This judgement, which extends the decision in L’Oreal v eBay relating to online marketplaces, held that under the third sentence of Article 11 of the Directive 2004/48/EC (‘Enforcement Directive’), operators of physical marketplaces, who sublet pitches to market-traders, may be forced to stop concluding contracts with market-traders selling counterfeit goods on their pitches to prevent new infringements of intellectual property rights by the market-traders.

dispute

Delta Center a.s. is the tenant of a marketplace in Prague who sublets pitches to market-traders. A number of brand owners, including Tommy Hilfiger, Lacoste and Burberry, found that the market-traders were selling counterfeits of their goods. As such, the brand owners bought an action against Delta Center in Prague courts to try and obtain an injunction against Delta Center to stop them subletting pitches to market-traders who infringed the brand owner’s intellectual property rights. The basis for applying for this injunction was that Article 11 of the Directive provides for injunction against intermediaries “whose services are used by a third party to infringe an intellectual property right” and therefore similar to operators of online marketplaces (covered by the L’Oreal v eBay decision), the operators of physical marketplaces, under the Directive, should be liable.

The Prague City Court rejected the application for an injunction and this decision was upheld by the Prague High Court. The case was then appealed to the Czech Supreme Court who took the view that this dispute would have to be resolved on the basis that the CJEU considers (1) whether the interpretation of the third sentence of Article 11 in the L’Oreal v eBay case, which held that Article 11 applied to online marketplaces, also applies to physical marketplaces and (2) if the conditions for an injunction addressed to intermediaries in an online marketplace would be identical for intermediaries who provide a service relating to letting pitches in physical marketplaces.

Judgment

The CJEU held that the fact that the provision of sales point concerns an online marketplace or a physical marketplace is irrelevant and it is also not apparent from the Directive that its scope is limited to electronic commerce, i.e. online marketplaces.

As such, the third sentence of Article 11 of the Directive must be interpreted as meaning that operators of physical marketplaces who sublet pitches to market-traders, some of whom use their pitches to sell counterfeit branded products, falls within the concept of “intermediary whose services are being used by a third party to infringe an intellectual property right”.

Furthermore, the CJEU held that the conditions of an injunction against an intermediary, i.e. an operator of a marketplace, would be the same as those imposed on an intermediary in an online marketplace. The injunctions must be equitable and proportionate, not excessively expensive and must not create barriers to legitimate trade.

This judgement is most likely going to assist brand owners tackle the sale of counterfeit goods in marketplaces. Brand owners could potentially write to operators of marketplaces bringing to their attention this CJEU judgement and request they assist them in taking steps to stop market-traders selling counterfeit goods and take measures to prevent future market-traders infringe their intellectual property rights.

Link to Judgment

Judgment Date: 07 JULY 2016

 

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