ISPs' appeal is "blocked"
Court of Appeal unanimously rules ISP blocking orders extend to trade mark rights
In a judgment handed down today, the Court of Appeal, led by Lord Justice Kitchin, has overwhelmingly rejected the appeal by the five largest ISPs and upheld the High Court decision to grant Richemont a blocking order requiring those ISPs in the UK to prevent access to various third party websites from advertising and selling goods which infringe Richemont's trade mark rights.
It is now clear that ISP blocking orders provide trade mark owners with another option in the fight against counterfeiting, but other effective measures still need to be developed and deployed to try and stem the tide of counterfeits and related websites.
The Claimants (collectively, "Richemont") own (and have registered trade marks for) a large number of luxury brands, including CARTIER, MONTBLANC and IWC.
Richemont became aware of certain third party websites, including www.cartierloveonline.com, www.iwcwatchtop.com and www.montblancopensonlineuk.com ("Target Websites") advertising and selling counterfeit goods.
High Court action
Richemont made an application to the High Court seeking an order requiring the five main retail internet service providers ("ISPs") in the UK, namely Sky, BT, EE, Talk Talk and Virgin, who between them have a market share of 95% of UK broadband users, to block, or at least impede, access by their respective subscribers to the Target Websites, all of which had infringed Richemont's trade mark rights.
(i) Legal basis for the blocking order
Blocking orders, such as the one sought by Richemont, have been made by the Court over the last three years pursuant to section 97A of the Copyright, Designs and Patents Act 1988 ("CDPA"), which implements Article 8(3) of the Information Society Directive. Section 97A expressly states that the High Court shall have 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.
As there is no analogous provision under UK trade mark law, Richemont asked the Court to rely on its inherent jurisdiction to grant an injunction where it is "just and convenient to do so", as recognised by section 37(1) of the Senior Courts Act 1981.
This was because the UK had not in fact implemented Article 11 of the IP Enforcement Directive and in particular the provision that "Members 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…".
(ii) Threshold conditions
The Judge noted that there are certain "threshold conditions" that must first be satisfied in order for a blocking order to be granted in a trade mark case:
- The ISPs must be 'intermediaries' within the meaning of the third sentence of Article 11 of the Enforcement Directive - this was not in dispute in this case.
- Either the users and/or the operators of the website must be infringing the claimant's trade marks - again, this was not in dispute in this case.
- The users and/or the operators of the website must use the ISP's services to do that. The Judge said that the operators of the Target Websites had been infringing Richemont's trade marks by placing on the internet advertisements and offers for sale which were targeted at UK consumers. In this respect, the Judge contended that the ISPs had an essential role, since it is via the ISP's services that the advertisements and offers for sale were communicated to 95% of broadband users in the UK. The Judge also made it clear that it was immaterial that there was no contractual link between the ISPs and the operators of the Target Websites.
- The ISPs must have actual knowledge of this. Richemont had sent the ISPs emails attaching two schedules, one containing information about its trade marks and the other information about the test purchases from each of the Target Websites. So knowledge of the infringement was not in dispute; in any case, the ISPs had the requisite knowledge as a result of having been served with the evidence in support of the blocking order injunction application itself.
(iii) Additional satisfying criteria
After deciding that the threshold conditions had been satisfied, the Judge went on to consider that the relief must:
- be necessary, but this did not mean that a brand owner has to show that a blocking order is indispensable for enforcing its trade mark rights;
- be effective, but this did not mean that a brand owner has to establish that the relief it seeks is likely to reduce the overall level of infringement of its rights;
- be dissuasive (ie the remedies granted against the defendant should dissuade third parties from infringing in the future);
- not be unnecessarily complicated or costly;
- avoid barriers to legitimate trade: the measures targeted by the ISP must be strictly targeted so that they do not affect users who are using the ISP's services in order lawfully to access information;
- be fair and equitable and strike a "fair balance" between the applicable fundamental rights;
- be proportionate: the Judge considered that proportionality was a key issue, in particular whether the likely costs burden on the ISPs is justified by the likely efficacy of the blocking measures and the benefit to the trade mark owner, compared against the other options available.
The Judge concluded that not only did he have jurisdiction to make the order sought by Richemont but that it was appropriate to do so. He also held that the ISPs should bear the costs of its implementation.
Court of Appeal decision
In their appeal against the order granted by the Judge, the ISPs contended, in broad outline, that:
- they were wholly innocent parties and were not alleged to be wrongdoers;
- the court had no jurisdiction to make any such order;
- if the court did have jurisdiction, the jurisdictional threshold requirements were not satisfied in the circumstances of these cases;
- the judge failed properly to identify the correct principles that should be applied in deciding whether or not to make an order;
- the orders made were disproportionate having regard to the evidence before the court; and
- the judge fell into error in making the orders that he did in relation to costs.
The Court of Appeal agreed with the High Court Judge and rejected the ISPs appeal in its entirety. In particular, the Court of Appeal held that the court had jurisdiction to grant the blocking order it did and that ISPs have a duty to take steps to assist with blocking measures when requested to do so in circumstances where rights holders' rights have been infringed.
The Court of Appeal also held by a majority of 2 to 1 that the ISPs should bear the cost of implementation of the blocking order as it considered those costs to be relatively modest and part of the price ISPs must pay for providing their services. Lord Justice Briggs dissented on this issue on the basis that the rights holder ought to pay such costs as the price of obtaining valuable injunctive relief for the better exploitation of its intellectual property.
This decision is a great outcome for brand owners, which provides them with certainty regarding a significant new weapon in their fight against websites that advertise and sell counterfeits. Whilst the sheer volume of online counterfeit activity means that requiring ISPs to block specific websites cannot eradicate the problem, brand owners can use blocking orders to target the worst offending sites.There is no doubt that more brand owners will now apply for these types of blocking orders, both before the English courts and other EU courts. The blocking orders will most likely be sought in relation to high profile or high volume counterfeit websites, or where websites are hosted outside of the EU, the US and other countries where notice and take down requests are usually complied with. The costs to brand owners of obtaining such blocking orders will likely provide a potential control on the number of such applications and resulting blocking orders, although they will welcome confirmation that the costs of implantation will be borne by the ISPs.