In its decision in Cartier, Montblanc and Richemont v BskyB, BT, TalkTalk, EE and Virgin  EWHC 3354, the High Court has held that it is possible for trade mark owners to obtain orders against ISPs requiring them to block access to infringing websites on which infringing articles are advertised and sold. In his judgement, Arnold J granted injunctions in favour of the claimants requiring the defendants to block access to websites selling counterfeit watches. Such a finding is significant; it is the first time the High Court has held that it has jurisdiction to grant such an injunction against service providers on the basis of trade mark infringement as opposed to copyright. The decision therefore provides trade mark owners with an additional option for dealing with counterfeit goods online and potentially carries serious implications for ISPs.
Whilst section 97A of the CDPA (implementing Article 8(3) of the Information Society Directive (Directive 2001/29/EC)) gives the High Court the power to grant an injunction against a service provider who has actual knowledge of another person using their service to infringe copyright, no such UK statutory counterpart exists for trade mark owners.
In absence of such statutory authority, Arnold J considered s.37(1) of the Supreme Courts Act 1981, which broadly provides that the High Court may grant an injunction “in all cases where it appears to be just and convenient to do so”. On a purely domestic reading of s.37(1), Arnold J concluded that the Court had jurisdiction to grant the blocking orders sought by Richemont, however, he went on to consider the interpretation of s.37(1) in light of European legislation.
Article 11 of the Enforcement Directive (Directive 2004/48/EC), goes further than Article 8(3) of the Information Society Directive. The final sentence of Article 11 provides that:
“Member States shall also ensure that rightholders 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, without prejudice to Article 8(3) of 2001/29/EC”.
Article 11 is broader than Article 8(3) of 2001/29/EC in that it applies to all intellectual property rights. However, on consultation, the UK government decided that no steps were necessary to implement Article 11 into national law.
Arnold J held that, even if the domestic interpretation of s.37(1) did not provide jurisdiction for the orders sought by Richemont, s.37(1) can and should be interpreted in compliance with Article 11 above. Due to the indirect effect of this article on UK law, Arnold J concluded that the Court had the power to grant a website blocking injunction in a trade mark case. Such jurisdiction may presumably also be extended to other forms of intellectual property rights such as designs and rights protected by passing off.
An additional option for trade mark owners to consider
By ruling in favour of Richemont, the High Court has provided trade mark owners with an additional option to consider when dealing with infringing websites offering for sale counterfeit goods. Indeed, in the early stages of his judgment, Arnold J highlights the significance of the ruling in favour of Richemont; “it is a test case, which, if successful, is likely to be followed by other applications by Richemont and other trade mark owners, both here and in other countries.” The main deterrent is likely to be cost, the trade mark owner having to bear both their own and the ISPs’ costs of the application (other than costs incurred by the ISPs in resisting it).
Following his finding of jurisdiction, Arnold J decided to deal with this case in the same manner as an order being sought under s.97A CDPA and therefore the following threshold conditions needed to be satisfied:
- the ISPs must be intermediaries;
- the users or operators of the website(s) must be substantially infringing the claimant's registered trade mark(s);
- the users or operators must use the ISPs' services to do that; and
- the ISPs must have actual knowledge and notice of details of infringement.
Whilst the actual infringer is not a party to the action, it goes without saying and is perhaps particularly important bearing that in mind, that the registered trade mark should be clearly valid at the date of claim (i.e. not invalid for non-use or any other reason).
It is also necessary to stress the importance of the requirement for the ISP to have “actual knowledge” of the third party’s infringement. This is particularly significant because Article 15 of the E-Commerce Directive (Directive 2001/31/EC) prohibits the imposition on ISPs of a general obligation to monitor what the users of their services are doing.
After summarising these conditions, Arnold J went on to consider whether the blocking order sought would:
- 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 various fundamental rights which are engaged; and
- be proportionate.
In considering whether the order sought would be ‘effective’, Arnold J did not accept the ISPs’ submission that Richemont needed to demonstrate that the remedy sought would reduce the overall level of infringement of its IP rights. However, he explained that the likely efficacy of the order is an important factor. The measures must at least seriously discourage users from accessing the target website. Any future order sought must also dissuade third parties from infringing in the future.
Arnold J also cited earlier copyright case law which suggests that, if a blocking order would require an ISP to install a complicated or costly system, then this would be relevant in deciding whether to grant the order. Therefore, if a claimant is pursuing a blocking order against a smaller sized ISP, this may be a factor which could affect the likelihood of such an order being granted. The resources of the ISP should therefore be considered for future similar actions by rights holders.
Awarding a blocking order must also result in a fair balance between the right holder’s trade mark rights, the ISPs’ freedom to carry on business and internet users’ freedom to receive information. Arnold J highlighted that in the present case it was relevant that the orders sought would not require the ISPs to acquire new technology. Further, it was stated that an internet user’s freedom to receive information is unlikely to ever extend to a right to engage in trade mark infringement, particularly where it involves counterfeit goods where public interest concerns are likely to exist. Query whether this issue would become more contentious in a trade mark infringement case which did not involve counterfeit goods and where there were not such strong ‘public interest’ arguments.
Most of Arnold J’s discussion of the above factors focused on whether awarding the blocking injunction would be “proportionate”. In assessing proportionality, Arnold J discussed the availability of the following alternative enforcement measures which Richemont could have pursued:
- Taking action against the operators of the websites – Arnold J explained that in the current case this option would have been problematic because the registrants of the websites were based in China. He also gave consideration to the fact that the registrants may not have been the actual operators of the target websites. It should be noted that if the person(s) behind the infringement can be effectively sued, pursuing an action against an ISP may not be proportionate.
- Notice and takedown action with the host – Arnold J considered that it is unlikely this action would have produced a long term solution in the circumstances. This was because of the likelihood that the websites would simply be moved to a new host.
- Payment freezing – again Arnold J felt that this was not a suitable option in the circumstances; a court order might be necessary and it was unlikely to be effective to achieve more than “mere disruption.”
- Domain Name Law Enforcement – It was explained that another alternative open to Richemont was to attempt to persuade a law enforcement agency, such as the Police Intellectual Property Crime Unit (PIPCU) to take action to have the domain names suspended or cancelled. Arnold J again focused on the short term nature of this option.
- De-indexing – It was said that Richemont could also have considered sending notices to search engine providers requesting them to “de-index” the infringing websites. Such an action would have the effect of removing the websites from search results and subsequently make them harder to locate. However, Richemont contended that there were problems with this approach and Arnold J agreed; there was likely to be a need for a court order and, even if the websites are de-indexed, they will remain on the Internet and can be accessed by other means.
- Customs seizure – Arnold J also dismissed the possibility of Richemont carrying out a customs seizure due to the fact that such an action would only tackle the imports of the counterfeit good themselves and it would not be possible for customs to inspect all of items imported.
Following the above discussion, Arnold J reached the conclusion that there were no alternative measures open to Richemont which would be “equally effective, but less burdensome” than pursing the order sought. However, it is important to stress that the facts of a future case may be assessed differently, for example if the website owners or operators are within the jurisdiction.
Therefore, whilst this case provides trade mark owners with an additional option for dealing with online infringement, Arnold J’s comments in his discussion of proportionality suggest that the alternative options available to trade mark owners should not be ignored; crucially, the means chosen to deal with the infringement must be proportionate. Trade mark owners should consider whether there is a more appropriate or efficient way of dealing with the matter before using this route.
IP address blocking can lead to over blocking of irrelevant third party sites so may not be granted if the offending website's IP address is shared with innocent third party web sites. However, Arnold J, in a later judgment relating solely to the form of the order in this case (See  EWHC 3765 (Ch)), gave an order to block additional addresses which would affect third party websites because he was clear they were all unlawful despite not being connected to these proceedings (either being sites indulging in intellectual property infringement or child pornography).
The process has several safeguards. Firstly, liberty to apply was granted for the ISPs, users and/or website operators meaning they can go back and request for the order to be changed in light of a change in circumstances or additional evidence. Additionally, the inclusion of a sunset clause provides that orders will cease to have effect at the end of a defined period unless either the ISPs consent to the orders being continued or the Court orders that they should be continued. Finally, Arnold J decided that the message displayed on the blocked webpages should not merely state that access to the website has been blocked by court order, but also provide details in relation to this case so that an affected user is informed.
Further and as noted above, as with s.97A copyright cases, web site operators will not be joined in the action and there will be a single hearing to determine both whether infringement is occurring and whether a blocking order should be made. No doubt, as with copyright cases, ISPs will need to engage experts to give written evidence on this issue if they wish to resist the making of the order. The order should be applied for by an application backed with witness statements and a draft order and there will not be full pleadings.
Impact on intermediaries
Following the ruling in this case, intermediaries are now potentially subject to similar obligations for trade mark infringement (and potentially other intellectual property rights) as under s97A for copyright infringement; where an intermediary has actual knowledge of another person using their service to infringe a registered trade mark, the High Court may be able to order an injunction against them in order to prevent the infringement.
The main impact will be an increased volume of complaints to deal with given the large amount of brand usage on the web. Whilst their legal costs will be borne by the brand owners, intermediaries will face the costs of implementation of the orders, although there was a suggestion in the judgement that in some cases brand owners may be ordered to help with these. Since each blocking order will now normally remain in force for two years and since during this period the trade mark owner will be able to add sites to the scope of the order by notice to the ISPs, there is a continuing cost for ISPs. Arnold J acknowledged that if a large number of blocking orders were now to be made, the cumulative cost for ISPs might become a concern. However, he pointed out that if each order applied to all ISPs the cost might simply be passed on to consumers in the form of increased prices for internet services.
Given Arnold J’s finding of jurisdiction in this case and in light of the wording of Article 11 of the Enforcement Directive, this ruling could be wider in scope to catch other forms of intellectual property rights and other forms of ‘intermediaries’ such as payment providers if their service is being used to infringe and they are put on notice given the potentially wide scope of the meaning of ‘intermediaries’.
Judgment Date: 17 OCTOBER 2014