held to outweigh the burden on the ISPs in implementing and maintaining the technical measures to secure the site blocking.
A second point of interest to arise in the assessment of proportionality was the court’s consideration of the efficacy of site blocking. The judgment provides welcome analysis on this point. Richemont produced expert evidence using data collated in respect of over 10,000 websites, including the websites that have so far been the target of blocking orders and in particular sites that stream film content. The judge assessed this evidence and noted *C.T.L.R. 9 that it showed that orders directed at streaming websites in the UK “have resulted in a decrease in the overall level of infringement in this sector in the UK”.9
The judge concluded that the orders were proportionate and not unduly burdensome on ISPs, and should be granted subject to certain safeguards.
The future of site blocking
The judge acknowledged this case to be a test case in his judgment, and it is without doubt that this decision creates scope for trade mark owners across the UK and Europe to pursue a site blocking strategy as part of their enforcement strategy.
In respect of the site blocking process, Arnold J expressly encouraged the parties to have constructive discussions about the way the procedures could be streamlined to make the process more efficient for both right holders and ISPs. This highlights an opportunity for right holders, ISPs and intermediaries to work towards the common goal of creating a secure, stable and trusted internet. In particular, in order for the site blocking process to be as streamlined as possible, it is hoped that ISPs will collaborate with right holders to enhance and implement technical measures more efficiently.
The benefit of this decision accrues not only to Richemont but to all other trade mark owners in the UK and Europe. Brands which find themselves the target of online counterfeit goods retailers should consider whether a site blocking strategy could be beneficial.
C.T.L.R. 2015, 21(1), 7-9
|1.||Cartier International AG v British Sky Broadcasting Ltd  EWHC 3354 (Ch) (October 17, 2014).|
|2.||The value of internationally traded counterfeit and pirated goods was estimated to increase to US$960 billion by 2015 in the report byFrontier Economics Ltd, Estimating the Global Economic and Social Impacts of Counterfeiting and Piracy (2011).|
|3.||With the possible exception of the Danish case of Home A/S v Telenor A/S (Retten på Frederiksberg, December 14, 2012).|
|4.||It was not disputed that ISPs come within the definition of service provider.|
|5.||Directive 2001/29 on the harmonisation of certain aspects of copyright and related rights in the information society  OJ L167/10.|
|6.||Directive 2004/48 on the enforcement of intellectual property rights  L195/16.|
|7.||Cartier v BskyB  EWHC 3354 (Ch) at .|
|8.||Cartier v BskyB  EWHC 3354 (Ch) at .|
|9.||Cartier v BskyB  EWHC 3354 (Ch) at .|