Website blocking orders and trade mark infringement

June 2018

Internet service providers (“ISPs”) should not pay the costs of implementing website blocking orders in relation to trade mark infringements, the Supreme Court has ruled in Cartier International AG and others  v British Telecommunications Plc and another  [2018] UKSC 28.

The Supreme Court found that issues of costs are a matter of national law. The decision that costs of compliance must be paid by trade mark owners is primarily based on ISPs being viewed as innocent intermediaries, who are not guilty of trade mark infringement and do not indirectly benefit from trade mark infringements.

Background

The trade mark owners in this dispute include luxury goods groups Cartier, Montblanc and Richemont (the Rights-Holders), whilst the ISPs include BT and EE.

At the outset of the litigation, the right holders identified 46,000 websites offering infringing copies of their branded goods.  The facilities which the ISPs provide for their subscribers are a critical means by which the sellers of infringing goods reach their customers. The Rights-Holders therefore sought injunctions requiring the ISPs to block or attempt to block access to specified “target websites” selling the counterfeit goods.  The injunction was granted and the ISPs were ordered to pay the costs, including those of implementing the website-blocking order.

Whilst a number of injunctions have been granted against ISPs on the application of copyright-owners, this is the first case in which a website blocking injunction has been granted to protect a trade mark. The practice in such cases has been to order the rights-holders to bear their costs of the unopposed proceedings to obtain website-blocking orders but to leave the ISPs to bear the costs of implementing such orders.

The main issue facing the Supreme Court was whether the Rights-Holders should have been required to bear the costs of implementing the website-blocking orders.

ISPs as “Innocent Intermediaries”

The Supreme Court did not accept the argument that ISPs should pay for the cost of compliance owing to an indirect financial benefit from the trade mark infringements, finding such assumed responsibility to have no legal basis.  In terms of their legal responsibilities, ISPs are passive, technical services with no editorial control and the restriction on monitoring in Article 15 of the E-Commerce Directive means ISPs are unlikely to know and have no duty to discover website content.  The Supreme Court therefore emphasised the ISPs were innocent intermediaries, themselves not guilty of trade mark infringement. It was held that it is not justifiable that intermediaries should pay the costs of compliance.

Whilst there is a public interest in the enforcement of intellectual property rights, the protection of IP rights is a cost of the business which owns the rights and has the relevant interest in asserting them. Website-blocking orders are sought by rights-holders in their own commercial interest, leading the Supreme Court to decide the costs of their implementation is the responsibility of trade mark owners.

Responsibilities of Intermediaries

Although “innocent intermediaries”, this does not absolve the ISPs of all responsibility entirely. The position in relation to website-blocking orders is no different in principle from the established position on injunctions.  Innocent parties are required to assist the claimant in the assertion of its rights against a wrongdoer.  Such intermediaries come under the duty to assist without incurring personal liability.

In the circumstances of this case, the costs of the litigation were awarded against the ISPs as they had strenuously resisted the application. It was noted however that practice is normally to award intermediaries the costs of the action as it is unusual for intermediaries to resist website-blocking orders.

In this instance, the ISPs were found to be “mere conduits” under Article 12 of the E-commerce Directive owing to their limited role in merely providing a communications network. However, different considerations may apply to intermediary internet services engaging in caching or hosting, as such activities involve greater participation in the infringement and are more likely to infringe national IP laws if a safe harbour immunity is unavailable.  Such operations fall under Articles 13-14 of the E-Commerce Directive. The immunity for hosting requires ISPs to take the same steps as soon as it becomes aware of any illegality or of facts from which it is apparent.

Should an intermediary breach such requirements to assist, they will lose such immunity, but whether that results in liability will depend on the provisions of national law.  Lord Sumpton of the Supreme Court noted he would not accept that the mere fact that the immunities of intermediaries under Articles 13-14 are conditional on active steps being taken against the infringer in certain circumstances, is enough to make intermediaries covered by those articles pay the cost of compliance.

Costs compliance was found to be a matter for English law, subject to the EU requirement that costs must not be excessive.  Therefore, the indemnity provided by the rights-holders to the ISPs would be limited to reasonable costs.  The Supreme Court found these costs are not excessive, disproportionate or such as to impair the Rights-Holders ability to enforce their rights.

What the future holds…

This judgment confirms that trade mark owners seeking to block access to websites selling infringing goods should be aware that any injunctions against ISPs will come at a cost. Questions are now raised as to whether these changes will apply to copyright cases in the future. In the meantime, however, rights holders should approach with caution in seeking injunctions from any third party internet services that can be considered “mere conduits”. The judgment appears to suggest that the result may be different in actions against other more active providers of internet services including web hosting, internet search engines, portals and internet payment systems. It is however indicated that more is required by such intermediaries rather than mere non-compliance with the conditions of immunity in the E-Commerce Directive for such third parties to be liable for costs of a website-blocking injunction.

This update was prepared by HGF IP Solicitor Maherunesa Khandaker.  If you would like further advice on this or any other matter please contact Maherunesa or your usual HGF representative, alternatively visit our Contact Page to get in touch with your nearest HGF office.

 

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