Court of Appeal forces ISPs to block counterfeiters selling on the internet

On the 6th July 2016, the Court of Appeal handed down its Judgment in the case of Cartier & Ors -v- BskyB & Ors [2016] EWCA Civ. 658. By way of background, the Claimants produce and sell luxury goods under very well-known Trade Marks. As you might expect, a successful brand regularly has to deal with the difficulties of counterfeiters who attempt to pass off usually sub-standard goods as having been produced by the Claimants’ brands. Those counterfeiters often utilise websites to advertise and sell their counterfeit goods. In 2014, the Claimants applied for a so-called ‘Blocking injunction’ which would require the internet service providers (“ISPs”), in this case BskyB, BT, EE, TalkTalk and Virgin, to take steps to block customers from accessing those websites.

Since around 2011, there has been a steady stream of applications to the High Court for an injunction to block, or at least impede, access to websites pursuant to a breach of copyright. The jurisdiction for the Court to grant an injunction against intermediaries is expressly envisaged by Section 97A of the Copyright, Designs and Patents Act 1988 (“the CDPA”). However no general power to grant an injunction in relation to any other intellectual property rights was created after the implementation of the Infosoc Directive in 2001. This became an important factor in the litigation as the Claimants in the Cartier case were seeking to rely on infringement of their Trade Marks as a basis for the application for an injunction (rather than copyright infringement).

The case at first instance in the High Court was heard by Mr. Justice Arnold who concluded that the High Court had jurisdiction to issue blocking Orders in respect of websites selling and advertising goods infringing third party Trade Marks. Arnold J relied on Section 37(1) of the Senior Courts Act 1981, which states as follows:

“The High Court may by order (whether interlocutory or final) grant an injunction…in all cases in which it appears to the court to be just and convenient to do so.”

Accordingly, the Defendant ISPs were required to block certain websites which were advertising and selling counterfeit copies of the Claimants’ goods.

The ISPs did not agree with this conclusion and issued an Appeal which was heard by Lord Justices Kitchin, Jackson and Briggs on 13th and 14th April 2016. The ISPs challenged Arnold J’s conclusion that the Court had jurisdiction to order an injunction, relying on the fact that the Trade Marks Act 1994 did not have an equivalent provision of Section 97A of the CDPA, as mentioned above. Specifically, the ISPs argued that Section 37(1) of the Superior Courts Act could not be interpreted sufficiently as to comply with the relevant requirements of EU law (namely, Article 11 of the Enforcement Directive) and, accordingly, the UK Government had not properly transposed the Directive into domestic law such that it gave the Court the power to issue an injunction in this case. Lord Justice Kitchin disagreed and endorsed the original view of Arnold J. in concluding that the Government had properly taken into consideration the requirements of Article 11 of the Enforcement Directive and had itself concluded during consultation that Section 37(1) of the Superior Courts Act already complied with the requirements of Article 11.

Lord Justice Kitchin also went on to consider whether Arnold J. was correct in his assessment of the relevant threshold conditions and the fundamental principles in deciding whether to grant an injunction. The Court of Appeal concluded that the Judge was right to hold that the threshold conditions were satisfied and that the relevant principles were properly considered, assessed and applied by Mr. Justice Arnold at first instance. Accordingly, the Court of Appeal has endorsed fully the decision of the High Court in ruling that the circumstances of infringement of the rights holders’ Trade Marks in this case were such that blocking injunctions should and could be ordered by the Court.

One of the further key issues addressed was the implementation costs (i.e. the costs the ISPs have to incur in implementing the blocking Orders made by the Court). This is one issue upon which all three members of the Court of Appeal did not agree. The majority (Kitchin LJ and Jackson LJ) held that Mr. Justice Arnold was entitled to require the ISPs to bear those costs, however Lord Justice Briggs took the view that he would have allowed one element of the Appeal in relation to the costs, commenting that the costs of designing and installing the software required to implement the blocking injunction should be something which, in principle, the rights holder ought to bear. Lord Justice Kitchin did himself note that the likely cost of implementation would be an important factor in deciding the proportionality of any Order sought and that in other cases a different view could be taken.

Comment

This decision is, of course, good news for rights holders seeking to contend with counterfeiters. It was acknowledged by the Court of Appeal that the ISPs were not wrongdoers and had not infringed the Claimants’ rights. However, the Court of Appeal was of the view that it is clear that the operators of infringing websites need the service of the ISPs in order to offer for sale and sell counterfeit goods to UK consumers. It follows, therefore, that the ISPs are inevitable and essential actors in those infringing activities. This is a common sense and clear extension of the pre-existing and well established blocking remedy under Section 97A of the CDPA and simply extends that remedy to the infringement of Trade Marks. Whether a large increase in these types of Orders will follow is not entirely clear as the facts of each case will, of course, be important and determinative in deciding whether an Order should be made. This decision does appear, however, to clear up finally that the Court has jurisdiction to do so.

For further information please contact the Intellectual Property Team at Hamlins.